EDGAR 10-K Filing

Company CIK: 1015328
Filing Year: 2025
Filename: 1015328_10-K_2025_0001015328-25-000093.json

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ITEM 1. BUSINESS
ITEM 1. BUSINESS
Overview
Wintrust Financial Corporation, an Illinois corporation (“we,” “Wintrust” or “the Company”), which was incorporated in 1992, is a financial holding company based in Rosemont, Illinois, with total assets of approximately $64.9 billion as of December 31, 2024. We provide community-oriented, personal and commercial banking services to customers generally located in the Chicago metropolitan area, southern Wisconsin, northwest Indiana and west Michigan (“our market area”) through our sixteen wholly-owned-banking subsidiaries (collectively, the “banks”), as well as the origination of residential mortgages for sale into the secondary market through Wintrust Mortgage, a division of Barrington Bank & Trust Company, N.A. (“Barrington Bank”). In addition, we provide specialty finance services, including financing for the payment of property and casualty insurance premiums and life insurance premiums (“premium finance receivables”) on a national basis through FIRST Insurance Funding, a division of our wholly-owned subsidiary Lake Forest Bank & Trust Company, N.A. (“Lake Forest Bank”), and Wintrust Life Finance, a division of Lake Forest Bank, and in Canada through our premium finance company, First Insurance Funding of Canada Inc. (“FIFC Canada”), an indirect subsidiary of Lake Forest Bank, lease financing and other direct leasing opportunities through our wholly-owned subsidiary, Wintrust Asset Finance, Inc. (“Wintrust Asset Finance”), and short-term accounts receivable financing and outsourced administrative services through our wholly-owned subsidiary, Tricom, Inc. of Milwaukee (“Tricom”). Further, we provide a full range of wealth management services primarily to customers in our market area through four separate subsidiaries, The Wintrust Private Trust Company, N.A. (“WPT”) (formerly known as The Chicago Trust Company), Wintrust Investments, LLC (“Wintrust Investments”), Great Lakes Advisors, LLC (“Great Lakes Advisors” or “GLA”) and Chicago Deferred Exchange Company, LLC (“CDEC”).
Our Business and Reporting Segments
As set forth in Note (24) “Segment Information”, our operations consist of three primary segments: community banking, specialty finance and wealth management. The three reportable segments are strategic business units that are separately managed as they offer different products and services and have different marketing strategies. In addition, each segment’s customer base has varying characteristics and each segment has a different regulatory environment. While the Company’s management monitors each of the sixteen bank subsidiaries’ operations and profitability separately, these subsidiaries have been aggregated into one reportable operating segment due to the similarities in products and services, customer base, operations, profitability measures and economic characteristics. All segment measurements discussed below are based on the reportable segments and do not reflect intersegment eliminations.
Community Banking
Through our community banking segment, our banks provide community-oriented, personal and commercial banking services to customers located in our market area. Our customers include individuals, small to mid-sized businesses, local governmental units and institutional clients residing primarily in the banks’ local service areas. The banks have a strategy to provide comprehensive community-focused banking services. In keeping with this strategy, the banks provide highly personalized and responsive services, a characteristic of locally-owned and managed institutions. As such, the banks compete for deposits principally by offering depositors a variety of deposit programs, convenient office locations, hours and other services, and for loan originations primarily through the interest rates and loan fees they charge, the efficiency and quality of services they provide to borrowers and the variety of their loan and treasury management products. Using our multiple bank charter corporate structure to our advantage, we offer our MaxSafe® deposit accounts, which provide customers with expanded Federal Deposit Insurance Corporation (“FDIC”) insurance coverage by spreading a customer’s deposit across our sixteen banks. This product differentiates our banks from many of our competitors that have consolidated their bank charters into branches. We also have downtown Chicago and Milwaukee offices that work with each of our banks to capture commercial and industrial business. Our commercial and industrial lenders in our downtown offices operate in close partnership with lenders at our community banks. By combining our expertise in the commercial and industrial sector with our high level of personal service and a full suite of banking products, we believe we create another point of differentiation from both our larger and smaller competitors. Our banks also offer home equity, consumer, and real estate loans, safe deposit facilities, ATMs, online and mobile banking and other innovative and traditional services specially tailored to meet the needs of customers in their market areas.
We developed our banking franchise through a combination of de novo organizations and the purchase of existing bank franchises. The organizational efforts began in 1991, when a group of experienced bankers and local business people identified an unfilled niche in the Chicago metropolitan area retail banking market. As large banks acquired smaller ones and personal
service was subjected to consolidation strategies, the opportunity increased for locally owned and operated, highly personal service-oriented banks. As a result, Lake Forest Bank was founded in December 1991 to service the Lake Forest and Lake Bluff communities within the Chicago metropolitan area.
As of December 31, 2024, we owned sixteen nationally chartered banks: Lake Forest Bank, Barrington Bank, Wintrust Bank, N.A. (“Wintrust Bank”), Libertyville Bank & Trust Company, N.A. (“Libertyville Bank”), Northbrook Bank & Trust Company, N.A. (“Northbrook Bank”), Village Bank & Trust, N.A. (“Village Bank”), Wheaton Bank & Trust Company, N.A. (“Wheaton Bank”), State Bank of the Lakes, N.A. (“State Bank of the Lakes”), Crystal Lake Bank & Trust Company, N.A. (“Crystal Lake Bank”), Schaumburg Bank & Trust Company, N.A. (“Schaumburg Bank”), Beverly Bank & Trust Company, N.A. (“Beverly Bank”), Old Plank Trail Community Bank, N.A. (“Old Plank Trail Bank”), Hinsdale Bank & Trust Company, N.A. (“Hinsdale Bank”), St. Charles Bank & Trust Company, N.A. (“St. Charles Bank”), Town Bank, N.A. (“Town Bank”) and Macatawa Bank, N.A. (“Macatawa Bank”). As of December 31, 2024, we had 205 banking locations. Each nationally-chartered bank is subject to regulation, supervision and regular examination by the Office of the Comptroller of the Currency (“OCC”).
We also engage in the retail origination of residential mortgages through Wintrust Mortgage as well as consumer direct lending primarily to veterans through our Veterans First brand. Certain originated residential mortgage loans are sold to unaffiliated companies or the Company’s banks; and, Wintrust Mortgage balances selling loans with servicing retained versus servicing released to maximize current gain on sale revenue combined with potentially deepening customer relationships. Wintrust Mortgage maintains retail mortgage offices in a number of states, with the largest concentration located in the Chicago, Minneapolis, Salt Lake City and Los Angeles metropolitan areas.
We also offer several niche lending products through several of the banks. These include Barrington Bank’s Community Advantage program, which provides lending, deposit and treasury management services to condominium, homeowner and community associations; Hinsdale Bank’s mortgage warehouse lending program, which provides loan and deposit services to mortgage brokerage companies located predominantly in the Chicago metropolitan area; Lake Forest Bank’s insurance agency finance lending program, which provides financing to insurance agents, brokers and insurance businesses; and Lake Forest Bank’s franchise lending program, which provides lending to restaurant franchisees. Other niches offered throughout our banking franchise include, but are not limited to, Wintrust Commercial Finance, which offers direct leasing opportunities; Wintrust Business Credit, which specializes in asset-based lending for middle-market companies; Wintrust SBA Lending, which is dedicated to offering expertise in Small Business Administration (“SBA”) loans; Wintrust Commercial Real Estate, which concentrates on real estate lending solutions including commercial mortgages and construction loans; and Wintrust Government, Non-Profit & Healthcare, which focuses on financial solutions for mission-based organizations such as healthcare facilities, non-profits, educational institutions and local government operations. In addition, we offer a niche deposit service through Northbrook Bank’s Funds Group and Financial Markets Group, as well as Wintrust Bank's Wintrust Workplace Solutions, which offers Health Savings Accounts and other notional banking products for employers.
For the years ended December 31, 2024, 2023 and 2022, the community banking segment had net revenues of $1.8 billion, $1.7 billion and $1.5 billion, respectively, and net income of $458.7 million, $414.1 million and $349.3 million, respectively. The community banking segment had total assets of $52.5 billion, $44.4 billion and $41.4 billion as of December 31, 2024, 2023 and 2022, respectively. The community banking segment accounted for approximately 72.9% of our consolidated net revenues, excluding intersegment eliminations, for the year ended December 31, 2024.
Specialty Finance
Through our specialty finance segment, we offer financing of insurance premiums for businesses and individuals; accounts receivable financing, value-added, out-sourced administrative services; and other specialty finance businesses. FIRST Insurance Funding and Wintrust Life Finance engage in the premium finance receivables business, our most significant specialized lending niche, including property and casualty insurance premium finance and life insurance premium finance. We also engage in property and casualty insurance premium finance in Canada through our wholly-owned subsidiary FIFC Canada.
In their property and casualty insurance premium finance operations, FIRST Insurance Funding and FIFC Canada make loans primarily to businesses to finance the insurance premiums they pay on their property and casualty insurance policies. Approved insurance agents and brokers located throughout the United States and Canada assist FIRST Insurance Funding and FIFC Canada, respectively, in arranging each commercial premium finance loan between the borrower and FIRST Insurance Funding or FIFC Canada, as the case may be. FIRST Insurance Funding or FIFC Canada evaluates each loan request according to its own underwriting criteria including the amount of the down payment on the insurance policy, the term of the loan, the credit quality of the insurance company providing the financed insurance policy, the interest rate, the borrower's previous payment history, if any, and other factors deemed appropriate. Upon approval of the loan by FIRST Insurance Funding or FIFC Canada, as the case may be, the borrower makes a down payment on the financed insurance policy, which is generally done by
providing payment to the agent or broker, who then forwards it to the insurance company. FIRST Insurance Funding or FIFC Canada may either forward the financed amount of the remaining policy premiums directly to the insurance carrier or to the agent or broker for remittance to the insurance carrier on FIRST Insurance Funding’s or FIFC Canada’s behalf. In some cases, the agent or broker may hold our collateral, in the form of the proceeds of the unearned insurance premium from the insurance company, and forward it to FIRST Insurance Funding or FIFC Canada in the event of a default by the borrower. This lending involves relatively rapid turnover of the loan portfolio and high volume of loan originations. Because the agent or broker is the primary contact to the ultimate borrowers who are located nationwide and because proceeds and our collateral may be handled by the agent or brokers during the term of the loan, FIRST Insurance Funding and FIFC Canada may be more susceptible to third party (i.e., agent or broker) fraud. The Company performs various controls and procedures including ongoing credit and other reviews of the agents and brokers as well as performs various internal audit steps to mitigate against the risk of material fraud.
The commercial and property premium finance business is subject to regulation in the majority of states. Regulation typically governs notices to borrowers prior to cancellation of a policy and required communication to insurance agents and insurance companies. FIRST Insurance Funding offers financing of property and casualty insurance policies in all 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. FIRST Insurance Funding’s legal department regularly monitors changes to regulations and updates policies and programs accordingly.
Wintrust Life Finance finances life insurance policy premiums generally used for estate planning purposes of high net-worth borrowers. These loans are originated directly with the borrowers with assistance from life insurance carriers, independent insurance agents, financial advisors and legal counsel. The cash surrender value of the life insurance policy is the primary form of collateral. In addition, these loans often are secured with a letter of credit, marketable securities or certificates of deposit. In very rare cases, Wintrust Life Finance may make a loan that has a partially unsecured position.
The life insurance premium finance business is subject to banking regulations but is not subject to additional regulatory regimes (e.g. additional state regulation). Wintrust Life Finance’s compliance department regularly monitors the regulatory environment and compliance with existing regulations. Wintrust Life Finance maintains a policy prohibiting the known financing of stranger-originated life insurance and has established procedures to identify and prevent financing such policies. While a carrier could potentially put at risk the cash surrender value of a policy, which serves as Wintrust Life Finance’s primary collateral, by challenging the validity of the insurance contract for lack of an insurable interest, Wintrust Life Finance believes it has strong counterclaims against any such claims by carriers, in addition to recourse to borrowers and guarantors as well as to additional collateral in certain cases.
Premium finance loans made by FIRST Insurance Funding, Wintrust Life Finance and FIFC Canada are primarily secured by the insurance policies financed by the loans. These insurance policies are written by a large number of insurance companies geographically dispersed throughout the United States and Canada. Our premium finance receivables balances finance insurance policies that are spread among a large number of insurers; however, one of the insurers represents approximately 10% of such balances and two additional insurers represent approximately 8% and 6% each of such balances. FIRST Insurance Funding, Wintrust Life Finance and FIFC Canada consistently monitor carrier ratings and financial performance of our carriers. In the event carrier ratings fall below certain levels, most of Wintrust Life Finance’s life insurance premium finance policies provide for an event of default and allow Wintrust Life Finance to have recourse to borrowers and guarantors as well as to additional collateral in certain cases. For the commercial premium finance business, the term of the loans is sufficiently short such that in the event of a decline in carrier ratings, FIRST Insurance Funding or FIFC Canada, as the case may be, can restrict or eliminate additional loans to finance premiums to such carriers. The majority of premium finance receivables are purchased by the banks in order to more fully utilize their lending capacity as these loans generally provide the banks with higher yields than alternative investments.
Through our wholly-owned subsidiary Wintrust Asset Finance, we provide equipment financing through structured loan and lease products to customers in a variety of industries throughout the United States. Wintrust Asset Finance provides financing of fixed assets consisting of property, plant and equipment, transportation (trucks, trailers, rail, marine, buses), construction, manufacturing equipment, technology, oil and gas, restaurant equipment, medical and healthcare. As of December 31, 2024, the Company’s leasing portfolio, including direct financing leases, loans and equipment on operating leases, totaled $3.9 billion compared to $3.4 billion as of December 31, 2023. During 2024, Wintrust Asset Finance contributed approximately $89.6 million to our revenue, which does not reflect intersegment eliminations.
Through our wholly-owned subsidiary Tricom, we provide high-yielding, short-term accounts receivable financing and value-added, outsourced administrative services, such as data processing of payrolls, billing and cash management services to the temporary staffing industry. Tricom’s clients, located throughout the United States, provide staffing services to businesses in diversified industries. During 2024, Tricom processed payrolls with associated client billings of approximately $695.5 million
and contributed approximately $10.5 million to our revenue, net of interest expense, which does not reflect intersegment eliminations.
In 2024, our commercial premium finance operations, life insurance premium finance operations, leasing operations and accounts receivable finance operations accounted for 49%, 30%, 19% and 2%, respectively, of the total revenues of our specialty finance business. For the years ended December 31, 2024, 2023 and 2022 the specialty finance segment had net revenues of $475.6 million, $435.0 million and $344.4 million, respectively, and net income of $186.3 million, $175.5 million and $120.9 million, respectively. The specialty finance segment had total assets of $11.2 billion, $10.7 billion and $9.8 billion as of December 31, 2024, 2023 and 2022, respectively. The specialty finance segment accounted for 19.1% of our consolidated net revenues, excluding intersegment eliminations, for the year ended December 31, 2024.
Wealth Management
Through our wealth management segment, we offer a full range of wealth management services through four separate subsidiaries (WPT, Wintrust Investments, GLA and CDEC): trust and investment services, tax-deferred like-kind exchange services, asset management solutions, and securities brokerage services.
Wintrust Investments, our registered broker/dealer subsidiary which has been operating since 1931, provides a full range of private client and securities brokerage services to clients located primarily in the Midwest. Wintrust Investments is headquartered in downtown Chicago, operates an office in Appleton, Wisconsin, and has established branch locations in offices at a majority of our banks. Wintrust Investments also provides a full range of investment services to clients through a network of relationships with community-based financial institutions primarily located in Illinois. Wintrust Investments currently is regulated by the Securities and Exchange Commission (“SEC”) and the Financial Industry Regulatory Authority (“FINRA”) as a registered broker-dealer, as well as by the SEC as a registered investment adviser. In late January of 2025, following receipt of regulatory approvals and satisfaction of certain other conditions, Wintrust Investments transitioned support of the wealth management business of Wintrust Investments and certain private client business at GLA to a platform operated by LPL Financial Holdings, Inc. (“LPL”). As previously announced by Wintrust Investments, this transition is expected to allow Wintrust and GLA to focus on the growth of their wealth management business, while outsourcing most of their operational and compliance support to LPL. As a result of this outsourcing, Wintrust Investments also expects to deregister as a broker-dealer and investment advisor by the end of 2025.
WPT, our trust subsidiary, offers trust and investment management services to clients through offices located in downtown Chicago and at various banking offices of our sixteen banks. WPT is subject to regulation, supervision and regular examination by the OCC.
GLA, our registered investment adviser with locations in downtown Chicago, Tampa, Florida, and Stamford, Connecticut, as well as in various banking offices of our sixteen banks, provides money management services and advisory services to individuals, institutions, and municipal and tax-exempt organizations. GLA also provides portfolio management and financial advisory services for a wide range of pension and profit-sharing plans as well as money management and advisory services to WPT. GLA is regulated by the SEC as a registered investment adviser.
CDEC, our provider of tax-deferred like-kind exchange services, provides Qualified Intermediary services (as defined by U.S. Treasury regulations) for taxpayers seeking to structure tax-deferred like-kind exchanges under Internal Revenue Code (“IRC”) Section 1031. Under IRC Section 1031, a taxpayer may defer the gain on the sale of certain investment property if the taxpayer utilizes the services of a Qualified Intermediary. These transactions typically generate customer deposits during the period following the sale of the property until such proceeds are used to purchase a replacement property. These deposits may flow into our banks as a source of low-cost deposits. CDEC is the subsidiary of Elektra Holding Company, LLC (“Elektra”), which was acquired by the Company in December of 2018.
As of December 31, 2024, the Company’s wealth management subsidiaries had approximately $51.2 billion of assets under administration, which included $8.5 billion of assets owned by the Company and its subsidiary banks. For the years ended December 31, 2024, 2023 and 2022, the wealth management segment had net revenues of $198.1 million, $169.3 million and $162.9 million, respectively, and net income of $50.0 million, $33.0 million and $39.4 million, respectively. The wealth management segment had total assets of $1.1 billion, $1.2 billion and $1.8 billion as of December 31, 2024, 2023 and 2022, respectively. The wealth management segment accounted for 8.0% of our consolidated net revenues, excluding intersegment eliminations, for the year ended December 31, 2024.
Strategy and Competition
The Company has employed certain strategies to achieve strong net income amid increased competition and an environment, that up until recent years, was characterized by low interest rates. In general, the Company has taken a steady and measured approach to grow strategically and manage expenses. Specifically, the Company has:
•Leveraged its internal loan pipeline and external growth opportunities to grow earnings assets to increase net interest income;
•Continued to diversify our loan portfolio by adding product and geographic diversification;
•Continued efforts to grow our deposit franchise in a diversified manner to be the Company’s primary funding source;
•Completed strategic acquisitions to expand our presence in existing and complimentary markets;
•Invested in our technology infrastructure to allow for growth and to enhance digital and other product offerings to better serve our existing customers and to attract new customers;
•Focused on cost control and leveraging our infrastructure to grow without a commensurate increase in operating expenses; and
•Expanded the Wintrust Asset Finance direct leasing niche.
Our strategy and competitive position for each of our business segments is summarized in further detail, below.
Community Banking
We compete in the commercial banking industry through our banks in the communities they serve. The commercial banking industry is highly competitive and the banks face strong direct competition for deposits, loans and other financial related services. The banks compete with other commercial banks, thrifts, credit unions, stockbrokers, government-sponsored entities, mutual fund companies, insurance companies, factoring companies and other commercial entities offering financial services products, including non-bank financial companies and entities commonly known as financial technology companies. Some of these competitors are local, while others are statewide or nationwide.
As a $64.9 billion asset financial services company, we expect to benefit from greater access to financial and managerial resources than our smaller local competitors while maintaining our commitment to local decision-making and to our community banking philosophy. In particular, we are able to provide a wider product selection and larger credit facilities than many of our smaller competitors, and we believe our service offerings help us in recruiting talented staff. We continue to add lenders throughout the community banking organization, many of whom have joined us because of our ability to offer a range of products and level of services which compete effectively with both larger and smaller market participants. We have continued to expand our product delivery systems, including a wide variety of electronic banking options for our retail and commercial customers which allow us to provide a level of service typically associated with much larger banking institutions. Additionally, we have access to public capital markets whereas many of our local competitors are privately held and may have limited capital-raising capabilities.
Management views service as a great equalizer to offset some of the inherent advantages of its significantly larger competitors. We also believe we are positioned to compete effectively with other larger and more diversified banks, bank holding companies and other financial services companies due to the multi-chartered approach that pushes accountability for building a franchise and a high level of customer service down to each of our banking franchises. Additionally, we believe that we provide a relatively complete portfolio of products that is responsive to the majority of our customers’ needs through the retail and commercial operations supplied by our banks, and through our mortgage and wealth management operations. The breadth of our product mix allows us to compete effectively with our larger competitors, while our multi-chartered approach with local and accountable management provides for what we believe is superior customer service relative to our larger and more centralized competitors. We continue to grow and enhance our digital service offerings while maintaining our expectations of high quality, more traditional banking services.
Wintrust Mortgage competes with large mortgage brokers as well as other banking organizations. Consolidation, margin compression, enhanced regulatory guidance and the promise of equal oversight for both banks and independent mortgage lenders have created challenges for small and medium-sized independent mortgage lenders. Wintrust Mortgage’s size, bank affiliation, regulatory competency, branding, technology, business development tools and reputation make us well positioned to compete in this environment. Wintrust Mortgage balances selling loans with servicing retained versus servicing released to maximize current gain on sale revenue combined with potentially deepening customer relationships. While earnings will fluctuate with the rise and fall of long-term interest rates, we expect that mortgage banking revenue will be a continuous source of revenue for us and our mortgage lending relationships will continue to provide franchise value to our other financial service businesses.
We continue to review our branch footprint and in 2024, the Company opened nine new branch locations in the Chicago metropolitan area and acquired twenty-six branch locations in the west Michigan market (Kent, Ottawa, and northern Allegan counties) resulting from the Macatawa Bank acquisition completed in August of 2024. The Company also closed four branch locations in the Chicago metropolitan area. There was no material attrition or customer disruption in connection with these footprint changes. It is important to note that while we see increased use of electronic services and are investing heavily in digital capabilities to allow clients to choose how they want to be served, Wintrust expects that our strategy will continue to include selectively opening branches in areas where we are not represented.
Specialty Finance
FIRST Insurance Funding and Wintrust Life Finance encounter intense competition from numerous other firms, including a number of national commercial premium finance companies, companies affiliated with insurance carriers, independent insurance brokers who offer premium finance services and other lending institutions. Some of our competitors are larger and have greater financial and other resources. FIRST Insurance Funding and Wintrust Life Finance compete with these entities by emphasizing a high level of knowledge of the insurance industry, flexibility in structuring financing transactions, and the timely funding of qualifying contracts. We believe that our commitment to service also distinguishes us from our competitors. FIFC Canada competes with one national commercial premium finance company, a few regional providers and insurance broker owned premium finance companies where brokers finance their own customers policies.
Wintrust Asset Finance competes with other bank-affiliated, independent, captive and vendor equipment leasing and finance companies. Wintrust Asset Finance believes a customer-focused origination philosophy, an experienced team, strong underwriting discipline and expert asset management enables them to compete effectively in a growing and dynamic market.
Tricom competes with numerous other firms, including a small number of similar niche finance companies and payroll processing firms, as well as various finance companies, banks and other lending institutions. Tricom’s management believes that its commitment to service distinguishes it from competitors.
Wealth Management
Our wealth management companies (WPT, Wintrust Investments, GLA and CDEC) compete with larger wealth management subsidiaries of other larger bank holding companies as well as with other trust companies, brokerage and other financial service companies, stockbrokers and financial advisors. We believe we can successfully compete for trust, tax services, asset management and brokerage business by offering personalized attention and customer service to small to midsize businesses and affluent individuals. We continue to recruit and hire experienced wealth management professionals from within the larger Chicago metropolitan area as well as Wisconsin, west Michigan and southwest Florida, which is expected to help in attracting new customer relationships.
Supervision and Regulation
Regulatory Environment
Our business is heavily regulated and supervised by federal agencies, state agencies and the federal & provincial governments of Canada. Both the scope of the laws and regulations and the intensity of the supervision to which our business is subject have increased in recent years, initially in response to the financial crisis, and more recently in light of other factors such as the regional banking uncertainty in early 2023, technological updates, and market changes. Regulatory enforcement and fines have also increased across the banking and financial services sector. Many of these changes have occurred as a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) and its implementing regulations, most of which are now in place. We expect that our business will remain subject to extensive regulation and supervision.
The Company is a bank holding company under the Bank Holding Company Act of 1956, as amended (the “BHC Act”), subject to regulation, supervision, and examination by the Federal Reserve. The Company is also subject to the disclosure and regulatory requirements of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, both as administered by the SEC, as well as the rules of the Nasdaq Stock Market (“Nasdaq”) that apply to companies with securities listed on the Nasdaq Global Select Market. Each nationally-chartered bank is subject to regulation, supervision and regular examination by the OCC. The deposits of all of our subsidiary banks are insured by the Deposit Insurance Fund (“DIF”) and, as such, the FDIC has additional oversight authority over the banks. The supervision, regulation and examination of banks and bank holding companies by bank regulatory agencies are intended primarily for the protection of depositors, the DIF, and the banking system as a whole, rather than shareholders of banks and bank holding companies, and in some instances may be
contrary to shareholders’ interests. First Insurance Funding of Canada Inc. as a foreign owned subsidiary through an Edge corp. is subject to examination by the Federal Reserve.
The Consumer Financial Protection Bureau (“CFPB”) has broad rulemaking authority over a wide range of federal consumer protection laws applicable to the business of our subsidiary banks and some other operating subsidiaries. Because each of our subsidiary banks has less than $10 billion in total consolidated assets, our subsidiary banks’ federal banking agency, not the CFPB, is responsible for examining and supervising the subsidiary banks’ compliance with federal consumer protection laws and regulations. Our non-bank subsidiaries are subject to regulation by their functional regulators, including applicable state finance and insurance agencies, the applicable exchanges, the SEC, FINRA, and the OCC, as well as by the Federal Reserve.
Federal and state laws, and the regulations of the bank regulatory agencies issued under them, affect the scope of business, the kinds and amounts of investments banks may make, reserve requirements, capital levels, the nature and amount of collateral for loans, the establishment of branches, the ability to merge, consolidate and acquire, dealings with insiders and affiliates and the payment of dividends. The regulatory agencies have broad discretion to impose restrictions and limitations on the operations of a regulated entity where the agencies determine, among other things, that such operations are unsafe or unsound, fail to comply with applicable law or are otherwise inconsistent with laws and regulations or with the supervisory policies of these agencies.
The following is a description of some of the laws and regulations that affect our business. By necessity, the descriptions below are summaries that do not purport to be complete, and that are qualified in their entirety by reference to those statutes and regulations discussed, and all regulatory interpretations thereof. Any changes in applicable laws, regulations, or the interpretations thereof could have a material adverse effect on our business or the business of our subsidiaries.
Bank Holding Company Regulation
The Company is a bank holding company that has elected to be treated as a financial holding company. The activities of bank holding companies generally are limited to the business of banking, managing or controlling banks, and certain other activities determined by the Federal Reserve to be closely related to banking. As a financial holding company, we may engage in an expanded range of activities, including activities that are considered to be financial in nature. Financial holding companies may also engage in activities incidental or complementary to financial activities, if the Federal Reserve determines that such activities pose no substantial risk to the safety or soundness of depository institutions or the financial system in general. Impermissible activities for financial holding companies and their subsidiaries include activities that are related to commerce, such as sales of nonfinancial products or manufacturing. As a result, subject to certain exceptions, the BHC Act generally prohibits us from acquiring direct or indirect ownership or control of voting shares of any company engaged in activities that are not permissible for us to engage in.
Maintaining our financial holding company status requires that the Company and each of our subsidiary banks remain “well-capitalized” and “well-managed” as defined by regulation and that each of our subsidiary banks maintain at least a “satisfactory” rating under the Community Reinvestment Act (“CRA”). If we or our subsidiary banks fail to continue to meet these requirements, we could be subject to restrictions on new activities and acquisitions, and/or be required to cease and possibly divest operations that conduct existing activities that are not permissible for a bank holding company that is not a financial holding company.
The BHC Act generally requires us to obtain prior approval from the Federal Reserve before acquiring direct or indirect ownership or control of more than 5% of the voting shares of an additional bank or bank holding company, or to merge or consolidate with another bank holding company. The Bank Merger Act generally requires our subsidiary banks to obtain prior regulatory approval to merge or consolidate with, or acquire substantially all of the assets of or assume deposits of, another bank. We must also be well-capitalized and well-managed, in order to acquire a bank located outside of our home state.
The standards by which bank and financial institution acquisitions are evaluated have been undergoing review and change by the federal banking agencies. In September 2024, the OCC adopted a final rule and policy statement regarding its review of Bank Merger Act applications for OCC-supervised institutions. The final rule removes the ability for Bank Merger Act applicants to file a streamlined application form for certain types of acquisitions and removes the expedited review process for Bank Merger Act applications. The policy statement provides indicators of whether a Bank Merger Act application is more or less likely to be approved by the OCC. One indicator for approval is that the resulting institution has total assets of less than $50 billion, which the Company exceeds. The policy statement also provides heightened expectations around the existing statutory factors the OCC is required to consider in evaluating Bank Merger Act applications.
In September 2024, the Department of Justice (the “DOJ”) withdrew its 1995 Bank Merger Guidelines and issued the 2024 Banking Addendum to 2023 Merger Guidelines (the “2024 Banking Addendum”). The DOJ clarified that it will assess
competition considerations in connection with bank and bank holding company mergers using its 2023 Merger Guidelines, which is the general merger review framework the DOJ now uses to evaluate transactions in all segments of the economy, and 2024 Banking Addendum. The 2024 Banking Addendum provides guidance on how the DOJ will assess competition in the context of bank and bank holding company mergers. An analysis under the 2023 Merger Guidelines and 2024 Banking Addendum may include consideration of theories of harm and relevant markets not considered under the 1995 Bank Merger Guidelines, which focused primarily on concentrations of deposits and branches.
The Federal Deposit Insurance Act (“FDIA”) and Federal Reserve regulations and policy require us to serve as a source of financial and managerial strength for our subsidiary banks, and to commit resources to support the banks. This support may be required even if doing so may adversely affect our ability to meet other obligations.
Acquisitions of Ownership of the Company
Acquisitions of the Company’s voting stock above certain thresholds may be subject to prior regulatory notice or approval under applicable federal banking laws. Investors are responsible for ensuring that they do not, directly or indirectly, acquire shares of our stock in excess of the amount that can be acquired without regulatory approval or notice under the BHC Act and the Change in Bank Control Act.
Volcker Rule
We are prohibited under the Volcker Rule from (1) engaging in short-term proprietary trading for our own account, and (2) having certain ownership interests in and relationships with hedge funds or private equity funds. The fundamental prohibitions of the Volcker Rule apply to banking entities of any size, including the Company and its bank subsidiaries. The Volcker Rule regulations contain exemptions for market-making, hedging, underwriting, trading in U.S. government and agency obligations and also permit certain ownership interests in certain types of funds to be retained. They also permit the offering and sponsoring of funds under certain conditions. The Volcker Rule regulations impose significant compliance and reporting obligations on banking entities. The Company has put in place the compliance programs required by the Volcker Rule and has divested any holdings in illiquid funds. The Company will continue to monitor Volcker Rule-related developments and assess their impact on its operations as necessary.
Capital Requirements of the Company and Subsidiary Banks
We and our subsidiary banks are required to maintain minimum risk-based and leverage capital ratios, as well as a capital conservation buffer (“Capital Conservation Buffer”), pursuant to regulations adopted by the Federal Reserve and the OCC to implement the Basel III capital framework (“U.S. Basel III Rule”).
Regulatory Capital and Risk-weighted Assets
Regulatory capital requirements apply to Common Equity Tier 1 capital, Tier 1 capital and total capital.
•Common Equity Tier 1 capital consists primarily of common stock and related surplus (net of treasury stock), retained earnings, and certain minority interests, subject to certain regulatory adjustments. For us and our subsidiary banks, Common Equity Tier 1 capital does not include most elements of accumulated other comprehensive income (“AOCI”) because we exercised an opt-out election that was available to us with respect to certain changes in the capital treatment of AOCI. We made this election to avoid variations in the level of our capital depending on fluctuations in the fair value of our securities and derivatives portfolio.
•Tier 1 capital is composed of Common Equity Tier 1 capital and Additional Tier 1 capital. Additional Tier 1 capital consists primarily of non-cumulative perpetual preferred stock and related surplus, certain minority interests and, subject to certain regulatory limits, certain grandfathered cumulative perpetual preferred stock and certain grandfathered trust preferred securities.
•Total capital is composed of Tier 1 capital and Tier 2 capital. Tier 2 capital consists primarily of capital instruments and related surplus meeting specified requirements, and may include cumulative preferred stock and long-term perpetual preferred stock, mandatory convertible securities, intermediate preferred stock, certain trust preferred securities and subordinated debt. Also included in Tier 2 capital is the allowance for credit losses limited to a maximum of 1.25% of risk-weighted assets (“RWAs”) and, for institutions that have exercised the opt-out election regarding the treatment of AOCI up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values.
Certain adjustments to and deductions from capital are required for purposes of calculating these regulatory capital measures, including with respect to goodwill, intangible assets, certain deferred tax assets, AOCI and investments in the capital instruments of unconsolidated financial institutions. In July 2019, the U.S. bank regulators finalized changes to certain aspects of the U.S. Basel III capital rules that simplified, for certain bank holding companies and banks, including us and our subsidiary banks, the framework for capital deductions for mortgage servicing assets, certain deferred tax assets and investments in the capital instruments of unconsolidated financial institutions, and the recognition of minority interests in regulatory capital. These amendments were effective as of April 1, 2020.
Pursuant to rules adopted by the U.S. federal banking agencies, the Company elected to delay, for regulatory capital purposes, the day-one impact of Accounting Standards Update (“ASU”) 2016-13 Financial Instruments - Credit Losses (Topic 326) (“CECL”) on retained earnings over a period of five years. Under the five-year transition going through the end of 2024, the Company deferred for two years 100% of the day-one effect of adopting CECL and 25% of the cumulative increase or decrease in the allowance for credit losses since the adoption of CECL. For further discussion of the CECL accounting standard, including the Company’s implementation of such guidance, see “Summary of Critical Accounting Estimates” under Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Annual Report on Form 10-K.
Capital Ratio Requirements
Under the U.S. Basel III Rule, we and our subsidiary banks are required to maintain the following minimum capital ratios:
•Tier 1 capital to quarterly average assets (net of goodwill, certain other intangible assets and certain other deductions) ratio (“Tier 1 Leverage Ratio”) of 4.0%;
•Tier 1 capital to RWAs ratio (“Tier 1 Capital Ratio”) of 6.0%;
•Common Equity Tier 1 capital to RWAs ratio (“Common Equity Tier 1 Capital Ratio”) of 4.5%; and
•Total capital to RWAs ratio (“Total Capital Ratio”) of 8.0%.
To be well-capitalized, our subsidiary banks must maintain the following capital ratios:
•Tier 1 Leverage Ratio of 5.0% or greater.
•Tier 1 Capital Ratio of 8.0% or greater;
•Common Equity Tier 1 Capital Ratio of 6.5% or greater; and
•Total Capital Ratio of 10.0% or greater.
The Federal Reserve has not yet revised the well-capitalized standard for bank holding companies to reflect the higher capital requirements imposed under the U.S. Basel III Rule. For purposes of the Federal Reserve’s Regulation Y, including determining whether a bank holding company meets the requirements to be a financial holding company, bank holding companies, such as the Company, must maintain a Tier 1 Capital Ratio of 6.0% or greater and a Total Capital Ratio of 10.0% or greater to be well-capitalized. If the Federal Reserve were to apply the same or a very similar well-capitalized standard to bank holding companies as that applicable to our subsidiary banks, the Company’s capital ratios as of December 31, 2024 would exceed such revised well-capitalized standard. The Federal Reserve may require bank holding companies, including us, to maintain capital ratios substantially in excess of mandated minimum levels, depending upon general economic conditions and a bank holding company’s particular condition, risk profile and growth plans.
Failure to be well-capitalized or to meet minimum capital requirements could result in certain mandatory and possible additional discretionary actions by regulators, including restrictions on our or our subsidiary banks’ ability to pay dividends or otherwise distribute capital or to receive regulatory approval of applications, or other restrictions on growth. Such actions, if undertaken, could have an adverse material effect on our operations or financial condition.
In addition to meeting the minimum capital requirements, under the U.S. Basel III Rule, we and our banking subsidiaries must also maintain the required Capital Conservation Buffer to avoid becoming subject to restrictions on capital distributions and certain discretionary bonus payments to management. The Capital Conservation Buffer is 2.5% and is calculated as a ratio of Common Equity Tier 1 capital to RWAs and it effectively increases the required minimum risk-based capital ratios. The Tier 1 Leverage Ratio is not impacted by the Capital Conservation Buffer, and a banking institution may be considered well-capitalized while remaining out of compliance with the Capital Conservation Buffer.
The table below summarizes the capital requirements that we and our subsidiary banks must satisfy to avoid limitations on capital distributions and certain discretionary bonus payments (i.e., the required minimum capital ratios plus the Capital Conservation Buffer):
Minimum Regulatory Capital Ratio Plus Capital Conservation Buffer
Tier 1 capital ratio 8.50 %
Common Equity Tier 1 Capital Ratio 7.00
Total Capital Ratio 10.50
As of December 31, 2024, our Company’s and our subsidiary banks’ regulatory capital ratios were above the well-capitalized standards and met the Capital Conservation Buffer. Based on current estimates, we believe that we and our subsidiary banks will continue to exceed all applicable well-capitalized regulatory capital requirements and the Capital Conservation Buffer. Please refer to the table below for a summary of our regulatory capital ratios as of December 31, 2024, calculated using the regulatory capital methodology applicable to us during 2024.
Company Regulatory Capital Ratios
Minimum Regulatory Capital Ratio for the Company Minimum Ratio + Capital Conservation Buffer(1)
Well-Capitalized Minimum
for the Company(2)
The Company
Tier 1 leverage ratio 4.00 % N/A N/A 9.4 %
Risk-based capital ratios:
Tier 1 capital ratio 6.00 8.50 6.00 10.7
Common equity tier 1 capital ratio 4.50 7.00 N/A 9.9
Total capital ratio 8.00 10.50 10.00 12.3
(1)Reflects the Capital Conservation Buffer of 2.50%.
(2)Reflects the well-capitalized standard applicable to the Company for purposes of the Federal Reserve’s Regulation Y. The Federal Reserve has not yet revised the well-capitalized standard for BHCs to reflect the higher capital requirements imposed under the U.S. Basel III Rule or to add Common Equity Tier 1 capital ratio and Tier 1 leverage ratio requirements to this standard. As a result, the Common Equity Tier 1 capital ratio and Tier 1 leverage ratio are denoted as “N/A” in this column. If the Federal Reserve were to apply the same or a very similar well-capitalized standard to BHCs as the standard applicable to our subsidiary banks, the Company’s capital ratios as of December 31, 2024 would exceed such revised well-capitalized standard.
In addition to the above, as a result of participation in mortgage programs with certain government-sponsored entities as well as other investors, the Company has specific net worth requirements for continued participation. As of December 31, 2024, the Company remained in compliance with such requirements.
Payment of Dividends and Share Repurchases
We are a legal entity separate and distinct from our banking and non-banking subsidiaries. Since our consolidated net income consists largely of net income of our bank and non-bank subsidiaries, our ability to pay dividends and repurchase shares depends upon our receipt of dividends from our subsidiaries. There are various federal and state law limitations on the extent to which our banking subsidiaries can declare and pay dividends to us, including regulatory capital requirements, general regulatory oversight to prevent unsafe or unsound practices and federal and state banking law requirements concerning the payment of dividends out of net profits or surplus. Applicable banking laws also prohibit, without prior regulatory approval, insured depository institutions, such as our bank subsidiaries, from making dividend distributions if such distributions are not paid out of available earnings. In addition, our right, and the right of our shareholders and creditors, to participate in any distribution of the assets or earnings of our bank and non-bank subsidiaries is further subject to the prior claims of creditors of our subsidiaries. No assurances can be given that the banks will, in any circumstances, pay dividends to the Company.
We and our bank subsidiaries must maintain the applicable Common Equity Tier 1 Capital Conservation Buffer to avoid becoming subject to restrictions on capital distributions, including dividends. The Capital Conservation Buffer is currently at its fully phased-in level of 2.5%. For more information on the Capital Conservation Buffer, see Capital Ratio Requirements above.
Our ability to declare and pay dividends to our shareholders is similarly limited by federal banking law and Federal Reserve regulations and policy. Federal Reserve policy provides that a bank holding company should not pay dividends unless (1) the bank holding company’s net income over the last four quarters (net of dividends paid) is sufficient to fully fund the dividends, (2) the prospective rate of earnings retention appears consistent with the capital needs, asset quality and overall financial condition of the bank holding company and its subsidiaries and (3) the bank holding company will continue to meet minimum required capital adequacy ratios. The policy also provides that a bank holding company should inform the Federal Reserve reasonably in advance of declaring or paying a dividend that exceeds earnings for the period for which the dividend is being paid or that could result in a material adverse change to the bank holding company’s capital structure. Bank holding companies also are required to consult with the Federal Reserve before materially increasing dividends. The Federal Reserve could prohibit or limit the payment of dividends by a bank holding company if it determines that payment of the dividend would constitute an unsafe or unsound practice.
FDICIA and Prompt Corrective Action
The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) requires the federal bank regulatory agencies to take “prompt corrective action” regarding FDIC-insured depository institutions that do not meet certain capital adequacy standards. A depository institution’s treatment for purposes of the prompt corrective action provisions depends upon its level of capitalization and certain other factors. An institution that fails to remain well-capitalized becomes subject to a series of restrictions that increase in severity as its capital condition weakens. Such restrictions may include a prohibition on capital distributions, restrictions on asset growth or restrictions on the ability to receive regulatory approval of applications. The FDICIA also provides for enhanced supervisory authority over under capitalized institutions, including authority for the appointment of a conservator or receiver for the institution. In certain instances, a bank holding company may be required to guarantee the performance of an under capitalized subsidiary bank’s capital restoration plan.
As of December 31, 2024, each of the Company’s banks was categorized as “well-capitalized” and, in addition, met additional requirements under the Capital Conservation Buffer.
Enforcement Authority
The federal bank regulatory agencies have broad authority to issue orders to depository institutions and their holding companies prohibiting activities that constitute violations of law, rule, regulation, or administrative order, or that represent unsafe or unsound banking practices, as determined by the federal banking agencies. The federal banking agencies also are empowered to require affirmative actions to correct any violation or practice; issue administrative orders that can be judicially enforced; direct increases in capital; limit dividends and distributions; restrict growth; assess civil money penalties against institutions or individuals who violate any laws, regulations, orders, or written agreements with the agencies; order termination of certain activities of holding companies or their non-bank subsidiaries; remove officers and directors; order divestiture of ownership or control of a non-banking subsidiary by a holding company; or terminate deposit insurance and appoint a conservator or receiver.
Safety and Soundness
The federal bank regulatory agencies have adopted a set of guidelines prescribing safety and soundness standards relating to internal controls and information systems, informational security, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, and compensation, fees and benefits. The guidelines prohibit excessive compensation as an unsafe and unsound practice and describe compensation as excessive when the amounts paid are unreasonable or disproportionate to the services performed by an executive officer, employee, director or principal shareholder.
Properly managing risks has been identified by regulators as critical to the conduct of safe and sound banking activities and has become even more important as new technologies, product innovation, and the size and speed of financial transactions have changed the nature of banking markets. The agencies have identified a spectrum of risks facing banking institutions including, but not limited to, credit, market, liquidity, operational, legal, and reputational risk. Some of the regulatory pronouncements have focused on operational risk, which arises from the potential that inadequate information systems, operational problems, breaches in internal controls, fraud, or unforeseen catastrophes will result in unexpected losses. New products and services, third-party risk management and cybersecurity are critical sources of operational risk that financial institutions are expected to address in the current environment. Our subsidiary banks are expected to have active board and senior management oversight; adequate policies, procedures, and limits; adequate risk measurement, monitoring, and management information systems; and comprehensive and effective internal controls.
Cross-Guarantee
Under the cross-guarantee provision of the FDIA, insured depository institutions such as our subsidiary banks may be liable to the FDIC for any losses incurred, or reasonably expected to be incurred, by the FDIC resulting from the default of, or FDIC assistance to, any other commonly controlled insured depository institution. An FDIC cross-guarantee claim against a depository institution is superior in right of payment to claims of the holding company and its affiliates against such depository institution. All of our subsidiary banks are commonly controlled within the meaning of the cross-guarantee provision.
Insurance of Deposit Accounts
The deposits of each of our subsidiary banks are insured by the DIF up to the standard maximum deposit insurance amount of $250,000 per depositor. Each of our subsidiary banks is subject to deposit insurance assessments based on the risk it poses to the DIF, as determined by the capital category and supervisory category to which it is assigned. The FDIC has authority to raise or lower assessment rates on insured deposits in order to achieve statutorily required reserve ratios in the DIF and to impose special additional assessments. There is a risk that our subsidiary banks’ deposit insurance premiums will increase if failures of insured depository institutions deplete the DIF or if the FDIC were to change its view of the risk that they pose to the DIF.
Extraordinary growth in insured deposits during the first and second quarters of 2020 caused the DIF reserve ratio to decline below the statutory minimum of 1.35%. On June 21, 2022, the FDIC Board of Directors adopted an Amended Restoration Plan. The FDIC later adopted a final rule, applicable to all insured depository institutions, to increase initial base deposit insurance assessment rate schedules uniformly by 2 basis points, beginning in the first quarterly assessment period of 2023. The FDIC also concurrently maintained the Designated Reserve Ratio (“DRR”) for the DIF at 2% for 2023 and 2024. The increase in assessment rate schedules is intended to increase the likelihood that the reserve ratio of the DIF reaches the statutory minimum of 1.35% by the statutory deadline of September 30, 2028. The new assessment rate schedules will remain in effect unless and until the reserve ratio meets or exceed 2% in order to support growth in the DIF in progressing toward the FDIC’s long-term goal of 2% DRR. Progressively lower assessment rate schedules will take effect when the reserve ratio reaches 2%, and again when it reaches 2.5%.
In November 2023, the FDIC issued a final rule to implement a special assessment to recoup losses to the DIF associated with bank failures in the first half of 2023. Under the rule, the assessment base for the special assessment is equal to an insured depository institution’s estimated uninsured deposits reported as of December 31, 2022, adjusted to exclude the first $5 billion of uninsured deposits. Wintrust recorded $34.4 million and $5.2 million, respectively, in the fourth quarter of 2023 and first quarter of 2024. Special assessment payments began in June of 2024 and will continue for a total of eight quarterly installments in the initial collection period. The FDIC currently projects that the special assessment will be collected for an additional two quarters beyond the initial eight quarter period at a lower rate, subject to change depending on any adjustments to the loss estimate, mergers or failures, or amendments to reported estimates of uninsured deposits. The FDIC may impose additional special assessments from time to time based on the actual losses incurred by the FDIC as a result of the March 2023 bank failures or future failures.
Limits on Loans to One Borrower and Loans to Insiders
Federal banking laws impose limits on the amount of credit a bank can extend to any one person (or group of related persons). For national banks, this limit includes credit exposures arising from derivative transactions, repurchase agreements, and securities lending and borrowing transactions.
Applicable banking laws and regulations also place restrictions on loans by FDIC-insured banks and their affiliates to their directors, executive officers and principal shareholders.
Lending Standards and Guidance
The federal banking agencies have adopted uniform regulations prescribing standards for extensions of credit that are secured by liens or interests in real estate or made for the purpose of financing permanent improvements to real estate. Under these regulations, all insured depository institutions, such as our subsidiary banks, must adopt and maintain written policies establishing appropriate limits and standards for extensions of credit that are secured by liens or interests in real estate or are made for the purpose of financing permanent improvements to real estate. These policies must establish loan portfolio diversification standards, prudent underwriting standards (including debt service coverage and loan-to-value limits) that are clear and measurable, loan administration procedures, and documentation, approval and reporting requirements. The real estate lending policies must reflect consideration of the federal bank regulators’ Interagency Guidelines for Real Estate Lending Policies.
Anti-Money Laundering Programs
The Bank Secrecy Act (the “BSA”) and USA PATRIOT Act of 2001 (the “USA PATRIOT Act”) contain anti-money laundering (“AML”) and financial transparency provisions intended to detect, and prevent the use of the U.S. financial system for, money laundering and terrorist financing activities. The BSA, as amended by the USA PATRIOT Act, requires financial institutions, including banks, to undertake activities including maintaining an AML program, verifying the identity of customers, monitoring for and reporting suspicious transactions, reporting on cash transactions exceeding specified thresholds, and responding to requests for information by regulatory authorities and law enforcement agencies. Each of our subsidiary banks is subject to the BSA and, therefore, is required to provide its employees with AML training, designate an AML compliance officer and undergo periodic, independent audits to assess the effectiveness of its AML program. We have implemented policies, procedures and internal controls that are designed to comply with these AML requirements. Bank regulators are focusing their examinations on AML compliance, and we will continue to monitor and augment, where necessary, our AML compliance programs. The federal banking agencies are required, when reviewing bank and bank holding company acquisition or merger applications, to take into account the effectiveness of the AML activities of the applicant.
The Anti-Money Laundering Act of 2020 (the “AMLA”), enacted on January 1, 2021 as part of the National Defense Authorization Act, does not directly impose new requirements on banks, but requires the U.S. Treasury Department to issue National Anti-Money Laundering and Countering the Financing of Terrorism Priorities, and conduct studies and issue regulations that may, over the next few years, significantly alter some of the due diligence, recordkeeping and reporting requirements that the BSA and USA PATRIOT Act impose on banks. The AMLA also contains provisions that promote increased information-sharing and use of technology, and increases penalties for violations of the BSA and includes whistleblower incentives, both of which could increase the prospect of regulatory enforcement.
In an effort to increase transparency in the U.S. financial system and prevent shell entities from being used to launder money or hide assets, AMLA includes the Corporate Transparency Act (the “CTA”), which requires the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) to, among other things, establish a national beneficial ownership information registry. In September 2022, FinCEN issued the final Beneficial Ownership Information Reporting Requirements rule (the BOI Reporting Rule) which, effective January 1, 2024, requires certain “reporting companies” to file beneficial ownership information reports with FinCEN that will be stored in the national beneficial ownership registry and will detail the reporting company’s beneficial owners. In December 2023, FinCEN issued the final Beneficial Ownership Information Access and Safeguards rule-the second of three rulemakings that would implement the CTA-which governs access to the national beneficial ownership registry. FinCEN has not yet issued the third CTA-implementing regulation, which will amend the beneficial ownership requirements applicable to banks and other covered financial institutions under FinCEN’s existing Customer Due Diligence (“CDD”) rule. The constitutionality of the CTA is subject to ongoing litigation, and it is not clear what impact the new rules will have on our bank subsidiaries; however, the Company’s compliance costs will likely increase as the Company develops enhanced CDD procedures and recalibrates customer information collection and reporting systems to effectively respond to the CTA’s new requirements.
Office of Foreign Assets Control Regulation
The U.S. Department of the Treasury’s Office of Foreign Assets Control, or “OFAC,” is responsible for administering economic sanctions that affect transactions with designated foreign countries and territories, nationals and others, as defined by various Executive Orders and Acts of Congress. OFAC-administered sanctions take many different forms. For example, sanctions may include: (1) restrictions on trade with or investment in a sanctioned country or territory, including prohibitions against direct or indirect imports from and exports to a sanctioned country or territory and prohibitions on U.S. persons engaging in financial transactions relating to, making investments in, or providing investment-related advice or assistance to, a sanctioned country or territory; and (2) a blocking of assets in which the government or “specially designated nationals” of the sanctioned country or territory have an interest, by prohibiting transfers of property subject to U.S. jurisdiction (including property in the possession or control of U.S. persons). OFAC also publishes lists of persons and organizations that are subject to asset blocking sanctions, known as the Specially Designated Nationals and Blocked Persons List. Blocked assets (e.g., property and bank deposits) cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC. Failure to comply with these sanctions could have serious legal and reputational consequences.
Protection of Client Information
Data privacy and cybersecurity laws and regulations concerning the collection, storage, handling, use, disclosure, transfer, protection and other processing of client information (including personal information) affect many aspects of the Company’s business, and are continuing to evolve. Data privacy and cybersecurity are currently areas of considerable legislative and regulatory attention, with new or modified laws, regulations, rules and standards frequently being adopted and potentially
subject to divergent interpretation or application in a manner that may create inconsistent or conflicting requirements for businesses.
We are, or may in the future become, subject to a variety of complex federal, state and local laws, regulations, rules and standards regarding data privacy and cybersecurity, including the privacy and information safeguarding provisions of the Gramm-Leach-Bliley Act (“GLB Act”), the Fair Credit Reporting Act (“FCRA”) and the amendments adopted by the Fair and Accurate Credit Transactions Act of 2003, as well as various state laws and regulations. The GLB Act requires a financial institution to, among other things, disclose its privacy policy to certain customers and, in some circumstances, enables certain customers to opt-out of certain sharing of the customers’ nonpublic personal information with nonaffiliated third parties. The GLB Act also requires financial institutions to implement a comprehensive information security program that includes administrative, technical and physical safeguards to ensure the security and confidentiality of customer information. In accordance with these requirements, we and each of our banks and operating subsidiaries provide a written privacy notice to each affected customer when the customer relationship begins and, to the extent required, on an annual basis. As described in the privacy notice, we endeavor to protect the security of information (including personal information) about our customers, educate our employees about the importance of protecting customer privacy, and allow affected customers to opt-out of certain types of information sharing. We and our subsidiaries also require business partners with which we share information (including personal information) to have adequate security safeguards and to follow the requirements of the GLB Act. The GLB Act, as interpreted by the federal banking regulators, and state laws and regulations require us to take certain actions, including providing notice under certain circumstances to affected customers, in the event that sensitive or personal customer information is compromised. We and/or each of the banks and operating subsidiaries may need to amend our privacy policies and adapt our internal procedures in the event that these legal requirements, or the regulators’ interpretation of them, change, or if new requirements are added. Additionally, the federal banking regulators, as well as the SEC and related self-regulatory organizations, regularly issue guidance regarding cybersecurity that is intended to enhance cyber risk management among financial institutions.
Data privacy and cybersecurity also are areas of increasing state legislative focus. For example, the California Consumer Privacy Act, as amended by the California Privacy Rights Act (collectively, the “CCPA”) applies to covered businesses that conduct business in California and meet certain revenue or personal information collection thresholds. The CCPA contains several exemptions, including that many, but not all, requirements of the CCPA are inapplicable to personal information that is collected, processed, sold or disclosed pursuant to the GLB Act. The CCPA imposes obligations on covered companies, broadly defines personal information, expands California residents’ rights with respect to personal information, and provides for civil penalties for violations. The CCPA may be interpreted or applied in a manner inconsistent with our understanding, resulting in further uncertainty and potentially requiring us to incur additional costs and expenses in an effort to comply with these requirements. Similar laws have been adopted by other states where we do business, or may in the future do business. At least four such laws (in Virginia, Colorado, Connecticut and Utah) took effect in 2023. In addition, laws in all 50 U.S. states generally require businesses to provide notice under certain circumstances to consumers whose personal information has been disclosed as a result of a data breach. Moreover, the federal government has recently considered, and is currently considering, various proposals for more comprehensive data privacy and cybersecurity legislation, to which we may be subject if passed.
Like other lenders, the banks and several of our operating subsidiaries use credit bureau data in their underwriting activities. Use of such data is regulated under the FCRA, and the FCRA also regulates, among other things, reporting information to credit bureaus, prescreening individuals for credit offers, sharing of information (including personal information) between affiliates, and using affiliate data for marketing purposes. Similar state laws and regulations may impose additional requirements on us, the banks and our operating subsidiaries.
Further, in the spring of 2022, the Federal Reserve, OCC, and FDIC adopted a regulation that requires a banking organization to notify its primary federal regulators as soon as possible and within 36 hours after identifying a “computer-security incident” that the banking organization believes in good faith is reasonably likely to materially disrupt or degrade its business or operations in a manner that would, among other things, jeopardize the viability of its operations, result in customers being unable to access their deposit and other accounts, result in a material loss of revenue, profit or franchise value, or pose a threat to the financial stability of the United States. The rule also imposes requirements on bank service providers to notify their affected banking organization customers of certain computer-security incidents.
Violation of these laws, rules, regulations and standards may expose us to regulatory action and private litigation, including claims for damages and penalties. For more information regarding the risks associated with data privacy and cybersecurity laws and regulations, see “We are subject to complex and evolving laws, regulations, rules, standards and contractual obligations regarding data privacy and cybersecurity, which could increase the cost of doing business, compliance risks and potential liability” and “We face risks from cyber-attacks, information security breaches and other similar incidents that could result in
the disclosure of confidential and other information (including personal information), all of which could adversely affect our business or reputation, and create significant legal and financial exposure” under Risk Factors in Item 1A.
Broker-Dealer and Investment Adviser Regulation
Wintrust Investments and GLA currently are subject to extensive regulation under federal and state securities laws. Wintrust Investments is registered as a broker-dealer with the SEC and in all 50 states, the District of Columbia and the U.S. Virgin Islands. Both Wintrust Investments and GLA are registered as investment advisers with the SEC. In addition, Wintrust Investments is a member of several self-regulatory organizations (“SROs”), including FINRA. In addition to SEC rules and regulations, the SROs adopt rules, subject to approval of the SEC, that govern all aspects of business in the securities industry and conduct periodic examinations of member firms. Wintrust Investments is also subject to regulation by state securities commissions in states in which it conducts business. Wintrust Investments and GLA are registered only with the SEC as investment advisers, but certain of their advisory personnel are subject to regulation by state securities regulatory agencies.
As a result of federal and state registrations and SRO memberships, Wintrust Investments is subject to overlapping schemes of regulation that cover all aspects of its securities businesses. Such regulations cover uses and safekeeping of clients’ funds; record-keeping and reporting requirements; supervisory and organizational procedures intended to assure compliance with securities laws and to prevent improper trading on material nonpublic information; personnel-related matters, including qualification and licensing of supervisory and sales personnel; limitations on extensions of credit in securities transactions; clearance and settlement procedures; “suitability” and best interest determinations as to certain customer transactions; limitations on the amounts and types of fees and commissions that may be charged to customers; and regulation of proprietary trading activities and affiliate transactions. Violations of the laws and regulations governing a broker-dealer’s actions can result in censures, fines, the issuance of cease-and-desist orders, revocation of licenses or registrations, the suspension or expulsion from the securities industry of a broker-dealer or its officers or employees, or other similar actions by both federal and state securities administrators, as well as the SROs.
As a registered broker-dealer, Wintrust Investments is subject to the SEC’s net capital rule as well as the net capital requirements of the SROs of which it is a member. Net capital rules, which specify minimum capital requirements, are designed to measure general financial integrity and liquidity and require that at least a minimum amount of net assets be kept in relatively liquid form. Rules of FINRA and other SROs also impose limitations and requirements on the transfer of member organizations’ assets. Compliance with net capital requirements may limit the Company’s operations requiring the intensive use of capital. These requirements restrict the Company’s ability to withdraw capital from Wintrust Investments, which in turn may limit the Company’s ability to pay dividends, repay debt or redeem or purchase shares of the Company’s own outstanding stock. Wintrust Investments is a member of the Securities Investor Protection Corporation (“SIPC”), which subject to certain limitations, serves to oversee the liquidation of a member brokerage firm, and to return missing cash, stock and other securities owed to the firm’s brokerage customers, in the event a member broker-dealer fails. The general SIPC protection for customers’ securities accounts held by a member broker-dealer is up to $500,000 for each eligible customer, including a maximum of $250,000 for cash claims. SIPC does not protect brokerage customers against investment losses. In addition to SIPC coverage, the clearing firm utilized by Wintrust Investments offers certain insurance coverage. In the event of the clearing firm’s insolvency, clients whose cash and securities were not fully protected by SIPC may benefit from this additional insurance. The policy provides coverage to each client up to $1.9 million, subject to an aggregate cap of $1 billion for all policy beneficiaries.
Wintrust Investments and GLA in their capacities as investment advisers are subject to regulations covering matters such as transactions between clients, transactions between the adviser and clients, custody of client assets and management of mutual funds and other client accounts. The principal purpose of regulation and discipline of investment firms is the protection of customers, clients and the securities markets rather than the protection of creditors and shareholders of investment firms. Sanctions that may be imposed for failure to comply with laws or regulations governing investment advisers include the suspension of individual employees, limitations on an adviser’s engaging in various asset management activities for specified periods of time, the revocation of registrations, other censures and fines.
In late January of 2025, following receipt of regulatory approvals and satisfaction of certain other conditions, Wintrust Investments transitioned support of the wealth management business of Wintrust Investments and certain private client business at GLA to a platform operated by LPL. As previously announced by Wintrust Investments, this transition is expected to allow Wintrust and GLA to focus on the growth of their wealth management business, while outsourcing most of their operational and compliance support to LPL. As a result of this outsourcing, Wintrust Investments also expects to deregister as a broker-dealer and investment advisor by the end of 2025.
Incentive Compensation
The federal banking agencies have issued joint guidance on incentive compensation designed to ensure that the incentive compensation policies of banking organizations, such as us and our subsidiary banks, do not encourage imprudent risk taking and are consistent with the safety and soundness of the organization. In addition, the Dodd-Frank Act requires the federal banking agencies and the SEC to issue regulations or guidelines requiring covered financial institutions, including us and our subsidiary banks, to prohibit incentive-based payment arrangements that encourage inappropriate risks by providing compensation that is excessive or that could lead to material financial loss to the institution. A proposed rule was issued in 2016 and re-proposed in May 2024 requesting public comments and questions. It is unclear when, if ever, the proposed rule will be finalized.
Also pursuant to the Dodd-Frank Act, in October 2022, the SEC adopted final rules that direct stock exchanges to require listed companies to implement clawback policies to recover incentive-based compensation from current or former executive officers in the event of certain financial restatements and require companies to disclose their clawback policies and certain actions under those policies. The Nasdaq listing standards required compliance by November 28, 2023.
De Novo Branching and De Novo Banks
With the approval of applicable regulators, national banks and state banks may establish de novo branches in states other than their home state as if such state was the bank’s home state.
For a three-year period, newly chartered banks are subject to enhanced supervisory procedures, including higher capital requirements, more frequent examinations and other requirements.
Anti-Tying Provisions
Each of our subsidiary banks is prohibited from conditioning the availability of any product or service, or varying the price for any product or service, on the requirement that the customer obtain some additional product or service from the bank or any of its affiliates, other than loans, deposits and trust services.
Transactions with Affiliates
Certain transactions between a bank and its holding company or other non-bank affiliates are subject to various restrictions imposed by state and federal law and regulation. Such “covered transactions” include loans and other extensions of credit by the bank to the affiliate, investments in securities issued by the affiliate, purchases of assets from the affiliate, certain derivative transactions that create a credit exposure to an affiliate, the acceptance of securities issued by the affiliate as collateral for a loan, and the issuance of a guarantee, acceptance or letter of credit on behalf of the affiliate. In general, these affiliate transaction rules limit the number of covered transactions between an institution and a single affiliate, as well as the aggregate amount of covered transactions between an institution and all of its affiliates. In addition, covered transactions that are credit transactions must be secured by acceptable collateral, and all affiliate transactions, including those that do not qualify as covered transactions, must be on terms that are at least as favorable to the bank as then-prevailing in the market for comparable transactions with unaffiliated entities. Transactions between affiliated banks may be subject to certain exemptions under applicable federal law.
Community Reinvestment Act
Under the CRA, insured depository institutions, including our subsidiary banks, have a continuing and affirmative obligation to help meet the credit needs of its entire community, including low and moderate-income neighborhoods. The CRA does not establish specific lending requirements or programs for insured depository institutions, nor does it limit an insured depository institution’s discretion to develop the types of products and services that it believes are best suited to its particular community, consistent with the CRA. However, insured depository institutions are rated on their performance in meeting the needs of their communities. The CRA requires each federal banking agency to take an insured depository institution’s CRA record into account when evaluating certain applications by the insured depository institution or its holding company, including applications for charters, branches and other deposit facilities, relocations, mergers, consolidations, acquisitions of assets or assumptions of liabilities, and bank and savings association acquisitions. An unsatisfactory record of performance may be the basis for denying or conditioning approval of an application by an insured depository institution or its holding company. The CRA also requires that all institutions publicly disclose their CRA ratings. Each of our subsidiary banks received a “satisfactory” or better rating from the OCC on its most recent CRA performance evaluation.
On October 24, 2023, the Federal Reserve, FDIC, and OCC issued a final rule to amend their regulations implementing the CRA. The rule materially revises the current CRA framework, including the assessment areas in which a bank is evaluated to include activities associated with online and mobile banking, the tests used to evaluate the bank in its assessment areas, new methods of calculating credit for lending, investment and service activities, and additional data collection and reporting requirements. The rule is expected to result in a significant increase in the thresholds for large banks to receive “Outstanding” ratings in the future. The final rule was expected to take effect April 1, 2024, with most of its provisions becoming applicable on January 1, 2026. Compliance with data and disclosure reporting requirements will not be required until 2027. Several banking industry groups filed a lawsuit seeking to invalidate the CRA final rule, in which they argued that the federal banking agencies exceeded their statutory authority in adopting the CRA final rule. In March 2024, a federal judge granted an injunction to extend the CRA final rule’s effective date, originally set for April 1, 2024. The effective date will be extended each day the injunction remains in place, pending the resolution of the lawsuit.
Compliance with Consumer Protection Laws
Our subsidiary banks and some other operating subsidiaries are subject to a variety of federal and state statutes and regulations designed to protect consumers. The CFPB has broad rulemaking authority over a wide range of federal consumer protection laws that apply to banks and other providers of financial products and services, including the authority to prohibit “unfair, deceptive or abusive” acts and practices, but examination and supervision is carried out by each subsidiary bank’s primary federal banking agency and, where applicable, state banking agency, not the CFPB. In addition, the Dodd-Frank Act authorizes state attorneys general and other state officials to enforce consumer protection rules issued by the CFPB. State authorities have recently increased their focus on and enforcement of consumer protection rules.
Interest and other charges collected or contracted for by banks are subject to state usury laws and federal laws concerning interest rates.
Loan operations are also subject to federal laws and regulations applicable to credit transactions, such as:
Issued by the CFPB:
•The federal Truth-In-Lending Act and Regulation Z governing disclosures of credit terms to consumer borrowers;
•The Real Estate Settlement Procedures Act and Regulation X requiring that borrowers for mortgage loans for one- to four-family residential real estate receive various disclosures, including good faith estimates of settlement costs, lender servicing and escrow account practices, and prohibiting certain practices that increase the cost of settlement services;
•The Home Mortgage Disclosure Act and Regulation C requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;
•The Equal Credit Opportunity Act and Regulation B prohibiting discrimination on the basis of various prohibited factors in extending credit;
•The Fair Credit Reporting Act and Regulation V governing the use and provision of information to consumer reporting agencies; and
•The Fair Debt Collection Practices Act and Regulation F governing the manner in which consumer debts may be collected by collection agencies;
Issued by others:
•The Service Members Civil Relief Act, applying to all debts incurred prior to commencement of active military service (including credit card and other open-end debt) and limiting the amount of interest, including service and renewal charges and any other fees or charges (other than bona fide insurance) that is related to the obligation or liability; and
•The guidance of the various federal agencies charged with the responsibility of implementing such federal laws.
Deposit operations are subject to, among others:
Issued by the CFPB:
•The Truth in Savings Act and Regulation DD which require disclosure of deposit terms to consumers; and
•The Electronic Fund Transfer Act and Regulation E which governs automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services;
Issued by others:
•Regulation CC issued by the Federal Reserve Board, which relates to the availability of deposit funds to consumers; and
•The Right to Financial Privacy Act, which imposes a duty to maintain the confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records.
There are consumer protection standards that apply to functional areas of operation rather than applying only to loan or deposit products. Our subsidiary banks and some other operating subsidiaries are also subject to certain state laws and regulations designed to protect consumers.
The CFPB has promulgated, and continues to promulgate, many mortgage-related final rules since it was established under the Dodd-Frank Act, including rules related to the ability to repay and qualified mortgage standards, mortgage servicing standards, loan originator compensation standards, high-cost mortgage requirements, Home Mortgage Disclosure Act requirements and appraisal and escrow standards for higher priced mortgages. Most of the provisions of these mortgage-related final rules are currently effective. In addition, several proposed revisions to mortgage-related rules are pending finalization. The mortgage-related final rules issued by the CFPB have materially restructured the origination, servicing and securitization of residential mortgages in the United States. These rules have impacted, and will continue to impact, the business practices of mortgage lenders, including the Company.
In order to ensure compliance with all mortgage-related rules and regulations, the Company consolidated its consumer mortgage loan origination and loan servicing operations primarily within Wintrust Mortgage. All consumer mortgage applications are taken through Wintrust Mortgage, which has extensively trained loan originators located at many of our branches. While in certain limited cases our banks may offer specialized consumer mortgages to our customers, substantially all consumer mortgages for all of our banks are originated and closed by Wintrust Mortgage. Wintrust Mortgage then sells loans to third parties or to our banks. To the extent that we retain consumer mortgage loans in our bank portfolios, our banks have engaged Wintrust Mortgage to provide loan servicing.
In March 2023, the CFPB issued the “Small Business Lending Rule” to implement Section 1071 of the Dodd-Frank Act for the stated purpose of increasing transparency in small business lending, promoting economic development and combating unlawful discrimination. Under this rule, covered lenders, including the Company’s bank subsidiaries, are required to collect and report information about the small business credit applications they receive, including geographic and demographic data, lending decisions and the price of credit. In October 2023, a federal district court issued a nationwide injunction prohibiting the CFPB from implementing or enforcing the Small Business Lending Rule pending the U.S. Supreme Court’s decision in an appeal of a Fifth Circuit decision finding that the CFPB’s funding structure is unconstitutional. The Supreme Court overruled the Fifth Circuit’s finding and extended the CFPB compliance deadlines for the Small Business Lending Rule to compensate for the period in which its implementation and enforcement of the rule was stayed by the district court. The extended compliance dates for the Small Business Lending Rule begin as early as July 2025. It is anticipated that the Company will require a material effort to update its systems and train its lenders to comply with the Small Business Lending Rule.
In October 2024, the CFPB finalized a rule to implement Section 1033 of the Dodd-Frank Act, sometimes referred to as the Dodd-Frank Act’s “open banking” provision, which would require certain entities, including the Company and our bank subsidiaries, to comply with an established framework to govern consumer access to electronic financial data. In general, the rule requires, among other things, data providers holding a consumer account, such as our bank subsidiaries, to establish a developer interface satisfying certain data security specifications and other standards, through which the data provider can receive requests for, and provide, specific types of data covered by the rule in electronic, usable form to authorized third parties, including data aggregators. Under the rule, data providers are prohibited from, among other things, charging consumers or third parties fees for processing these consumer data requests. The rule also places certain data security, authorization and other obligations on third parties accessing covered data from data providers, which could include the Company and our bank subsidiaries when acting in certain capacities. The rule requires third parties to limit their collection, use, and retention of the data received to only what is reasonably necessary to provide the consumers’ requested product or service. The final rule is subject to ongoing litigation that could impact whether and when the Company and our bank subsidiaries are required to comply with the rule. The Company continues to monitor this rule and evaluate the potential impacts on the Company and our bank subsidiaries.
Changes to consumer protection regulations, including those promulgated by the CFPB, could affect our business but the likelihood, timing and scope of any such changes and the impact any such change may have on us cannot be determined with any certainty. See Item 1A. Risk Factors.
Debit Interchange
We are subject to a statutory requirement that interchange fees for electronic debit transactions that are paid to or charged by payment card issuers, including our bank subsidiaries, be reasonable and proportional to the cost incurred by the issuer. Interchange fees for electronic debit transactions are limited to 21 cents plus 0.05% of the transaction, plus an additional one cent per transaction fraud adjustment, impose requirements regarding routing and exclusivity of electronic debit transactions. On October 3, 2022, the Federal Reserve finalized a rule that amended Regulation II to, among other things, specify that debit card issuers should enable all debit card transactions, including card-not-present transactions such as online payments, to be processed on at least two unaffiliated payment card networks. The final rule became effective July 1, 2023. As an issuer with over $10 billion in assets, we are subject to Regulation II and have incorporated all new requirements as of July 1, 2023.
In October 2023, the Federal Reserve released a notice of proposed rulemaking that would lower the maximum interchange fee that a large debit card issuer can receive on a debit card transaction. Under the proposal, initially the base component would decrease from 21.0 cents to 14.4 cents, the ad valorem component would decrease from 5.0 basis points to 4.0 basis points multiplied by the value of the transaction, and the fraud-prevention adjustment would increase from 1.0 cents to 1.3 cents for the debit card transactions performed from the effective date of the final rule to June 30, 2025. In addition, the proposal would adopt an approach for future adjustments to the interchange fee cap, which would occur every other year based on issuer cost data gathered from large debit card issuers. We will continue to monitor the status of the proposed rule and are in the process of evaluating this proposed rulemaking and assessing the scale of its adverse impact on the Company and our bank subsidiaries, if adopted as proposed.
Human Capital Resources
Since its formation, Wintrust has held the objective of aiming to differentiate itself by offering customers a highly-personalized banking experience, through staff that is warm, friendly, and responsive. Wintrust expects each of its employees to embody that original mission by serving as brand ambassadors each day, within each community served by our banks and other business units.
Workforce Overview
As of December 31, 2024, Wintrust employed 5,903 full-time equivalent employees in the U.S. and Canada. 98% of Wintrust’s employees are classified as full-time, working greater than 30 hours per week. None of our employees are represented by a collective bargaining agreement and we consider our employee relations to be good.
Talent Recruiting and Retention
At Wintrust we recognize that attracting, motivating and retaining talent at all levels is vital to continuing our success. In 2024, Wintrust filled over 1,390 positions, including external hires, internal transfers/promotions, and temporary hires. In 2024, 53% of our new hires self-identified as female and 41% of our new hires self-identified as a racial or ethnic minority. Wintrust promotes an employee referral program, which we believe favorably influences colleague retention and engagement. Turnover for the entire Wintrust enterprise for the year was approximately 12% and of that voluntary departures accounted for approximately 75% of the total turnover.
Wintrust offers a robust total rewards package that is designed to attract, motivate and retain a talented and inclusive group of employees. In addition to competitive, performance-based compensation plans, we provide employees with comprehensive benefits packages. Wintrust consistently monitors and adapts its total rewards program design to reflect both market changes and employee feedback.
Inclusion
Wintrust strives to promote an inclusive culture where each employee can be successful, and one that is reflective of the communities we serve. Women currently represent 56% of Wintrust’s workforce. In addition, the racial and ethnic representation in Wintrust’s workforce is 33%. To further support inclusion across Wintrust, we have taken the following steps:
•Continued the “shared responsibility in action” theme with Paired To Win: Mentoring, a program launched in 2023 designed to enable access to mentoring for all employees across the enterprise. Over 1,300 Wintrust employees participated in the mentoring program and 33% of participants were minorities.
•Continued our Paired To Win: Advocacy program, which is open to all employees, pairs select high-potential protégés with senior executive advocates. The third cohort launched in 2024, and includes over 73% women and 13% minority mid-level leaders. The program objective is to accelerate development of leadership opportunities for protégés within one to three years after launching the partnership. As an outcome of the program, 48% of the proteges from the inaugural cohort have been promoted.
•Continued to offer and support Business Resource Groups (“BRG”) to all employees to help foster a sense of belonging and recognizing the value of creating an inclusive and supportive workplace for all of our employees. Our BRGs consist of Leadership Coalition, Multicultural Professionals Network, Career Navigation, Prism, and Women of Wintrust. Approximately 23% of Wintrust employees have registered as members of one or more BRG.
•Continued the 360° Inclusivity Model, a multicultural marketing framework for addressing the unique needs of an increasingly diverse marketplace by taking inclusive approaches to eradicating financial disparities in the communities we serve, through access to products and services.
•Supported each of our business units as they update their Business Unit Action Plans, documenting key goals and effective efforts towards fostering inclusion internally and externally in a relevant and intentional way. The Business Unit Action Plan is updated annually and reviewed by senior leaders and the Board of Directors.
Learning & Development
We are committed to providing all team members with development opportunities through individual and career development planning. Our employees have access to approximately 500 Banking topics, 200 Professional Skills topics and 770 customized training courses and resources through Wintrust University - our learning portal. In 2024, we maintained an online training catalog containing over 21,000 course offerings for our employees’ personal and professional development and, in 2024, invested more than 177,000 total hours in training by team members.
We routinely identify and recognize talented employees by performing comprehensive reviews of leadership capability, readiness, aspiration and succession planning. To support the development of our internal talent pipeline, we have invested in a number of programs to support the development of future leaders and additional training for senior leaders with strategic accountability. To support the development of future leaders, over 425 leaders participated in at least one of our leadership development programs in 2024. We also developed the “Leadership Journey”, an eight-phase program that supports our leaders at every phase of their advancement.
Annually, Wintrust team members at all levels certify their completion of regulatory training based upon their roles and responsibilities. They also are encouraged to complete a minimum of two professional development activities each year.
Climate Impact
The Company’s approach in considering its climate impact is currently focused on mitigating the environmental impact of operations, specifically at its various banking locations; assessing other climate-related risks within the Company’s various businesses; and providing support to projects and investments that contribute to climate solutions. In 2024, some of the highlights of this approach included the following:
•The Company continued to monitor the climate impact of its various banking locations, including its corporate campus that consists of three office buildings located in Rosemont, Illinois. In 2024, the corporate campus green house gas carbon emissions (CO2e) totaled 3,692 tons in 2024 compared to 3,938 tons in 2023. The Company also measures green house gas carbon emissions (CO2e) at a majority of its retail banking locations and the aggregate measurement of such emissions from the Company’s corporate campus and the retail banking locations totaled 17,699 tons in 2024 related to 187 locations compared to 18,607 tons in 2023 related to 181 locations.
•The Company continued to pursue certain renewable energy solutions as well as efficient building standards and technologies.
•GLA executes investing through its Climate Opportunities strategy (which began in 2013) as well as additional client portfolios which emphasize climate considerations. These portfolios include investments in solutions for green
buildings, renewable energy, sustainable agriculture, sustainable water, energy efficiency and pollution prevention. At December 31, 2024, these portfolios totaled approximately $135 million in climate-focused assets.
Available Information
The Company’s Internet address is www.wintrust.com. The Company makes available at this address, under the “Investor Relations” tab, free of charge, its Annual Report on Form 10-K, its annual reports to shareholders, Quarterly Reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. These filings are also available on the SEC’s website at www.sec.gov.

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ITEM 1A. RISK FACTORS
ITEM 1A. RISK FACTORS
Risk Factors Summary
The summary of risks below provides an overview of the principal risks we are exposed to in the normal course of our business activities. This summary does not contain all of the information provided in the detailed discussion of risks that follows this summary and should be read together with such detailed discussion.
Risks Related to Economic Conditions and Operating Environment
•Includes risks related to deterioration in economic conditions and economic declines in the Chicago metropolitan, southern Wisconsin and west Michigan market areas, since our business is concentrated in these regions, and climate change and related environmental and sustainability matters.
Risks Related to Competition and Reputation
•Includes risks related to our ability to compete effectively, damage to our reputation, consumers deciding not to use banks to complete their financial transactions and the impact on us from the soundness of other financial institutions.
Risks Related to Growth and Acquisitions
•Includes risks related to our ability to identify favorable acquisitions or successfully integrate our acquisitions, our participation in FDIC-assisted acquisitions, new lines of business and new products and services and de novo operations that often involve significant expenses and delayed returns.
Legal and Regulatory Risks
•Includes risks related to our ability to meet regulatory capital ratios, changes in the United States’ monetary policy, legislative and regulatory actions taken now or in the future regarding the financial services industry, changes in data privacy and cybersecurity laws and regulations, financial reform legislation and increased regulatory rigor around consumer protection mortgage-related issues, federal, state and local consumer lending laws that may restrict our ability to originate certain mortgage loans or increase our risk of liability with respect to such loans, regulatory initiatives regarding bank capital requirements that may require heightened capital, any increase in our FDIC insurance premiums, any non-compliance with the USA PATRIOT Act, BSA or other laws and regulations, claims and legal actions, examinations and challenges by tax authorities, changes in federal and state tax laws and changes in the interpretation of existing laws, changes in accounting policies or accounting standards and changes in U.S. trade policies, including the imposition of tariffs and retaliatory tariffs.
Risks Related to Lending Operations
•Includes risks related to our allowance for credit losses and sufficiency to absorb losses that may occur in our loan portfolio, the repayment of commercial loans which are largely dependent upon the financial success and economic viability of the borrower, our loan portfolio being secured by real estate, in particular commercial real estate, events impacting collateral consisting of real property, any inaccurate assumptions in our analytical and forecasting models and environmental liability risk associated with lending activities.
Risks Related to Our Niche Businesses
•Includes risks related to our premium finance business, which may involve a higher risk of delinquency or collection than our other lending operations, widespread financial difficulties or credit downgrades among commercial and life insurance providers and exposure to certain risks associated with the securities industry.
Risks Related to Financial Strength and Liquidity
•Includes risks related to changes in prevailing interest rates, our liquidity position, an actual or perceived reduction in our financial strength, loss of deposits or a change in deposit mix, our credit rating, capital not being available when it is needed or the cost of that capital being very high, disruption in the financial markets, and being a bank holding company and therefore being limited in sources of funds, including to pay dividends.
Risks Related to General Operations
•Includes risks related to our controls and procedures, our operational or security systems or infrastructure, or those of third parties, fraud and security risks (including cyber-attacks, information security breaches and other similar incidents and those associated with debit cards and debit card transactions), the failure of vendors, the accuracy and completeness of information we receive about our customers and counterparties to make credit decisions, our ability to attract and retain experienced and qualified personnel, losses incurred in connection with actual or projected repurchases and indemnification payments related to mortgages that we have sold into the secondary market and the occurrence of extraordinary events, such as acts of war, terrorist attacks, natural disasters and public health threats.
Risks Related to Ownership of Our Common Stock
•Anti-takeover provisions could negatively impact our shareholders.
Risk Factors
An investment in our securities is subject to risks inherent to our business. Certain material risks and uncertainties that management believes affect Wintrust are described below. Before making an investment decision, you should carefully consider the risks and uncertainties described below together with all of the other information included or incorporated by reference in this Annual Report on Form 10-K and in our other filings with the SEC. Additional risks and uncertainties that management is not aware of or that management currently deems immaterial may also impair Wintrust’s business operations. This Annual Report on Form 10-K is qualified in its entirety by these risk factors. If any of the following risks actually occur, our business, financial condition and results of operations could be materially and adversely affected. If this were to happen, the value of our securities could decline significantly, and you could lose all or part of your investment.
Risks Related to Economic Conditions and Operating Environment
Deterioration in economic conditions may materially adversely affect the financial services industry and our business, financial condition, results of operations and cash flows.
Our business activities and earnings are affected by general economic and business conditions in the United States and abroad, including factors such as the level and volatility of short-term and long-term interest rates, inflation, home prices, unemployment and underemployment levels, bankruptcies, household income, consumer spending, fluctuations in both debt and equity capital markets, liquidity of the global financial markets, the availability and cost of capital and credit, investor sentiment and confidence in the financial markets, and the strength of the domestic economies in which we operate. The deterioration of any of these conditions can adversely affect our consumer and commercial businesses and securities portfolios, our level of charge-offs and provision for credit losses, our capital levels and liquidity, and our results of operations.
As a lending institution, our business is directly affected by the ability of our borrowers to repay their loans, as well as by the value of collateral, such as real estate, that secures many of our loans. Any economic deterioration from current levels or slowing of current economic activity could lead to an increase in loan charge-offs and negatively affect consumer confidence as well as the level of business activity. Net charge-offs totaled $94.4 million in 2024 compared to $45.5 million in 2023. Our balance of non-performing loans and other real estate owned (“OREO”) was $170.8 million and $23.1 million, respectively, at December 31, 2024 compared to $139.0 million and $13.3 million, respectively, at December 31, 2023. Deterioration in the economy and real estate markets, higher inflation, rising interest rates or increased unemployment rates, particularly in the markets in which we operate, will likely diminish the ability of our borrowers to repay loans that we have made to them, decrease the value of any collateral securing such loans and may cause increases in delinquencies, problem assets, charge-offs and provision for credit losses, all of which could materially adversely affect our financial condition and results of operations. Further, the underwriting and credit monitoring policies and procedures that we have adopted may not prevent losses that could have a material adverse effect on our business, financial condition, results of operations and cash flows.
A U.S. government debt default or rating downgrade could have a material adverse impact on our business and financial performance, including a decrease in the value of Treasury bonds and other government securities we hold, which could negatively impact the banks’ capital position and ability to meet regulatory requirements. Other negative impacts could include volatile capital markets, an adverse impact on the U.S. economy and the U.S. dollar, as well as increased default rates among
borrowers in light of increased economic uncertainty. Some of these impacts might occur even in the absence of an actual default by or rating downgrade of the U.S. government but as a consequence of the uncertainty caused by extended political negotiations around the threat of such a default or rating downgrade and a U.S. government shutdown.
Since our business is concentrated in the Chicago metropolitan, southern Wisconsin and west Michigan market areas, economic declines in the economy of this region could adversely affect our business.
Except for our premium finance business and certain other niche businesses, our success depends primarily on the general economic conditions of the specific local markets in which we operate. Unlike larger national or other regional banks that are more geographically diversified, we provide banking and financial services to customers primarily in the Chicago metropolitan, southern Wisconsin and west Michigan market areas. The local economic conditions in these areas significantly impact the demand for our products and services as well as the ability of our customers to repay loans, the value of the collateral securing loans and the stability of our deposit funding sources.
In addition, the State of Illinois has experienced significant financial difficulty in recent years. To the extent that these issues impact the economic vitality of the state and the businesses operating in Illinois, businesses may be encouraged to leave the state or new employers may be discouraged to start or move businesses to Illinois, which could have a material adverse effect on our financial condition and results of operations.
Climate change manifesting as transition, physical or other risks could adversely affect our operations, businesses, customers, reputation and financial condition.
The physical risks of climate change include discrete events, such as flooding, hurricanes, tornadoes and wildfires, and longer-term shifts in climate patterns, such as extreme heat, sea level rise, and more frequent and prolonged drought. Such events could disrupt our operations or those of our customers or third parties on which we rely, including through direct damage to assets and indirect impacts from supply chain disruption and market volatility. Additionally, transitioning to a low-carbon economy would entail extensive policy, legal, technology, human capital and market initiatives, each of which may be costly. Transition risks, including changes in consumer preferences, additional regulatory requirements or taxes and additional counterparty or customer requirements, could increase our expenses, undermine our strategies and impact our financial condition.
In addition, our reputation and client relationships may be damaged as a result of our practices related to climate change, including our involvement, or our clients’ involvement, in certain industries or projects associated with causing or exacerbating climate change, as well as any decisions we make to continue to conduct or change our activities in response to considerations relating to climate change. As climate risk is interconnected with all key risk types, we have begun to develop and continue to enhance processes, to embed climate risk considerations into our risk management strategies established for risks such as market, credit and operational risks; however, because the timing and severity of climate change may not be predictable, our risk management strategies may not be effective in mitigating climate risk exposure.
Risks Related to Competition and Reputation
The financial services industry is very competitive, and if we are not able to compete effectively, we may lose market share and our business could suffer.
We face competition in attracting and retaining deposits, making loans, and providing other financial services (including wealth management services) throughout our market area. Our competitors include national, regional and other community banks, and a wide range of other financial institutions such as credit unions, government-sponsored enterprises, mutual fund companies, insurance companies, factoring companies and other non-bank financial companies such as marketplace lenders and other financial technology companies. Many of these competitors have substantially greater resources and market presence or more advanced technology than Wintrust and, as a result of their size, may be able to offer a broader range of products and services, better pricing for those products and services, or newer technologies to deliver those products and services than we can. The financial services industry could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation. For example, the Economic Growth Act and its implementing regulations significantly reduce the regulatory burden of certain large BHCs and raise the asset thresholds at which more onerous requirements apply, which could cause certain large BHCs to become more competitive or to more aggressively pursue expansion. Also, technology has lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks, such as mobile payment and other automatic transfer and payment systems, and for banks that do not have a physical presence in our markets to compete for deposits. The absence of regulatory requirements may give non-bank financial companies a competitive advantage over Wintrust.
Our ability to compete successfully depends on a number of factors, including, among other things:
•the ability to develop, maintain and build upon long-term customer relationships based on top quality service and high ethical standards;
•the scope, relevance and pricing of products and services offered to meet customer needs and demands;
•the ability to expand our market position;
•the ability to uphold our reputation in the marketplace;
•the rate at which we introduce new products and services relative to our competitors;
•customer satisfaction with our level of service; and
•industry and general economic trends.
If we are unable to compete effectively, our market share and income from deposits, loans and other products may be reduced. This could adversely affect our profitability and have a material adverse effect on our business, financial condition and results of operations.
Damage to our reputation may harm our business.
Maintaining trust in the Company is critical to our ability to attract and maintain customers, investors and employees. If our reputation is damaged, our business could be significantly harmed. Harm to our reputation could arise from numerous sources, including, among others, employee misconduct, security and cybersecurity breaches, compliance failures, litigation or regulatory outcomes or governmental investigations. Our reputation could also be harmed by the failure or perceived failure of an affiliate or a vendor or other third party with which we do business, to comply with applicable laws or regulations. In addition, our reputation or prospects could be significantly damaged by adverse publicity or negative information regarding the Company, whether or not true, that may be posted on social media, non-mainstream news services or other parts of the internet, and this risk can be magnified by the speed and pervasiveness with which information is disseminated through those channels.
Actions by the financial services industry generally or by certain members of or individuals in the industry can also affect our reputation. For example, the role played by financial services firms during and after the financial crisis, including concerns that consumers have been treated unfairly by financial institutions or that a financial institution had acted inappropriately with respect to the methods employed in offering products to customers, have damaged the reputation of the industry as a whole.
Should any of these or other events or factors that can undermine our reputation occur, there is no assurance that the additional costs and expenses that we may need to incur to address the issues giving rise to the damage to our reputation would not adversely affect our earnings and results of operations, or that damage to our reputation will not impair our ability to retain our
existing customers and employees or attract new customers and employees. Harm to our reputation or the reputation of our industry may also result in greater regulatory or legislative scrutiny, which may lead to changes in laws or regulations that could constrain our business or operations. Events that result in damage to our reputation may also increase our litigation risk.
Investors’ and other stakeholders’ expectations of our performance relating to environmental, social and governance factors may impose additional costs and expose us to new risks.
Increased focus on environmental, social and governance (“ESG”) issues could damage our reputation or prospects if customers, prospective customers, investors or third parties assigning ESG ratings to the Company are of the opinion that the Company’s practices, including without limitation our lending practices, are not sufficiently robust from an ESG perspective, or otherwise disagree with the Company’s practices. Simultaneous, disparate and divergent sentiments on ESG-related matters from multiple stakeholder groups increase the risk that any action or lack thereof by us on such matters will be perceived negatively by some stakeholders. Failing to comply with expectations and standards from investors, customers, regulators, policymakers and other stakeholders regarding ESG-related issues, or taking action in conflict with one or another of those stakeholders’ expectations, could also lead to a loss of business, adverse publicity, an adverse impact on our reputation, customer complaints or other adverse consequences.
At the same time, “anti-ESG” sentiment has gained momentum among certain groups across the United States, and the federal and certain state governments have proposed or enacted anti-ESG legislation, rules, regulations and policies. Such anti-ESG measures may lead to increased scrutiny and expose us to the risk of litigation, regulatory exposure and reputational harm. Additionally, certain states now require that certain investment managers make investments based solely on financial considerations, without regard to consideration of ESG factors. If investors subject to such legislation viewed us, our policies or our practices as being in contradiction of such anti-ESG requirements, such investors may not invest in us, which could negatively affect our financial performance.
Consumers may decide not to use banks to complete their financial transactions, which could adversely affect our business and results of operations.
Technology and other changes are allowing parties to complete financial transactions that historically have involved banks through alternative methods. For example, consumers can now maintain funds that would have historically been held as bank deposits in brokerage accounts or mutual funds. Consumers can also complete transactions such as paying bills and transferring funds directly without the assistance of banks. The process of eliminating banks as intermediaries could result in the loss of fee income, as well as the loss of customer deposits and the related income generated from those deposits. The loss of these revenue streams and the lower cost deposits as a source of funds could have a material adverse effect on our business, financial condition and results of operations.
We may be adversely impacted by the soundness of other financial institutions.
Adverse developments affecting the overall strength and soundness of other financial institutions, the financial services industry as a whole and the general economic climate and the U.S. Treasury market could have a negative impact on perceptions about the strength and soundness of our business even if we are not subject to the same adverse developments. In addition, adverse developments with respect to third parties with whom we have important relationships could also negatively impact perceptions about us. These perceptions about us could cause our business to be negatively affected and exacerbate the other risks that we face.
Wintrust may be impacted by actual or perceived soundness of other financial institutions, including as a result of the financial or operational failure of a major financial institution, or concerns about the creditworthiness of such a financial institution or its ability to fulfill its obligations, which can cause substantial and cascading disruption within the financial markets and increased expenses, including FDIC insurance premiums, and could affect our ability to attract and retain depositors and to borrow or raise capital. The failure of other banks and financial institutions and the measures taken by governments, businesses and other organizations in response to these events could adversely impact Wintrust’s business, financial condition and results of operations.
Wintrust’s ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial services institutions are interrelated as a result of trading, clearing, counterparty or other relationships. We have exposure to many different industries and counterparties and routinely execute transactions with counterparties in the financial services industry, including the Federal Home Loan Bank (“FHLB”), commercial banks, brokers and dealers, investment banks and other institutional clients. Many of these transactions expose us to credit risk as well as market and liquidity risk in the event of a default by a counterparty or client. In addition, our credit risk
may be exacerbated when collateral held by us cannot be realized or is liquidated at prices not sufficient to recover the full amount due to us. Any such losses could have material adverse effect on our business, financial condition and results of operations.
In addition a decrease in the supply of deposits or significant increase in competition for deposits could result in substantial increases in costs to retain and service deposits. Increased adoption of consumer banking technology could result in reduced deposit retention due to the relevant ease with which depositors may transfer deposits to a different depository institution in the event that confidence is lost in us or any of our bank subsidiaries.
Risks Related to Growth and Acquisitions
If we are unable to continue to identify favorable acquisitions or successfully integrate our acquisitions, our growth may be limited and our results of operations could suffer.
In the past, we have completed numerous acquisitions of banks, other financial services related companies and financial services related assets, including acquisitions of troubled financial institutions, as more fully described below. We expect to continue to make such acquisitions in the future. Wintrust seeks merger or acquisition partners that are culturally similar, have experienced management, possess either significant market presence or have potential for improved profitability through financial management, economies of scale or expanded services. Failure to successfully identify and complete acquisitions may result in Wintrust achieving slower growth.
The standards by which bank and financial institution acquisitions will be evaluated are currently in flux and some banking organizations are experiencing delays in the processing of applications. For example, the OCC adopted a final rule in September 2024 amending its procedures for reviewing applications under the Bank Merger Act (the “BMA”) and adding a policy statement on the OCC’s substantive approach to evaluating bank mergers under the BMA. The policy statement outlines the general principles the OCC will apply when reviewing bank merger applications and clarifies how the OCC would consider the statutory factors under the BMA. The policy statement also identifies certain indicators that are more likely to withstand scrutiny and be approved expeditiously and those that would raise supervisory or regulatory concerns. Indicators generally consistent with timely approval include, among others, appropriate capital and supervisory ratings, lack of enforcement or fair lending actions, lack of significant CRA or consumer compliance concerns or significant adverse effect on competition and that the resulting institution would have total assets less than $50 billion.
Acquiring other banks, businesses or branches involves various risks commonly associated with acquisitions, including, among other things:
(1)potential exposure to unknown or contingent liabilities or asset quality issues of the target company;
(2)failure to adequately estimate the level of loan losses at the target company;
(3)difficulty and expense of integrating the operations and personnel of the target company;
(4)potential disruption to our business, including diversion of our management's time and attention;
(5)the possible loss of key employees and customers of the target company;
(6)difficulty in estimating the value of the target company; and
(7)potential changes in banking or tax laws or regulations that may affect the target company.
Acquisitions typically involve the payment of a premium over book and market values, and, therefore, some dilution of Wintrust’s tangible book value and net income per common share may occur as a result of any future acquisitions. In addition, certain acquisitions may expose us to additional regulatory risks, including from foreign governments. Our ability to comply with any such regulations will impact the success of any such acquisitions. Furthermore, failure to realize the expected revenue increases, cost savings, increases in geographic or product presence, and/or other projected benefits from an acquisition could have a material adverse effect on our financial condition and results of operations.
New lines of business and new products and services are essential to our ability to compete but may subject us to additional risks.
We continually implement new lines of business and offer new products and services within existing lines of business to offer our customers a competitive array of products and services. The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services, such as the rapid adoption of mobile payment platforms. The effective use of technology can increase efficiency and enable financial institutions to better serve customers and to reduce costs. However, some new technologies needed to compete effectively result in incremental
operating costs. Our future success depends, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in operations. Many of our competitors, because of their larger size and available capital, have substantially greater resources to invest in technological improvements. We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers. Failure to successfully keep pace with technological change affecting the financial services industry, including the emerging use of artificial intelligence and machine learning, could cause a loss of customers and have a material adverse effect on our business.
At the same time, there can be substantial risks and uncertainties associated with these efforts, particularly in instances where the markets for such services are still developing. In developing and marketing new lines of business and/or new products or services, we may invest significant time and resources. Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved, and price and profitability targets may not prove feasible. External factors, such as compliance with regulations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service. Furthermore, any new line of business and/or new product or service could have a significant impact on the effectiveness of our system of internal controls. Failure to successfully manage these risks in the development and implementation of new lines of business or new products or services could have a material adverse effect on our business, financial condition, and results of operations.
De novo operations often involve significant expenses and delayed returns and may negatively impact Wintrust's profitability.
Our financial results have been and will continue to be impacted by our strategy of branch openings and de novo bank formations. We expect to increase the opening of additional branches and may, under certain circumstances, resume de novo bank formations. It may take longer than expected or more than the amount of time Wintrust has historically experienced for new banks and/or banking facilities to reach profitability, and there can be no guarantee that these branches or banks will ever be profitable. Moreover, the FDIC's enhanced supervisory period for de novo banks of three years, including higher capital requirements during this period, could also delay a new bank's ability to contribute to the Company's earnings and impact the Company's willingness to expand through de novo bank formation. To the extent we undertake additional de novo bank, branch and business formations, our level of reported net income, return on average equity and return on average assets will be impacted by startup costs associated with such operations, and it is likely to continue to experience the effects of higher expenses relative to operating income from the new operations. These expenses may be higher than we expected or than our experience has shown, which could have a material adverse effect on our business, financial condition and results of operations.
Legal and Regulatory Risks
If we fail to meet our regulatory capital ratios, we may be forced to raise capital or sell assets.
As a banking institution, we are subject to regulations that require us to maintain certain capital ratios, such as the ratio of our Tier 1 capital to our risk-based assets, and in recent years these regulatory and market expectations have increased substantially. If our regulatory capital ratios decline, as a result of decreases in the value of our loan portfolio or otherwise, we may be required to improve such ratios by either raising additional capital or by disposing of assets. If we choose to dispose of assets, we cannot be certain that we will be able to do so at prices that we believe to be appropriate, and our future operating results could be negatively affected. If we choose to raise additional capital, we may accomplish this by selling additional shares of common stock, or securities convertible into or exchangeable for common stock, which could significantly dilute the ownership percentage of holders of our common stock and cause the market price of our common stock to decline. Additionally, events or circumstances in the capital markets generally may increase our capital costs and impair our ability to raise capital at any given time.
Changes in the United States’ monetary policy may restrict our ability to conduct our business in a profitable manner.
Our ability to profitably operate is dependent, in part, upon federal fiscal policies that cannot be predicted. We are particularly affected by the monetary policies of the Federal Reserve, which influence money supply in the United States. Any change in the United States’ monetary policy, or worsening federal budgetary pressures, could affect our access to capital. Additionally, any trend toward inflation, economic decline, destabilizing of financial markets, or other factors beyond our control may significantly affect consumer demand for our products and consumers’ ability to repay loans, reducing our results of operations.
The Federal Reserve lowered interest rates towards the end of 2024, while maintaining its balance sheet reduction throughout the entire year. Inflation remains above the Federal Reserve's two percent target rate and while the Federal Reserve may seek to
further lower interest rates in 2025, the range of potential rate paths will ultimately be driven by inflation data, labor market performance, and economic growth. It is anticipated the Federal Funds Rate will remain restrictive in the near term. Sustained higher interest rates and continued Federal Reserve asset reductions may adversely affect market stability, market liquidity, and our financial performance and condition. We cannot predict the nature or timing of future changes in monetary policies, or the precise effects that future changes in monetary policies may have on our activities and financial results.
Legislative and regulatory actions taken now or in the future regarding the financial services industry may significantly increase our costs or limit our ability to conduct our business in a profitable manner.
We are subject to extensive federal and state regulation and supervision. The cost of compliance with such laws and regulations can be substantial and adversely affect our ability to operate profitably. While we are unable to predict the scope or impact of any potential legislation or regulatory action until it becomes final, it is possible that changes in applicable laws, regulations or interpretations thereof could significantly increase our regulatory compliance costs, impede the efficiency of our internal business processes, negatively impact the recoverability of certain of our recorded assets, require us to increase our regulatory capital, interfere with our executive compensation plans, or limit our ability to pursue business opportunities in an efficient manner including our plan for de novo growth and growth through acquisitions.
We are subject to complex and evolving laws, regulations, rules, standards and contractual obligations regarding data privacy and cybersecurity, which could increase the cost of doing business, compliance risks and potential liability.
We are subject to complex and evolving laws, regulations, rules, standards and contractual obligations regarding data privacy and cybersecurity, including in relation to the personal information of customers, employees or others, and any failure to comply with these laws, regulations, rules, standards and contractual obligations could expose us to liability and/or reputational damage. As data privacy and cybersecurity risks for banking organizations and the broader financial system have significantly increased in recent years, data privacy and cybersecurity issues have become the subject of increasing legislative and regulatory focus. As new data privacy and cybersecurity-related laws, regulations, rules and standards are implemented, the time and resources needed for us to comply with such laws, regulations, rules and standards as well as our potential liability for non-compliance and reporting obligations in the case of cyber-attacks, information security breaches or other similar incidents, may significantly increase. Compliance with these laws, regulations, rules and standards may require us to change our policies, procedures and technology, which could, among other things, make us more vulnerable to operational failures and to monetary penalties for breach of such laws, regulations, rules and standards.
In addition to various data privacy and cybersecurity laws and regulations already in place, U.S. states are increasingly adopting laws and regulations imposing comprehensive data privacy and cybersecurity obligations, which may be more stringent, broader in scope, or offer greater individual rights, with respect to personal information than federal or other state laws and regulations, and such laws and regulations may differ from each other, which may complicate compliance efforts and increase compliance costs. Certain aspects of federal and state laws and regulations relating to data privacy and cybersecurity, as well as their enforcement, remain unclear, and we may be required to modify our practices in an effort to comply with them.
Further, while we strive to publish and prominently display privacy policies that are accurate, comprehensive, and compliant with applicable laws, regulations, rules and industry standards, we cannot ensure that our privacy policies and other statements regarding our practices will be sufficient to protect us from claims, proceedings, liability or adverse publicity relating to data privacy or cybersecurity. Although we endeavor to comply with our privacy policies, we may at times fail to do so or be alleged to have failed to do so. The publication of our privacy policies and other documentation that provide promises and assurances about data privacy and cybersecurity can subject us to potential federal or state action if they are found to be deceptive, unfair, or misrepresentative of our actual practices. Additional risks could arise in connection with any failure or perceived failure by us, our service providers or other third parties with which we do business to provide adequate disclosure or transparency to our customers about the personal information collected from them and its use, to receive, document or honor the privacy preferences expressed by our customers, to protect personal information from unauthorized disclosure, or to maintain proper training on privacy practices for all employees or third parties who have access to personal information in our possession or control.
Any failure or perceived failure by us to comply with our privacy policies, or applicable data privacy and cybersecurity laws, regulations, rules, standards or contractual obligations, or any compromise of security that results in unauthorized access to, or unauthorized loss, destruction, use, modification, acquisition, disclosure, release or transfer of personal information, may result in requirements to modify or cease certain operations or practices, the expenditure of substantial costs, time and other resources, proceedings or actions against us, legal liability, governmental investigations, enforcement actions, claims, fines, judgments, awards, penalties, sanctions and costly litigation (including class actions). Any of the foregoing could harm our reputation,
distract our management and technical personnel, increase our costs of doing business, adversely affect the demand for our products and services, and ultimately result in the imposition of liability, any of which could have a material adverse effect on our business, financial condition and results of operations. For more information regarding data privacy and cybersecurity laws and regulations, see “Protection of Client Information” under Supervision and Regulation in Item 1.
Financial reform legislation and increased regulatory rigor around consumer protection and mortgage-related issues may reduce our ability to market our products to consumers and may limit our ability to profitably operate our mortgage business.
The CFPB has broad rulemaking authority over a wide range of federal consumer protection laws applicable to the business of our subsidiary banks and some other operating subsidiaries, including the authority to prohibit “unfair, deceptive or abusive” acts and practices, but examination and supervision of our subsidiary banks is carried out by the primary federal banking agency and, where applicable, state banking agencies. Consumer protection is an area of significantly heightened regulatory focus, and the CFPB has promulgated a number of specific regulatory requirements and regulatory guidance in this area. These actions have increased and may further increase the costs of doing business for all market participants, including our subsidiaries.
In particular, the mortgage-related rules issued by the CFPB have materially restructured the origination, servicing and securitization of residential mortgages in the United States. These rules have impacted, and will continue to impact, the business practices of mortgage lenders, including the Company. For example, in order to ensure compliance with mortgage-related rules issued by the CFPB, the Company consolidated its consumer mortgage loan origination and loan servicing operations within Wintrust Mortgage.
The CFPB and federal and state banking agencies also closely examine the mortgage and mortgage servicing activities of depository financial institutions. Should these or other agencies have serious concerns with respect to our operations in this regard, the effect of such concerns could have a material adverse effect on our profits.
Federal, state and local consumer lending laws may restrict our ability to originate certain mortgage loans or increase our risk of liability with respect to such loans and could increase our cost of doing business.
Federal, state and local laws have been adopted that are intended to eliminate certain lending practices considered “predatory.” These laws prohibit practices such as steering borrowers away from more affordable products, selling unnecessary insurance to borrowers, repeatedly refinancing loans and making loans without a reasonable expectation that the borrowers will be able to repay the loans irrespective of the value of the underlying property. The CFPB has promulgated many mortgage-related rules since it was established under the Dodd-Frank Act, including rules relating to the ability to repay loans and relating to qualified mortgage standards. Most of these mortgage-related rules have been adopted, although portions of certain of these rules have not yet become effective. We may find it necessary to tighten our mortgage loan underwriting standards in response to the CFPB rules, which may constrain our ability to make loans consistent with our business strategies. It is our policy not to make predatory loans and to determine borrowers' ability to repay, but the law and related rules create the potential for increased liability with respect to our lending and loan investment activities. They increase our cost of doing business and, ultimately, may prevent us from making certain loans and cause us to reduce the average percentage rate or the points and fees on loans that we do make. In addition, regulation related to redlining, fair lending, CRA compliance and BSA compliance create significant burdens which necessitate increased costs. Any failure to comply with any of these regulations could have a significant impact on our ability to operate, our ability to acquire or open new banks and/or result in meaningful fines.
Regulatory initiatives regarding bank capital requirements may require heightened capital.
The U.S. Basel III Rule, as well as other aspects of current or proposed regulatory or legislative changes to laws applicable to banking organizations, have increased our compliance costs, impacted the profitability of our business activities and may change certain of our business practices, including the ability to offer new products, obtain financing, attract deposits, make loans, and achieve satisfactory interest spreads, and could expose us to additional costs, including increased compliance costs. These changes also may require us to invest significant management attention and resources to make any necessary changes to operations in order to comply, and could therefore also materially and adversely affect our business, financial condition and results of operations.
Our ability to engage in capital distributions, including paying dividends or repurchasing stock, may be restricted if we do not maintain the required Capital Conservation Buffer. In addition, we anticipate that our pro forma capital ratios will be an
important factor considered by the Federal Reserve in evaluating whether proposed payments of dividends or stock repurchases are consistent with its prudential expectations. For more information regarding capital requirements, see “Capital Requirements of the Company and Subsidiary Banks” under Supervision and Regulation in Item 1.
Our FDIC insurance premiums may increase, or the FDIC could adopt additional special assessments, either of which could negatively impact our results of operations.
The Dodd-Frank Act and FDIC regulations use an assessment base for federal deposit insurance premiums based on average total consolidated assets less average tangible capital. There is a risk that the banks’ deposit insurance premiums will increase in the future if failures of insured depository institutions once again deplete the DIF. Additionally, to recoup losses to the DIF resulting from the bank failures of 2023, the FDIC also adopted a special assessment that became effective in 2024 and will be collected over an initial eight quarterly assessment periods, which the FDIC currently projects will be extended for an additional two quarters at a lower rate, subject to certain adjustments. There is a risk that the FDIC could adopt additional special assessments in the future to recoup future DIF losses. Either of these events could negatively impact our financial condition and results of operations. For more information regarding the most recent increase to the banks’ deposit insurance premiums, see “Insurance of Deposit Accounts” under Supervision and Regulation in Item 1.
Non-compliance with the USA PATRIOT Act, BSA or other laws and regulations could result in fines or sanctions.
The USA PATRIOT Act and the BSA require financial institutions to develop risk-based compliance programs designed to prevent financial institutions from being used for money laundering, the funding of terrorist activities or other illicit finance activities. If such activities are detected, financial institutions are obligated to file suspicious activity reports with FinCEN. The BSA and its implementing regulations require covered financial institutions to establish procedures for identifying and verifying the identity of customers seeking to open new accounts. Failure to comply with the BSA and its implementing regulations could result in fines or sanctions. An increasing number of banking institutions have received large fines for non-compliance with the BSA and its implementing regulations. Although we have developed policies and procedures designed to assist in compliance with these laws and regulations, no assurance can be given that these policies and procedures will be effective in preventing violations of these laws and regulations.
We are subject to claims and legal actions that could negatively affect our results of operations or financial condition.
Periodically, as a result of our normal course of business, we are involved in claims and related litigation from our customers, employees or other parties. These claims and legal actions, whether meritorious or not, as well as reviews, investigations and proceedings by governmental and self-regulatory agencies could involve large monetary claims and significant legal expense. In addition, such actions may negatively impact our reputation in the marketplace and lessen customer demand. If such claims and legal actions are not decided in Wintrust's favor, our results of operations and financial condition could be adversely impacted.
We are subject to examinations and challenges by tax authorities that may impact our financial results.
In the normal course of business, we, as well as our subsidiaries, are routinely subject to examinations from federal and state tax authorities regarding the amount of taxes due in connection with investments we have made and the businesses in which we have engaged. Recently, federal and state tax authorities have become increasingly aggressive in challenging tax positions taken by financial institutions. These tax positions may relate to among other things tax compliance, sales and use, franchise, gross receipts, payroll, property and income tax issues, including tax base, apportionment and tax credit planning. The challenges made by tax authorities may result in adjustments to the timing or amount of taxable income or deductions or the allocation of income among tax jurisdictions. If any such challenges are made and are not resolved in our favor, they could have a material adverse effect on our financial condition and results of operations.
Changes in federal and state tax laws and changes in interpretation of existing laws can impact our financial results.
Given the changing economic and political environment and ongoing budgetary pressures, the enactment of further new federal or state tax legislation may occur. The enactment of such legislation, or changes in the interpretation of existing law, including provisions impacting tax rates, apportionment, consolidation or combination, income, expenses, credits and exemptions may have a material adverse effect on our business, financial condition and results of operations.
Changes in accounting policies or accounting standards could materially adversely affect how we report our financial results and financial condition.
Our accounting policies are fundamental to understanding our financial results and financial condition. Some of these policies require use of estimates and assumptions that affect the value of our assets or liabilities and financial results. Some of our accounting policies are critical because they require management to make difficult, subjective and complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions. If such estimates or assumptions underlying our financial statements are incorrect, we may experience material losses. From time to time, the FASB and the SEC change the financial accounting and reporting standards that govern the preparation of our financial statements. These changes can be hard to predict and could materially impact how we record and report our financial condition and results of operations. In some cases, we could be required to apply a new or revised standard retroactively, resulting in the restatement of prior period financial statements.
Changes in U.S. trade policies, including the imposition of tariffs and retaliatory tariffs, may adversely impact our business, financial condition and results of operations.
There continue to be proposals and discussion and dialogue in the U.S. government regarding potential changes to U.S. trade policies, legislation, treaties and tariffs, including trade policies and tariffs affecting other countries, including China, the European Union, Canada and Mexico and retaliatory tariffs by such countries. Tariffs and retaliatory tariffs have been imposed, and additional tariffs and retaliatory tariffs have been proposed. Additionally, the U.S. government has imposed certain economic sanctions and trade restrictions against certain other countries, and could impose additional sanctions and trade restrictions. Such tariffs, retaliatory tariffs, sanctions or other trade restrictions on products and materials that our customers import or export could cause the prices of our customers’ products to increase, which could reduce demand for such products, or reduce our customers’ margins, and adversely impact their revenues, financial results and ability to service debt. This in turn, could adversely affect our financial condition and results of operations. In addition, to the extent changes in the political environment have a negative impact on us or on the markets in which we operate our business, results of operations and financial condition could be materially and adversely impacted. It remains unclear what the U.S. government or foreign governments will or will not do with respect to tariffs already imposed, additional tariffs that may be imposed, or international trade agreements and policies.
Risks Related to Lending Operations
If our allowance for credit losses is not sufficient to absorb losses that may occur in our loan portfolio, our financial condition and liquidity could suffer.
We maintain an allowance for credit losses that is intended to absorb expected lifetime credit losses related to our loan portfolio, off-balance sheet credit exposures and held-to-maturity debt securities portfolio. At each balance sheet date, our management determines the amount of the allowance for credit losses based on our estimate of expected credit losses over the life of the related asset with consideration of historical credit losses, current economic conditions and reasonable and supportable forecasts.
Because our allowance for credit losses represents an estimate of lifetime losses, there is no certainty that it will be adequate over time to cover credit losses in the portfolios, particularly if there are changes in expectations of general economic or market conditions, or events that adversely affect specific customers. In 2024, we charged off $94.4 million in loans (net of recoveries) and increased our allowance for credit losses from $427.6 million at December 31, 2023 to $437.1 million at December 31, 2024. Our allowance for loan and unfunded lending-related commitment losses represented 0.91% and 1.01% of total loans outstanding at December 31, 2024 and 2023, respectively.
Although we believe our allowance for credits losses is adequate to absorb estimated credit losses in our loan portfolio, if our estimates are inaccurate and our actual credit losses exceed the amount that is anticipated, or if the forecasts and assumptions used in calculating our reserves are significantly different from those we actually experience, our financial condition and liquidity could be materially adversely affected.
For more information regarding our allowance for loan losses, see “Loan Portfolio and Asset Quality” under Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 7.
A significant portion of our loan portfolio is comprised of commercial loans, the repayment of which is largely dependent upon the financial success and economic viability of the borrower.
The repayment of our commercial loans is dependent upon the financial success and viability of the borrower. If the economy weakens for a prolonged period or experiences deterioration or if the industry or market in which the borrower operates weakens, our borrowers may experience depressed or dramatic and sudden decreases in revenues that could hinder their ability to repay their loans. Our commercial loan portfolio totaled $15.6 billion or 32% of our total loan portfolio, at December 31, 2024, compared to $12.8 billion, or 30% of our total loan portfolio, at December 31, 2023.
Commercial loans are secured by different types of collateral related to the underlying business, such as accounts receivable, inventory and equipment. Should a commercial loan require us to foreclose on the underlying collateral, the unique nature of the collateral may make it more difficult and costly to liquidate, thereby increasing the risk to us of not recovering the principal amount of the loan. Accordingly, our business, results of operations and financial condition may be materially adversely affected by defaults in this portfolio.
A substantial portion of our loan portfolio is secured by real estate, in particular commercial real estate. Deterioration in the real estate markets could lead to additional losses, which could have a material adverse effect on our financial condition and results of operations.
As of both December 31, 2024 and 2023, approximately 36% and 35%, respectively, of our total loan portfolio was secured by real estate, the majority of which is commercial real estate. The commercial and residential real estate markets continue to experience a variety of difficulties, including the Chicago metropolitan area, southern Wisconsin and west Michigan, in which a majority of our real estate loans are concentrated. Continued uncertainty in economic conditions may impair a borrower’s business operations, slow the execution of new leases and lead to existing lease turnover. As a result of these factors, vacancy rates for retail, office and industrial space may increase, and hotel occupancy rates may decline. High vacancy and lower occupancy rates could also result in rents falling. The combination of these factors could result in the deterioration in the fundamentals underlying the commercial real estate market and the deterioration in value of some of our loans. Any such deterioration could adversely affect the ability of our borrowers to repay the amounts due under their loans. Specifically, the office property segment, which represents 3.45% of our total loan portfolio, is undergoing a structural shift given the rise of a remote work environment, resulting in heightened vacancies and potentially reduced leasing needs. It is anticipated that this heightened risk environment for the office segment may take several years to resolve. Increases in commercial and consumer delinquency levels or declines in real estate market values would require increased net charge-offs and increases in the allowance for loan and lease losses, which could have a material adverse effect on our business, financial condition and results of operations.
Additionally, any formal or informal action by our regulatory supervisors may require us to take increased reserves on these loans and could affect our share price. As a result of the risks associated with commercial real estate, banking regulators give greater scrutiny to lenders with a high concentration of commercial real estate in their portfolios, and such lenders are expected to implement stricter underwriting, internal controls, risk management policies and portfolio stress testing, as well as maintain higher capital levels and loss allowances. Concentrations in commercial real estate are monitored by regulatory agencies and subject to especially heightened scrutiny both on a public and confidential basis. Regulators may require banks to maintain elevated levels of capital or liquidity due to commercial real estate concentrations, especially if there is a downturn in our local real estate markets.
Events impacting collateral consisting of real property could lead to additional losses which could have a material adverse effect on our financial condition and results of operations.
Many of the loans in our portfolio are secured by real estate located in the Chicago metropolitan area. Any declines in economic conditions, including inflation, recession, unemployment, changes in securities markets or other factors impacting these local markets could, in turn, have a material adverse effect on our financial condition and results of operations. Deterioration in the real estate markets where collateral for our mortgage loans is located could adversely affect the borrower's ability to repay the loan and the value of the collateral securing the loan, and in turn the value of our assets. In addition, any natural disasters or severe weather events have the potential to damage our real estate collateral. Climate change could have an impact on longer-term natural weather trends and increase the occurrence and severity of such adverse weather events.
Any inaccurate assumptions in our analytical and forecasting models could cause us to miscalculate our projected revenue, capital, liquidity or losses, which could adversely affect our financial condition.
We use analytical and forecasting models to estimate the effects of economic conditions on our loan portfolio and probable loan performance. Those models reflect certain assumptions about market forces, including interest rates and consumer behavior that may be incorrect. If our analytical and forecasting models’ underlying assumptions are incorrect, improperly applied, or otherwise inadequate, we may suffer deleterious effects such as higher than expected loan losses, lower than expected net interest income, lower than expected liquidity, lower than expected capital or unanticipated charge-offs, any of which could have a material adverse effect on our business, financial condition and results of operations.
We are subject to environmental liability risk associated with lending activities.
A significant portion of the Company's loan portfolio is secured by real property. In the ordinary course of business, the Company may foreclose on and take title to properties securing certain loans. In doing so, there is a risk that hazardous or toxic substances could be found on these properties. If hazardous or toxic substances are found, the Company may be liable for remediation costs, as well as for personal injury and property damage and may suffer reputational harm as a result. In addition, we own and operate a number of properties that may be subject to similar environmental liability risks.
Environmental laws may require the Company to incur substantial expenses and could materially reduce the affected property's value or limit the Company's ability to use or sell the affected property. The costs associated with investigation and remediation activities could be substantial and increase over time. In addition, if we are the owner or former owner of a contaminated site, we may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property. Although the Company has policies and procedures to perform an environmental review before initiating any foreclosure action on real property, these reviews may not be sufficient to detect all potential environmental hazards. The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on the Company's business, financial condition, reputation and results of operations.
Risks Related to Our Niche Businesses
Our premium finance business may involve a higher risk of delinquency or collection than our other lending operations, and could expose us to losses.
We provide financing for the payment of property and casualty insurance premiums and life insurance premiums on a national basis through FIRST Insurance Funding and Wintrust Life Finance, respectively, and financing for the payment of property and casualty insurance premiums in Canada through our wholly-owned subsidiary, FIFC Canada. Property and casualty insurance premium finance loans involve a different, and possibly higher, risk of delinquency or collection than life insurance premium finance loans and the loan portfolios of our bank subsidiaries because these loans are issued primarily through relationships with a large number of unaffiliated insurance agents and because the borrowers are located nationwide. As a result, risk management and general supervisory oversight may be difficult. As of December 31, 2024, we had $7.3 billion of property and casualty insurance premium finance loans outstanding, of which $6.4 billion related to the Company's U.S. operations at FIRST Insurance Funding and $824.4 million related to the Company's Canadian operations at FIFC Canada. Together, these loans represented 15% of our total loan portfolio as of such date.
FIRST Insurance Funding and FIFC Canada have in the past been susceptible to, and may in the future be more susceptible to third party fraud with respect to property and casualty insurance premium finance loans because these loans are originated and many times funded through relationships with unaffiliated insurance agents and brokers. Acts of fraud are difficult to detect and deter, and we cannot assure investors that our risk management procedures and controls will prevent losses from fraudulent activity.
Wintrust Life Finance may be exposed to the risk of loss in our life insurance premium finance business because of fraud. While Wintrust Life Finance maintains a policy prohibiting the known financing of stranger-originated life insurance and has established procedures to identify and prevent the company from financing such policies, Wintrust Life Finance cannot be certain that it will never provide loans with respect to such a policy. In the event such policies were financed, a carrier could potentially put at risk the cash surrender value of a policy, which serves as Wintrust Life Finance's primary collateral, by challenging the validity of the insurance contract for lack of an insurable interest.
See the below risk factor “Widespread financial difficulties or credit downgrades among commercial and life insurance providers could lessen the value of the collateral securing our premium finance loans and impair the financial condition and liquidity of FIRST Insurance Funding, Wintrust Life Finance and FIFC Canada” for a discussion of further risks associated with our insurance premium finance activities.
While FIRST Insurance Funding and Wintrust Life Finance are licensed as required and carefully monitor compliance with regulation of each of their businesses, there can be no assurance that either will not be negatively impacted by material changes in the regulatory environment. FIFC Canada is not required to be licensed in most provinces of Canada, but there can be no assurance that future regulations which impact the business of FIFC Canada will not be enacted.
Additionally, to the extent that affiliates of insurance carriers, banks, and other lending institutions add greater service and flexibility to their financing practices in the future, our competitive position and results of operations could be adversely affected. Wintrust Life Finance's life insurance premium finance business could be materially negatively impacted by changes in the federal or state estate tax provisions. There can be no assurance that FIRST Insurance Funding and Wintrust Life Finance will be able to continue to compete successfully in its markets.
Widespread financial difficulties or credit downgrades among commercial and life insurance providers could lessen the value of the collateral securing our premium finance loans and impair the financial condition and liquidity of FIRST Insurance Funding, Wintrust Life Finance and FIFC Canada.
FIRST Insurance Funding, Wintrust Life Finance and FIFC Canada's premium finance loans are primarily secured by the insurance policies financed by the loans. These insurance policies are written by a large number of geographically dispersed insurance companies. Our premium finance receivables balances finance insurance policies that are spread among a large number of insurers; however, one of the insurers represents approximately 10% of such balances and two additional insurers represent approximately 8% and 6% each of such balances. FIRST Insurance Funding, Wintrust Life Finance and FIFC Canada consistently monitor carrier ratings and financial performance of our carriers. While FIRST Insurance Funding, Wintrust Life Finance and FIFC Canada can mitigate risks as a result of this monitoring to the extent that commercial or life insurance providers experience widespread difficulties or credit downgrades, the value of our collateral will be reduced. FIRST Insurance Funding, Wintrust Life Finance and FIFC Canada are also subject to the possibility of insolvency of insurance carriers in the commercial and life insurance businesses that are in possession of our collateral. If one or more large nationwide insurers were to fail, the value of our portfolio could be significantly negatively impacted. A significant downgrade in the value of the collateral supporting our premium finance business could impair our ability to create liquidity for this business, which, in turn could negatively impact our ability to expand.
Our wealth management business in general, and Wintrust Investments’ brokerage operation, in particular, exposes us to certain risks associated with the securities industry.
Our wealth management business in general, and Wintrust Investments' brokerage operations in particular, present special risks not borne by community banks that focus exclusively on community banking. For example, the brokerage industry is subject to fluctuations in the stock market that may have a significant adverse impact on transaction fees, customer activity and investment portfolio gains and losses. Likewise, additional or modified regulations may adversely affect our wealth management operations. Each of our wealth management operations is dependent on a small number of professionals whose departure could result in the loss of a significant number of customer accounts. A significant decline in fees and commissions or trading losses suffered in the investment portfolio could adversely affect our results of operations. In addition, we are subject to claim arbitration risk arising from customers who claim their investments were not suitable or that their portfolios were inappropriately traded. These risks increase when the market, as a whole, declines. The risks associated with retail brokerage may not be supported by the income generated by our wealth management operations.
Risks Related to Financial Strength and Liquidity
Changes in prevailing interest rates could adversely affect our net interest income, which is our largest source of income.
We are exposed to interest rate risk in our core banking activities of lending and deposit taking, since changes in prevailing interest rates affect the value of our assets and liabilities. Such changes may adversely affect our net interest income, which is the difference between interest income and interest expense. Our net interest income is affected by the fact that assets and liabilities reprice at different times and by different amounts as interest rates change. Net interest income represents our largest component of net income, and was $2.0 billion and $1.8 billion for the years ended December 31, 2024 and 2023, respectively.
Each of our businesses may be affected differently by a given change in interest rates. For example, we expect that the results of our mortgage banking business in selling loans into the secondary market could be negatively impacted during periods of rising interest rates, whereas falling interest rates could have a negative impact on the net interest spread earned on deposits as we would be unable to lower the rates on many interest bearing deposit accounts of our customers to the same extent as many of our higher yielding asset classes.
Additionally, increases in interest rates may adversely influence the growth rate of loans and deposits, the quality of our loan portfolio, loan and deposit pricing, the volume of loan originations in our mortgage banking business and the value that we can recognize on the sale of mortgage loans in the secondary market.
In response to inflationary forces, the Federal Reserve has maintained a restrictive monetary policy stance, despite lowering rates at the end of 2024. The federal funds rate ended 2024 at a range of 4.25-4.50%. Though we expect the Federal Reserve to slow the rate of decreases, we cannot predict the nature or timing of future changes in monetary policies or the precise effects that they may have on our activities and financial results. For more discussion of this issue, see the above risk factor “Changes in the United States’ monetary policy may restrict our ability to conduct our business in a profitable manner.”
We seek to mitigate our interest rate risk through several strategies, which may not be successful. With the relatively low interest rates that prevailed in past years, we were able to augment the total return of our investment securities portfolio by selling call options on fixed-income securities that we own. We recorded fee income of approximately $10.2 million, $21.9 million and $14.1 million for the years ended December 31, 2024, 2023 and 2022, respectively. We also mitigate our interest rate risk by entering into interest rate swaps and other interest rate derivative contracts from time to time with counterparties. The Company held $6.7 billion of derivatives effective as of December 31, 2024 that were designated as cash flow hedges against the potential downward repricing of variable rate loans. To the extent that the market value of any derivative contract moves to a negative market value, we are subject to loss if the counterparty defaults. In the future, there can be no assurance that such mitigation strategies will be available or successful or that we will be successful in implementing any new mitigation strategies necessary to address the current rising interest rate environment. In addition, transactions entered into as part of mitigation strategies employed to mitigate risks associated with a prolonged low interest rate environment could be less beneficial or result in losses if interest rates continue to rise.
Our liquidity position may be negatively impacted if economic conditions do not improve or if they decline.
Liquidity is a measure of whether our cash flows and liquid assets are sufficient to satisfy current and future financial obligations, such as demand for loans, deposit withdrawals and operating costs. Our liquidity position is affected by a number of factors, including the amount of cash and other liquid assets on hand, payment of interest and dividends on debt and equity instruments that we have issued, capital we inject into our bank subsidiaries, proceeds we raise through the issuance of securities, our ability to draw upon our revolving credit facility and dividends received from our banking subsidiaries. Our future liquidity position may be adversely affected by multiple factors, including:
•if our banking subsidiaries report net losses or their earnings are weak relative to our cash flow needs;
•if it is necessary for us to make capital injections to our banking subsidiaries;
•if changes in regulations require us to maintain a greater level of capital, as more fully described below;
•if we are unable to access our revolving credit facility due to a failure to satisfy financial and other covenants; or
•if we are unable to raise additional capital on terms that are satisfactory to us.
Weakness or worsening of the economy, real estate markets or unemployment levels may increase the likelihood that one or more of these events will occur. If our liquidity is adversely affected, it may have a material adverse effect on our business, results of operations and financial condition.
An actual or perceived reduction in our financial strength may cause others to reduce or cease doing business with us, which could result in a decrease in our net interest income and fee revenues.
Our customers rely upon our financial strength and stability and evaluate the risks of doing business with us. If we experience diminished financial strength or stability, actual or perceived, including due to market or regulatory developments, announced or rumored business developments or results of operations, or a decline in stock price, customers may withdraw their deposits or otherwise seek services from other banking institutions and prospective customers may select other service providers. The risk that we may be perceived as less creditworthy relative to other market participants is increased in the current market
environment, where the consolidation of financial institutions, including major global financial institutions, is resulting in a smaller number of much larger counterparties and competitors. As our community banks become more closely identified with the Wintrust name, the impact of any perceived weakness or creditworthiness at either the holding company or our community banks may be greater than in prior periods. If customers reduce their deposits with us or select other service providers for all or a portion of the services that we provide them, net interest income and fee revenues will decrease accordingly, and could have a material adverse effect on our results of operations.
Loss of deposits or a change in the deposit mix could increase our funding costs.
Deposits are a low cost and stable source of funding. Wintrust competes with banks and other financial institutions for deposits and as a result, Wintrust could lose deposits in the future, clients may shift their deposits into higher cost products or Wintrust may need to raise interest rates to avoid deposit attrition. Funding costs may also increase if lost deposits are replaced with wholesale funding. Higher funding costs reduce Wintrust’s net interest margin, net interest income and net income. Any of a variety of single or combined factors could contribute to adverse movement in deposits or deposit costs, including but not limited to economic uncertainty, rapid movements in market interest rates or the Federal Reserve’s monetary policy, entrance of competitors, disruptive technology or decreased confidence in Wintrust or the banking industry.
If our credit rating is lowered, our financing costs could increase.
As of December 31, 2024, we have been rated by Fitch Ratings as "BBB+" and Morningstar DBRS as "A (low)". A credit rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating organization.
Our creditworthiness is not fixed and should be expected to change over time as a result of company performance and industry conditions. We cannot give any assurances that our credit ratings will remain at current levels, and it is possible that our ratings could be lowered or withdrawn by Fitch Ratings or Morningstar DBRS. Any actual or threatened downgrade or withdrawal of our credit rating could affect our perception in the marketplace and our ability to raise capital, and could increase our debt financing costs.
If our growth requires us to raise additional capital, that capital may not be available when it is needed or the cost of that capital may be very high.
We are required by regulatory authorities to maintain adequate levels of capital to support our operations (see the above risk factor “Legal and Regulatory Risks - If we fail to meet our regulatory capital ratios, we may be forced to raise capital or sell assets”) and as we grow, internally and through acquisitions, the amount of capital required to support our operations grows as well. We may need to raise additional capital to support continued growth both internally and through acquisitions. Any capital we obtain may result in the dilution of the interests of existing holders of our common stock.
Our ability to raise additional capital, if needed, will depend on conditions in the capital markets at that time which are outside our control and on our financial condition and performance. The interest rate environment, disruptions in financial markets, negative perception of our business or our financial strength or other factors may impact our ability to raise additional capital when needed, or on terms acceptable to us. For example, in the event of future uncertainty in the banking industry or other idiosyncratic events, there is no guarantee that the U.S. government would invoke the systemic risk exception, create additional liquidity programs or take any other action to stabilize the banking industry or provide liquidity. Any diminished ability to access short-term funding or capital markets to raise additional capital, if needed, could subject us to liability, and our ability to further expand our operations through internal growth and acquisitions could be materially impaired and our financial condition and liquidity could be materially and negatively affected.
Disruption in the financial markets could result in lower fair values for our investment securities portfolio.
The Company's available-for-sale debt and trading securities as well as certain equity securities are carried at fair value.
Accounting standards require the Company to categorize these securities according to a fair value hierarchy. As of December 31, 2024, approximately 97% of the Company's available-for-sale debt securities and equity securities with a readily determinable fair value were categorized in level 1 or 2 of the fair value hierarchy (meaning that their fair values were determined by unadjusted quoted prices in active markets for identical assets, quoted prices for similar assets or other observable inputs). Significant prolonged reduced investor demand could manifest itself in lower fair values for these securities
and may result in recognition of an other-than-temporary or permanent impairment of available-for-sale debt securities and unrealized losses of equity securities with a readily determinable fair value recognized in earnings, which could lead to accounting charges and have a material adverse effect on the Company's financial condition and results of operations.
The remaining securities in our available-for-sale debt securities and equity securities with a readily determinable fair value portfolios were categorized as level 3 (meaning that their fair values were determined by inputs that are unobservable in the market and therefore require a greater degree of management judgment). The determination of fair value for securities categorized in level 3 involves significant judgment due to the complexity of factors contributing to the valuation, many of which are not readily observable in the market. In addition, the nature of the business of the third party source that is valuing the securities at any given time could impact the valuation of the securities. Consequently, the ultimate sales price for any of these securities could vary significantly from the recorded fair value at December 31, 2024, especially if the security is sold during a period of illiquidity or market disruption or as part of a large block of securities under a forced transaction.
There can be no assurance that decline in market value of available-for-sale debt securities and equity securities with a readily determinable fair value associated with these disruptions will not result in credit or permanent impairments, and unrealized losses, respectively, of these assets, which would lead to accounting charges which could have a material negative effect on our business, financial condition and results of operations.
We are a bank holding company, and our sources of funds, including to pay dividends, are limited.
We are a bank holding company and our operations are primarily conducted by and through our 16 operating banks, which are subject to significant federal and state regulation. Cash available to pay dividends to our shareholders, repurchase our shares or repay our indebtedness is derived primarily from dividends received from our banks and our ability to receive dividends from our subsidiaries is restricted. Various statutory provisions restrict the amount of dividends our banks can pay to us without regulatory approval. The banks may not pay cash dividends if that payment could reduce the amount of their capital below that necessary to meet the “adequately capitalized” level in accordance with regulatory capital requirements. It is also possible that, depending upon the financial condition of the banks and other factors, regulatory authorities could conclude that payment of dividends or other payments, including payments to us, is an unsafe or unsound practice and impose restrictions or prohibit such payments. Our inability to receive dividends from our banks could adversely affect our business, financial condition and results of operations.
Risks Related to General Operations
Our controls and procedures may fail or be circumvented.
Management regularly reviews and updates our internal controls over financial reporting, disclosure controls and procedures and corporate governance policies and procedures. Any system of controls, however well-designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. Any circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business, results of operations and financial condition.
Our operational or security systems, networks or infrastructure, or those of third parties, could fail or be breached, which could disrupt our business and adversely impact our results of operations, liquidity and financial condition, as well as cause legal or reputational harm.
The potential for operational risk exposure exists throughout our business and, as a result of our interactions with, and reliance on, third parties, is not limited to our own internal operational functions. Our operational and security systems, networks and infrastructure, including our computer systems and networks, data management, and internal processes, as well as those of third parties, are integral to our performance. We rely on our employees and third parties in our day-to-day and ongoing operations, who may, as a result of human error, misconduct, malfeasance or failure, or breach of our or of third-party systems or infrastructure, expose us to risk. For example, our ability to conduct business may be adversely affected by any significant disruptions to us or to third parties with whom we interact or upon whom we rely. In addition, our ability to implement backup systems and other safeguards with respect to third-party systems is more limited than with respect to our own systems. Moreover, technological or financial difficulties of one of our third-party vendors or their subcontractors could adversely affect our business to the extent those difficulties results in the interruption or discontinuation of services provided by an affected vendor. Our financial, accounting, data processing, backup or other operating or security systems, networks and infrastructure, or those of third parties, may fail to operate properly or become disabled or damaged as a result of a number of factors, including events that are wholly or partially beyond our control, which could adversely affect our ability to process transactions
or provide services. Such events may include sudden increases in customer transaction volume; electrical, telecommunications or other major physical infrastructure outages; natural disasters such as earthquakes, tornadoes, wildfires, hurricanes and floods; disease pandemics; and events arising from local or larger scale political or social matters, including wars and terrorist acts. In addition, we may need to take our systems or networks offline if they become infected with malware or a computer virus or as a result of another form of cyber-attack, information security breach or other similar incident. In the event that backup systems are utilized, they may not process data as quickly as our primary systems and some data might not have been saved to backup systems, potentially resulting in a temporary or permanent loss of such data. Our business recovery plan may not be adequate and may not prevent significant interruptions of our operations or substantial losses. We frequently update our systems to support our operations and growth and to remain compliant with all applicable laws, rules and regulations. This updating entails significant costs and creates risks associated with implementing new systems and networks and integrating them with existing ones, including business interruptions. Implementation and testing of controls related to our computer systems and networks, security monitoring and retaining and training personnel required to operate our systems also entail significant costs.
We may not be insured against all types of losses as a result of disruptions to or failures of our operational and security systems, networks and infrastructure or those of third parties, and our insurance coverage may not be available on reasonable terms, or at all, or may be inadequate to cover all losses resulting from such disruptions or failures. Disruptions or failures in our business structure or in the structure of one or more of our third-party vendors could interrupt the operations or increase the cost of doing business. The occurrence of any disruptions or failures impacting our or our third-party vendors’ operational or security systems, networks or infrastructure could result in a loss of customer business and expose us to additional regulatory scrutiny, civil litigation, and possible financial liability, any of which could adversely impact our results of operations, liquidity and financial condition, as well as cause reputational harm.
We face risks from cyber-attacks, information security breaches and other similar incidents that could result in the disclosure of confidential and other information (including personal information), all of which could adversely affect our business or reputation, and create significant legal and financial exposure.
Our computer systems and network infrastructure and those of third parties, on which we are highly dependent, are subject to security risks and could be susceptible to cyber-attacks, information security breaches and other similar incidents. Our business relies on the secure processing, transmission, storage and retrieval of confidential, personal, proprietary and other information in our computer and data management systems and networks, and in the computer and data management systems and networks of third parties. In addition, to access our network, products and services, our customers and other third parties may use personal mobile devices or computing devices that are outside of our network environment and are subject to their own cybersecurity risks.
We, our customers, regulators and other third parties, including other financial services institutions and companies engaged in data processing, have been subject to, and are likely to continue to be the target of, cyber-attacks, information or security breaches, and other similar incidents. These may include, among other things, computer viruses, malicious or destructive code, phishing attacks, denial of service or information, ransomware, malfeasance or improper access by employees or vendors, attacks on personal email of employees, hacking, terrorist activities, identity theft, social engineering, credential stuffing, account takeovers, insider threats, human error, fraud, or other similar incidents that could result in the unauthorized release, gathering, monitoring, misuse, misappropriation, loss, disclosure or destruction of confidential, personal, proprietary and other information of ours, our employees, our customers or of third parties, damage to our systems and networks or other material disruption of our or our customers’ or other third parties’ network access or business operations. As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities or incidents. Despite efforts to ensure the integrity of our systems and implement controls, processes, policies and other protective measures, we may not be able to anticipate all security breaches, nor may we be able to implement guaranteed preventive measures against such security breaches. Cyber threats are rapidly evolving and we may not be able to anticipate or prevent all such attacks and could be held liable for any security breach or loss.
Cybersecurity risks for banking organizations have significantly increased in recent years in part because of the proliferation of new technologies, and the use of the internet and telecommunications technologies to conduct financial transactions. For example, cybersecurity risks may increase in the future as we continue to increase our mobile-payment and other internet-based product offerings and expand our internal usage of web-based products and applications. In addition, cybersecurity risks have significantly increased in recent years in part due to the increased sophistication and activities of organized crime affiliates, terrorist organizations, hostile foreign governments, nation states, nation state-supported actors, disgruntled employees or vendors, activists and other external parties, including those involved in corporate espionage. Even the most advanced internal control environment may be vulnerable to compromise. Targeted social engineering attacks and "spear phishing" attacks are
becoming more sophisticated and are extremely difficult to prevent. In such an attack, an attacker will attempt to fraudulently induce colleagues, customers or other users of our systems and networks to disclose sensitive information (including confidential, personal, proprietary and other information) in order to gain access to its data or that of its clients. Persistent attackers may succeed in penetrating defenses given enough resources, time, and motive. The techniques used by cyber criminals change frequently and may not be recognized until launched or until well after a breach has occurred. The risk of a security breach caused by a cyber-attack, information security breach or other similar incident at a vendor or by unauthorized vendor access has also increased in recent years. Additionally, the existence of cyber-attacks, information security breaches or other similar incidents at third-party vendors with access to our data may not be disclosed to us in a timely manner. While we generally perform cybersecurity diligence on our key vendors, because we do not control our vendors and our ability to monitor their cybersecurity is limited, we cannot ensure the cybersecurity measures they take will be sufficient to protect any information we share them. Due to applicable laws and regulations or contractual obligations, we may be held responsible for cyber-attacks, information security breaches or other similar incidents attributed to our service providers as they relate to the information we share with them.
We also face indirect technology, cybersecurity and operational risks relating to the customers, clients and other third parties with whom we do business or upon whom we rely to facilitate or enable our business activities, including, for example, financial counterparties, regulators and providers of critical infrastructure such as internet access and electrical power. As a result of increasing consolidation, interdependence and complexity of financial entities and technology systems, a technology failure, cyber-attack, information security breach or other similar incident that significantly degrades, deletes or compromises the systems, networks or data of one or more financial entities could have a material impact on counterparties or other market participants, including us. This consolidation, interconnectivity and complexity increases the risk of operational failure, on both individual and industry-wide bases, as disparate systems need to be integrated, often on an accelerated basis. Any third-party technology failure, cyber-attack, information security breach, termination, constraint or other similar incident could, among other things, adversely affect our ability to effect transactions, service our clients, manage our exposure to risk or expand our business.
Moreover, debit card numbers are susceptible to theft at the point of sale via the physical terminal through which transactions are processed and by other means of hacking. The security and integrity of these transactions are dependent upon retailers’ vigilance and willingness to invest in technology and upgrades. Despite third-party security risks that are beyond our control, we offer our customers protection against fraud and attendant losses for unauthorized use of debit cards in order to stay competitive in the marketplace. Offering such protection to our customers exposes us to potential losses which, in the event of a data breach at one or more retailers of considerable magnitude, may adversely affect our business, financial condition, and results of operations.
Although we believe that we have appropriate information security procedures and controls designed to prevent or limit the effects of a cyber-attack, information security breach or other similar incident, our or our customers’ and/or third parties’ computers, systems or networks may be the target of cyber-attacks, information security breaches or other similar incidents that could result in the unauthorized release, accessing, gathering, monitoring, loss, destruction, modification, acquisition, transfer, use or other processing of our or our customers’ confidential, personal, proprietary and other information. Additionally, we may not be insured against all types of losses as a result of cyber-attacks, information security breaches and other similar incidents, and our insurer may deny coverage as to any future claim or insurance coverage may not be available on reasonable terms, or at all, or may be inadequate to cover all losses resulting from such incidents.
Cyber-attacks, information security breaches or similar incidents, whether directed at us or third parties, may result in a material loss or have material consequences. Furthermore, the public perception that a cyber-attack on our systems has been successful, whether or not this perception is correct, may damage our reputation with customers and third parties with whom we do business. Hacking or other unauthorized disclosure of personal information and identity theft risks, in particular, could cause serious reputational harm. A successful penetration or circumvention of system security could cause us serious negative consequences, including our loss of customers and business opportunities, significant disruption to our operations and business, misappropriation or destruction of our confidential, personal, proprietary or other information and/or that of our customers or other third parties, or damage to our or our customers’ and/or third parties’ computers, systems or networks, and could result in a violation of applicable data privacy and cybersecurity laws and regulations and other laws and regulations, litigation exposure, regulatory fines, penalties or intervention, remediation costs, loss of confidence in our security measures, reputational damage, reimbursement or other compensatory costs, remediation costs, additional compliance costs, and could adversely impact our results of operations, liquidity and financial condition.
Our business could be adversely affected by fraud.
As a financial institution, we are inherently and consistently exposed to a wide variety of fraudulent activity, including but not limited to check fraud, card fraud, electronic and digital fraud, wire fraud, ATM machine compromise, person-to-person payment fraud, social engineering and phishing attacks. Fraudulent activity is becoming increasingly sophisticated and may evade the systems and controls that we have in place to monitor our operations. We have experienced, and could experience in the future, losses incurred due to third-party, customer or employee fraud and theft. Additionally, certain of our banking clients have experienced, and could experience in the future, financial fraud and related losses, often requiring our involvement and assistance. Losses in the future could be material, negatively affect our results of operations, financial condition, prospects or reputation.
Our vendors may be responsible for failures that adversely affect our operations.
We use and rely upon many external vendors to provide us with day-to-day products and services essential to our operations. We are thus exposed to risk that such vendors will not perform as contracted or at agreed-upon service levels. The failure of our vendors to perform as contracted or at necessary service levels for any reason could disrupt our operations, which could adversely affect our business. In addition, if any of our vendors experience insolvency or other business failure, such failure could affect our ability to obtain necessary products or services from a substitute vendor in a timely and cost-effective manner or prevent us from effectively pursuing certain business objectives entirely. Our failure to implement business objectives due to vendor nonperformance could adversely affect our financial condition and results of operations.
We depend on the accuracy and completeness of information we receive about our customers and counterparties to make credit decisions.
We rely on information furnished by or on behalf of customers and counterparties in deciding whether to extend credit or enter into other transactions. This information could include financial statements, credit reports, and other financial information. We also rely on representations of those customers, counterparties, or other third parties, such as independent auditors, as to the accuracy and completeness of that information. Reliance on inaccurate or misleading financial statements, credit reports, or other financial information could have a material adverse impact on our business, financial condition and results of operations.
If we are unable to attract and retain experienced and qualified personnel, our ability to provide high quality service will be diminished, we may lose key customer relationships, and our results of operations may suffer.
We believe that our future success depends, in part, on our ability to attract and retain experienced personnel, including our senior management and other key personnel. Our business model is dependent upon our ability to provide high quality and personal service. In addition, as a holding company that conducts its operations through our subsidiaries, we are focused on providing entrepreneurial-based compensation to the chief executives of each our business units. As a Company with start-up and growth oriented operations, we are cognizant that to attract and retain the managerial talent necessary to operate and grow our businesses we often have to compensate our executives with a view to the business we expect them to manage, rather than the size of the business they currently manage. Accordingly, any executive compensation restrictions may negatively impact our ability to retain and attract senior management. The departure of a senior manager or other key personnel may damage relationships with certain customers, or certain customers may choose to follow such personnel to a competitor. The loss of any of our senior managers or other key personnel, or our inability to identify, recruit and retain such personnel, particularly during a period in which the labor market is characterized as tight and employee turnover has escalated in many industries, could materially and adversely affect our business, results of operations and financial condition. If we fail to effectively manage the transition in the position of chief executive officer, our business, financial condition, results of operations, cash flows and reputation, as well as our ability to successfully attract, motivate and retain key employees, could be harmed.
Losses incurred in connection with actual or projected repurchases and indemnification payments related to mortgages that we have sold into the secondary market may exceed our financial statement reserves and we may be required to increase such reserves in the future. Increases to our reserves and losses incurred in connection with actual loan repurchases and indemnification payments could have a material adverse effect on our business, financial condition, results of operations or cash flows.
We engage in the origination of residential mortgages for sale into the secondary market. In connection with such sales, we make certain representations and warranties, which, if breached, may require us to repurchase such loans, substitute other loans or indemnify the purchasers of such loans for actual losses incurred in respect of such loans. We receive requests for loan repurchases and indemnification payments relating to the representations and warranties with respect to such loans. We have been able to reach settlements with a number of purchasers, and believe that we have established appropriate reserves with respect to indemnification requests. It is possible that the number of such requests will increase or that we will not be able to reach settlements with respect to such requests in the future. Accordingly, it is possible that losses incurred in connection with loan repurchases and indemnification payments may be in excess of our financial statement reserves, and we may be required to increase such reserves and may sustain additional losses associated with such loan repurchases and indemnification payments in the future. Increases to our reserves and losses incurred by us in connection with actual loan repurchases and indemnification payments in excess of our reserves could have a material adverse effect on our business, financial condition, results of operations or cash flows.
Our business could be adversely affected by the occurrence of extraordinary events, such as acts of war, terrorist attacks, natural disasters and public health threats.
An act of war, terrorist activity, including acts of domestic terrorism or violence, a major epidemic or pandemic, natural disaster, or the threat of such an event or other public health threat, could adversely affect our customers and our business. Such events could significantly impact the demand for our products and services as well as the ability of our customers to repay loans, affect the stability of our deposit base, impair the value of the collateral securing loans, adversely impact our employee base, cause significant property damage, result in loss of revenue, and cause us to incur additional expenses. Additionally, financial markets may be adversely affected by the current or anticipated impact of military conflict, including the war in Ukraine, the conflict between Israel and Hamas, terrorism or other geopolitical events. The occurrence or threat of any such extraordinary event could result in a material negative effect on our business and results of operations.
Risks Related to Ownership of Our Common Stock
Anti-takeover provisions could negatively impact our shareholders.
Certain provisions of our articles of incorporation, by-laws and Illinois law may have the effect of impeding the acquisition of control of Wintrust by means of a tender offer, a proxy fight, open-market purchases or otherwise in a transaction not approved by our board of directors. For example, our board of directors may issue additional authorized shares of our capital stock to deter future attempts to gain control of Wintrust, including the authority to determine the terms of any one or more series of preferred stock, such as voting rights, conversion rates and liquidation preferences. As a result of the ability to fix voting rights for a series of preferred stock, the board has the power, to the extent consistent with its fiduciary duty, to issue a series of preferred stock to persons friendly to management in order to attempt to block a merger or other transaction by which a third party seeks control, and thereby assist the incumbent board of directors and management to retain their respective positions. In addition, our articles of incorporation expressly elect to be governed by the provisions of Section 7.85 of the Illinois Business Corporation Act, which would make it more difficult for another party to acquire us without the approval of our board of directors.
The ability of a third party to acquire us is also limited under applicable banking regulations. The BHC Act requires any “bank holding company” (as defined in the BHC Act) to obtain the approval of the Federal Reserve prior to acquiring more than 5% of our outstanding common stock. Any person other than a bank holding company is required to obtain prior approval of the Federal Reserve to acquire 10% or more of our outstanding common stock under the Change in Bank Control Act of 1978. Any holder of 25% or more of our outstanding common stock, other than an individual, is subject to regulation as a “bank holding company” under the BHC Act. For purposes of calculating ownership thresholds under these banking regulations, bank regulators would generally take the position that the maximum number of shares of Wintrust common stock that a holder is entitled to receive pursuant to securities convertible into or settled in Wintrust common stock, including pursuant to any warrants to purchase Wintrust common stock held by such holder, must be taken into account in calculating a shareholder's aggregate holdings of Wintrust common stock.
These provisions may have the effect of discouraging a future takeover attempt that is not approved by our board of directors but which our individual shareholders may deem to be in their best interests or in which our shareholders may receive a substantial premium for their shares over then-current market prices. As a result, shareholders who might desire to participate in such a transaction may not have an opportunity to do so. Such provisions will also render the removal of our current board of directors or management more difficult.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.

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ITEM 2. PROPERTIES
ITEM 2. PROPERTIES
The Company’s executive offices are located at 9700 W. Higgins Road, Rosemont, Illinois as well as additional nearby corporate office locations at 9701 W. Higgins Road, Rosemont, Illinois and 9801 W. Higgins Road, Rosemont, Illinois. The Company also leases office locations and retail space at 231 S. LaSalle Street in downtown Chicago and at 731 N. Jackson Street in downtown Milwaukee. The Company’s community banking segment operates through 205 banking facilities, the majority of which are owned. The Company owns 184 automatic teller machines, the majority of which are housed at banking locations. The banking facilities are located in communities throughout the Chicago metropolitan area, southern Wisconsin, northwest Indiana, and Kent, Ottawa and northern Allegan counties in the state of Michigan, as well as three banking locations in southwest Florida. Excess space in certain properties is leased to third parties. Wintrust Mortgage, also of our banking segment, is headquartered in our corporate headquarters in Rosemont, Illinois and has 28 locations in 11 states, all of which are leased, as well as office locations at several of our banks.
The Company’s wealth management subsidiaries has locations in downtown Chicago, Appleton, Wisconsin, Tampa, Florida, and Stamford, Connecticut, all of which are leased, as well as office locations at several of our banks. FIRST Insurance Funding and Wintrust Life Finance have one location in Northbrook, Illinois which is owned and locations in downtown Newark, New Jersey, Long Island, New York and Newport Beach, California, all of which are leased. FIFC Canada has three locations in Canada that are leased, located in Toronto, Ontario; Wainwright, Alberta; and Vancouver, British Columbia. Wintrust Asset Finance is located in our corporate headquarters in Rosemont, Illinois and has locations in Frisco, Texas, and Irvine, California, all of which are leased. Tricom has one location in Menomonee Falls, Wisconsin which is owned.

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ITEM 3. LEGAL PROCEEDINGS
ITEM 3. LEGAL PROCEEDINGS
The information required by this item is set forth in Part II, Item 8, Financial Statements and Supplementary Data, under Note (20) “Commitments and Contingencies”.

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ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
The Company’s common stock is traded on The Nasdaq Global Select Stock Market under the symbol WTFC.
Performance Graph
The following performance graph compares the five-year percentage change in the Company’s cumulative shareholder return on common stock compared with the cumulative total return on composites of (1) all Nasdaq Global Select Market stocks for United States companies (broad market index) and (2) all Nasdaq Global Select Market bank stocks (peer group index). Cumulative total return is computed by dividing the sum of the cumulative amount of dividends for the measurement period and the difference between the Company’s share price at the end and the beginning of the measurement period by the share price at the beginning of the measurement period. The Nasdaq Global Select Market for United States companies’ index comprises all domestic common shares traded on the Nasdaq Global Select Market and the Nasdaq Small-Cap Market. The Nasdaq Global Select Market bank stocks index comprises all banks traded on the Nasdaq Global Select Market and the Nasdaq Small-Cap Market.
This graph and other information furnished in the section titled “Performance Graph” under this Part II, Item 5 of this Annual Report on Form 10-K shall not be deemed to be “soliciting” materials or to be “filed” with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Exchange Act, as amended.
2019 2020 2021 2022 2023 2024
Wintrust Financial Corporation 100.00 88.23 133.32 125.94 141.06 193.02
Nasdaq - Total US 100.00 121.27 152.67 122.55 154.93 192.86
Nasdaq - Bank Index 100.00 87.20 119.74 99.06 109.02 146.80
Approximate Number of Equity Security Holders
As of February 6, 2025, there were approximately 2,069 shareholders of record of the Company’s common stock.
Dividends on Common Stock
The Company’s Board of Directors approved the first semi-annual dividend on the Company’s common stock in January 2000 and continued to approve a semi-annual dividend until quarterly dividends were approved starting in 2014. The payment of dividends is subject to statutory restrictions and restrictions arising under the terms of the Company's Fixed-to-Floating Non-Cumulative Perpetual Preferred Stock, Series D (the “Series D Preferred Stock”), the terms of the Company’s Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series E (the “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 credit facilities. Under the terms of these separate revolving and term credit facilities, the Company is prohibited from paying dividends on any equity interests, including its common stock and preferred stock, if such payments would cause the Company to be in default under its credit facilities or exceed a certain threshold.
The following is a summary of the cash dividends paid in 2024 and 2023:
Record Date Payable Date Dividend per Share
November 7, 2024 November 22, 2024 $0.45
August 8, 2024 August 22, 2024 $0.45
May 9, 2024 May 23, 2024 $0.45
February 8, 2024 February 22, 2024 $0.45
November 9, 2023 November 24, 2023 $0.40
August 10, 2023 August 24, 2023 $0.40
May 11, 2023 May 25, 2023 $0.40
February 9, 2023 February 23, 2023 $0.40
On January 23, 2025, Wintrust Financial Corporation announced that the Company’s Board of Directors approved a quarterly cash dividend of $0.50 per share of outstanding common stock. The dividend was paid on February 20, 2025 to shareholders of record as of February 6, 2025.
The final determination of timing, amount and payment of dividends is at the discretion of the Company’s Board of Directors and will depend on the Company’s earnings, financial condition, capital requirements and other relevant factors. Because the Company’s consolidated net income consists largely of net income of the banks and certain wealth management subsidiaries, the Company’s ability to pay dividends generally depends upon its receipt of dividends from these entities. The Company’s and the banks’ ability to pay dividends is subject to banking laws, regulations and policies. See “Supervision and Regulation - Payment of Dividends and Share Repurchases” in Item 1 of this Annual Report on Form 10-K. During 2024, 2023 and 2022, the banks and certain wealth management subsidiaries paid $475.0 million, $360.0 million and $52.0 million, respectively, in dividends to the Company.
Reference is also made to Note (19) “Regulatory Matters” to the Consolidated Financial Statements, and “Liquidity and Capital Resources” contained in Item 8 of this Annual Report on Form 10-K for a description of the restrictions on the ability of certain subsidiaries to transfer funds to the Company in the form of dividends.
Issuer Purchases of Equity Securities
Our previously authorized share repurchase program permitted the repurchase of up to $125 million of our common stock. On October 28, 2021, the Board of Directors of the Company authorized the repurchase of up to $200 million of the Company’s outstanding shares of common stock. This authorization is incremental to the remaining authorization of approximately $23 million under the previous program, which the Board approved in 2019. The repurchase authorization does not have an expiration date. No purchases of the Company’s common shares were made by or on behalf of the Company or any “affiliated purchaser” as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended, during the twelve months ended December 31, 2024.

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. [Reserved]

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion highlights the significant factors affecting the operations and financial condition of Wintrust for the three years ended December 31, 2024. The detailed financial discussion focuses on 2024 results compared to 2023. This discussion and analysis should be read in conjunction with the Company’s Consolidated Financial Statements and Notes thereto within this Annual Report on Form 10-K.
For a discussion of 2023 results compared to 2022, refer to Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations” of the Wintrust Annual Report on Form 10-K for the year ended December 31, 2023 filed on February 28, 2024.
OPERATING SUMMARY
Wintrust’s key measures of profitability and balance sheet changes are shown in the following table:
Years Ended
December 31, Percentage (%) or
Basis Point (bp)
Change Percentage (%) or
Basis Point (bp)
Change
(Dollars in thousands, except per share data)
2024 2023 2022 2023 to 2024 2022 to 2023
Net income $ 695,045 $ 622,626 $ 509,682 12 % 22 %
Pre-tax income, excluding provision for credit losses (non-GAAP) (1)
1,048,136 959,471 779,144 9 23
Net income per common share - Diluted 10.31 9.58 8.02 8 19
Net revenue (2)
2,450,860 2,271,970 1,956,415 8 16
Net interest income 1,962,535 1,837,864 1,495,362 7 23
Net interest margin 3.51 % 3.66 % 3.15 % (15) bp 51 bp
Net interest margin - fully taxable-equivalent (non-GAAP) (1)
3.53 3.68 3.17 (15) 51
Net overhead ratio (3)
1.54 1.64 1.42 (10) 22
Non-interest income to average assets 0.82 0.81 0.91 1 (10)
Non-interest expense to average assets 2.36 2.45 2.33 (9) 12
Return on average assets 1.17 1.16 1.01 1 15
Return on average common equity 12.32 12.90 11.41 (58) 149
Return on average tangible common equity (non-GAAP) (1)
14.58 15.23 13.73 (65) 150
At end of period
Total assets $ 64,879,668 $ 56,259,934 $ 52,949,649 15 % 6 %
Total loans, excluding loans held-for-sale 48,055,037 42,131,831 39,196,485 14 7
Total deposits 52,512,349 45,397,170 42,902,544 16 6
Total shareholders’ equity 6,344,297 5,399,526 4,796,838 17 13
Average loans to average deposits ratio 93.8 % 93.1 % 87.5 % 70 bp 560 bp
Book value per common share (1)
$ 89.21 $ 81.43 $ 72.12 10 % 13 %
Tangible book value per common share (non-GAAP) (1)
75.39 70.33 61.00 7 15
Common equity to assets ratio (1)
9.1 % 8.9 % 8.3 % 20 bp 60 bp
Tangible common equity ratio (non-GAAP) (1)
7.8 7.7 7.1 10 60
Market price per common share $ 124.71 $ 92.75 $ 84.52 34 % 10 %
Allowance for loan and unfunded lending-related commitment losses to total loans 0.91 % 1.01 % 0.91 % (10) bp 10 bp
Non-performing loans to total loans 0.36 0.33 0.26 3 7
(1)See “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 and dividing by that period’s total average assets. A lower ratio indicates a higher degree of efficiency.
Please refer to the Consolidated Results of Operations section later in this discussion for an analysis of the Company’s operations for the past three years.
NON-GAAP FINANCIAL MEASURES/RATIOS
The accounting and reporting policies of Wintrust conform to generally accepted accounting principles (“GAAP”) in the United States and prevailing practices in the banking industry. However, certain non-GAAP performance measures and ratios are used by management to evaluate and measure the Company’s performance. These include taxable-equivalent net interest income (including its individual components), taxable-equivalent net interest margin (including its individual components), the taxable-equivalent efficiency ratio, tangible common equity ratio, tangible book value per common share, return on average tangible common equity and pre-tax income, excluding provision for credit losses. Management believes that these measures and ratios provide users of the Company’s financial information a more meaningful view of the performance of the Company’s interest-earning assets and interest-bearing liabilities and of the Company’s operating efficiency. Other financial holding companies may define or calculate these measures and ratios differently.
Management reviews yields on certain asset categories and the net interest margin of the Company and its banking subsidiaries on a fully taxable-equivalent (“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 FTE basis is also used in the calculation of the Company’s efficiency ratio. The efficiency ratio, which is calculated by dividing non-interest expense by total taxable-equivalent net revenue (less securities gains or losses), measures how much it costs to produce one dollar of revenue. Securities gains or losses are excluded from this calculation to better match revenue from daily operations to operational expenses. Management considers the tangible common equity ratio and tangible book value per common share as useful measurements of the Company’s equity. The Company references the return on average tangible common equity as a measurement of profitability. Management considers pre-tax income, excluding provision for credit losses as a useful measurement of the Company’s core net income.
The following table presents a reconciliation of certain non-GAAP performance measures and ratios used by the Company to evaluate and measure the Company’s performance to the most directly comparable GAAP financial measures for the last three years.
Years Ended December 31,
(Dollars and shares in thousands, except per share data) 2024 2023 2022
Reconciliation of Non-GAAP Net Interest Margin and Efficiency Ratio:
(A) Interest Income (GAAP) $ 3,477,597 $ 2,893,114 $ 1,747,443
Taxable-equivalent adjustment:
-Loans 9,377 7,827 3,619
-Liquidity management assets 2,501 2,249 1,977
-Other earning assets 12 10 5
(B) Interest Income (non-GAAP) $ 3,489,487 $ 2,903,200 $ 1,753,044
(C) Interest Expense (GAAP) 1,515,062 1,055,250 252,081
(D) Net Interest Income (GAAP) (A minus C) 1,962,535 1,837,864 1,495,362
(E) Net interest Income, fully taxable-equivalent (non-GAAP) (B minus C) 1,974,425 1,847,950 1,500,963
Net interest margin (GAAP) 3.51 % 3.66 % 3.15 %
Net interest margin, fully taxable-equivalent (non-GAAP) 3.53 3.68 3.17
(F) Non-interest income $ 488,325 $ 434,106 $ 461,053
(G) Losses on investment securities, net (2,602) 1,525 (20,427)
(H) Non-interest expense 1,402,724 1,312,499 1,177,271
Efficiency ratio (H/(D+F-G)) 57.17 % 57.81 % 59.55 %
Efficiency ratio (non-GAAP) (H/(E+F-G)) 56.90 57.55 59.38
Reconciliation of Non-GAAP Tangible Common Equity Ratio:
Total shareholders’ equity (GAAP) $ 6,344,297 $ 5,399,526 $ 4,796,838
Less: Non-convertible preferred stock (GAAP) (412,500) (412,500) (412,500)
Less: Acquisition-related intangible assets (GAAP) (918,632) (679,561) (675,710)
(I) Total tangible common shareholders’ equity (non-GAAP) $ 5,013,165 $ 4,307,465 $ 3,708,628
(J) Total assets (GAAP) $ 64,879,668 $ 56,259,934 $ 52,949,649
Less: Acquisition-related intangible assets (GAAP) (918,632) (679,561) (675,710)
(K) Total tangible assets (non-GAAP) $ 63,961,036 $ 55,580,373 $ 52,273,939
Common equity to assets ratio (GAAP) (L/J) 9.1 % 8.9 % 8.3 %
Tangible common equity ratio (non-GAAP) (I/K) 7.8 7.7 7.1
Reconciliation of Non-GAAP Tangible Book Value per Common Share:
Total shareholders’ equity (GAAP) $ 6,344,297 $ 5,399,526 $ 4,796,838
Less: Non-convertible preferred stock (GAAP) (412,500) (412,500) (412,500)
(L) Total common equity $ 5,931,797 $ 4,987,026 $ 4,384,338
(M) Actual common shares outstanding 66,495 61,244 60,794
Book value per common share (L/M) $ 89.21 $ 81.43 $ 72.12
Tangible book value per common share (Non-GAAP) (I/M) 75.39 70.33 61.00
Reconciliation of Non-GAAP Return on Average Tangible Common Equity:
(N) Net income applicable to common shares $ 667,081 $ 594,662 $ 481,718
Add: Acquisition-related intangible asset amortization 12,095 5,498 6,116
Less: Tax effect of acquisition-related intangible asset amortization (3,217) (1,446) (1,664)
After-tax acquisition-related intangible asset amortization 8,878 4,052 4,452
(O) Tangible net income applicable to common shares (non-GAAP) $ 675,959 $ 598,714 $ 486,170
Total average shareholders’ equity $ 5,826,940 $ 5,023,153 $ 4,634,224
Less: Average preferred stock (412,500) (412,500) (412,500)
(P) Total average common shareholders’ equity $ 5,414,440 $ 4,610,653 $ 4,221,724
Less: Average acquisition-related intangible assets (778,283) (679,802) (679,735)
(Q) Total average tangible common shareholders’ equity (non-GAAP) $ 4,636,157 $ 3,930,851 $ 3,541,989
Return on average common equity (N/P) 12.32 % 12.90 % 11.41 %
Return on average tangible common equity (non-GAAP) (O/Q) 14.58 15.23 13.73
Reconciliation of Non-GAAP Pre-Tax, Pre-Provision Income:
Income before taxes $ 947,089 $ 845,081 $ 700,555
Add: Provision for credit losses 101,047 114,390 78,589
Pre-tax income, excluding provision for credit losses (non-GAAP) $ 1,048,136 $ 959,471 $ 779,144
OVERVIEW AND STRATEGY
2024 Highlights
The Company recorded net income of $695.0 million for the year of 2024 compared to $622.6 million and $509.7 million for the years of 2023 and 2022, respectively. The results for 2024 demonstrate increased net interest income primarily due to increased growth in earning assets, as well as increased wealth management revenue and mortgage banking revenues as a result of a favorable fair value adjustments of MSRs, net of servicing hedge, and an increase in loans originated for sale, partially offset by payoffs, paydowns and repurchases of the existing portfolio.
The Company increased its loan portfolio from $42.1 billion at December 31, 2023 to $48.1 billion at December 31, 2024. This increase was primarily due to growth in several portfolios, including the commercial, industrial and other, commercial real estate, property and casualty premium finance receivables, and residential real estate portfolios. For more information regarding changes in the Company’s loan portfolio, see “Analysis of Financial Condition - Interest Earning Assets” and Note (4) “Loans” to the Consolidated Financial Statements presented under Item 8 of this Annual Report on Form 10-K.
The Company recorded net interest income of $2.0 billion in 2024 compared to $1.8 billion and $1.5 billion in 2023 and 2022, respectively. The higher level of net interest income recorded in 2024 compared to 2023 resulted primarily from a $5.7 billion increase in average earning assets partially offset by a 15 basis point decline in the net interest margin in 2024 (see “Net Interest Margin” section later in this Item 7 for further detail).
Non-interest income totaled $488.3 million in 2024, increasing $54.2 million, or 12%, compared to 2023. The increase in non-interest income in 2024 compared to 2023 was primarily attributable to a $20.0 million gain recognized in the first quarter of 2024 related to the sale of the Company’s Retirement Benefits Advisors (“RBA”) division within its wealth management business and an increase in mortgage banking revenues as a result of favorable fair value adjustments of MSRs, net of servicing hedge, and an increase in loans originated for sale, partially offset by payoffs, paydowns and repurchases of the existing portfolio (see “Non-Interest Income” section later in this Item 7 for further detail).
Non-interest expense totaled $1.4 billion in 2024, increasing $90.2 million, or 7%, compared to 2023. The increase compared to 2023 was primarily attributable to an $69.1 million increase in salary and employee benefits expense and a $18.2 million increase in software and equipment expense (see “Non-Interest Expense” section later in this Item 7 for further detail).
Management considers the maintenance of adequate liquidity to be important to the management of risk. Accordingly, during 2024, 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 investment portfolio and its access to funding from a variety of external funding sources. The Company had overnight liquid funds and interest-bearing deposits with banks of $4.9 billion and $2.5 billion at December 31, 2024 and 2023, respectively.
Economic Environment
The economic environment in 2024 included the return of a more normal shaped yield curve that is no longer inverted as the Federal Reserve Open Market Committee pivoted to reduce short term interest rates in the second half of 2024. Additionally, overall economic forecasts improved resulting in favorable credit trends for banks. The Company has employed certain strategies to manage net income in the current environment, including those discussed below.
Net Interest Income
The Company has leveraged its operating strengths to grow its earning assets base while maintaining a stable net interest margin in 2024. In 2024, the Company's net interest margin decreased to 3.51% (3.53% on a fully tax-equivalent basis, non-GAAP) as compared to 3.66% (3.68% on a fully tax-equivalent basis, non-GAAP) in 2023, primarily due to increased deposit competition following bank failures in 2023. Significant growth in earning assets resulted in the Company’s net interest income increasing by $124.7 million in 2024 compared to 2023. Based on contractual terms, approximately 74% of our current loan balances are projected to reprice or mature in 2025. The magnitude of potential changes in net interest income in various interest rate scenarios has continued to remain relatively neutral. As the current interest rate cycle progressed, management took action to reposition its sensitivity to interest rates. To this end, management has executed various derivative instruments including collars and receive-fixed swaps to hedge variable-rate loan exposures. The Company will continue to monitor current and projected interest rates and may execute additional derivatives to mitigate potential fluctuations in the net interest margin in future periods.
The Company has continued its practice of writing call options against certain investment securities to economically hedge the securities positions and receive fee income to compensate for net interest margin compression. In 2024, the Company recognized $10.2 million in fees on covered call options compared to $21.9 million in 2023.
The Company utilizes “back to back” interest rate derivative transactions, primarily interest rate swaps, to receive floating rate interest payments related to customer loans. In these arrangements, the Company makes a floating rate loan to a borrower who prefers to pay a fixed rate. To accommodate the risk management strategy of certain qualified borrowers, the Company enters a swap with its borrower to effectively convert the borrower's variable rate loan to a fixed rate. However, in order to minimize the Company's exposure on these transactions and continue to receive a floating rate, the Company simultaneously executes an offsetting mirror-image swap with various third parties.
Non-Interest Income
The interest rate environment impacts the profitability and mix of the Company’s mortgage banking business which generated revenues of $93.2 million in 2024 and $83.1 million in 2023, representing 4% of total net revenue in both 2024 and 2023. Mortgage banking revenue is primarily comprised of gains on sales of mortgage loans originated for new home purchases as well as mortgage refinancing. Mortgage revenue is also impacted by changes in the fair value of MSRs and EBOs guaranteed by U.S. government agencies. Mortgage originations for sale totaled $2.6 billion and $2.0 billion in 2024 and 2023, respectively. In 2024, approximately 75% of originations were mortgages associated with new home purchases, while 25% of originations were related to refinancing of mortgages. In 2023, approximately 83% of originations were mortgages associated with new home purchases, while 17% of originations were related to refinancing of mortgages.
Non-Interest Expense
Management believes expense management is important to enhance profitability amid increased competition. Cost control and an efficient infrastructure should position the Company appropriately as it continues its growth strategy. Management continues to be disciplined in its approach to growth and plans to leverage the Company's existing expense infrastructure to expand its presence in existing and complimentary markets. Potentially impacting the cost control strategies discussed above, the Company anticipates increased costs resulting from the regulatory environment in which we operate as well as wage inflation, higher FDIC insurance assessments and continued investment in technology.
Credit Quality
The Company continues to actively address non-performing assets and remains disciplined in its approach to grow without sacrificing asset quality.
In particular:
•The Company’s 2024 provision for credit losses totaled $101.0 million compared to a provision of $114.4 million in 2023 and a provision of $78.6 million in 2022. The lower provision in 2024 was primarily the result of improvements in the macroeconomic forecast, specifically the Company’s macroeconomic forecasts of key model inputs (most notably, Commercial Real Estate Price Index and Baa corporate credit spreads) despite growth in the Company's loan portfolios. Net charge-offs increased to $94.4 million in 2024 (of which $67.8 million related to commercial and commercial real estate loans), compared to $45.5 million in 2023 (of which $27.8 million related to commercial and commercial real estate loans) and $20.3 million in 2022 (of which $10.1 million related to commercial and commercial real estate loans).
•The Company's allowance for loan and unfunded lending-related commitment losses increased to $436.6 million at December 31, 2024, reflecting an increase of $9.3 million, or 2%, when compared to 2023. At December 31, 2024, approximately $222.9 million, or 51%, of the allowance for loan and unfunded lending-related commitment losses was associated with commercial real estate loans and an additional $175.8 million, or 40%, was associated with commercial loans.
•The Company has significant exposure to commercial real estate. At December 31, 2024, $12.9 billion, or 27%, of our loan portfolio was commercial real estate, with approximately 68.5% located in our market area. The commercial real estate loan portfolio was comprised of $2.4 billion in construction and development loans, and $10.5 billion in non-construction loans. In analyzing the commercial real estate market, the Company does not rely upon the assessment of broad market statistical data, in large part because the Company’s market area is diverse and covers many communities, each of which is impacted differently by economic forces affecting the Company’s general market area. As such, the extent of the decline in real estate valuations can vary meaningfully among the different types of commercial and other
real estate loans made by the Company. The Company uses its multi-chartered structure and local management knowledge to analyze and manage the local market conditions at each of its banks.
•Excluding early buy-out loans guaranteed by U.S. government agencies, total non-performing loans (loans on non-accrual status and loans more than 90 days past due and still accruing interest) were $170.8 million (of which $21.0 million, or 12%, was related to commercial real estate) at December 31, 2024, an increase of $31.8 million compared to December 31, 2023. Non-performing loans as a percentage of total loans were 0.36% at December 31, 2024 compared to 0.33% at December 31, 2023.
•The Company’s other real estate owned increased by $9.8 million to $23.1 million during 2024, from $13.3 million at December 31, 2023. The $23.1 million of other real estate owned as of December 31, 2024 was comprised entirely of commercial real estate property.
During 2024, management continued its efforts to aggressively resolve problem loans through liquidation, rather than retention of loans or real estate acquired as collateral through the foreclosure process. Management believes these actions will serve the Company well in the future by providing some protection for the Company from further valuation deterioration and permitting management to spend less time on resolution of problem loans and more time on growing the Company’s core business and the evaluation of other opportunities.
The Company enters into residential mortgage loan sale agreements with investors in the normal course of business. The Company’s practice is generally not to retain long-term fixed-rate mortgages on its balance sheet in order to mitigate interest rate risk, and consequently sells most of such mortgages into the secondary market. These agreements provide recourse to investors through certain representations concerning credit information, loan documentation, collateral and insurability. Investors request the Company to indemnify them against losses on certain loans or to repurchase loans which the investors believe do not comply with applicable representations. An increase in requests for loss indemnification can negatively impact mortgage banking revenue as additional recourse expense. The liability for estimated losses on repurchase and indemnification claims for residential mortgage loans previously sold to investors was approximately $188,000 at December 31, 2024 and $152,000 at December 31, 2023.
Community Banking
Through our community banking franchise, we provide banking and financial services primarily to individuals, small to mid-sized businesses, local governmental units and institutional clients residing primarily in the local areas we service. Profitability of this franchise is primarily driven by our net interest income and margin, our funding mix and related costs, the measurement of the allowance for credit losses and the impact of current and forecasted macroeconomic conditions on such measurement, the level of non-performing loans and other real estate owned, the amount of mortgage banking revenue and our history of acquiring banking operations and establishing de novo banking locations.
Net interest income and margin. The primary source of our revenue is net interest income. Net interest income is the difference between interest income and fees on earning assets, such as loans and securities, and interest expense on liabilities to fund those assets, including deposits and other borrowings. Net interest income can change significantly from period to period based on general levels of interest rates, customer prepayment patterns, the mix of interest-earning assets and the mix of interest-bearing and non-interest-bearing deposits and borrowings.
Funding mix and related costs. The most significant source of funding in community banking is core deposits, which are comprised of non-interest-bearing deposits, non-brokered interest-bearing transaction accounts, savings deposits and domestic time deposits. Our branch network is the principal source of core deposits, which generally carry lower interest rates than wholesale funds of comparable maturities. Community banking profitability has been favorably impacted in recent years as the Company funded strong loan growth with a more desirable blend of funds.
Measurement of the allowance for credit losses. The Company adopted CECL as of January 1, 2020, which requires the estimate of expected credit losses over the entire life of financial assets measured at amortized cost. To measure lifetime expected credit losses, the Company adjusts credit loss estimates for reasonable and supportable forecasts of macroeconomic conditions. Such forecasts can significantly impact the profitability of our community banks as changing estimates of lifetime losses from period to period can result in significant fluctuations in provision for credit losses during those periods. In 2024, such fluctuations in provision for credit losses favorably impacted the profitability of our community banks, primarily as a result of improvement in key variables (Baa credit spread and Commercial Real Estate Price Index) within forecasted macroeconomic conditions.
Level of non-performing loans and other real estate owned. The level of non-performing loans and other real estate owned can significantly impact our profitability as these loans and other real estate owned do not accrue any income, can be subject to charge-offs and write-downs due to deteriorating market conditions and generally result in additional legal and collections expenses. The Company’s credit quality measures have remained at historically low levels in recent years.
Mortgage banking revenue. Our community banking franchise is also influenced by the level of fees generated by the origination of residential mortgages and the sale of such mortgages into the secondary market by Wintrust Mortgage. The Company recognized an increase of $10.1 million in mortgage banking revenue in 2024 compared to 2023 as a result of higher origination volumes and favorable fair value adjustments of MSRs in 2024 compared to 2023. Mortgage originations for sale totaled $2.6 billion and $2.0 billion in 2024 and 2023, respectively, and was driven by growth in both purchase and refinance originations as housing inventories have improved and interest rates pulled back from peak levels reached in 2023. Partially offsetting the impact of higher originations and production margins was the change in fair value on EBOs guaranteed by U.S. government agencies.
Expansion of banking operations. Our historical financial performance has been affected by costs associated with growing market share in deposits and loans, establishing and acquiring banks, opening new branch facilities and building an experienced management team. Our financial performance generally reflects the improved profitability of our banking subsidiaries as they mature, offset by the costs of establishing and acquiring banks and opening new branch facilities.
In determining the timing of the opening of additional branches of existing banks, and the acquisition of additional banks, we consider many factors, particularly our perceived ability to obtain an adequate return on our invested capital driven largely by the then existing cost of funds and lending margins, the general economic climate and the level of competition in a given market.
In addition to the factors considered above, before we engage in expansion through de novo branches, we must first make a determination that the expansion fulfills our objective of enhancing shareholder value through potential future earnings growth and enhancement of the overall franchise value of the Company. Generally, we believe that, in normal market conditions, expansion through de novo growth is a better long-term investment than acquiring banks because the cost to bring a de novo location to profitability is generally substantially less than the premium paid for the acquisition of a healthy bank. Each opportunity to expand is unique from a cost and benefit perspective. Both FDIC-assisted and non-FDIC-assisted acquisitions offer a unique opportunity for the Company to expand into new and existing markets in a non-traditional manner. Potential acquisitions are reviewed in a similar manner as a de novo branch opportunities, however, FDIC-assisted and non-FDIC-assisted acquisitions have the ability to immediately enhance shareholder value. Factors including the valuation of our stock, other economic market conditions, the size and scope of the particular expansion opportunity and competitive landscape all influence the decision to expand via de novo growth or through acquisition. See discussion of acquisition activity in the “Recent Transactions” section below.
Specialty Finance
Through our specialty finance segment, we offer financing of insurance premiums for businesses and individuals; lease financing and other direct leasing opportunities; accounts receivable financing, value-added, out-sourced administrative services; and other specialty finance businesses.
Financing of Commercial Insurance Premiums
The primary driver of profitability related to the financing of property and casualty insurance premiums is the net interest spread that FIRST Insurance Funding and FIFC Canada can produce between the yields on the loans generated and the cost of funds incurred by the business unit. The property and casualty insurance premium finance business is a competitive industry and yields on loans are influenced by the market rates offered by our competitors. The majority of loans originated by FIRST Insurance Funding are purchased by the banks in order to more fully utilize their lending capacity as these loans generally provide the banks with higher yields than alternative investments. We fund these loans primarily through our deposits, the cost of which is influenced by competitors in the retail banking markets in our market area.
Financing of Life Insurance Premiums
The primary driver of profitability related to the financing of life insurance premiums is the net interest spread that Wintrust Life Finance can produce between the yields on the loans generated and the cost of funds allocated to the business unit. Profitability of financing both commercial and life insurance premiums is also meaningfully impacted by leveraging
information technology systems, maintaining operational efficiency and increasing average loan size, each of which allows us to expand our loan volume without significant capital investment.
Wealth Management
Through our wealth management segment, we offer a full range of wealth management services through four separate subsidiaries (WPT, Wintrust Investments, GLA and CDEC): trust and investment services, tax-deferred like-kind exchange services, asset management solutions, and securities brokerage services.
The primary drivers of profitability of the wealth management business can be associated with the level of commission received related to the trading performed by the brokerage customers for their accounts and the amount of assets under management in which the unit receives a management fee for advisory, administrative and custodial services. As such, revenues are influenced by a rise or fall in the debt and equity markets and the resulting increase or decrease in the value of our client accounts on which our fees are based. The commissions received by the brokerage unit are not as directly influenced by the directionality of the debt and equity markets but rather the desire of our customers to engage in trading based on their particular situations and outlooks of the market or particular stocks and bonds.
Financial Regulatory Reform
Our business is heavily regulated and supervised by federal agencies, state agencies and the federal & provincial governments of Canada. Both the scope of the laws and regulations and the intensity of the supervision to which our business is subject have increased in recent years, initially in response to the financial crisis, and more recently in light of other factors such as the regional banking uncertainty in early 2023, technological updates, and market changes. Many of these changes have occurred as a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) and its implementing regulations, most of which are now in place. We expect that our business will remain subject to extensive regulation and supervision.
The exact impact of the changing regulatory environment on our business and operations depends upon legislative or regulatory changes to reform the financial regulatory framework and the actions of our competitors, customers, and other market participants. Legislative and regulatory changes could have a significant impact on us by, for example, requiring us to change our business practices; requiring us to meet more stringent capital, liquidity and leverage ratio requirements; limiting our ability to pursue business opportunities; imposing additional costs and compliance obligations on us; limiting fees we can charge for services; impacting the value of our assets; or otherwise adversely affecting our businesses and our earnings’ capabilities. We have already experienced significant increases in compliance related costs in recent years, and we are now subject to more stringent risk-based capital and leverage ratio requirements than we were prior to the adoption of the U.S. Basel III Rules. We are also now subject to many mortgage-related rules promulgated by the CFPB that materially restructured the origination, services and securitization of residential mortgages in the United States. As discussed under Supervision and Regulation in Item 1, the FDIC adopted a final rule, applicable to all insured depository institutions, to increase initial base deposit insurance assessment rate schedules uniformly by 2 basis points, which began in the first quarterly assessment period of 2023. There was no change to the initial base deposit insurance assessment rate in 2024. Additionally, there was a special assessment by the FDIC that was levied on banks with an asset size above $5 billion to recoup losses from certain bank failures that occurred early in 2023. Special assessment payments began in June of 2024. We will continue to monitor the impact that the implementation of applicable rules, regulations and policies arising out of any legislative or regulatory changes may have on our organization. For further discussion of the laws and regulations applicable to us and our subsidiary banks, please refer to “Business-Supervision and Regulation.”
Recent Transactions
Business Combination
On August 1, 2024, the Company completed its previously announced acquisition of Macatawa, the parent company of Macatawa Bank. In conjunction with the completed acquisition, the Company issued approximately 4.7 million shares of common stock. Macatawa operates 26 full-service branches located throughout communities in Kent, Ottawa and northern Allegan counties in the state of Michigan. Macatawa offers a full range of banking, retail and commercial lending, wealth management and ecommerce services to individuals, businesses and governmental entities. As of August 1, 2024, Macatawa had carrying values of approximately $2.7 billion in assets, $2.3 billion in deposits and $1.4 billion in loans. As of December 31, 2024, the Company recorded preliminary goodwill of approximately $142.1 million on the purchase. The initial purchase accounting for the acquisition, in accordance with GAAP, for this business combination is not finalized and is therefore subject to change. See Note (7) “Business Combinations” to the Consolidated Financial Statements in Item 8 for a further discussion of recent and other transactions.
Division Sale
In the first quarter of 2024, the Company sold its Retirement Benefits Advisors (“RBA”) division and recorded a gain of approximately $20.0 million in other non-interest income from the sale.
Business Combination
On April 3, 2023, the Company completed its acquisition of Rothschild & Co Asset Management US Inc. and Rothschild & Co Risk Based Investments LLC from Rothschild & Co North America Inc. As of the acquisition date, the Company acquired approximately $12.6 million in net assets. As the transaction was determined to be a business combination, the Company recorded goodwill of approximately $2.6 million on the purchase.
SUMMARY OF CRITICAL ACCOUNTING ESTIMATES
The Company’s Consolidated Financial Statements are prepared in accordance with GAAP in the United States, prevailing practices of the banking industry, and the application of accounting policies of which are described in Note (1) “Summary of Significant Accounting Policies” to the Consolidated Financial Statements in Item 8. These policies require numerous estimates and strategic or economic assumptions, which may prove inaccurate or subject to variations. Changes in underlying factors, assumptions or estimates could have material impact on the Company’s future financial condition and results of operations. At December 31, 2024, management views critical accounting estimates to include the determination of the allowance for credit 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 most subject to revision as new information becomes available. These estimates were reviewed with the Audit Committee of the Company’s Board of Directors and are discussed more fully below.
Allowance for Credit Losses, including the Allowance for Loan Losses, Allowance for Losses on Lending-Related Commitments and Allowance for Held-to-Maturity Debt Securities
The allowance for credit losses represents management’s estimate of expected credit losses over the life of a financial asset carried at amortized cost. Determining the amount of the allowance for credit losses is considered a critical accounting estimate because it requires significant judgment and the use of estimates related to the fair value of the underlying collateral and amount and timing of expected future cash flows on individually assessed financial assets, estimated credit losses on pools of loans with similar risk characteristics, and consideration of reasonable and supportable forecasts of macroeconomic conditions, all of which are susceptible to significant change. At December 31, 2024, the loan and held-to-maturity debt securities portfolios represent 80% of total assets on the Company’s consolidated balance sheet. The Company also maintains an allowance for lending-related commitments, specifically unfunded loan commitments and letters of credit, which relates to certain amounts the Company is committed to lend (not unconditionally cancelable) but for which funds have not yet been disbursed.
Key macroeconomic variable data points that are significant inputs into our credit loss models for the commercial and commercial real estate portfolios are the Baa corporate credit spread, as well as the Commercial Real Estate Pricing Index (“CREPI”) specifically related to the commercial real estate portfolio. Holding all other inputs constant, the table below shows the impact of changes in these key macroeconomic variable data points on the estimate of allowance for credit losses.
Impact to estimated allowance for credit losses from an increased or higher input value
Baa Credit Spread Increases
CRE Price Index Decreases
Holding all other inputs constant, the following table provides a sensitivity analysis for the commercial and commercial real estate portfolios based on a 20 basis point change in Baa credit spreads from the assumption utilized in the estimate of that portfolio’s allowance for credit losses at December 31, 2024:
Baa Credit Spread
Narrows Widens
Commercial Decreases estimate by 10%-15% Increases estimate by 10%-15%
Commercial Real Estate:
Construction Decreases estimate by 15%-20% Increases estimate by 15%-20%
Non-Construction Decreases estimate by 5%-6% Increases estimate by 5%-6%
Holding all other inputs constant, the following table provides a sensitivity analysis for the commercial real estate construction and non-construction portfolios based on a 10% change in CREPI from the assumption utilized in the estimate of that portfolio’s allowance for credit losses at December 31, 2024:
CRE Price Index
Increases Decreases
Commercial Real Estate:
Construction Decreases estimate by 35%-40% Increases estimate by 130%-135%
Non-Construction Decreases estimate by 25%-30% Increases estimate by 45%-50%
See Note (5) “Allowance for Credit Losses” to the Consolidated Financial Statements in Item 8 and the section titled “Loan Portfolio and Asset Quality” in Item 7 for a description of the methodology used to determine the allowance for credit losses.
Estimations of Fair Value
A portion of the Company’s assets and liabilities are carried at fair value on the Consolidated Statements of Condition, with changes in fair value recorded either through earnings or other comprehensive income in accordance with applicable accounting principles generally accepted in the United States. These include the Company’s trading account securities, available-for-sale debt securities, equity securities with a readily determinable fair value, derivatives, mortgage loans held-for-sale, certain loans held-for-investment and mortgage servicing rights (“MSRs”). The determination of fair value is important for certain other assets, including goodwill and other intangible assets, loans individually assessed when measuring a related allowance for credit loss, and other real estate owned that are periodically evaluated for impairment using fair value estimates.
Fair value is generally defined as the amount at which an asset or liability could be exchanged in a current transaction between willing, unrelated parties, other than in a forced or liquidation sale. Fair value is based on quoted market prices in an active market, or if market prices are not available, is estimated using models employing techniques such as matrix pricing or discounting expected cash flows. The significant assumptions used in the models, which include assumptions for interest rates, discount rates, prepayments and credit losses, are independently verified against observable market data where possible. Where observable market data is not available, the estimate of fair value becomes more subjective and involves a high degree of judgment. In this circumstance, fair value is estimated based on management’s judgment regarding the value that market participants would assign to the asset or liability. This valuation process takes into consideration factors such as market illiquidity. Imprecision in estimating these factors can impact the amount recorded on the balance sheet for a particular asset or liability with related impacts to earnings or other comprehensive income. See Note (22) “Fair Value of Assets and Liabilities” to the Consolidated Financial Statements in Item 8 for a further discussion of fair value measurements.
Impairment Testing of Goodwill
The Company performs impairment testing of goodwill for each of its reporting units on an annual basis or more frequently when events warrant, using a qualitative or quantitative approach. Using a qualitative approach, the Company reviews any
recent events or circumstances that would indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount. These events and circumstances include the performance of the Company, the condition of the related industry in which the reporting unit operates and general economic environment and other factors. If the Company determines it is not more likely than not that there is impairment based on an evaluation of these events and circumstances, the Company may forgo the quantitative approach.
Using a quantitative approach, the Company compares each reporting unit’s fair value to its carrying value. If the carrying value of a reporting unit was determined to have been higher than its fair value, the Company would measure and recognize an impairment loss for the amount by which the carrying value exceeds the fair value of the reporting unit. Any impairment loss would not exceed the total amount of goodwill allocated to the reporting unit. Valuations are estimated in good faith by management through the use of publicly available valuations of comparable entities and discounted cash flow models using internal financial projections in the reporting unit’s business plan.
Under both a qualitative and quantitative approach, the goodwill impairment analysis requires management to make subjective judgments in determining if an indicator of impairment has occurred. Events and factors that may significantly affect the analysis include: a significant decline in the Company’s expected future cash flows, a substantial increase in the discount rate, a sustained, significant decline in the Company’s stock price and market capitalization, a significant adverse change in legal factors or in the business climate. Other factors might include changing competitive forces, customer behaviors and attrition, revenue trends, cost structures, along with specific industry and market conditions. Adverse change in these factors could have a significant impact on the recoverability of intangible assets and could have a material impact on the Company’s consolidated financial statements.
As of December 31, 2024, the Company had three reporting units: Community Banking, Specialty Finance and Wealth Management. Based on the Company’s 2024 annual goodwill impairment testing, which was performed quantitatively, the Company concluded that the fair value of each reporting unit more likely than not exceeded the carrying amounts of the respective reporting units.
Derivative Instruments
The Company utilizes derivative instruments to manage risks such as interest rate risk or market risk. The Company’s policy prohibits using derivatives for speculative purposes.
Accounting for derivatives differs significantly depending on whether a derivative is designated as an accounting hedge, which is a transaction intended to reduce a risk associated with specific assets or liabilities or future expected cash flows at the time it is purchased. In order to qualify as an accounting hedge, a derivative must be designated as such at inception by management and meet certain criteria. Management must also continue to evaluate whether the instrument effectively reduces the risk associated with the hedged item. To determine if a derivative instrument continues to be an effective hedge, the Company must make assumptions and judgments about the continued effectiveness of the hedging strategies and the nature and timing of forecasted transactions. If the Company’s hedging strategy were to become ineffective, hedge accounting would no longer apply and the reported results of operations or financial condition could be materially affected. See Note (21) “Derivative Financial Instruments” to the Consolidated Financial Statements in Item 8 for a further discussion of derivative accounting.
Income Taxes
The Company is subject to the income tax laws of the United States, its states, Canada and other jurisdictions where it conducts business. These laws are complex and subject to potentially different interpretations by the taxpayer and the various taxing authorities. In determining the provision for income taxes, management must make judgments and estimates about the application of these inherently complex laws, related regulations and case law. In the process of preparing the Company’s tax returns, management attempts to make reasonable interpretations of the tax laws. These interpretations are subject to challenge by the tax authorities upon audit or to reinterpretation based on management’s ongoing assessment of facts and evolving case law. Management reviews its uncertain tax positions and recognition of the benefits of such positions on a regular basis.
On a quarterly basis, management assesses the reasonableness of its effective tax rate based upon its current best estimate of net income and the applicable taxes expected for the full year. Deferred tax assets and liabilities are reassessed on a quarterly basis, if business events or circumstances warrant. Additionally, any enactment of new tax rates requires the Company to re-measure its existing deferred tax assets and liabilities to reflect the new tax rate, with such adjustments recognized in current year earnings. See Note (17) “Income Taxes” to the Consolidated Financial Statements in Item 8 for a further discussion of income taxes.
CONSOLIDATED RESULTS OF OPERATIONS
The following discussion of Wintrust’s results of operations requires an understanding that a majority of the Company’s bank subsidiaries have been started as de novo banks since December 1991. Wintrust has a strategy of continuing to build its customer base and securing broad product penetration in each marketplace that it serves. The Company has expanded its banking franchise from three banks with five offices in 1994 to 16 banks with 205 offices at the end of 2024. FIRST Insurance Funding and Wintrust Life Finance have matured into separate divisions that generated, on a national basis, $18.1 billion in total premium finance receivables in 2024 within the United States. FIFC Canada, acquired in 2012, originated $1.9 billion in Canadian property and casualty premium finance receivables in 2024. The Company’s leasing business increased its portfolio of assets, including direct financing leases, loans and equipment on operating leases, to $3.9 billion as of December 31, 2024. In addition, the wealth management companies have been building a team of experienced professionals who are located within a majority of the banks.
Earnings Summary
Net income for the year ended December 31, 2024, totaled $695.0 million, or $10.31 per diluted common share, compared to $622.6 million, or $9.58 per diluted common share, in 2023, and $509.7 million, or $8.02 per diluted common share, in 2022. During 2024, net income increased by $72.4 million and earnings per diluted common share increased by $0.73. Net interest income increased in 2024 compared to 2023 primarily as a result of growth in average earning assets in 2024. Non-interest income increased primarily due to a $20.0 million gain recognized in the first quarter of 2024 related to the sale of the Company’s RBA division within its wealth management business and an increase in mortgage banking revenue in 2024 as compared 2023 primarily as a result of favorable fair value adjustments of MSRs, net of servicing hedge, and an increase in loans originated for sale, partially offset by unfavorable adjustments to the Company’s held-for-sale portfolio of EBOs guaranteed by U.S. government agencies, which are held at fair value.
Other items impacting net income in 2024 compared to 2023 include increased salary and employee benefits expenses.
Net Interest Income
The primary source of the Company’s revenue is net interest income. Net interest income is the difference between interest income and fees on earning assets, such as loans and securities, and interest expense on the liabilities to fund those assets, including interest-bearing deposits and other borrowings. The amount of net interest income is affected by both changes in the level of interest rates, and the amount and composition of earning assets and interest-bearing liabilities.
Net interest income in 2024 totaled $1.96 billion, up from $1.84 billion in 2023 and up from $1.50 billion in 2022, representing an increase of $124.7 million, or 7%, in 2024 and an increase of $342.5 million, or 23%, in 2023. The table presented later in this section, titled “Changes in Interest Income and Expense,” presents the dollar amount of changes in interest income and expense, by major category, attributable to changes in the volume of the balance sheet category and changes in the rate earned or paid with respect to that category of assets or liabilities for 2024 and 2023.
Average earning assets increased $5.7 billion, or 11%, in 2024 and $2.8 billion, or 6%, in 2023. Loans are the most significant component of the earning asset base as they earn interest at a higher rate than the majority of other earning assets. Average loans increased $4.4 billion, or 11%, in 2024 and $3.6 billion, or 10%, in 2023. Total average loans as a percentage of total average earning assets were 80%, 80% and 77% in 2024, 2023 and 2022, respectively. The average yield on loans was 6.82% in 2024, 6.32% in 2023 and 4.12% in 2022, reflecting an increase of 50 basis points in 2024 and an increase of 220 basis points in 2023. The higher loan yields in 2024 compared to 2023 is primarily a result of new loan originations at higher market rates along with existing loans repricing at higher levels in 2024 compared to 2023. The average yield on liquidity management assets was 3.85% in 2024, 3.53% in 2023 and 2.15% in 2022, reflecting an increase of 32 basis points in 2024 and an increase of 138 basis points in 2023. The higher yield in 2024 compared to 2023 is a result of investment security purchases at higher market rates. The average rate paid on interest-bearing deposits, the largest component of the Company’s interest-bearing liabilities, was 3.58% in 2024, 2.81% in 2023 and 0.62% in 2022, representing an increase of 77 basis points in 2024 and an increase of 219 basis points in 2023. The higher level of interest-bearing deposits rates in 2024 compared to 2023 is primarily a result of increased deposit competition driving interest rates higher in 2024 compared to 2023. As a result of the above, net interest margin decreased to 3.51% (3.53% on a fully taxable-equivalent basis, non-GAAP) in 2024 compared to 3.66% (3.68% on a fully taxable-equivalent basis, non-GAAP) in 2023.
Net interest income and net interest margin were also affected by amortization of valuation adjustments to earning assets and interest-bearing liabilities of acquired businesses. Assets and liabilities of acquired businesses are required to be recognized at their estimated fair value at the date of acquisition. These valuation adjustments represent the difference between the estimated
fair value and the carrying value of assets and liabilities acquired. These adjustments are amortized into interest income and interest expense based upon the estimated remaining lives of the assets and liabilities acquired.
Average Balance Sheets, Interest Income and Expense, and Interest Rate Yields and Costs
The following table sets forth the average balances, the interest earned or paid thereon, and the effective interest rate, yield or cost for each major category of interest-earning assets and interest-bearing liabilities for the years ended December 31, 2024, 2023 and 2022. The yields and costs include loan origination fees and certain direct origination costs that are considered adjustments to yields. Interest income on non-accruing loans is reflected in the year that it is collected, to the extent it is not applied to principal. Such amounts are not material to net interest income or the net change in net interest income in any year. Non-accrual loans are included in the average balances. Net interest income and the related net interest margin have been adjusted to reflect tax-exempt income, such as interest on municipal securities and loans, on a fully taxable-equivalent basis (non-GAAP). This table should be referred to in conjunction with discussion of the financial condition and results of operations of the Company.
Average Balance
for the years ended December 31, Interest
for the years ended December 31, Yield/Rate
for the years ended December 31,
(Dollars in thousands) 2024 2023 2022 2024 2023 2022 2024 2023 2022
Assets
Interest-bearing deposits with banks, securities purchased under resale agreements and cash equivalents (1)
$ 2,276,818 $ 1,608,835 $ 3,323,196 $ 115,618 $ 80,783 $ 48,350 5.08 % 5.02 % 1.45 %
Investment securities(2)
8,229,846 7,721,661 6,735,732 278,617 240,837 162,577 3.39 3.12 2.41
FHLB and FRB stock 255,018 215,699 150,223 20,060 14,912 8,622 7.87 6.91 5.74
Total liquidity management assets (3) (8)
$ 10,761,682 $ 9,546,195 $ 10,209,151 $ 414,295 $ 336,532 $ 219,549 3.85 % 3.53 % 2.15 %
Other earning assets (3) (4) (8)
17,113 17,129 22,391 1,025 1,098 955 5.99 6.41 4.27
Mortgage loans held-for-sale 348,278 294,421 496,088 21,436 16,791 21,195 6.15 5.70 4.27
Loans, net of unearned income (3) (5) (8)
44,765,445 40,324,472 36,684,528 3,052,731 2,548,779 1,511,345 6.82 6.32 4.12
Total earning assets (8)
$ 55,892,518 $ 50,182,217 $ 47,412,158 $ 3,489,487 $ 2,903,200 $ 1,753,044 6.24 % 5.79 % 3.70 %
Allowance for loan and investment security losses (368,342) (308,724) (256,690)
Cash and due from banks 455,708 468,298 473,025
Other assets 3,437,025 3,187,715 2,795,826
Total assets $ 59,416,909 $ 53,529,506 $ 50,424,319
Liabilities and Shareholders’ Equity
Deposits - interest-bearing:
NOW and interest-bearing demand deposits $ 5,360,630 $ 5,626,277 $ 5,355,077 $ 130,281 $ 122,074 $ 27,566 2.43 % 2.17 % 0.51 %
Wealth management deposits 1,458,404 1,730,523 2,827,497 40,324 42,782 29,750 2.76 2.47 1.05
Money market accounts 15,946,363 13,665,248 12,254,159 620,411 429,900 80,591 3.89 3.15 0.66
Savings accounts 6,015,085 5,299,205 4,014,166 161,429 109,666 11,234 2.68 2.07 0.28
Time deposits 8,753,848 5,952,537 3,812,148 391,197 202,048 26,061 4.47 3.39 0.68
Total interest-bearing deposits $ 37,534,330 $ 32,273,790 $ 28,263,047 $ 1,343,642 $ 906,470 $ 175,202 3.58 % 2.81 % 0.62 %
FHLB advances 3,042,052 2,316,722 1,484,663 99,149 72,287 30,329 3.26 3.12 2.04
Other borrowings 603,868 630,115 485,820 34,480 35,280 14,294 5.71 5.60 2.94
Subordinated notes 360,802 437,604 437,139 18,117 22,023 22,004 5.02 5.03 5.03
Junior subordinated notes 253,566 253,566 253,566 19,674 19,190 10,252 7.76 7.57 4.10
Total interest-bearing liabilities $ 41,794,618 $ 35,911,797 $ 30,924,235 $ 1,515,062 $ 1,055,250 $ 252,081 3.63 % 2.94 % 0.81 %
Non-interest-bearing deposits 10,212,088 11,018,596 13,667,879
Other liabilities 1,583,263 1,575,960 1,197,981
Equity 5,826,940 5,023,153 4,634,224
Total liabilities and shareholders’ equity $ 59,416,909 $ 53,529,506 $ 50,424,319
Interest rate spread (6) (8)
2.61 % 2.85 % 2.89 %
Less: fully taxable-equivalent adjustment $ (11,890) $ (10,086) $ (5,601) (0.02) (0.02) (0.02)
Net free funds/contribution (7)
$ 14,097,900 $ 14,270,420 $ 16,487,923 0.92 0.83 0.28
Net interest income/margin (GAAP) (8)
$ 1,962,535 $ 1,837,864 $ 1,495,362 3.51 % 3.66 % 3.15 %
Fully taxable-equivalent adjustment 11,890 10,086 5,601 0.02 0.02 0.02
Net interest income/margin fully taxable-equivalent (non-GAAP) (8)
$ 1,974,425 $ 1,847,950 $ 1,500,963 3.53 % 3.68 % 3.17 %
(1)Includes interest-bearing deposits from 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 a marginal federal corporate tax rate in effect as of the applicable period. The total adjustments for the years ended December 31, 2024, 2023 and 2022 were $11.9 million, $10.1 million and $5.6 million, respectively.
(4)Other earning assets include brokerage customer receivables and trading account securities.
(5)Loans, net of unearned income, include non-accrual loans.
(6)Interest rate spread is the difference between the yield earned on earning assets and the rate paid on interest-bearing liabilities.
(7)Net free funds is the difference between total average earning assets and total average interest-bearing liabilities. The estimated contribution to net interest margin from net free funds is calculated using the rate paid for total interest-bearing liabilities.
(8)See “Non-GAAP Financial Measures/Ratios” for additional information on this performance measure/ratio.
Changes In Interest Income and Expense
The following table shows the dollar amount of changes in interest income and expense, on a fully taxable-equivalent basis (non-GAAP), by major categories of interest-earning assets and interest-bearing liabilities attributable to changes in volume or rate for the periods indicated:
Years Ended December 31,
2024 Compared to 2023
2023 Compared to 2022
(In thousands) Change
Due to
Rate Change
Due to
Volume Total
Change Change
Due to
Rate Change
Due to
Volume Total
Change
Interest income, FTE basis (non-GAAP) (1)
Interest-bearing deposits with banks, securities purchased under resale agreements and cash equivalents (2)
$ 968 $ 33,867 $ 34,835 $ 67,201 $ (34,768) $ 32,433
Investment securities 21,089 16,691 37,780 52,257 26,003 78,260
FHLB and FRB stock 2,208 2,940 5,148 2,005 4,285 6,290
Total liquidity management assets $ 24,265 $ 53,498 $ 77,763 $ 121,463 $ (4,480) $ 116,983
Other earning assets (75) 2 (73) 403 (260) 143
Mortgage loans held-for-sale 1,387 3,258 4,645 5,792 (10,196) (4,404)
Loans, net of unearned income 207,753 296,199 503,952 872,679 164,755 1,037,434
Total interest income $ 233,330 $ 352,957 $ 586,287 $ 1,000,337 $ 149,819 $ 1,150,156
Interest Expense
Deposits - interest-bearing:
NOW and interest-bearing demand deposits $ 13,940 $ (5,733) $ 8,207 $ 93,047 $ 1,461 $ 94,508
Wealth management deposits 4,664 (7,122) (2,458) 28,052 (15,020) 13,032
Money market accounts 110,745 79,766 190,511 338,999 10,310 349,309
Savings accounts 35,290 16,473 51,763 93,740 4,692 98,432
Time deposits 76,076 113,073 189,149 154,153 21,834 175,987
Total interest expense - deposits $ 240,715 $ 196,457 $ 437,172 $ 707,991 $ 23,277 $ 731,268
FHLB advances 3,343 23,519 26,862 20,367 21,591 41,958
Other borrowings 657 (1,457) (800) 14,983 6,003 20,986
Subordinated notes (45) (3,861) (3,906) - 19 19
Junior subordinated notes 432 52 484 8,938 - 8,938
Total interest expense $ 245,102 $ 214,710 $ 459,812 $ 752,279 $ 50,890 $ 803,169
Less: fully taxable-equivalent adjustment (1,804) - (1,804) (4,485) - (4,485)
Net interest income (GAAP) (1)
$ (13,576) $ 138,247 $ 124,671 $ 243,573 $ 98,929 $ 342,502
Fully taxable-equivalent adjustment 1,804 - 1,804 4,485 - 4,485
Net interest income, FTE basis (non-GAAP) (1)
$ (11,772) $ 138,247 $ 126,475 $ 248,058 $ 98,929 $ 346,987
(1)See “Non-GAAP Financial Measures/Ratios” for additional information on this performance measure/ratio.
(2)Includes interest-bearing deposits from 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.
The changes in net interest income are created by changes in both interest rates and volumes. In the table above, volume variances are computed using the change in volume multiplied by the previous year’s rate. Rate variances are computed using the change in rate multiplied by the previous year’s volume. The change in interest due to both rate and volume has been allocated between factors in proportion to the relationship of the absolute dollar amounts of the change in each. The change in interest due to an additional day resulting from the 2024 leap year has been allocated entirely to the change due to volume.
Non-Interest Income
The following table presents non-interest income by category for 2024, 2023 and 2022:
Years ended December 31, 2024 compared to 2023
2023 compared to 2022
(Dollars in thousands)
2024 2023 2022 $ Change % Change $ Change % Change
Brokerage $ 22,611 $ 18,645 $ 17,668 $ 3,966 21 % $ 977 6 %
Trust and asset management 123,616 111,962 108,946 11,654 10 3,016 3
Total wealth management(1)
$ 146,227 $ 130,607 $ 126,614 $ 15,620 12 % $ 3,993 3 %
Mortgage banking 93,213 83,073 155,173 10,140 12 (72,100) (46)
Service charges on deposit accounts 65,651 55,250 58,574 10,401 19 (3,324) (6)
(Losses) gains on investment securities, net (2,602) 1,525 (20,427) (4,127) NM 21,952 NM
Fees from covered call options 10,196 21,863 14,133 (11,667) (53) 7,730 55
Trading gains, net 504 1,142 3,752 (638) (56) (2,610) (70)
Operating lease income, net 58,710 53,298 55,510 5,412 10 (2,212) (4)
Other:
Interest rate swap fees 12,494 12,251 12,185 243 2 66 1
BOLI 5,755 5,149 806 606 12 4,343 NM
Administrative services 5,336 5,599 6,713 (263) (5) (1,114) (17)
Foreign currency remeasurement (losses) gains (1,302) 1,059 292 (2,361) NM 767 NM
Changes in fair value on EBOs and loans held-for-investment 812 1,521 4,240 (709) (47) (2,719) (64)
Early pay-offs of capital leases 1,869 1,184 694 685 58 490 71
Miscellaneous 91,462 60,585 42,794 30,877 51 17,791 42
Total Other
$ 116,426 $ 87,348 $ 67,724 $ 29,078 33 % $ 19,624 29 %
Total Non-Interest Income $ 488,325 $ 434,106 $ 461,053 $ 54,219 12 % $ (26,947) (6) %
(1)Wealth management revenue is comprised of the trust and asset management revenue of the WPT and GLA, the brokerage commissions, managed money fees and insurance product commissions at Wintrust Investments and fees from tax-deferred like-kind exchange services provided by CDEC.
NM-Not Meaningful
Notable contributions to the change in non-interest income are as follows:
Mortgage banking revenue increased in 2024 as compared 2023 primarily as a result of a favorable fair value adjustments of MSRs, net of servicing hedge, and a increase in loans originated for sale, partially offset by payoffs, paydowns and repurchases of the existing portfolio. Mortgage banking revenue includes revenue from activities related to originating, selling and servicing residential real estate loans for the secondary market. A main factor in the mortgage banking revenue recognized by the Company is the volume of mortgage loans originated or purchased for sale. Mortgage loans originated for sale totaled $2.6 billion for the year ended 2024 compared to $2.0 billion for the same period of 2023. The increase in originations was primarily driven by growth in both purchase and refinance originations as housing inventories have improved and interest rates pulled back from peak levels reached in 2023. The percentage of origination volume from refinancing activities was 25% in 2024 as compared to 17% in 2023.
The Company records MSRs at fair value on a recurring basis. During 2024, the fair value of the MSRs portfolio increased due to a favorable fair value adjustment of $4.4 million and retained servicing rights which led to capitalization of $30.0 million, partially offset by reduction in value of $23.0 million due to payoffs and paydowns of the existing portfolio. See Note (6) “Mortgage Servicing Rights (“MSRs”)” to the Consolidated Financial Statements in Item 8 for a summary of the changes in the carrying value of MSRs.
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 during 2024 was a $7.9 million unfavorable valuation adjustment compared to a $1.3
million favorable valuation adjustment in 2023. The table below presents additional selected information regarding mortgage banking for the respective periods.
Years Ended December 31,
(Dollars in thousands)
2024 2023 2022
Originations:
Retail originations $ 1,886,730 $ 1,387,423 $ 1,978,609
Veterans First originations 738,184 574,782 820,391
Total originations for sale (A) $ 2,624,914 $ 1,962,205 $ 2,799,000
Originations for investment 1,018,680 578,571 944,389
Total originations $ 3,643,594 $ 2,540,776 $ 3,743,389
As a percentage of originations for sale:
Retail originations 72 % 71 % 71 %
Veterans First originations 28 29 29
Purchases 75 % 83 % 71 %
Refinances 25 17 29
Production Margin:
Production revenue (B) (1)
$ 48,531 $ 41,031 $ 44,153
Total originations for sale (A) 2,624,914 1,962,205 2,799,000
Add: Current period end mandatory interest rate lock commitments to fund originations for sale (2)
103,946 119,624 113,303
Less: Prior period end mandatory interest rate lock commitments to fund originations for sale (2)
119,624 113,303 353,509
Total mortgage production volume (C) $ 2,609,236 $ 1,968,526 $ 2,558,794
Production margin (B / C) 1.86 % 2.08 % 1.73 %
Mortgage servicing:
Loans serviced for others (D) $ 12,400,913 $ 12,007,165 $ 14,052,596
Mortgage servicing rights, at fair value (E) 203,788 192,456 230,225
Percentage of mortgage servicing rights to loans serviced for others (E/D) 1.64 % 1.60 % 1.64 %
Servicing income 42,624 43,563 44,080
MSR Fair Value Asset Activity
MSR - FV at Beginning of Period $ 192,456 $ 230,225 $ 147,571
MSR - current period rights sold - (30,170) -
MSR - current period capitalization 29,969 28,610 46,221
MSR - collection of expected cash flows - paydowns (6,009) (6,284) (6,213)
MSR - collection of expected cash flows - payoffs and repurchases (17,017) (10,776) (17,418)
MSR - changes in fair value model assumptions 4,389 (19,149) 60,064
MSR Fair Value at end of period $ 203,788 $ 192,456 $ 230,225
Summary of Mortgage Banking Revenue
Operational:
Production revenue (1)
$ 48,531 $ 41,031 $ 44,153
MSR - Current period capitalization 29,969 28,610 46,221
MSR - Collection of expected cash flows - paydowns (6,009) (6,284) (6,213)
MSR - Collection of expected cash flows - pay offs (17,017) (10,776) (17,418)
Servicing income 42,624 43,563 44,080
Other revenue (97) 384 176
Total operational mortgage banking revenue $ 98,001 $ 96,528 $ 110,999
Fair Value:
MSR - changes in fair value model assumptions $ 4,389 $ (19,149) $ 60,064
(Loss) gain on derivative contract held as an economic hedge, net (7,909) 1,280 (2,165)
Changes in FV on early buy-out loans guaranteed by US Govt (HFS) (1,268) 4,414 (13,725)
Total fair value mortgage banking revenue $ (4,788) $ (13,455) $ 44,174
Total mortgage banking revenue $ 93,213 $ 83,073 $ 155,173
(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.
Wealth management revenue increased by $15.6 million in 2024 compared to the same period in 2023 primarily due to increased asset management fees as a result of higher assets under management when compared to the same period in the prior year. Trust and asset management fees are based primarily on the market value of the assets under management or administration as well as volume of tax-deferred like-kind exchange services provided during a period.
Service charges on deposit accounts increased in 2024 compared to 2023 primarily as a result of higher fees associated with commercial account analysis fees.
Net losses on investment securities in 2024 were primarily the result of unrealized losses on equity investments. The Company did not recognize any credit-related write-downs or other-than-temporary impairment charges within its available-for-sale or held-to-maturity investment securities portfolio in 2024 or 2023, respectively.
Fees from covered call option transactions totaled $10.2 million in 2024, compared to $21.9 million in 2023. The Company has typically written call options with terms of less than three months against certain U.S. Treasury and agency securities held in its portfolio for liquidity and other purposes. Management has effectively entered into these transactions with the goal of economically hedging security positions and enhancing its overall return on its investment portfolio. These option transactions are designed to increase the total return associated with holding certain investment securities and do not qualify as hedges pursuant to accounting guidance. There were no outstanding call option contracts at December 31, 2024 and 2023.
Miscellaneous non-interest income includes loan servicing fees, income from other investments, service charges and other fees. The increased miscellaneous other income for 2024 compared to 2023 was primarily due to a $20.0 million gain recognized in the first quarter of 2024 related to the sale of the Company’s RBA division within its wealth management business as well as a $4.6 million gain recognized in the second quarter of 2024 on the sale of premium finance receivables.
Non-Interest Expense
The following table presents non-interest expense by category for 2024, 2023 and 2022:
Years ended December 31, 2024 compared to 2023
2023 compared to 2022
(Dollars in thousands)
2024 2023 2022 $ Change % Change $ Change % Change
Salaries and employee benefits:
Salaries $ 465,972 $ 438,812 $ 382,181 $ 27,160 6 % $ 56,631 15 %
Commissions and incentive compensation 215,519 182,101 197,873 33,418 18 (15,772) (8)
Benefits 135,617 127,100 116,053 8,517 7 11,047 10
Total salaries and employee benefits
$ 817,108 $ 748,013 $ 696,107 $ 69,095 9 % $ 51,906 7 %
Software and equipment 122,794 104,632 95,885 18,162 17 8,747 9
Operating lease equipment 42,298 42,363 38,008 (65) (0) 4,355 11
Occupancy, net 79,213 77,068 70,965 2,145 3 6,103 9
Data processing 39,736 38,800 31,209 936 2 7,591 24
Advertising and marketing 61,812 65,075 59,418 (3,263) (5) 5,657 10
Professional fees 40,637 34,758 33,088 5,879 17 1,670 5
Amortization of other acquisition-related intangible assets 12,095 5,498 6,116 6,597 NM (618) (10)
FDIC insurance 40,962 36,728 28,639 4,234 12 8,089 28
FDIC insurance - special assessment 5,156 34,374 - (29,218) (85) 34,374 NM
OREO expenses, net (408) (1,528) (140) 1,120 (73) (1,388) NM
Other:
Lending expenses, net of deferred origination costs 21,856 21,096 20,576 760 4 520 3
Travel and entertainment 23,441 21,194 16,506 2,247 11 4,688 28
Miscellaneous 96,024 84,428 80,894 11,596 14 3,534 4
Total other $ 141,321 $ 126,718 $ 117,976 $ 14,603 12 % $ 8,742 7 %
Total Non-Interest Expense $ 1,402,724 $ 1,312,499 $ 1,177,271 $ 90,225 7 % $ 135,228 11 %
NM-Not Meaningful
Notable contributions to the change in non-interest expense are as follows:
Salaries and employee benefits is the largest component of non-interest expense, accounting for 58% of the total in 2024 compared to 57% in 2023. Salaries and employee benefits increased in 2024 compared to 2023 primarily as a result of elevated commissions from increased mortgage production as well as due to the increase in employees related to the growth of the Company, including Macatawa.
Software and equipment expense increased in 2024 compared to 2023 primarily as a result of increased software licensing expenses as the Company invests in enhancements to the digital customer experience, upgrades to infrastructure and enhancements to information security capabilities. Software and equipment expense includes furniture, equipment and computer software, depreciation and repairs and maintenance costs.
Amortization of other-acquisition related intangible assets increased in 2024 compared to 2023. The increase was primarily due to the amortization of the core deposit intangible associated with the Macatawa acquisition.
Professional fees expense increased in 2024 compared to 2023 primarily as a result of increased fees on consulting services and legal costs associated with the Macatawa acquisition. Professional fees include legal, audit, and tax fees, external loan review costs, consulting arrangements and normal regulatory exam assessments.
FDIC insurance expense decreased in 2024 compared to 2023 primarily due to the Company’s recognition of approximately $34.4 million in 2023 as compared to $5.2 million recognized in 2024 accrued for the estimated amount owed as a result of the FDIC special assessment on uninsured deposits in response to certain bank failures occurring in 2023.
Miscellaneous non-interest expense includes ATM expenses, correspondent banking charges, directors’ fees, telephone, postage, corporate insurance, dues and subscriptions, problem loan expenses and other miscellaneous operational losses and costs. Miscellaneous non-interest expense increased in 2024 as compared to 2023 primarily as a result of various other operational costs including an increase in interest payments made on collateral received for outstanding interest rate derivative contracts and includes approximately $4.3 million in acquisition related expenses related to the acquisition of Macatawa.
Income Taxes
The Company recorded income tax expense of $252.0 million in 2024 compared to $222.5 million in 2023 and $190.9 million 2022. The effective tax rates were 26.6% in 2024, 26.3% in 2023 and 27.2% in 2022. The effective tax rate in 2024 is slightly higher due to the Company’s income tax expense being impacted by an increase in non-deductible items in the most recent comparable period. Income tax expense was also impacted by the tax effects related to the issuance of shares in share-based compensation plans. These tax effects fluctuate based on the Company’s stock price and timing of employee stock option exercises and vesting of other share based awards. The Company recorded a net excess tax benefit related to share-based compensation of $4.5 million in 2024, a net excess tax benefit of $2.9 million 2023, and a net excess tax benefit of $2.9 million in 2022, the majority of which were recognized in the first quarter in each year. Please refer to Note (17) “Income Taxes” to the Consolidated Financial Statements in Item 8 for further discussion and analysis of the Company’s tax position, including a reconciliation of the tax expense computed at the statutory tax rate to the Company’s actual tax expense.
Operating Segment Results
As described in Note (24) “Segment Information” to the Consolidated Financial Statements in Item 8, the Company’s operations consist of three primary segments: community banking, specialty finance and wealth management. The Company’s profitability is primarily dependent on the net interest income, provision for credit losses, non-interest income and operating expenses of its community banking segment. For purposes of internal segment profitability, management allocates certain intersegment and parent company balances. Management allocates a portion of revenues to the specialty finance segment related to loans and leases originated by the specialty finance segment and sold or assigned to the community banking segment. Similarly, for purposes of analyzing the contribution from the wealth management segment, management allocates a portion of the net interest income earned by the community banking segment on deposit balances of customers of the wealth management segment to the wealth management segment. Finally, expenses incurred at the Wintrust parent company are allocated to each segment based on each segment’s risk-weighted assets.
The community banking segment’s net interest income for the year ended December 31, 2024 totaled $1.5 billion as compared to $1.4 billion for the same period in 2023, an increase of $95.3 million, or 7%. The increase in 2024 compared to 2023 was primarily attributable to increased interest and fees on loans due to loan growth and increased interest rates, partially offset by increased interest expense on deposits. The community banking segment recorded a provision for credit losses of $88.3 million in 2024 compared to $104.9 million in 2023. The provision for credit losses decreased in 2024 compared to 2023 primarily due to improvements in the macroeconomic forecast partially offset by increased loan growth across portfolios including $15.5 million in Day 1 loan loss provision related to the acquisition of Macatawa. Non-interest income for the community banking segment increased $16.8 million, or 6% in 2024 when compared to 2023. The increase in non-interest income in 2024 compared to 2023 was primarily the result of increased mortgage banking revenue due to favorable fair value adjustments of MSRs, net of servicing hedge, and higher originations for sale. Non-interest expenses increased by $65.5 million in 2024 compared to 2023, primarily because of higher salary, commissions, and incentive compensation. The community banking segment’s net income for the year ended December 31, 2024 totaled $458.7 million, an increase of $44.7 million, compared to net income of $414.1 million in 2023. The increase was primarily attributable to higher net interest income and a decrease in the provision for credit losses in 2024, as discussed above.
The specialty finance segment’s net interest income totaled $356.3 million for the year ended December 31, 2024, compared to $329.0 million in the same period of 2023, an increase of $27.2 million, or 8%. The increase in 2024 compared to 2023 was primarily attributable to loan growth and increased interest rates on the premium finance receivables portfolios. The specialty finance segment’s provision for credit losses totaled $12.7 million in 2024 compared to $9.5 million in 2023. The increase was due to higher net charge-offs experienced in 2024 and loan growth. The specialty finance segment’s non-interest income increased to $119.3 million for the year ended December 31, 2024 compared to $106.0 million in 2023. Non-interest expenses increased by $20.9 million in 2024 compared to 2023, primarily because of higher salary, commissions, and incentive compensation as well as other segment expenses. For 2024, our commercial premium finance operations, life insurance premium finance operations, leasing operations and accounts receivable finance operations accounted for 49%, 30%, 19% and 2%, respectively, of the total revenues of our specialty finance business. Net income of the specialty finance segment totaled $186.3 million and $175.5 million for the years ended December 31, 2024 and 2023, respectively.
The wealth management segment reported net interest income of $30.0 million for 2024 and $32.7 million for 2023. Net interest income for this segment is primarily comprised of an allocation of net interest income earned by the community banking segment on non-interest bearing and interest-bearing wealth management customer account balances on deposit at the
banks. Wealth management customer account balances on deposit at the banks averaged $1.5 billion and $1.7 billion in 2024 and 2023, respectively. This segment recorded non-interest income of $168.1 million for 2024 as compared to $136.6 million for 2023. The increase was primarily due to a $20.0 million gain recognized in the first quarter of 2024 related to the sale of the Company’s RBA division within its wealth management business. Non-interest expenses increased by $6.4 million in 2024 compared to 2023, primarily because of higher commissions and incentive compensation. Distribution of wealth management services through each bank continues to be a focus of the Company as the number of brokers in its banks continues to increase. The Company is committed to growing the wealth management segment in order to better service its customers and create a more diversified revenue stream. The wealth management segment reported net income of $50.0 million for 2024 compared to $33.0 million for 2023.
Analysis of Financial Condition
Total assets were $64.9 billion at December 31, 2024, representing an increase of $8.6 billion, or 15%, when compared to December 31, 2023. Total funding, which includes deposits, all notes and advances, including secured borrowings and junior subordinated debentures, was $56.8 billion at December 31, 2024 and $49.1 billion at December 31, 2023. See Notes (3), (4), and (10) through (14) to the Consolidated Financial Statements in Item 8 for additional period-end detail on the Company’s interest-earning assets and funding liabilities.
Interest-Earning Assets
The following table sets forth, by category, the composition of average earning assets and the relative percentage of each category to total average earning assets for the periods presented:
Years Ended December 31,
2024 2023 2022
(Dollars in thousands)
Balance Percent Balance Percent Balance Percent
Mortgage loans held-for-sale $ 348,278 1 % $ 294,421 1 % $ 496,088 1 %
Loans:
Commercial 14,075,830 25 12,478,768 25 11,897,776 25
Commercial real estate 12,180,253 22 10,631,288 21 9,432,526 20
Home equity 384,095 1 337,836 1 327,506 1
Residential real estate 3,044,847 5 2,497,553 5 1,968,333 4
Premium finance receivables 14,992,245 27 14,295,504 28 12,993,677 27
Other loans 88,175 0 83,523 0 64,710 0
Total loans, net of unearned income (1)
$ 44,765,445 80 % $ 40,324,472 80 % $ 36,684,528 77 %
Liquidity management assets (2)
10,761,682 19 9,546,195 19 10,209,151 22
Other earning assets (3)
17,113 0 17,129 0 22,391 0
Total average earning assets $ 55,892,518 100 % $ 50,182,217 100 % $ 47,412,158 100 %
Total average assets $ 59,416,909 $ 53,529,506 $ 50,424,319
Total average earning assets to total average assets 94 % 94 % 94 %
(1)Includes non-accrual loans.
(2)Liquidity management assets include investment securities, other securities, interest-earning deposits with banks, federal funds sold and securities purchased under resale agreements.
(3)Other earning assets include brokerage customer receivables and trading account securities.
Total average earning assets increased $5.7 billion, or 11%, in 2024. Average earning assets comprised 94% of average total assets in 2024 and 2023.
Mortgage loans held-for-sale. Average mortgage loans held-for-sale totaled $348.3 million in 2024, compared to $294.4 million in 2023. These balances represent mortgage loans awaiting subsequent sale in the secondary market with such sales eliminating the interest-rate risk associated with these loans, as they are predominantly long-term fixed rate loans, and provides a source of non-interest revenue. The increase in average balance from 2023 to 2024 was primarily due to higher mortgage origination production balances.
Loans, net of unearned income. Average total loans, net of unearned income, totaled $44.8 billion and increased $4.4 billion, or 11%, in 2024. Average commercial loans totaled $14.1 billion in 2024, and increased $1.6 billion, or 13%, over the average balance in 2023. Average commercial real estate loans totaled $12.2 billion in 2024, increasing $1.5 billion, or 15%, since 2023. Combined, these categories comprised 59% and 57% of the average loan portfolio in 2024 and 2023, respectively. The growth realized in these categories for 2024 is primarily attributable to increased business development efforts during the period.
Home equity loans averaged $384.1 million in 2024, and increased $46.3 million, or 14%, when compared to the average balance in 2023. Unused commitments on home equity lines of credit totaled $999.1 million at December 31, 2024 and $845.6 million at December 31, 2023. 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 $3.0 billion in 2024, and increased $547.3 million, or 22%, from the average balance in 2023. The increase in average balance was partially due to the Company originating, through Wintrust Mortgage, more loans which were retained in the banks’ portfolios rather than being sold into the secondary market.
Average premium finance receivables totaled $15.0 billion in 2024, and accounted for 33% of the Company’s average total loans. In 2024, average premium finance receivables increased $0.7 billion, or 5%, compared to 2023. The increase during 2024 was the result of effective marketing and customer servicing as well as 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. Approximately $20.0 billion of premium finance receivables were originated in 2024 compared to approximately $17.9 billion in 2023.
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 19% and 19% of total average earning assets in 2024 and 2023, respectively. Average liquidity management assets increased $1.2 billion in 2024 compared to 2023. 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 the out-sourced securities firm, extends credit to its customer, subject to various regulatory and internal margin requirements, collateralized by cash and securities in customer’s accounts. In connection with these activities, 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 an agreement with the out-sourced securities firm, may be required to purchase or sell financial instruments at prevailing market prices to fulfill the customer's obligations. 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.
Investment Securities Portfolio
Supplemental Statistical Data
The following statistical information is provided in accordance with the requirements of Regulation S-K as promulgated by the SEC. This data should be read in conjunction with the Company’s Consolidated Financial Statements and notes thereto, and Management’s Discussion and Analysis which are contained in Item 8 and Item 7, respectively, of this Annual Report on Form 10-K.
The following table presents the amortized cost and fair value of the Company’s investment securities portfolios, by investment category, as of December 31, 2024, and 2023:
(In thousands)
2024 2023
Amortized
Cost Fair
Value Amortized
Cost Fair
Value
Available-for-sale securities
U.S. Treasury $ 37,858 $ 37,907 $ 6,960 $ 6,968
U.S. government agencies 50,000 44,945 50,000 45,124
Municipal 188,405 184,593 144,299 140,958
Corporate notes:
Financial issuers 83,997 80,169 83,996 75,540
Other 1,000 993 1,000 991
Mortgage-backed: (1)
Residential mortgage-backed securities 4,106,641 3,553,638 3,505,012 3,059,620
Commercial (multi-family) mortgage-backed securities 19,064 18,332 13,201 12,980
Collateralized mortgage obligations 238,574 220,905 175,346 160,734
Total available-for-sale securities $ 4,725,539 $ 4,141,482 $ 3,979,814 $ 3,502,915
Held-to-maturity securities
U.S. government agencies $ 313,539 $ 244,412 $ 336,468 $ 269,410
Municipal 161,016 155,969 172,933 169,720
Mortgage-backed: (1)
Residential mortgage-backed securities 2,864,927 2,259,913 3,042,828 2,495,485
Commercial (multi-family) mortgage-backed securities 6,364 6,112 6,415 6,231
Collateralized mortgage obligations 211,023 189,155 241,075 220,551
Corporate notes 56,851 54,989 57,544 54,071
Total held-to-maturity securities $ 3,613,720 $ 2,910,550 $ 3,857,263 $ 3,215,468
Less: Allowance for credit losses (457) (347)
Held-to-maturity securities, net of allowance for credit losses $ 3,613,263 $ 3,856,916
Equity securities with readily determinable fair value $ 220,758 $ 215,412 $ 143,312 $ 139,268
(1)None of our mortgage-backed securities are subprime.
Tables presenting the carrying amounts and gross unrealized gains and losses for securities at December 31, 2024 and 2023 are included by reference to Note (3) “Investment Securities” to the Consolidated Financial Statements presented under Item 8 of this Annual Report on Form 10-K.
The following table presents the carrying value of the investment securities portfolios as of December 31, 2024, by maturity distribution. Carrying value represents the fair value of investment securities classified as available-for-sale, the amortized cost of those classified as held-to-maturity and the fair value of equity securities with readily determinable fair values.
(In thousands)
Within 1
year From 1 to
5 years From 5 to
10 years After 10
years Mortgage-
backed Equity Securities Total
Available-for-sale securities
U.S. Treasury $ 35,902 $ 2,005 $ - $ - $ - $ - $ 37,907
U.S. government agencies - - 37,225 7,720 - - 44,945
Municipal 53,490 81,461 35,712 13,930 - - 184,593
Corporate notes:
Financial issuers - 68,866 11,303 - - - 80,169
Other - 993 - - - - 993
Mortgage-backed: (1)
Residential mortgage-backed securities - - - - 3,553,638 - 3,553,638
Commercial (multi-family) mortgage-backed securities - - - - 18,332 - 18,332
Collateralized mortgage obligations - - - - 220,905 - 220,905
Total available-for-sale securities $ 89,392 $ 153,325 $ 84,240 $ 21,650 $ 3,792,875 $ - $ 4,141,482
Held-to-maturity securities
U.S. government agencies $ - $ 1,719 $ - $ 311,820 $ - $ - $ 313,539
Municipal 7,626 78,599 56,877 17,914 - - 161,016
Corporate notes:
Financial issuers 11,303 30,579 14,969 - - - 56,851
Mortgage-backed: (1)
Residential mortgage-backed securities - - - - 2,864,927 - 2,864,927
Commercial (multi-family) mortgage-backed securities - - - - 6,364 - 6,364
Collateralized mortgage obligations - - - - 211,023 - 211,023
Total held-to-maturity securities $ 18,929 $ 110,897 $ 71,846 $ 329,734 $ 3,082,314 $ - $ 3,613,720
Less: Allowance for credit losses (457)
Held-to-maturity securities, net of allowance for credit losses $ 3,613,263
Equity securities with readily determinable fair value $ - $ - $ - $ - $ - $ 215,412 $ 215,412
(1) None of our mortgage-backed securities are subprime.
The weighted average yield calculated based on amortized cost for each range of maturities of securities, on a tax-equivalent basis, is shown below as of December 31, 2024:
Within
1 year From 1
to 5 years From 5 to
10 years After
10 years Mortgage-
backed Equity Securities Total
Available-for-sale securities
U.S. Treasury 5.16 % 4.96 % - % - % - % - % 5.15 %
U.S. government agencies - - 4.00 2.87 - - 3.81
Municipal 4.29 4.44 4.67 4.80 - - 4.47
Corporate notes:
Financial issuers - 4.26 3.49 - - - 4.15
Other - 4.40 - - - - 4.40
Mortgage-backed: (1)
Residential mortgage-backed securities - - - - 3.52 - 3.52
Commercial (multi-family) mortgage-backed securities - - - - 5.57 - 5.57
Collateralized mortgage obligations - - - - 4.83 - 4.83
Total available-for-sale securities 4.64 % 4.37 % 4.22 % 4.11 % 3.61 % 0.32 % 3.68 %
Held-to-maturity securities
U.S. government agencies - % 3.22 % - % 2.84 % - % - % 2.84 %
Municipal 4.16 4.20 4.36 4.35 - - 4.27
Corporate notes:
Financial issuers 1.89 1.05 6.37 - - - 2.62
Mortgage-backed: (1)
Residential mortgage-backed securities - - - - 2.49 - 2.49
Commercial (multi-family) mortgage-backed securities - - - - 3.94 - 3.94
Collateralized mortgage obligations - - - - 3.82 - 3.82
Total held-to-maturity securities 2.80 % 3.32 % 4.78 % 2.92 % 2.58 % - % 2.68 %
Equity securities with readily determinable fair value - % - % - % - % - % 0.32 % 0.32 %
(1) None of our mortgage-backed securities are subprime.
Credit Quality
Commercial and Commercial Real Estate Loan Portfolios
Commercial and commercial real estate loans. Our commercial and commercial real estate loan portfolios are comprised primarily of commercial real estate loans and lines of credit for working capital purposes. The table below sets forth information regarding the types, amounts and performance of our loans within these portfolios as of December 31, 2024 and 2023:
As of December 31, 2024 As of December 31, 2023
Balance % of
Total
Balance Allowance
For Credit
Losses Allocation Balance % of
Total
Balance Allowance
For Credit
Losses Allocation
Commercial:
Commercial, industrial and other $ 15,574,551 54.7 % $ 175,837 $ 12,832,053 53.1 % $ 169,604
Commercial Real Estate:
Construction and development $ 2,434,081 8.5 % $ 87,236 $ 2,084,041 8.6 % $ 94,081
Non-construction 10,469,863 36.8 135,620 9,260,123 38.3 129,772
Total commercial real estate $ 12,903,944 45.3 % $ 222,856 $ 11,344,164 46.9 % $ 223,853
Total commercial and commercial real estate $ 28,478,495 100.0 % $ 398,693 $ 24,176,217 100.0 % $ 393,457
Commercial real estate-collateral location by state:
Illinois $ 7,043,810 54.6 % $ 6,935,002 61.1 %
Wisconsin 918,976 7.1 878,888 7.7
Michigan 877,058 6.8 195,212 1.7
Total primary markets $ 8,839,844 68.5 % $ 8,009,102 70.5 %
Indiana 447,768 3.5 367,215 3.2
Florida 434,078 3.4 337,771 3.0
Colorado 249,070 1.9 267,369 2.4
California 260,037 2.0 251,509 2.2
Tennessee 290,391 2.3 199,751 1.8
Ohio 235,257 1.8 224,588 2.0
Texas 327,660 2.5 219,163 1.9
Other 1,819,839 14.1 1,467,696 13.0
Total $ 12,903,944 100.0 % $ 11,344,164 100.0 %
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. 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 portfolio, our allowance for credit losses in our commercial loan portfolio increased to $175.8 million as of December 31, 2024 compared to $169.6 million as of December 31, 2023.
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, southern Wisconsin, and west Michigan, 68.5% of our commercial real estate loan portfolio is located in this region as of December 31, 2024. We have been able to effectively manage our total non-performing commercial real estate loans. As of December 31, 2024, our allowance for credit losses related to this portfolio was $222.9 million compared to $223.9 million as of December 31, 2023. The decrease in the allowance for credit losses is primarily due to the impact on the Company’s loan loss modeling from improving macroeconomic conditions and expectations between the two reporting dates primarily related to the Baa credit spread and the Commercial Real Estate Price Index. The table below sets forth the commercial real estate loans by property type and owner vs. non-owner occupied.
(In thousands)
December 31, 2024 December 31, 2023
Commercial Real Estate: Owner Occupied Non-Owner Occupied Total % of Total Average Size of Loan Owner Occupied Non-Owner Occupied Total % of Total Average Size of Loan
Residential construction $ 2,252 $ 46,365 $ 48,617 0 % $ 423 $ 3,790 $ 54,852 $ 58,642 0 % $ 814
Commercial construction 197,184 1,868,591 2,065,775 16 4,661 85,353 1,644,584 1,729,937 15 5,351
Land 5,554 314,135 319,689 2 1,827 9,663 285,799 295,462 3 1,813
Office 286,041 1,370,068 1,656,109 13 1,489 272,171 1,183,246 1,455,417 13 1,386
Industrial 956,972 1,671,604 2,628,576 21 1,786 840,056 1,295,820 2,135,876 19 1,602
Retail 349,183 1,025,472 1,374,655 11 1,156 316,527 1,020,990 1,337,517 12 1,176
Multi-family 95,855 3,029,650 3,125,505 24 1,315 111,005 2,704,906 2,815,911 25 1,199
Mixed use and other 586,970 1,098,048 1,685,018 13 1,210 481,345 1,034,057 1,515,402 13 1,170
Total commercial real estate $ 2,480,011 $ 10,423,933 $ 12,903,944 100 % $ 1,559 $ 2,119,910 $ 9,224,254 $ 11,344,164 100 % $ 1,470
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.
Home equity loans. The Company’s home equity loans and lines of credit are primarily originated by each of the bank subsidiaries in their local markets where there is a strong understanding of the underlying real estate value. The Company’s banks monitor and manage these loans, and conduct an automated review of all home equity lines of credit at least twice per year. This review collects FICO and Bankruptcy scores for each home equity borrower and identifies situations where the credit strength of the borrower is declining. When other specific events occur that may influence repayment, information such as tax liens or judgments is collected. The bank subsidiaries use this information to manage loans that may be higher risk and to determine whether to obtain additional credit information or updated property valuations. In a limited number of cases, the Company may issue home equity credit together with first mortgage financing, and requests for such financing are evaluated on a combined basis.
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. 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. The Company’s 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 December 31, 2024, our residential loan portfolio totaled $3.6 billion, or 8% of our total outstanding loans.
Our adjustable rate mortgages are often non-agency conforming. These loans generally provide for periodic and lifetime limits on the interest rate adjustments among other features. Additionally, adjustable rate mortgages may pose a higher risk of delinquency and default because they require borrowers to make larger payments when interest rates rise. As of December 31, 2024, excluding early buyout loans guaranteed by U.S. government agencies, $23.8 million of our residential real estate mortgages, or 0.7% of our residential real estate loan portfolio were classified as nonaccrual, no balances were 90 or more days past due and still accruing, $24.6 million were 30 to 89 days past due or 0.7% and $3.4 billion were current or 98.6%. 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, the Company generally sells in the secondary market loans originated with long-term fixed rates, for which we receive fee income. The Company also selectively retains certain of these loans within the banks’ own loan portfolios where they are non-agency conforming, or where the terms of the loans make them favorable to retain. A portion of the loans we sold into the secondary market were sold with the servicing of those loans retained. The amount of loans serviced for others as of December 31, 2024 and 2023 was $12.4 billion and $12.0 billion, respectively. All other mortgage loans sold into the secondary market were sold without the retention of servicing rights.
The 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 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 loan classified as held-for-investment totaled $156.8 million at December 31, 2024 compared to $150.6 million at December 31, 2023. 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 $115.0 million at December 31, 2024, compared to $92.8 million at December 31, 2023. The increase in balance from December 31, 2023 to December 31, 2024 was the result of a slightly higher delinquency rate between periods and less frequent exercising of the early buyout option by the Company. As of December 31, 2024, early buyout exercised loans held-for-investment totaled $41.8 million compared to $57.8 million as of December 31, 2023. At December 31, 2024 and 2023, early buyout exercised mortgage loans held-for-sale remained relatively stable and totaled $141.5 million and $137.2 million, respectively.
It is not the Company’s current practice to underwrite, and there are no plans to underwrite subprime, Alt A, no or little documentation loans, or option ARM loans. As of December 31, 2024, none of our mortgage loans consist of interest-only loans.
Premium finance receivables - property & casualty. FIRST Insurance Funding and FIFC Canada originated approximately $18.4 billion in property and casualty insurance premium finance receivables during 2024 as compared to approximately $16.4 billion in 2023. FIRST Insurance Funding and FIFC Canada makes loans to finance insurance premiums related to property and casualty insurance policies. The loans are indirectly originated by working through independent medium and large insurance agents and brokers located throughout the United States and Canada. The insurance premiums financed are primarily for commercial customers’ purchases of liability, property and casualty and other commercial insurance. This lending involves relatively rapid turnover of the loan portfolio and high volume of loan originations. The Company performs ongoing credit and other reviews of the agents and brokers, and performs various internal audit steps to mitigate against the risk of 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 $1.7 billion in life insurance premium finance receivables in 2024 as compared to $1.5 billion in 2023. 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 Company originates consumer loans in order to provide a wider range of financial services to its customers. Consumer loans generally have shorter terms and higher interest rates than mortgage loans but generally involve more credit risk than mortgage loans due to the type and nature of the collateral.
Foreign. The Company had approximately $824.4 million of loans to businesses with operations in foreign countries as of December 31, 2024 compared to $920.4 million at December 31, 2023. This balance as of December 31, 2024 consists of loans originated by FIFC Canada.
Loan Concentrations
Loan concentrations are considered to exist when there are amounts loaned to multiple borrowers engaged in similar activities which would cause them to be similarly impacted by economic or other conditions. The Company had limited concentrations of loans exceeding 10% of total loans at December 31, 2024, including the specialty finance operating segment, which are diversified throughout the United States and Canada.
Maturities and Sensitivities of Loans to Changes in Interest Rates
The following table classifies the loan portfolio at December 31, 2024 by date at which the loans reprice or mature, and the type of rate exposure:
(In thousands) One year or
less From one to
five years From five to fifteen years After fifteen years Total
Commercial
Fixed rate $ 419,733 $ 3,452,609 $ 2,001,276 $ 26,914 $ 5,900,532
Variable rate 9,673,183 836 - - 9,674,019
Total commercial $ 10,092,916 $ 3,453,445 $ 2,001,276 $ 26,914 $ 15,574,551
Commercial real estate
Fixed rate $ 611,473 $ 2,842,450 $ 389,550 $ 60,813 $ 3,904,286
Variable rate 8,987,087 12,504 67 - 8,999,658
Total commercial real estate $ 9,598,560 $ 2,854,954 $ 389,617 $ 60,813 $ 12,903,944
Home equity
Fixed rate $ 9,106 $ 1,138 $ - $ 20 $ 10,264
Variable rate 434,764 - - - 434,764
Total home equity $ 443,870 $ 1,138 $ - $ 20 $ 445,028
Residential real estate
Fixed rate $ 12,157 $ 4,594 $ 76,321 $ 1,093,139 $ 1,186,211
Variable rate 90,855 584,092 1,751,607 - 2,426,554
Total residential real estate $ 103,012 $ 588,686 $ 1,827,928 $ 1,093,139 $ 3,612,765
Premium finance receivables - property & casualty
Fixed rate $ 7,179,672 $ 92,370 $ - $ - $ 7,272,042
Variable rate - - - - -
Total premium finance receivables - property & casualty $ 7,179,672 $ 92,370 $ - $ - $ 7,272,042
Premium finance receivables - life insurance
Fixed rate $ 271,528 $ 318,470 $ 4,000 $ 4,451 $ 598,449
Variable rate 7,548,696 - - - 7,548,696
Total premium finance receivables - life insurance $ 7,820,224 $ 318,470 $ 4,000 $ 4,451 $ 8,147,145
Consumer and other
Fixed rate $ 32,507 $ 7,587 $ 927 $ 920 $ 41,941
Variable rate 57,621 - - - 57,621
Total consumer and other $ 90,128 $ 7,587 $ 927 $ 920 $ 99,562
Total per category
Fixed rate $ 8,536,176 $ 6,719,218 $ 2,472,074 $ 1,186,257 $ 18,913,725
Variable rate 26,792,206 597,432 1,751,674 - 29,141,312
Total loans, net of unearned income $ 35,328,382 $ 7,316,650 $ 4,223,748 $ 1,186,257 $ 48,055,037
Less: Existing cash flow hedging derivatives (1) (6,700,000)
Total loans repricing or maturing in one year or less, adjusted for cash flow hedging activity $ 28,628,382
Variable Rate Loan Pricing by Index:
SOFR tenors (2) $ 18,029,528
12- month CMT (3) 6,355,203
Prime 3,388,920
Fed Funds 886,812
Other U.S. Treasury tenors 190,576
Other 290,273
Total variable rate $ 29,141,312
(1)Excludes cash flow hedges with future effective starting dates.
(2)SOFR - Secured Overnight Financing Rate.
(3)CMT - Constant Maturity Treasury Rate.SOFR - Secured Overnight Financing Rate
Past Due Loans and Non-Performing Assets
The Company’s ability to manage credit risk depends in large part on its ability to properly identify and manage problem loans. To do so, the Company operates a credit risk rating system under which credit management personnel assign a credit risk rating (1 to 10 rating, with higher scores indicating higher risk) to each loan at the time of origination and review loans on a regular basis. For loans measured at amortized cost, these credit risk ratings are also an important aspect of the Company’s allowance for credit losses measurement methodology. The credit risk rating structure and classifications are shown below:
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, minimum for most commercial real estate construction loans)
6 Rating - Special Mention (Loss Potential moderate if corrective action not taken) (Assets in this category are currently protected, potentially weak, but not to the point of substandard classification)
7 Rating - Substandard Accrual (Loss Potential distinct possibility that the bank may sustain some loss, but no discernible impairment) (Must have well defined weaknesses that jeopardize the liquidation of the debt)
8 Rating - Substandard Non-accrual (Loss Potential well documented probability of loss, including potential impairment) (Must have well defined weaknesses that jeopardize the liquidation of the debt)
9 Rating - Doubtful (Loss Potential extremely high) (These assets have all the weaknesses in those classified “substandard” with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of current existing facts, conditions, and values, highly improbable)
10 Rating - Loss (fully charged-off) (Loans in this category are considered fully uncollectible.)
Generally, each loan officer is responsible for monitoring his or her loan portfolio, recommending a credit risk rating for each loan in his or her portfolio and ensuring the credit risk ratings are appropriate. These credit risk ratings are then ratified by the 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 the management-assigned credit risk ratings. These ratings are subject to further review at each of our bank subsidiaries by the applicable regulatory authority, including the FRB of Chicago and the OCC, and are also reviewed by our internal loan review staff and 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 on-going detailed tracking mechanism for each problem loan. Once management determines that a loan has deteriorated to a point where it has a credit risk rating of 6 or worse, the Company’s Managed Asset Division performs an overall credit and collateral review. As part of this review, all underlying collateral is identified and the valuation methodology is analyzed and tracked. As a result of this initial review by the Company’s Managed Asset Division, the credit risk rating is reviewed and a portion of the outstanding loan balance may be deemed uncollectible and, as a result, no longer share similar risk characteristics as its related pool. If that is the case, the individual loan is considered collateral dependent and individually assessed for an allowance for credit loss. The Company’s individual assessment utilizes an
independent re-appraisal of the collateral (unless such a third-party evaluation is not possible due to the unique nature of the collateral, such as a closely-held business or thinly traded securities). In the case of commercial real estate collateral, an independent third party appraisal is ordered by the Company’s Real Estate Services Group to determine if there has been any change in the underlying collateral value. These independent appraisals are reviewed by the Real Estate Services Group and sometimes by independent third party valuation experts and may be adjusted depending upon market conditions.
Through the credit risk rating process, 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 non-accrual status or a charge-off. If the Company determines that a loan amount or portion thereof is uncollectible, the loan’s credit risk rating is immediately downgraded to an 8 or 9 and the uncollectible amount is charged-off. Any loan that has a partial charge-off continues to be assigned a credit risk rating of an 8 or 9 for the duration of time that a balance remains outstanding. The Company undertakes a thorough and ongoing analysis to determine if additional impairment and/or charge-offs are appropriate and to begin a workout plan for the credit to minimize actual losses. In determining the appropriate charge-off for collateral-dependent loans, the Company considers the results of appraisals for the associated collateral.
The 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 enhanced loan modifications that now must be disclosed in accordance with ASU 2022-02. In that event, our Managed Assets Division conducts an overall credit and collateral review. A modification of a loan is considered to be enhanced 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 an enhanced modification. 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 enhanced modifications.
Loan modifications are 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 loans that do not meet the criteria listed above for enhanced modifications, 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 for the years prior to 2023, the troubled debt restructurings (“TDRs”) performing under the contractual terms of the loan agreement as of the dates shown. Reporting periods prior to the adoption of ASU 2022-02 as of January 1, 2023 present information on loan modifications representing TDRs under the prior accounting standards and related disclosure requirements. Prior to January 1, 2020, Purchased Credit-Impaired (“PCI”) loans were aggregated into pools by common risk characteristics for accounting purposes, including recognition of interest income on a pool basis. As a result of the implementation of CECL, beginning in the first quarter of 2020, PCI loans transitioned to a classification of Purchased Credit Deteriorated (“PCD”) loans, which no longer maintains the prior pools and related accounting concepts. Recognition of interest income on PCD loans is considered at the individual asset level following the Company’s accrual policies, instead of based upon the entire pool of loans. Due to the adoption of CECL, the Company included $22.6 million of PCD loans in total non-performing loans as of December 31, 2020.
(Dollars in thousands) 2024 2023 2022 2021 2020
Loans past due greater than 90 days and still accruing(2):
Commercial $ 104 $ 98 $ 462 $ 15 $ 307
Commercial real estate - - - - -
Home equity - - - - -
Residential real estate - - - - -
Premium finance receivables - property & casualty 16,031 20,135 15,841 7,210 12,792
Premium finance receivables - life insurance - - 17,245 7 -
Consumer and other 47 54 49 137 264
Total loans past due greater than 90 days and still accruing $ 16,182 $ 20,287 $ 33,597 $ 7,369 $ 13,363
Non-accrual loans(3):
Commercial $ 73,490 $ 38,940 $ 35,579 $ 20,399 $ 21,743
Commercial real estate 21,042 35,459 6,387 21,746 46,107
Home equity 1,117 1,341 1,487 2,574 6,529
Residential real estate 23,762 15,391 10,171 16,440 26,071
Premium finance receivables - property & casualty 28,797 27,590 13,470 5,433 13,264
Premium finance receivables - life insurance 6,431 - - - -
Consumer and other 2 22 6 477 436
Total non-accrual loans $ 154,641 $ 118,743 $ 67,100 $ 67,069 $ 114,150
Total non-performing loans:
Commercial $ 73,594 $ 39,038 $ 36,041 $ 20,414 $ 22,050
Commercial real estate 21,042 35,459 6,387 21,746 46,107
Home equity 1,117 1,341 1,487 2,574 6,529
Residential real estate 23,762 15,391 10,171 16,440 26,071
Premium finance receivables - property & casualty 44,828 47,725 29,311 12,643 26,056
Premium finance receivables - life insurance 6,431 - 17,245 7 -
Consumer and other 49 76 55 614 700
Total non-performing loans $ 170,823 $ 139,030 $ 100,697 $ 74,438 $ 127,513
Other real estate owned 23,116 13,309 8,589 1,959 9,711
Other real estate owned - from acquisitions - - 1,311 2,312 6,847
Total non-performing assets $ 193,939 $ 152,339 $ 110,597 $ 78,709 $ 144,071
Accruing TDRs not included within non-performing assets N/A N/A $ 36,620 $ 37,486 $ 47,023
Total non-performing loans by category as a percent of its own respective category’s period-end balance:
Commercial 0.47 % 0.30 % 0.29 % 0.17 % 0.18 %
Commercial real estate 0.16 0.31 0.06 0.24 0.54
Home equity 0.25 0.39 0.45 0.77 1.54
Residential real estate 0.66 0.56 0.43 1.00 2.07
Premium finance receivables - property & casualty 0.62 0.69 0.50 0.26 0.64
Premium finance receivables - life insurance 0.08 - 0.21 0.00 -
Consumer and other 0.05 0.13 0.11 2.54 2.17
Total non-performing loans 0.36 % 0.33 % 0.26 % 0.21 % 0.40 %
Total non-performing assets as a percentage of total assets
0.30 % 0.27 % 0.21 % 0.16 % 0.32 %
Total non-accrual loans as a percentage of total loans 0.32 % 0.28 % 0.17 % 0.19 % 0.36 %
Allowance for loan and unfunded lending-related commitment losses as a percentage of
nonaccrual loans 282.33 % 359.82 % 532.71 % 446.78 % 332.82 %
(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 December 31, 2022, no TDRs were past due greater than 90 days and still accruing interest. As of December 31, 2021, approximately $320,000 of TDRs were past due and greater than 90 days and still accruing interest. As of December 31, 2020, no TDRs were past due greater than 90 days and still accruing interest.
(3)Non-accrual loans included TDRs totaling $4.5 million, $11.8 million, and $21.2 million as of December 31, 2022, 2021, and 2020, respectively.
At this time, management believes reserves are appropriate to absorb losses that are expected upon the ultimate resolution of these credits. Management will continue to actively review and monitor its loan portfolios, in an effort to identify problem credits in a timely manner.
Loan Portfolio Aging
As of December 31, 2024, $164.4 million, or 0.3% 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 $249.9 million, or 0.5%, were 30 to 59 days (or one payment) past
due. As of December 31, 2023, $69.9 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 $227.6 million, or 0.5%, were 30 to 59 days (or one payment) past due. Many of the commercial and commercial real estate loans shown as 60 to 89 days and 30 to 59 days past due are included on the Company’s internal problem loan reporting system. Loans on this system are closely monitored by management on a monthly basis.
The Company’s home equity and residential loan portfolios continue to exhibit low delinquency ratios. Home equity loans at December 31, 2024 that are current with regard to the contractual terms of the loan agreement represent 99.0% of the total home equity portfolio. Residential real estate loans, excluding early buy-out loans guaranteed by U.S. government agencies, at December 31, 2024 that are current with regards to the contractual terms of the loan agreements comprise 98.6% of these residential real estate loans outstanding.
For more information regarding delinquent loans as of December 31, 2024, see Note (5) “Allowance for Credit Losses” in Item 8.
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)
2024 2023
Balance at beginning of period $ 139,030 $ 100,697
Additions from becoming non-performing in the respective period 150,784 123,377
Additions from assets acquired in the respective period 189 -
Return to performing status (2,872) (27,011)
Payments received (41,060) (34,063)
Transfers to OREO and other repossessed assets (29,903) (8,252)
Charge-offs, net (49,306) (16,346)
Net change for niche loans (1)
3,961 628
Balance at period end $ 170,823 $ 139,030
(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 loan 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 7.
The following table sets forth the allocation of the allowance for credit losses by major loan type and the percentage of loans in each category to total loans for the past five fiscal years:
December 31, 2024 December 31, 2023 December 31, 2022 December 31, 2021 December 31, 2020
(Dollars in thousands) Amount % of
Loan Type to
Total
Loans Amount % of
Loan Type to
Total
Loans Amount % of
Loan Type to
Total
Loans Amount % of
Loan Type to
Total
Loans Amount % of
Loan Type to
Total
Loans
Allowance for credit losses allocation:
Commercial $ 175,837 32 % $ 169,604 30 % $ 142,769 32 % $ 119,307 34 % $ 94,212 37 %
Commercial real-estate 222,856 27 223,853 27 184,352 25 144,583 26 243,603 26
Home equity 8,943 1 7,116 1 7,573 1 10,699 1 11,437 1
Residential real-estate 10,335 8 13,133 7 11,585 6 8,782 5 12,459 5
Premium finance receivables - property & casualty 17,111 15 12,384 16 9,967 15 15,246 14 17,267 13
Premium finance receivables - life insurance 709 17 685 19 704 21 613 20 510 18
Consumer and other 812 0 490 0 498 0 423 0 422 0
Total allowance for credit losses $ 436,603 100 % $ 427,265 100 % $ 357,448 100 % $ 299,653 100 % $ 379,910 100 %
Allowance category as a percent of total allowance for credit losses:
Commercial 41 % 40 % 40 % 40 % 25 %
Commercial real-estate 51 52 52 48 64
Home equity 2 2 2 4 3
Residential real-estate 2 3 3 3 3
Premium finance receivables-property & casualty 4 3 3 5 5
Premium finance receivables-life insurance 0 0 0 0 0
Consumer and other 0 0 0 0 0
Total allowance for credit losses 100 % 100 % 100 % 100 % 100 %
Management determined that the allowance for credit losses was appropriate at December 31, 2024, 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 last five fiscal years.
(Dollars in thousands) 2024 2023 2022 2021 2020
Allowance for credit losses at beginning of year $ 427,265 $ 357,448 $ 299,653 $ 379,910 $ 158,461
Cumulative effect adjustment from the adoption of ASU 2016-13 - 741 - - 47,344
Provision for credit losses - Other 85,390 114,531 78,179 (59,280) 214,235
Provision for credit losses - Day 1 on non-PCD assets acquired during the period 15,547 - - - -
Initial allowance for credit losses recognized on PCD assets acquired during the period 3,004 - - 470 -
Other adjustments (207) 47 (108) 3 179
Charge-offs:
Commercial 48,864 15,713 14,141 20,801 18,293
Commercial real estate 22,127 15,228 1,379 3,293 15,960
Home equity 74 227 432 336 2,061
Residential real estate 175 192 471 1,082 891
Premium finance receivables - property & casualty 37,515 21,684 14,240 9,020 15,472
Premium finance receivables - life insurance 4 173 35 - -
Consumer and other 587 595 1,081 487 528
Total charge-offs $ 109,346 $ 53,812 $ 31,779 $ 35,019 $ 53,205
Recoveries:
Commercial 2,853 2,651 4,748 2,559 5,092
Commercial real estate 323 460 701 1,304 1,835
Home equity 359 139 319 1,203 528
Residential real estate 15 21 77 330 184
Premium finance receivables - property & casualty 11,259 4,930 5,522 7,989 5,108
Premium finance receivables - life insurance 54 16 - - -
Consumer and other 87 93 136 184 149
Total recoveries $ 14,950 $ 8,310 $ 11,503 $ 13,569 $ 12,896
Net charge-offs $ (94,396) $ (45,502) $ (20,276) $ (21,450) $ (40,309)
Allowance for credit losses at year end $ 436,603 $ 427,265 $ 357,448 $ 299,653 $ 379,910
Net charge-offs (recoveries) by category as a percentage of its own respective category’s average:
Commercial 0.33 % 0.10 % 0.08 % 0.16 % 0.12 %
Commercial real estate 0.18 0.14 0.01 0.02 0.17
Home equity (0.07) 0.03 0.03 (0.23) 0.33
Residential real estate 0.01 0.01 0.02 0.05 0.06
Premium finance receivables - property & casualty 0.37 0.27 0.16 0.02 0.27
Premium finance receivables - life insurance (0.00) 0.00 0.00 - -
Consumer and other 0.57 0.60 1.22 0.66 0.52
Total loans, net of unearned income 0.21 % 0.11 % 0.06 % 0.06 % 0.13 %
Year-end total loans $ 48,055,037 $ 42,131,831 $ 39,196,485 $ 34,789,104 $ 32,079,273
Allowance for loan losses as a percentage of loans at end of year 0.76 % 0.82 % 0.69 % 0.71 % 1.00 %
Allowance for loan and unfunded loan-related commitment losses as a percentage of loans at end of year 0.91 1.01 0.91 0.86 1.18
NM-Not Meaningful
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 $72.6 million as of December 31, 2024 compared to $83.0 million as of December 31, 2023.
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 (5) “Allowance for Credit Losses” of the Consolidated Financial Statements presented under Item 8 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 (5) “Allowance for Credit Losses” of the Consolidated Financial Statements presented under Item 8 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. These methodologies include estimating the probability of default and loss given default on the commercial and commercial real estate segments, using the weighted-average remaining maturity methodology for the residential real estate, home equity, and consumer segments, and utilizing an assumption-based approach focusing on historical loss rates for the premium finance receivables 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 considered when the expected extension, renewal or modification is contained within the existing agreement and is not unconditionally cancelable. The methodologies discussed above are applied to both current asset balances on the Company's Consolidated Statements of Condition and off-balance sheet commitments (i.e. unfunded lending-related commitments).
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 credit risk rating 8 or 9, 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 and Bankruptcy scores of the borrowers, line availability, recent line usage, approaching maturity, and the aging status of the loan. Certain of these factors, or combination of these factors, may cause a portion of the credit risk ratings of home equity loans across all banks to be
downgraded. Similar to commercial and commercial real estate loans, once a home equity loan’s credit risk rating is downgraded to a 6 through 9, the Company’s Managed Asset Division reviews and advises the subsidiary banks as to collateral valuations and as to the ultimate resolution of the credits that deteriorate to a non-accrual status to minimize losses.
Residential real estate loans that are downgraded to a credit risk rating of 6 through 9 also enter the problem loan reporting system and have the underlying collateral evaluated by the Managed Assets Division.
Premium Finance Receivables
The determination of the appropriate allowance for 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.
Potential Problem Loans
Management believes that any loan where there are serious doubts as to the ability of such borrowers to comply with the present loan repayment terms should be identified as a non-performing loan and should be included in the disclosure of “Past Due Loans and Non-Performing Assets.” At end of the periods presented in this Annual Report on Form 10-K, the Company had no potential problem loans not already identified as non-performing.
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 show the activity for the respective periods and the balance for each property type:
Years Ended
(In thousands)
December 31, December 31,
2024 2023
Balance at beginning of period $ 13,309 $ 9,900
Disposal/resolved (20,026) (5,051)
Transfers in at fair value, less costs to sell 30,040 8,564
Fair value adjustments (207) (104)
Balance at period end $ 23,116 $ 13,309
Period End
(In thousands)
December 31, December 31,
2024 2023
Residential real estate $ - $ 720
Commercial real estate 23,116 12,589
Total $ 23,116 $ 13,309
Deposits and Other Funding Sources
Total deposits at December 31, 2024, were $52.5 billion, increasing $7.1 billion, or 16%, compared to the $45.4 billion at December 31, 2023. Average deposit balances in 2024 were $47.7 billion, reflecting an increase of $4.5 billion, or 10%, compared to the average balances in 2023.
The increase in year end and average deposits in 2024 over 2023 is primarily attributable to the Company's increased marketing efforts during 2024 to retain and attract deposits to support continued loan growth, the Macatawa acquisition, and due to the diversity of our deposit base. The Company has experienced a change in the mix of deposits as non-interest bearing deposits have migrated to interest-bearing products as rates paid on deposits increased substantially in 2023 due to the rise in market
rates. Average non-interest bearing deposits decreased $806.5 million, or 7% in 2024 compared to 2023, with period end balances ending at 22% of total deposits at December 31, 2024, compared to 23% at December 31, 2023.
The following table presents the composition of average deposits by product category for each of the last three years:
Years Ended December 31,
2024 2023 2022
(Dollars in thousands)
Balance Percent Balance Percent Balance Percent
Non-interest bearing deposits $ 10,212,088 22 % $ 11,018,596 25 % $ 13,667,879 32 %
NOW and interest-bearing demand deposits 5,360,630 11 5,626,277 13 5,355,077 13
Wealth management deposits 1,458,404 3 1,730,523 4 2,827,497 7
Money market accounts 15,946,363 33 13,665,248 32 12,254,159 29
Savings accounts 6,015,085 13 5,299,205 12 4,014,166 10
Time certificates of deposit 8,753,848 18 5,952,537 14 3,812,148 9
Total average deposits $ 47,746,418 100 % $ 43,292,386 100 % $ 41,930,926 100 %
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.
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 Company had approximately $18.9 billion of uninsured deposits as of December 31, 2024, of which $3.1 billion were fully collateralized deposits. The net position of $15.8 billion of uninsured and uncollateralized deposits represents approximately 30% of total deposits as of December 31, 2024. The Company had total liquidity sources, including cash and collateralized funding sources of $17.4 billion or approximately 110% of uninsured and uncollateralized deposits as of December 31, 2024.
The following table sets forth, by category, the composition of the average balances of other funding sources for the periods presented:
Years Ended December 31,
2024 2023
Average Percent Average Percent
(Dollars in thousands)
Balance of Total Balance of Total
Federal Home Loan Bank advances $ 3,042,052 72 % $ 2,316,722 64 %
Subordinated notes 360,802 8 437,604 12
Notes payable 160,396 4 188,900 5
Short-term borrowings 6,207 0 17,893 0
Secured borrowings 379,194 9 363,173 10
Other 58,071 1 60,149 2
Total other borrowings 603,868 14 630,115 17
Junior subordinated debentures 253,566 6 253,566 7
Total other funding sources $ 4,260,288 100 % $ 3,638,007 100 %
FHLB advances provide the banks with access to fixed-rate funds which are useful in mitigating interest rate risk and achieving an acceptable interest rate spread on fixed-rate loans or securities. FHLB advances to the banks outstanding balance totaled $3.2 billion at December 31, 2024 and $2.3 billion at December 31, 2023. See Note (11) “Federal Home Loan Bank Advances” to the Consolidated Financial Statements in Item 8 for further discussion of the terms of these advances.
Notes payable balances represent the balances on a credit agreement (as amended, the “Credit Agreement”) with certain unaffiliated banks. The Credit Agreement consists of a $200.0 million term loan facility and a $100.0 million revolving credit facility. As of December 31, 2024, the outstanding principal balance under the term loan facility was $142.8 million and there was no outstanding principal balance under the revolving credit facility. See Note (13) “Other Borrowings” to the Consolidated Financial Statements in Item 8 for further discussion of notes payable.
Short-term borrowings include securities sold under repurchase agreements of customer sweep accounts in connection with master repurchase agreements at the banks. At December 31, 2024, the Company had none of these types of borrowings compared to $13.4 million at December 31, 2023. This funding category typically fluctuates based on customer preferences and daily liquidity needs of the banks, their customers and the banks’ operating subsidiaries. See Note (13) “Other Borrowings” to the Consolidated Financial Statements in Item 8 for further discussion of these borrowings.
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”). See Note (13) “Other Borrowings” to the Consolidated Financial Statements in Item 8 for further discussion of these secured borrowings under this agreement. At December 31, 2024 and 2023, the translated balance of the secured borrowings totaled $323.2 million and $392.5 million, respectively.
Other borrowings at December 31, 2024 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 December 31, 2024 and 2023, the Fixed-Rate Promissory Note had a balance of $57.1 million and $59.2 million, respectively. See Note (13) “Other Borrowings” to the Consolidated Financial Statements in Item 8 for further discussion of these borrowings.
At December 31, 2024 and 2023, subordinated notes totaled $298.3 million and $437.9 million, respectively. During 2019, the Company issued $300.0 million of subordinated notes receiving $296.7 million in proceeds, net of underwriting discount. The notes have a stated interest rate of 4.85% and mature in June 2029. In the second quarter of 2024, the Company repaid the $140.0 million of subordinated notes issued in 2014. The notes had a stated interest rate of 5.00% and matured in June 2024. See Note (12) “Subordinated Notes” to the Consolidated Financial Statements in Item 8 for further discussion.
The Company had $253.6 million of junior subordinated debentures outstanding as of December 31, 2024 and 2023. 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. See Note (14) “Junior Subordinated Debentures” to the Consolidated Financial Statements in Item 8 for further discussion of the Company’s junior subordinated debentures. Starting in 2016, none of the junior subordinated debentures qualified as Tier 1 regulatory capital of the Company resulting in $245.5 million of the junior subordinated debentures, net of common securities, being included in the Company’s Tier 2 regulatory capital as of December 31, 2024.
Shareholders’ Equity. Total shareholders’ equity was $6.3 billion at December 31, 2024, an increase of $944.8 million from the December 31, 2023 total of $5.4 billion. The increase in 2024 was primarily a result of net income of $695.0 million, common stock issued for acquisition of Macatawa Bank Corporation of $499.2 million, and $38.1 million of stock-based compensation costs credited to surplus. These increases to total shareholders’ equity were partially offset by $78.9 million in net unrealized losses from investment securities, net of tax, $43.3 million of net unrealized losses on cash flow hedges, net of tax, $24.9 million of foreign currency translation adjustments, net of tax, common stock dividends of $115.3 million and preferred stock dividends of $28.0 million. See Note (23) “Shareholders’ Equity” to the Consolidated Financial Statements in Item 8 for further discussion of shareholders’ equity.
Liquidity and Capital Resources
The Company and the banks are subject to various regulatory capital requirements established by the federal banking agencies that take into account risk attributable to balance sheet and off-balance sheet activities. Failure to meet minimum capital requirements can initiate certain mandatory - and possibly discretionary - actions by regulators, that if undertaken could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the banks must meet specific capital guidelines that involve quantitative measures of the Company’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Federal Reserve’s capital guidelines require bank holding companies to maintain a minimum ratio of
qualifying total capital to risk-weighted assets of 8.0%, of which at least 4.5% must be in the form of Common Equity Tier 1 capital and 6.0% must be in the form of Tier 1 capital. The Federal Reserve also requires a minimum leverage ratio of Tier 1 capital to total assets of greater than 4.0%. In addition, the Federal Reserve continues to consider the Tier 1 leverage ratio in evaluating proposals for expansion or new activities.
The following table summarizes the capital guidelines for bank holding companies as of December 31, 2024, as well as certain ratios relating to the Company’s equity and assets as of December 31, 2024, 2023 and 2022:
Minimum
Ratios Minimum Ratio + Capital Conservation Buffer (1)
Minimum Well
Capitalized
Ratios (2)
2024 2023 2022
Tier 1 Leverage Ratio 4.0 % N/A N/A 9.4 % 9.3 % 8.8 %
Risk-based capital ratios:
Tier 1 Capital Ratio 6.0 8.50 6.0 10.7 10.3 10.0
Common equity tier 1 capital ratio 4.5 7.00 N/A 9.9 9.4 9.1
Total capital ratio 8.0 10.50 10.0 12.3 12.1 11.9
Other ratios:
Total average equity to total average assets N/A N/A N/A 9.8 9.4 9.2
Dividend payout ratio N/A N/A N/A 17.5 16.7 17.0
(1)Reflects the Capital Conservation Buffer of 2.50%.
(2)Reflects the well-capitalized standard applicable to the Company for purposes of the Federal Reserve’s Regulation Y. The Federal Reserve has not yet revised the well-capitalized standard for BHCs to reflect the higher capital requirements imposed under the U.S. Basel III Rule or to add Common Equity Tier 1 capital ratio and Tier 1 leverage ratio requirements to this standard. As a result, the Common Equity Tier 1 capital ratio and Tier 1 leverage ratio are denoted as “N/A” in this column. If the Federal Reserve were to apply the same or a very similar well-capitalized standard to BHCs as the standard applicable to our subsidiary banks, the Company’s capital ratios as of December 31, 2024 would exceed such revised well-capitalized standard.
As reflected in the table, each of the Company’s capital ratios at December 31, 2024, exceeded the well-capitalized ratios established by the Federal Reserve. Management is committed to maintaining the Company’s capital levels above the “Well Capitalized” levels established by the Federal Reserve for bank holding companies. Refer to Note (19) “Regulatory Matters” to the Consolidated Financial Statements in Item 8 for further information on the capital positions of the banks.
The Company’s principal sources of funds at the holding company level are dividends from its subsidiaries, borrowings under its loan agreement with unaffiliated banks and proceeds from the issuances of subordinated debt and additional equity. Refer to Notes (12), (13), (14) and (23) to the Consolidated Financial Statements in Item 8 for further information on the Company’s subordinated notes, other borrowings, junior subordinated debentures and shareholders’ equity, respectively.
In January, April, July and October of 2024 and 2023, Wintrust declared a quarterly cash dividend of $0.41 per share and $429.69 per share of Series D and Series E Preferred Stock, respectively.
The payment of common stock dividends is also subject to statutory restrictions and restrictions arising under the terms of the Company’s Series D and Series E Preferred Stock, the Company’s trust preferred securities offerings units and under certain financial covenants in the Company’s revolving and term credit facilities. Under the terms of these separate revolving and term credit facilities, the Company is prohibited from paying dividends on any equity interests, including its common stock and preferred stock, if such payments would cause the Company to be in default under its facilities or exceed a certain threshold. In January, April, July and October of 2024, Wintrust declared a quarterly cash dividend of $0.45 per common share. In January, April, July and October of 2023, Wintrust declared a quarterly cash dividend of $0.40 per common share. In January of 2025, Wintrust declared a quarterly cash dividend of $0.50 per common share. Taking into account the limitations on the payment of dividends, the final determination of timing, amount and payment of dividends is at the discretion of the Company’s Board of Directors and will depend on the Company’s earnings, financial condition, capital requirements and other relevant factors.
In June 2022, the Company sold a total of 3,450,000 shares of its common stock through a public offering. Net proceeds to the Company totaled approximately $285.7 million, net of estimated issuance costs.
Banking laws impose restrictions upon the amount of dividends that can be paid to the holding company by the banks. Based on these laws, the banks could, subject to minimum capital requirements, declare dividends to the Company without obtaining
regulatory approval in an amount not exceeding (a) undivided profits, and (b) the amount of net income reduced by dividends paid for the current and prior two years.
Since the banks are required to maintain their capital at the well-capitalized level (due to the Company being a financial holding company), funds otherwise available as dividends from the banks are limited to the amount that would not reduce any of the banks’ capital ratios below the well-capitalized level. During 2024, 2023 and 2022, the subsidiaries paid $475.0 million, $360.0 million and $52.0 million, respectively, in dividends to the Company. As of December 31, 2024, subject to minimum capital requirements at the banks, approximately $932.5 million was available as dividends from the banks without prior regulatory approval and without compromising the banks’ well-capitalized positions.
Liquidity management at the banks involves planning to meet anticipated funding needs at a reasonable cost. Liquidity management is guided by policies, formulated and monitored by the Company’s senior management and each Bank’s asset/liability committee, which take into account the marketability of assets, the sources and stability of funding and the level of unfunded commitments. The banks’ principal sources of funds are deposits, short-term borrowings and capital contributions from the holding company. In addition, the banks are eligible to borrow under FHLB advances and at the FRB Discount Window, another source of liquidity.
In accordance with the liquidity management noted above, deposit growth and increases in borrowings from various sources have resulted in accumulating liquidity assets in recent periods. In 2024, we managed our liquid assets to ensure that we 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 meet its working capital and other needs. The Company will continue to prudently evaluate liquidity sources, including the management of availability with the FHLB and FRB and utilization of the revolving credit facility with unaffiliated banks.
Core deposits are the most stable source of liquidity for community banks due to the nature of long-term relationships generally established with depositors and the security of deposit insurance provided by the FDIC. Core deposits are generally defined in the industry as total deposits less time deposits with balances greater than $100,000. Due to the affluent nature of many of the communities that the Company serves, management believes that many of its time deposits with balances in excess of $100,000 are also a stable source of funds. Currently, standard deposit insurance coverage is $250,000 per depositor per insured bank, for each account ownership category.
While the Company obtains a portion of its total deposits through brokered deposits, the Company does so primarily as an asset-liability management tool to assist in the management of interest rate risk, and the Company does not consider brokered deposits to be a vital component of its current liquidity resources. Historically, brokered deposits have represented a small component of the Company’s total deposits outstanding, as set forth in the table below:
December 31,
(Dollars in thousands) 2024 2023 2022 2021 2020
Total deposits $ 52,512,349 $ 45,397,170 $ 42,902,544 $ 42,095,585 $ 37,092,651
Brokered Deposits (1)
3,598,102 4,216,718 3,174,093 1,591,083 1,843,227
Brokered deposits as a percentage of total deposits (1)
6.9 % 9.3 % 7.4 % 3.8 % 5.0 %
(1)Brokered Deposits include certificates of deposit obtained through deposit brokers, deposits received through the Certificate of Deposit Account Registry Program, as well as wealth management deposits of brokerage customers from unaffiliated companies which have been placed into deposit accounts of the banks.
The Company’s banks routinely accept deposits from a variety of municipal entities. Typically, these municipal entities require that banks pledge marketable securities to collateralize these public deposits. At December 31, 2024 and 2023, the banks had approximately $6.9 billion of securities collateralizing public deposits and other liquidity sources. Public deposits requiring pledged assets are not considered to be core deposits, however they provide the Company with a reliable, lower cost, short-term funding source than what is available through many other wholesale alternatives.
Other than as discussed in this section, the Company is not aware of any known trends, commitments, events, regulatory recommendations or uncertainties that would have any material adverse effect on the Company’s capital resources, operations or liquidity.
CONTRACTUAL OBLIGATIONS, OFF-BALANCE SHEET COMMITMENTS AND CONTINGENT LIABILITIES
The Company has various financial obligations, including contractual obligations and commitments, that may require future cash payments.
Contractual Obligations. Our significant contractual obligations with third parties primarily consist of deposit liabilities and other sources of funding for our businesses, including FHLB advances, subordinated debt, other debt borrowings and junior subordinated debentures. These debt obligations have fixed and determinable contractual repayment dates specific to each type of instrument. Deposit liabilities are primarily due on-demand, with certain time deposits due based on contractual maturities that may exceed one year. Repayment of debt obligations, including junior subordinated debentures, vary based on terms of the underlying debt instrument, with certain debt instruments requiring full repayment of the debt at the respective maturity date and other debt instruments requiring periodic partial repayment over the entire term of the debt instrument. Further information on these debt obligations is included in Notes (10) “Deposits” through (14) “Junior Subordinated Debentures” of the Consolidated Financial Statements in Item 8 of this report.
The Company enters into various leasing arrangements with contractual obligations to pay for use of specified assets over a specific period of time. These leased assets primarily related to certain banking facilities as well as specific signage related to sponsorships and other agreements, and certain automatic teller machines and other equipment. Payments under these obligations are primarily made on a monthly basis. Further information on these lease obligations is included in Note (16) “Lease Commitments” of the Consolidated Financial Statements in Item 8 of this report.
The Company’s other purchase obligations relate to certain contractual cash obligations for acquisition-related contingent costs, marketing obligations and services related to the construction of facilities, data processing and the outsourcing of certain operational activities. In 2024, the Company continued to significantly invest in technology, including enhancements to our customer’s digital experience, and it is subject to additional contractual purchase obligations in furtherance of these efforts.
The Company also enters into derivative contracts under which the Company is required to either receive cash from or pay cash to counterparties depending on changes in interest rates. Derivative contracts are carried at fair value representing the net present value of expected future cash receipts or payments based on market rates as of the balance sheet date. Further information on derivative contracts is included in Note (21) “Derivative Financial Instruments” of the Consolidated Financial Statements in Item 8 of this report.
Commitments. The following table presents a summary of the amounts and expected maturities of significant commitments as of December 31, 2024. Further information on these commitments is included in Note (20) “Commitments and Contingencies” of the Consolidated Financial Statements in Item 8 of this report.
(In thousands) One year or
less From one to
three years From three
to five years Over
five years Total
Commitment type:
Commercial, commercial real estate and construction $ 6,159,670 $ 3,797,836 $ 1,192,951 $ 379,005 $ 11,529,462
Residential real estate 361,342 - - - 361,342
Revolving home equity lines of credit 999,063 - - - 999,063
Letters of credit 382,809 53,650 66,708 260 503,427
Commitments to sell mortgage loans 377,544 - - - 377,544
Our remaining commitment to fund community investments totaled $94.1 million, which includes future cash outlays for the construction and development of properties for low-income housing, support for small businesses, and historic tax credit projects that qualify for CRA purposes. These commitments are not included in the commitments table above, as the timing and amounts are based upon the financing arrangements provided in each project’s partnership or operating agreement and could change due to variances in the construction schedule, project revisions, or the cancellation of the project.
Contingencies. The Company enters into residential mortgage loan sale agreements with investors in the normal course of business. These agreements usually require certain representations concerning credit information, loan documentation, collateral and insurability. On occasion, investors have requested the Company to indemnify them against losses on certain loans or to repurchase loans which the investors believe do not comply with applicable representations. Upon completion of its own investigation, the Company generally repurchases or provides indemnification on certain loans. Indemnification requests
are generally received within two years subsequent to sale. Management maintains a liability for estimated losses on loans expected to be repurchased or on which indemnification is expected to be provided and regularly evaluates the adequacy of this recourse liability based on trends in repurchase and indemnification requests, actual loss experience, known and inherent risks in the loans, and current economic conditions. At December 31, 2024, the liability for estimated losses on repurchase and indemnification was approximately $188,000 and was included in other liabilities on the balance sheet.
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. 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, plans to form additional de novo banks or branch offices, and management’s long-term performance goals, as well as statements relating to the anticipated effects on the Company’s financial condition and results of operations from expected developments or events, the Company’s business and growth strategies, including future acquisitions of banks, specialty finance or wealth management businesses, internal growth and plans to form additional de novo banks or branch offices. Actual results could differ materially from those addressed in the forward-looking statements as a result of numerous factors and uncertainties, including those discussed in the Risk Factors and summary thereof disclosed under Item 1A of this Annual Report on 10-K and in any of the Company’s subsequent SEC filings.
Therefore, there can be no assurances that future actual results will correspond to any forward-looking statements. The reader is cautioned not to place undue reliance on any forward-looking statement made by the Company. Any such statement speaks only as of the date the statement was made or as of such date that may be referenced within the statement. The Company undertakes no obligation to update any forward-looking statement to reflect the impact of circumstances or events after the date of this Annual Report on Form 10-K. Persons are advised, however, to consult further disclosures management makes on related subjects in its reports filed with the SEC and in its press releases.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Effects of Inflation
A banking organization’s assets and liabilities are primarily monetary. Changes in the rate of inflation do not have as great an impact on the financial condition of a bank as do changes in interest rates. Moreover, interest rates do not necessarily change at the same percentage as inflation. Accordingly, changes in inflation are not expected to have a material impact on the Company.
Asset-Liability Management
As an ongoing part of its financial strategy, the Company attempts to manage the impact of fluctuations in market interest rates on net interest income. This effort entails providing a reasonable balance between interest rate risk, credit risk, liquidity risk and maintenance of yield. Asset-liability management policies are established and monitored by management in conjunction with the boards of directors of the banks, subject to general oversight by the Risk Management Committee of the Company’s Board. The policies establish guidelines for acceptable limits on the sensitivity of the market value of assets and liabilities to changes in interest rates.
Interest rate risk arises when the maturity or re-pricing periods and interest rate indices of the interest-earning assets, interest-bearing liabilities, and derivative financial instruments are different. It is the risk that changes in the level of market interest rates will result in disproportionate changes in the value of, and the net earnings generated from, the Company’s interest-earning assets, interest-bearing liabilities and derivative financial instruments. The Company continuously monitors not only the organization’s current net interest margin, but also the historical trends of these margins. In addition, management attempts to identify potential adverse changes in net interest income in future years as a result interest rate fluctuations by performing simulation analysis of various interest rate environments. If a potential adverse change in net interest margin and/or net income is identified, management takes appropriate action with its asset-liability structure to mitigate these potentially adverse
situations. Please refer to Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion of the net interest margin.
Since the Company’s primary source of interest-bearing liabilities is from customer deposits, the Company’s ability to manage the types and terms of such deposits is somewhat limited by customer preferences and local competition in the market areas in which the banks operate. The rates, terms and interest rate indices of the Company’s interest-earning assets result primarily from the Company’s strategy of investing in loans and securities that permit the Company to limit its exposure to interest rate risk, together with credit risk, while at the same time achieving an acceptable interest rate spread.
The Company’s exposure to interest rate risk is reviewed on a regular basis by management and the Risk Management Committees of the boards of directors of the banks and the Company. The objective of the review is to measure the effect on net income and to adjust balance sheet and derivative financial instruments to minimize the inherent risk while at the same time maximize net interest income.
The following interest rate scenarios display the percentage change in net interest income over a one-year time horizon assuming increases and decreases of 100 and 200 basis points as compared to projected net interest income in a scenario with no assumed rate changes. 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 Scenario at December 31, 2024 and December 31, 2023 is as follows:
Static Shock Scenarios +200
Basis
Points +100
Basis
Points -100
Basis
Points -200
Basis
Points
December 31, 2024 (1.6) % (0.6) % (0.3) % (1.5) %
December 31, 2023 2.6 1.8 0.4 (0.7)
Ramp Scenarios +200
Basis
Points +100
Basis
Points -100
Basis
Points -200
Basis
Points
December 31, 2024 (0.2) % (0.0) % 0.0 % (0.3) %
December 31, 2023 1.6 1.2 (0.3) (1.5)
One method utilized by financial institutions, including the Company, to manage interest rate risk is to enter into derivative financial instruments. Derivative financial instruments include interest rate swaps, interest rate caps, floors and collars, futures, 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 (21) “Derivative Financial Instruments” to the Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K for further information on the Company’s derivative financial instruments.
As shown above, at December 31, 2024, the magnitude of potential changes in net interest income in various interest rate scenarios has continued to remain relatively neutral. As the current interest rate cycle progressed, management took action to reposition its sensitivity to interest rates. To this end, management has executed various derivative instruments including collars and receive-fixed swaps to hedge variable-rate loan exposures. The Company will continue to monitor current and projected interest rates and may execute additional derivatives to mitigate potential fluctuations in the net interest margin in future periods.
During 2024 and 2023, the Company entered into certain covered call option transactions related to certain securities held by the Company. The Company uses these option transactions (rather than entering into other derivative interest rate contracts, such as interest rate floors) to economically hedge positions and compensate for net interest margin compression by increasing the total return associated with the related securities through fees generated from these options. Although the revenue received from these options is recorded as non-interest income rather than interest income, the increased return attributable to the related securities from these options contributes to the Company’s overall profitability. The Company’s exposure to interest rate risk may be impacted by these transactions. To 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 December 31, 2024 or 2023. See Note (21) “Derivative Financial Instruments” of the Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K for further information on the Company’s fees from covered call options for the twelve months ended December 31, 2024 and December 31, 2023.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Wintrust Financial Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of condition of Wintrust Financial Corporation and subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 28, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosures to which it relates.
Allowance for credit losses
Description of the Matter At December 31, 2024, the Company’s allowance for credit losses (ACL) was $437.1 million. As more fully described in Notes (1) and (5) to the consolidated financial statements, the ACL represents management’s estimate of expected credit losses over the contractual term of the loan. The ACL is measured on a collective or pooled basis when assets share the same risk characteristics or on an individual basis when assets do not share similar risk characteristics. For assets measured on a collective basis, the Company applies modeling methodologies that utilize the Company’s historical loss experience to estimate lifetime credit loss rates on each pool, including methodologies estimating the probability of default and loss given default on specific segments. The historical credit loss experience utilized in the ACL models is adjusted for the Company’s reasonable and supportable economic forecasts. The modeled results are then adjusted for certain qualitative factors. For assets measured on an individual basis, the Company measures the expected losses primarily based on the estimated collateral value.
Auditing management’s estimate of the ACL was especially challenging due to the complexity of the Company’s ACL models, the significant judgment required in establishing management’s reasonable and supportable economic forecasts, and the significant judgment required in developing and applying management’s qualitative factors.
How We Addressed the Matter in Our Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the ACL process, including, among other things, controls over management’s process for the development, operation and monitoring of the ACL models, assessing and challenging the reasonable and supportable economic forecasts, the development and application of qualitative factors, and verifying the completeness and accuracy of key inputs and assumptions used in the ACL models.
To test the Company’s ACL models, we involved our specialists to test a sample of the ACL models by evaluating model methodology, model performance and testing key modeling assumptions. Additionally, we tested the accuracy of data utilized in the models by agreeing key data fields to source documentation and performed targeted re-calculations for a sample of models.
To test the reasonable and supportable economic forecasts, our audit procedures included among others, evaluating the basis of the economic forecast factors utilized by management and testing the completeness and accuracy of data used by management to develop the economic forecasts.
To test the qualitative factors, among other procedures, we assessed management’s methodology and considered whether relevant risks were reflected in the models and whether qualitative adjustments to the model outputs were appropriate. We tested the completeness, accuracy and relevance of the underlying data used to estimate the qualitative factors. We evaluated whether qualitative factors were reasonable based on changes in economic conditions and the composition of the loan portfolio.
In addition, we evaluated the overall ACL and whether the ACL appropriately reflects expected lifetime losses in the loan portfolio as of the consolidated balance sheet date. For example, we compared the overall ACL amount to those established by similar banking institutions with similar loan portfolios.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 1999.
Chicago, Illinois
February 28, 2025
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
December 31,
(In thousands, except shares and per share amounts) 2024 2023
Assets
Cash and due from banks $ 452,017 $ 423,404
Federal funds sold and securities purchased under resale agreements 6,519 60
Interest-bearing deposits with banks 4,409,753 2,084,323
Available-for-sale securities, at fair value 4,141,482 3,502,915
Held-to-maturity securities, at amortized cost, net of allowance for credit losses of $457 and $347 at December 31, 2024 and December 31, 2023, respectively ($2.9 billion and $3.2 billion fair value at December 31, 2024 and December 31, 2023, respectively)
3,613,263 3,856,916
Trading account securities 4,072 4,707
Equity securities with readily determinable fair value 215,412 139,268
Federal Home Loan Bank and Federal Reserve Bank stock 281,407 205,003
Brokerage customer receivables 18,102 10,592
Mortgage loans held-for-sale, at fair value 331,261 292,722
Loans, net of unearned income 48,055,037 42,131,831
Allowance for loan losses (364,017) (344,235)
Net loans 47,691,020 41,787,596
Premises, software and equipment, net 779,130 748,966
Lease investments, net 278,264 281,280
Accrued interest receivable and other assets 1,739,334 1,551,899
Receivable on unsettled securities sales - 690,722
Goodwill 796,942 656,672
Other acquisition-related intangible assets 121,690 22,889
Total assets $ 64,879,668 $ 56,259,934
Liabilities and Shareholders’ Equity
Deposits:
Non-interest-bearing $ 11,410,018 $ 10,420,401
Interest-bearing 41,102,331 34,976,769
Total deposits 52,512,349 45,397,170
Federal Home Loan Bank advances 3,151,309 2,326,071
Other borrowings 534,803 645,813
Subordinated notes 298,283 437,866
Junior subordinated debentures 253,566 253,566
Accrued interest payable and other liabilities 1,785,061 1,799,922
Total liabilities 58,535,371 50,860,408
Shareholders’ Equity:
Preferred stock, no par value; 20,000,000 shares authorized:
Series D - $25 liquidation value; 5,000,000 shares issued and outstanding at December 31, 2024 and December 31, 2023
125,000 125,000
Series E - $25,000 liquidation value; 11,500 shares issued and outstanding at December 31, 2024 and December 31, 2023
287,500 287,500
Common stock, no par value; $1.00 stated value; 100,000,000 shares authorized at December 31, 2024 and December 31, 2023; 66,560,182 shares issued at December 31, 2024 and 61,268,566 shares issued at December 31, 2023
66,560 61,269
Surplus 2,482,561 1,943,806
Treasury stock, at cost, 64,955 shares at December 31, 2024 and 24,940 shares at December 31, 2023
(6,153) (2,217)
Retained earnings 3,897,164 3,345,399
Accumulated other comprehensive loss (508,335) (361,231)
Total shareholders’ equity 6,344,297 5,399,526
Total liabilities and shareholders’ equity $ 64,879,668 $ 56,259,934
See accompanying Notes to Consolidated Financial Statements.
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31,
(In thousands, except per share data)
2024 2023 2022
Interest income
Interest and fees on loans $ 3,043,354 $ 2,540,952 $ 1,507,726
Mortgage loans held-for-sale 21,436 16,791 21,195
Interest-bearing deposits with banks 115,253 78,978 43,447
Federal funds sold and securities purchased under resale agreements 366 1,806 4,903
Investment securities 276,115 238,587 160,600
Trading account securities 48 41 22
Federal Home Loan Bank and Federal Reserve Bank stock 20,060 14,912 8,622
Brokerage customer receivables 965 1,047 928
Total interest income 3,477,597 2,893,114 1,747,443
Interest expense
Interest on deposits 1,343,642 906,470 175,202
Interest on Federal Home Loan Bank advances 99,149 72,286 30,329
Interest on other borrowings 34,480 35,280 14,294
Interest on subordinated notes 18,117 22,024 22,004
Interest on junior subordinated debentures 19,674 19,190 10,252
Total interest expense 1,515,062 1,055,250 252,081
Net interest income 1,962,535 1,837,864 1,495,362
Provision for credit losses 101,047 114,390 78,589
Net interest income after provision for credit losses 1,861,488 1,723,474 1,416,773
Non-interest income
Wealth management 146,227 130,607 126,614
Mortgage banking 93,213 83,073 155,173
Service charges on deposit accounts 65,651 55,250 58,574
Gains (losses) on investment securities, net (2,602) 1,525 (20,427)
Fees from covered call options 10,196 21,863 14,133
Trading gains, net 504 1,142 3,752
Operating lease income, net 58,710 53,298 55,510
Other 116,426 87,348 67,724
Total non-interest income 488,325 434,106 461,053
Non-interest expense
Salaries and employee benefits 817,108 748,013 696,107
Software and equipment 122,794 104,632 95,885
Operating lease equipment 42,298 42,363 38,008
Occupancy, net 79,213 77,068 70,965
Data processing 39,736 38,800 31,209
Advertising and marketing 61,812 65,075 59,418
Professional fees 40,637 34,758 33,088
Amortization of other acquisition-related intangible assets 12,095 5,498 6,116
FDIC insurance 46,118 71,102 28,639
OREO expense, net (408) (1,528) (140)
Other 141,321 126,718 117,976
Total non-interest expense 1,402,724 1,312,499 1,177,271
Income before taxes 947,089 845,081 700,555
Income tax expense 252,044 222,455 190,873
Net income $ 695,045 $ 622,626 $ 509,682
Preferred stock dividends 27,964 27,964 27,964
Net income applicable to common shares $ 667,081 $ 594,662 $ 481,718
Net income per common share-Basic $ 10.47 $ 9.72 $ 8.14
Net income per common share-Diluted $ 10.31 $ 9.58 $ 8.02
Cash dividends declared per common share $ 1.80 $ 1.60 $ 1.36
Weighted average common shares outstanding 63,685 61,149 59,205
Dilutive potential common shares 1,016 938 886
Average common shares and dilutive common shares 64,701 62,087 60,091
See accompanying Notes to Consolidated Financial Statements.
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years Ended December 31,
(In thousands) 2024 2023 2022
Net income $ 695,045 $ 622,626 $ 509,682
Unrealized (losses) gains on available-for-sale securities
Before tax (105,922) 50,669 (537,602)
Tax effect 28,019 (14,455) 143,270
Net of tax (77,903) 36,214 (394,332)
Reclassification of net gains on available-for-sale securities included in net income
Before tax 1,236 951 439
Tax effect (321) (252) (118)
Net of tax 915 699 321
Reclassification of amortization of unrealized gains on investment securities transferred to held-to-maturity from available-for-sale
Before tax 89 212 175
Tax effect (24) (57) (47)
Net of tax 65 155 128
Net unrealized (losses) gains on available-for-sale securities (78,883) 35,360 (394,781)
Unrealized (losses) gains on derivative instruments
Before tax (59,046) 33,512 (26,882)
Tax effect 15,770 (8,844) 7,152
Net unrealized (losses) gains on derivative instruments (43,276) 24,668 (19,730)
Foreign currency translation adjustment
Before tax (30,518) 7,788 (21,781)
Tax effect 5,573 (1,411) 4,564
Net foreign currency translation adjustment (24,945) 6,377 (17,217)
Total other comprehensive (loss) income (147,104) 66,405 (431,728)
Comprehensive income $ 547,941 $ 689,031 $ 77,954
See accompanying Notes to Consolidated Financial Statements.
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(In thousands, except per share data) Preferred
stock Common
stock Surplus Treasury
stock Retained
earnings Accumulated
other
comprehensive
income (loss) Total
shareholders’
equity
Balance at December 31, 2021 $ 412,500 $ 58,892 $ 1,685,572 $ (109,903) $ 2,447,535 $ 4,092 $ 4,498,688
Net income - - - - 509,682 - 509,682
Other comprehensive loss, net of tax - - - - - (431,728) (431,728)
Cash dividends declared on common stock, $1.36 per share
- - - - (80,246) - (80,246)
Dividends on Series D preferred stock, $1.64 per share and Series E preferred stock, $1,718.76 per share
- - - - (27,964) - (27,964)
Stock-based compensation - - 31,748 - - - 31,748
Common stock issued for:
New issuances, net of cost - 1,612 174,214 109,903 - - 285,729
Exercise of stock options and warrants - 123 5,067 (304) - - 4,886
Restricted stock awards - 69 (69) - - - -
Employee stock purchase plan - 42 3,344 - - - 3,386
Director compensation plan - 59 2,598 - - - 2,657
Balance at December 31, 2022 $ 412,500 $ 60,797 $ 1,902,474 $ (304) $ 2,849,007 $ (427,636) $ 4,796,838
Cumulative effect adjustment from the adoption of ASU 2022-02 (TDR), net of tax - - - - (544) - (544)
Net income - - - - 622,626 - 622,626
Other comprehensive income, net of tax - - - - - 66,405 66,405
Cash dividends declared on common stock, $1.60 per share
- - - - (97,726) - (97,726)
Dividends on Series D preferred stock, $1.64 per share and Series E preferred stock, $1,718.76 per share
- - - - (27,964) - (27,964)
Stock-based compensation - - 33,495 - - - 33,495
Common stock issued for:
Exercise of stock options and warrants - 56 2,186 - - - 2,242
Restricted stock awards - 307 (307) (1,913) - - (1,913)
Employee stock purchase plan - 46 3,283 - - - 3,329
Director compensation plan - 63 2,675 - - - 2,738
Balance at December 31, 2023 $ 412,500 $ 61,269 $ 1,943,806 $ (2,217) $ 3,345,399 $ (361,231) $ 5,399,526
Net income - - - - 695,045 - 695,045
Other comprehensive loss, net of tax - - - - - (147,104) (147,104)
Cash dividends declared on common stock, $1.80 per share
- - - - (115,316) - (115,316)
Dividends on Series D preferred stock, $1.64 per share and Series E preferred stock, $1,718.76 per share
- - - - (27,964) - (27,964)
Stock-based compensation - - 38,108 - - - 38,108
Common stock issued for:
Acquisition of Macatawa Bank Corporation - 4,702 494,537 - - - 499,239
Exercise of stock options and warrants - 2 84 - - - 86
Restricted stock awards - 537 (532) (3,936) - - (3,931)
Employee stock purchase plan - 35 3,312 - - - 3,347
Director compensation plan - 15 3,246 - - - 3,261
Balance at December 31, 2024 $ 412,500 $ 66,560 $ 2,482,561 $ (6,153) $ 3,897,164 $ (508,335) $ 6,344,297
See accompanying Notes to Consolidated Financial Statements.
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
(In thousands) 2024 2023 2022
Operating Activities:
Net income $ 695,045 $ 622,626 $ 509,682
Adjustments to reconcile net income to net cash provided by operating activities
Provision for credit losses 101,047 114,390 78,589
Depreciation, amortization and accretion, net 100,079 84,764 82,070
Deferred income tax expense (benefit) 11,011 (19,707) 22,057
Stock-based compensation expense 38,108 33,495 31,748
(Accretion) amortization of premium on securities, net (2,133) 1,236 2,416
Accretion of discount and deferred fees on loans, net (18,984) (16,943) (19,565)
Mortgage servicing rights fair value changes 18,637 36,209 (36,609)
Non-designated derivatives fair value changes, net 61,035 (3,048) 1,691
Originations and purchases of mortgage loans held-for-sale (2,624,914) (1,962,205) (2,799,000)
Early buy-out exercises of mortgage loans held-for-sale guaranteed by U.S. government agencies, net of subsequent paydowns or payoffs (23,197) (25,954) 80,158
Proceeds from sales of mortgage loans held-for-sale 2,609,248 1,963,214 3,146,442
Bank owned life insurance (“BOLI”) (gains) losses (5,755) (4,575) 806
Decrease (increase) in trading securities, net 635 (3,580) (66)
(Increase) decrease in brokerage customer receivables, net (7,510) 5,795 9,681
Gains on mortgage loans sold (46,430) (37,738) (43,391)
Gains on premium financing receivables sold (4,575) (890) -
Losses (gains) on investment securities, net, and dividend reinvestment on equity securities 2,602 (1,525) 20,427
Losses on sales of premises and equipment, net 336 1,290 2,845
Gains on sales and fair value adjustments of other real estate owned, net (1,951) (1,656) (792)
Increase in accrued interest receivable and other assets, net (131,429) (205,428) (91,585)
(Decrease) increase in accrued interest payable and other liabilities, net (49,348) 164,606 377,396
Net Cash Provided by Operating Activities 721,557 744,376 1,375,000
Investing Activities:
Proceeds from calls and sales of available-for-sale securities 1,769,854 1,881,410 17,413
Proceeds from payments and maturities of available-for-sale securities 588,664 384,769 368,846
Proceeds from payments, maturities and calls of held-to-maturity securities 242,427 191,421 210,958
Proceeds from sales of equity securities with readily determinable fair value 51,792 23,592 31,753
Proceeds from sales and capital distributions of equity securities without readily determinable fair value 2,226 67 1,330
Purchases of available-for-sale securities (1,748,535) (2,244,564) (2,762,171)
Purchases of held-to-maturity securities - (408,917) (910,964)
Purchases of equity securities with readily determinable fair value (125,573) (47,454) (59,495)
Purchases of equity securities without readily determinable fair value (6,933) (10,450) (17,429)
(Purchases) redemptions of FHLB and FRB stock, net (76,404) 19,756 (89,381)
Distributions from investments in partnerships, net 2,763 7,476 4,765
Net cash received (paid) in business combinations 531,308 (5,147) -
Proceeds from sales of premium financing receivables, net 627,450 405,560 -
Proceeds from sale of other real estate owned 20,026 5,051 3,954
Decrease in securities purchased under resale agreements with terms exceeding three months, net - - 700,000
(Increase) decrease in interest-bearing deposits with banks, net (2,334,423) (91,251) 3,382,366
Increase in loans, net (5,405,340) (3,303,303) (4,320,225)
Redemption of BOLI 367 574 960
Purchases of premises and equipment, net (86,032) (46,406) (53,449)
Net Cash Used for Investing Activities (5,946,363) (3,237,816) (3,490,769)
Financing Activities:
Increase in deposit accounts, net 4,805,004 2,494,619 806,947
(Decrease) increase in other borrowings, net (83,674) 40,670 125,135
Increase in Federal Home Loan Bank advances, net 825,238 10,000 1,075,000
Cash payments to settle contingent consideration liabilities recognized in business combinations (6,168) (57) -
Proceeds from common stock offering, net - - 285,729
Repayment of subordinated notes (140,000) - -
Issuance of common shares resulting from exercise of stock options, employee stock purchase plan and director compensation plan 6,694 8,309 11,233
Common stock repurchases for tax withholdings related to stock-based compensation (3,936) (1,913) (304)
Dividends paid (143,280) (125,690) (108,210)
Net Cash Provided by Financing Activities 5,259,878 2,425,938 2,195,530
Net Increase (Decrease) in Cash and Cash Equivalents 35,072 (67,502) 79,761
Cash and Cash Equivalents at Beginning of Period 423,464 490,966 411,205
Cash and Cash Equivalents at End of Period $ 458,536 $ 423,464 $ 490,966
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest $ 1,517,813 $ 1,026,311 $ 239,209
Income taxes, net 252,851 231,653 153,499
Business combinations:
Fair value of assets acquired, including cash and cash equivalents 2,611,601 23,669 -
Value ascribed to goodwill and other intangible assets 252,983 8,822 -
Fair value of liabilities assumed 2,365,345 12,468 -
Non-cash activities
Transfer to other real estate owned from loans 30,040 8,564 10,018
Common stock issued for acquisitions 499,239 - -
See accompanying Notes to Consolidated Financial Statements.
(1) Summary of Significant Accounting Policies
The accounting and reporting policies of Wintrust Financial Corporation (“Wintrust” or the “Company”) and its subsidiaries conform to generally accepted accounting principles in the United States and prevailing practices of the banking industry. In the preparation of the consolidated financial statements, management is required to make certain estimates and assumptions that affect the reported amounts contained in the consolidated financial statements. Management believes that the estimates made are reasonable; however, changes in estimates may be required if economic or other conditions change beyond management’s expectations. Reclassifications of certain prior year amounts have been made to conform to the current year presentation. The following is a summary of the Company’s significant accounting policies.
Principles of Consolidation
The consolidated financial statements of Wintrust include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements.
Earnings per Share
Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then share in the earnings of the Company. The weighted-average number of common shares outstanding is increased by the assumed conversion of any outstanding convertible preferred stock shares from the beginning of the year or date of issuance, if later, and the number of common shares that would be issued assuming the exercise of stock options and the issuance of restricted shares using the treasury stock method. The adjustments to the weighted-average common shares outstanding are only made when such adjustments will dilute earnings per common share. If relevant convertible preferred shares are outstanding during a period, net income applicable to common shares used in the diluted earnings per share calculation may be adjusted to consider potential conversion of such preferred shares. Where the effect of this conversion would reduce the loss per share or increase the income per share, net income applicable to common shares is not adjusted by the associated preferred dividends.
Business Combinations
The Company accounts for business combinations under the acquisition method of accounting in accordance with ASC 805, “Business Combinations” (“ASC 805”) when it obtains control of a business. When determining whether a business has been acquired, the Company first evaluates whether substantially all of the fair value of the gross assets acquired are concentrated in a single identifiable asset or a group of similar identifiable assets. If concentrated in such a manner, the set of assets and activities is not a business. If not concentrated in such a manner, the Company assesses whether the set meets the definition of a business by containing inputs, outputs and at least one substantive process. If the set represents a business, the Company recognizes the fair value of the assets acquired and liabilities assumed, immediately expenses transaction costs and accounts for restructuring plans separately from the business combination. The excess of the cost of the acquisition over the fair value of the net tangible and intangible assets acquired is recorded as goodwill. Alternatively, a gain is recorded equal to the amount by which the fair value of assets purchased exceeds the fair value of liabilities assumed and consideration paid.
If the set of assets and activities do not constitute a business, the transaction is accounted for as an asset acquisition. The cost of a group of assets acquired is allocated to the individual assets acquired or liabilities assumed based on the relative fair value and does not result in the recognition of goodwill. Generally, any excess of the cost of the transaction over the fair value of the individual assets acquired or liabilities assumed, or, in contrast, any excess of the fair value of the individual assets acquired or liabilities assumed over the cost of the transaction, should be allocated on a relative fair value basis. Certain "non-qualifying" assets are excluded from this allocation, and are recognized at the individual asset's fair value.
Results of operations of the acquired business are included in the income statement from the effective date of acquisition. Subsequent adjustments to provisional amounts that are identified in reporting periods within one year after the acquisition date in a business combination are recognized in the reporting period in which the adjustment amounts are determined.
Cash Equivalents
For purposes of the consolidated statements of cash flows, Wintrust considers cash on hand, cash items in the process of collection, non-interest bearing amounts due from correspondent banks, federal funds sold and securities purchased under resale agreements with original maturities of three months or less, to be cash equivalents. There were no securities sold under agreements to repurchase with original maturities of three months or less at December 31, 2024.
Investment Securities
The Company classifies debt and equity securities upon purchase in one of five categories: trading, held-to-maturity debt securities, available-for-sale debt securities, equity securities with a readily determinable fair value or equity securities without a readily determinable fair value. Debt and equity securities held for resale are classified as trading securities. Debt securities for which the Company has the ability and positive intent to hold until maturity are classified as held-to-maturity. All other debt securities are classified as available-for-sale as they may be sold prior to maturity in response to changes in the Company’s interest rate risk profile, funding needs, demand for collateralized deposits by public entities or other reasons. Equity securities are classified based upon whether a readily determinable fair value exists on such security. The fair value of an equity security is readily determinable if it meets certain conditions, including whether sales prices or bid-ask quotes are currently available on certain securities exchanges; traded only in a foreign market that is of a breadth and scope comparable to one of the U.S. markets; or the security is an investment in a mutual fund or similar structure with a fair value per share or unit that is determined and published, and is the basis for current transactions.
Held-to-maturity debt securities are stated at amortized cost, which represents actual cost adjusted for premium amortization and discount accretion using methods that approximate the effective interest method. Available-for-sale debt securities are stated at fair value, with unrealized gains and losses, net of related taxes, included in shareholders’ equity as a separate component of other comprehensive income. Trading account securities and equity securities with a readily determinable fair value are stated at fair value. Realized and unrealized gains and losses from sales and fair value adjustments are included in other non-interest income. Equity securities without a readily determinable fair value are stated at either a calculated net asset value per share, if available, or the cost of the security minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar instrument of the same issuer.
Subsequent to classification at the time of purchase, the Company may transfer debt securities between trading, held-to-maturity, or available-for-sale. For debt securities transferred to trading, the current unrealized gain or loss at the date of transfer, net of related taxes, is immediately recognized in earnings. Debt securities transferred from trading to either held-to-maturity or available-for-sale have already recognized any unrealized gain or loss into earnings and this amount is not reversed. Unrealized gains or losses, net related taxes, for available-for-sale debt securities transferred to held-to-maturity remain as a separate component of other comprehensive income and an offsetting discount or premium is included in the amortized cost of the held-to-maturity debt security. These amounts are amortized over the remaining life of the debt security in equal and offsetting amounts. Unrealized gains or losses for held-to-maturity debt securities transferred to available-for-sale are recognized at the transfer date as a separate component of other comprehensive income, net of related taxes.
Declines in the fair value of held-to-maturity and available-for-sale debt investment securities (with certain exceptions for debt securities noted below) that are deemed to be credit losses are charged to the allowance for credit losses. In evaluating credit impairment, management considers the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value in the near term. Declines in the fair value of debt securities below amortized cost are deemed to be credit losses in circumstances where: (1) the Company has the intent to sell a security; (2) it is more likely than not that the Company will be required to sell the debt security before recovery of its amortized cost basis; or (3) the Company does not expect to recover the entire amortized cost basis of the debt security. If the Company intends to sell a debt security or if it is more likely than not that the Company will be required to sell the debt security before recovery, a credit impairment write-down is recognized in the allowance for credit losses equal to the difference between the debt security’s amortized cost basis and its fair value. If an entity does not intend to sell the debt security or it is not more likely than not that it will be required to sell the debt security before recovery, the credit impairment write-down is separated into an amount representing credit loss, which is recognized in the allowance for credit losses, and an amount related to all other factors, which is recognized in other comprehensive income.
Equity securities with readily determinable fair values are measured at fair value with changes recognized in net income. Equity securities without readily determinable fair values are measured at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. Such
investments are included within accrued interest receivable and other assets within the Company's Consolidated Statements of Condition.
Interest and dividends, including amortization of premiums and accretion of discounts, are recognized as interest income when earned. Realized gains and losses on sales (using the specific identification method), unrealized gains and losses on equity securities and declines in value judged to be other-than-temporary are included in non-interest income.
FHLB and FRB Stock
Investments in FHLB and FRB stock are restricted as to redemption and are carried at cost.
Securities Purchased Under Resale Agreements and Securities Sold Under Repurchase Agreements
Securities purchased under resale agreements and securities sold under repurchase agreements are generally treated as collateralized financing transactions and are recorded at the amount at which the securities were acquired or sold plus accrued interest. Securities, consisting of U.S. Treasury, U.S. Government agency and mortgage-backed securities, pledged as collateral under these financing arrangements cannot be sold by the secured party. The fair value of collateral either received from or provided to a third party is monitored and additional collateral is obtained or requested to be returned as deemed appropriate.
Brokerage Customer Receivables
The Company, under an agreement with an out-sourced securities clearing firm, extends credit to its brokerage customers to finance their purchases of securities on margin. The Company receives income from interest charged on such extensions of credit. Brokerage customer receivables represent amounts due on margin balances. Securities owned by customers are held as collateral for these receivables.
Mortgage Loans Held-for-Sale
Mortgage loans are classified as held-for-sale when originated or acquired with the intent to sell the loan into the secondary market. ASC 825, “Financial Instruments” provides entities with an option to report selected financial assets and liabilities at fair value. Mortgage loans classified as held-for-sale are measured at fair value which is typically determined by reference to investor prices for loan products with similar characteristics. Changes in fair value are recognized in mortgage banking revenue.
Market conditions or other developments may change management’s intent with respect to the disposition of these loans and loans previously classified as mortgage loans held-for-sale may be reclassified to the loans held-for-investment portfolio, with the balance transferred continuing to be carried at fair value.
Loans and Leases
Loans are generally reported at the principal amount outstanding, net of unearned income. Interest income is recognized when earned. Loan origination fees and certain direct origination costs are deferred and amortized over the expected life of the loan as an adjustment to the yield using methods that approximate the effective interest method. Finance charges on premium finance receivables are earned over the term of the loan, using a method which approximates the effective yield method.
Leases classified as direct financing leases are included within lease loans, net of unearned income, for financial statement purposes. Direct financing leases are stated as the sum of remaining minimum lease payments from lessees plus estimated residual values less unearned lease income. Unearned lease income on direct financing leases is recognized over the term of the leases using the effective interest method.
Interest income is not accrued on loans where management has determined that the borrowers may be unable to meet contractual principal or interest obligations, or where interest or principal is 90 days or more past due, unless the loans are adequately secured and in the process of collection. Cash receipts on non-accrual loans are generally applied to the principal balance until the remaining balance is considered collectible, at which time interest income may be recognized when received.
Allowance for Credit Losses
In accordance with ASC 326, “Financial Instruments - Credit Losses” (“ASC 326”), the Company measures the allowance for credit losses at the time of origination or purchase of a financial asset, representing an estimate of lifetime expected credit losses on the related asset. Financial assets include assets measured under the amortized cost basis, including loans, net investments in
leases recognized by a lessor, held-to-maturity debt securities and purchased credit deteriorated (“PCD”) assets at the time of and subsequent to acquisition, and off-balance-sheet credit exposures considered not unconditionally cancellable. In addition to financial assets measured at amortized cost, credit losses related to available-for-sale debt securities are recorded through the allowance for credit losses and not as a direct adjustment to the amortized cost of the securities. The Company elects the collateral maintenance practical expedient under ASC 326 and applies this approach to securities purchased under resale agreements and brokerage customer receivables. In accordance with contractual terms, these assets require underlying collateral to be monitored continuously and replenished when collateral is less than required levels. The Company measures an allowance for credit losses if the carrying balance of such assets exceeds the amount of underlying collateral.
The allowance for credit losses on financial assets held at amortized cost is measured on a collective or pooled basis when similar risk characteristics exist. 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. Credit quality indicators, specifically the Company's internal risk rating systems, reflect how the Company monitors credit losses and represent factors used by the Company when measuring the allowance for credit losses. Historical credit loss history is adjusted for reasonable and supportable forecasts developed by the Company and incorporates third party economic forecasts on a quantitative or qualitative basis. 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. For periods beyond the ability to develop reasonable and supportable forecasts, the Company reverts to historical loss rates. Qualitative factors assessed by Management include the following:
•Changes in the nature and volume of the institution’s financial assets;
•Changes in the existence, growth, and effect of any concentrations of credit;
•Changes in the volume and severity of past due financial assets, the volume of non-accrual assets, and the volume and severity of adversely classified or graded assets;
•Changes in the value of the underlying collateral for loans that are not collateral-dependent;
•Changes in the institution’s lending policies and procedures, including changes in underwriting standards and practices for collections, write-offs, and recoveries;
•Changes in the quality of the institution’s credit review function;
•Changes in the experience, ability, and depth of the institution’s lending, investment, collection, and other relevant management and staff;
•The effect of changes in other external factors such as the regulatory, legal and technological environments; competition; and events such as natural disasters; and
•Actual and expected changes in international, national, regional, and local economic and business conditions and developments in which the institution operates that affect the collectability of financial assets.
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 considered when the expected extension, renewal or modification is contained within the existing agreement and is not unconditionally cancellable.
Financial assets that do not share similar risk characteristics with any pool are assessed for the allowance for credit losses on an individual basis. These typically include assets experiencing financial difficulties, including substandard non-accrual assets. If an individual asset is removed from a pool, the allowance for credit losses for such pool will be measured without considering the removed asset. If foreclosure is probable or the asset is considered collateral-dependent, expected credit losses are measured based upon the fair value of the underlying collateral adjusted for selling costs, if appropriate.
For purchased financial assets that have experienced more-than-insignificant deterioration in credit quality since origination (“PCD assets”), the Company recognizes the sum of the purchase price and estimate of the allowance for credit losses as of the date of acquisition as the initial amortized cost basis. If the estimated allowance for credit losses is recognized under a methodology that is not a discounted cash flow methodology, such allowance for credit losses will be estimated based upon the unpaid principal balance of the financial asset.
The Company does not measure an allowance for credit losses on accrued interest receivable balances if these balances are written off in a timely manner. Write-offs of accrued interest receivable balances are recorded as a reduction to interest income.
Recoveries of financial assets previously written off are recognized when received and recorded as a component of the allowance for credit losses. When measuring the allowance for credit losses, the Company incorporates an estimate of expected recoveries provided the estimate is reasonable and supportable. Write-offs of financial assets are charged-off or deducted from the allowance for credit losses and recorded in the period when the Company concludes that all or a portion of a financial asset is no longer collectible. A provision for credit losses is charged to income based on Management’s periodic evaluation of the factors previously described. Evaluations are conducted at least quarterly and more frequently if deemed necessary.
Mortgage Servicing Rights ("MSRs")
MSRs are recorded in the Consolidated Statements of Condition at fair value in accordance with ASC 860, “Transfers and Servicing.” The Company originates mortgage loans for sale to the secondary market. Certain loans are originated and sold with servicing rights retained. MSRs associated with loans originated and sold, where servicing is retained, are capitalized at the time of sale at fair value based on the future net cash flows expected to be realized for performing the servicing activities, and included in other assets in the Consolidated Statements of Condition. The change in the fair value of MSRs is recorded as a component of mortgage banking revenue in non-interest income in the Consolidated Statements of Income. The Company measures the fair value of MSRs by stratifying the servicing rights into pools based on homogeneous characteristics, such as product type and interest rate. The fair value of each servicing rights pool is calculated based on the present value of estimated future cash flows using a discount rate commensurate with the risk associated with that pool, given current market conditions. Estimates of fair value include assumptions about prepayment speeds, interest rates and other factors which are subject to change over time. Changes in these underlying assumptions could cause the fair value of MSRs to change significantly in the future.
Lease Investments
The Company’s investments in equipment and other assets held on operating leases are reported as lease investments, net. Rental income on operating leases is recognized as income over the lease term on a straight-line basis. Equipment and other assets held on operating leases is stated at cost less accumulated depreciation. Depreciation of the cost of the assets held on operating leases, less any residual value, is computed using the straight-line method over the term of the leases, which is generally seven years or less.
Premises and Equipment
Premises and equipment, including leasehold improvements, are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the related assets. Useful lives generally range from two to 15 years for furniture, fixtures and equipment, two to seven years for software and computer-related equipment and seven to 39 years for buildings and improvements. Land improvements are amortized over a period of 15 years and leasehold improvements are amortized over the shorter of the useful life of the improvement or the term of the respective lease including any lease renewals deemed to be reasonably assured. Land, antique furnishings and artwork are not subject to depreciation. Expenditures for major additions and improvements are capitalized, and maintenance and repairs are charged to expense as incurred. Eligible costs related to the configuration, coding, testing and installation of internal use software and qualifying cloud computing arrangements are capitalized.
Long-lived depreciable assets are evaluated periodically for impairment when events or changes in circumstances indicate the carrying amount may not be recoverable. Impairment exists when the expected undiscounted future cash flows of a long-lived asset are less than its carrying value. In that event, a loss is recognized for the difference between the carrying value and the estimated fair value of the asset based on a quoted market price, if applicable, or a discounted cash flow analysis. Impairment losses are recognized in other non-interest expense.
Other Real Estate Owned
Other real estate owned is comprised of real estate acquired in partial or full satisfaction of loans and is included in other assets in the Consolidated Statements of Condition. Other real estate owned is recorded at its estimated fair value less estimated selling costs at the date of transfer. Any excess of the related loan balance over the fair value less expected selling costs is charged to the allowance for credit losses. In contrast, any excess of the fair value less expected selling costs over the related loan balance is recorded as a recovery of prior charge-offs on the loan and, if any portion of the excess exceeds prior charge-offs, as an increase to earnings. Subsequent changes in value are reported as adjustments to the carrying amount, limited to the initial fair value recorded at the date of transfer, and are recorded in other non-interest expense. Gains and losses upon sale, if any, are also charged to other non-interest expense. At December 31, 2024 and 2023, other real estate owned totaled $23.1 million and $13.3 million, respectively.
Goodwill and Other Intangible Assets
Goodwill represents the excess of the cost of a business acquisition over the fair value of net assets acquired. Other intangible assets represent purchased assets that also lack physical substance but can be distinguished from goodwill because of contractual or other legal rights or because the asset is capable of being sold or exchanged either on its own or in combination with a related contract, asset or liability. In accordance with accounting standards, goodwill is not amortized, but rather is tested for impairment on an annual basis or more frequently when events warrant, using a qualitative or quantitative approach. Intangible assets which have finite lives are amortized over their estimated useful lives and also are subject to impairment testing. Intangible assets which have indefinite lives are evaluated each reporting date to determine whether events and circumstances continue to support an indefinite useful life. If an indefinite useful life can no longer be supported for such asset, the intangible asset will be amortized prospectively over the remaining estimated useful life. If an indefinite useful life can be supported, the asset is not amortized, but rather is tested for impairment on an annual basis or more frequently when events warrant, using a qualitative or quantitative approach. The Company’s intangible assets having finite lives are amortized over varying periods not exceeding twenty years.
Bank-Owned Life Insurance ("BOLI")
The Company maintains BOLI on certain individuals. BOLI balances are recorded at their cash surrender values and are included in other assets in the Consolidated Statements of Condition. Changes in the cash surrender values are included in non-interest income. At December 31, 2024 and 2023, BOLI totaled $219.5 million and $160.2 million, respectively.
Derivative Instruments
The Company enters into derivative transactions principally to protect against the risk of adverse price or interest rate movements on the future cash flows or the value of certain assets and liabilities. The Company is also required to recognize certain contracts and commitments, including certain commitments to fund mortgage loans held-for-sale, as derivatives when the characteristics of those contracts and commitments meet the definition of a derivative. The Company accounts for derivatives in accordance with ASC 815, “Derivatives and Hedging,” which requires that all derivative instruments be recorded in the Consolidated Statements of Condition at fair value. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship.
Derivative instruments designated in a hedge relationship to mitigate exposure to changes in the fair value of an asset or liability attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivative instruments designated in a hedge relationship to mitigate exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Formal documentation of the relationship between a derivative instrument and a hedged asset or liability, as well as the risk-management objective and strategy for undertaking each hedge transaction and an assessment of effectiveness, is required at inception to apply hedge accounting. In addition, formal documentation of ongoing effectiveness testing is required to maintain hedge accounting.
Fair value hedges are accounted for by recording the changes in the fair value of the derivative instrument and the changes in the fair value related to the risk being hedged of the hedged asset or liability on the statement of condition with corresponding offsets recorded in the income statement. The adjustment to the hedged asset or liability is included in the basis of the hedged item, while the fair value of the derivative is recorded as a freestanding asset or liability. Actual cash receipts or payments and related amounts accrued during the period on derivatives included in a fair value hedge relationship are recorded as adjustments to the interest income or expense recorded on the hedged asset or liability.
Cash flow hedges are accounted for by recording the changes in the fair value of the derivative instrument on the statement of condition as either a freestanding asset or liability, with a corresponding offset recorded in other comprehensive income within shareholders’ equity, net of deferred taxes. Amounts are reclassified from accumulated other comprehensive income to interest expense in the period or periods the hedged forecasted transaction affects earnings.
Under both the fair value and cash flow hedge scenarios, changes in the fair value of derivatives not considered to be highly effective in hedging the change in fair value or the expected cash flows of the hedged item are recognized in earnings as non-interest income during the period of the change.
Derivative instruments that are not designated as hedges according to accounting guidance are reported on the statement of condition at fair value and the changes in fair value are recognized in earnings as non-interest income during the period of the change.
Commitments to fund mortgage loans (i.e. interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of these mortgage loans are accounted for as derivatives and are not designated in hedging relationships. Fair values of these mortgage derivatives are estimated primarily based on changes in mortgage rates from the date of the commitments. Changes in the fair values of these derivatives are included in mortgage banking revenue.
Forward currency and commodity contracts used to manage foreign exchange risk and commodity price risk, respectively, associated with certain assets are accounted for as derivatives and are not designated in hedging relationships. Such derivatives are recorded at fair value based on prevailing currency and commodity exchange rates at the measurement date. Changes in the fair values of these derivatives are recognized in earnings as non-interest income during the period of change.
Periodically, the Company sells options to an unrelated bank or dealer for the right to purchase certain securities held within its investment portfolios (“covered call options”). These option transactions are designed primarily as an economic hedge to compensate for net interest margin compression by increasing the total return associated with holding the related securities as earning assets by using fee income generated from these options. These transactions are not designated in hedging relationships pursuant to accounting guidance and, accordingly, changes in fair values of these contracts, are reported in other non-interest income.
The Company periodically purchases options for the right to purchase securities not currently held within its investment portfolios or enters into interest rate swaps in which the Company elects to not designate such derivatives as hedging instruments. These option and swap transactions are designed primarily to economically hedge a portion of the fair value adjustments related to the Company’s mortgage servicing rights portfolio. The gain or loss associated with these derivative contracts are included in mortgage banking revenue.
Trust Assets, Assets Under Management and Brokerage Assets
Assets held in fiduciary or agency capacity for customers are not included in the consolidated financial statements as they are not assets of Wintrust or its subsidiaries. Fee income is recognized on an accrual basis and is included as a component of non-interest income.
Income Taxes
Wintrust and its subsidiaries file a consolidated Federal income tax return. Income tax expense is based upon income in the consolidated financial statements rather than amounts reported on the income tax return. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using currently enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as an income tax benefit or income tax expense in the period that includes the enactment date.
Positions taken in the Company’s tax returns may be subject to challenge by the taxing authorities upon examination. In accordance with applicable accounting guidance, uncertain tax positions are initially recognized in the financial statements when it is more likely than not the positions will be sustained upon examination by the tax authorities. Such tax positions are both initially and subsequently measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement with the tax authority, assuming full knowledge of the position and all relevant facts. Interest and penalties on income tax uncertainties are classified within income tax expense in the income statement.
The Company has elected to apply the deferral method for acquired investments that generate investment tax credits (ITCs). This includes solar tax credit investments. Under this approach, the ITCs are recorded as an offset to the related investment on the balance sheet, with credit amounts being recognized in earnings over the life of the investment within the same income or expense accounts as used for the investment.
Stock-Based Compensation Plans
In accordance with ASC 718, “Compensation - Stock Compensation,” compensation cost is measured as the fair value of the awards on their date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options and a Monte-Carlo simulation model is used to estimate the fair value of performance awards with a market condition metric. The market price of the Company’s stock at the date of grant is used to estimate the fair value of time-vested restricted stock awards and performance awards with a performance metric. Compensation cost is recognized over the required service period, generally
defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award.
Accounting guidance permits for the recognition of stock based compensation for the number of awards that are ultimately expected to vest. As a result, recognized compensation expense for stock options and restricted share awards is reduced for estimated forfeitures prior to vesting. Forfeitures rates are estimated for each type of award based on historical forfeiture experience. Estimated forfeitures will be reassessed in subsequent periods and may change based on new facts and circumstances. The Company issues new shares to satisfy option exercises and vesting of restricted shares.
Comprehensive Income
Comprehensive income consists of net income and other comprehensive income. Other comprehensive income includes unrealized gains and losses on available-for-sale debt securities, net of deferred taxes, changes in deferred unrealized gains and losses on investment securities transferred from available-for-sale debt securities to held-to-maturity debt securities, net of deferred taxes, adjustments related to cash flow hedges, net of deferred taxes, and foreign currency translation adjustments, net of deferred taxes. The Company has a policy for releasing the income tax effects from accumulated other comprehensive income using an individual security approach.
Stock Repurchases
The Company periodically repurchases shares of its outstanding common stock through open market purchases or other methods. Repurchased shares are recorded as treasury shares on the trade date using the treasury stock method, and the cash paid is recorded as treasury stock.
Foreign Currency Translation
The Company revalues assets and liabilities denominated in non-U.S. currencies into U.S. dollars at the end of each month using applicable exchange rates and revenue and expenses are revalued using a daily spot rate.
Gains and losses relating to translating functional currency financial statements for U.S. reporting are included in other comprehensive income. Gains and losses relating to the re-measurement of transactions to the functional currency are reported in the Consolidated Statements of Income.
Going Concern
In connection with preparing financial statements for each reporting period, the Company evaluates whether conditions or events, considered in the aggregate, exist that would raise substantial doubt about the Company's ability to continue as a going concern within one year after the date the financial statements are issued. If substantial doubt exists, specific disclosures are required to be included in the Company's financial statements issued. Through its evaluation, the Company did not identify any conditions or events that would raise substantial doubt about the Company's ability to continue as a going concern within one year of the issuance of these consolidated financial statements.
Accounting Pronouncements and Other Regulatory Rules Newly Adopted
Equity Method and Joint Ventures - Investments in Tax Credit Structures
In March 2023, the FASB issued ASU No. 2023-02, “Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method,” which allows reporting entities the option to apply the proportional amortization method to other tax credit programs besides the Low-Income Housing Tax Credit structures. The guidance requires application of the proportional amortization method on a tax-credit-program-by-tax-credit-program basis rather than electing the method at the reporting level entity level. The Company adopted ASU No. 2023-02 as of January 1, 2024. Adoption of this standard did not have a material impact on the Company’s consolidated financial statements.
Segment Reporting
In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” to enhance public entity disclosures regarding significant segment expenses which are regularly reported to an entity’s chief operating decision-maker (“CODM”) and included in a segment’s reported profit or loss. This ASU requires disclosure of the amount and composition of “other segment items”, the title and position of the CODM, and how the CODM
uses reported measures of profit or loss to assess segment performance. Further, the guidance requires certain segment disclosures previously provided only annually, on an interim basis. The Company adopted ASU No. 2023-07 as of January 1, 2024. Refer to Note (24) “Segment Information” for further information regarding the adoption of this standard.
(2) Recent Accounting Pronouncements
Income Tax Disclosures
In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” to enhance the transparency and decision usefulness of income tax disclosures. This ASU requires annually that all entities disclose increasingly disaggregated information on amount of income taxes paid. Further, this ASU requires annually that all public entities must disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a specific quantitative threshold. This guidance is effective for fiscal years beginning after December 15, 2024 and is to be applied either on prospective basis or retrospective basis. Early adoption is permitted. The Company expects that adopting this new guidance will have an impact to disclosures only.
Compensation - Scope Application of Profits Interest and Similar Awards
In March 2024, the FASB issued ASU No. 2024-01, “Compensation - Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards” which clarifies the guidance by providing an illustrative example to demonstrate how an entity should apply the scope guidance in Topic 718 when determining whether profits interest and similar awards should be accounted for in accordance with Topic 718. For public business entities, this guidance is effective for fiscal years beginning after December 15, 2024, including interim periods therein, and is to be applied either on a prospective basis or retrospective basis. Early adoption is permitted. The Company does not expect this guidance to have a material impact on the Company’s consolidated financial statements.
Disaggregation of Income Statement Expenses
In November 2024, the FASB issued ASU No. 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses”, which requires public business entities to disclose additional information about specific expense categories including employee compensation, depreciation, intangible asset amortization, etc., as well as qualitative descriptions of certain expenses, in the notes to the financial statements. This guidance is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. The guidance is to be applied either prospectively or retrospectively. Early adoption is permitted. The Company is currently evaluating the impact of adopting this new guidance on the consolidated financial statements.
Induced Conversions of Convertible Debt Instruments
In November 2024, the FASB issued ASU No. 2024-04, “Debt - Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments” to clarify the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. This guidance is effective for fiscal years beginning after December 15, 2025, including interim periods therein, and is to be applied either on a prospective basis or retrospective basis. Early adoption is permitted. The Company is currently evaluating the impact of adopting this new guidance on the consolidated financial statements.
(3) Investment Securities
A summary of the available-for-sale and held-to-maturity investment securities portfolios presenting carrying amounts and gross unrealized gains and losses as of December 31, 2024 and 2023 is as follows:
December 31, 2024 December 31, 2023
(In thousands)
Amortized
Cost Gross
unrealized
gains Gross
unrealized
losses Fair Value Amortized
Cost Gross
unrealized
gains Gross
unrealized
losses Fair Value
Available-for-sale securities
U.S. Treasury $ 37,858 $ 49 $ - $ 37,907 $ 6,960 $ 8 $ - $ 6,968
U.S. government agencies 50,000 - (5,055) 44,945 50,000 - (4,876) 45,124
Municipal 188,405 528 (4,340) 184,593 144,299 657 (3,998) 140,958
Corporate notes:
Financial issuers 83,997 - (3,828) 80,169 83,996 - (8,456) 75,540
Other 1,000 - (7) 993 1,000 - (9) 991
Mortgage-backed: (1)
Residential mortgage-backed securities 4,106,641 284 (553,287) 3,553,638 3,505,012 1,392 (446,784) 3,059,620
Commercial (multi-family) mortgage-baked securities 19,064 23 (755) 18,332 13,201 68 (289) 12,980
Collateralized mortgage obligations 238,574 1,187 (18,856) 220,905 175,346 1,400 (16,012) 160,734
Total available-for-sale securities $ 4,725,539 $ 2,071 $ (586,128) $ 4,141,482 $ 3,979,814 $ 3,525 $ (480,424) $ 3,502,915
Held-to-maturity securities
U.S. government agencies $ 313,539 $ - $ (69,127) $ 244,412 $ 336,468 $ - $ (67,058) $ 269,410
Municipal 161,016 243 (5,290) 155,969 172,933 565 (3,778) 169,720
Mortgage-backed: (1)
Residential mortgage-backed securities 2,864,927 - (605,014) 2,259,913 3,042,828 1,922 (549,265) 2,495,485
Commercial (multi-family) mortgage-backed securities 6,364 - (252) 6,112 6,415 - (184) 6,231
Collateralized mortgage obligations 211,023 815 (22,683) 189,155 241,075 978 (21,502) 220,551
Corporate notes 56,851 8 (1,870) 54,989 57,544 7 (3,480) 54,071
Total held-to-maturity securities $ 3,613,720 $ 1,066 $ (704,236) $ 2,910,550 $ 3,857,263 $ 3,472 $ (645,267) $ 3,215,468
Less: Allowance for credit losses (457) (347)
Held-to-maturity securities, net of allowance for credit losses $ 3,613,263 $ 3,856,916
Equity securities with readily determinable fair value $ 220,758 $ 2,905 $ (8,251) $ 215,412 $ 143,312 $ 3,500 $ (7,544) $ 139,268
(1)None of our mortgage-backed securities are subprime.
Equity securities without readily determinable fair values totaled $65.1 million as of December 31, 2024 and $60.0 million as of December 31, 2023. Equity securities without readily determinable fair values are included as part of accrued interest receivable and other assets in the Company’s Consolidated Statements of Condition. The Company monitors its equity investments without readily determinable fair values to identify potential transactions that may indicate an observable price change in orderly transactions for the identical or a similar investment of the same issuer, requiring adjustment to its carrying amount. The Company recorded no upward and no downward adjustments related to such observable price changes in 2024 or 2023. The Company conducts a quarterly assessment of its equity securities without readily determinable fair values to determine whether impairment exists in such equity securities, considering, among other factors, the nature of the securities, financial condition of the issuer and expected future cash flows. During the years ended December 31, 2024 and December 31, 2023, the Company recorded $3.7 million and $688,000, respectively, of impairment of equity securities without readily determinable fair values.
The following tables present the portion of the Company’s available-for-sale investment securities portfolios which had gross unrealized losses, reflecting the length of time that individual securities have been in a continuous unrealized loss position at December 31, 2024 and 2023, respectively:
As of December 31, 2024
Continuous unrealized
losses existing for less
than 12 months Continuous unrealized
losses existing for
greater than 12 months Total
(In thousands)
Fair value Unrealized
losses Fair value Unrealized
losses Fair value Unrealized
losses
Available-for-sale securities
U.S. government agencies $ 44,945 $ (5,055) $ - $ - $ 44,945 $ (5,055)
Municipal 52,344 (3,536) 83,517 (804) 135,861 (4,340)
Corporate notes:
Financial issuers 80,169 (3,828) - - 80,169 (3,828)
Other 993 (7) - - 993 (7)
Mortgage-backed: (1)
Residential mortgage-backed securities 2,212,780 (519,164) 1,327,534 (34,123) 3,540,314 (553,287)
Commercial (multi-family) mortgage backed securities 3,134 (390) 12,204 (365) 15,338 (755)
Collateralized mortgage obligations 65,874 (18,841) 7,428 (15) 73,302 (18,856)
Total available-for-sale securities $ 2,460,239 $ (550,821) $ 1,430,683 $ (35,307) $ 3,890,922 $ (586,128)
(1)None of our mortgage-backed securities are subprime.
As of December 31, 2023
Continuous unrealized
losses existing for less
than 12 months Continuous unrealized
losses existing for
greater than 12 months Total
(In thousands)
Fair value Unrealized
losses Fair value Unrealized
losses Fair value Unrealized
losses
Available-for-sale securities
U.S. government agencies $ - $ - $ 45,124 $ (4,876) $ 45,124 $ (4,876)
Municipal 36,519 (513) 58,216 (3,485) 94,735 (3,998)
Corporate notes:
Financial issuers - - 75,540 (8,456) 75,540 (8,456)
Other 991 (9) - - 991 (9)
Mortgage-backed: (1)
Mortgage-backed securities 333,879 (1,170) 2,374,724 (445,614) 2,708,603 (446,784)
Commercial (multi-family) mortgage backed securities 9,953 (289) - - 9,953 (289)
Collateralized mortgage obligations - - 75,101 (16,012) 75,101 (16,012)
Total available-for-sale securities $ 381,342 $ (1,981) $ 2,628,705 $ (478,443) $ 3,010,047 $ (480,424)
(1)None of our mortgage-backed securities are subprime.
The Company conducts a regular assessment of its investment securities to determine whether securities are experiencing credit losses. Factors for consideration include the nature of the securities, credit ratings or financial condition of the issuer, the extent of the unrealized loss, expected cash flows, market conditions and the Company’s ability to hold the securities through the anticipated recovery period.
The Company does not consider available-for-sale securities with unrealized losses at December 31, 2024 to be experiencing credit losses and recognized no resulting allowance for credit losses for such individually assessed credit losses. The Company does not intend to sell these investments and it is more likely than not that the Company will not be required to sell these investments before recovery of the amortized cost bases, which may be the maturity dates of the securities. The unrealized losses within each category have occurred as a result of changes in interest rates, market spreads and market conditions subsequent to purchase. Available-for-sale securities with continuous unrealized losses existing for more than twelve months at December 31, 2024 were primarily mortgage-backed securities with unrealized losses due to increased market rates during such period.
See Note (5) “Allowance for Credit Losses” for further discussion regarding any credit losses associated with held-to-maturity securities at December 31, 2024.
The following table provides information as to the amount of gross gains and losses, adjustments and impairment on investment securities recognized in earnings and proceeds received through the sale or call of investment securities:
Years Ended December 31,
(In thousands)
2024 2023 2022
Realized gains on investment securities $ 2,704 $ 1,136 $ 461
Realized losses on investment securities (276) (71) (22)
Net realized gains on investment securities 2,428 1,065 439
Unrealized gains on equity securities with readily determinable fair value 4,451 5,428 1,154
Unrealized losses on equity securities with readily determinable fair value (5,751) (4,280) (9,862)
Net unrealized (losses) gains on equity securities with readily determinable fair value (1,300) 1,148 (8,708)
Impairment of equity securities without readily determinable fair values (3,730) (688) (12,158)
Adjustment and impairment, net, of equity securities without readily determinable fair values (3,730) (688) (12,158)
(Losses) gains on investment securities, net $ (2,602) $ 1,525 $ (20,427)
Proceeds from sales of equity securities with readily determinable fair value $ 51,792 $ 23,592 $ 31,753
Proceeds from sales and capital distributions of equity securities without readily determinable fair value 2,226 67 1,330
Net gains/losses on investment securities resulted in income tax (benefit) expense of $(676,520), $403,000 and $(5.4) million in 2024, 2023 and 2022, respectively.
The amortized cost and fair value of investment securities as of December 31, 2024 and December 31, 2023, by contractual maturity, are shown in the following table. Contractual maturities may differ from actual maturities as borrowers may have the right to call or repay obligations with or without call or prepayment penalties. Mortgage-backed securities are not included in the maturity categories in the following maturity summary as actual maturities may differ from contractual maturities because the underlying mortgages may be called or prepaid without penalties:
December 31, 2024 December 31, 2023
(In thousands)
Amortized
Cost Fair Value Amortized
Cost Fair Value
Available-for-sale securities
Due in one year or less $ 89,578 $ 89,392 $ 53,162 $ 52,945
Due in one to five years 157,883 153,325 132,348 123,985
Due in five to ten years 89,125 84,240 82,040 76,869
Due after ten years 24,674 21,650 18,705 15,782
Mortgage-backed 4,364,279 3,792,875 3,693,559 3,233,334
Total available-for-sale securities $ 4,725,539 $ 4,141,482 $ 3,979,814 $ 3,502,915
Held-to-maturity securities
Due in one year or less $ 18,929 $ 18,658 $ 5,169 $ 5,142
Due in one to five years 110,897 108,056 109,602 105,835
Due in five to ten years 71,846 70,277 99,700 98,718
Due after ten years 329,734 258,379 352,474 283,506
Mortgage-backed 3,082,314 2,455,180 3,290,318 2,722,267
Total held-to-maturity securities $ 3,613,720 $ 2,910,550 $ 3,857,263 $ 3,215,468
Less: Allowance for credit losses (457) (347)
Held-to-maturity securities, net of allowance for credit losses $ 3,613,263 $ 3,856,916
At December 31, 2024 and December 31, 2023, securities having a carrying value of $6.9 billion were pledged as collateral for public deposits, trust deposits, FHLB advances, FRB discount window, securities sold under repurchase agreements, and derivatives. At December 31, 2024, there were no securities of a single issuer, other than U.S. government-sponsored agency securities, which exceeded 10% of shareholders’ equity.
(4) Loans
The following table shows the Company’s loan portfolio by category as of the dates shown:
(Dollars in thousands) December 31, 2024 December 31, 2023
Balance:
Commercial $ 15,574,551 $ 12,832,053
Commercial real estate 12,903,944 11,344,164
Home equity 445,028 343,976
Residential real estate 3,612,765 2,769,666
Premium finance receivables-property & casualty 7,272,042 6,903,529
Premium finance receivables-life insurance 8,147,145 7,877,943
Consumer and other 99,562 60,500
Total loans, net of unearned income $ 48,055,037 $ 42,131,831
Mix:
Commercial 32 % 30 %
Commercial real estate 27 27
Home equity 1 1
Residential real estate 8 7
Premium finance receivables-property & casualty 15 16
Premium finance receivables-life insurance 17 19
Consumer and other 0 0
Total loans, net of unearned income 100 % 100 %
The Company’s loan portfolio is generally comprised of loans to consumers and small to medium-sized businesses, which, for the commercial and commercial real estate portfolios, are located primarily within the geographic market areas that the banks serve. Various niche lending businesses, including lease finance and franchise lending, operate on a national level. The premium finance receivables portfolios are made to customers throughout the United States and Canada. The Company strives to maintain a loan portfolio that is diverse in terms of loan type, industry, borrower and geographic concentrations. Such diversification reduces the exposure to economic downturns that may occur in different segments of the economy or in different industries.
Certain premium finance receivables are recorded net of unearned income. The unearned income portions of such premium finance receivables were $267.7 million and $285.4 million at December 31, 2024 and 2023, respectively.
Total loans, excluding PCD loans, include net deferred loan fees and costs and fair value purchase accounting adjustments totaling $78.2 million at December 31, 2024 and $84.2 million at December 31, 2023.
Certain real estate loans, including mortgage loans held-for-sale, commercial, consumer, and home equity loans with balances totaling approximately $23.7 billion and $21.1 billion at December 31, 2024 and 2023, respectively, were pledged as collateral to secure the availability of borrowings from certain federal agency banks. At December 31, 2024, approximately $15.1 billion of these pledged loans are included in a pledge of qualifying loans to the FHLB. The remaining $8.6 billion of pledged loans was used to secure potential borrowings at the FRB discount window. At December 31, 2024 and 2023, the banks had outstanding borrowings of $3.2 billion and $2.3 billion from the FHLB in connection with these collateral arrangements. See Note (11) “Federal Home Loan Bank Advances” for a summary of these borrowings.
It is the policy of the Company to review each prospective credit in order to determine the appropriateness and, when required, the adequacy of security or collateral necessary to obtain when making a loan. The type of collateral, when required, will vary from liquid assets to real estate. The Company seeks to assure access to collateral, in the event of default, through adherence to state lending laws and the Company’s credit monitoring procedures.
Acquired Loan Information - PCD Loans
As part of the Company’s prior acquisitions, the Company acquired loans that were classified as PCD based upon various factors as of the acquisition date, including internal risk rating methodologies and prior performance under the acquiree. The following table provides estimated details as of the date of acquisition on PCD loans acquired in 2024:
(In thousands) Macatawa
Contractually required payments (unpaid principal balance) $ 169,472
Allowance for credit losses (3,004)
Discount, net of any premium (4,529)
Purchase price of PCD loans acquired $ 161,939
(5) Allowance for Credit Losses
In accordance with ASC 326, the Company is required to measure the allowance for credit losses of financial assets with similar risk characteristics on a collective or pooled basis. In considering the segmentation of financial assets measured at amortized cost into pools, the Company considered various risk characteristics in its analysis. Generally, the segmentation utilized represents the level at which the Company develops and documents its systematic methodology to determine the allowance for credit losses for the financial asset held at amortized cost, specifically the Company’s loan portfolio and debt securities classified as held-to-maturity. Below is a summary of the Company’s loan portfolio segments and major debt security types:
Commercial loans: The Company makes commercial loans for many purposes, including working capital lines and leasing arrangements, that are generally renewable annually and supported by business assets, personal guarantees and additional collateral. Underlying collateral includes receivables, inventory, enterprise value and the assets of the business. Commercial business lending is generally considered to involve a slightly higher degree of risk than traditional consumer bank lending. This portfolio includes a range of industries, including manufacturing, restaurants, franchise, professional services, equipment finance and leasing, mortgage warehouse lending and industrial. Individually assessed collateral dependent commercial loans are primarily collateralized by equipment and the enterprise value or assets of the specific business.
Commercial real estate loans, including construction and development, and non-construction: The Company’s commercial real estate loans are generally secured by a first mortgage lien and assignment of rents on the underlying property (utilized in related assessment of individually assessed collateral dependent loans). Since most of the Company’s bank branches are located in the Chicago metropolitan area, southern Wisconsin, and west Michigan, a significant portion of the Company’s commercial real estate loan portfolio is located in this region. As the risks and circumstances of such loans in construction phase vary from that of non-construction commercial real estate loans, the Company assesses the allowance for credit losses separately for these two segments.
Home equity loans: The Company’s home equity loans and lines of credit are primarily originated by each of the bank subsidiaries in their local markets where there is a strong understanding of the underlying real estate value. The Company’s banks monitor and manage these loans, and conduct an automated review of all home equity lines of credit at least twice per year. This review collects FICO and Bankruptcy scores for each home equity borrower and identifies situations where the credit strength of the borrower is declining. When other specific events occur that may influence repayment, information such as tax liens or judgments is collected. The bank subsidiaries use this information to manage loans that may be higher risk and to determine whether to obtain additional credit information or updated property valuations. In a limited number of cases, the Company may issue home equity credit together with first mortgage financing, and requests for such financing are evaluated on a combined basis.
Residential real estate loans, including early buy-out loans guaranteed by U.S. government agencies: The Company’s residential real estate portfolio includes one- to four-family adjustable rate mortgages, construction loans to individuals and bridge financing loans for qualifying customers as well as certain long-term fixed rate loans. The Company’s residential mortgages relate to properties located principally in the Chicago metropolitan area, California, southern Wisconsin and west Michigan. Due to interest rate risk considerations, the Company generally sells in the secondary market loans originated with long-term fixed rates, for which we receive fee income. The Company also selectively retains certain of these loans within the banks’ own loan portfolios where they are non-agency conforming, or where the terms of the loans make them favorable to retain. Since this loan portfolio consists primarily of locally originated loans, and since the majority of the borrowers are longer-term customers with lower LTV ratios, the Company may face a relatively low risk of borrower default and delinquency. Collateral dependent residential real estate loans that are individually assessed when measuring the allowance for credit losses
are primarily collateralized by such one-to-four family properties noted above. It is not the Company’s current practice to underwrite, and there are no plans to underwrite subprime, Alt A, no or little documentation loans, or option ARM loans.
Additionally, early buy-out loans guaranteed by U.S. government agencies include loans in which the Company is eligible or has exercised its option under the Government National Mortgage Association (“GNMA”) securitization program to repurchase certain delinquent mortgage loans. Such loans were previously transferred by the Company with servicing of such loans retained. Early buy-out loans are insured or guaranteed by the Federal Housing Administration (“FHA”) or the U.S. Department of Veterans Affairs, subject to indemnifications and insurance limits for certain loans.
Premium finance receivables: The Company makes loans to finance insurance premiums related to property and casualty insurance policies. The loans are indirectly originated by working through independent medium and large insurance agents and brokers located throughout the United States and Canada. The insurance premiums financed are primarily for commercial customers’ purchases of liability, property and casualty and other commercial insurance. This lending involves relatively rapid turnover of the loan portfolio and high volume of loan originations. The Company performs ongoing credit and other reviews of the agents and brokers, and performs various internal audit steps to mitigate against the risk of fraud.
The Company also originates life insurance premium finance receivables. These loans are originated directly with the borrowers with assistance from life insurance carriers, independent insurance agents, financial advisors and legal counsel. The life insurance policy is the primary form of collateral. In addition, these loans often are secured with a letter of credit, marketable securities or certificates of deposit. In some cases, the Company may make a loan that has a partially unsecured position.
Consumer and other loans: Included in the consumer and other loan category is a wide variety of personal and consumer loans to individuals. The Company originates consumer loans in order to provide a wider range of financial services to its customers. Consumer loans generally have shorter terms and higher interest rates than mortgage loans but generally involve more credit risk than mortgage loans due to the type and nature of the collateral.
U.S. government agency securities: This security type includes debt obligations of certain government-sponsored entities of the U.S. government such as the Federal Home Loan Bank, Federal Agricultural Mortgage Corporation, Federal Farm Credit Banks Funding Corporation and Fannie Mae. Such securities often contain an explicit or implicit guarantee of the U.S. government.
Municipal securities: The Company’s municipal securities portfolio includes bond issues for various municipal government entities located throughout the United States, including the Chicago metropolitan area, southern Wisconsin and west Michigan, some of which are privately placed and non-rated. Though the risk of loss is typically low, default history exists on municipal securities within the United States.
Mortgage-backed securities: This security type includes debt obligations supported by pools of individual mortgage loans and issued by certain government-sponsored entities of the U.S. government such as Freddie Mac and Fannie Mae. Such securities are considered to contain an implicit guarantee of the U.S. government.
Corporate notes: The Company’s corporate notes portfolio includes bond issues for various public companies representing a diversified population of industries. The risk of loss in this portfolio is considered low based on the characteristics of the investments.
In accordance with ASC 326, the Company elected to not measure an allowance for credit losses on accrued interest. As such, accrued interest is written off in a timely manner when deemed uncollectible. Any such write-off of accrued interest will reverse previously recognized interest income. In addition, the Company elected to not include accrued interest within presentation and disclosures of the carrying amount of financial assets held at amortized cost. This election is applicable to the various disclosures included within the Company’s financial statements. Accrued interest related to financial assets held at amortized cost is included within accrued interest receivable and other assets within the Company’s Consolidated Statements of Condition and totaled $332.8 million at December 31, 2024 and $304.5 million at December 31, 2023.
The tables below show the aging of the Company’s loan portfolio by the segmentation noted above at December 31, 2024 and 2023.
As of December 31, 2024
(In thousands)
Nonaccrual 90+ days
and still
accruing 60-89
days past
due 30-59
days past
due Current Total Loans
Loan Balances (includes PCD):
Commercial $ 73,490 $ 104 $ 54,844 $ 92,551 $ 15,353,562 $ 15,574,551
Commercial real estate:
Construction and development 2,282 - 1,339 4,634 2,425,826 2,434,081
Non-construction 18,760 - 9,182 26,132 10,415,789 10,469,863
Home equity 1,117 - 1,233 2,148 440,530 445,028
Residential real estate loans, excluding early buy-out loans 23,762 - 5,708 18,917 3,407,622 3,456,009
Premium finance receivables
Property & casualty insurance loans 28,797 16,031 19,042 68,219 7,139,953 7,272,042
Life insurance loans 6,431 - 72,963 36,405 8,031,346 8,147,145
Consumer and other 2 47 59 882 98,572 99,562
Total loans, net of unearned income, excluding early buy-out loans $ 154,641 $ 16,182 $ 164,370 $ 249,888 $ 47,313,200 $ 47,898,281
Early buy-out loans guaranteed by U.S. government agencies (1)
- 33,952 618 2,335 119,851 156,756
Total loans, net of unearned income $ 154,641 $ 50,134 $ 164,988 $ 252,223 $ 47,433,051 $ 48,055,037
As of December 31, 2023
(In thousands)
Nonaccrual 90+ days
and still
accruing 60-89
days past
due 30-59
days past
due Current Total Loans
Loan Balances (includes PCD):
Commercial $ 38,940 $ 98 $ 19,488 $ 85,743 $ 12,687,784 $ 12,832,053
Commercial real estate
Construction and development 2,205 - 251 1,343 2,080,242 2,084,041
Non-construction 33,254 - 8,264 19,291 9,199,314 9,260,123
Home equity 1,341 - 62 2,263 340,310 343,976
Residential real estate loans, excluding early buy-out loans 15,391 - 2,325 22,942 2,578,425 2,619,083
Premium finance receivables
Property & casualty insurance loans 27,590 20,135 23,236 50,437 6,782,131 6,903,529
Life insurance loans - - 16,206 45,464 7,816,273 7,877,943
Consumer and other 22 54 25 165 60,234 60,500
Total loans, net of unearned income, excluding early buy-out loans $ 118,743 $ 20,287 $ 69,857 $ 227,648 $ 41,544,713 $ 41,981,248
Early buy-out loans guaranteed by U.S. government agencies (1)
- 57,688 250 328 92,317 150,583
Total loans, net of unearned income $ 118,743 $ 77,975 $ 70,107 $ 227,976 $ 41,637,030 $ 42,131,831
(1)Early buy-out loans are insured or guaranteed by the FHA or the U.S. Department of Veterans Affairs, subject to indemnifications and insurance limits for certain loans.
Credit Quality Indicators
Credit quality indicators, specifically the Company’s internal risk rating systems, reflect how the Company monitors credit losses and represents factors used by the Company when measuring the allowance for credit losses. The following discusses the Company’s credit quality indicators by financial asset.
Loan portfolios
The Company’s ability to manage credit risk depends in large part on its ability to properly identify and manage problem loans. To do so, the Company operates a credit risk rating system under which credit management personnel assign a credit risk rating (1 to 10 rating, with higher scores indicating higher risk) to each loan at the time of origination and review loans on a regular basis. For loans measured at amortized cost, these credit risk ratings are also an important aspect of the Company’s allowance for credit losses measurement methodology. The credit risk rating structure and classifications are shown below:
Pass (risk rating 1 to 5): Based on various factors (liquidity, leverage, etc.), the Company believes asset quality is acceptable and is deemed to not require additional monitoring by the Company.
Special mention (risk rating 6): Assets in this category are currently protected, potentially weak, but not to the point of substandard classification. Loss potential is moderate if corrective action is not taken.
Substandard accrual (risk rating 7): Assets in this category have well defined weaknesses that jeopardize the liquidation of the debt. Loss potential is distinct but with no discernible impairment.
Substandard nonaccrual/doubtful (risk rating 8 and 9): Assets have all the weaknesses in those classified “substandard accrual” with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of current existing facts, conditions, and values, improbable.
Loss/fully charged-off (risk rating 10): Assets in this category are considered fully uncollectible. As such, these assets have no carrying balance on the Company's Consolidated Statements of Condition.
Early buy-out loans guaranteed by U.S. government agencies: These loans are measured at fair value and thus excluded from the measurement of the allowance for credit losses. Credit risk rating assigned to such loans are considered in the measurement of fair value as well as related guarantees provided by the FHA or the U.S. Department of Veterans Affairs, subject to indemnifications and insurance limits for certain loans.
Generally, each loan officer is responsible for monitoring his or her loan portfolio, recommending a credit risk rating for each loan in his or her portfolio and ensuring the credit risk ratings are appropriate. These credit risk ratings are then ratified by the bank’s chief credit officer and/or concurrence credit officer. Credit risk ratings are determined by evaluating a number of factors including: a borrower’s financial strength, cash flow coverage, collateral protection and guarantees.
The Company’s Problem Loan Reporting system includes all such loans described above with credit risk ratings of 6 through 9. This system is designed to provide an on-going detailed tracking mechanism for each problem loan. Once management determines that a loan has deteriorated to a point where it has a credit risk rating of 6 or worse, the Company’s Managed Asset Division performs an overall credit and collateral review. As part of this review, all underlying collateral is identified and the valuation methodology is analyzed and tracked. As a result of this initial review by the Company’s Managed Asset Division, the credit risk rating is reviewed and a portion of the outstanding loan balance may be deemed uncollectible and, as a result, no longer share similar risk characteristics as its related pool. If that is the case, the individual loan is considered collateral dependent and individually assessed for an allowance for credit loss. The Company’s individual assessment utilizes an independent re-appraisal of the collateral (unless such a third-party evaluation is not possible due to the unique nature of the collateral, such as a closely-held business or thinly traded securities). In the case of commercial real estate collateral, an independent third party appraisal is ordered by the Company’s Real Estate Services Group to determine if there has been any change in the underlying collateral value. These independent appraisals are reviewed by the Real Estate Services Group and sometimes by independent third party valuation experts and may be adjusted depending upon market conditions.
Through the credit risk rating process, 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 non-accrual status or a charge-off. If the Company determines that a loan amount or portion thereof is uncollectible, the loan’s credit risk rating is immediately downgraded to an 8 or 9 and the uncollectible amount is charged-off. Any loan that has a partial charge-off continues to be assigned a credit risk rating of an 8 or 9 for the duration of time that a balance remains outstanding. The Company undertakes a thorough and ongoing analysis to determine if additional impairment and/or charge-offs are appropriate and to begin a workout plan for the credit to minimize actual losses. In determining the appropriate charge-off for collateral-dependent loans, the Company considers the results of appraisals for the associated collateral.
The table below shows the Company’s loan portfolio by credit quality indicator and year of origination at December 31, 2024:
As of December 31, 2024
Year of Origination Revolving Total
(In thousands) 2024 2023 2022 2021 2020 Prior Revolving to Term Loans
Loan Balances:
Commercial, industrial and other
Pass $ 3,361,218 $ 2,217,568 $ 1,628,315 $ 1,139,059 $ 424,974 $ 1,035,390 $ 5,111,527 $ 15,821 $ 14,933,872
Special mention 11,611 86,527 34,790 78,699 12,529 5,372 143,428 1,691 374,647
Substandard accrual 7,561 23,119 40,548 19,924 6,000 9,346 84,969 1,075 192,542
Substandard nonaccrual/doubtful 503 5,824 18,764 15,813 1,747 7,696 22,823 320 73,490
Total commercial, industrial and other $ 3,380,893 $ 2,333,038 $ 1,722,417 $ 1,253,495 $ 445,250 $ 1,057,804 $ 5,362,747 $ 18,907 $ 15,574,551
Construction and development
Pass $ 342,474 $ 616,252 $ 983,538 $ 216,737 $ 32,972 $ 139,706 $ 15,388 $ - $ 2,347,067
Special mention - 845 - - - - 3,690 - 4,535
Substandard accrual - 755 18,999 1,166 1,777 57,500 - - 80,197
Substandard nonaccrual/doubtful - 251 - - 2,031 - - - 2,282
Total construction and development $ 342,474 $ 618,103 $ 1,002,537 $ 217,903 $ 36,780 $ 197,206 $ 19,078 $ - $ 2,434,081
Non-construction
Pass $ 1,466,041 $ 1,481,826 $ 1,809,592 $ 1,417,473 $ 978,442 $ 2,812,243 $ 216,231 $ 1,534 $ 10,183,382
Special mention 3,509 15,212 16,310 59,130 3,293 37,032 2,334 - 136,820
Substandard accrual 156 2,691 30,333 26,041 30,453 41,227 - - 130,901
Substandard nonaccrual/doubtful - 487 453 557 - 17,263 - - 18,760
Total non-construction $ 1,469,706 $ 1,500,216 $ 1,856,688 $ 1,503,201 $ 1,012,188 $ 2,907,765 $ 218,565 $ 1,534 $ 10,469,863
Home equity
Pass $ 70 $ 43 $ 110 $ 22 $ 189 $ 6,988 $ 415,011 $ 6,021 $ 428,454
Special mention - 97 276 60 42 3,472 5,492 545 9,984
Substandard accrual - 15 197 - 57 4,578 542 84 5,473
Substandard nonaccrual/doubtful - - 385 129 - 517 - 86 1,117
Total home equity $ 70 $ 155 $ 968 $ 211 $ 288 $ 15,555 $ 421,045 $ 6,736 $ 445,028
Residential real estate
Early buy-out loans guaranteed by U.S. government agencies $ - $ 4,421 $ 3,417 $ 3,707 $ 4,076 $ 141,135 $ - $ - $ 156,756
Pass 870,033 498,330 811,336 762,997 204,328 250,196 - - 3,397,220
Special mention 1,046 2,558 5,821 3,420 637 8,898 - - 22,380
Substandard accrual 162 572 6,634 532 1,155 3,592 - - 12,647
Substandard nonaccrual/doubtful 155 5,044 5,486 4,906 628 7,543 - - 23,762
Total residential real estate $ 871,396 $ 510,925 $ 832,694 $ 775,562 $ 210,824 $ 411,364 $ - $ - $ 3,612,765
Premium finance receivables - property & casualty
Pass $ 7,095,026 $ 25,834 $ - $ 4,542 $ 1 $ - $ - $ - $ 7,125,403
Special mention 114,401 902 26 - - - - - 115,329
Substandard accrual 1,938 571 1 3 - - - - 2,513
Substandard nonaccrual/doubtful 23,213 5,542 33 9 - - - - 28,797
Total premium finance receivables - property & casualty $ 7,234,578 $ 32,849 $ 60 $ 4,554 $ 1 $ - $ - $ - $ 7,272,042
Premium finance receivables - life
Pass $ 1,352,365 $ 6,783,031 $ 4,135 $ - $ - $ - $ - $ - $ 8,139,531
Special mention - 1,183 - - - - - - 1,183
Substandard accrual - - - - - - - - -
Substandard nonaccrual/doubtful 6,431 - - - - - - - 6,431
Total premium finance receivables - life $ 1,358,796 $ 6,784,214 $ 4,135 $ - $ - $ - $ - $ - $ 8,147,145
Consumer and other
Pass $ 4,408 $ 3,131 $ 700 $ 805 $ 70 $ 31,065 $ 59,127 $ - $ 99,306
Special mention 28 13 5 3 - 70 5 - 124
Substandard accrual 8 3 85 - - 25 9 - 130
Substandard nonaccrual/doubtful - 1 - 1 - - - - 2
Total consumer and other $ 4,444 $ 3,148 $ 790 $ 809 $ 70 $ 31,160 $ 59,141 $ - $ 99,562
Total loans
Early buy-out loans guaranteed by U.S. government agencies $ - $ 4,421 $ 3,417 $ 3,707 $ 4,076 $ 141,135 $ - $ - $ 156,756
Pass 14,491,635 11,626,015 5,237,726 3,541,635 1,640,976 4,275,588 5,817,284 23,376 46,654,235
Special mention 130,595 107,337 57,228 141,312 16,501 54,844 154,949 2,236 665,002
Substandard accrual 9,825 27,726 96,797 47,666 39,442 116,268 85,520 1,159 424,403
Substandard nonaccrual/doubtful 30,302 17,149 25,121 21,415 4,406 33,019 22,823 406 154,641
Total loans $ 14,662,357 $ 11,782,648 $ 5,420,289 $ 3,755,735 $ 1,705,401 $ 4,620,854 $ 6,080,576 $ 27,177 $ 48,055,037
Gross write offs
Three months ended December 31, 2024 $ 13,839 $ 1,722 $ 1,810 $ 702 $ 403 $ 1,255 $ - $ - $ 19,731
Twelve months ended December 31, 2024 22,062 32,707 7,607 20,796 2,609 23,565 - - 109,346
Held-to-maturity debt securities
The Company conducts an assessment of its investment securities, including those classified as held-to-maturity, at the time of purchase and on at least an annual basis to ensure such investment securities remain within appropriate levels of risk and continue to perform satisfactorily in fulfilling its obligations. The Company considers, among other factors, the nature of the securities and credit ratings or financial condition of the issuer. If available, the Company obtains a credit rating for issuers from a Nationally Recognized Statistical Rating Organization (“NRSRO”) for consideration. If no such rating is available for an issuer, the Company performs an internal rating based on the scale utilized within the loan portfolio as discussed above. For purposes of the table below, the Company has converted any issuer rating from an NRSRO into the Company’s internal ratings based on Investment Policy and review by the Company’s management.
As of December 31, 2024
Year of Origination Total
(In thousands) 2024 2023 2022 2021 2020 Prior Balance
Amortized Cost Balances:
U.S. government agencies
1-4 internal grade $ - $ - $ 135,000 $ 147,820 $ 25,000 $ 5,719 $ 313,539
5-7 internal grade - - - - - - -
8-10 internal grade - - - - - - -
Total U.S. government agencies $ - $ - $ 135,000 $ 147,820 $ 25,000 $ 5,719 $ 313,539
Municipal
1-4 internal grade $ - $ 4,176 $ 1,033 $ 6,815 $ 258 $ 146,610 $ 158,892
5-7 internal grade - - - - - 2,124 2,124
8-10 internal grade - - - - - - -
Total municipal $ - $ 4,176 $ 1,033 $ 6,815 $ 258 $ 148,734 $ 161,016
Mortgage-backed securities
1-4 internal grade $ - $ 333,577 $ 532,079 $ 2,216,658 $ - $ - $ 3,082,314
5-7 internal grade - - - - - - -
8-10 internal grade - - - - - - -
Total mortgage-backed securities $ - $ 333,577 $ 532,079 $ 2,216,658 $ - $ - $ 3,082,314
Corporate notes
1-4 internal grade $ - $ - $ 14,969 $ - $ 6,004 $ 35,878 $ 56,851
5-7 internal grade - - - - - - -
8-10 internal grade - - - - - - -
Total corporate notes $ - $ - $ 14,969 $ - $ 6,004 $ 35,878 $ 56,851
Total held-to-maturity securities $ 3,613,720
Less: Allowance for credit losses (457)
Held-to-maturity securities, net of allowance for credit losses $ 3,613,263
Measurement of Allowance for Credit Losses
The Company’s allowance for credit losses consists of the allowance for loan losses, the allowance for unfunded commitment losses and the allowance for held-to-maturity debt security losses. In accordance with ASC 326, the Company measures the allowance for credit losses at the time of origination or purchase of a financial asset, representing an estimate of lifetime expected credit losses on the related asset. When developing its estimate, the Company considers available information relevant to assessing the collectability of cash flows, from both internal and external sources. Historical credit loss experience is one input in the estimation process as well as inputs relevant to current conditions and reasonable and supportable forecasts. In considering past events, the Company considers the relevance, or lack thereof, of historical information due to changes in such things as financial asset underwriting or collection practices, and changes in portfolio mix due to changing business plans and strategies. In considering current conditions and forecasts, the Company considers both the current economic environment and the forecasted direction of the economic environment with emphasis on those factors deemed relevant to or driving changes in expected credit losses. As significant judgment is required, the review of the appropriateness of the allowance for credit losses is performed quarterly by various committees with participation by the Company’s executive management.
December 31, December 31,
(In thousands) 2024 2023
Allowance for loan losses $ 364,017 $ 344,235
Allowance for unfunded lending-related commitments losses 72,586 83,030
Allowance for loan losses and unfunded lending-related commitments losses 436,603 427,265
Allowance for held-to-maturity securities losses 457 347
Allowance for credit losses $ 437,060 $ 427,612
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. These methodologies include estimating the probability of default and loss given default on the commercial and commercial real estate segments, using the weighted-average remaining maturity methodology for the residential real estate, home equity, and consumer segments, and utilizing an assumption-based approach focusing on historical loss rates for the premium finance receivables 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 considered when the expected extension, renewal or modification is contained within the existing agreement and is not unconditionally cancelable. The methodologies discussed above are applied to both current asset balances on the Company's Consolidated Statements of Condition and off-balance sheet commitments (i.e. unfunded lending-related commitments).
Assets that do not share similar risk characteristics with a pool are assessed for the allowance for credit losses on an individual basis. These typically include assets experiencing financial difficulties, including assets rated as substandard nonaccrual and doubtful. If foreclosure is probable or the asset is considered collateral-dependent, expected credit losses are measured based upon the fair value of the underlying collateral, adjusted for selling costs, if appropriate. Underlying collateral across the Company’s segments consist primarily of real estate, land and construction assets, as well as general business assets of the borrower. As of December 31, 2024, excluding loans carried at fair value, substandard nonaccrual loans totaling $33.8 million in carrying balance had no related allowance for credit losses.
The Company does not measure an allowance for credit losses on accrued interest receivable balances because these balances are written off in a timely manner as a reduction to interest income when assets are placed on nonaccrual status.
Loan portfolios
A summary of the activity in the allowance for credit losses by loan portfolio (i.e. allowance for loan losses and allowance for unfunded commitment losses) for the years ended December 31, 2024 and 2023 is as follows:
Year Ended
December 31, 2024
(In thousands)
Commercial Commercial
Real Estate Home
Equity Residential
Real Estate Premium
Finance
Receivable Consumer
and Other Total
Loans
Allowance for credit losses at beginning of period $ 169,604 $ 223,853 $ 7,116 $ 13,133 $ 13,069 $ 490 427,265
Other adjustments - - - - (207) - (207)
Charge-offs (48,864) (22,127) (74) (175) (37,519) (587) (109,346)
Recoveries 2,853 323 359 15 11,313 87 14,950
Provision for credit losses - other 47,439 9,164 196 (3,337) 31,164 764 85,390
Provision for credit losses - Day 1 on non-PCD assets acquired during the period 2,967 10,540 1,344 638 - 58 15,547
Initial allowance for credit losses recognized on PCD assets acquired during the period 1,838 1,103 2 61 - - 3,004
Allowance for credit losses at period end $ 175,837 $ 222,856 $ 8,943 $ 10,335 $ 17,820 $ 812 $ 436,603
By measurement method:
Individually evaluated for impairment $ 27,894 $ 6,768 $ 50 $ 44 $ - $ 1 $ 34,757
Collectively evaluated for impairment 147,943 216,088 8,893 10,291 17,820 811 401,846
Loans at period end:
Individually evaluated for impairment $ 73,490 $ 21,042 $ 1,117 $ 23,674 $ - $ 2 $ 119,325
Collectively evaluated for impairment 15,501,061 12,882,902 443,911 3,430,296 15,419,187 99,560 47,776,917
Loans held at fair value - - - 158,795 - - 158,795
Year Ended
December 31, 2023
(In thousands)
Commercial Commercial
Real Estate Home
Equity Residential
Real Estate Premium
Finance
Receivable Consumer
and Other Total
Loans
Allowance for credit losses at beginning of period $ 142,769 $ 184,352 $ 7,573 $ 11,585 $ 10,671 $ 498 $ 357,448
Cumulative effect adjustment from the adoption of ASU 2022-02 111 1,356 (33) (692) - (1) 741
Other adjustments - - - - 47 - 47
Charge-offs (15,713) (15,228) (227) (192) (21,857) (595) (53,812)
Recoveries 2,651 460 139 21 4,946 93 8,310
Provision for credit losses 39,786 52,913 (336) 2,411 19,262 495 114,531
Allowance for loan losses at period end $ 169,604 $ 223,853 $ 7,116 $ 13,133 $ 13,069 $ 490 427,265
By measurement method:
Individually evaluated for impairment $ 17,589 $ 3,150 $ - $ 135 $ - $ 11 $ 20,885
Collectively evaluated for impairment 152,015 220,703 7,116 12,998 13,069 479 406,380
Loans at period end:
Individually evaluated for impairment $ 38,940 $ 35,459 $ 1,341 $ 15,391 $ - $ 22 $ 91,153
Collectively evaluated for impairment 12,793,113 11,308,705 342,635 2,599,014 14,781,472 60,478 41,885,417
Loan held at fair value - - - 155,261 - - 155,261
For the year ended December 31, 2024, the Company recognized an approximately $100.9 million provision for credit losses related to loans and lending agreements, including an approximately $15.5 million provision for credit losses related to non-PCD assets acquired with the Macatawa acquisition. The decreased provision compared to December 31, 2023 was primarily the result of improvements in the macroeconomic forecast, specifically the Company’s macroeconomic forecasts of key model inputs (most notably, Commercial Real Estate Price Index primarily impacting the commercial real estate portfolio and Baa corporate credit spreads) partially offset by growth experienced by the Company in 2024 in various loan portfolios and from the Macatawa acquisition. While uncertainties remain regarding expected economic performance, macroeconomic forecasts as of December 31, 2024 assume that the impact of those uncertainties is less severe compared to that assumed at December 31, 2023. Other key drivers of provision for credit losses in these portfolios include, but are not limited to, loan risk rating migration and net charge-offs in 2024 totaled $94.4 million.
Held-to-maturity debt securities
The allowance for credit losses on the Company’s held-to-maturity debt securities is presented as a reduction to the amortized cost basis of held-to-maturity securities on the Company’s Consolidated Statements of Condition. For the years ended December 31, 2024 and December 31, 2023, the Company recognized approximately $110,000 and $(141,000), respectively, of provision for credit losses related to held-to-maturity securities. At December 31, 2024 and December 31, 2023, the Company did not identify any held-to-maturity debt securities within its portfolio that would require a charge-off.
Loan Modifications to Borrowers Experiencing Financial Difficulties
The Company’s approach to restructuring or modifying loans is built on its credit risk rating system, which requires credit management personnel to assign a credit risk rating to each loan. In each case, the loan officer is responsible for recommending a credit risk rating for each loan and ensuring the credit risk ratings are appropriate. These credit risk ratings are then reviewed and approved by the bank’s chief credit officer and/or concurrence credit officer. Credit risk ratings are determined by evaluating a number of factors, including a borrower’s financial strength, cash flow coverage, collateral protection and guarantees. The Company’s credit risk rating scale is one through ten with higher scores indicating higher risk. In the case of loans rated six or worse following modification, the Company’s Managed Assets Division evaluates the loan and the credit risk rating and determines that the loan has been restructured to be reasonably assured of repayment and of performance according to the modified terms and is supported by a current, well-documented credit assessment of the borrower’s financial condition and prospects for repayment under the revised terms. 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.
Restructurings may arise when, due to financial difficulties experienced by the borrower, the Company obtains through physical possession one or more collateral assets in satisfaction of all or part of an existing credit. Once possession is obtained, the Company reclassifies the appropriate portion of the remaining balance of the credit from loans to other real estate owned (“OREO”), which is included within other assets in the Consolidated Statements of Condition. For any residential real estate property collateralizing a consumer mortgage loan, the Company is considered to possess the related collateral only if legal title is obtained upon completion of foreclosure, or the borrower conveys all interest in the residential real estate property to the Company through completion of a deed in lieu of foreclosure or similar legal agreement. At December 31, 2024, the Company had no foreclosed residential real estate properties included within OREO. Further, the recorded investment in residential mortgage loans secured by residential real estate properties for which foreclosure proceedings are in process totaled $38.2 million and $53.3 million at December 31, 2024 and 2023, respectively.
The tables below presents a summary of the balance immediately following the modification of loans to borrowers experiencing financial difficulties during the years ended December 31, 2024 and 2023:
Year Ended
December 31, 2024
(Dollars in thousands)
Total Percentage of Total Class of Loan Extension of Term Reduction of
Interest
Rate Interest Only
Payments Delay in Contractual Payments Extension of Term and Reduction of Interest Rate
Commercial
Commercial, industrial and other $ 11,531 0.1 % $ 9,516 $ 9 $ 17 $ 81 $ 1,908
Commercial real estate
Construction and development 701 0.0 % 701 - - - -
Non-Construction 813 0.0 493 - 320 - -
Home equity 86 0.0 86 - - - -
Residential real estate 166 0.0 - 166 - - -
Premium finance receivables
Property and casualty insurance loans 1,226 0.0 96 1,103 - - 27
Total loans $ 14,523 0.0 $ 10,892 $ 1,278 $ 337 $ 81 $ 1,935
Weighted Average Magnitude of Modifications:
Year Ended December 31, 2024
(Dollars in thousands)
Total Duration of Extension of Term (months) Reduction of
Interest
Rate (bps) Duration of Delay in Contractual Payments (months)
Commercial
Commercial, industrial and other $ 11,531 10 80 34
Commercial real estate
Construction and development 701 13 - -
Non-construction 813 8 - -
Home equity 86 12 - -
Residential real estate 166 - 201 -
Premium finance receivables
Property and casualty insurance loans 1,226 - 37 -
Total loans $ 14,523 9 74 34
Year Ended
December 31, 2023
(Dollars in thousands)
Total (1)
Percentage of Total Class of Loan Extension of (1)
Term
Reduction of
Interest
Rate (1)
Delay in Contractual Payments (1)
Extension of
Term and
Reduction of Interest Rate (1)
Commercial
Commercial, industrial and other $ 41,223 0.3 % $ 3,367 $ 314 $ 37,069 $ 473
Commercial real estate
Construction and development 2,504 0.1 - - - 2,504
Non-construction 6,980 0.1 467 827 1,310 4,376
Home equity 702 0.2 203 - - 499
Residential real estate 2,113 0.1 1,537 271 - 305
Premium finance receivables
Property and casualty insurance loans 129 0.0 62 59 - 8
Total loans $ 53,651 0.1 % $ 5,636 $ 1,471 $ 38,379 $ 8,165
(1)Balances represent the recorded investment in the loan at the time of the restructuring.
Weighted Average Magnitude of Modifications:
Year Ended December 31, 2023
(Dollars in thousands)
Total Duration of Extension of Term (months) Reduction of
Interest
Rate (bps) Duration of Delay in Contractual Payments (months)
Commercial
Commercial, industrial and other $ 41,223 15 114 16
Commercial real estate
Construction and development 2,504 12 150 -
Non-construction 6,980 40 232 101
Home equity 702 21 137 -
Residential real estate 2,113 54 284 -
Premium finance receivables
Property and casualty insurance loans 129 1 50 -
Total loans $ 53,651 28 198 16
The Company had commitments of $20.9 million and $53.7 million as of December 31, 2024 and December 31, 2023, respectively, to lend additional funds to borrowers experiencing financial difficulty and for whom the Company has modified the terms of loans in the form of principal forgiveness, an interest rate reduction, an other-than insignificant payment delay or a term extension during the periods presented.
The following table presents a summary of all modified loans for borrowers experiencing financial difficulties and such loans that were in payment default under the restructured terms during the respective periods below:
(Dollars in thousands) Year Ended December 31, 2024
Year Ended December 31, 2024
Year Ended December 31, 2023
Year Ended December 31, 2023
Total Payments in Default Total Payments in Default
Commercial
Commercial, industrial and other $ 11,531 $ 995 $ 41,223 $ 19,361
Commercial real estate
Construction and development 701 - 2,504 2,504
Non-construction 813 319 6,980 4,851
Home equity 86 86 702 203
Residential real estate 166 166 2,113 767
Premium finance receivables
Property and casualty insurance loans 1,226 122 129 129
Total loans $ 14,523 $ 1,688 $ 53,651 $ 27,815
(6) Mortgage Servicing Rights (“MSRs”)
Following is a summary of the changes in the carrying value of MSRs, accounted for at fair value, for the years ended December 31, 2024, 2023 and 2022:
December 31, December 31, December 31,
(In thousands)
2024 2023 2022
Fair value at beginning of year $ 192,456 $ 230,225 $ 147,571
Additions from loans sold with servicing retained 29,969 28,610 46,221
Servicing rights sold - (30,170) -
Estimate of changes in fair value due to:
Payoffs and paydowns (23,026) (17,060) (23,631)
Changes in valuation inputs or assumptions 4,389 (19,149) 60,064
Fair value at end of year $ 203,788 $ 192,456 $ 230,225
Unpaid principal balance of mortgage loans serviced for others $ 12,400,913 $ 12,007,165 $ 14,052,596
The Company recognizes MSR assets upon the sale of residential real estate loans to external third parties when it retains the obligation to service the loans and the servicing fee is more than adequate compensation. The initial recognition of MSR assets from loans sold with servicing retained and subsequent changes in fair value of all MSRs are recognized in mortgage banking revenue. MSRs are subject to changes in value from actual and expected prepayment of the underlying loans.
The estimation of fair value related to MSRs is partly impacted by the Company exercising its EBO on eligible loans previously sold to the GNMA. Under such optional repurchase program, financial institutions acting as servicers are allowed to buy back from the securitized loan pool individual delinquent mortgage loans meeting certain criteria for which the institution was the original transferor of such loans. At the option of the servicer and without prior authorization from GNMA, the servicer may repurchase such delinquent loans for an amount equal to the remaining principal balance of the loan. At the time of such repurchase, any MSR value related to such loans is derecognized.
The MSR asset fair value is determined by using a discounted cash flow model that incorporates the objective characteristics of the portfolio as well as subjective valuation parameters that purchasers of servicing would apply to such portfolios sold into the secondary market. The subjective factors include loan prepayment speeds, discount rates, servicing costs and other economic factors. The Company uses a third party to assist in the valuation of MSRs.
Periodically the Company will purchase options for the right to purchase securities not currently held within the banks’ investment portfolios or enter into interest rate swaps in which the Company elects to not designate such derivatives as hedging instruments. These option and swap transactions are designed primarily to economically hedge a portion of the fair value adjustments related to the Company’s MSRs. The gain or loss associated with these derivative contracts is included in mortgage
banking revenue. For more information regarding these hedges outstanding as of December 31, 2024 and December 31, 2023, see Note (21) “Derivative Financial Instruments” in Item 8 of this report.
(7) Business Combinations
On August 1, 2024, the Company completed its previously announced acquisition of Macatawa Bank Corporation (“Macatawa”), the parent company of Macatawa Bank. Pursuant to the terms of the merger, each common share of Macatawa outstanding at the time of merger was converted into the right to receive 0.137 shares of Wintrust common stock, with cash paid in lieu of fractional shares. As a result, the Company issued approximately 4.7 million shares of common stock, the fair value of consideration paid was $499.3 million. Macatawa operates 26 full-service branches located throughout communities in Kent, Ottawa and northern Allegan counties in the state of Michigan. Macatawa offers a full range of banking, retail and commercial lending, wealth management and ecommerce services to individuals, businesses and governmental entities. As of August 1, 2024, Macatawa had approximately $2.7 billion in assets, $2.3 billion in deposits and $1.4 billion in loans. In conjunction with the acquisition, the Company recorded $53.7 million discount on acquired loans, $33.5 million discount on securities and recorded total intangibles of $253.0 million. During 2024, the Company incurred $4.3 million in acquisition expenses related to the acquisition of Macatawa. The fair value estimates of the loans acquired are subject to adjustment up to one year after the closing date of the acquisition as additional information becomes available.
On April 3, 2023, the Company completed its acquisition of Rothschild & Co Asset Management US Inc. and Rothschild & Co Risk Based Investments LLC from Rothschild & Co North America Inc. (collectively, “Rothschild & Co Asset Management U.S.”). As of the acquisition date, the Company acquired approximately $12.6 million in net assets. As the transaction was determined to be a business combination, the Company recorded goodwill of approximately $2.6 million on the purchase.
(8) Goodwill and Other Acquisition-Related Intangible Assets
A summary of the Company’s goodwill assets by business segment is presented in the following table:
(In thousands)
January 1,
2024 Goodwill
Acquired Impairment
Loss Goodwill Adjustments December 31, 2024
Community banking $ 545,671 $ 142,083 $ - $ - $ 687,754
Specialty finance 39,006 - - (1,813) 37,193
Wealth management 71,995 - - - 71,995
Total $ 656,672 $ 142,083 $ - $ (1,813) $ 796,942
The community banking unit’s goodwill increased $142.1 million in 2024 as a result of the Macatawa acquisition. The specialty finance segment’s goodwill decreased $1.8 million in 2024 as a result of foreign currency translation adjustments related to prior Canadian acquisitions.
The Company assesses each reporting unit’s goodwill for impairment on at least an annual basis and considers potential indicators of impairment at each reporting date between annual goodwill impairment tests. At October 1, 2024, the Company utilized a quantitative approach for its annual goodwill impairment tests of the community banking, specialty finance and wealth management reporting units and determined that no impairment existed at that time.
At each reporting date between annual goodwill impairment tests, the Company considers potential indicators of impairment. The Company assessed whether events and circumstances as of each reporting date in 2024 resulted in it being more likely than not that the fair value of any reporting unit was less than its carrying value. Potential impairment indicators considered include the condition of the economy and banking industry; government intervention and regulatory updates; the impact of recent events to financial performance and cost factors of the reporting units; performance of the Company’s stock and other relevant events. As of December 31, 2024, the Company identified no indicators of goodwill impairment subsequent to its analysis as of October 1, 2024 within the community banking, specialty finance or wealth management reporting units and the Company determined it was more likely than not that the fair value of all reporting units exceeded the respective carrying value of such reporting unit.
A summary of acquisition-related intangible assets as of the dates shown and the expected amortization of finite-lived acquisition-related intangible assets as of December 31, 2024 is as follows:
December 31,
(In thousands)
2024 2023
Community banking segment:
Core deposit intangibles with finite lives:
Gross carrying amount $ 158,106 $ 55,206
Accumulated amortization (56,784) (46,125)
Net carrying amount $ 101,322 $ 9,081
Trademark with indefinite lives:
Carrying amount 13,800 5,800
Total net carrying amount $ 115,122 $ 14,881
Specialty finance segment:
Customer list intangibles with finite lives:
Gross carrying amount $ 1,959 $ 1,963
Accumulated amortization (1,881) (1,837)
Net carrying amount $ 78 $ 126
Wealth management segment:
Customer list and other intangibles with finite lives:
Gross carrying amount $ 26,630 $ 26,630
Accumulated amortization (20,140) (18,748)
Net carrying amount $ 6,490 $ 7,882
Total acquisition-related intangible assets:
Gross carrying amount $ 200,495 $ 89,599
Accumulated amortization (78,805) (66,710)
Total acquisition-related intangible assets, net $ 121,690 $ 22,889
Estimated amortization for the year-ended:
2025 $ 21,391
2026 18,830
2027 16,342
2028 13,908
2029 11,536
The community banking unit's core deposit intangibles and trademarks with indefinite lives increased $102.9 million and $8.0 million, respectively, in the third quarter of 2024 as a result of the Macatawa acquisition.
The core deposit intangibles recognized in connection with the Company’s bank acquisitions are amortized over a ten-year period on an accelerated basis. The customer list intangibles recognized in connection with the purchase of life insurance premium finance assets in 2009 are being amortized over an 18-year period on an accelerated basis. The customer list and other intangibles recognized in connection with prior acquisitions within the wealth management segment are being amortized over a period of up to ten-years on a straight-line or accelerated basis. Indefinite-lived intangible assets consist of certain trade and domain names recognized in connection with prior acquisitions. As indefinite-lived intangible assets are not amortized, the Company assesses impairment on at least an annual basis.
Total amortization expense associated with finite-lived intangibles in 2024, 2023 and 2022 was $12.1 million, $5.5 million and $6.1 million, respectively.
(9) Premises, Software and Equipment, Net
A summary of premises, software and equipment at December 31, 2024 and 2023 is as follows:
December 31,
(In thousands)
2024 2023
Land $ 184,318 $ 166,036
Buildings and leasehold improvements 703,798 687,326
Furniture, equipment and computer software 383,056 333,176
Construction in progress 15,702 26,443
$ 1,286,874 $ 1,212,981
Less: Accumulated depreciation and amortization 507,744 464,015
Total premises, software, and equipment, net $ 779,130 $ 748,966
Depreciation and amortization expense related to premises, software and equipment totaled $61.4 million in 2024, $56.9 million in 2023 and $53.1 million in 2022.
(10) Deposits
The following is a summary of deposits at December 31, 2024 and 2023:
(Dollars in thousands)
2024 2023
Balance:
Non-interest bearing $ 11,410,018 $ 10,420,401
NOW and interest-bearing demand deposits 5,865,546 5,797,649
Wealth management deposits 1,469,064 1,614,499
Money market 17,975,191 15,149,215
Savings 6,372,499 5,790,334
Time certificates of deposit 9,420,031 6,625,072
Total deposits
$ 52,512,349 $ 45,397,170
Mix:
Non-interest bearing 22 % 23 %
NOW and interest-bearing demand deposits 11 13
Wealth management deposits 3 4
Money market 34 33
Savings 12 13
Time certificates of deposit 18 14
Total deposits
100 % 100 %
Wealth management deposits represent deposit balances (primarily money market accounts) at the Company’s subsidiary banks from brokerage customers of Wintrust Investments, CDEC and trust and asset management customers of the Company.
The scheduled maturities of time certificates of deposit at December 31, 2024 and 2023 are as follows:
(In thousands)
2024 2023
Due within one year $ 9,061,295 $ 5,994,905
Due in one to two years 281,239 558,387
Due in two to three years 53,009 42,559
Due in three to four years 14,316 16,251
Due in four to five years 10,104 12,966
Due after five years 68 4
Total time certificate of deposits
$ 9,420,031 $ 6,625,072
The following table sets forth the scheduled maturities of uninsured time deposits, specifically the portion of time deposit balances in excess of the FDIC insurance limit of $250,000, at December 31, 2024 and 2023:
(In thousands)
2024 2023
Maturing within three months $ 774,312 $ 315,495
After three but within six months 926,997 327,183
After six but within 12 months 490,231 466,699
After 12 months 54,691 73,534
Total
$ 2,246,231 $ 1,182,911
Time deposits in denominations of $250,000 or more were $3.9 billion and $2.5 billion at December 31, 2024 and 2023, respectively.
(11) Federal Home Loan Bank Advances
A summary of the outstanding FHLB advances at December 31, 2024 and 2023, is as follows:
(In thousands)
2024 2023
0.00% advance due April 2024
$ - $ 442
2.98% advance due August 2024
- 25,000
0.00% advance due April 2026
629 629
0.00% advance due January 2029
680 -
3.70% advance due July 2030
150,000 150,000
2.81% advance due September 2032
500,000 500,000
3.08% advance due September 2032
500,000 500,000
2.96% advance due December 2032
- 250,000
2.98% advance due December 2032
- 250,000
3.13% advance due February 2033
- 250,000
2.95% advance due May 2033
250,000 250,000
3.72% advance due July 2033
150,000 150,000
3.43% advance due January 2034
175,000 -
3.19% advance due January 2034
175,000 -
3.45% advance due April 2034
250,000 -
3.44% advance due April 2034
250,000 -
3.33% advance due May 2034
250,000 -
3.29% advance due June 2034
250,000 -
3.38% advance due June 2034
250,000 -
Total FHLB advances $ 3,151,309 $ 2,326,071
FHLB advances consist of obligations of the banks and are collateralized by qualifying commercial and residential real estate and home equity loans and certain securities. The banks have arrangements with the FHLB whereby, based on available collateral, they could have borrowed an additional $3.9 billion at December 31, 2024.
FHLB advances are stated at par value of the debt adjusted for unamortized prepayment fees paid at the time of prior restructurings of FHLB advances and unamortized fair value adjustments recorded in connection with advances acquired through acquisitions and debt issuance costs. Unamortized prepayment fees are amortized as an adjustment to interest expense using the effective interest method.
In 2024, the Company was required to repay approximately $750.0 million of FHLB advances prior to the respective maturity date as a result of call date terms within the related agreements. Approximately $2.7 billion of the FHLB advances outstanding at December 31, 2024 currently have varying put or call dates over the next 12 months. At December 31, 2024, the weighted average contractual interest rate on FHLB advances was 3.23%.
(12) Subordinated Notes
At December 31, 2024, the Company had outstanding subordinated notes totaling $298.3 million compared to $437.9 million at December 31, 2023. In 2019, the Company issued $300.0 million of subordinated notes receiving $296.7 million in proceeds,
net of underwriting discount. The notes have a stated interest rate of 4.85% and mature in June 2029. In the second quarter of 2024, the Company repaid the $140.0 million of subordinated notes issued in 2014. The notes had a stated interest rate of 5.00% and matured in June 2024. Subordinated notes are stated at par adjusted for unamortized issuance costs paid related to such debt.
In connection with the issuance of subordinated notes in 2019 and 2014, the Company incurred costs totaling $3.3 million and $1.3 million, respectively. These costs are a direct deduction from the carrying amount of the subordinated notes and are amortized to interest expense using the effective interest method. At December 31, 2024, the unamortized balances of costs for both issuances were approximately $1.7 million. These subordinated notes qualify as Tier II capital under the regulatory capital requirements, subject to restrictions.
(13) Other Borrowings
The following is a summary of other borrowings at December 31, 2024 and 2023:
(In thousands)
2024 2023
Notes payable $ 142,763 $ 171,282
Short-term borrowings - 13,430
Secured Borrowings 334,934 401,897
Other 57,106 59,204
Total other borrowings $ 534,803 $ 645,813
Notes Payable
On December 12, 2022, the Company entered into a credit agreement (as amended, the “Amended and Restated Credit Agreement”) with certain unaffiliated banks. The Credit Agreement consists of a $200.0 million term loan facility and a $100.0 million revolving credit facility.
The Amended and Restated Credit Agreement provides for, among other things, a maturity date for the revolving credit facility of December 5, 2025, and a maturity date for the term loan facility of December 12, 2027. The Amended and Restated Credit Agreement also provides for certain financial covenants that must be met by the Company for so long as any amounts or commitments under the Amended and Restated Credit Agreement are still outstanding.
Borrowings under the Amended and Restated Credit Agreement that are considered “Base Rate Loans” bear interest at a rate equal to the sum of (1) 75 basis points plus (2) the highest of (a) the prime rate, (b) the federal funds rate plus 50 basis points, and (c) Term SOFR for a one-month tenor in effect on such day plus 110 basis points. Borrowings under the Amended and Restated Credit Agreement that are considered “Term SOFR Loans” bear interest at a rate equal to the sum of (1) 160 basis points plus (2) Term SOFR for the applicable interested period. A commitment fee is payable quarterly in arrears in an amount equal to 0.30% of the actual daily amount by which the lenders’ commitments under the revolving credit facility exceeded the amount outstanding under such facility. The Company is required to make monthly or quarterly (as applicable) payments of interest in respect of all loans under the Amended and Restated Credit Agreement, and quarterly payments of principal in respect of the loans under the term loan facility.
Borrowings under the Amended and Restated Credit Agreement are secured by pledges of and first priority perfected security interests in the Company’s equity interest in its bank subsidiaries and contain several restrictive covenants, including the maintenance of various capital adequacy levels, asset quality and profitability ratios, and certain restrictions on dividends and other indebtedness. As of December 31, 2024, the Company was in compliance with all such covenants. The term loan facility and revolving credit facility under the Amended and Restated Credit Agreement are available to be utilized, as needed, to provide capital to fund continued growth at the Company’s banks and to serve as an interim source of funds for acquisitions, common stock repurchases or other general corporate purposes.
The term debt facility is stated at par of the current outstanding balance of the debt adjusted for unamortized costs paid by the Company in relation to the debt issuance. Unamortized costs paid by the Company in relation to the issuance of the revolving credit facility are classified in other assets on the Consolidated Statements of Condition.
As of December 31, 2024, the outstanding principal balance under the term loan facility was $142.8 million and there was no outstanding principal balance under the revolving credit facility.
Short-term Borrowings
Short-term borrowings include securities sold under repurchase agreements of customer sweep accounts in connection with master repurchase agreements at the banks. At December 31, 2024, the Company had none of these types of borrowings compared to $13.4 million at December 31, 2023. The Company records securities sold under repurchase agreements at their gross value and does not offset positions on the Consolidated Statements of Condition.
Secured Borrowings
Secured borrowings primarily represent transactions to sell an undivided co-ownership interest in all receivables owed to the Company’s subsidiary, First Insurance Funding of Canada (“FIFC Canada”). In December 2014, FIFC Canada sold such interest to an unrelated third party in exchange for a cash payment of approximately C$150 million pursuant to a receivables purchase agreement (“Receivables Purchase Agreement”). Amendments to the Receivables Purchase Agreement since issuance increased the total payments to C$650 million, extended the maturity date to December 15, 2025. Additionally, since Canadian Dollar Offered Rate (“CDOR”) ceased being used in Canada in June 2024, references to CDOR changed to the Benchmark rate. These transactions were not considered sales of receivables and, as such, related proceeds received are reflected on the Company’s Consolidated Statements of Condition as a secured borrowing owed to the unrelated third party, net of unamortized debt issuance costs, and translated to the Company’s reporting currency as of the respective date. At December 31, 2024, the translated balance of the secured borrowing totaled $323.2 million compared to $392.5 million at December 31, 2023. The interest rate under the Receivables Purchase Agreement is the Canadian Commercial Paper Rate plus 0.825%.
Other Borrowings
Other borrowings 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 December 31, 2024, the Fixed-Rate Promissory Note had a balance of $57.1 million compared to $59.2 million at December 31, 2023. Under the Fixed-Rate Promissory Note, during the twelve months ended December 31, 2024, the Company made monthly principal and interest payments. The Fixed-Rate Promissory Note contains several restrictive covenants, including the maintenance of various capital adequacy levels, asset quality and profitability ratios, and certain restrictions on dividends and indebtedness. At December 31, 2024, the Company was in compliance with all such covenants.
The remaining $11.7 million within secured borrowings at December 31, 2024 represents other sold interests in certain loans by the Company that were not considered sales and, as such, related proceeds received are reflected on the Company’s Consolidated Statements of Condition as a secured borrowing owed to the various unrelated third parties.
(14) Junior Subordinated Debentures
As of December 31, 2024, the Company owned 100% of the common securities of eleven trusts, Wintrust Capital Trust III, Wintrust Statutory Trust IV, Wintrust Statutory Trust V, Wintrust Capital Trust VII, Wintrust Capital Trust VIII, Wintrust Capital Trust IX, Northview Capital Trust I, Town Bankshares Capital Trust I, First Northwest Capital Trust I, Suburban Illinois Capital Trust II, and Community Financial Shares Statutory Trust II (the “Trusts”) set up to provide long-term financing. The Northview, Town, First Northwest, Suburban and Community Financial Shares capital trusts were acquired as part of the acquisitions of Northview Financial Corporation, Town Bankshares, Ltd., First Northwest Bancorp, Inc., Suburban Illinois Bancorp, Inc. and Community Financial Shares, Inc., respectively. The Trusts were formed for purposes of issuing trust preferred securities to third-party investors and investing the proceeds from the issuance of the trust preferred securities and common securities solely in junior subordinated debentures issued by the Company (or assumed by the Company in connection with an acquisition), with the same maturities and interest rates as the trust preferred securities. The junior subordinated debentures are the sole assets of the Trusts. In each Trust, the common securities represent approximately 3% of the junior subordinated debentures and the trust preferred securities represent approximately 97% of the junior subordinated debentures.
The Trusts are reported in the Company’s consolidated financial statements as unconsolidated subsidiaries. Accordingly, in the Consolidated Statements of Condition, the junior subordinated debentures issued by the Company to the Trusts are reported as liabilities and the common securities of the Trusts, all of which are owned by the Company, are included in investment securities.
The following table provides a summary of the Company’s junior subordinated debentures as of December 31, 2024 and 2023. The junior subordinated debentures represent the par value of the obligations owed to the Trusts.
Common Securities Trust Preferred Securities Junior
Subordinated
Debentures Rate Structure (1)
Contractual rate at 12/31/2024
Maturity Date Earliest Redemption Date
(Dollars in thousands)
2024 2023 Issue Date
Wintrust Capital Trust III $ 774 $ 25,000 $ 25,774 $ 25,774 S+0.26161+3.25
8.17 % 04/2003 04/2033 04/2008
Wintrust Statutory Trust IV 619 20,000 20,619 20,619 S+0.26161+2.80
7.39 12/2003 12/2033 12/2008
Wintrust Statutory Trust V 1,238 40,000 41,238 41,238 S+0.26161+2.60
7.19 05/2004 05/2034 06/2009
Wintrust Capital Trust VII 1,550 50,000 51,550 51,550 S+0.26161+1.95
6.57 12/2004 03/2035 03/2010
Wintrust Capital Trust VIII 1,238 25,000 26,238 26,238 S+0.26161+1.45
6.04 08/2005 09/2035 09/2010
Wintrust Capital Trust IX 1,547 50,000 51,547 51,547 S+0.26161+1.63
6.25 09/2006 09/2036 09/2011
Northview Capital Trust I 186 6,000 6,186 6,186 S+0.26161+3.00
7.83 08/2003 11/2033 08/2008
Town Bankshares Capital Trust I 186 6,000 6,186 6,186 S+0.26161+3.00
7.83 08/2003 11/2033 08/2008
First Northwest Capital Trust I 155 5,000 5,155 5,155 S+0.26161+3.00
7.59 05/2004 05/2034 05/2009
Suburban Illinois Capital Trust II 464 15,000 15,464 15,464 S+0.26161+1.75
6.37 12/2006 12/2036 12/2011
Community Financial Shares Statutory Trust II 109 3,500 3,609 3,609 S+0.26161+1.62
6.24 06/2007 09/2037 06/2012
Total $ 253,566 $ 253,566 6.85 %
(1)The interest rates on the variable rate junior subordinated debentures are based on the three-month Chicago Mercantile Exchange (“CME”) Term Secured Overnight Financing Rate (“SOFR”) and reset on a quarterly basis.
At December 31, 2024, the weighted average contractual interest rate on the junior subordinated debentures was 6.85%. Distributions on the common and preferred securities issued by the Trusts are payable quarterly at a rate per annum equal to the interest rates being earned by the Trusts on the junior subordinated debentures. Interest expense on the junior subordinated debentures is deductible for income tax purposes.
Under AIRLA and Part 253 of Regulation ZZ (Rule 253), after June 30, 2023, the interest rate on the junior subordinated debentures, by operation of law, changed their base rate from USD LIBOR to CME Term SOFR of the same tenor, plus an applicable tenor spread adjustment. CME Term SOFR is an indicative, forward-looking measurement of daily overnight SOFR. CME Term SOFR is published by CME Group Inc., as administrator of that rate. The calculation agent for any series of the junior subordinated debentures may also make additional administrative conforming changes to the terms of that series of the junior subordinated debentures under AIRLA and Rule 253.
The Company has guaranteed the payment of distributions and payments upon liquidation or redemption of the trust preferred securities, in each case to the extent of funds held by the Trusts. The Company and the Trusts believe that, taken together, the obligations of the Company under the guarantees, the junior subordinated debentures, and other related agreements provide, in the aggregate, a full, irrevocable and unconditional guarantee, on a subordinated basis, of all of the obligations of the Trusts under the trust preferred securities. Subject to certain limitations, the Company has the right to defer the payment of interest on the junior subordinated debentures at any time, or from time to time, for a period not to exceed 20 consecutive quarters. The trust preferred securities are subject to mandatory redemption, in whole or in part, upon repayment of the junior subordinated debentures at maturity or their earlier redemption. The junior subordinated debentures are redeemable in whole or in part prior to maturity at any time after the earliest redemption dates shown in the table, and earlier at the discretion of the Company if certain conditions are met, and, in any event, only after the Company has obtained Federal Reserve Bank (“FRB”) approval, if then required under applicable guidelines or regulations.
At December 31, 2024, the Company included $245.5 million of the junior subordinated debentures, net of common securities, in Tier 2 regulatory capital.
(15) Revenue from Contracts with Customers
Disaggregation of Revenue
The following table presents revenue from contracts with customers, disaggregated by the revenue source:
(Dollars in thousands) Years Ended
Revenue from contracts with customers Location in income statement December 31,
2024 December 31,
2023 December 31,
Brokerage and insurance product commissions Wealth management $ 22,611 $ 18,645 $ 17,668
Trust Wealth management 25,941 24,190 33,460
Asset management Wealth management 97,675 87,772 75,486
Total wealth management 146,227 130,607 126,614
Mortgage broker fees Mortgage banking 1,925 844 854
Service charges on deposit accounts Service charges on deposit accounts 65,651 55,250 58,574
Administrative services Other non-interest income 5,336 5,599 6,713
Card related fees Other non-interest income 17,829 13,789 11,474
Other deposit related fees Other non-interest income 13,774 14,354 13,490
Total revenue from contracts with customers $ 250,742 $ 220,443 $ 217,719
Wealth Management Revenue
Wealth management revenue is comprised of brokerage and insurance product commissions, managed money fees and trust and asset management revenue of the Company's four wealth management subsidiaries: Wintrust Investments, GLA, WPT and CDEC. All wealth management revenue is recognized in the wealth management segment.
Brokerage and insurance product commissions consists primarily of commissions earned from trade execution services on behalf of customers and from selling mutual funds, insurance and other investment products to customers. For trade execution services, the Company recognizes commissions and receives payment from the brokerage customers at the point of transaction execution. Commissions received from the investment or insurance product providers are recognized at the point of sale of the product. The Company also receives trail and other commissions from providers for certain plans. These are generally based on qualifying account values and are recognized once the performance obligation, specific to each provider, is satisfied on a monthly, quarterly or annual basis.
Trust revenue is earned primarily from trust and custody services that are generally performed over time as well as fees earned on funds held during the facilitation of tax-deferred like-kind exchange transactions. Revenue is determined periodically based on a schedule of fees applied to the value of each customer account using a time-elapsed method to measure progress toward complete satisfaction of the performance obligation. Fees are typically billed on a calendar month or quarter basis in advance or in arrears depending upon the contract. Upfront fees received related to the facilitation of tax-deferred like-kind exchange transactions are deferred until the transaction is completed. Additional fees earned for certain extraordinary services performed on behalf of the customers are recognized when the service has been performed.
Asset management revenue is earned from money management and advisory services that are performed over time. Revenue is based primarily on the market value of assets under management or administration using a time-elapsed method to measure progress toward complete satisfaction of the performance obligation. Fees are typically billed on a calendar month or quarter basis in advance or in arrears depending upon the contract. Certain programs provide the customer with an option of paying fees as a percentage of the account value or incurring commission charges for each trade similar to brokerage and insurance product commissions. Trade commissions and any other fees received for additional services are recognized at a point in time once the performance obligation is satisfied.
Mortgage Broker Fees
For customers desiring a mortgage product not currently offered by the Company, the Company may refer such customers and, with permission, direct such customers' applications to certain third party mortgage brokers. Mortgage broker fees are received from these brokers for such customer referrals upon settlement of the underlying mortgage. The Company's entitlement to the consideration is contingent on the settlement of the mortgage which is highly susceptible to factors outside of the Company's influence, such as the third party broker's underwriting requirements. Also, the uncertainty surrounding the consideration could be resolved in varying lengths of time, dependent upon the third party brokers. Therefore, mortgage broker fees are recognized at the settlement of the underlying mortgage when the consideration is received. Broker fees are recognized in the community banking segment.
Service Charges on Deposit Accounts
Service charges on deposit accounts include fees charged to deposit customers for various services, including account analysis services, and are based on factors such as the size and type of customer, type of product and number of transactions. The fees are based on a standard schedule of fees and, depending on the nature of the service performed, the service is performed at a point in time or over a period of a month. When the service is performed at a point in time, the Company recognizes and receives revenue when the service has been performed. When the service is performed over a period of a month, the Company recognizes and receives revenue in the month the service has been performed. Service charges on deposit accounts are recognized in the community banking segment.
Administrative Services
Administrative services revenue is earned from providing outsourced administrative services, such as data processing of payrolls, billing and cash management services, to temporary staffing service clients located throughout the United States. Fees are charged periodically (typically a payroll cycle) and computed in accordance with the contractually determined rate applied to the total gross billings administered for the period. The revenue is recognized over the period using a time-elapsed method to measure progress toward complete satisfaction of the performance obligation. Other fees are charged on a per occurrence basis as the service is provided in the billing cycle. The Company has certain contracts with customers to perform outsourced administrative services and short-term accounts receivable financing. For these contracts, the total fee is allocated between the administrative services revenue and interest income during the client onboarding process based on the specific client and services provided. Administrative services revenue is recognized in the specialty finance segment.
Card and Deposit Related Fees
Card related fees include interchange and merchant revenue, and fees related to debit and credit cards. Interchange revenue is related to the Company issued debit cards. Other deposit related fees primarily include pay by phone processing fees, ATM and safe deposit box fees, check order charges and foreign currency related fees. Card and deposit related fees are generally based on volume of transactions and are recognized at the point in time when the service has been performed. For any consideration that is constrained, the revenue is recognized once the uncertainty is known. Upfront fees received from certain contracts are recognized on a straight line basis over the term of the contract. Card and deposit related fees are recognized in the community banking segment.
Contract Balances
The following table provides information about contract assets, contract liabilities and receivables from contracts with customers:
(Dollars in thousands) December 31,
2024 December 31,
Contract assets $ - $ -
Contract liabilities $ 1,329 $ 665
Mortgage broker fees receivable $ 101 $ 64
Administrative services receivable 213 118
Wealth management receivable 12,130 13,796
Card related fees receivable 1,026 1,190
Total receivables from contracts with customer $ 13,470 $ 15,168
Contract liabilities represent upfront fees that the Company received at inception of certain contracts. The revenue recognized that was included in the contract liability balance at beginning of the period totaled $565,000 and $932,000 for the years ended December 31, 2024 and 2023, respectively. Receivables are recognized in the period the Company provides services when the Company's right to consideration is unconditional. Card related fee receivable is the result of volume based fee that the Company receives from a customer on an annual basis in the second quarter of each year. Payment terms on other invoiced amounts are typically 30 days or less. Contract liabilities and receivables from contracts with customers are included within the accrued interest payable and other liabilities and accrued interest receivable and other assets line items, respectively, in the Consolidated Statements of Condition.
Transaction price allocated to the remaining performance obligations
For contracts with an original expected length of more than one year, the following table presents the estimated future timing of recognition of upfront fees related to card and deposit related fees. These upfront fees represent performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period.
(Dollars in thousands)
Estimated-2025 $ 552
Estimated-2026 111
Estimated-2027 111
Estimated-2028 111
Estimated-2029+ 444
Total $ 1,329
Practical Expedients and Exemptions
The Company does not adjust the promised amount of consideration for the effects of a significant financing component if the Company expects, at contract inception, that the period between when the Company transfers a promised service to a customer and when the customer pays for that services is one year or less.
The Company recognizes the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one year or less.
(16) Lease Commitments
The following tables provide a summary of lease costs, weighted average remaining lease term and discount rate and future required fixed payments related to the Company’s leasing arrangements in which it is the lessee:
Year Ended
(In thousands)
December 31,
2024 December 31,
2023 December 31,
Operating lease cost $ 23,446 $ 22,337 $ 22,767
Finance lease cost:
Amortization of right-of-use asset 249 219 219
Interest on lease liability 366 290 291
Short-term lease cost 111 41 302
Variable lease cost 2,865 2,391 2,966
Sublease income (80) (70) (73)
Total lease cost $ 26,957 $ 25,208 $ 26,472
Year Ended
(In thousands) December 31,
2024 December 31,
Cash paid for amounts included in the measurement of operating lease liabilities $ 24,940 $ 23,599
Cash paid for amounts included in the measurement of finance lease liabilities 349 337
Right-of-use asset obtained in exchange for new operating lease liabilities 9,538 14,595
Right-of-use asset obtained in exchange for new finance lease liabilities 1,222 1,408
Weighted average remaining lease term - operating leases 9.87 years 10.6 years
Weighted average remaining lease term - finance leases 36.49 years 37.4 years
Weighted average discount rate - operating leases 4.30 % 4.12 %
Weighted average discount rate - finance leases 3.93 % 3.81 %
(In thousands)
Payments
2025 $ 25,408
2026 23,020
2027 21,544
2028 19,601
2029 17,407
2030 and thereafter 93,401
Total minimum future amounts $ 200,381
Impact of measuring the lease liability on a discounted basis (46,771)
Total lease liability $ 153,610
In addition to the lessee arrangements discussed above, the Company also leases certain owned premises and receives rental income from such lessor agreements. Gross rental income related to the Company’s buildings totaled $5.8 million, $6.3 million and $7.8 million, in 2024, 2023 and 2022, respectively. The approximate annual gross rental receipts under noncancelable agreements with remaining terms in excess of one year as of December 31, 2024, are as follows (in thousands):
Receipts
2025 $ 3,717
2026 2,997
2027 2,245
2028 1,131
2029 746
2030 and thereafter 3,612
Total minimum future amounts $ 14,448
(17) Income Taxes
Income tax expense (benefit) for the years ended December 31, 2024, 2023 and 2022 is summarized as follows:
Years Ended December 31,
(In thousands)
2024 2023 2022
Current income taxes:
Federal $ 178,075 $ 165,518 $ 116,976
State 52,882 62,948 48,633
Foreign 10,076 13,696 3,207
Total current income taxes $ 241,033 $ 242,162 $ 168,816
Deferred income taxes:
Federal $ 2,914 $ (8,245) $ 18,560
State 7,927 (9,750) (1,183)
Foreign 170 (1,712) 4,680
Total deferred income taxes $ 11,011 $ (19,707) $ 22,057
Total income tax expense $ 252,044 $ 222,455 $ 190,873
The Company’s income before income taxes in 2024, 2023 and 2022 includes $27.3 million, $42.5 million and $27.7 million, respectively, of foreign income attributable to its Canadian subsidiary.
The tax effects of certain transactions are recorded directly to shareholders’ equity rather than income tax expense. The tax effect of fair value adjustments on securities available-for-sale and derivative instruments in cash flow hedges are recorded directly to shareholders’ equity as part of other comprehensive income (loss) and are reflected on the Consolidated Statements of Comprehensive Income. The tax effect of unrealized gains and losses on certain foreign currency transactions is also recorded in shareholders’ equity as part of other comprehensive income (loss).
A reconciliation of the differences between taxes computed using the statutory Federal income tax rate and actual income tax expense is as follows:
Years Ended December 31,
(Dollars in thousands)
2024 2023 2022
Income tax expense using the statutory Federal income tax rate of 21% on income before taxes $ 198,889 $ 177,467 $ 147,117
(Decrease) increase in tax resulting from:
Tax-exempt interest, net of interest expense disallowance (5,338) (5,348) (3,936)
State taxes, net of federal tax benefit 48,039 42,027 37,328
Income earned on bank owned life insurance (1,139) (1,013) (102)
Excess tax benefits on share based compensation (3,621) (2,314) (2,278)
Meals, entertainment and related expenses 2,823 2,439 1,506
FDIC insurance expense 8,602 7,713 6,014
Non-deductible compensation expense 2,587 2,147 2,361
Foreign subsidiary, net 4,600 3,060 2,376
Tax benefits related to tax credits, net (3,049) (3,632) (338)
Other, net (349) (91) 825
Income tax expense $ 252,044 $ 222,455 $ 190,873
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 31, 2024 and 2023 are as follows:
(In thousands)
2024 2023
Deferred tax assets:
Net unrealized losses on securities included in other comprehensive income $ 151,886 $ 126,155
Allowance for credit losses 113,648 113,105
Right-of-use liability 39,691 43,693
Deferred compensation 34,850 25,369
Stock-based compensation 14,741 13,762
Loans 12,104 435
FDIC special assessment 6,926 9,092
Net unrealized losses on derivatives included in other comprehensive income 4,032 -
Federal net operating loss carryforward 549 697
Other 1,091 4,495
Total gross deferred tax assets 379,518 336,803
Deferred tax liabilities:
Equipment leasing 165,363 165,806
Capitalized servicing rights 52,298 49,857
Goodwill and intangible assets 42,733 16,019
Premises and equipment 38,554 35,288
Right-of-use asset 32,651 36,249
Net unrealized gains on derivatives included in other comprehensive income - 11,516
Deferred loan fees and costs 7,889 7,434
Other 2,660 2,652
Total gross deferred tax liabilities 342,148 324,821
Net deferred tax assets $ 37,370 $ 11,982
Management has determined that a valuation allowance is not required for the deferred tax assets at December 31, 2024 because it is more likely than not that these assets could be realized through future reversals of existing taxable temporary differences, tax planning strategies and future taxable income. This conclusion is based on the Company’s historical earnings, its current level of earnings and prospects for continued growth and profitability.
The Company has Federal net operating loss (“NOL”) carryforwards of $2.6 million that begin to expire in 2029 through 2035 and are subject to IRC Section 382 annual limitation. The NOL carryforwards were a result of acquisitions.
The Company accounts for uncertainties in income taxes in accordance with ASC 740, “Income Taxes.” At December 31, 2024, 2023, and 2022, the Company had no unrecognized tax benefits related to uncertain tax positions that, if recognized, would impact the effective tax rate. If the Company were to record interest or penalties associated with uncertain tax positions, the interest or penalties would be included in income tax expense. As of December 31, 2024, the Company does not expect the total amount of unrecognized tax benefits to significantly increase in the next 12 months.
The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax in numerous state jurisdictions and in Canada. In the ordinary course of business, we are routinely subject to audit by the taxing authorities of these jurisdictions. Currently, the Company’s U.S. federal income tax returns are open and subject to audit for the 2021 tax return year forward, and in general, the Company’s state income tax returns are open and subject to audit from the 2021 tax return year forward, subject to individual state statutes of limitation. The Company has extended the statute of limitations on certain state income tax returns for tax years 2017 through 2020 due to an ongoing audit. The Company’s Canadian subsidiary’s Canadian income tax returns are also subject to audit for the 2021 tax return year forward.
(18) Stock Compensation Plans and Other Employee Benefit Plans
Stock Incentive Plan
In May 2022, the Company’s shareholders approved the 2022 Stock Incentive Plan (“the 2022 Plan”) which provides for the issuance of up to 1,200,000 shares of common stock plus any shares of common stock that were available for awards under the 2015 Stock Incentive Plan (“the 2015 Plan”) as of the effective date of the 2022 Plan. The 2022 Plan replaced the 2015 Plan, and similarly, the 2015 Plan replaced the 2007 Stock Incentive Plan (“the 2007 Plan”) and the 2007 Plan replaced the 1997 Stock Incentive Plan (“the 1997 Plan”). The 2022 Plan, 2015 Plan, 2007 Plan and the 1997 Plan are collectively referred to as “the Plans.” The 2022 Plan has substantially similar terms to the predecessor plans. Awards granted under the Plans for which common shares are not issued by reason of cancellation, forfeiture, lapse of such award or settlement of such award in cash, are again available under the 2022 Plan. All grants made after the approval of the 2022 Plan are made pursuant to the 2022 Plan. As of December 31, 2024, approximately 680,538 shares were available for future grants assuming the maximum number of shares are issued for the performance awards outstanding. The Plans cover substantially all employees of Wintrust. The Compensation Committee of the Board of Directors administers all stock-based compensation programs and authorizes all awards granted pursuant to the Plans.
The Plans permit the grant of incentive stock options, non-qualified stock options, stock appreciation rights, stock awards, restricted share or unit awards, performance awards and other incentive awards valued in whole or in part by reference to the Company’s common stock, all on a stand-alone, combination or tandem basis. The Company historically awarded stock-based compensation in the form of time-vested non-qualified stock options and time-vested restricted share unit awards (“restricted shares”). The grants of options provide for the purchase of shares of the Company’s common stock at the fair market value of the stock on the date the options are granted. Stock options generally vest ratably over periods of three to five years and have a maximum term of ten years from the date of grant. Restricted shares entitle the holders to receive, at no cost, shares of the Company’s common stock. Restricted shares generally vest over periods of one to five years from the date of grant.
Beginning in 2011, the Company has awarded annual grants under the Long-Term Incentive Program (“LTIP”), which is administered under the Plans. The LTIP is designed in part to align the interests of management with interests of shareholders, foster retention, create a long-term focus based on sustainable results and provide participants a target long-term incentive opportunity. LTIP grants in 2024, 2023, and 2022 consisted of a combination of performance-based stock awards with a performance condition metric, performance-based stock awards with a market condition metric and time-vested restricted shares. Performance-based stock awards granted under the LTIP are contingent upon the achievement of pre-established long-term performance goals set in advance by the Compensation Committee over a three-year period starting at the beginning of each calendar year. Performance-based stock awards with a market condition metric are contingent on the total shareholder return performance over a three-year period relative to the KBW Regional Bank Index. These performance awards are granted at a target level, and based on the Company’s achievement of the pre-established long-term goals, the actual payouts can range from 0% to a maximum of 150% of the target award. The awards typically vest in the quarter after the end of the performance period upon certification of the payout by the Compensation Committee of the Board of Directors. Holders of performance-based stock awards are entitled to receive, at no cost, the shares earned based on the achievement of the pre-established long-term goals.
Holders of restricted share awards and performance-based stock awards received under the Plans are not entitled to vote or receive cash dividends (or cash payments equal to the cash dividends) on the underlying common shares until the awards are vested and shares are issued. Shares that are vested but are not issuable pursuant to deferred compensation arrangements accrue additional shares based on the value of dividends otherwise paid. Except in limited circumstances, awards granted pursuant to the Plans are canceled upon termination of employment without any payment of consideration by the Company.
Stock-based compensation is measured as the fair value of an award on the date of grant, and the measured cost is recognized over the period which the recipient is required to provide service in exchange for the award. The fair value of restricted share and performance-based stock awards with a performance metric is determined based on the average of the high and low trading prices on the grant date. The fair value of performance stock awards with a market condition metric is determined using a Monte Carlo simulation model and the fair value of stock options is estimated using a Black-Scholes option-pricing model. The Monte Carlo simulation model and the Black-Scholes option-pricing model require the input of highly subjective assumptions and are sensitive to changes in the award’s expected life and the price volatility of the underlying stock, which can materially affect the fair value estimates. Management periodically reviews and adjusts the assumptions used to calculate the fair value of such awards when granted. No options have been granted since 2016.
Stock-based compensation is recognized based on the number of awards that are ultimately expected to vest, taking into account expected forfeitures. In addition, for performance-based awards with a performance metric, an estimate is made of the number of shares expected to vest as a result of actual performance against the performance criteria in the award to determine the amount of compensation expense to recognize. The estimate is re-evaluated quarterly and total compensation expense is adjusted for any change in estimate in the current period.
Stock-based compensation expense recognized in the Consolidated Statements of Income was $38.9 million, $33.5 million and $31.7 million and the related tax benefits were $8.3 million, $7.4 million and $7.0 million in 2024, 2023 and 2022, respectively.
A summary of the Plans’ stock option activity for the years ended December 31, 2024, 2023 and 2022 is as follows:
Stock Options Common
Shares Weighted Average
Strike Price Remaining
Contractual Term(1)
Intrinsic Value(2)
($000)
Outstanding at January 1, 2022
193,447 $ 41.62
Exercised (123,924) 41.89
Forfeited or canceled (1,430) 40.87
Outstanding at December 31, 2022
68,093 $ 41.14 1.1 $ 2,954
Exercisable at December 31, 2022
68,093 $ 41.14 1.1 $ 2,954
Outstanding at January 1, 2023
68,093 $ 41.14
Exercised (54,993) 40.75
Outstanding at December 31, 2023
13,100 $ 42.76 4.2 $ 655
Exercisable at December 31, 2023
13,100 $ 42.76 4.2 $ 655
Outstanding at January 1, 2024
13,100 $ 42.76
Exercised (2,275) 38.00
Outstanding at December 31, 2024
10,825 $ 43.76 3.5 $ 876
Exercisable at December 31, 2024
10,825 $ 43.76 3.5 $ 876
Vested or expected to vest at December 31, 2024
10,825 $ 43.76 3.5 $ 876
(1)Represents the weighted average contractual remaining life in years.
(2)Aggregate intrinsic value represents the total pretax intrinsic value (i.e., the difference between the Company’s stock price at year end and the option exercise price, multiplied by the number of shares) that would have been received by the option holders if they had exercised their options on the last day of the year. Options with exercise prices above the year end stock price are excluded from the calculation of intrinsic value. The intrinsic value will change based on the fair market value of the Company’s stock.
The aggregate intrinsic value of options exercised during the years ended December 31, 2024, 2023 and 2022, was $179,664, $2.5 million and $6.7 million, respectively. The actual tax benefit realized for the tax deductions from option exercises totaled $30,000, $540,000 and $1.8 million for 2024, 2023 and 2022, respectively. Cash received from option exercises under the Plans for the years ended December 31, 2024, 2023 and 2022 was $86,457, $2.2 million and $5.2 million, respectively.
A summary of the Plans’ restricted share activity for the years ended December 31, 2024, 2023 and 2022 is as follows:
2024 2023 2022
Restricted Shares Common
Shares Weighted
Average
Grant-Date
Fair Value Common
Shares Weighted
Average
Grant-Date
Fair Value Common
Shares Weighted
Average
Grant-Date
Fair Value
Outstanding at January 1 746,123 $ 79.60 610,155 $ 73.21 476,813 $ 61.33
Granted 407,046 99.89 270,855 88.06 225,680 95.93
Vested and issued (241,415) 70.41 (121,534) 65.90 (68,541) 64.49
Forfeited or canceled (30,888) 95.26 (13,353) 83.68 (23,797) 75.84
Outstanding at end of year 880,866 $ 90.95 746,123 $ 79.60 610,155 $ 73.21
Vested, but deferred, at year end 100,610 $ 54.46 98,919 $ 53.58 96,920 $ 53.08
A summary of the Plans’ performance-based stock award activity, based on the target level of the awards, for the years ended December 31, 2024, 2023 and 2022 is as follows:
2024 2023 2022
Performance Shares Common
Shares Weighted
Average
Grant-Date
Fair Value Common
Shares Weighted
Average
Grant-Date
Fair Value Common
Shares Weighted
Average
Grant-Date
Fair Value
Outstanding at January 1 553,026 $ 79.69 545,379 $ 70.30 557,255 $ 62.94
Granted 111,469 100.47 189,355 92.36 160,598 97.14
Added by performance factor at vesting 96,952 58.78 23,925 62.82 - -
Vested and issued (295,644) 58.69 (186,344) 62.67 - -
Forfeited or canceled (11,786) 95.97 (19,289) 81.84 (172,474) 71.52
Outstanding at end of year 454,017 $ 93.57 553,026 $ 79.69 545,379 $ 70.30
Vested, but deferred, at year end 21,759 $ 44.51 29,020 $ 45.88 35,696 $ 44.38
At December 31, 2024, the maximum number of performance-based shares that could be issued on outstanding awards if performance is attained at the maximum amount was approximately 670,000 shares.
The actual tax benefit realized upon the vesting and issuance of restricted shares and performance-based stock is based on the fair value of the shares on the issue date, and the estimated tax benefit of the awards is based on fair value of the awards on the grant date. The actual tax benefit realized upon the vesting and issuance of restricted shares and performance-based stock in 2024 was $4.4 million more than the expected tax benefit for those shares; in 2023 the actual tax benefit was $1.8 million more than the expected tax benefit for those shares and in 2022 the actual tax benefit was $580,000 more than the expected tax benefit for those shares. These differences in actual and expected tax benefits were recorded to income tax expense.
As of December 31, 2024, there was $47.2 million of total unrecognized compensation cost related to non-vested share based arrangements under the Plans. That cost is expected to be recognized over a weighted average period of approximately two years. The total fair value of shares vested during the years ended December 31, 2024, 2023 and 2022 was $34.7 million, $22.1 million and $4.5 million, respectively.
The Company issues new shares to satisfy its obligation to issue shares granted pursuant to the Plans.
Cash Incentive and Retention Plan
The Cash Incentive and Retention Plan (“CIRP”) allows the Company to provide cash compensation to the Company’s and its subsidiaries’ officers and employees. The CIRP is administered by the Compensation Committee of the Board of Directors. The CIRP generally provides for the grants of cash awards, which may be earned pursuant to the achievement of performance criteria established by the Compensation Committee and/or continued employment. The performance criteria, if any, established by the Compensation Committee must relate to one or more of the criteria specified in the CIRP, which includes: earnings, earnings growth, revenues, stock price, return on assets, return on equity, improvement of financial ratings, achievement of balance sheet or income statement objectives and expenses. These criteria may relate to the Company, a particular line of business or a specific subsidiary of the Company. The Company had no expense related to the CIRP in 2024, 2023 and 2022, and no awards were paid in those years. There were no outstanding awards under this plan at December 31, 2024.
Other Employee Benefits
Wintrust and its subsidiaries also provide 401(k) Retirement Savings Plans (“401(k) Plans”). The 401(k) Plans cover all employees meeting certain eligibility requirements. Contributions by employees are made through salary deferrals at their direction, subject to certain Plan and statutory limitations. Employer contributions to the 401(k) Plans are made at the employer’s discretion. Eligible participants that have contributed to the 401(k) Plans are eligible to share in an allocation of employer contributions. The Company’s expense for the employer contributions to the 401(k) Plans was approximately $19.7 million in 2024, $19.2 million in 2023, and $16.2 million in 2022.
The Wintrust Financial Corporation Employee Stock Purchase Plan (“ESPP”) is designed to encourage greater stock ownership among employees, thereby enhancing employee commitment to the Company. The ESPP gives eligible employees the right to accumulate funds over an offering period to purchase shares of common stock. All shares offered under the ESPP will be either newly issued shares of the Company or shares issued from treasury, if any. In accordance with the ESPP, beginning January 1, 2015, the purchase price of the shares of common stock is equal to 95% of the closing price of the Company’s common stock on the last day of the offering period. During 2024, 2023 and 2022, 32,942, 46,034 and 40,421, shares of common stock, respectively, were purchased by participants and no compensation expense was recorded. The Company plans to continue to offer common stock through this ESPP on an ongoing basis and, in 2021, increased the shares authorized under the ESPP by 200,000 shares. At December 31, 2024, the Company had an obligation to issue 6,540 shares of common stock to participants and had 133,496 shares available for future grants under the ESPP.
The Company does not currently offer other postretirement benefits such as health care or other pension plans.
Directors Deferred Fee and Stock Plan
The Wintrust Financial Corporation Directors Deferred Fee and Stock Plan (“DDFS Plan”) allows directors of the Company and its subsidiaries to choose to receive payment of directors’ fees in either cash or common stock of the Company and to defer the receipt of the fees. The DDFS Plan is designed to encourage stock ownership by directors. All shares offered under the DDFS Plan will be either newly issued shares of the Company or shares issued from treasury. The number of shares issued is determined on a quarterly basis based on the fees earned during the quarter and the fair market value per share of the common stock on the last trading day of the preceding quarter. The shares are issued annually and the directors are entitled to dividends and voting rights upon the issuance of the shares. During 2020, an additional 200,000 shares were authorized under the DDFS Plan. During 2024, 2023 and 2022, a total of 14,927 shares, 63,001 shares and 59,174 shares, respectively, were issued to directors. For those directors that elect to defer the receipt of the common stock, the Company maintains records of stock units representing an obligation to issue shares of common stock. The number of stock units equals the number of shares that would have been issued had the director not elected to defer receipt of the shares. Additional stock units are credited at the time dividends are paid, however no voting rights are associated with the stock units. The shares of common stock represented by the stock units are issued in the year specified by the directors in their participation agreements. At December 31, 2024, the Company has an obligation to issue 304,092 shares of common stock to directors and has 52,508 shares available for future grants under the DDFS Plan.
(19) Regulatory Matters
Banking laws place restrictions upon the amount of dividends that can be paid to Wintrust by the banks. Based on these laws, the banks could, subject to minimum capital requirements, declare dividends to Wintrust without obtaining regulatory approval in an amount not exceeding (a) undivided profits, and (b) the amount of net income reduced by dividends paid for the current and prior two years. During 2024, 2023 and 2022, cash dividends totaling $475.0 million, $360.0 million and $52.0 million, respectively, were paid to Wintrust by the banks and other subsidiaries. As of December 31, 2024, the banks had approximately $932.5 million available to be paid as dividends to Wintrust without prior regulatory approval and without reducing their capital below the well-capitalized level.
The Company and the banks are subject to various regulatory capital requirements established by the federal banking agencies that take into account risk attributable to balance sheet and off-balance sheet activities. Failure to meet minimum capital requirements can initiate certain mandatory - and possibly discretionary - actions by regulators, that if undertaken could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the banks must meet specific capital guidelines that involve quantitative measures of the Company’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices.
Quantitative measures established by regulation to ensure capital adequacy require the Company and the banks to maintain minimum amounts and ratios of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and Tier 1 leverage capital (as defined) to average quarterly assets (as defined). The Federal Reserve’s capital guidelines require bank holding companies to maintain a minimum ratio of qualifying total capital to risk-weighted assets of 8.0%, of which at least 4.50% must be in the form of Common Equity Tier 1 capital and 6.0% must be in the form of Tier 1 capital. The Federal Reserve also requires a minimum leverage ratio of Tier 1 capital to average total assets of 4.0%. In addition, the Federal Reserve continues to consider the Tier 1 leverage ratio in evaluating proposals for expansion or new activities.
As reflected in the following table, the Company met all minimum capital requirements at December 31, 2024 and 2023:
2024 2023
Total capital to risk weighted assets 12.3 % 12.1 %
Tier 1 capital to risk weighted assets 10.7 10.3
Common Equity Tier 1 capital to risk weighted assets 9.9 9.4
Tier 1 Leverage Ratio 9.4 9.3
Wintrust is designated as a financial holding company. Bank holding companies approved as financial holding companies may engage in an expanded range of activities, including the businesses conducted by its wealth management subsidiaries. As a financial holding company, Wintrust’s banks are required to maintain their capital positions at the “well-capitalized” level. As of December 31, 2024, the banks were categorized as well-capitalized under the regulatory framework for prompt corrective action. The ratios required for the banks to be “well capitalized” by regulatory definition are 10.0%, 8.0%, 6.5% and 5.0% for total capital to risk-weighted assets, Tier 1 capital to risk-weighted assets, Common Equity Tier 1 capital to risk weighted assets and Tier 1 leverage ratio, respectively.
The banks’ actual capital amounts and ratios as of December 31, 2024 and 2023 are presented in the following table:
December 31, 2024 December 31, 2023
Actual To Be Well
Capitalized by
Regulatory Definition Actual To Be Well
Capitalized by
Regulatory Definition
(Dollars in thousands) Amount Ratio Amount Ratio Amount Ratio Amount Ratio
Total Capital (to Risk Weighted Assets):
Lake Forest Bank $ 857,438 11.8 % $ 728,358 10.0 % $ 852,471 12.5 % $ 683,460 10.0 %
Hinsdale Bank 543,925 11.9 458,046 10.0 478,606 11.8 407,428 10.0
Wintrust Bank 1,164,532 12.7 915,950 10.0 1,115,527 11.9 938,320 10.0
Libertyville Bank 276,568 11.8 234,181 10.0 272,241 12.3 221,509 10.0
Barrington Bank 472,428 11.4 413,497 10.0 431,663 11.6 372,989 10.0
Crystal Lake Bank 187,820 11.8 159,314 10.0 181,916 12.7 143,786 10.0
Northbrook Bank 502,434 11.3 446,536 10.0 474,973 12.3 385,619 10.0
Macatawa 307,829 16.3 189,233 10.0 NA NA NA 10.0
Schaumburg Bank 229,770 12.2 187,982 10.0 203,127 11.3 179,670 10.0
Village Bank 310,037 11.5 270,656 10.0 278,437 11.9 233,112 10.0
Beverly Bank 265,590 12.5 213,222 10.0 239,374 11.5 207,604 10.0
Town Bank 387,911 11.4 340,161 10.0 352,266 11.7 301,424 10.0
Wheaton Bank 347,365 11.4 304,003 10.0 317,491 11.5 275,018 10.0
State Bank of the Lakes 213,869 11.6 184,932 10.0 197,243 11.9 165,218 10.0
Old Plank Trail Bank 271,641 11.3 241,562 10.0 240,694 11.3 212,258 10.0
St. Charles Bank 291,380 11.2 259,615 10.0 250,964 11.5 218,403 10.0
Tier 1 Capital (to Risk Weighted Assets):
Lake Forest Bank $ 807,848 11.1 % $ 582,687 8.0 % $ 804,011 11.8 % $ 546,768 8.0 %
Hinsdale Bank 512,323 11.2 366,437 8.0 447,075 11.0 325,943 8.0
Wintrust Bank 1,069,171 11.7 732,760 8.0 1,009,631 10.8 750,656 8.0
Libertyville Bank 258,709 11.1 187,345 8.0 253,576 11.5 177,207 8.0
Barrington Bank 453,022 11.0 330,798 8.0 416,070 11.2 298,392 8.0
Crystal Lake Bank 176,144 11.1 127,451 8.0 170,670 11.9 115,029 8.0
Northbrook Bank 473,065 10.6 357,229 8.0 441,563 11.5 308,496 8.0
Macatawa 293,541 15.5 151,387 8.0 NA NA NA 8.0
Schaumburg Bank 216,675 11.5 150,386 8.0 190,280 10.6 143,736 8.0
Village Bank 286,808 10.6 216,524 8.0 255,649 11.0 186,489 8.0
Beverly Bank 246,565 11.6 170,578 8.0 221,548 10.7 166,083 8.0
Town Bank 366,265 10.8 272,129 8.0 334,086 11.1 241,139 8.0
Wheaton Bank 323,221 10.6 243,202 8.0 296,134 10.8 220,014 8.0
State Bank of the Lakes 203,972 11.0 147,946 8.0 189,197 11.5 132,174 8.0
Old Plank Trail Bank 255,788 10.6 193,249 8.0 227,759 10.7 169,806 8.0
St. Charles Bank 270,446 10.4 207,692 8.0 233,651 10.7 174,722 8.0
Common Equity Tier 1 Capital (to Risk Weighted Assets):
Lake Forest Bank $ 807,848 11.1 % $ 473,433 6.5 % $ 804,011 11.8 % $ 444,249 6.5 %
Hinsdale Bank 512,323 11.2 297,730 6.5 447,075 11.0 264,828 6.5
Wintrust Bank 1,069,171 11.7 595,367 6.5 1,009,631 10.8 609,908 6.5
Libertyville Bank 258,709 11.1 152,218 6.5 253,576 11.5 143,981 6.5
Barrington Bank 453,022 11.0 268,773 6.5 416,070 11.2 242,443 6.5
Crystal Lake Bank 176,144 11.1 103,554 6.5 170,670 11.9 93,461 6.5
Northbrook Bank 473,065 10.6 290,248 6.5 441,563 11.5 250,653 6.5
Macatawa 293,541 15.5 123,002 6.5 NA NA NA 6.5
Schaumburg Bank 216,675 11.5 122,188 6.5 190,280 10.6 116,786 6.5
Village Bank 286,808 10.6 175,926 6.5 255,649 11.0 151,523 6.5
Beverly Bank 246,565 11.6 138,594 6.5 221,548 10.7 134,942 6.5
Town Bank 366,265 10.8 221,105 6.5 334,086 11.1 195,926 6.5
Wheaton Bank 323,221 10.6 197,602 6.5 296,134 10.8 178,762 6.5
State Bank of the Lakes 203,972 11.0 120,206 6.5 189,197 11.5 107,392 6.5
Old Plank Trail Bank 255,788 10.6 157,015 6.5 227,759 10.7 137,968 6.5
St. Charles Bank 270,446 10.4 168,750 6.5 233,651 10.7 141,962 6.5
December 31, 2024 December 31, 2023
Actual To Be Well
Capitalized by
Regulatory Definition Actual To Be Well
Capitalized by
Regulatory Definition
(Dollars in thousands) Amount Ratio Amount Ratio Amount Ratio Amount Ratio
Tier 1 Leverage Ratio:
Lake Forest Bank $ 807,848 9.7 % $ 416,233 5.0 % $ 804,011 9.9 % $ 404,942 5.0 %
Hinsdale Bank 512,323 9.6 266,427 5.0 447,075 9.4 238,724 5.0
Wintrust Bank 1,069,171 11.1 479,667 5.0 1,009,631 10.8 467,712 5.0
Libertyville Bank 258,709 9.5 136,451 5.0 253,576 9.7 130,396 5.0
Barrington Bank 453,022 10.7 212,429 5.0 416,070 10.8 192,589 5.0
Crystal Lake Bank 176,144 9.8 89,519 5.0 170,670 10.0 85,280 5.0
Northbrook Bank 473,065 9.2 256,737 5.0 441,563 9.9 222,668 5.0
Macatawa 293,541 10.1 144,975 5.0 NA NA NA 5.0
Schaumburg Bank 216,675 10.0 108,031 5.0 190,280 9.4 101,620 5.0
Village Bank 286,808 9.6 149,062 5.0 255,649 9.8 129,995 5.0
Beverly Bank 246,565 10.1 122,295 5.0 221,548 10.0 110,741 5.0
Town Bank 366,265 8.9 205,847 5.0 334,086 9.1 183,077 5.0
Wheaton Bank 323,221 9.1 178,254 5.0 296,134 9.4 157,056 5.0
State Bank of the Lakes 203,972 9.8 104,067 5.0 189,197 9.9 95,551 5.0
Old Plank Trail Bank 255,788 8.9 143,480 5.0 227,759 9.0 127,250 5.0
St. Charles Bank 270,446 9.3 144,886 5.0 233,651 9.5 122,638 5.0
NA - Macatawa Bank acquired August 1, 2024
Wintrust’s mortgage banking division and broker/dealer subsidiary are also required to maintain minimum net worth capital requirements with various governmental agencies. The mortgage banking division’s net worth requirements are governed by the Department of Housing and Urban Development and the broker/dealer’s net worth requirements are governed by the SEC. As of December 31, 2024, these business units met their minimum net worth capital requirements.
(20) Commitments and Contingencies
The Company has outstanding, at any time, a number of commitments to extend credit. These commitments include revolving home equity line and other credit agreements, term loan commitments and standby and commercial letters of credit. Standby and commercial letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Standby letters of credit are contingent upon the failure of the customer to perform according to the terms of the underlying contract with the third party, while commercial letters of credit are issued specifically to facilitate commerce and typically result in the commitment being drawn on when the underlying transaction is consummated between the customer and the third party.
These commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the Consolidated Statements of Condition. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company uses the same credit policies in making commitments as it does for on-balance sheet instruments. Commitments to extend commercial, commercial real estate and construction loans totaled $11.5 billion and $10.5 billion as of December 31, 2024 and 2023, respectively, and unused home equity lines totaled $999.1 million and $845.6 million as of December 31, 2024 and 2023, respectively. Standby and commercial letters of credit totaled $503.4 million at December 31, 2024 and $389.5 million at December 31, 2023.
In addition, at December 31, 2024 and 2023, the Company had approximately $361.3 million and $222.8 million, respectively, in commitments to fund residential mortgage loans to be sold into the secondary market. These lending commitments are also considered derivative instruments. The Company also enters into forward contracts for the future delivery of residential mortgage loans at specified interest rates to reduce the interest rate risk associated with commitments to fund loans as well as mortgage loans held-for-sale. These forward contracts are also considered derivative instruments and had contractual amounts of approximately $377.5 million at December 31, 2024 and $626.9 million at December 31, 2023. See Note (21) “Derivative Financial Instruments” in Item 8 of this report for further discussion on derivative instruments.
The Company enters into residential mortgage loan sale agreements with investors in the normal course of business. These agreements usually require certain representations concerning credit information, loan documentation, collateral and insurability. On occasion, investors have requested the Company to indemnify them against losses on certain loans or to
repurchase loans which the investors believe do not comply with applicable representations. Management maintains a liability for estimated losses on loans expected to be repurchased or on which indemnification is expected to be provided and regularly evaluates the adequacy of this recourse liability based on trends in repurchase and indemnification requests, actual loss experience, known and inherent risks in the loans, and current economic conditions. The Company sold approximately $2.6 billion of mortgage loans in 2024 and $2.0 billion in 2023. The liability for estimated losses on repurchase and indemnification claims for residential mortgage loans previously sold to investors was approximately $188,000 and $152,000 at December 31, 2024 and 2023, respectively, and was included in other liabilities on the Consolidated Statements of Condition. Losses charged against the liability were $60,100 in 2024 as compared to $96,000 in 2023. These losses relate to mortgages which experienced early payment and other defaults meeting certain representation and warranty recourse requirements.
The Company had unfunded commitments to investment partnerships that qualify for CRA purposes totaling $94.1 million and $54.0 million as of December 31, 2024 and 2023, respectively. Of these commitments, $67.0 million and $36.2 million related to legally-binding unfunded commitments for tax-credit investments and were included within other liabilities on the Consolidated Statements of Condition as of December 31, 2024 and 2023, respectively.
The Company utilizes an out-sourced securities clearing platform and has agreed to indemnify the clearing broker of Wintrust Investments for losses that it may sustain from the customer accounts introduced by Wintrust Investments. As of December 31, 2024 and 2023, the total amount of customer balances maintained by the clearing broker and subject to indemnification was approximately $15.4 million and $9.0 million, respectively. 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.
Litigation Matters
In accordance with applicable accounting principles, the Company establishes an accrued liability for litigation and threatened litigation actions and proceedings when those actions present loss contingencies, which are both probable and estimable. In actions for which a loss is reasonably possible in future periods, the Company determines whether it can estimate a loss or range of possible loss. To determine whether a possible loss is estimable, the Company reviews and evaluates its material litigation on an ongoing basis, in conjunction with any outside counsel handling the matter, in light of potentially relevant factual and legal developments. This review may include information learned through the discovery process, rulings on substantive or dispositive motions, and settlement discussions.
Wintrust Mortgage California PAGA Matter
On May 24, 2022, a former Wintrust Mortgage employee filed a California Private Attorney General Act (“PAGA”) suit, not individually, but as representative of all Wintrust Mortgage’s California hourly employees, against Wintrust Mortgage in the Superior Court of San Diego County, California. Plaintiff alleges Wintrust Mortgage failed to provide: (i) accurate sick leave accrual and pay; (ii) overtime wages; (iii) accurately itemized wage statements; (iv) meal breaks and meal premiums; (v) timely payment of earned wages; (vi) payment of all earned wages; and (vii) payment of all vested vacation hours. Wintrust Mortgage disputes the validity of Plaintiff’s claims and believes, to the extent there were defects in complying with California law governing the payment of compensation to Plaintiff, such errors would have been de minimis. Plaintiff also has an arbitration agreement with a collective and class action waiver and on January 19, 2023, Wintrust Mortgage moved to compel arbitration. The court stayed litigation pending mediation, which was held on May 13, 2024. The parties agreed to settle the dispute for an immaterial amount. On October 16, 2024, the court entered an order approving the settlement and on December 31, 2024, the funds were disbursed to the settlement administrator.
Wintrust Mortgage Fair Lending Matter
On May 25, 2022, a Wintrust Mortgage customer filed a putative class action and asserted individual claims against Wintrust Mortgage and Wintrust Financial Corporation in the District Court for the Northern District of Illinois. Plaintiff alleges that Wintrust Mortgage discriminated against black/African American borrowers and brings class claims under the Equal Credit Opportunity Act, Sections 1981 and 1982 under Chapter 42 of the United States Code; and the Fair Housing Act of 1968. Plaintiff also asserts individual claims under theories of promissory estoppel, fraudulent inducement, and breach of contract. On September 23, 2022, Wintrust filed a motion to dismiss the entire suit and the court granted that motion to dismiss on September 27, 2023 and gave Plaintiff until October 20, 2023 to file an amended complaint. Plaintiff timely filed an amended complaint. Wintrust moved to dismiss the amended complaint on November 21, 2023. This motion was fully briefed in January 2024 and remains pending with the Court. Wintrust vigorously disputes these allegations, believing them to be legally and factually meritless, and Wintrust otherwise lacks sufficient information to estimate the amount of any potential liability.
Wintrust Financial ERISA Matter
On July 29, 2022, a former Wintrust employee filed a class action in the District Court for the Northern District of Illinois asserting claims under the federal Employee Retirement Income Security Act (“ERISA”) against Wintrust Financial Corporation. Plaintiff alleges Wintrust breached its fiduciary duty in the selection of BlackRock Target Date funds for inclusion in its 401(k) plan, that Wintrust failed to monitor the performance of those funds, and in the alternative, Wintrust should be liable for breach of trust. Plaintiff’s sole basis for the allegations is that BlackRock Target Date funds allegedly performed more poorly than two comparable funds over a three-year period. Wintrust is one of several public companies that were sued on identical grounds within the same week by the same plaintiff’s law firm. On November 8, 2022, Wintrust filed a motion to dismiss the entire complaint. On July 14, 2023, the District Court granted Wintrust’s motion to dismiss and gave Plaintiff until August 2, 2023 to file an amended complaint. Plaintiff timely filed an amended complaint which Wintrust moved to dismiss on September 14, 2023. On August 14, 2024, the district court granted Wintrust’s motion with prejudice. On September 9, 2024, Plaintiff timely appealed to the Seventh Circuit. In December 2024, Plaintiff proposed the parties agree to dismiss the appeal and on December 18, 2024, the court entered and approved the joint stipulation of dismissal with prejudice which ended the litigation.
Other Matters
In addition, the Company and its subsidiaries, from time to time, are subject to pending and threatened legal action and proceedings arising in the ordinary course of business.
Based on information currently available and upon consultation with counsel, management believes that the eventual outcome of any pending or threatened legal actions and proceedings described above, including our ordinary course litigation, will not have a material adverse effect on the operations or financial condition of the Company. However, it is possible that the ultimate resolution of these matters, if unfavorable, may be material to the results of operations or financial condition for a particular period.
(21) Derivative Financial Instruments
The Company primarily enters into derivative financial instruments as part of its strategy to manage its exposure to changes in interest rates. Derivative instruments represent contracts between parties that result in one party delivering cash to the other party based on a notional amount and an underlying term (such as a rate, security price or price index or commodity price) as specified in the contract. The amount of cash delivered from one party to the other is determined based on the interaction of the notional amount of the contract with the underlying term. Derivatives are also implicit in certain contracts and commitments.
The derivative financial instruments currently used by the Company to manage its exposure to interest rate risk include: (1) interest rate swaps and collars to manage the interest rate risk of certain fixed and variable rate assets and variable rate liabilities; (2) interest rate lock commitments provided to customers to fund certain mortgage loans to be sold into the secondary market; (3) forward commitments for the future delivery of such mortgage loans to protect the Company from adverse changes in interest rates and corresponding changes in the value of mortgage loans held-for-sale; (4) covered call options to economically hedge specific investment securities and receive fee income, effectively enhancing the overall yield on such securities to compensate for net interest margin compression; and (5) options and swaps to economically hedge a portion of the fair value adjustments related to the Company’s mortgage servicing rights portfolio. The Company also enters into derivatives (typically interest rate swaps and commodity forward contracts) with certain qualified borrowers to facilitate the borrowers’ risk management strategies and concurrently enters into mirror-image derivatives with a third party counterparty, effectively making a market in the derivatives for such borrowers. Additionally, the Company enters into foreign currency contracts to manage foreign exchange risk associated with certain foreign currency denominated assets.
The Company recognizes derivative financial instruments in the consolidated financial statements at fair value regardless of the purpose or intent for holding the instrument. The Company records derivative assets and derivative liabilities on the Consolidated Statements of Condition within accrued interest receivable and other assets and accrued interest payable and other liabilities, respectively. Changes in the fair value of derivative financial instruments are either recognized in income or in shareholders’ equity as a component of accumulated other comprehensive income or loss depending on whether the derivative financial instrument qualifies for hedge accounting and, if so, whether it qualifies as a fair value hedge or cash flow hedge.
Changes in fair values of derivatives accounted for as fair value hedges are recorded in income in the same period and in the same income statement line as changes in the fair values of the hedged items that relate to the hedged risk(s). Changes in fair values of derivative financial instruments accounted for as cash flow hedges are recorded as a component of accumulated other comprehensive income or loss, net of deferred taxes, and reclassified to earnings when the hedged transaction affects earnings. Changes in fair values of derivative financial instruments not designated in a hedging relationship pursuant to ASC 815 are
reported in non-interest income during the period of the change. Derivative financial instruments are valued by a third party and are corroborated by comparison with valuations provided by the respective counterparties. Fair values of certain mortgage banking derivatives (interest rate lock commitments and forward commitments to sell mortgage loans) are estimated based on changes in mortgage interest rates from the date of the loan commitment. The fair value of foreign currency derivatives is computed based on changes in foreign currency rates stated in the contract compared to those prevailing at the measurement date. Commodity derivative fair values are computed based on changes in the price per unit stated in the contract compared to those prevailing at the measurement date.
The table below presents the fair value of the Company’s derivative financial instruments as of December 31, 2024 and December 31, 2023:
Derivative Assets Derivative Liabilities
(In thousands) December 31, 2024 December 31, 2023 December 31, 2024 December 31, 2023
Derivatives designated as hedging instruments under ASC 815:
Interest rate derivatives designated as Cash Flow Hedges $ 7,329 $ 40,116 $ 56,084 $ 44,456
Interest rate derivatives designated as Fair Value Hedges 10,001 12,349 87 273
Total derivatives designated as hedging instruments under ASC 815 $ 17,330 $ 52,465 $ 56,171 $ 44,729
Derivatives not designated as hedging instruments under ASC 815:
Interest rate derivatives $ 177,553 $ 211,490 $ 183,799 $ 210,397
Interest rate lock commitments 1,950 4,511 18 -
Forward commitments to sell mortgage loans 1,297 - 88 5,212
Commodity forward contracts 766 888 583 609
Foreign exchange contracts 1,131 6,372 1,091 6,308
Total derivatives not designated as hedging instruments under ASC 815 $ 182,697 $ 223,261 $ 185,579 $ 222,526
Total Derivatives $ 200,027 $ 275,726 $ 241,750 $ 267,255
Cash Flow Hedges of Interest Rate Risk
The Company’s objectives in using interest rate derivatives are to add stability to net interest income and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps and interest rate collars as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts to or from a counterparty in exchange for the Company receiving or paying fixed-rate payments over the life of the agreements without the exchange of the underlying notional amount. Interest rate collars designated as cash flow hedges involve the settlement of amounts in which the interest rate specified in the contract exceeds the agreed upon cap strike rate or in which the interest rate specified in the contract is below the agreed upon floor strike rate at the end of each period.
As of December 31, 2024, the Company had various interest rate collar and swap derivatives designated as cash flow hedges of variable rate loans. When the relationship between the hedged item and hedging instrument is highly effective at achieving offsetting changes in cash flows attributable to the hedged risk, changes in the fair value of these cash flow hedges are recorded in accumulated other comprehensive income or loss and are subsequently reclassified to interest income as interest payments are made on such variable rate loans. The changes in fair value (net of tax) are separately disclosed in the Consolidated Statements of Comprehensive Income.
The table below provides details on these cash flow hedges, summarized by derivative type and maturity, as of December 31, 2024:
December 31, 2024
(In thousands) Notional
Amount Fair Value
Asset (Liability)
Interest Rate Collars at 1-month CME term SOFR:
Buy 2.250% floor, sell 3.743% cap; matures September 2025
$ 1,250,000 $ (3,943)
Buy 2.750% floor, sell 4.320% cap; matures October 2026
500,000 (893)
Buy 2.000% floor, sell 3.450% cap; matures September 2027
1,250,000 (23,600)
Interest Rate Swaps at 1-month CME term SOFR:
Fixed 3.748%; matures December 2025
250,000 (881)
Fixed 3.759%; matures December 2025
250,000 (854)
Fixed 3.680%; matures February 2026
250,000 (1,100)
Fixed 4.176%; matures March 2026
250,000 277
Fixed 3.915%; matures March 2026
250,000 (470)
Fixed 4.450%; matures July 2026
250,000 1,497
Fixed 3.515%, matures December 2026
250,000 (2,412)
Fixed 3.512%; matures December 2026
250,000 (2,427)
Fixed 3.453%; matures February 2027
250,000 (2,807)
Fixed 4.150%; matures July 2027
250,000 916
Fixed 3.748%; matures March 2028
250,000 (1,784)
Fixed 3.526%; matures March 2028
250,000 (3,452)
Fixed 3.993%; matures October 2029
350,000 329
Fixed 4.245%; matures November 2029
350,000 4,270
Fixed 3.300%; matures November 2029(1)
250,000 (5,732)
Fixed 3.816%; matures November 2030(1)
250,000 (1,399)
Fixed 3.551%; matures November 2030(1)
250,000 (4,330)
Fixed 3.950%; matures February 2031(2)
250,000 40
Total Cash Flow Hedges $ 7,700,000 $ (48,755)
(1)Represents interest rate swaps that have effective starting dates of November 1, 2025.
(2)Represents interest rate swaps that have effective starting dates of February 1, 2026.
In the first quarter of 2022, the Company terminated interest rate swap derivative contracts designated as cash flow hedges of variable rate deposits with a total notional value of $1.0 billion and a five-year term effective July 2022. At the time of termination, the fair value of the derivative contracts totaled an asset of $66.5 million, with such adjustments to fair value recorded in accumulated other comprehensive income or loss. In the second quarter of 2022, the Company terminated two interest rate swap derivative contracts designated as cash flow hedges of variable rate deposits with a total notional value of $500.0 million each effective since April 2020. The remaining terms of such derivative contracts were through March 2023 and April 2024 and, at the time of termination, the fair value of the derivative contracts totaled assets of $3.7 million and $10.7 million, respectively, with such adjustments to fair value recorded in accumulated other comprehensive income or loss. In the fourth quarter of 2022, the Company terminated one additional interest rate collar derivative contract designated as a cash flow hedge of the Term Facility with a total notional value of $64.3 million effective since September 2018. The remaining term of such derivative contract was through September 2023 and, at the time of termination, the fair value of the derivative contract totaled an asset of $875,000, with such adjustments to fair value recorded in accumulated other comprehensive income or loss.
For all such terminations, as the hedged forecasted transactions (interest payments on variable rate deposits and the Term Facility) are still expected to occur over the remaining term of such terminated derivatives, such adjustments will remain in accumulated other comprehensive income or loss and be reclassified as a reduction to interest expense on a straight-line basis over the original term of the terminated derivative contracts.
A rollforward of the amounts in accumulated other comprehensive income or loss related to interest rate derivatives designated as cash flow hedges, including such derivative contracts terminated during the period, follows:
Years Ended December 31,
(In thousands) 2024 2023
Unrealized gain at beginning of period $ 43,538 $ 10,026
Amount reclassified from accumulated other comprehensive income or loss to interest income or expense on deposits, loans and other borrowings 72,674 55,846
Amount of loss recognized in other comprehensive income or loss (131,720) (22,334)
Unrealized (loss) gain at end of period $ (15,508) $ 43,538
As of December 31, 2024, the Company estimated that during the next 12 months, $5.9 million will be reclassified from accumulated other comprehensive income or loss as a decrease to net interest income. Such estimate consists of $13.3 million reclassified as a reduction to interest expense on the terminated cash flow hedges discussed above and $19.2 million reclassified as a reduction to interest income related to the interest rate collars and swaps noted above that remain outstanding.
Fair Value Hedges of Interest Rate Risk
Interest rate swaps designated as fair value hedges involve the payment of fixed amounts to a counterparty in exchange for the Company receiving variable payments over the life of the agreements without the exchange of the underlying notional amount. As of December 31, 2024, the Company had 13 interest rate swaps with an aggregate notional amount of $176.2 million that were designated as fair value hedges primarily associated with fixed rate commercial and industrial and commercial real estate loans as well as life insurance premium finance receivables.
For derivatives designated and that qualify as fair value hedges, the net gain or loss from the entire change in the fair value of the derivative instrument is recognized in the same income statement line item as the earnings effect, including the net gain or loss, of the hedged item (interest income earned on fixed rate loans) when the hedged item affects earnings.
The following table presents the carrying amount of the hedged assets/(liabilities) and the cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged assets/(liabilities) that are designated as a fair value hedge accounting relationship as of December 31, 2024:
December 31, 2024
(In thousands)
Derivatives in Fair Value
Hedging Relationships
Location in the Statement of Condition Carrying Amount of the Hedged Assets/(Liabilities) Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets/(Liabilities) Cumulative Amount of Fair Value Hedging Adjustment Remaining for any Hedged Assets/(Liabilities) for which Hedge Accounting has been Discontinued
Interest rate swaps Loans, net of unearned income $ 156,907 $ (9,961) $ (56)
Available-for-sale debt securities 605 (11) -
The following table presents the gain or loss recognized related to derivative instruments that are designated as fair value hedges for the respective period:
(In thousands) Location of Gain or (Loss) Recognized in Income on Derivative Year Ended
December 31,
Derivatives in Fair Value
Hedging Relationships 2024
Interest rate swaps Interest and fees on loans $ (27)
Interest income - investment securities -
Non-Designated Hedges
The Company does not use derivatives for speculative purposes. Derivatives not designated as accounting hedges are used to manage the Company’s economic exposure to interest rate movements and other identified risks but do not meet the strict
hedge accounting requirements of ASC 815. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings.
Interest Rate Derivatives-Periodically, the Company may purchase interest rate cap derivatives designed to act as an economic hedge of the risk of the negative impact on its fixed-rate loan portfolios from rising interest rates. As of December 31, 2024, there were no interest rate caps outstanding that were designed to act as an economic hedge.
Additionally, the Company has interest rate derivatives, including swaps and option products, resulting from a service the Company provides to certain qualified borrowers. The Company’s banking subsidiaries execute certain derivative products (typically interest rate swaps) directly with qualified commercial borrowers to facilitate their respective risk management strategies. For example, these arrangements allow the Company’s commercial borrowers to effectively convert a variable rate loan to a fixed rate. In order to minimize the Company’s exposure on these transactions, the Company simultaneously executes offsetting derivatives with third parties. In most cases, the offsetting derivatives have mirror-image terms, which result in the positions’ changes in fair value substantially offsetting through earnings each period. However, to the extent that the derivatives are not a mirror-image and because of differences in counterparty credit risk, changes in fair value will not completely offset resulting in some earnings impact each period. Changes in the fair value of these derivatives are included in other non-interest income. At December 31, 2024 and 2023, the Company had interest rate derivative transactions with an aggregate notional amount of approximately $13.3 billion and $11.4 billion, respectively, (all interest rate swaps and caps with customers and third parties) related to this program. At December 31, 2024, these interest rate derivatives had maturity dates ranging from January 2025 to January 2037.
Mortgage Banking Derivatives-These derivatives include interest rate lock commitments provided to customers to fund certain mortgage loans to be sold into the secondary market and forward commitments for the future delivery of such loans. It is the Company’s practice to enter into forward commitments for the future delivery of a portion of our residential mortgage loan production when interest rate lock commitments are entered into in order to economically hedge the effect of future changes in interest rates on its commitments to fund the loans as well as on its portfolio of mortgage loans held-for-sale. The Company’s mortgage banking derivatives have not been designated as being in hedge relationships. At December 31, 2024 and 2023, the Company had interest rate lock commitments with an aggregate notional amount of approximately $120.7 million and $129.9 million and forward commitments to sell mortgage loans with an aggregate notional amount of approximately $377.5 million and $626.9 million. The fair values of these derivatives were estimated based on changes in mortgage rates from the dates of the commitments. Changes in the fair value of these mortgage banking derivatives are included in mortgage banking revenue.
Commodity Derivatives-The Company has commodity forward contracts resulting from a service the Company provides to certain qualified borrowers. The Company’s banking subsidiaries execute certain derivative products directly with qualified commercial borrowers to facilitate their respective risk management strategies. For example, these arrangements allow the Company’s commercial borrowers to effectively purchase or sell a given commodity at an agreed-upon price on an agreed-upon settlement date. In order to minimize the Company’s exposure on these transactions, the Company simultaneously executes offsetting derivatives with third parties. In most cases, the offsetting derivatives have mirror-image terms, which result in the positions’ changes in fair value substantially offsetting through earnings each period. However, to the extent that the derivatives are not a mirror-image and because of differences in counterparty credit risk, changes in fair value will not completely offset resulting in some earnings impact each period. Changes in the fair value of these derivatives are included in other non-interest income. At December 31, 2024 and 2023, the Company had commodity derivative transactions with an aggregate notional amount of approximately $5.2 million and $8.4 million, respectively, (all forward contracts with customers and third parties) related to this program. At December 31, 2024, these commodity derivatives had maturity dates ranging from January 2025 to October 2025.
Foreign Currency Derivatives-The Company has foreign currency derivative contracts resulting from a service the Company provides to certain qualified customers. The Company’s banking subsidiaries execute certain derivative products directly with qualified customers to facilitate their respective risk management strategies related to foreign currency fluctuations. For example, these arrangements allow the Company’s customers to effectively exchange the currency of one country for the currency of another country at an agreed-upon price on an agreed-upon settlement date. In order to minimize the Company’s exposure on these transactions, the Company simultaneously executes offsetting derivatives with third parties. In most cases, the offsetting derivatives have mirror-image terms, which result in the positions’ changes in fair value substantially offsetting through earnings each period. However, to the extent that the derivatives are not a mirror-image and because of differences in counterparty credit risk, changes in fair value will not completely offset resulting in some earnings impact each period. Changes in the fair value of these derivatives are included in other non-interest income. As of December 31, 2024 and 2023, the Company held foreign currency derivatives with an aggregate notional amount of approximately $97.1 million and $144.3 million, respectively.
Other Derivatives-Periodically, the Company will sell options to a bank or dealer for the right to purchase certain securities held within the banks’ investment portfolios (covered call options). These option transactions are designed to increase the total return associated with the investment securities portfolio. These options do not qualify as accounting hedges pursuant to ASC 815 and, accordingly, changes in fair value of these contracts are recognized as other non-interest income. There were no covered call options outstanding as of December 31, 2024 or December 31, 2023.
Periodically, the Company will purchase options for the right to purchase securities not currently held within the banks’ investment portfolios or enter into interest rate swaps in which the Company elects to not designate such derivatives as hedging instruments. These option and swap transactions are designed primarily to economically hedge a portion of the fair value adjustments related to the Company’s mortgage servicing rights portfolio. The gain or loss associated with these derivative contracts are included in mortgage banking revenue. At December 31, 2024 the Company held ten interest rate derivatives with an aggregate notional value of $295.0 million and four interest rate derivatives with an aggregate notional value of $195.0 million at December 31, 2023 for such purpose of economically hedging a portion of the fair value adjustment related to its mortgage servicing rights portfolio.
Amounts included in the Consolidated Statements of Income related to derivative instruments not designated in hedge relationships were as follows:
(In thousands) Years Ended
December 31,
Derivative Location in income statement 2024 2023
Interest rate swaps and caps Trading gains (losses), net $ 59 $ 765
Mortgage banking derivatives Mortgage banking revenue 952 12,285
Commodity contracts Trading gains (losses), net 184 279
Foreign exchange contracts Trading gains (losses), net (84) -
Covered call options Fees from covered call options 10,196 21,863
Derivative contract held as economic hedge on MSRs Mortgage banking revenue (7,909) 1,280
Credit Risk
Derivative instruments have inherent risks, primarily market risk and credit risk. Market risk is associated with changes in the value of an underlying asset. Credit risk relates to the risk that the counterparty will fail to perform according to the terms of the agreement. The Company is exposed to the credit risk of its commercial borrowers and third party financial institutions who are counterparties to interest rate derivatives with the Company.
The counterparty credit risk associated with the mirror-image swaps executed with third party financial institutions, is monitored and managed as part of the Company’s overall asset-liability management process, except that the counterparty credit risk related to derivatives entered into with certain qualified borrowers is managed through the Company’s standard loan underwriting process for commercial borrowers since these derivatives typically share in the collateral provided by the loan agreements.
When deemed necessary, appropriate types and amounts of collateral are obtained to minimize credit exposure. The Company hedges the market risk of derivatives transactions with commercial borrowers by entering into offsetting transactions with large, highly rated financial institutions. These exposures are generally secured by cash under bilateral Credit Support Annexes (“CSAs”), which are a component of the ISDA Master Agreements executed with counterparties.
Aggregate counterparty exposures are monitored against various types of credit limits established to contain risk within parameters. Counterparty credit risk is managed by the Counterparty Credit Risk Management team in accordance with SR 11-10, Interagency Counterparty Credit Risk Guidance, which was issued in 2011 in response to the financial crisis of 2008. The guidance addresses counterparty credit risk governance, measurement, management, and systems. Specifically, counterparty risk is managed through the establishment and regular review of exposure limits, formalization of limits in policy and procedure, ongoing review of models, and having a single platform to allow for the timely aggregation of exposures. The Counterparty Credit Risk Management team uses a variety of approaches to monitor counterparty financial performance, including monitoring of credit exposure versus limits, use of early warning reports, and daily and intraday monitoring of financial developments.
The Company has agreements with certain of its interest rate derivative counterparties that contain cross-default provisions, which provide that if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations. The
Company also has agreements with certain of its derivative counterparties that contain a provision allowing the counterparty to terminate the derivative positions if the Company fails to maintain its status as a well or adequately capitalized institution, which would require the Company to settle its obligations under the agreements. If the Company were to breach any of these provisions, at a time when the derivatives subject to such agreements are in a liability position, and the derivatives were to be terminated as a result, the Company would be required to settle its obligations under the agreements at the termination value and would be required to pay any additional amounts due in excess of amounts previously posted as collateral with the respective counterparty. As of December 31, 2024, there were no derivatives that were subject to such agreements in a net liability position.
The Company records interest rate derivatives subject to master netting agreements at their gross value and does not offset derivative assets and liabilities on the Consolidated Statements of Condition. The table below summarizes the Company’s interest rate derivatives and offsetting positions as of the dates shown.
Derivative Assets Derivative Liabilities
Fair Value Fair Value
(In thousands) December 31, 2024 December 31, 2023 December 31, 2024 December 31, 2023
Gross Amounts Recognized $ 194,883 $ 263,955 $ 239,970 $ 255,126
Less: Amounts offset in the Statements of Condition - - - -
Net amount presented in the Statements of Condition $ 194,883 $ 263,955 $ 239,970 $ 255,126
Gross amounts not offset in the Statements of Condition
Offsetting Derivative Positions $ (74,656) $ (76,514) $ (74,656) $ (76,514)
Collateral Posted (78,550) (144,899) - -
Net Credit Exposure $ 41,677 $ 42,542 $ 165,314 $ 178,612
(22) Fair Value of Assets and Liabilities
The Company measures, monitors and discloses certain of its assets and liabilities on a fair value basis. These financial assets and financial liabilities are measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the observability of the inputs used to determine fair value. These levels are:
•Level 1 - unadjusted quoted prices in active markets for identical assets or liabilities.
•Level 2 - inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
•Level 3 - significant unobservable inputs that reflect the Company’s own assumptions that market participants would use in pricing the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.
A financial instrument’s categorization within the above valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the assets or liabilities. The following is a description of the valuation methodologies used for the Company’s assets and liabilities measured at fair value on a recurring basis.
Available-for-sale debt securities, trading account securities and equity securities with readily determinable fair value - Fair values for available-for-sale debt securities, trading account securities and equity securities with readily determinable fair value are typically based on prices obtained from independent pricing vendors. Securities measured with these valuation techniques are generally classified as Level 2 of the fair value hierarchy. Typically, standard inputs such as benchmark yields, reported trades for similar securities, issuer spreads, benchmark securities, bids, offers and reference data including market research publications are used to determine the fair value these securities. When these inputs are not available, broker/dealer quotes may be obtained by the vendor to determine the fair value of the security. We review the vendor’s pricing methodologies to determine if observable market information is being used, versus unobservable inputs. Fair value measurements using
significant inputs that are unobservable in the market due to limited activity or a less liquid market are classified as Level 3 in the fair value hierarchy. The fair value of U.S. Treasury securities and certain equity securities with readily determinable fair value are based on unadjusted quoted prices in active markets for identical securities. As such, these securities are classified as Level 1 in the fair value hierarchy.
The Company’s Investment Operations Department is responsible for the valuation of Level 3 available-for-sale debt securities. The methodology and variables used as inputs in pricing Level 3 securities are derived from a combination of observable and unobservable inputs. The unobservable inputs are determined through internal assumptions that may vary from period to period due to external factors, such as market movement and credit rating adjustments.
At December 31, 2024, the Company classified $121.6 million of municipal securities as Level 3. These municipal securities are bond issues for various municipal government entities primarily located in the Chicago metropolitan area and southern Wisconsin and are privately placed, non-rated bonds without CUSIP numbers. The Company’s methodology for pricing these securities focuses on three distinct inputs: equivalent rating, yield and other pricing terms. To determine the rating for a given non-rated investment debt security, the Investment Operations Department references a rated, publicly issued bond by the same issuer if available. A reduction is then applied to the rating obtained from the comparable bond, as the Company believes if liquidated, a non-rated bond would be valued less than a similar bond with a verifiable rating. The reduction applied by the Company is one complete rating grade (i.e., a “AA” rating for a comparable bond would be reduced to “A” for the Company’s valuation). For bond issues without comparable bond proxies, a rating of “BBB” was assigned. For the year ended December 31, 2024, all of the ratings derived by the Investment Operations Department using the above process were “BBB” or better. The fair value measurement noted above is sensitive to the rating input, as a higher rating typically results in an increased valuation. The remaining pricing inputs used in the bond valuation are observable. Based on the rating determined in the above process, Investment Operations obtains a corresponding current market yield curve available to market participants. Other terms including coupon, maturity date, redemption price, number of coupon payments per year, and accrual method are obtained from the individual bond term sheets. Certain municipal bonds held by the Company at December 31, 2024 are continuously callable. When valuing these bonds, the fair value is capped at par value as the Company assumes a market participant would not pay more than par for a continuously callable bond.
Mortgage loans held-for-sale - The fair value of mortgage loans held-for-sale is typically determined by reference to investor price sheets for loan products with similar characteristics. Loans measured with this valuation technique are classified as Level 2 in the fair value hierarchy.
At December 31, 2024, the Company classified $60.4 million of certain delinquent mortgage loans held-for-sale as Level 3. For such delinquent loans in which investor interest may be limited, the Company estimates fair value by discounting future scheduled cash flows for the specific loan through its life, adjusted for estimated credit losses. The Company uses a discount rate based on prevailing market coupon rates on loans with similar characteristics. The assumed weighted average discount rate used as an input to value these loans at December 31, 2024 was 6.61%. The higher the rate utilized to discount estimated future cash flows, the lower the fair value measurement. Additionally, the weighted average credit discount used as an input to value the specific loans was 0.69% with a credit loss discount ranging from 0% to 20% at December 31, 2024.
Loans held-for-investment - The fair value of loans held-for-investment is typically determined by reference to investor price sheets for loan products with similar characteristics. Loans measured with this valuation technique are classified as Level 2 in the fair value hierarchy.
The fair value for certain loans in which the Company previously elected the fair value option is estimated by discounting future scheduled cash flows for the specific loan through maturity, adjusted for estimated credit losses and prepayment or life assumptions. These loans primarily consist of early buyout loans guaranteed by U.S. government agencies that are delinquent and, as a result, investor interest may be limited. The Company uses a discount rate based on the actual coupon rate of the underlying loan. At December 31, 2024, the Company classified $34.9 million of loans held-for-investment carried at fair value as Level 3. The assumed weighted average discount rate used as an input to value these loans at December 31, 2024 was 6.61%. The higher the rate utilized to discount estimated future cash flows, the lower the fair value measurement. As noted above, the fair value estimate also includes assumptions of prepayment speeds and average life as well as credit losses. The weighted average prepayments speed used as an input to value current loans was 8.29% at December 31, 2024. Prepayment speeds are inversely related to the fair value of these loans as an increase in prepayment speeds results in a decreased valuation. For delinquent loans in which performance is not assumed and there is a higher probability of resolution of the loan ending in foreclosure, the weighted average life of such loans was 6.1 years. Average life is inversely related to the fair value of these loans as an increase in estimated life results in a decreased valuation. Additionally, the weighted average credit discount used as an input to value the specific loans was 1.17% with credit loss discounts ranging from 0% to 39% at December 31, 2024.
MSRs - Fair value for MSRs is determined utilizing a valuation model which calculates the fair value of each servicing right based on the present value of estimated future cash flows. The Company uses a discount rate commensurate with the risk associated with each servicing right, given current market conditions. At December 31, 2024, the Company classified $203.8 million of MSRs as Level 3. The weighted average discount rate used as an input to value the pool of MSRs at December 31, 2024 was 10.95% with discount rates applied ranging from 6% to 18%. The higher the rate utilized to discount estimated future cash flows, the lower the fair value measurement. The fair value of MSRs was also estimated based on other assumptions including prepayment speeds and the cost to service. Prepayment speeds ranged from 4% to 90% or a weighted average prepayment speed of 8.29%. Further, for current and delinquent loans, the Company assumed a weighted average cost of servicing of $76 and $378, respectively, per loan. Prepayment speeds and the cost to service are both inversely related to the fair value of MSRs as an increase in prepayment speeds or the cost to service results in a decreased valuation. See Note (6) “Mortgage Servicing Rights (“MSRs”)” for further discussion of MSRs.
Derivative instruments - The Company’s derivative instruments include interest rate swaps, caps and collars, commitments to fund mortgages for sale into the secondary market (interest rate locks), forward commitments to end investors for the sale of mortgage loans, commodity future contracts and foreign currency contracts. Interest rate swaps, caps and collars and commodity future contracts are valued by a third party, using models that primarily use market observable inputs, such as yield curves and commodity prices prevailing at the measurement date, and are classified as Level 2 in the fair value hierarchy. The credit risk associated with derivative financial instruments that are subject to master netting agreements is measured on a net basis by counterparty portfolio. The fair value for mortgage-related derivatives is based on changes in mortgage rates from the date of the commitments. The fair value of foreign currency derivatives is computed based on change in foreign currency rates stated in the contract compared to those prevailing at the measurement date.
At December 31, 2024, the Company classified $2.0 million of derivative assets related to interest rate locks as Level 3. The fair value of interest rate locks is based on prices obtained for loans with similar characteristics from third parties, adjusted for the pull-through rate, which represents the Company’s best estimate of the likelihood that a committed loan will ultimately fund. The weighted-average pull-through rate at December 31, 2024 was 82.52% with pull-through rates applied ranging from 1% to 100%. Pull-through rates are directly related to the fair value of interest rate locks as an increase in the pull-through rate results in an increased valuation.
Nonqualified deferred compensation assets - The underlying assets relating to the nonqualified deferred compensation plan are included in a trust and primarily consist of non-exchange traded institutional funds which are priced based by an independent third party service. These assets are classified as Level 2 in the fair value hierarchy.
The following tables present the balances of assets and liabilities measured at fair value on a recurring basis for the periods presented:
December 31, 2024
(In thousands) Total Level 1 Level 2 Level 3
Available-for-sale securities
U.S. Treasury $ 37,907 $ 37,907 $ - $ -
U.S. government agencies 44,945 - 44,945 -
Municipal 184,593 - 62,986 121,607
Corporate notes 81,162 - 81,162 -
Mortgage-backed 3,792,875 - 3,792,875 -
Trading account securities 4,072 - 4,072 -
Equity securities with readily determinable fair value 215,412 207,346 8,066 -
Mortgage loans held-for-sale 331,261 - 270,862 60,399
Loans held-for-investment 158,795 - 123,899 34,896
MSRs 203,788 - - 203,788
Nonqualified deferred compensations assets 16,653 - 16,653 -
Derivative assets 200,027 - 198,077 1,950
Total $ 5,271,490 $ 245,253 $ 4,603,597 $ 422,640
Derivative liabilities $ 241,750 $ - $ 241,750 $ -
December 31, 2023
(In thousands) Total Level 1 Level 2 Level 3
Available-for-sale securities
U.S. Treasury $ 6,968 $ 6,968 $ - $ -
U.S. government agencies 45,124 - 45,124 -
Municipal 140,958 - 54,721 86,237
Corporate notes 76,531 - 76,531 -
Mortgage-backed 3,233,334 - 3,233,334 -
Trading account securities 4,707 - 4,707 -
Equity securities with readily determinable fair value 139,268 131,202 8,066 -
Mortgage loans held-for-sale 292,722 - 265,887 26,835
Loans held-for-investment 155,261 - 94,591 60,670
MSRs 192,456 - - 192,456
Nonqualified deferred compensations assets 15,238 - 15,238 -
Derivative assets 275,726 - 271,216 4,510
Total $ 4,578,293 $ 138,170 $ 4,069,415 $ 370,708
Derivative liabilities $ 267,255 $ - $ 267,255 $ -
The aggregate remaining contractual principal balance outstanding as of December 31, 2024 and 2023 for mortgage loans held- for-sale measured at fair value under ASC 825 was $335.9 million and $291.7 million, respectively, while the aggregate fair value of mortgage loans held-for-sale was $331.3 million and $292.7 million, respectively, as shown in the above tables. At December 31, 2024, $4.0 million of mortgage loans held-for-sale were classified as nonaccrual compared to $649,000 as of December 31, 2023. Additionally, there were $59.3 million of loans past due greater than 90 days and still accruing interest within the mortgage loans held-for-sale portfolio as of December 31, 2024 compared to $26.6 million as of December 31, 2023. All of the nonaccrual loans and loans past due greater than 90 days and still accruing within the mortgage loans held-for-sale portfolio as of December 31, 2024 and December 31, 2023 were individual delinquent mortgage loans bought back from GNMA at the unconditional option of the Company as servicer for those loans.
The aggregate remaining contractual principal balance outstanding as of December 31, 2024 and 2023 for loans held-for-investment measured at fair value under ASC 825 was $157.8 million and $156.9 million, respectively, while the aggregate fair value of loans held-for-investment was $158.8 million and $155.3 million, respectively, as shown in the above tables.
The changes in Level 3 assets measured at fair value on a recurring basis during the years ended December 31, 2024 and 2023 are summarized as follows:
(In thousands) Municipal Mortgage loans held-for-sale Loans held-for-investment MSRs Derivative assets
Balance at January 1, 2024
$ 86,237 $ 26,835 $ 60,670 $ 192,456 $ 4,510
Total net gains (losses) included in:
Net income (1)
- 370 (43) 11,332 (2,560)
Other comprehensive income or loss (11,212) - - - -
Purchases 84,839 - - - -
Issuances - - - - -
Sales - - - - -
Settlements (38,257) (48,555) (43,525) - -
Net transfers into Level 3 - 81,749 17,794 - -
Balance at December 31, 2024
$ 121,607 $ 60,399 $ 34,896 $ 203,788 $ 1,950
(In thousands) Municipal Mortgage loans held-for-sale Loans held-for-investment MSRs Derivative assets
Balance at January 1, 2023
$ 117,537 $ 48,655 $ 84,165 $ 230,225 $ 1,711
Total net (losses) gains included in:
Net income (1)
- 1,960 (103) (7,599) 2,799
Other comprehensive income or loss (7,152) - - - -
Purchases 36,688 - - - -
Issuances - - - - -
Sales - - - (30,170) -
Settlements (60,836) (75,342) (69,218) - -
Net transfers into Level 3 - 51,562 45,826 - -
Balance at December 31, 2023
$ 86,237 $ 26,835 $ 60,670 $ 192,456 $ 4,510
(1)Changes in the balance of mortgage loans held-for-sale, MSRs and derivative assets related to fair value adjustments are recorded as components of mortgage banking revenue. Changes in the balance of loans held-for-investment related to fair value adjustments are recorded as other non-interest income.
Also, the Company may be required, from time to time, to measure certain other assets at fair value on a non-recurring basis in accordance with GAAP. These adjustments to fair value usually result from impairment charges on individual assets. For assets measured at fair value on a non-recurring basis that were still held in the balance sheet at the end of the period, the following table provides the carrying value of the related individual assets or portfolios at December 31, 2024.
December 31, 2024 Year Ended
December 31, 2024
Fair Value Losses
Recognized, net
(In thousands) Total Level 1 Level 2 Level 3
Individually assessed loans - foreclosure probable and collateral-dependent $ 119,325 $ - $ - $ 119,325 $ 71,462
Other real estate owned (1)
23,116 - - 23,116 207
Total $ 142,441 $ - $ - $ 142,441 $ 71,669
(1)Net fair value losses recognized on other real estate owned include valuation adjustments and charge-offs during the respective period.
Individually assessed loans - In accordance with ASC 326, the allowance for credit losses for loans and other financial assets held at amortized cost should be measured on a collective or pooled basis when such assets exhibit similar risk characteristics. In instances in which a financial asset does not exhibit similar risk characteristics to a pool, the Company is required to measure such allowance for credit losses on an individual asset basis. For the Company’s loan portfolio, nonaccrual loans are considered
to not exhibit similar risk characteristics as pools and thus are individually assessed. Credit losses are measured by estimating the fair value of the loan based on the present value of expected cash flows, the market price of the loan, or the fair value of the underlying collateral. Individually assessed loans are considered a fair value measurement where an allowance for credit loss is established based on the fair value of collateral. Appraised values on relevant real estate properties, which may require adjustments to market-based valuation inputs, are generally used on foreclosure probable and collateral-dependent loans within the real estate portfolios.
The Company’s Managed Assets Division is primarily responsible for the valuation of Level 3 inputs of individually assessed loans. For more information on individually assessed loans refer to Note (5) “Allowance for Credit Losses”. At December 31, 2024, the Company had $119.3 million of individually assessed loans classified as Level 3. All of the $119.3 million of individually assessed loans were measured at fair value based on the underlying collateral of the loan as shown in the table above. None were valued based on discounted cash flows in accordance with ASC 310,”Receivables.”
Other real estate owned - Other real estate owned is comprised of real estate acquired in partial or full satisfaction of loans and is included in other assets. Other real estate owned is recorded at its estimated fair value less estimated selling costs at the date of transfer, with any excess of the related loan balance over the fair value less expected selling costs charged to the allowance for loan losses. Subsequent changes in value are reported as adjustments to the carrying amount and are recorded in other non-interest expense. Gains and losses upon sale, if any, are also charged to other non-interest expense. Fair value is generally based on third party appraisals and internal estimates that are adjusted by a discount representing the estimated cost of sale and is therefore considered a Level 3 valuation.
The Company’s Managed Assets Division is primarily responsible for the valuation of Level 3 inputs for other real estate owned. At December 31, 2024, the Company had $23.1 million of other real estate owned classified as Level 3. The unobservable input applied to other real estate owned relates to the 10% reduction to the appraisal value representing the estimated cost of sale of the foreclosed property. A higher discount for the estimated cost of sale results in a decreased carrying value.
The valuation techniques and significant unobservable inputs used to measure both recurring and non-recurring Level 3 fair value measurements at December 31, 2024 were as follows:
(Dollars in thousands) Fair Value Valuation Methodology Significant Unobservable Input Range
of Inputs Weighted
Average
of Inputs Impact to valuation from an increased
or higher input value
Measured at fair value on a recurring basis:
Municipal securities $ 121,607 Bond pricing Equivalent rating BBB-AA+ N/A Increase
Mortgage loans held-for-sale 60,399 Discounted cash flows Discount rate 6.61 % 6.61 % Decrease
Credit discount 0% - 20%
0.69 % Decrease
Loans held-for-investment 34,896 Discounted cash flows Discount rate 6.50% - 6.61%
6.61 % Decrease
Credit discount 0% - 39%
1.17 % Decrease
Constant prepayment rate (CPR) - current loans 8.29 % 8.29 % Decrease
Average life - delinquent loans (in years) 1.7 years - 11.3 years
6.1 years Decrease
MSRs 203,788 Discounted cash flows Discount rate 6% - 18%
10.95 % Decrease
Constant prepayment rate (CPR) 4% - 90%
8.29 % Decrease
Cost of servicing $70 - $200
$ 76 Decrease
Cost of servicing - delinquent $200 - $1,000
$ 378 Decrease
Derivatives 1,950 Discounted cash flows Pull-through rate 1% - 100%
82.52 % Increase
Measured at fair value on a non-recurring basis:
Individually assessed loans - foreclosure probable and collateral-dependent 119,325 Appraisal value Appraisal adjustment - cost of sale 10 % 10.00 % Decrease
Other real estate owned 23,116 Appraisal value Appraisal adjustment - cost of sale 10 % 10.00 % Decrease
The Company is required under applicable accounting guidance to report the fair value of all financial instruments on the Consolidated Statements of Condition, including those financial instruments carried at cost. The table below presents the carrying amounts and estimated fair values of the Company’s financial instruments as of the dates shown:
December 31, 2024 December 31, 2023
(In thousands) Carrying
Value Fair
Value Carrying
Value Fair
Value
Financial Assets:
Cash and cash equivalents $ 458,536 $ 458,536 $ 423,464 $ 423,464
Interest-bearing deposits with banks 4,409,753 4,409,753 2,084,323 2,084,323
Available-for-sale securities 4,141,482 4,141,482 3,502,915 3,502,915
Held-to-maturity securities 3,613,263 2,910,550 3,856,916 3,215,468
Trading account securities 4,072 4,072 4,707 4,707
Equity securities with readily determinable fair value 215,412 215,412 139,268 139,268
FHLB and FRB stock, at cost 281,407 281,407 205,003 205,003
Brokerage customer receivables 18,102 18,102 10,592 10,592
Mortgage loans held-for-sale, at fair value 331,261 331,261 292,722 292,722
Loans held-for-investment, at fair value 158,795 158,795 155,261 155,261
Loans held-for-investment, at amortized cost 47,896,242 47,070,249 41,976,570 41,090,010
Nonqualified deferred compensation assets 16,653 16,653 15,238 15,238
Derivative assets 200,027 200,027 275,726 275,726
Accrued interest receivable and other 563,625 563,625 477,832 477,832
Total financial assets $ 62,308,630 $ 60,779,924 $ 53,420,537 $ 51,892,529
Financial Liabilities:
Non-maturity deposits $ 43,092,318 $ 43,092,318 $ 38,772,098 $ 38,772,098
Deposits with stated maturities 9,420,031 9,423,976 6,625,072 6,603,746
FHLB advances 3,151,309 3,153,524 2,326,071 2,367,107
Other borrowings 534,803 534,406 645,813 643,755
Subordinated notes 298,283 286,683 437,866 413,501
Junior subordinated debentures 253,566 253,588 253,566 253,579
Derivative liabilities 241,750 241,750 267,255 267,255
Accrued interest payable 48,364 48,364 51,116 51,116
Total financial liabilities $ 57,040,424 $ 57,034,609 $ 49,378,857 $ 49,372,157
Not all the financial instruments listed in the table above are subject to the disclosure provisions of ASC 820, as certain assets and liabilities result in their carrying value approximating fair value. These include cash and cash equivalents, interest bearing deposits with banks, brokerage customer receivables, FHLB and FRB stock, accrued interest receivable and accrued interest payable and non-maturity deposits.
The following methods and assumptions were used by the Company in estimating fair values of financial instruments that were not previously disclosed.
Held-to-maturity securities - Held-to-maturity securities include U.S. government-sponsored agency securities, municipal bonds issued by various municipal government entities primarily located in the Chicago metropolitan area, southern Wisconsin, and west Michigan and mortgage-backed securities. Fair values for held-to-maturity securities are typically based on prices obtained from independent pricing vendors. In accordance with ASC 820, the Company has generally categorized these held-to-maturity securities as a Level 2 fair value measurement. Fair values for certain other held-to-maturity securities are based on the bond pricing methodology discussed previously related to certain available-for-sale securities. In accordance with ASC 820, the Company has categorized these held-to-maturity securities as a Level 3 fair value measurement.
Loans held-for-investment, at amortized cost - Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are analyzed by type (commercial, residential real estate, etc.) and category within each type (construction, non-construction, franchise lending etc.). Each category is further segmented by interest rate type (fixed and variable). The fair value of both fixed and variable rate loans is estimated by discounting scheduled cash flows through the
estimated maturity using estimated market discount rates that reflect credit and interest rate risks inherent in the loan. In accordance with ASC 820, the Company has categorized loans as a Level 3 fair value measurement.
Deposits with stated maturities - The fair value of certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently in effect for deposits of similar remaining maturities. In accordance with ASC 820, the Company has categorized deposits with stated maturities as a Level 3 fair value measurement.
FHLB advances - The fair value of FHLB advances is calculated using a discounted cash flow analysis based on current market rates of similar maturity debt securities to discount cash flows. In accordance with ASC 820, the Company has categorized FHLB advances as a Level 3 fair value measurement.
Subordinated notes - The fair value of the subordinated notes is based on a market price obtained from an independent pricing vendor. In accordance with ASC 820, the Company has categorized subordinated notes as a Level 2 fair value measurement.
Junior subordinated debentures - The fair value of the junior subordinated debentures is based on the discounted value of contractual cash flows. In accordance with ASC 820, the Company has categorized junior subordinated debentures as a Level 3 fair value measurement.
(23) Shareholders’ Equity
A summary of the Company’s common and preferred stock at December 31, 2024 and 2023 is as follows:
2024 2023
Common Stock:
Shares authorized 100,000,000 100,000,000
Shares issued 66,560,182 61,268,566
Shares outstanding 66,495,227 61,243,626
Cash dividend per share $ 1.80 $ 1.60
Preferred Stock:
Shares authorized 20,000,000 20,000,000
Shares issued 5,011,500 5,011,500
Shares outstanding 5,011,500 5,011,500
The Company reserves shares of its authorized common stock specifically for the 2022 Plan, the ESPP and the DDFS. The reserved shares and these plans are detailed in Note (18) “Stock Compensation Plans and Other Employee Benefit Plans”.
Common Stock Offering
In June 2022, the Company sold a total of 3,450,000 shares of its common stock through a public offering. Net proceeds to the Company totaled approximately $285.7 million, net of estimated issuance costs.
Series D Preferred Stock
In June 2015, the Company issued and sold 5,000,000 shares of fixed-to-floating non-cumulative perpetual preferred stock, Series D, liquidation preference $25 per share (the “Series D Preferred Stock”) for $125.0 million in a public offering. When, as and if declared, dividends on the Series D Preferred Stock are payable quarterly in arrears at a fixed rate of 6.50% per annum from the original issuance date to, but excluding, July 15, 2025, and from (and including) that date (as currently specified in the certificate of designations and subject to the below) at a floating rate equal to three-month LIBOR plus a spread of 4.06% per annum. Under the AIRLA and Part 253 of Regulation ZZ (Rule 253), the dividend rate on the Series D Preferred Stock, by operation of law, changed from 3-month USD LIBOR to 3-month CME Term SOFR plus a statutory tenor spread adjustment of 0.26161%. Consequently, for each floating rate period, commencing on July 15, 2025, any dividends will be paid at a rate of the then-current 3-month CME Term SOFR plus 0.26161%, plus the spread of 4.06% per annum. The calculation agent for the Series D Preferred Stock may also make additional administrative conforming changes to the terms of the Series D Preferred Stock under AIRLA and Rule 253.
Series E Preferred Stock
In May 2020, the Company issued 11,500 shares of fixed-rate reset non-cumulative perpetual preferred stock, Series E, liquidation preference $25,000 per share (the “Series E Preferred Stock”) as part of a $287.5 million public offering of 11,500,000 depositary shares, each representing a 1/1,000th interest in a share of Series E Preferred Stock. When, as and if declared, dividends on the Series E Preferred Stock are payable quarterly in arrears at a fixed rate of 6.875% per annum from October 15, 2020 to, but excluding, July 15, 2025, and from (and including) July 15, 2025 at a floating rate equal to the Five-Year Treasury Rate (as defined in the certificate of designations for the Series E Preferred Stock) plus 6.507%.
Other
At the January 2025 Board of Directors meeting, a quarterly cash dividend of $0.50 per share of common stock ($2.00 on an annualized basis) was declared. It was paid on February 20, 2025 to shareholders of record as of February 6, 2025.
Accumulated Other Comprehensive Income or Loss
The following tables summarize the components of other comprehensive income or loss, including the related income tax effects, and the related amount reclassified to net income for the years ended December 31, 2024, 2023 and 2022:
(In thousands) Accumulated
Unrealized
(Losses) Gains on Securities Accumulated
Unrealized
Gains (Losses) on Derivative
Instruments Accumulated
Foreign
Currency
Translation
Adjustments Total
Accumulated
Other
Comprehensive
(Loss) Income
Balance at January 1, 2024 $ (350,697) $ 32,049 $ (42,583) $ (361,231)
Other comprehensive (loss) during the period, net of tax, before reclassifications (77,903) (96,872) (24,945) (199,720)
Amount reclassified from accumulated other comprehensive income or loss into net income, net of tax (915) 53,596 - 52,681
Amount reclassified from accumulated other comprehensive income or loss related to amortization of unrealized gains on investment securities transferred to held-to-maturity from available-for-sale, net of tax (65) - - (65)
Net other comprehensive loss during the period, net of tax $ (78,883) $ (43,276) $ (24,945) $ (147,104)
Balance at December 31, 2024 $ (429,580) $ (11,227) $ (67,528) $ (508,335)
Balance at January 1, 2023 $ (386,057) $ 7,381 $ (48,960) $ (427,636)
Other comprehensive income (loss) during the period, net of tax, before reclassifications 36,214 (16,334) 6,377 26,257
Amount reclassified from accumulated other comprehensive income or loss into net income, net of tax (699) 41,002 - 40,303
Amount reclassified from accumulated other comprehensive income or loss related to amortization of unrealized gains on investment securities transferred to held-to-maturity from available-for-sale, net of tax (155) - - (155)
Net other comprehensive income during the period, net of tax $ 35,360 $ 24,668 $ 6,377 $ 66,405
Balance at December 31, 2023 $ (350,697) $ 32,049 $ (42,583) $ (361,231)
Balance at January 1, 2022 $ 8,724 $ 27,111 $ (31,743) $ 4,092
Other comprehensive loss during the period, net of tax, before reclassifications (394,332) (17,295) (17,217) (428,844)
Amount reclassified from accumulated other comprehensive income or loss into net income, net of tax (321) (2,435) - (2,756)
Amount reclassified from accumulated other comprehensive income or loss related to amortization of unrealized gains on investment securities transferred to held-to-maturity from available-for-sale, net of tax (128) - - (128)
Net other comprehensive loss during the period, net of tax $ (394,781) $ (19,730) $ (17,217) $ (431,728)
Balance at December 31, 2022 $ (386,057) $ 7,381 $ (48,960) $ (427,636)
Amount Reclassified from Accumulated Other Comprehensive Income or Loss for the Years Ended,
Details Regarding the Component of Accumulated Other Comprehensive Income or Loss December 31, Impacted Line on the Consolidated Statements of Income
2024 2023
(In thousands)
Accumulated unrealized gains on available-for-sale securities
Gains included in net income $ 1,236 $ 951 Gains (losses) on investment securities, net
1,236 951 Income before taxes
Tax effect (321) (252) Income tax expense
Net of tax $ 915 $ 699 Net income
Accumulated unrealized gains (losses) on derivative instruments
Amount reclassified to interest income on loans $ 87,306 $ 74,616 Interest on loans
Amount reclassified to interest expense on deposits (14,632) (19,559) Interest on deposits
Amount reclassified to interest expense on other borrowings - 789 Interest on other borrowings
(72,674) (55,846) Income before taxes
Tax effect 19,078 14,844 Income tax expense
Net of tax $ (53,596) $ (41,002) Net income
(24) Segment Information
The Company’s operations consist of three primary segments: community banking, specialty finance and wealth management.
The three reportable segments are strategic business units that are separately managed as they offer different products and services and have different marketing strategies. In addition, each segment’s customer base has varying characteristics and each segment has a different regulatory environment. While the Company’s management monitors each of the sixteen bank subsidiaries’ operations and profitability separately, these subsidiaries have been aggregated into one reportable operating segment due to the similarities in products and services, customer base, operations, profitability measures and economic characteristics.
For purposes of internal segment profitability, management allocates certain intersegment and parent company balances. Management allocates a portion of revenues to the specialty finance segment related to loans and leases originated by the specialty finance segment and sold or assigned to the community banking segment. Similarly, for purposes of analyzing the contribution from the wealth management segment, management allocates a portion of the net interest income earned by the community banking segment on deposit balances of customers of the wealth management segment to the wealth management segment. See Note (10) “Deposits” for more information on these deposits. Finally, expenses incurred at the Wintrust parent company are allocated to each segment based on each segment’s risk-weighted assets.
The segment financial information provided in the following tables has been derived from the internal profitability reporting system used by management to monitor and manage the financial performance of the Company. The accounting policies of the segments are substantially similar to those described in Note (1) “Summary of Significant Accounting Policies”.
Our Chief Executive Officer is our chief operating decision maker (“CODM”). The CODM uses income before taxes to review segment performance and allocate resources for each reportable segment. Financial information regarding each significant segment expense outlined below is regularly provided (at least monthly) to the CODM. For community banking and specialty finance segments, ‘Interest expense’ is a significant segment expense. Additionally, for each of the three reportable segments, ‘Salaries’, ‘Commissions and incentive compensation’ and ‘Benefits’ are significant segment expenses.
The following is a summary of certain operating information for reportable segments:
(In thousands)
Community
Banking Specialty
Finance Wealth
Management Total Operating Segments Intersegment Eliminations Consolidated
Interest income $ 3,001,500 $ 405,317 $ 30,765 $ 3,437,582 $ 40,015 $ 3,477,597
Interest expense 1,465,237 49,030 795 1,515,062 - 1,515,062
Net interest income 1,536,263 356,287 29,970 1,922,520 40,015 1,962,535
Provision for credit losses 88,345 12,702 - 101,047 - 101,047
Non-interest income 279,845 119,339 168,134 567,318 (78,993) 488,325
Non-interest expense:
Salaries 364,144 61,070 38,989 464,203 1,769 465,972
Commissions and incentive compensation 130,516 36,130 48,873 215,519 - 215,519
Benefits 106,994 18,686 9,937 135,617 - 135,617
Other segment expenses(1)
500,327 91,479 34,557 626,363 (40,747) 585,616
Total non-interest expense 1,101,981 207,365 132,356 1,441,702 (38,978) 1,402,724
Income before taxes 625,782 255,559 65,748 947,089 - 947,089
Income tax expense 167,072 69,214 15,758 252,044 - 252,044
Net income $ 458,710 $ 186,345 $ 49,990 $ 695,045 $ - $ 695,045
Total assets at end of year $ 52,500,643 $ 11,234,012 $ 1,145,013 $ 64,879,668 $ - $ 64,879,668
Interest income $ 2,462,103 $ 362,035 $ 33,867 $ 2,858,005 $ 35,109 $ 2,893,114
Interest expense 1,021,128 32,991 1,131 1,055,250 - 1,055,250
Net interest income 1,440,975 329,044 32,736 1,802,755 35,109 1,837,864
Provision for credit losses 104,895 9,495 - 114,390 - 114,390
Non-interest income 263,023 105,992 136,561 505,576 (71,470) 434,106
Non-interest expense:
Salaries 340,993 57,024 39,129 437,146 1,666 438,812
Commissions and incentive compensation 110,986 30,395 40,720 182,101 - 182,101
Benefits 100,190 17,070 9,840 127,100 - 127,100
Other segment expenses(1)
484,263 82,024 36,226 602,513 (38,027) 564,486
Total non-interest expense 1,036,432 186,513 125,915 1,348,860 (36,361) 1,312,499
Income before taxes 562,671 239,028 43,382 845,081 - 845,081
Income tax expense 148,612 63,484 10,359 222,455 - 222,455
Net income $ 414,059 $ 175,544 $ 33,023 $ 622,626 $ - $ 622,626
Total assets at end of year $ 44,355,786 $ 10,664,887 $ 1,239,261 $ 56,259,934 $ - $ 56,259,934
Interest income $ 1,411,485 $ 266,238 $ 39,541 $ 1,717,264 $ 30,179 $ 1,747,443
Interest expense 231,287 19,557 1,237 252,081 - 252,081
Net interest income 1,180,198 246,681 38,304 1,465,183 30,179 1,495,362
Provision for credit losses 74,184 4,405 - 78,589 - 78,589
Non-interest income 298,572 97,701 124,609 520,882 (59,829) 461,053
Non-interest expense:
Salaries 306,062 45,043 29,526 380,631 1,550 382,181
Commissions and incentive compensation 127,178 31,329 39,366 197,873 - 197,873
Benefits 91,875 15,812 8,366 116,053 - 116,053
Other segment expenses(1)
401,183 80,600 30,581 512,364 (31,200) 481,164
Total non-interest expense 926,298 172,784 107,839 1,206,921 (29,650) 1,177,271
Income before taxes 478,288 167,193 55,074 700,555 - 700,555
Income tax expense 128,939 46,286 15,648 190,873 - 190,873
Net income $ 349,349 $ 120,907 $ 39,426 $ 509,682 $ - $ 509,682
Total assets at end of year $ 41,368,200 $ 9,826,254 $ 1,755,195 $ 52,949,649 $ - $ 52,949,649
(1)Other segment items include non-interest expense categories such as ‘Software & Equipment’, ‘Data processing’, ‘Advertising and Marketing’, ‘FDIC Insurance’, and ‘Occupancy’. See “Non-Interest Expense” under Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Annual Report on Form 10-K for further discussion on non-interest expense.
(25) Condensed Parent Company Financial Statements
Condensed parent company only financial statements of Wintrust follow:
Statements of Financial Condition
December 31,
(In thousands) 2024 2023
Assets
Cash $ 196,969 $ 262,680
Available-for-sale debt securities and equity securities with readily determinable fair value 16,240 15,532
Investment in and receivable from subsidiaries 6,674,426 5,842,160
Goodwill 8,371 8,371
Other assets 371,284 364,623
Total assets $ 7,267,290 $ 6,493,366
Liabilities and Shareholders’ Equity
Other liabilities $ 171,275 $ 171,922
Subordinated notes 298,283 437,866
Other borrowings 199,869 230,486
Junior subordinated debentures 253,566 253,566
Shareholders’ equity 6,344,297 5,399,526
Total liabilities and shareholders’ equity $ 7,267,290 $ 6,493,366
Statements of Income
Years Ended December 31,
(In thousands) 2024 2023 2022
Income
Dividends and other revenue from subsidiaries $ 548,232 $ 433,784 $ 120,151
Other income (losses) (1,781) 1,729 (12,969)
Total income $ 546,451 $ 435,513 $ 107,182
Expenses
Interest expense $ 49,306 $ 53,612 $ 36,522
Salaries and employee benefits 159,725 145,011 138,466
Other expenses 182,255 160,259 155,744
Total expenses $ 391,286 $ 358,882 $ 330,732
Income (loss) before income taxes and equity in undistributed income of subsidiaries $ 155,165 $ 76,631 $ (223,550)
Income tax benefit 79,684 72,260 70,490
Income (loss) before equity in undistributed net income of subsidiaries $ 234,849 $ 148,891 $ (153,060)
Equity in undistributed net income of subsidiaries 460,196 473,735 662,742
Net income $ 695,045 $ 622,626 $ 509,682
Statements of Cash Flows
Years Ended December 31,
(In thousands) 2024 2023 2022
Operating Activities:
Net income $ 695,045 $ 622,626 $ 509,682
Adjustments to reconcile net income to net cash provided by operating activities
Losses (gains) on available-for-sale debt securities and equity securities with readily determinable fair value, net 913 (442) 7,018
Depreciation and amortization 35,627 25,840 27,642
Deferred income tax benefit (9,449) (6,176) (2,773)
Stock-based compensation expense 16,401 14,154 13,632
Increase in other assets (3,862) (3,978) (7,116)
Increase (decrease) in other liabilities 8,802 (6,059) (6,107)
Equity in undistributed net income of subsidiaries (460,196) (473,735) (662,742)
Net Cash Provided by (Used for) Operating Activities $ 283,281 $ 172,230 $ (120,764)
Investing Activities:
Capital contributions to subsidiaries, net $ - $ - $ (69,000)
Net cash paid for acquisitions, net (38) - -
Other investing activity, net (37,764) (25,965) (30,872)
Net Cash Used for Investing Activities $ (37,802) $ (25,965) $ (99,872)
Financing Activities:
(Decrease) increase in other borrowings and junior subordinated debentures, net $ (30,668) $ (30,641) $ 117,381
Repayment of subordinated note (140,000) - -
Proceeds from the issuance of common stock, net - - 285,729
Issuance of common shares resulting from exercise of stock options and employee stock purchase plan 6,694 8,309 11,233
Dividends paid (143,280) (125,690) (108,210)
Common stock repurchases for tax withholdings related to stock-based compensation (3,936) (1,913) (304)
Net Cash (Used for) Provided by Financing Activities $ (311,190) $ (149,935) $ 305,829
Net (Decrease) Increase in Cash and Cash Equivalents $ (65,711) $ (3,670) $ 85,193
Cash and Cash Equivalents at Beginning of Year 262,680 266,350 181,157
Cash and Cash Equivalents at End of Year $ 196,969 $ 262,680 $ 266,350
(26) Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per common share for 2024, 2023 and 2022:
(In thousands, except per share data) 2024 2023 2022
Net income $ 695,045 $ 622,626 $ 509,682
Less: Preferred stock dividends 27,964 27,964 27,964
Net income applicable to common shares (A) $ 667,081 $ 594,662 $ 481,718
Weighted average common shares outstanding (B) 63,685 61,149 59,205
Effect of dilutive potential common shares:
Common stock equivalents
1,016 938 886
Weighted average common shares and effect of dilutive potential common shares (C) 64,701 62,087 60,091
Net income per common share:
Basic (A/B) $ 10.47 $ 9.72 $ 8.14
Diluted (A/C) 10.31 9.58 8.02
Potentially dilutive common shares can result from stock options, restricted stock unit awards and shares to be issued under the ESPP and the DDFS Plan, being treated as if they had been either exercised or issued, computed by application of the treasury stock method. While potentially dilutive common shares are typically included in the computation of diluted earnings per share, potentially dilutive common shares are excluded from this computation in periods in which the effect would reduce the loss per share or increase the income per share.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
The Company made no changes in and had no disagreements with its independent accountants during the two most recent fiscal years or any subsequent interim period.

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ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As of the end of the period covered by this Annual Report on Form 10-K, management of the Company, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined under Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based upon, and as of the date of that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective, in ensuring the information relating to the Company (and its consolidated subsidiaries) required to be disclosed by the Company in the reports it files or submits under the Exchange Act was recorded, processed, summarized and reported in a timely manner. As permitted by SEC-issued guidance that an assessment of internal controls over financial reporting of a recently acquired business may be excluded from management’s evaluation of disclosure controls and procedures for up to a year from the date of acquisition, the Company excluded Macatawa from management’s reporting on internal control over financial reporting as of December 31, 2024 as Macatawa was acquired by the Company during 2024. The Company will continue to evaluate the effectiveness of internal controls over financial reporting as it completes the integration of Macatawa with the Company and will make changes to its internal control framework, as necessary. The acquisition of Macatawa contributed $3.3 billion of assets, or 5.1% of the Company’s total assets, at December 31, 2024 and $63.6 million of net revenue, or 2.6% of the Company’s total net revenue for the year ended December 31, 2024. The annual report of the Company’s management on internal control over financial reporting is provided on page 170. The report of Ernst & Young LLP, the Company’s independent registered public accounting firm, regarding the Company’s internal control over financial reporting is provided on page 171.
Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Report on Management’s Assessment of Internal Control Over Financial Reporting
Wintrust Financial Corporation is responsible for the preparation, integrity, and fair presentation of the consolidated financial statements included in this Annual Report on Form 10-K. The consolidated financial statements and notes included in this Annual Report on Form 10-K have been prepared in conformity with generally accepted accounting principles in the United States and necessarily include some amounts that are based on management’s best estimates and judgments.
We, as management of Wintrust Financial Corporation, are responsible for establishing and maintaining adequate internal control over financial reporting that is designed to produce reliable financial statements in conformity with generally accepted accounting principles in the United States. The system of internal control over financial reporting as it relates to the financial statements is evaluated for effectiveness by management and tested for reliability through a program of internal audits. Actions are taken to correct potential deficiencies as they are identified. Any system of internal control, no matter how well designed, has inherent limitations, including the possibility that a control can be circumvented or overridden and misstatements due to error or fraud may occur and not be detected. Also, because of changes in conditions, internal control effectiveness may vary over time. Accordingly, even an effective system of internal control will provide only reasonable assurance with respect to financial statement preparation.
Management assessed the Company’s system of internal control over financial reporting as of December 31, 2024, in relation to criteria for the effective internal control over financial reporting as described in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (COSO Criteria). Based on this assessment, management concluded that, as of December 31, 2024, the Company's system of internal control over financial reporting is effective and meets the criteria of the COSO Criteria.
In conducting the evaluation of the effectiveness of its system of internal control over financial reporting as of December 31, 2024, the Company excluded the operations of Macatawa Bank, N.A. (“Macatawa”) as permitted by the guidance issued by the Office of the Chief Accountant of the Securities and Exchange Commission (not to extend more than one year beyond the date of the acquisition or for more than one annual reporting period). The acquisition of Macatawa was completed on August 1, 2024. As of and for the year ended December 31, 2024, Macatawa’s assets represented approximately $3.3 billion of assets, or 5.1% of the Company’s total assets, at December 31, 2024 and $63.6 million of net revenue, or 2.6% of the Company’s total net revenue for the year ended December 31, 2024. Refer to Note (7) of the Notes to Consolidated Financial Statements for further discussion of the acquisition and its impact on the Company’s consolidated financial statements.
Ernst & Young LLP (PCAOB ID 42), the independent registered public accounting firm that audited the Company's financial statements included in this Annual Report on Form 10-K, has issued an attestation report on management’s assessment of the Corporation’s internal control over financial reporting. Their report expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024.
/s/ Timothy S. Crane /s/ David L. Stoehr
Timothy S. Crane David L. Stoehr
President and Executive Vice President &
Chief Executive Officer Chief Financial Officer
Rosemont, Illinois
February 28, 2025
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Wintrust Financial Corporation
Opinion on Internal Control Over Financial Reporting
We have audited Wintrust Financial Corporation and subsidiaries’ internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Wintrust Financial Corporation and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on the COSO criteria.
As indicated in the accompanying Report on Management’s Assessment of Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Macatawa Bank, N.A. (“Macatawa”), which is included in the 2024 consolidated financial statements of the Company and constituted 5.1% of total assets, respectively, as of December 31, 2024 and 2.6% of total net revenue, respectively, for the year then ended. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Macatawa.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statements of condition of the Company as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes and our report dated February 28, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Report on Management’s Assessment of Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Chicago, Illinois
February 28, 2025

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ITEM 9B. OTHER INFORMATION
ITEM 9B. OTHER INFORMATION
Securities Trading Plans of Directors and Officers
During the three months ended December 31, 2024, none of our directors or officers adopted or terminated a Rule 10b5-1 trading plan or adopted or terminated a non-Rule 10b5-1 trading arrangement (as each term is defined in Item 408(a) of Regulation S-K).

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required in response to this item will be contained in the Company’s Proxy Statement for its Annual Meeting of Shareholders to be held May 22, 2025 (the “Proxy Statement”) under the captions “Proposal No. 1 - Election of Directors,” “Executive Officers of the Company,” “Board of Directors, Committees and Governance” and “Delinquent Section 16(a) Reports” and is incorporated herein by reference.
The Company has adopted a Corporate Code of Ethics which complies with the rules of the SEC and the listing standards of the Nasdaq Global Select Market. The code applies to all of the Company’s directors, officers and employees and is posted on the Company’s website (www.wintrust.com), under the “Corporate Governance” section of the “Investor Relations” tab. The Company will post on its website any amendments to, or waivers from, its Corporate Code of Ethics as the code applies to its directors or executive officers.
The Company has adopted an insider trading policy and procedures applicable to our directors, officers, employees and other covered persons, and have implemented processes for the Company, that we believe are reasonably designed to promote compliance with insider trading laws, rules and regulations, and the Nasdaq listing standards. The Company’s insider trading policy is filed as Exhibit 19.1 to this Annual Report on Form 10-K.

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ITEM 11. EXECUTIVE COMPENSATION
ITEM 11. EXECUTIVE COMPENSATION
The information required in response to this item will be contained in the Company’s Proxy Statement under the captions “Executive Compensation - Compensation Discussion & Analysis,” “Director Compensation” “Compensation Committee Interlocks and Insider Participation” “CEO Pay Ratio Disclosure” and “Compensation Committee Report” and is incorporated herein by reference. The information included under the heading “Compensation Committee Report” in the Proxy Statement shall not be deemed “soliciting” materials or to be “filed” with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Information with respect to security ownership of certain beneficial owners and management is incorporated by reference to the materials under the caption “Security Ownership of Certain Beneficial Owners, Directors and Management” that will be included in the Company’s Proxy Statement.
The following table summarizes information as of December 31, 2024, relating to the Company’s equity compensation plans pursuant to which common stock is authorized for issuance:
EQUITY COMPENSATION PLAN INFORMATION
Plan Category Number of
securities to be issued
upon exercise of
outstanding options,
warrants and rights
(a) Weighted-average
exercise price of
outstanding options,
warrants and rights
(b) Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in column (a))
(c)
Equity compensation plans approved by security holders
WTFC 1997 Stock Incentive Plan, as amended 85,000 - -
WTFC 2007 Stock Incentive Plan 10,576 - -
WTFC 2015 Stock Incentive Plan 380,678 - -
WTFC 2022 Stock Incentive Plan 1,074,759 - 680,538
WTFC Employee Stock Purchase Plan - - 140,036
WTFC Directors Deferred Fee and Stock Plan - - 356,600
1,551,013 - 1,177,174
Equity compensation plans not approved by security holders (1)
N/A - - -
Total 1,551,013 - 1,177,174
(1)Excludes 10,825 shares of the Company’s common stock issuable pursuant to the exercise of options granted under the plan of STC Bancshares Corporation. The weighted average exercise price of these options is $43.76. No additional awards will be made under this plan.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required in response to this item will be contained in the Company’s Proxy Statement under the caption “Related Person Transactions” and is incorporated herein by reference.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required in response to this item will be contained in the Company’s Proxy Statement under the caption “Audit and Non-Audit Fees Paid” and is incorporated herein by reference.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Documents filed as part of this Annual Report on Form 10-K.
1 Financial Statements
The following financial statements of Wintrust Financial Corporation, incorporated herein by reference to Item 8, Financial Statements and Supplementary Data:
•Consolidated Statements of Condition as of December 31, 2024 and 2023
•Consolidated Statements of Income for the Years Ended December 31, 2024, 2023 and 2022
•Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2024, 2023 and 2022
•Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2024, 2023 and 2022
•Consolidated Statements of Cash Flows for the Years Ended December 31, 2024, 2023 and 2022
•Notes to Consolidated Financial Statements
•Report of Independent Registered Public Accounting Firm
2 Financial Statement Schedules
Financial statement schedules have been omitted as they are not applicable or the required information is shown in the Consolidated Financial Statements or notes thereto.
3 Exhibits (Exhibits marked with a “*” denote management contracts or compensatory plans or arrangements)
Exhibit No. Exhibit Description
2.1
Agreement and Plan of Merger, by and among Wintrust Financial Corporation, Leo Subsidiary LLC and Macatawa Bank Corporation, dated April 15, 2024 (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 15, 2024).
3.1
Amended and Restated Articles of Incorporation of the Company, as amended (incorporated by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006, Exhibits 3.1 and 3.2 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 29, 2011 and Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012).
3.2
Restated Certificate of Designations of the Company filed on May 5, 2023 with the Secretary of State of the State of Illinois designating the preferences, limitations, voting powers and relative rights of the Series D Preferred Stock (incorporated by reference to Exhibit 3.2 of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023).
3.3
Certificate of Designations of the Company filed on May 7, 2020 with the Secretary of State of the State of Illinois designating the preferences, limitations, voting powers and relative rights of the Series E Preferred Stock (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 8, 2020).
3.4
Amended and Restated By-laws of the Company, as amended (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on August 1, 2024).
4.1
Description of the Company’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (incorporated by reference to Exhibit 4.1 of the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 28, 2024).
4.2 Certain instruments defining the rights of the holders of long-term debt of the Company and certain of its subsidiaries, none of which authorize a total amount of indebtedness in excess of 10% of the total assets of the Company and its subsidiaries on a consolidated basis, have not been filed as Exhibits. The Company hereby agrees to furnish a copy of any of these agreements to the Securities and Exchange Commission upon request.
4.3
Form of Subordinated Indenture between the Company and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.5 of the Company’s Registration Statement on Form S-3 filed with the Securities and Exchange Commission on May 6, 2020).
4.4
Form of Depositary Receipt (incorporated by reference as Exhibit A to Exhibit 4.2 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 15, 2020).
4.5
Deposit Agreement, dated as of May 15, 2020, among Wintrust Financial Corporation, U.S. Bank National Association, as Depositary, and the holders from time to time of the Depositary Receipts issued thereunder (incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 15, 2020).
4.6
Subordinated Indenture, dated June 13, 2014, between the Company and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 13, 2014).
4.7
First Supplemental Indenture, dated June 13, 2014 between the Company and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 13, 2014).
4.8
Form of 5.000% Subordinated Note due 2024 (incorporated by reference to Exhibit A in Exhibit 4.2 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 13, 2014).
4.9
Second Supplemental Indenture, dated June 6, 2019 between the Company and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 6, 2019).
4.10
Form of 4.850% Subordinated Notes due 2029 (incorporated by reference to Exhibit A in Exhibit 4.2 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 6, 2019).
4.11
Form of Subordinated Indenture (incorporated by reference to Exhibit 4.5 of the Company’s Registration Statement on Form S-3 filed with the Securities and Exchange Commission on May 6, 2020).
10.1
Amended and Restated Credit Agreement, dated as of December 12, 2022, by and among Wintrust Financial Corporation, as Borrower, the lenders who are party to the Agreement and the lenders who may become a party to the Agreement pursuant to terms hereof, as Lenders, and Wells Fargo Bank, National Association, a national banking association, as Administrative Agent for the Lenders (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on December 15, 2022).
10.2
First Amendment, dated as of July 17, 2023 to the Credit Agreement dated December 12, 2022, as amended and restated, among the Company, the lenders named therein, and Wells Fargo Bank, National Association, as administrative agent (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K Filed with the Securities and Exchange Commission on July 20, 2023).
10.3
Second Amendment, dated as of December 11, 2023 to the Credit Agreement dated December 12, 2022, as amended and restated, among the Company, the lenders named therein, and Wells Fargo Bank, National Association, as administrative agent (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K Filed with the Securities and Exchange Commission on December 12, 2023).
10.4
Third Amendment, dated as of December 6, 2024 to the Credit Agreement dated December 12, 2022, as amended and restated, among the Company, the lenders named therein, and U.S. Bank, National Association, as administrative agent (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K Filed with the Securities and Exchange Commission on December 10, 2024).
10.5
Receivables Purchase Agreement, dated as of December 16, 2014, by and among First Insurance Funding of Canada Inc. and CIBC Mellon Trust Company, in its capacity as Trustee of PLAZA Trust, by its Financial Service Agent, Royal Bank of Canada (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 19, 2014).
10.6
First Amending Agreement to the Receivables Purchase Agreement, dated December 15, 2015, by and among First Insurance Funding of Canada Inc. and CIBC Mellon Trust Company, in its capacity as Trustee of PLAZA Trust, by its Financial Service Agent, Royal Bank of Canada (incorporated by reference to Exhibit 10.5 of the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 29, 2016).
10.7
Second Amending Agreement to the Receivables Purchase Agreement, dated September 9, 2016, by and among First Insurance Funding of Canada, Inc. and CIBC Mellon Trust Company, in its capacity as Trustee of PLAZA Trust, by its Financial Service Agent, Royal Bank of Canada (incorporated by reference to Exhibit 10.9 of the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 28, 2018).
10.8
Third Amending Agreement to the Receivables Purchase Agreement, dated December 15, 2017, by and among First Insurance Funding of Canada Inc. and CIBC Mellon Trust Company, in its capacity as Trustee of PLAZA Trust, by its Financial Service Agent, Royal Bank of Canada (incorporated by reference to Exhibit 10.1 of the Company's Annual Report on Form 8-K filed with the Securities and Exchange Commission on December 18, 2017).
10.9
Fourth Amending Agreement to the Receivables Purchase Agreement, dated June 29, 2018, by and among First Insurance Funding of Canada Inc. and CIBC Mellon Trust Company, in its capacity as Trustee of PLAZA Trust, by its Financial Service Agent, Royal Bank of Canada (incorporated by reference to Exhibit 10.1 of the Company's Annual Report on Form 8-K filed with the Securities and Exchange Commission on July 3, 2018).
10.10
Fifth Amending Agreement to the Receivables Purchase Agreement, dated as of February 15, 2019 by and between First Insurance Funding of Canada Inc. and CIBC Mellon Trust, in its capacity as trustee of PLAZA Trust, by its Financial Service Agent, Royal Bank of Canada (incorporated by reference to Exhibit 10.1 of the Company's Annual Report on Form 8-K filed with the Securities and Exchange Commission on February 22, 2019).
10.11
Sixth Amending Agreement to the Receivables Purchase Agreement, dated as of May 27, 2019 by and between First Insurance Funding of Canada Inc. and CIBC Mellon Trust, in its capacity as trustee of PLAZA Trust, by its Financial Service Agent, Royal Bank of Canada (incorporated by reference to Exhibit 10.1 of the Company's Annual Report on Form 8-K filed with the Securities and Exchange Commission on May 30, 2019).
10.12
Seventh Amending Agreement to the Receivables Purchase Agreement, date as of January 15, 2020 by and between First Insurance Funding of Canada Inc. and CIBC Mellon Trust, in its capacity as trustee of PLAZA Trust, by its Financial Service Agent, Royal Bank of Canada (incorporated by reference to Exhibit 10.1 of the Company's Annual Report on Form 8-K filed with the Securities and Exchange Commission on January 17, 2020).
10.13
Eighth Amending Agreement to the Receivables Purchase Agreement, dated May 20, 2020, by and between First Insurance Funding of Canada Inc. and CIBC Mellon Trust, in its capacity as trustee of the PLAZA Trust, by its Financial Service Agent, Royal Bank of Canada (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 26, 2020).
10.14
Ninth Amending Agreement to the Receivables Purchase Agreement, dated January 15, 2021, by and between First Insurance Funding of Canada Inc. and CIBC Mellon Trust, in its capacity as trustee of the PLAZA Trust, by its Financial Service Agent, Royal Bank of Canada (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 20, 2021).
10.15
Tenth Amending Agreement to the Receivables Purchase Agreement, dated as of May 2, 2022, by and between First Insurance Funding of Canada Inc. and CIBC Mellon Trust Company, in its capacity as trustee of PLAZA Trust, by its Financial Service Agent, Royal Bank of Canada (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 3, 2022).
10.16
Eleventh Amending Agreement to the Receivables Purchase Agreement, dated as of May 31, 2023, by and between First Insurance Funding of Canada Inc. and CIBC Mellon Trust Company in its capacity as trustee of PLAZA Trust, by its Financial Service Agent, Royal Bank of Canada (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K Filed with the Securities and Exchange Commission on June 6, 2023).
10.17
Twelfth Amending Agreement to the Receivables Purchase Agreement, dated as of August 29, 2024, by and between First Insurance Funding of Canada Inc. and CIBC Mellon Trust Company in its capacity as trustee of PLAZA Trust, by its Financial Service Agent, Royal Bank of Canada (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K Filed with the Securities and Exchange Commission on August 29, 2024).
10.18
Performance Guarantee, made as of December 16, 2014, by the Company in favor of CIBC Mellon Trust Company, in its capacity as trustee of PLAZA Trust (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 19, 2014).
10.19
Performance Guarantee Confirmation, made as of December 15, 2017, by the Company in favor of CIBC Mellon Trust Company, in its capacity as trustee of PLAZA Trust (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 18, 2017).
10.20
Performance Guarantee Confirmation, dated as of June 28, 2018, by the Company in favor of CIBC Mellon Trust Company, in its capacity as trustee of PLAZA Trust (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 3, 2018).
10.21
Performance Guarantee Confirmation, dated as of February 15, 2019, by the Company in favor of CIBC Mellon Trust Company, in its capacity as trustee of PLAZA Trust (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 22, 2019).
10.22
Performance Guarantee Confirmation, dated as of May 27, 2019, by the Company in favor of CIBC Mellon Trust Company, in its capacity as trustee of PLAZA Trust (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 30, 2019).
10.23
Performance Guarantee Confirmation, dated as of January 15, 2020, by the Company in favor of CIBC Mellon Trust Company, in its capacity as trustee of PLAZA Trust (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 17, 2020).
10.24
Performance Guarantee Confirmation, dated as of May 20, 2020, by the Company in favor of CIBC Mellon Trust Company, in its capacity as trustee of PLAZA Trust (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 26, 2020).
10.25
Performance Guarantee Confirmation, dated as of January 15, 2021, by the Company in favor of CIBC Mellon Trust Company, in its capacity as trustee of PLAZA Trust (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 20, 2021).
10.26
Performance Guarantee Confirmation, dated as of May 2, 2022, by the Company in favor of CIBC Mellon Trust Company, in its capacity as trustee of PLAZA Trust (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K Filed with the Securities and Exchange Commission on May 3, 2022).
10.27
Performance Guarantee Confirmation, dated as of May 31, 2023, confirming the Performance Guarantee dates as of December 16, 2014, by and between the Company and PLAZA Trust (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K Filed with the Securities and Exchange Commission on June 6, 2023).
10.28
Performance Guarantee Confirmation, dated as of August 29, 2024, confirming the Performance Guarantee dated as of December 16, 2014, by and between the Company and Plaza Trust (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K Filed with the Securities and Exchange Commission on August 29, 2024).
10.29
Fee Letter dated as of August 29, 2024 by CIBC Mellon Trust Company, in its capacity as trustee of Plaza Trust, by its Financial Service Agent, Royal Bank of Canada and acknowledged by First Insurance Funding of Canada Inc. (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K Filed with the Securities and Exchange Commission on August 29, 2024).
10.30
Junior Subordinated Indenture, dated as of August 2, 2005, between the Company and Wilmington Trust Company, as trustee (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 4, 2005).
10.31
Amended and Restated Trust Agreement, dated as of August 2, 2005, among the Company, as depositor, Wilmington Trust Company, as property trustee and Delaware trustee, and the Administrative Trustees listed therein (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 4, 2005).
10.32
Guarantee Agreement, dated as of August 2, 2005, between the Company, as Guarantor, and Wilmington Trust Company, as trustee (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 4, 2005).
10.33
Indenture, dated as of September 1, 2006, between the Company and LaSalle Bank National Association, as trustee (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 6, 2006).
10.34
Amended and Restated Declaration of Trust, dated as of September 1, 2006, among the Company, as depositor, LaSalle Bank National Association, as institutional trustee, Christiana Bank & Trust Company, as Delaware trustee, and the Administrators listed therein (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 6, 2006).
10.35
Guarantee Agreement, dated as of September 1, 2006, between the Company, as Guarantor, and LaSalle Bank National Association, as trustee (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 6, 2006).
10.36
Amended and Restated Employment Agreement, dated as of January 26, 2023, between the Company and Edward J. Wehmer (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 30, 2023).*
10.37
Amended and Restated Employment Agreement, dated December 19, 2008, between the Company and David A. Dykstra, Senior Executive Vice President and Chief Operating Officer (incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 24, 2008).*
10.38
Amended and Restated Employment Agreement, dated December 19, 2008, between the Company and Richard B. Murphy, Executive Vice President and Chief Credit Officer (incorporated by reference to Exhibit 10.7 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 24, 2008).*
10.39
Amended and Restated Employment Agreement, dated December 19, 2008, between the Company and David L. Stoehr, Executive Vice President and Chief Financial Officer (incorporated by reference to Exhibit 10.6 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 24, 2008).*
10.40
Amended and Restated Employment Agreement, dated as of January 26, 2023, between the Company and Timothy S. Crane (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 30, 2023).*
10.41
Wintrust Financial Corporation 1997 Stock Incentive Plan (incorporated by reference to Appendix A of the Proxy Statement relating to the May 22, 1997 Annual Meeting of Shareholders of the Company).*
10.42
First Amendment to Wintrust Financial Corporation 1997 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2000).*
10.43
Second Amendment to Wintrust Financial Corporation 1997 Stock Incentive Plan adopted by the Board of Directors on January 24, 2002 (incorporated by reference to Exhibit 99.3 of the Company’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on July 1, 2004).*
10.44
Third Amendment to Wintrust Financial Corporation 1997 Stock Incentive Plan adopted by the Board of Directors on May 27, 2004 (incorporated by reference to Exhibit 99.4 of the Company’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on July 1, 2004).*
10.45
Wintrust Financial Corporation 2007 Stock Incentive Plan, as amended (incorporated by reference to Exhibit 4.6 to the Company’s Registration Statement on Form S-8, filed with the Securities and Exchange Commission on November 8, 2011).*
10.46
Wintrust Financial Corporation 2015 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 1, 2015).*
10.47
Wintrust Financial Corporation 2022 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K Filed with the Securities and Exchange Commission on May 27, 2022).*
10.48
Form of Nonqualified Stock Option Agreement under the Company’s 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.31 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2006).*
10.49
Form of Nonqualified Stock Option Agreement under the Company’s 2015 Stock Incentive Plan (incorporated by reference to Exhibit 10.2 of the Company’s Quarter Report on Form 10-Q for the quarter ended March 31, 2016).*
10.50
Form of Restricted Stock Unit Award, Agreement under Company’s 2015 Stock Incentive Plan (incorporated by reference to Exhibit 10.4 of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021).
10.51
Form of Performance Share Unit Award - Stock Settled under the Company's 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013).*
10.52
Form of Performance Award Agreement - Share Settled under the Company's 2015 Stock Incentive Plan (incorporated by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016).*
10.53
Form of Performance Share Unit Award - Cash Settled under the Company's 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013).*
10.54
Form of Performance Share Unit Award - Cash Settled under the Company's 2015 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016).*
10.55
Form of Performance Share Unit Agreement - Shares Settled under the Company’s 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.25 of the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 27, 2015).
10.56
Form of Performance Share Unit Award - Shares Settled - Deferral Option under the Company’s 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.30 of the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 29, 2016).*
10.57
Form of Performance Award Agreement - Shares Settled under Company’s 2015 Stock Incentive Plan (incorporated by reference to Exhibit 10.5 of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021).
10.58
Form of Performance Share Unit Award - Cash Settled - Deferral Option under the Company’s 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.31 the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 29, 2016).*
10.59
Form of Performance Share Unit Agreement - Cash Settled under the Company’s 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.26 of the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 27, 2015).
10.60
Wintrust Financial Corporation Employee Stock Purchase Plan, as amended (incorporated by reference to Annex A of the Company's definitive Proxy Statement filed with the Securities and Exchange Commission on April 24, 2012).*
10.61
Amended and Restated Wintrust Financial Corporation Employee Stock Purchase Plan, (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 25, 2018).*
10.62
Second Amended and Restated Wintrust Financial Corporation Employee Stock Purchase Plan, (incorporated by reference to Annex A to the Company’s Definitive Proxy Statement on Schedule 14A, filed with the Securities and Exchange Commission on April 8, 2021).*
10.63
Wintrust Financial Corporation Directors Deferred Fee and Stock Plan (incorporated by reference to Appendix B of the Proxy Statement relating to the May 24, 2001 Annual Meeting of Shareholders of the Company).*
10.64
Wintrust Financial Corporation 2005 Directors Deferred Fee and Stock Plan, as amended and restated (incorporated by reference to Exhibit 99.1 of the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on July 29, 2014).*
10.65
Form of Cash Incentive and Retention Award Agreement under the Company’s 2008 Long-Term Cash and Incentive Retention Plan with no Minimum Payout (incorporated by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008).*
10.66
Form of Director Indemnification Agreement (incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009).
10.67
Form of Officer Indemnification Agreement (incorporated by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009).
19.1
Wintrust Financial Corporation Insider Trading and Confidentiality Policy.
21.1
Subsidiaries of the Registrant.
23.1
Consent of Independent Registered Public Accounting Firm.
31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
97.1
Policy on Recoupment of Incentive Compensation.
101.INS Inline XBRL Instance Document (1)
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
(1)Includes the following financial information included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Condition, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Shareholders’ Equity, (v) the Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements.