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What changed in WINTRUST FINANCIAL CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of WINTRUST FINANCIAL CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+485 added−482 removedSource: 10-K (2024-02-28) vs 10-K (2023-02-28)

Top changes in WINTRUST FINANCIAL CORP's 2023 10-K

485 paragraphs added · 482 removed · 401 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

84 edited+21 added−13 removed196 unchanged
Biggest changeLoan 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; • 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. 15 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; • 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.
Biggest changeLoan 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; 20 • 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.
In May 2016, the Financial Crimes Enforcement Network (“FinCEN”), which is a bureau of the Treasury Department that drafts regulations implementing the BSA, USA PATRIOT Act and other AML and BSA legislation, issued a final rule governing enhanced customer due diligence (the “CDD rule”).
In May 2016, the Financial Crimes Enforcement Network (“FinCEN”), which is a bureau of the Treasury Department that drafts regulations implementing the BSA, USA PATRIOT Act and other AML legislation, issued a final rule governing enhanced customer due diligence (the “CDD rule”).
The federal banking agencies also are empowered to 12 require affirmative actions to correct any violation or practice; issue administrative orders that can be judicially enforced; direct increases in capital; limit dividends and distributions; restrict growth; assess civil money penalties against institutions or individuals who violate any laws, regulations, orders, or written agreements with the agencies; order termination of certain activities of holding companies or their non-bank subsidiaries; remove officers and directors; order divestiture of ownership or control of a non-banking subsidiary by a holding company; or terminate deposit insurance and appoint a conservator or receiver.
The federal banking agencies also are empowered to require affirmative actions to correct any violation or practice; issue administrative orders that can be judicially enforced; direct increases in capital; limit dividends and distributions; restrict growth; assess civil money penalties against institutions or individuals who violate any laws, regulations, orders, or written agreements with the agencies; order termination of certain activities of holding companies or their non-bank subsidiaries; remove officers and directors; order divestiture of ownership or control of a non-banking subsidiary by a holding company; or terminate deposit insurance and appoint a conservator or receiver.
The 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.
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 22 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.
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, 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.
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.
Transactions between affiliated banks may be subject to certain exemptions under applicable federal law. 14 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.
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 Business Unit Action Plan is updated annually and reviewed by senior leaders and the Board of Directors. 20 Learning & Development We are committed to providing all team members with development opportunities through individual and career development planning.
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.
We continue to recruit and hire experienced wealth management professionals from within the larger Chicago metropolitan area as well as Wisconsin, which is expected to help in attracting new customer relationships. Supervision and Regulation Regulatory Environment Our business is heavily regulated and supervised by both federal and state agencies.
We continue to recruit and hire experienced wealth management professionals from within the larger Chicago metropolitan area as well as Wisconsin 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 both federal and state agencies.
OFAC also publishes lists of persons and organizations that are subject to asset blocking sanctions, known as Specially Designated Nationals and Blocked Persons. Blocked assets ( e.g. , property and bank deposits) cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC.
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.
(“Old Plank Trail Bank”), Hinsdale Bank & Trust Company, N.A. (“Hinsdale Bank”), St. Charles Bank & Trust Company, N.A. (“St. Charles Bank”) and Town Bank, N.A. (“Town Bank”). As of December 31, 2022, we had 174 banking locations. Each nationally-chartered bank is subject to regulation, supervision and regular examination by the Office of the Comptroller of the Currency (“OCC”).
(“Old Plank Trail Bank”), Hinsdale Bank & Trust Company, N.A. (“Hinsdale Bank”), St. Charles Bank & Trust Company, N.A. (“St. Charles Bank”) and Town Bank, N.A. (“Town Bank”). As of December 31, 2023, we had 174 banking locations. Each nationally-chartered bank is subject to regulation, supervision and regular examination by the Office of the Comptroller of the Currency (“OCC”).
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, 2022, calculated using the regulatory capital methodology applicable to us during 2022.
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, 2023, calculated using the regulatory capital methodology applicable to us during 2023.
A listed company must adopt a clawback policy no later than sixty days following the date on which the applicable listing standard becomes effective and must begin to comply with the final rules 19 disclosure requirements in proxy and information statements and annual reports filed on or after the effective date of the applicable listing standard.
A listed company must adopt a clawback policy no later than sixty days following the date on which the applicable listing standard becomes effective and must begin to 17 comply with the final rules disclosure requirements in proxy and information statements and annual reports filed on or after the effective date of the applicable listing standard.
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, 2022, we owned fifteen 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.
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, 2023, we owned fifteen 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.
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 Common Equity Tier 1 Capital Ratio 7.00 % Tier 1 Capital Ratio 8.50 Total Capital Ratio 10.50 As of December 31, 2022, our Company’s and our subsidiary banks’ regulatory capital ratios were above the well-capitalized standards and met 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 11 As of December 31, 2023, our Company’s and our subsidiary banks’ regulatory capital ratios were above the well-capitalized standards and met the Capital Conservation Buffer.
Great Lakes Advisors, our registered investment adviser with locations in downtown Chicago and Tampa, Florida, as well as in various banking offices of our fifteen banks, provides money management services and advisory services to individuals, institutions, and municipal and tax-exempt organizations.
Great Lakes Advisors, our registered investment adviser with locations in downtown Chicago, Tampa, Florida, and Stamford, Connecticut, as well as in various banking offices of our fifteen banks, provides money management services and advisory services to individuals, institutions, and municipal and tax-exempt organizations.
(“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 (“FIFC Canada”), lease financing and other direct leasing opportunities through our wholly-owned subsidiary, Wintrust Asset Finance, Inc.
(“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 (“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.
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, 2022 would exceed such revised well-capitalized standard.
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, 2023 would exceed such revised well-capitalized standard.
The GLB Act requires a financial institution to, among other things, disclose its privacy policy to certain customers and, in some circumstances, enables certain 17 customers to opt-out of certain sharing of the customers’ nonpublic personal information with nonaffiliated third persons.
The GLB Act requires a financial institution to, among other things, disclose its privacy policy to certain customers and, in some circumstances, enables certain 15 customers to opt-out of certain sharing of the customers’ nonpublic personal information with nonaffiliated third persons.
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, 2022, the Company remained in compliance with such requirements.
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, 2023, the Company remained in compliance with such requirements.
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, 2022 would exceed such revised well-capitalized standard.
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, 2023 would exceed such revised well-capitalized standard.
Both Wintrust Investments and Great Lakes Advisors are registered as investment advisers with the SEC. In 18 addition, Wintrust Investments is a member of several self-regulatory organizations (“SROs”), including FINRA.
Both Wintrust Investments and Great Lakes Advisors are registered as investment advisers with the SEC. In 16 addition, Wintrust Investments is a member of several self-regulatory organizations (“SROs”), including FINRA.
On October 3, 2022, the Federal Reserve finalized a rule that amends 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 becomes effective July 1, 2023.
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.
Workforce Overview As of December 31, 2022, Wintrust employed 5,275 full-time equivalent employees in the U.S. and Canada. 97% 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.
Workforce Overview As of December 31, 2023, Wintrust employed 5,521 full-time equivalent employees in the U.S. and Canada. 97% 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.
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.
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.
In keeping with this strategy, the banks provide highly personalized and responsive service, a characteristic of locally-owned and managed institutions.
In keeping with this strategy, the banks provide highly personalized and responsive services, a characteristic of locally-owned and managed institutions.
Diversity & Inclusion Wintrust strives to promote an equitable, diverse and inclusive culture where each employee can be successful, and one that is reflective of the communities we serve. Women currently represent 57% of Wintrust’s workforce. In addition, the racially and ethnically diverse representation in Wintrust’s workforce is 32%.
Diversity & Inclusion Wintrust strives to promote an equitable, diverse and 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 racially and ethnically diverse representation in Wintrust’s workforce is 33%.
The portfolio includes investments in solutions for green buildings, renewable energy, sustainable agriculture, sustainable water, energy efficiency and pollution prevention. At December 31, 2022, this program managed $157 million in climate-focused portfolios. Available Information The Company’s Internet address is www.wintrust.com.
The portfolio includes investments in solutions for green buildings, renewable energy, sustainable agriculture, sustainable water, energy efficiency and pollution prevention. At December 31, 2023, this program managed $102 million in climate-focused portfolios. Available Information The Company’s Internet address is www.wintrust.com.
Over 13% 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 enhanced products and services. • Required each of our business units to develop a Diversity & Inclusion Business Unit Action Plan, documenting key goals and effective efforts towards advancing diversity, equity and inclusion internally and externally in a relevant and intentional way.
Approximately 17% 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 enhanced products and services. 18 • Required each of our business units to update their Diversity & Inclusion Business Unit Action Plan, documenting key goals and effective efforts towards advancing diversity, equity and inclusion internally and externally in a relevant and intentional way.
In addition, we offer a niche deposit service through our Northbrook Bank’s Funds Group. For the years ended December 31, 2022, 2021 and 2020, the community banking segment had net revenues of $1.5 billion, $1.3 billion and $1.3 billion, respectively, and net income of $349 million, $319 million and $164 million, respectively.
In addition, we offer a niche deposit service through our Northbrook Bank’s Funds Group. For the years ended December 31, 2023, 2022 and 2021, the community banking segment had net revenues of $1.7 billion, $1.5 billion and $1.3 billion, respectively, and net income of $414 million, $349 million and $319 million, respectively.
As a $52.9 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.
As a $56.3 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.
Basel III Rule, we and our subsidiary banks are required to maintain the following minimum capital ratios: • Common Equity Tier 1 capital to RWAs ratio (“Common Equity Tier 1 Capital Ratio”) of 4.5%; • Tier 1 capital to RWAs ratio (“Tier 1 Capital Ratio”) of 6.0%; • Total capital to RWAs ratio (“Total Capital Ratio”) of 8.0%; and • Tier 1 capital to quarterly average assets (net of goodwill, certain other intangible assets and certain other deductions) ratio (“Tier 1 Leverage Ratio”) of 4.0%. 10 To be well-capitalized, our subsidiary banks must maintain the following capital ratios: • Common Equity Tier 1 Capital Ratio of 6.5% or greater; • Tier 1 Capital Ratio of 8.0% or greater; • Total Capital Ratio of 10.0% or greater; and • Tier 1 Leverage Ratio of 5.0% or greater.
Basel III Rule, we and our subsidiary banks are required to maintain the following minimum capital ratios: 10 • 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%.
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 better manage our interest costs by improving our funding mix; • Written call option contracts on certain securities as an economic hedge to mitigate overall interest rate risk and enhance the securities’ overall return by using fees generated from these options; 6 • Entered into mirror-image swap transactions to both satisfy customer preferences and maintain variable interest rate exposure; • Completed strategic acquisitions to expand our presence in existing and complimentary markets; • Focused on cost control and leveraging our current infrastructure to grow without a commensurate increase in operating expenses; and • Expanded the Wintrust Asset Finance direct leasing niche.
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; 6 • Written call option contracts on certain securities as an economic hedge to mitigate overall interest rate risk and enhance the securities’ overall return by using fees generated from these options; • Entered into mirror-image swap transactions to both satisfy customer preferences and maintain variable interest rate exposure; • Completed strategic acquisitions to expand our presence in existing and complimentary markets; • Focused on cost control and leveraging our current infrastructure to grow without a commensurate increase in operating expenses; and • Expanded the Wintrust Asset Finance direct leasing niche.
In 2022, we maintained an online training catalog containing over 16,000 course offerings for our employees’ personal and professional development and, in 2022, invested more than 189,000 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.
In 2023, we maintained an online training catalog containing over 22,000 course offerings for our employees’ personal and professional development and, in 2023, invested more than 217,000 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.
The wealth management segment had total assets of $1.8 billion, $1.5 billion and $1.3 billion as of December 31, 2022, 2021 and 2020, respectively. The wealth management segment accounted for 8% of our consolidated net revenues, excluding intersegment eliminations, for the year ended December 31, 2022.
The wealth management segment had total assets of $1.2 billion, $1.8 billion and $1.5 billion as of December 31, 2023, 2022 and 2021, respectively. The wealth management segment accounted for 7% of our consolidated net revenues, excluding intersegment eliminations, for the year ended December 31, 2023.
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 $52.9 billion as of December 31, 2022.
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 $56.3 billion as of December 31, 2023.
As of December 31, 2022, the Company’s leasing portfolio, including direct financing leases, loans and equipment on operating leases, totaled $3.0 billion compared to $2.4 billion as of December 31, 2021. During 2022, Wintrust Asset Finance contributed approximately $82.1 million to our revenue, which does not reflect intersegment eliminations.
As of December 31, 2023, the Company’s leasing portfolio, including direct financing leases, loans and equipment on operating leases, totaled $3.4 billion compared to $3.0 billion as of December 31, 2022. During 2023, Wintrust Asset Finance contributed approximately $77.5 million to our revenue, which does not reflect intersegment eliminations.
Recognizing that remote work had been successful, productive and beneficial for many colleagues, we adopted a model to create additional flexibility where roles, business requirements and customer needs are met. Wintrust’s Future of Work model consists of: • Colleagues who work 100% onsite on a daily basis, based on role, business need, and customer/collaboration impact.
Recognizing that remote work had been successful, productive and beneficial for many colleagues, we continue to support workplace flexibility where roles, business requirements and customer needs are met. Wintrust’s work model consists of: • Colleagues who work 100% onsite on a daily basis, based on role, business need, and customer/collaboration impact.
Our employees have access to approximately 450 Banking topics, 160 Professional Skills topics and 440 customized training courses and resources through Wintrust University – our learning portal.
Our employees have access to approximately 460 Banking topics, 160 Professional Skills topics and 640 customized training courses and resources through Wintrust University – our learning portal.
The specialty finance segment had total assets of $9.8 billion, $8.4 billion and $7.0 billion as of December 31, 2022, 2021 and 2020, respectively. The specialty finance segment accounted for 17% of our consolidated net revenues, excluding intersegment eliminations, for the year ended December 31, 2022.
The specialty finance segment had total assets of $10.7 billion, $9.8 billion and $8.4 billion as of December 31, 2023, 2022 and 2021, respectively. The specialty finance segment accounted for 19% of our consolidated net revenues, excluding intersegment eliminations, for the year ended December 31, 2023.
Company Regulatory Capital Ratios Minimum Regulatory Capital Ratio for the Company Minimum Ratio + Capital Conservation Buffer (1) Well-Capitalized Minimum for the Company (2) The Company Common Equity Tier 1 Capital Ratio 4.50 % 7.00 % N/A 9.1 % Tier 1 Capital Ratio 6.00 8.50 6.00 10.0 Total Capital Ratio 8.00 10.50 10.00 11.9 Tier 1 Leverage Ratio 4.00 N/A N/A 8.8 (1) Reflects the Capital Conservation Buffer of 2.50%.
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 9.3 % Risk-based capital ratios: Tier 1 capital ratio 6.00 8.50 6.00 10.3 Common equity tier 1 capital ratio 4.50 7.00 N/A 9.4 Total capital ratio 8.00 10.50 10.00 12.1 (1) Reflects the Capital Conservation Buffer of 2.50%.
The community banking segment had total assets of $41.4 billion, $40.3 billion and $36.8 billion as of December 31, 2022, 2021 and 2020, respectively. The community banking segment accounted for approximately 75% of our consolidated net revenues, excluding intersegment eliminations, for the year ended December 31, 2022.
The community banking segment had total assets of $44.4 billion, $41.4 billion and $40.3 billion as of December 31, 2023, 2022 and 2021, respectively. The community banking segment accounted for approximately 74% of our consolidated net revenues, excluding intersegment eliminations, for the year ended December 31, 2023.
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.
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 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.
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%.
For the years ended December 31, 2022, 2021 and 2020 the specialty finance segment had net revenues of $344 million, $294 million and $263 million, respectively, and net income of $121 million, $109 million and $100 million, respectively.
For the years ended December 31, 2023, 2022 and 2021 the specialty finance segment had net revenues of $435 million, $344 million and $294 million, respectively, and net income of $176 million, $121 million and $109 million, respectively.
For the years ended December 31, 2022, 2021 and 2020, the wealth management segment had net revenues of $163 million, $161 million and $134 million, respectively, and net income of $39 million, $38 million and $29 million, respectively.
For the years ended December 31, 2023, 2022 and 2021, the wealth management segment had net revenues of $169 million, $163 million and $161 million, respectively, and net income of $33 million, $39 million and $38 million, respectively.
Our premium finance receivables balances finance insurance policies that are spread among a large number of insurers, however, the top three insurers represent approximately 13%, 7% and 6% of such balances. FIRST Insurance Funding, Wintrust Life Finance and FIFC Canada consistently monitor carrier ratings and financial performance of our carriers.
Our premium finance receivables balances finance insurance policies that are spread among a large number of insurers; however, one of the insurers represents approximately 11% of such balances and two additional insurers represent approximately 6% each of such balances. FIRST Insurance Funding, Wintrust Life Finance and FIFC Canada consistently monitor carrier ratings and financial performance of our carriers.
As of December 31, 2022, the Company’s wealth management subsidiaries had approximately $34.4 billion of assets under administration, which included $7.4 billion of assets owned by the Company and its subsidiary banks.
As of December 31, 2023, the Company’s wealth management subsidiaries had approximately $47.1 billion of assets under administration, which included $8.7 billion of assets owned by the Company and its subsidiary banks.
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 technological and market changes. Regulatory enforcement and fines have also increased across the banking and financial services sector.
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.
The Company has adopted the capital transition relief over the permissible five-year period. 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.
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.
Additionally, green house gas carbon emissions (CO 2 e) totaled 4,194 tons in 2022 compared to 4,733 tons in 2021. • The Company pursued certain renewable energy solutions as well as efficient building standards and technologies, including the installation of new electric vehicle charging stations at the corporate campus. 21 • Great Lakes Advisors executes investing through its Climate Opportunities Net Zero Portfolio, a portfolio started in 2013.
In 2023, the corporate campus green house gas carbon emissions (CO 2 e) totaled 4,473 tons in 2023 compared to 4,194 tons in 2022. • The Company continued to pursue certain renewable energy solutions as well as efficient building standards and technologies. • Great Lakes Advisors executes investing through its Climate Opportunities Net Zero Portfolio, a portfolio started in 2013.
The Company will continue to monitor Volcker Rule-related developments and assess their impact on its operations as necessary. 9 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.
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”).
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.
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.
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.
As a result, the Common Equity Tier 1 capital ratio and Tier 1 leverage ratio are denoted as “N/A” in this column.
The NYSE and NASDAQ filed proposed listing standards on February 22, 2023, and these listing standards must then be effective no later November 28, 2023.
The NYSE and NASDAQ filed proposed listing standards on February 22, 2023, and these listing standards were required to be effective no later November 28, 2023, which the Company met.
In 2022, some of the highlights of this approach included the following: • The Company continued to monitor the climate impact of it various banking locations, including its corporate campus that consists of three office buildings located in Rosemont, Illinois. In 2022, the energy used at the corporate campus totaled 9,331 MWh compared to 9,713 MWh in 2021.
In 2023, 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.
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 8 payment of dividends.
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. 8 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.
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 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 100 newly minted leaders attended “The Fundamentals of Wintrust Leadership” program annually in 2023.
(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 11 imposed under the U.S.
(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.
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.
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.
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%.
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.
These policies must establish loan portfolio diversification standards, prudent underwriting standards (including loan-to-value limits) that are clear and measurable, loan administration procedures, and documentation, approval and reporting requirements. The real estate lending policies must reflect consideration of the federal bank regulators’ Interagency Guidelines for Real Estate Lending Policies.
These policies must establish loan portfolio diversification standards, prudent underwriting standards (including loan-to-value limits) that are clear and measurable, loan administration procedures, and documentation, approval and reporting requirements.
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.
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. 19 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.
In December 2018, the U.S. federal banking agencies finalized rules that permit BHCs and banks to phase in, 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 three years.
Pursuant to rules adopted by the U.S. federal banking agencies, the Company has 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.
Talent Recruiting and Retention At Wintrust we recognize that attracting, motivating and retaining talent at all levels is vital to continuing our success. In 2022, Wintrust filled 1,881 positions, including external hires, internal transfers/promotions, and temporary hires. In 2022, 53% of our new hires self-identified as female and 42% of our new hires self-identified as a racial or ethnic minority.
Talent Recruiting and Retention At Wintrust we recognize that attracting, motivating and retaining talent at all levels is vital to continuing our success. In 2023, Wintrust filled over 1,500 positions, including external hires, internal transfers/promotions, and temporary hires.
Insurance of Deposit Accounts The deposits of each of our subsidiary banks are insured by the Depositors Insurance Fund (“DIF”) up to the standard maximum deposit insurance amount of $250,000 per depositor.
All of our subsidiary banks are commonly controlled within the meaning of the cross-guarantee provision. 13 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.
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 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.
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.
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. 9 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 Company has put in place the compliance programs required by the Volcker Rule and has either divested or received extensions for any holdings in illiquid funds.
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 either divested or received extensions for any holdings in illiquid funds.
Wintrust promotes an employee referral program, which we believe favorably affects colleague retention and engagement. Turnover for the entire Wintrust enterprise for the year was approximately 25% and voluntary departures accounted for approximately 83% of the total turnover. Wintrust offers total rewards packages that are designed to attract, motivate and retain a talented and diverse group of employees.
Turnover for the entire Wintrust enterprise for the year was approximately 14% and of that voluntary departures accounted for approximately 63% of the total turnover. Wintrust offers a robust total rewards package that is designed to attract, motivate and retain a talented and diverse group of employees.
The other BRGs are: Leadership Coalition, Multicultural Professionals Network, Career Navigation and Prism.
Our BRGs consist of Leadership Coalition, Multicultural Professionals Network, Career Navigation, Prism, and Women of Wintrust.
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.
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. 12 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.
As of December 31, 2022, each of the Company’s banks was categorized as “well-capitalized” and, in addition, met additional requirements under the Capital Conservation Buffer.
In certain instances, a bank holding company may be required to guarantee the performance of an undercapitalized subsidiary bank’s capital restoration plan. As of December 31, 2023, each of the Company’s banks was categorized as “well-capitalized” and, in addition, met additional requirements under the Capital Conservation Buffer.
We continue to review our branch footprint and in 2022, the Company opened four new branch locations in the Chicago metropolitan area. In 2022, the Company closed three branches which were predominantly smaller locations in close proximity to other Wintrust locations. As such, there was no material attrition or customer disruption.
We continue to review our branch footprint and in 2023, the Company opened one new branch location in its Florida market area and closed one branch location in the Chicago metropolitan area. There was no material attrition or customer disruption in connection with these footprint changes.
As an issuer with over $10 billion in assets, we are subject to Regulation II and will work to implement these new requirements. 16 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 real estate lending policies must reflect consideration of the federal bank regulators’ Interagency Guidelines for Real Estate Lending Policies. 14 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 program objective is to accelerate development of leadership opportunities for protégés within one to three years after launching the partnership. • Launched a fifth Business Resource Group (“BRG”) called Women of Wintrust, whose mission is to create an environment of inclusivity where women are empowered and engaged in the workplace.
The program objective is to accelerate development of leadership opportunities for protégés within one to three years after launching the partnership.
Progressively lower assessment rate schedules will take effect when the reserve ratio reaches 2%, and again when it reaches 2.5%. 13 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).
This amount was recorded in the fourth quarter for 2023 and will be paid in eight quarterly installments beginning in June of 2024. 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).
During 2022, Tricom processed payrolls with associated client billings of approximately $835.8 million and contributed approximately $13.5 million to our revenue, net of interest expense, which does not reflect intersegment eliminations.
During 2023, Tricom processed payrolls with associated client billings of approximately $703.6 million and contributed approximately $11.1 million to our revenue, net of interest expense, which does not reflect intersegment eliminations. 5 In 2023, our commercial premium finance operations, life insurance premium finance operations, leasing operations and accounts receivable finance operations accounted for 44%, 35%, 18% and 3%, respectively, of the total revenues of our specialty finance business.
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.
Bank holding companies also are required to consult with the Federal Reserve before materially increasing dividends.
The FDICIA also provides for enhanced supervisory authority over undercapitalized institutions, including authority for the appointment of a conservator or receiver for the institution. In certain instances, a bank holding company may be required to guarantee the performance of an undercapitalized subsidiary bank’s capital restoration plan.
Such restrictions may include a prohibition on capital distributions, restrictions on asset growth or restrictions on the ability to receive regulatory approval of applications. The FDICIA also provides for enhanced supervisory authority over undercapitalized institutions, including authority for the appointment of a conservator or receiver for the institution.
The proposed rules would materially revise the current CRA framework, including new assessment area requirements, new methods of calculating credit for lending, investment and service activities, and additional data collection and reporting requirements. The proposed rules included analysis indicating a significant increase in the thresholds for large banks to receive “Outstanding” ratings in the future.
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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisks Related to General Operations • Includes risks related to our controls and procedures, our operational or security systems or infrastructure, or those of third parties, 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.
Biggest changeRisks 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. 23 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, 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.
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; 26 (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.
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.
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, 40 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.
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.
Maintaining trust in the Company is critical to our ability to attract and maintain customers, investors and employees. If our reputation is damaged, our business could be significantly harmed. Harm to our reputation could arise from numerous sources, including, among others, employee misconduct, security breaches, compliance failures, litigation or regulatory outcomes or governmental investigations.
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 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 36 could be lowered or withdrawn by Fitch Ratings or DBRS.
Our creditworthiness is not fixed and should be expected to change over time as a result of company performance and industry conditions. We cannot give any assurances that our credit ratings will remain at current levels, and it is possible that our ratings could be lowered or withdrawn by Fitch Ratings or DBRS.
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.
We also rely on representations of those customers, counterparties, or other third parties, such as independent auditors, as to the 42 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.
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. 27 Legal and Regulatory Risks If we fail to meet our regulatory capital ratios, we may be forced to raise capital or sell assets.
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.
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.
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 32 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.
In some cases, we could be required to apply a new or revised standard retroactively, resulting in the restatement of prior period financial statements. 31 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.
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.
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.
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, 25 better pricing for those products and services, or newer technologies to deliver those products and services than we can.
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.
Sustained higher interest rates and continued Federal Reserve asset reductions may adversely affect market stability, market liquidity, and 29 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.
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 38 systems and other safeguards with respect to third-party systems is more limited than with respect to our own systems.
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.
Such tariffs, retaliatory tariffs 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.
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.
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.
Many of our competitors, because of their larger size and available capital, have substantially greater resources to invest in 28 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.
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.
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, 30 or misrepresentative of our actual practices.
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.
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 34 to repay their loans.
In July 2021, President Biden issued an executive order on competition that requires the banking agencies to review the standards for bank mergers and the Department of Justice (“DOJ”) has announced that it is reviewing its bank merger guidelines.
In July 2021, President Biden issued an executive order on competition that requires the banking agencies to review the standards for bank mergers and the Department of Justice has announced that it is reviewing its bank merger guidelines.
Though we expect the Federal Reserve to 35 slow the rate of increases, 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.
Though we expect the Federal Reserve to slow the rate of increases, 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.
An act of war, terrorist activity, including acts of domestic terrorism, 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.
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.
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. 33 We are subject to environmental liability risk associated with lending activities.
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. 35 We are subject to environmental liability risk associated with lending activities.
For 39 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.
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.
Our reputation could also be harmed by the failure or perceived failure of an affiliate or a vendor or other third party with which we do business, to comply with laws or regulations.
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.
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. 34 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.
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. 36 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.
As of December 31, 2022, approximately 96% 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).
As of December 31, 2023, approximately 96% 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).
While the Company is still much smaller in asset size than $100 billion, we cannot exclude the possibility that we may be subject to higher antitrust standards, enhanced scrutiny under the financial stability risk factor, or have a potential acquisition denied.
While the Company is still much smaller in asset size than $100 billion, we cannot exclude the possibility that we may be subject to higher antitrust standards, enhanced scrutiny under the financial stability risk factor, or have a potential acquisition challenged.
In the past, we have completed numerous acquisitions of banks, other financial service related companies and financial service related assets, including acquisitions of troubled financial institutions, as more fully described below. We expect to continue to make such acquisitions in the future.
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.
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, 2022 and 2021, approximately 34% and 34%, respectively, of our total loan portfolio was secured by real estate, the majority of which is 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, 2023 and 2022, approximately 35% and 34%, respectively, of our total loan portfolio was secured by real estate, the majority of which is commercial real estate.
As a participating lender in the SBA Paycheck Protection Program (“PPP”), the Company and its banks are subject to additional risks of litigation from the banks’ customers or other parties regarding the banks’ processing of loans for the PPP and risks that the SBA may not fund some or all PPP loan guaranties.
As a participating lender in the SBA Paycheck Protection Program (“PPP”), the Company and its banks are subject to additional risks of litigation from the banks’ customers or other parties regarding the banks’ processing of loans for the PPP and risks that the SBA may invalidate some or all PPP loan guaranties.
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 $1.5 billion and $1.1 billion for the years ended December 31, 2022 and 2021, respectively.
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 $1.8 billion and $1.5 billion for the years ended December 31, 2023 and 2022, respectively.
Risks Related to Economic Conditions and Operating Environment • Includes risks related to climate change and related environmental sustainability matters, deterioration in economic conditions and economic declines in the Chicago metropolitan and southern Wisconsin market areas, since our business is concentrated in these regions, and the COVID-19 pandemic.
Risks Related to Economic Conditions and Operating Environment • Includes risks related to deterioration in economic conditions and economic declines in the Chicago metropolitan and southern Wisconsin market areas, since our business is concentrated in these regions, and climate change and related environmental sustainability matters.
With the relatively low interest rates that prevailed in recent years, we were able to augment the total return of our investment securities portfolio by selling call options on fixed-income securities that we own. We recorded fee income of approximately $14.1 million, $3.7 million and $2.3 million for the years ended December 31, 2022, 2021 and 2020, respectively.
With the relatively low interest rates that prevailed in recent years, we were able to augment the total return of our investment securities portfolio by selling call options on fixed-income securities that we own. We recorded fee income of approximately $21.9 million, $14.1 million and $3.7 million for the years ended December 31, 2023, 2022 and 2021, respectively.
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 $20.3 million in 2022 from $21.5 million in 2021.
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 $45.5 million in 2023 from $20.3 million in 2022.
From April 3, 2020 through the end of the program in the second quarter of 2021, we originated over 19,400 PPP loans with a carrying balance totaling approximately $4.8 billion. As of December 31, 2022, the carrying balance of such loans was reduced to approximately $28.9 million primarily resulting from forgiveness by the SBA.
From April 3, 2020 through the end of the program in the second quarter of 2021, we originated over 19,400 PPP loans with a carrying balance totaling approximately $4.8 billion. As of December 31, 2023, the carrying balance of such loans was reduced to approximately $11.5 million primarily resulting from forgiveness by the SBA.
Together, these loans represented 15% of our total loan portfolio as of such date.
Together, these loans represented 16% of our total loan portfolio as of such date.
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.
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. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
We are required by regulatory authorities to maintain adequate levels of capital to support our operations (see “ - Risks Related to Our Regulatory Environment - If we fail to meet our regulatory capital ratios, we may be forced to raise capital or sell assets”) and as we grow, internally and through acquisitions, the amount of capital required to support our operations grows as well.
We 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.
The USA PATRIOT Act and the BSA require financial institutions to develop programs to prevent financial institutions from being used for money laundering or the funding of terrorist activities. If such activities are detected, financial institutions are obligated to file suspicious activity reports with FinCEN.
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.
As of December 31, 2022, we have been rated by Fitch Ratings as "BBB+" and 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.
If our credit rating is lowered, our financing costs could increase. As of December 31, 2023, we have been rated by Fitch Ratings as "BBB+" and 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.
As a result, risk management and general supervisory oversight may be difficult. As of December 31, 2022, we had $5.8 billion of property and casualty insurance premium finance loans outstanding, of which $5.1 billion related to the Company's U.S. operations at FIRST Insurance Funding and $745.6 million related to the Company's Canadian operations at FIFC Canada.
As a result, risk management and general supervisory oversight may be difficult. As of December 31, 2023, we had $6.9 billion of property and casualty insurance premium finance loans outstanding, of which $6.0 billion related to the Company's U.S. operations at FIRST Insurance Funding and $920.4 million related to the Company's Canadian operations at FIFC Canada.
If customers reduce their deposits with us or select other service providers for all or a portion of the services that we provide them, net interest income and fee revenues will decrease accordingly, and could have a material adverse effect on our results of operations. If our credit rating is lowered, our financing costs could increase.
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.
The loss of these revenue streams and the lower cost deposits as a source of funds could have a material adverse effect on our business, financial condition and results of operations. We may be adversely impacted by the soundness of other financial institutions. Financial services institutions are interrelated as a result of trading, clearing, counterparty or other relationships.
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.
Many of these changes have occurred as a result of the Dodd-Frank Act and its implementing regulations, most of which are now in place. We expect that our business will remain subject to extensive regulation and supervision.
Many of these changes have occurred as a result of the Dodd-Frank Act and its implementing regulations, most of which are now in place. We expect that our business will remain subject to extensive regulation and supervision. In addition, we expect that the Biden Administration will continue to seek to implement a regulatory reform agenda.
From time to time, the FASB and the SEC change the financial accounting and reporting standards that govern the preparation of our financial statements. These changes, such as the CECL standard adopted on January 1, 2020, can be hard to predict and could materially impact how we record and report our financial condition and results of operations.
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.
The PPP program expired on May 31, 2021. 32 Any financial liability, litigation costs or reputational damage caused by PPP related litigation could have a material adverse impact on our business, financial condition and results of operations.
Any financial liability, litigation costs or reputational damage caused by PPP related litigation could have a material adverse impact on our business, financial condition and results of operations.
Our premium finance receivables balances finance insurance policies that are spread among a large number of insurers, however, the top three insurers represent approximately 13%, 7% and 6% of such balances. FIRST Insurance Funding, Wintrust Life Finance and FIFC Canada consistently monitor carrier ratings and financial performance of our carriers.
Our premium finance receivables balances finance insurance policies that are spread among a large number of insurers; however, one of the insurers represents approximately 11% of such balances and two additional insurers represent approximately 6% each of such balances. FIRST Insurance Funding, Wintrust Life Finance and FIFC Canada consistently monitor carrier ratings and financial performance of our carriers.
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. 23 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.
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.
Our balance of non-performing loans and other real estate owned (“OREO”) was $100.7 million and $9.9 million, respectively, at December 31, 2022 compared to $74.4 million and $4.3 million, respectively, at December 31, 2021.
Our balance of non-performing loans and other real estate owned (“OREO”) was $139.0 million and $13.3 million, respectively, at December 31, 2023 compared to $100.7 million and $9.9 million, respectively, at December 31, 2022.
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. 30 Non-compliance with the USA PATRIOT Act, BSA or other laws and regulations could result in fines or sanctions.
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.
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, litigation from the banks’ customers or other parties regarding the banks’ processing of loans for the SBA Paycheck Protection Program (“PPP”) and that the SBA may not fund some or all PPP loan guaranties, 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. 22 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 Lending Operations • Includes risks related to our allowance for credit losses and sufficiency to absorb losses that may occur in our loan portfolio, litigation from the banks’ customers or other parties regarding the banks’ processing of loans for the SBA Paycheck Protection Program (“PPP”) and that the SBA may invalidate some or all PPP loan guaranties, 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.
Changes in federal and state tax laws and changes in interpretation of existing laws can impact our financial results. The federal government enacted the Tax Cuts and Jobs Act (the “Tax Act”) on December 22, 2017, and given the changing economic and political environment and ongoing budgetary pressures, the enactment of further new federal or state tax legislation may occur.
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.
In 2022, we charged off $20.3 million in loans (net of recoveries) and increased our allowance for credit losses from $299.7 million at December 31, 2021 to $357.9 million at December 31, 2022. Our allowance for loan and unfunded lending-related commitment losses represented 0.91% and 0.86% of total loans outstanding at December 31, 2022 and 2021, respectively.
In 2023, we charged off $45.5 million in loans (net of recoveries) and increased our allowance for credit losses from $357.9 million at December 31, 2022 to $427.6 million at December 31, 2023. Our allowance for loan and unfunded lending-related commitment losses represented 1.01% and 0.91% of total loans outstanding at December 31, 2023 and 2022, respectively.
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.
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.
Although the U.S. and global economies have begun to recover from the COVID-19 pandemic, as many health and safety restrictions have been lifted and vaccine distribution has increased, certain adverse consequences of the pandemic, including labor shortages, disruptions of global supply chains and inflationary pressures, continue to impact the macroeconomic environment and could adversely affect our business.
Although the U.S. and global economies continue to recover from the COVID-19 pandemic, certain adverse consequences of the pandemic, including labor shortages, disruptions of global supply chains and inflationary pressures, could continue to impact the macroeconomic environment and could adversely affect our business.
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.
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.
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.
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. 40 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.
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. It is also unclear what changes, if any, to U.S. trade policy will be made by the Biden Administration and Congress.
It remains unclear what the U.S. government or foreign governments will or will 33 not do with respect to tariffs already imposed, additional tariffs that may be imposed, or international trade agreements and policies.
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 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.
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.
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. 41 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.
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. 41 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.
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.
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.
Consequently, the ultimate sales price for any of these securities could vary significantly from the recorded fair value at December 31, 2023, 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. 39 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.
The Federal Reserve raised interest rates significantly and began shrinking its assets during 2022 in response to persistently high inflation measures that were well above the Federal Reserve’s two percent target. The Federal Reserve has signaled that it will likely further increase interest rates in the near term.
The Federal Reserve raised interest rates significantly and continued to shrink its assets during 2023 in response to persistently high inflation measures that were well above the Federal Reserve’s two percent target.
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.
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. 24 Since our business is concentrated in the Chicago metropolitan and southern Wisconsin market areas, economic declines in the economy of this region could adversely affect our business.
The commercial and residential real estate markets continue to experience a variety of difficulties, including the Chicago metropolitan area and southern Wisconsin, in which a majority of our real estate loans are concentrated.
The commercial and residential real estate markets continue to experience a variety of difficulties, including the Chicago metropolitan area and southern Wisconsin, in which a majority of our real estate loans are concentrated. Continued uncertainty in economic conditions may impair a borrower’s business operations, slow the execution of new leases and lead to existing lease turnover.
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.
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. 31 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.
These developments also caused our FDIC insurance premiums to increase. There is a risk that the banks’ deposit insurance premiums will increase in the future if failures of insured depository institutions once again deplete the DIF. Any such increase may negatively impact our financial condition and results of operations.
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.
Unlike larger national or other regional banks that are more geographically diversified, we provide banking and financial services to customers primarily in the Chicago metropolitan and southern Wisconsin market areas.
Except for our premium finance business and certain other niche businesses, our success depends primarily on the general economic conditions of the specific local markets in which we operate. Unlike larger national or other regional banks that are more geographically diversified, we provide banking and financial services to customers primarily in the Chicago metropolitan and southern Wisconsin market areas.
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.
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. 37 In response to inflationary forces in 2023, the Federal Reserve raised its target for the federal funds rate several times, beginning from a range of 4.25-4.50% and ending at a range of 5.25-5.5% at year end.
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.
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 addition, increased focus on environmental, social and governance (“ESG”) issues, including without limitation the impact of climate change, 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. 25 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.
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 26 existing customers and employees or attract new customers and employees.
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.
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.
Additionally, financial markets may be adversely affected by the current or anticipated impact of military conflict, including the war in Ukraine, 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.
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 .
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.
This updating entails significant costs and creates risks associated with implementing new systems and networks and integrating them with existing ones, including business interruptions.
It is expected that these reviews will tighten the standards for bank mergers and may change how the financial stability factor is evaluated. In addition, some members of Congress have called for a moratorium of any bank merger and acquisition of greater than $100 billion in assets.
It is expected that these reviews will tighten the standards for bank mergers and may change how the financial stability factor is evaluated.
Commercial loans are secured by different types of collateral related to the underlying business, such as accounts receivable, inventory and equipment.
Our commercial loan portfolio totaled $12.8 billion or 30% of our total loan portfolio, at December 31, 2023, compared to $12.5 billion, or 32% of our total loan portfolio, at December 31, 2022. Commercial loans are secured by different types of collateral related to the underlying business, such as accounts receivable, inventory and equipment.
If we cannot raise additional capital when needed, or on terms acceptable to us, our ability to further expand our operations through internal growth and acquisitions could be materially impaired and our financial condition and liquidity could be materially and negatively affected. Disruption in the financial markets could result in lower fair values for our investment securities portfolio.
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.
The Economic Growth Act could result in increased competition for merger or acquisition partners, potentially resulting in higher acquisition prices or an inability to complete desired acquisitions. In addition, 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.
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.
These actions have increased and may further increase the costs of doing business for all market participants, including our subsidiaries. 29 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.
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.
The effects of the pandemic and measures taken in response may subject us to increased risk of litigation and governmental and regulatory scrutiny. 24 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.
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.
Any such losses could have material adverse effect on our business, financial condition and results of operations. 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.
Any such losses could have material adverse effect on our business, financial condition and results of operations.
In addition, mergers and acquisitions could be dampened by increased antitrust scrutiny. We also expect reform proposals for the short-term wholesale markets.
In addition, mergers and acquisitions could be dampened by increased antitrust scrutiny. We also expect reform proposals for the short-term wholesale markets. At this time, we are unable to assess which, or to what extent, these policies will continue to be implemented and what their impact on the Company's business, financial condition or results of operations would be.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWintrust Mortgage, also of our banking segment, is headquartered in our corporate headquarters in Rosemont, Illinois and has 42 locations in 10 states, all of which are leased, as well as office locations at several of our banks.
Biggest changeWintrust Mortgage, also of our banking segment, is headquartered in our corporate headquarters in Rosemont, Illinois and has 31 locations in 9 states, all of which are leased, as well as office locations at several of our banks. 45 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.
Wintrust Asset Finance is located in our corporate headquarters in Rosemont, Illinois and has locations in Frisco, Texas, Mishawaka, Indiana, and Irvine, California, all of which are leased. Tricom has one location in Menomonee Falls, Wisconsin which is owned.
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.
Jackson Street in downtown Milwaukee. The Company’s community banking segment operates through 174 banking facilities, the majority of which are owned. The Company owns 221 automatic teller machines, the majority of which are housed at banking locations.
Jackson Street in downtown Milwaukee. The Company’s community banking segment operates through 174 banking facilities, the majority of which are owned. The Company owns 224 automatic teller machines, the majority of which are housed at banking locations.
The banking facilities are located in communities throughout the Chicago metropolitan area, southern Wisconsin and northwest Indiana as well as one banking location in Naples, Florida. Excess space in certain properties is leased to third parties.
The banking facilities are located in communities throughout the Chicago metropolitan area, southern Wisconsin and northwest Indiana as well as two banking locations in southwest Florida. Excess space in certain properties is leased to third parties.
Removed
The Company’s wealth management subsidiaries has one location in downtown Chicago, one in Appleton, Wisconsin, and one in Tampa, Florida, all of which are leased, as well as office locations at several of our banks.
Removed
In addition, the Company owns other real estate acquired for further expansion that, when considered in the aggregate, is not material to the Company’s financial position.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following is a summary of the cash dividends paid in 2022 and 2021: Record Date Payable Date Dividend per Share November 10, 2022 November 25, 2022 $0.34 August 11, 2022 August 25, 2022 $0.34 May 12, 2022 May 26, 2022 $0.34 February 10, 2022 February 24, 2022 $0.34 November 11, 2021 November 26, 2021 $0.31 August 5, 2021 August 19, 2021 $0.31 May 6, 2021 May 20, 2021 $0.31 February 11, 2021 February 25, 2021 $0.31 On January 26, 2023, Wintrust Financial Corporation announced that the Company’s Board of Directors approved a quarterly cash dividend of $0.40 per share of outstanding common stock.
Biggest changeThe following is a summary of the cash dividends paid in 2023 and 2022: Record Date Payable Date Dividend per Share 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 November 10, 2022 November 25, 2022 $0.34 August 11, 2022 August 25, 2022 $0.34 May 12, 2022 May 26, 2022 $0.34 February 10, 2022 February 24, 2022 $0.34 On January 25, 2024, Wintrust Financial Corporation announced that the Company’s Board of Directors approved a quarterly cash dividend of $0.45 per share of outstanding common stock.
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, 2022.
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, 2023.
See “Supervision and Regulation - Payment of Dividends and Share Repurchases” in Item 1 of this Annual Report on Form 10-K. During 2022, 2021 and 2020, the banks and certain wealth management subsidiaries paid $52.0 million, $145.0 million and $253.0 million, respectively, in dividends to the Company.
See “Supervision and Regulation - Payment of Dividends and Share Repurchases” in Item 1 of this Annual Report on Form 10-K. During 2023, 2022 and 2021, the banks and certain wealth management subsidiaries paid $360.0 million, $52.0 million and $145.0 million, respectively, in dividends to the Company.
The dividend was paid on February 23, 2023 to shareholders of record as of February 9, 2023. 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.
The dividend was paid on February 22, 2024 to shareholders of record as of February 8, 2024. 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.
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. 2017 2018 2019 2020 2021 2022 Wintrust Financial Corporation 100.00 81.44 88.09 77.73 117.45 110.94 NASDAQ — Total US 100.00 94.56 124.03 150.41 189.36 152.00 NASDAQ — Bank Index 100.00 83.60 114.68 100.00 137.32 113.60 44 Approximate Number of Equity Security Holders As of February 9, 2023, there were approximately 1,678 shareholders of record of the Company’s common stock.
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. 2018 2019 2020 2021 2022 2023 Wintrust Financial Corporation 100.00 108.17 95.44 144.21 136.22 152.59 NASDAQ — Total US 100.00 131.17 159.07 200.26 160.75 203.23 NASDAQ — Bank Index 100.00 137.18 119.62 164.26 135.89 149.56 47 Approximate Number of Equity Security Holders As of February 8, 2024, there were approximately 1,770 shareholders of record of the Company’s common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

222 edited+26 added−38 removed216 unchanged
Biggest changeTreasury 4.40 % — % — % — % — % — % 4.40 % U.S. government agencies 5.10 — — 3.81 — — 4.33 Municipal 3.32 2.75 3.35 3.95 — — 3.17 Corporate notes: Financial issuers 3.12 5.28 4.03 — — — 3.95 Other 5.89 — — — — — 5.89 Mortgage-backed: (1) Mortgage-backed securities — — — — 2.75 — 2.75 Collateralized mortgage obligations — — — — 2.00 — 2.00 Total available-for-sale securities 3.91 % 2.82 % 3.82 % 3.84 % 2.73 % — % 2.83 % Held-to-maturity securities U.S. government agencies — % 2.56 % 2.62 % 3.12 % — % — % 3.11 % Municipal 3.80 3.92 4.19 4.29 — — 4.13 Corporate notes: Financial issuers — 0.90 6.37 — — — 2.30 Mortgage-backed: (1) Mortgage-backed securities — — — — 2.19 — 2.19 Collateralized mortgage obligations — — — — 2.67 — 2.67 Total held-to-maturity securities 3.80 % 2.51 % 4.46 % 3.21 % 2.22 % — % 2.40 % Equity securities with readily determinable fair value — % — % — % — % — % 0.50 % 0.50 % (1) Consisting entirely of residential mortgage-backed securities, none of which are subprime. 70 Loan Portfolio and Asset Quality Loan Portfolio The following table shows the Company’s loan portfolio by category as of December 31 for the current and previous fiscal years: 2022 2021 % of % of (Dollars in thousands) Amount Total Amount Total Commercial $ 12,549,164 32 % $ 11,904,068 34 % Commercial real estate 9,950,947 25 8,990,286 26 Home equity 332,698 1 335,155 1 Residential real estate 2,372,383 6 1,637,099 5 Premium finance receivables—property & casualty 5,849,459 15 4,855,487 14 Premium finance receivables—life insurance 8,090,998 21 7,042,810 20 Consumer and other 50,836 0 24,199 0 Total loans, net of unearned income $ 39,196,485 100 % $ 34,789,104 100 % Commercial and commercial real estate loans.
Biggest changeTreasury 5.44 % 4.61 % — % — % — % — % 5.32 % U.S. government agencies — — 4.00 2.87 — — 3.81 Municipal 4.14 3.58 3.89 3.93 — — 3.85 Corporate notes: Financial issuers — 4.97 3.49 — — — 4.77 Other — 4.40 — — — — 4.40 Mortgage-backed: (1) Residential mortgage-backed securities — — — — 3.06 — 3.06 Commercial (multi-family) mortgage-backed securities — — — — 5.99 — 5.99 Collateralized mortgage obligations — — — — 4.49 — 4.49 Total available-for-sale securities 4.28 % 4.33 % 3.89 % 3.42 % 3.14 % — % 3.22 % Held-to-maturity securities U.S. government agencies 2.64 % 2.54 % — % 3.09 % — % — % 3.08 % Municipal 4.18 4.02 4.13 4.28 — — 4.11 Corporate notes: Financial issuers — 0.96 6.37 — — — 2.36 Mortgage-backed: (1) Residential mortgage-backed securities — — — — 2.51 — 2.51 Commercial (multi-family) mortgage-backed securities — — — — 3.92 — 3.92 Collateralized mortgage obligations — — — — 3.96 — 3.96 Total held-to-maturity securities 3.86 % 2.81 % 4.47 % 3.15 % 2.62 % — % 2.72 % Equity securities with readily determinable fair value — % — % — % — % — % 0.46 % 0.46 % (1) None of our mortgage-backed securities are subprime. 73 Loan Portfolio and Asset Quality Loan Portfolio Commercial and commercial real estate loans.
Such forward-looking statements may be deemed to include, among other things, statements relating to the Company’s future financial performance, the performance of its loan portfolio, the expected amount of future credit reserves and charge-offs, delinquency trends, growth plans, regulatory developments, securities that the Company may offer from time to time, and management’s long-term performance goals, as well as statements relating to the anticipated effects on financial condition and results of operations from expected developments or events, the Company’s business and growth strategies, including future acquisitions of banks, specialty finance or wealth management businesses, internal growth and plans to form additional de novo banks or branch offices.
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.
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 the periods presented in this Annual Report on Form 10-K, the Company had no potential problem loans not already identified as non-performing.
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.
When the Company is deemed to have regained effective control over these loans under the 72 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.
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.
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.
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. 93
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).
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 79 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).
The Company performs ongoing credit and other reviews of the agents and brokers, and performs various internal audit steps to mitigate against the risk of any fraud. The majority of these loans are purchased by the banks in order to more fully utilize their lending capacity as these loans generally provide the banks with higher yields than alternative investments.
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.
Based on these laws, the banks could, subject to minimum capital requirements, declare dividends to the Company without obtaining 88 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.
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.
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.
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 54 time deposits. Our branch network is the principal source of core deposits, which generally carry lower interest rates than wholesale funds of comparable maturities.
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 52 funds allocated to the business unit.
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 allocated to the business unit.
Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the banks must meet specific capital guidelines that involve 87 quantitative measures of the Company’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices.
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.
Advertising and marketing costs are incurred to promote the Company’s brand, commercial banking capabilities, the Company’s MaxSafe ® suite of products, community-based products, to attract loans and deposits and to announce new branch openings as well as the expansion of the Company’s non-bank businesses.
Advertising and marketing costs are incurred to promote the Company’s brand, commercial banking capabilities, the Company’s MaxSafe ® suite of products, community-based products, to attract loans and deposits and to announce new branch 67 openings as well as the expansion of the Company’s non-bank businesses.
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.
We believe that since our loan portfolio consists primarily of locally originated loans, and since the majority 75 of our borrowers are longer-term customers with lower LTV ratios, we face a relatively low risk of borrower default and delinquency.
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. 51 Funding mix and related costs.
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.
Upon completion of its own investigation, the Company generally repurchases or provides indemnification on certain loans. Indemnification requests are 90 generally received within two years subsequent to sale.
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.
At December 31, 2022, 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.
At December 31, 2023, 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.
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. 82 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.
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. 86 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.
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 property and casualty insurance premium finance business is a competitive industry 55 and yields on loans are influenced by the market rates offered by our competitors.
In 2022, 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.
In 2023, 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.
(3) Non-accrual loans included TDRs totaling $4.5 million, $11.8 million, $21.2 million, $27.1 million and $32.8 million as of December 31, 2022, 2021, 2020, 2019, and 2018, respectively. (4) Includes PCD loans. As a result of the adoption of ASU 2016-13, the Company transitioned all previously classified PCI loans to PCD loans effective January 1, 2020.
(3) Non-accrual loans included TDRs totaling $4.5 million, $11.8 million, $21.2 million and $27.1 million as of December 31, 2022, 2021, 2020, and 2019, respectively. (4) Includes PCD loans. As a result of the adoption of ASU 2016-13, the Company transitioned all previously classified PCI loans to PCD loans effective January 1, 2020.
Further information on these debt obligations is included in Note (10) “Deposits” through Note (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.
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.
Management considers pre-tax income, excluding provision for credit losses as a useful measurement of the Company’s core net income. 47 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.
Management considers pre-tax income, excluding provision for credit losses as a useful measurement of the Company’s core net income. 50 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.
As of December 31, 2022, the Company had three reporting units: Community Banking, Specialty Finance and Wealth Management. Based on the Company’s 2022 annual goodwill impairment testing, which was performed qualitatively, the Company concluded that the fair value of each reporting unit more likely than not exceeded the carrying amounts of the respective reporting units.
As of December 31, 2023, the Company had three reporting units: Community Banking, Specialty Finance and Wealth Management. Based on the Company’s 2023 annual goodwill impairment testing, which was performed qualitatively, the Company concluded that the fair value of each reporting unit more likely than not exceeded the carrying amounts of the respective reporting units.
See Note (17) “Income Taxes” to the Consolidated Financial Statements in Item 8 for a further discussion of income taxes. 56 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.
See Note (17) “Income Taxes” to the Consolidated Financial Statements in Item 8 for a further discussion of income taxes. 59 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.
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. 46 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.
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. 49 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.
The only significant difference is in how the credit risk ratings are assigned to these loans. 81 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.
The only significant difference is in how the credit risk ratings are assigned to these loans. 85 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.
Other borrowings at December 31, 2022 represent a fixed-rate promissory note (“Fixed-Rate Promissory Note”) issued by the Company in June 2017. Amendments to the Fixed-Rate Promissory Note since issuance increased the principal amount to $66.4 million, reduced the interest rate to 1.70%, and extended the maturity date to March 31, 2025.
Other borrowings at December 31, 2023 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.
Wintrust has a strategy of continuing to build its customer base and securing broad product penetration in each marketplace that it serves. The Company has expanded its banking franchise from three banks with five offices in 1994 to 15 banks with 174 offices at the end of 2022.
Wintrust has a strategy of continuing to build its customer base and securing broad product penetration in each marketplace that it serves. The Company has expanded its banking franchise from three banks with five offices in 1994 to 15 banks with 174 offices at the end of 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 2022 and 2021.
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 2023 and 2022.
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, 2022, 2021 and 2020.
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, 2023, 2022 and 2021.
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, 2022, none of our mortgage loans consist of interest-only loans. Premium finance receivables — property & casualty.
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, 2023, none of our mortgage loans consist of interest-only loans. Premium finance receivables — property & casualty.
Historical trending of both the Company’s results and the industry peers is also reviewed to analyze comparative significance. 79 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.
Historical trending of both the Company’s results and the industry peers is also reviewed to analyze comparative significance. 83 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.
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. 55 Using a quantitative approach, the Company compares each reporting unit’s fair value to its carrying value.
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. 58 Using a quantitative approach, the Company compares each reporting unit’s fair value to its carrying value.
Software and equipment expense increased in 2022 compared to 2021 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.
Software and equipment expense increased in 2023 compared to 2022 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.
The increase in the allowance for credit losses is primarily due to portfolio growth and the impact on the Company’s loan loss modeling from deteriorating macroeconomic conditions and expectations between the two reporting dates primarily related to the Commercial Real Estate Price Index.
The increase in the allowance for credit losses is primarily due to portfolio growth and the impact on the Company’s loan loss modeling from deteriorating macroeconomic conditions and expectations between the two reporting dates primarily related to the Baa credit spread and the Commercial Real Estate Price Index.
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 2022, we managed our liquid assets to ensure that we have the balance sheet strength to serve our clients.
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 2023, we managed our liquid assets to ensure that we have the balance sheet strength to serve our clients.
The following table presents the carrying value of the investment securities portfolios as of December 31, 2022, 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.
The following table presents the carrying value of the investment securities portfolios as of December 31, 2023, 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.
Our allowance for unfunded commitment losses is determined with respect to funds that we have committed to lend but for which funds have not 80 yet been disbursed and is computed using a methodology similar to that used to determine the allowance for loan losses.
Our allowance for unfunded commitment losses is determined with respect to funds that we have committed to lend but for which funds have not 84 yet been disbursed and is computed using a methodology similar to that used to determine the allowance for loan losses.
As reflected in the table, each of the Company’s capital ratios at December 31, 2022, 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.
As reflected in the table, each of the Company’s capital ratios at December 31, 2023, 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.
The Company had $253.6 million of junior subordinated debentures outstanding as of December 31, 2022 and 2021. The amounts reflected on the balance sheet represent the junior subordinated debentures issued to eleven trusts by the Company and equal the amount of the preferred and common securities issued by the trusts.
The Company had $253.6 million of junior subordinated debentures outstanding as of December 31, 2023 and 2022. 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.
Net interest income increased in 2022 compared to 2021 primarily as a result of growth in average earning assets in 2022, as well as an increase in the net interest margin. Partially offsetting the increase to net income from higher net interest income was a higher provision for credit losses.
Net interest income increased in 2023 compared to 2022 primarily as a result of an increase in the net interest margin as well as growth in average earning assets in 2023. Partially offsetting the increase to net income from higher net interest income was a higher provision for credit losses.
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, 2022 would exceed such revised well-capitalized standard.
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, 2023 would exceed such revised well-capitalized standard.
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, 2022. The detailed financial discussion focuses on 2022 results compared to 2021.
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, 2023. The detailed financial discussion focuses on 2023 results compared to 2022.
Management considers the maintenance of adequate liquidity to be important to the management of risk. Accordingly, during 2022, the Company continued its practice of maintaining appropriate funding capacity to provide the Company with adequate liquidity for its ongoing operations.
Management considers the maintenance of adequate liquidity to be important to the management of risk. Accordingly, during 2023, the Company continued its practice of maintaining appropriate funding capacity to provide the Company with adequate liquidity for its ongoing operations.
Loan Portfolio Aging As of December 31, 2022, $47.9 million,or 0.1% of all loans, excluding early buy-out loans guaranteed by U.S. government agencies, were 60 to 89 days (or two payments) past due and $209.0 million, or 0.5%, were 30 to 59 days (or one payment) past due.
As of December 31, 2022, $47.9 million, or 0.1%, of all loans, excluding early buy-out loans guaranteed by U.S. government agencies were 60 to 89 days (or two payments) past due and $209.0 million, or 0.5%, were 30 to 59 days (or one payment) past due.
TDRs are individually assessed at the time of the modification and on a quarterly basis to measure an allowance for credit loss. The carrying amount of the loan is compared to the expected payments to be received, discounted at the loan’s original rate, or for collateral dependent loans, to the fair value of the collateral.
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.
At December 31, 2022 and 2021, subordinated notes totaled $437.4 million and $436.9 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.
At December 31, 2023 and 2022, subordinated notes totaled $437.9 million and $437.4 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.
After considering these loans that were immediately charged off, the net impact of PCD allowance for credit losses at the acquisition date was approximately $470,000.
After considering these loans that were immediately charged off, the net impact of PCD allowance for credit losses at the acquisition date was approximately $470,000 in 2021.
Residential real estate loans, excluding early buy-out loans guaranteed by U.S. government agencies, at December 31, 2022 that are current with regards to the contractual terms of the loan agreements comprise 98.9% of these residential real estate loans outstanding. For more information regarding delinquent loans as of December 31, 2022, see Note (5) “Allowance for Credit Losses” in Item 8.
Residential real estate loans, excluding early buy-out loans guaranteed by U.S. government agencies, at December 31, 2023 that are current with regards to the contractual terms of the loan agreements comprise 98.4% of these residential real estate loans outstanding. For more information regarding delinquent loans as of December 31, 2023, see Note (5) “Allowance for Credit Losses” in Item 8.
As of December 31, 2021, approximately $320,000 of TDRs were past due greater than 90 days and still accruing interest. No TDRs as of December 31, 2020, 2019, or 2018 were past due greater than 90 days and still accruing interest.
As of December 31, 2021, approximately $320,000 of TDRs were past due greater than 90 days and still accruing interest. No TDRs as of December 31, 2020, and 2019 were past due greater than 90 days and still accruing interest.
Home equity loans at December 31, 2022 that are current with regard to the contractual terms of the loan agreement represent 98.9% of the total home equity portfolio.
Home equity loans at December 31, 2023 that are current with regard to the contractual terms of the loan agreement represent 98.9% of the total home equity portfolio.
FHLB advances to the banks totaled $2.3 billion at December 31, 2022 and $1.2 billion at December 31, 2021. 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.
FHLB advances to the banks totaled $2.3 billion at December 31, 2023 and $2.3 billion at December 31, 2022. 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.
The Company’s leasing business increased its portfolio of assets, including direct financing leases, loans and equipment on operating leases, to $3.0 billion as of December 31, 2022. In addition, the wealth management companies have been building a team of experienced professionals who are located within a majority of the banks.
The Company’s leasing business increased its portfolio of assets, including direct financing leases, loans and equipment on operating leases, to $3.4 billion as of December 31, 2023. In addition, the wealth management companies have been building a team of experienced professionals who are located within a majority of the banks.
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, 2022. Shareholders’ Equity .
Starting in 2016, none of the junior subordinated debentures qualified as Tier 1 regulatory capital of the Company resulting in 89 $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, 2023. Shareholders’ Equity .
Please refer to Part I, Item 1A, “Risk Factors” of this Form 10-K for additional information. Net Interest Income The Company has leveraged its operating strengths to grow its earning assets base while still benefiting from rising interest rates and the resulting impact in net interest margin in 2022.
Please refer to Part I, Item 1A, “Risk Factors” of this Form 10-K for additional information. Net Interest Income The Company has leveraged its operating strengths to grow its earning assets base while still benefiting from high interest rates and the resulting impact in net interest margin in 2023.
The higher level of interest-bearing deposits rates in 2022 compared to 2021 is also primarily a result of the increase in the interest rate environment in 2022 compared to 2021.
The higher level of interest-bearing deposits rates in 2023 compared to 2022 is also primarily a result of the increase in the interest rate environment in 2023 compared to 2022.
Liquidity Management Assets. Funds that are not utilized for loan originations are used to purchase investment securities and short-term money market investments, to sell as federal funds and to maintain in interest-bearing deposits with banks. Average liquidity management assets accounted for 22% and 23% of total average earning assets in 2022 and 2021, respectively.
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 22% of total average earning assets in 2023 and 2022, respectively.
The Fixed-Rate Promissory Note relates to and is secured by three office buildings owned by the Company. At December 31, 2022 and 2021, the Fixed-Rate Promissory Note had a balance of $61.3 million and $63.3 million, respectively. See Note (13) “Other Borrowings” to the Consolidated Financial Statements in Item 8 for further discussion of these borrowings.
The Fixed-Rate Promissory Note relates to and is secured by three office buildings owned by the Company. At December 31, 2023 and 2022, the Fixed-Rate Promissory Note had a balance of $59.2 million and $61.3 million, respectively. See Note (13) “Other Borrowings” to the Consolidated Financial Statements in Item 8 for further discussion of these borrowings.
For a discussion of 2021 results compared to 2020, 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, 2021 filed on February 25, 2022.
For a discussion of 2022 results compared to 2021, 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, 2022 filed on February 28, 2023.
The higher loan yields in 2022 compared to 2021 is primarily a result of the increase in the interest rate environment in 2022 compared to 2021.
The higher loan yields in 2023 compared to 2022 is primarily a result of the increase in the interest rate environment in 2023 compared to 2022.
In determining the appropriate reserve for collateral-dependent loans, the Company considers the results of appraisals for the associated collateral. Non-Performing Assets (1) The following table sets forth the Company’s non-performing assets and TDRs performing under the contractual terms of the loan agreement as of the dates shown.
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 TDRs performing under the contractual terms of the loan agreement as of the dates shown.
At December 31, 2022, the liability for estimated losses on repurchase and indemnification was approximately $624,000 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.
At December 31, 2023, the liability for estimated losses on repurchase and indemnification was approximately $152,000 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.
(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, 2022, 2021 and 2020 were $5.6 million, $3.6 million and $4.4 million, respectively.
(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, 2023, 2022 and 2021 were $10.1 million, $5.6 million and $3.6 million, respectively.
The following table summarizes the capital guidelines for bank holding companies as of December 31, 2022, as well as certain ratios relating to the Company’s equity and assets as of December 31, 2022, 2021 and 2020: Minimum Ratios Minimum Ratio + Capital Conservation Buffer (1) Minimum Well Capitalized Ratios (2) 2022 2021 2020 Common Equity Tier 1 capital to risk-weighted assets 4.5 % 7.00 % N/A 9.1 % 8.6 % 8.8 % Tier 1 capital to risk-weighted assets 6.0 8.50 6.0 10.0 9.6 10.0 Total capital to risk-weighted assets 8.0 10.50 10.0 11.9 11.6 12.6 Tier 1 leverage ratio 4.0 N/A N/A 8.8 8.0 8.1 Total average equity to total average assets N/A N/A N/A 9.2 9.2 9.5 Dividend payout ratio N/A N/A N/A 17.0 16.4 23.9 (1) Reflects the Capital Conservation Buffer of 2.50%.
The following table summarizes the capital guidelines for bank holding companies as of December 31, 2023, as well as certain ratios relating to the Company’s equity and assets as of December 31, 2023, 2022 and 2021: Minimum Ratios Minimum Ratio + Capital Conservation Buffer (1) Minimum Well Capitalized Ratios (2) 2023 2022 2021 Tier 1 Leverage Ratio 4.0 % N/A N/A 9.3 % 8.8 % 8.0 % Risk-based capital ratios: Tier 1 Capital Ratio 6.0 8.50 6.0 10.3 10.0 9.6 Common equity tier 1 capital ratio 4.5 7.00 N/A 9.4 9.1 8.6 Total capital ratio 8.0 10.50 10.0 12.1 11.9 11.6 Other ratios: Total average equity to total average assets N/A N/A N/A 9.4 9.2 9.2 Dividend payout ratio N/A N/A N/A 16.7 17.0 16.4 (1) Reflects the Capital Conservation Buffer of 2.50%.
If a loan is individually assessed, the carrying amount of the loan is compared to the expected payments to be received, discounted at the loan’s original rate, or for foreclosure-probable and collateral dependent loans, to the fair value of the collateral less the estimated cost to sell, when appropriate under accounting rules.
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.
Premium finance receivables — life insurance. Wintrust Life Finance originated approximately $1.8 billion in life insurance premium finance receivables in 2022 as compared to $1.6 billion in 2021. The Company continues to experience a high level of competition and pricing pressure within the current market.
Premium finance receivables — life insurance. Wintrust Life Finance originated approximately $1.5 billion in life insurance premium finance receivables in 2023 as compared to $1.8 billion in 2022. The Company continues to experience a high level of competition and pricing pressure within the current market.
FIRST Insurance Funding and Wintrust Life Finance have matured into separate divisions that generated, on a national basis, $13.8 billion in total premium finance receivables in 2022 within the United States. FIFC Canada, acquired in 2012, originated $1.6 billion in Canadian property and casualty premium finance receivables in 2022.
FIRST Insurance Funding and Wintrust Life Finance have matured into separate divisions that generated, on a national basis, $16.1 billion in total premium finance receivables in 2023 within the United States. FIFC Canada, acquired in 2012, originated $1.8 billion in Canadian property and casualty premium finance receivables in 2023.
Rebooked GNMA loans held-for-investment amounted to $80.7 million at December 31, 2022, compared to $22.7 million at December 31, 2021. The increase in balance from December 31, 2021 to December 31, 2022 was the result of higher delinquencies between periods and less frequent exercising of the early buyout option by the Company.
Rebooked GNMA loans held-for-investment amounted to $92.8 million at December 31, 2023, compared to $80.7 million at December 31, 2022. The increase in balance from December 31, 2022 to December 31, 2023 was the result of higher delinquencies between periods and less frequent exercising of the early buyout option by the Company.
The modification of a loan where the credit risk rating is 5 or better both before and after such modification is not considered to be a TDR. Based on the Company’s credit risk rating system, it considers that borrowers whose credit risk rating is 5 or better are not experiencing financial difficulties and therefore, are not considered TDRs.
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.
Average earning assets increased $3.6 billion, or 8%, in 2022 and $5.5 billion, or 14%, in 2021. 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 $3.6 billion, or 11%, in 2022 and $2.9 billion, or 10%, in 2021.
Average earning assets increased $2.8 billion, or 6%, in 2023 and $3.6 billion, or 8%, in 2022. 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 $3.6 billion, or 10%, in 2023 and $3.6 billion, or 11%, in 2022.
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, 2022 and 2021 was $14.1 billion and $13.1 billion, respectively. All other mortgage loans sold into the secondary market were sold without the retention of servicing rights.
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, 2023 and 2022 was $12.0 billion and $14.1 billion, respectively. All other mortgage loans sold into the secondary market were sold without the retention of servicing rights.
The provision in 2022 was primarily the result of deterioration in the forecasted macroeconomic forecast, specifically the Company’s macroeconomic forecasts of key model inputs (most notably, Commercial Real Estate Price Index and Baa corporate credit spreads) as well as growth in the Company's loan portfolios.
The provision in 2023 was primarily the result of higher charge-offs, deterioration in the forecasted macroeconomic forecast, specifically the Company’s macroeconomic forecasts of key model inputs (most notably, Commercial Real Estate Price Index and Baa corporate credit spreads) as well as growth in the Company's loan portfolios.
Impact to estimated allowance for credit losses from an increased or higher input value Baa Credit Spread Increases CRE Price Index Decreases 54 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, 2022: Baa Credit Spread Narrows Widens Commercial Decreases estimate by 10%-15% Increases estimate by 15%-20% Commercial Real Estate: Construction Decreases estimate by 15%-20% Increases estimate by 15%-20% Non-Construction Decreases estimate by 4%-5% Increases estimate by 4%-5% Holding all other inputs constant, the following table provides a sensitivity analysis for the commercial real estate construction and non-construction portfolios based on a 10% change in CREPI from the assumption utilized in the estimate of that portfolio’s allowance for credit losses at December 31, 2022: CRE Price Index Increases Decreases Commercial Real Estate: Construction Decreases estimate by 30%-35% Increases estimate by 130%-135% Non-Construction Decreases estimate by 25%-30% Increases estimate by 40%-45% See Note (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.
Impact to estimated allowance for credit losses from an increased or higher input value Baa Credit Spread Increases CRE Price Index Decreases 57 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, 2023: Baa Credit Spread Narrows Widens Commercial Decreases estimate by 10%-15% Increases estimate by 20%-25% Commercial Real Estate: Construction Decreases estimate by 15%-20% Increases estimate by 15%-20% Non-Construction Decreases estimate by 4%-5% Increases estimate by 4%-5% Holding all other inputs constant, the following table provides a sensitivity analysis for the commercial real estate construction and non-construction portfolios based on a 10% change in CREPI from the assumption utilized in the estimate of that portfolio’s allowance for credit losses at December 31, 2023: CRE Price Index Increases Decreases Commercial Real Estate: Construction Decreases estimate by 45%-50% Increases estimate by 95%-100% Non-Construction Decreases estimate by 25%-30% Increases estimate by 55%-60% 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.
Notes payable balances represent the balances on a credit agreement (as amended, the “Credit Agreement”) with certain unaffiliated banks. The Credit Agreement consisted of a $150.0 million term loan facility and a $100.0 million revolving credit facility.
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.
In this regard, the Company benefited from its strong deposit base, a liquid short-term investment portfolio and its access to funding from a variety of external funding sources. The Company had overnight liquid funds and interest-bearing deposits with banks of $2.5 billion and $5.8 billion at December 31, 2022 and 2021, respectively.
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 $2.5 billion at December 31, 2023 and 2022.
Primarily as a result of growth in the portfolio and deteriorating macroeconomic conditions and expectations between the two reporting dates primarily related to the Baa credit spread, our allowance for credit losses in our commercial loan portfolio increased to $142.8 million as of December 31, 2022 compared to $119.3 million as of December 31, 2021.
Primarily as a result of growth in the portfolio and deteriorating macroeconomic conditions and expectations between the two reporting dates primarily related to the Baa credit spread, our allowance for credit losses in our commercial loan portfolio increased to $169.6 million as of December 31, 2023 compared to $142.8 million as of December 31, 2022.
The liability for estimated losses on repurchase and indemnification claims for residential mortgage loans previously sold to investors was $624,000 at December 31, 2022 and $675,000 at December 31, 2021.
The liability for estimated losses on repurchase and indemnification claims for residential mortgage loans previously sold to investors was $152,000 at December 31, 2023 and $624,000 at December 31, 2022.
The community banking segment’s net income for the year ended December 31, 2022 totaled $349.3 million, an increase of $30.3 million, compared to net income of $319.1 million in 2021. The increase was primarily attributable to higher net interest income in 2022 partially offset by increased provision for credit losses and reduced mortgage banking revenue, as discussed above.
The community banking segment’s net income for the year ended December 31, 2023 totaled $414.1 million, an increase of $64.7 million, compared to net income of $349.3 million in 2022. The increase was primarily attributable to higher net interest income in 2023 partially offset by increased provision for credit losses and reduced mortgage banking revenue, as discussed above.
Early buyout loan classified as held-for-investment totaled $164.8 million at December 31, 2022 compared to $30.8 million at December 31, 2021. Such loans consist of both the rebooked GNMA loans and the early buyout exercised loans classified as held-for-investment discussed above.
Early buyout loan classified as held-for-investment totaled $150.6 million at December 31, 2023 compared to $164.8 million at December 31, 2022. Such loans consist of both the rebooked GNMA loans and the early buyout exercised loans classified as held-for-investment discussed above.
(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 $3.6 billion, or 8%, in 2022. Average earning assets comprised 94% of average total assets in 2022 and 2021.
(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 $2.8 billion, or 6%, in 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changePlease refer to Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion of the net interest margin. 91 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.
Biggest changeSince 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.
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. During 2022 and 2021, the Company entered into certain covered call option transactions related to certain securities held by the Company.
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. During 2023 and 2022, the Company entered into certain covered call option transactions related to certain securities held by the Company.
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, 2022 or 2021. 92
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, 2023 or 2022. 95
The interest rate sensitivity for both the Static Shock and Ramp Scenarios at December 31, 2022 and December 31, 2021 is as follows: Static Shock Scenarios +200 Basis Points +100 Basis Points -100 Basis Points -200 Basis Points December 31, 2022 7.2 % 3.8 % (5.0) % (12.1) % December 31, 2021 25.3 12.4 (8.5) (15.8) Ramp Scenarios +200 Basis Points +100 Basis Points -100 Basis Points -200 Basis Points December 31, 2022 5.6 % 3.0 % (2.9) % (6.8) % December 31, 2021 13.9 6.9 (5.6) (10.8) One method utilized by financial institutions, including the Company, to manage interest rate risk is to enter into derivative financial instruments.
The interest rate sensitivity for both the Static Shock and Ramp Scenarios at December 31, 2023 and December 31, 2022 is as follows: 94 Static Shock Scenarios +200 Basis Points +100 Basis Points -100 Basis Points -200 Basis Points December 31, 2023 2.6 % 1.8 % 0.4 % (0.7) % December 31, 2022 7.2 3.8 (5.0) (12.1) Ramp Scenarios +200 Basis Points +100 Basis Points -100 Basis Points -200 Basis Points December 31, 2023 1.6 % 1.2 % (0.3) % (1.5) % December 31, 2022 5.6 3.0 (2.9) (6.8) One method utilized by financial institutions, including the Company, to manage interest rate risk is to enter into derivative financial instruments.
Added
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.
Added
While the Company does not believe rapid rate cuts are warranted at this point, we are assuming that there will be three 25 basis point rate cuts starting June 2024. With that assumption our net interest margin should be reasonably stable in a narrow range around the current level for the near term.

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