WINTRUST FINANCIAL CORP

Previous wording

The following discussion and analysis of the financial condition of Wintrust Financial Corporation and its subsidiaries (collectively, “Wintrust” or the “Company”) as of September 30, 2024 compared with December 31, 2023 and September 30, 2023, and the results of operations for the three and nine month periods ended September 30, 2024 and September 30, 2023, should be read in conjunction with the unaudited consolidated financial statements and notes contained in this report and the risk factors discussed under Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 Form 10-K”) and in Part II, Item 1A, of this Form 10-Q. This discussion contains forward-looking statements that involve risks and uncertainties and, as such, future results could differ significantly from management’s current expectations. See the last section of this discussion for further information on forward-looking statements.

Current wording

The following discussion and analysis of the financial condition of Wintrust Financial Corporation and its subsidiaries (collectively, “Wintrust” or the “Company”) as of March 31, 2025 compared with December 31, 2024 and March 31, 2024, and the results of operations for the three month periods ended March 31, 2025 and March 31, 2024, should be read in conjunction with the unaudited consolidated financial statements and notes contained in this report and the risk factors discussed under Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 (“2024 Form 10-K”) and in Part II, Item 1A, of this Form 10-Q. This discussion contains forward-looking statements that involve risks and uncertainties and, as such, future results could differ significantly from management’s current expectations. See the last section of this discussion for further information on forward-looking statements.

Previous wording

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

Current wording

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

Previous wording

The Company recorded net income of $170.0 million for the third quarter of 2024 compared to $164.2 million in the third quarter of 2023. The results for the third quarter of 2024 demonstrate the Company's ability to grow net interest income through both organic earning asset growth and growth through acquisitions. Partially offsetting the increase in net interest income was an increase in non-interest expense. The increase in non-interest expense was a result of additional expenses to support organic growth as well as the impact from the Macatawa acquisition. Comprehensive income includes 1) net income as presented on the Company’s Consolidated Statements of Income and 2) other comprehensive income or loss from unrealized gains and losses on the Company’s available-for-sale investment securities portfolios and derivative contracts designated as cash flow hedges as well as foreign currency translation adjustments. Comprehensive income (loss) totaled $390.0 million for the third quarter of 2024 compared to a loss of $4.4 million for the third quarter of 2023.

Current wording

The Company recorded net income of $189.0 million for the first quarter of 2025 compared to $187.3 million in the first quarter of 2024. The results for the first quarter of 2025 demonstrate increased net interest income due to growth in earning assets as well as the Company’s ability to navigate disruptions in the current economic environment during the period due to the Company’s strong deposit franchise and balanced business model. Partially offsetting the increase in net interest income was an increase in non-interest expense and a decrease in non-interest income. The increase in non-interest expense was a result of additional expenses to support organic growth as well as the impact from the Macatawa acquisition. The decrease in non-interest income was primarily a result of gain on the sale of a wealth management division recognized in the first quarter of 2024. Comprehensive income includes 1) net income as presented on the Company’s Consolidated Statements of Income and 2) other comprehensive income or loss from unrealized gains and losses on the Company’s available-for-sale investment securities portfolios and derivative contracts designated as cash flow hedges as well as foreign currency translation adjustments. Comprehensive income totaled $287.4 million for the first quarter of 2025 compared to $63.4 million for the first quarter of 2024.

Previous wording

The Company increased its loan portfolio from $41.4 billion at September 30, 2023 and $42.1 billion at December 31, 2023 to $47.1 billion at September 30, 2024. The increase in the current period compared to the prior periods was a result of organic growth in several portfolios, including the commercial, commercial real estate, residential real estate loans held for investment portfolios, and property and casualty insurance premium finance receivable portfolios as well as $1.3 billion in loans acquired from Macatawa. For more information regarding changes in the Company’s loan portfolio, see Financial Condition – Interest Earning Assets and Note (6) “Loans” of the Consolidated Financial Statements in Item 1 of this report.

Current wording

The Company increased its loan portfolio from $43.2 billion at March 31, 2024 and $48.1 billion at December 31, 2024 to $48.7 billion at March 31, 2025. The increase in the current period compared to the prior periods was a result of growth in several portfolios, including the commercial, commercial real estate, residential real estate loans held for investment portfolios, and insurance premium finance receivable portfolios. For more information regarding changes in the Company’s loan portfolio, see Financial Condition – Interest Earning Assets and Note (6) “Loans” of the Consolidated Financial Statements in Item 1 of this report.

Previous wording

The Company recorded net interest income of $502.6 million in the third quarter of 2024 compared to $462.4 million in the third quarter of 2023. This increase in net interest income recorded in the third quarter of 2024 compared to the third quarter of 2023 resulted primarily from growth in earning assets, specifically a $5.2 billion increase in average loans. Net interest margin was 3.49% (3.51% on a fully taxable-equivalent basis, non-GAAP) in the third quarter of 2024 compared to 3.60% (3.62% on a fully taxable-equivalent basis, non-GAAP) in the third quarter of 2023. The decrease is primarily due to higher rates on interest-bearing liabilities, most notably interest-bearing deposits (see “Net Interest Income” for further detail).

Current wording

The Company recorded net interest income of $526.5 million in the first quarter of 2025 compared to $464.2 million in the first quarter of 2024. This increase in net interest income recorded in the first quarter of 2025 compared to the first quarter of 2024 resulted primarily from growth in earning assets, specifically a $5.7 billion increase in average loans. Net interest margin was 3.54% (3.56% on a fully taxable-equivalent basis, non-GAAP) in the first quarter of 2025 compared to 3.57% (3.59% on a fully taxable-equivalent basis, non-GAAP) in the first quarter of 2024. The decrease in net interest margin is primarily due to a decline in loan and other earning assets yields along with a decline in the net free funds contribution. This was partially offset by a reduction in funding cost, primarily related to the rate paid on interest-bearing liabilities, most notably interest-bearing deposits, junior subordinated debentures and other borrowings (see “Net Interest Income” for further detail).

Previous wording

Non-interest expense totaled $360.7 million in the third quarter of 2024, an increase of $30.6 million, or 9%, compared to the third quarter of 2023. This increase compared to the third quarter of 2023 was primarily attributable to increased salaries and employee benefits of $18.9 million and increased software and equipment expenses of $5.6 million. (see “Non-Interest Expense” for further detail).

Current wording

Non-interest expense totaled $366.1 million in the first quarter of 2025, an increase of $32.9 million, or 10%, compared to the first quarter of 2024. This increase compared to the first quarter of 2024 was primarily attributable to increased salaries and employee benefits of $16.4 million and increased software and equipment expenses of $7.0 million. (see “Non-Interest Expense” for further detail).

Previous wording

Management considers the maintenance of adequate liquidity to be important to the management of risk. Accordingly, during the third quarter of 2024, the Company continued its practice of maintaining appropriate funding capacity to provide the Company with adequate liquidity for its ongoing operations. In this regard, the Company benefited from its strong deposit base, a liquid short-term investment portfolio and its access to funding from a variety of external funding sources. See “Deposits” and “Other Funding Sources” for additional information regarding liquidity sources.

Current wording

Management considers the maintenance of adequate liquidity to be important to the management of risk. Accordingly, during the first quarter of 2025, the Company continued its practice of maintaining appropriate funding capacity to provide the Company with adequate liquidity for its ongoing operations. In this regard, the Company benefited from its strong deposit base, a liquid short-term investment portfolio and its access to funding from a variety of external funding sources. See “Deposits” and “Other Funding Sources” for additional information regarding liquidity sources.

Previous wording

The Company’s key operating measures and growth rates for the three and nine months ended September 30, 2024, as compared to the same period last year, are shown below:

Current wording

The Company’s key operating measures and growth rates for the three months ended March 31, 2025, as compared to the same period last year, are shown below:

Previous wording

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

Current wording

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

Previous wording

Management reviews yields on certain asset categories and the net interest margin of the Company and its banking subsidiaries on a fully taxable-equivalent (“FTE”) basis. In this non-GAAP presentation, net interest income is adjusted to reflect tax-exempt interest income on an equivalent before-tax basis using tax rates effective as of the end of the period. This measure ensures comparability of net interest income arising from both taxable and tax-exempt sources. Net interest income on a fully taxable-equivalent basis is also used in the calculation of the Company’s efficiency ratio. The efficiency ratio, which is calculated by dividing non-interest expense by total taxable-equivalent net revenue (less securities gains or losses), measures how much it costs to produce one dollar of revenue. Securities gains or losses are excluded from this calculation to better match revenue from daily operations to operational expenses. Management considers the tangible common equity ratio and tangible book value per common share as useful measurements of the Company’s equity. The Company references the return on average tangible common equity as a measurement of profitability. Management considers pre-tax income, excluding provision for credit losses as a useful measurement of the Company’s core net income.

Current wording

Management reviews yields on certain asset categories and the net interest margin of the Company and its banking subsidiaries on a fully taxable-equivalent (“FTE”) basis. In this non-GAAP presentation, net interest income is adjusted to reflect tax-exempt interest income on an equivalent before-tax basis using tax rates effective as of the end of the period. This measure ensures comparability of net interest income arising from both taxable and tax-exempt sources. Net interest income on a FTE basis is also used in the calculation of the Company’s efficiency ratio. The efficiency ratio, which is calculated by dividing non-interest expense by total taxable-equivalent net revenue (less securities gains or losses), measures how much it costs to produce one dollar of revenue. Securities gains or losses are excluded from this calculation to better match revenue from daily operations to operational expenses. Management considers the tangible common equity ratio and tangible book value per common share as useful measurements of the Company’s equity. The Company references the return on average tangible common equity as a measurement of profitability. Management considers pre-tax income, excluding provision for credit losses as a useful measurement of the Company’s core net income.

Previous wording

The allowance for credit losses represents management’s estimate of expected credit losses over the life of a financial asset carried at amortized cost. Determining the amount of the allowance for credit losses is considered a critical accounting estimate because it requires significant judgment and the use of estimates related to the fair value of the underlying collateral and amount and timing of expected future cash flows on individually assessed financial assets, estimated credit losses on pools of loans with similar risk characteristics, and consideration of reasonable and supportable forecasts of macroeconomic conditions, all of which are susceptible to significant change. At September 30, 2024, the loan and held-to-maturity debt securities portfolios represent 80% of the total assets on the Company’s consolidated balance sheet. The Company also maintains an allowance for lending-related commitments, specifically unfunded loan commitments and letters of credit, which relates to certain amounts the Company is committed to lend (not unconditionally cancelable) but for which funds have not yet been disbursed.

Current wording

The allowance for credit losses represents management’s estimate of expected credit losses over the life of a financial asset carried at amortized cost. Determining the amount of the allowance for credit losses is considered a critical accounting estimate because it requires significant judgment and the use of estimates related to the fair value of the underlying collateral and amount and timing of expected future cash flows on individually assessed financial assets, estimated credit losses on pools of loans with similar risk characteristics, and consideration of reasonable and supportable forecasts of macroeconomic conditions, all of which are susceptible to significant change. At March 31, 2025, the loan and held-to-maturity debt securities portfolios represent 79% of the total assets on the Company’s consolidated balance sheet. The Company also maintains an allowance for lending-related commitments, specifically unfunded loan commitments and letters of credit, which relates to certain amounts the Company is committed to lend (not unconditionally cancelable) but for which funds have not yet been disbursed.

Previous wording

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

Current wording

Key macroeconomic variable data points that are significant inputs into our credit loss models for the commercial and commercial real estate portfolios are the Baa corporate credit spread as well as the Dow Jones Total Stock Market Index specifically for the commercial portfolio and the Commercial Real Estate Price Index (“CREPI”) specifically related to the commercial real estate portfolio. The Dow Jones Total Stock Market Index is not a new macroeconomic variable used in the commercial loss model. This variable has always been a part of the expected credit loss model for commercial, however we have included the impact analysis due to the significant volatility experienced in this variable during the first quarter of 2025. Holding all other inputs constant, the table below shows the impact of changes in these key macroeconomic variable data points on the estimate of allowance for credit losses.

Previous wording

Net income for the quarter ended September 30, 2024 totaled $170.0 million, an increase of $5.8 million, or 4%, compared to the quarter ended September 30, 2023. On a per share basis, net income for the third quarter of 2024 totaled $2.47 per diluted common share compared to $2.53 for the third quarter of 2023.

Current wording

Net income for the quarter ended March 31, 2025 totaled $189.0 million, an increase of $1.7 million, or 1%, compared to the quarter ended March 31, 2024. On a per share basis, net income for the first quarter of 2025 totaled $2.69 per diluted common share compared to $2.89 for the first quarter of 2024.

Previous wording

The increase in net income for the third quarter of 2024 as compared to the same period in the prior year is primarily attributable to increased net interest income, partially offset by increased non-interest expense including the impact of the Macatawa acquisition. See “Net Interest Income”, “Non-interest Income”, “Non-interest Expense” and “Credit Quality” for further detail.

Current wording

The increase in net income for the first quarter of 2025 as compared to the same period in the prior year is primarily attributable to increased net interest income, partially offset by decreased non-interest income related to a $20.0 million gain recognized in the first quarter of 2024 related to the sale of the Company’s RBA division within its wealth management business ($20.0 million in other non-interest income from the sale, offset by $0.7 million in commissions/incentive compensation expense) and increased non-interest expense primarily due to salary annual merit increases, increases in employees related to the growth of the Company, increased software and equipment expenses and amortization of intangible assets and other acquisition-related expenses that were not applicable in the same period in the prior year. See “Net Interest Income,” “Non-interest Income,” “Non-interest Expense” and “Credit Quality” for further detail.

Previous wording

The following table presents a summary of the Company’s average balances, net interest income and related net interest margins, including a calculation on a fully taxable-equivalent basis, for the third quarter of 2024 as compared to the second quarter of 2024 (sequential quarters) and third quarter of 2023 (linked quarters):

Current wording

The following table presents a summary of the Company’s average balances, net interest income and related net interest margins, including a calculation on a fully taxable-equivalent basis, for the first quarter of 2025 as compared to the fourth quarter of 2024 (sequential quarters) and first quarter of 2024 (linked quarters):

Previous wording

(3)Interest income on tax-advantaged loans, trading securities and investment securities reflects a tax-equivalent adjustment based on the marginal federal corporate tax rate in effect as of the applicable period. The total adjustments for the three months ended September 30, 2024, June 30, 2024 and September 30, 2023 were $3.1 million, $2.9 million and $2.5 million, respectively.

Current wording

(3)Interest income on tax-advantaged loans, trading securities and investment securities reflects a tax-equivalent adjustment based on the marginal federal corporate tax rate in effect as of the applicable period. The total adjustments for the three months ended March 31, 2025, December 31, 2024 and March 31, 2024 were $2.9 million, $3.1 million and $2.8 million, respectively.

Previous wording

For the third quarter of 2024, net interest income totaled $502.6 million, an increase of $32.0 million as compared to the second quarter of 2024, and an increase of $40.2 million as compared to the third quarter of 2023. Net interest margin was 3.49% (3.51% on a FTE basis, non-GAAP) during the third quarter of 2024 compared to 3.50% (3.52% on a FTE basis, non-GAAP) during the second quarter of 2024, and 3.60% (3.62% on a FTE basis, non-GAAP) during the third quarter of 2023.

Current wording

For the first quarter of 2025, net interest income totaled $526.5 million, an increase of $1.3 million as compared to the fourth quarter of 2024, and an increase of $62.3 million as compared to the first quarter of 2024. Net interest margin was 3.54% (3.56% on a FTE basis, non-GAAP) during the first quarter of 2025 compared to 3.49% (3.51% on a FTE basis, non-GAAP) during the fourth quarter of 2024, and 3.57% (3.59% on a FTE basis, non-GAAP) during the first quarter of 2024.

Previous wording

The following table presents an analysis of the changes in the Company’s net interest income on a FTE basis (non-GAAP) comparing the three month ended September 30, 2024 to each of the three month periods ended June 30, 2024 and September 30, 2023 and nine month periods ended September 30, 2024 and 2023. The reconciliations set forth the changes in the net interest income on a FTE basis (non-GAAP) as a result of changes in volumes, changes in rates and differing number of days in each period:

Current wording

The following table presents an analysis of the changes in the Company’s net interest income on a FTE basis (non-GAAP) comparing the three month ended March 31, 2025 to each of the three month periods ended December 31, 2024 and March 31, 2024. The reconciliations set forth the changes in the net interest income on a FTE basis (non-GAAP) as a result of changes in volumes, changes in rates and differing number of days in each period:

Previous wording

(1)Wealth management revenue is comprised of the trust and asset management revenue of Wintrust Private Trust Company, N.A. (“WPTC”) and Great Lakes Advisors, the brokerage commissions, managed money fees and insurance product commissions at Wintrust Investments and fees from tax-deferred like-kind exchange services provided by CDEC.

Current wording

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

Previous wording

Mortgage banking revenue decreased for the three months ended September 30, 2024 as compared to the same period in 2023 due to lower net revenue related to MSR activity and valuation adjustments. On a year-to-date basis, mortgage banking revenue decreased slightly for the nine months ended September 30, 2024 as compared to the same period in 2023 as a result of lower net revenue related to MSR activity which was offset by higher production revenue from increased mortgage production. Mortgage banking revenue includes revenue from activities related to originating, selling and servicing residential real estate loans for the secondary market. A main factor in the mortgage banking revenue recognized by the Company is the volume of mortgage loans originated or purchased for sale. Mortgage loans originated for sale totaled $766.8 million in the third quarter of 2024 as compared to $572.6 million in the third quarter of 2023. On a year-to-date basis, mortgage loans originated for sale totaled $2.0 billion for the nine months ended September 30, 2024 as compared to $1.5 billion for the nine months ended September 30, 2023. The increase in originations from the comparative three and nine month periods was driven by growth in both purchase and refinance originations as housing inventories have improved and interest rates pulled back from peak levels reached in 2023. The percentage of origination volume from refinancing activities was 28% and 22% for the three and nine months ended September 30, 2024, as compared to 16% and 17%, for the same periods in 2023, respectively.

Current wording

Mortgage banking revenue decreased for the three months ended March 31, 2025 as compared to the same period in 2024 due to lower production margins and lower net revenue related to MSR activity and valuation adjustments. Mortgage banking revenue includes revenue from activities related to originating, selling and servicing residential real estate loans for the secondary market. A main factor in the mortgage banking revenue recognized by the Company is the volume of mortgage loans originated or purchased for sale and the related production margins. Mortgage loans originated for sale totaled $460.5 million in the first quarter of 2025 as compared to $475.6 million in the first quarter of 2024. The slight decrease in linked quarter originations was driven by a slight uptick in rates coupled with a slightly lower refinance percentage offset by slightly higher inventory levels. The percentage of origination volume from refinancing activities was 23% for the three months ended March 31, 2025, as compared to 25%, for the same periods in 2024.

Previous wording

The Company records MSRs at fair value on a recurring basis. For the three months ended September 30, 2024, the fair value of the MSRs portfolio decreased as a result of an unfavorable fair value adjustment of $17.3 million was recorded and a reduction in value of $7.3 million due to payoffs, paydowns and repurchases of the existing portfolio, partially offset as retained servicing rights led to capitalization of$6.4 million. On a year-to-date basis, the fair value of MSRs decreased due to a unfavorable fair value adjustment of $8.9 million as well as a reduction in value of $17.2 million due to payoffs, paydowns and repurchases of the existing portfolio, partially offset by retained servicing rights led to capitalization of $20.0 million. See Note (9) “Mortgage Servicing Rights (“MSRs”)” to the Consolidated Financial Statements in Item 1 of this report for a summary of the changes in the carrying value of MSRs.

Current wording

The Company records MSRs at fair value on a recurring basis. For the three months ended March 31, 2025, the fair value of the MSRs portfolio decreased as a result of an unfavorable fair value adjustment of $7.5 million was recorded and a reduction in value of $4.6 million due to payoffs, paydowns and repurchases of the existing portfolio, partially offset as retained servicing rights led to capitalization of$4.7 million. See Note (9) “Mortgage Servicing Rights (“MSRs”)” to the Consolidated Financial Statements in Item 1 of this report for a summary of the changes in the carrying value of MSRs.

Previous wording

Mortgage banking revenue is also impacted by changes in the fair value of derivative contracts held to economically hedge a portion of the fair value adjustments related to the Company’s MSRs portfolio. The change in fair value of the derivative contracts held as an economic hedge was a favorable $6.9 million and $3.5 million for the three and nine months ended September 30, 2024, respectively.

Current wording

Mortgage banking revenue is also impacted by changes in the fair value of derivative contracts held to economically hedge a portion of the fair value adjustments related to the Company’s MSRs portfolio. The change in fair value of the derivative contracts held as an economic hedge was a favorable $4.9 million for the three months ended March 31, 2025 compared to an unfavorable $2.6 million for the three months ended March 31, 2024.

Previous wording

Service charges on deposits increased for the three and nine months ended September 30, 2024 as compared to the same periods in 2023 primarily as a result of increased account analysis services fees. Service charges on deposit accounts include fees charged to deposit customers for various services, including account analysis services, and are based on factors such as the size and type of customer, type of product and number of transactions. The fees are based on a standard schedule of fees and, depending on the nature of the service performed, the service is performed at a point in time or over a period of a month.

Current wording

Service charges on deposits increased for the three months ended March 31, 2025 as compared to the same period in 2024 primarily as a result of increased commercial account analysis service fees, and the Macatawa acquisition. Service charges on deposit accounts include fees charged to deposit customers for various services, including account analysis services, and are based on factors such as the size and type of customer, type of product and number of transactions. The fees are based on a standard schedule of fees and, depending on the nature of the service performed, the service is performed at a point in time or over a period of a month.

Previous wording

The Company recognized net gains on investment securities for the three and nine months ended September 30, 2024 of $3.2 million and $233,000, respectively. The Company recognized net losses on investment securities for the three and nine months ended September 30, 2023 of $2.4 million and $1.0 million, respectively. The net gains for the three and nine months ended September 30, 2024 were primarily due to gains on the Company’s equity investment securities recorded in the third quarter of 2024. See Note (5) “Investment Securities” to the Consolidated Financial Statements in Item 1 of this report for more information on net gains and losses on investment securities.

Current wording

The Company recognized net gains on investment securities for the three months ended March 31, 2025 of $3.2 million. The Company recognized net gains on investment securities for the three months ended March 31, 2024 of $1.3 million. The net gains for the three months ended March 31, 2025 were primarily due to unrealized gains on the Company’s equity investment securities with a readily determinable fair value recorded in the first quarter of 2025. See Note (5) “Investment Securities” to the Consolidated Financial Statements in Item 1 of this report for more information on net gains and losses on investment securities.

Previous wording

Fees from covered call options for the three and nine months ended September 30, 2024 decreased $3.2 million and $9.3 million, respectively, when compared to the same periods in the prior year, respectively. The decreased income was primarily because the Company sold less options than the prior year for both comparative periods. The Company has typically written call options with terms of less than three months against certain U.S. Treasury and agency securities held in its portfolio for liquidity and other purposes. Management has effectively entered into these transactions with the goal of economically hedging security positions and enhancing its overall return on its investment portfolio. These option transactions are designed to increase the total return associated with holding certain investment securities and do not qualify as hedges pursuant to accounting guidance. There were no outstanding call option contracts at September 30, 2024 and 2023.

Current wording

Fees from covered call options for the three months ended March 31, 2025 decreased $1.4 million when compared to the same period in the prior year. The decreased income was primarily because the Company sold less options than in the comparative period. The Company has typically written call options with terms of less than three months against certain U.S. Treasury and agency securities held in its portfolio for liquidity and other purposes. Management has effectively entered into these transactions with the goal of economically hedging security positions and enhancing its overall return on its investment portfolio. These option transactions are designed to increase the total return associated with holding certain investment securities and do not qualify as hedges pursuant to accounting guidance. There were no outstanding call option contracts at March 31, 2025 and 2024.

Previous wording

Miscellaneous non-interest income includes loan servicing fees, income from other investments, and other fees. This category of income increased $277,000 and $30.9 million for the three and nine months ended September 30, 2024 compared to the same periods in 2023, respectively. For the three months ended September 30, 2024, miscellaneous income increased compared to the same period in 2023 primarily due higher fee income earned on card-related arrangements and partnership income. The increased income on a year-to-date basis was primarily due to a $20.0 million gain recognized in the first quarter of 2024 related to the sale of the Company’s Retirement Benefits Advisors (“RBA") division within its wealth management business as well as a $4.6 million gain recognized in the second quarter of 2024 on the sale of premium finance receivables.

Current wording

Miscellaneous non-interest income includes loan servicing fees, income from other investments, and other fees. This category of income decreased $22.4 million for the three months ended March 31, 2025 compared to the same period in 2024. For the three months ended March 31, 2025, miscellaneous income decreased compared to the same period in 2024 primarily due to a $20.0 million gain recognized in the first quarter of 2024 related to the sale of the Company’s RBA division within its wealth management business.

Previous wording

Salaries and employee benefits expense increased for the three and nine months ended September 30, 2024 as compared to the same periods in 2023. The increase was primarily due to elevated commissions from increased mortgage production as well as due to the increase in employees related to the growth of the Company, including the Macatawa acquisition.

Current wording

Salaries and employee benefits expense increased for the three months ended March 31, 2025 as compared to the same period in 2024. The increase was primarily due to annual merit increases and increases in employees related to the growth of the Company, including the Macatawa acquisition.

Previous wording

Software and equipment expense increased for the three and nine months ended September 30, 2024 as compared to the same periods in 2023 as a result of higher software license fees as well as higher computer and software depreciation expense as the Company invests in enhancements to the digital customer experience, upgrades to infrastructure and enhancements to information security capabilities.

Current wording

Software and equipment expense increased for the three months ended March 31, 2025 as compared to the same period in 2024 as a result of higher software license fees as well as higher computer and software depreciation expense as the Company invests in enhancements to the digital customer experience, upgrades to infrastructure and enhancements to information security capabilities. Software and equipment expense includes furniture, equipment and computer software, depreciation, and repairs and maintenance costs.

Previous wording

Amortization of other acquisition-related intangible assets increased for the three and nine months ended September 30, 2024 compared to the same periods in 2023. The Macatawa acquisition impacted this increase by approximately $3.0 million.

Current wording

Amortization of other acquisition-related intangible assets increased for the three months ended March 31, 2025 compared to the same period in 2024 as a result of amortization of the core deposit intangible asset associated with the Macatawa acquisition.

Previous wording

FDIC insurance expense increased for the three and nine months ended September 30, 2024 compared to the same periods in 2023. On a year-to-date basis, the increase is primarily due to the Company’s recognition of approximately $5.2 million accrued in the first quarter of 2024 as a result of the FDIC special assessment on uninsured deposits in response to certain bank failures that occurred in 2023 as compared to the nine months ended September 30, 2023. For the three months ended September 30, 2024, the increased expense is primarily due to balance sheet growth as compared to the three months ended September 30, 2023.

Current wording

FDIC insurance expense decreased for the three months ended March 31, 2025 compared to the same period in 2024 primarily due to $5.2 million recognized in March 31, 2024 related to the FDIC’s special assessment on uninsured deposits in response to certain bank failures that occurred in 2023.

Previous wording

Miscellaneous expense includes ATM expenses, correspondent bank charges, directors’ fees, telephone, postage, corporate insurance, dues and subscriptions, problem loan expenses and other miscellaneous operational losses and costs. During the three and nine months ended September 30, 2024, the company incurred $1.6 million and $2.5 million, respectively, in acquisition expenses related to the acquisition of Macatawa.

Current wording

Miscellaneous non-interest expense includes ATM expenses, correspondent bank charges, directors’ fees, telephone, postage, corporate insurance, dues and subscriptions, problem loan expenses and other miscellaneous operational losses and costs. During the three months ended March 31, 2025, the company incurred $2.7 million in acquisition-related expenses related to the Macatawa acquisition.

Previous wording

The effective tax rates were partially impacted by the tax effects related to share-based compensation which fluctuate based on the Company’s stock price and timing of employee stock option exercises and vesting of other shared-based awards. The Company recorded net excess tax benefits of $4.4 million in the first nine months of 2024, compared to net excess tax benefits of $2.9 million in the first nine months of 2023 related to share-based compensation, most of which was recorded in the first quarter for each year.

Current wording

The effective tax rates were partially impacted by the tax effects related to share-based compensation which fluctuate based on the Company’s stock price and timing of employee stock option exercises and vesting of other shared-based awards. The Company recorded net excess tax benefits of $3.7 million in the first three months of 2025, compared to net excess tax benefits of $4.4 million in the first three months of 2024 related to share-based compensation.

Previous wording

The community banking segment’s net interest income for the quarter ended September 30, 2024 totaled $396.9 million as compared to $360.6 million for the same period in 2023, an increase of $36.3 million, or 10%. On a year-to-date basis, net interest income for the nine months ended September 30, 2024 and September 30, 2023 was $1.1 billion. The increase in thethird quarter of 2024, was primarily attributable to increased interest and fees on loans. The community banking segment’s non-interest income totaled$66.3 million in the third quarter of 2024, andecrease of$4.2 million, or 6%, when compared to the third quarter of 2023 total of$70.5 million. On a year-to-date basis, non-interest income totaled$212.6 million for thenine months ended September 30, 2024, anincrease of$5.2 million, or 2%, compared to$207.4 million for thenine months ended September 30, 2023. Theincrease in thenine month period was primarily the result of gains on investment securities and increased service charges on deposit accounts, partially offset by decreased mortgage banking revenue due to the decrease in the fair value of MSRs related to the changes in fair value model assumptions. The community banking segment recorded provision for credit losses of$20.5 million and $77.2 million, respectively, for the three and nine months ended September 30, 2024, compared to$16.7 million and $64.6 million, respectively, for the same periods in 2023. Theincrease in provision for credit losses for thethree and nine month period wasprimarily the result of loan growth, including $15.5 million in Day 1 provision related to the acquisition of Macatawa, coupled with losses experienced in the Commercial and Commercial Real

Current wording

The community banking segment’s net interest income for the quarter ended March 31, 2025 totaled $419.0 million as compared to $363.7 million for the same period in 2024, an increase of $55.3 million, or 15%. The increase in thefirst quarter of 2025, was primarily attributable to growth in average earning assets coupled with a relatively stable net interest margin. The community banking segment’s non-interest income totaled$73.5 million in the first quarter of 2025, adecrease of$1.1 million, or 2%, when compared to the first quarter of 2024 total of$74.6 million. Thedecrease in thethree month period was primarily the result of decreased mortgage banking revenue due to the decreases in MSRs related to the change in fair value model assumptions and losses on investment securities, partially offset by increased service charges on deposit accounts. The community banking segment recorded provision for credit losses of$22.4 million for the three months ended March 31, 2025, compared to$20.4 millionfor the same period in 2024. Theincrease in provision for credit losses for thethree month period wasprimarily the result of loan growth, coupled with a macroeconomic uncertainty qualitative overlay. Non-interest expenses increased by $32.8 million for the quarter ended March 31, 2025 compared to the same period in 2024, primarily because of higher salary, commissions, and incentive compensation. The community banking segment’s net income for the quarter ended March 31, 2025 totaled$134.3 million, an increase of $14.2 million as compared to net income in thefirst quarter of 2024 of$120.0 million.

Previous wording

The specialty finance segment’s net interest income totaled $88.4 million for the quarter ended September 30, 2024, compared to $85.4 million for the same period in 2023, an increase of $3.0 million, or 4%. On a year-to-date basis, net interest income for the segment increased $25.2 million, or 10%, compared to the same period in 2023. The increase for the three and nine month period was primarily due to loan growth and increased interest rates on the premium finance receivables portfolios. The specialty finance segment’s non-interest income increased to $29.6 million from $20.8 million for the three months ended September 30, 2024 and 2023, respectively, and stood at $89.2 million and $78.3 million for the nine months ended September 30, 2024 and 2023, respectively. Our property and casualty insurance premium finance operations, life insurance finance operations, lease financing operations and accounts receivable finance operations accounted for 51%, 29%, 18% and 2%, respectively, of the net revenues of our specialty finance business for the nine month period ended September 30, 2024. The net income of the specialty finance segment for the quarter ended September 30, 2024 totaled $46.8 million as compared to $40.5 million for the quarter ended September 30, 2023. On a year-to-date basis, the net income of the specialty finance segment for the nine months ended September 30, 2024 totaled $142.4 million as compared to $123.7 million for the nine months ended September 30, 2023.

Current wording

The specialty finance segment’s net interest income totaled $91.3 million for the quarter ended March 31, 2025, compared to $82.3 million for the same period in 2024, an increase of $9.0 million, or 11%. The increase for the three month period was primarily due to loan growth as a result of effective marketing and customer servicing. The specialty finance segment’s provision for credit losses totaled $1.5 million and $1.3 million for the three months ended March 31, 2025 and 2024, respectively. The increase in provision for credit losses for the three month period was primarily the result of loan growth. The specialty finance segment’s non-interest income increased to $31.0 million from $27.3 million for the three months ended March 31, 2025 and 2024, respectively. Non-interest expenses increased by $2.7 million for the quarter ended March 31, 2025 compared to the same period in 2024, primarily because of higher salary, commissions, and incentive compensation as well as other segment expenses. Our property and casualty insurance premium finance operations, life insurance finance operations, lease financing operations and accounts receivable finance operations accounted for 47%, 30%, 21% and 2%, respectively, of the net revenues of our specialty finance business for the three month period ended March 31, 2025. The net income of the specialty finance segment for the quarter ended March 31, 2025 totaled $50.3 million as compared to $42.5 million for the quarter ended March 31, 2024.

Previous wording

The wealth management segment reported net interest income of $6.9 million for the third quarter of 2024 compared to $8.0 million in the same quarter of 2023, a decrease of $1.1 million, or 13%. On a year-to-date basis, net interest income totaled $22.6 million for the first nine months of 2024, as compared to $24.4 million for the first nine months of 2023. Net interest income for this segment is primarily comprised of an allocation of the net interest income earned by the community banking segment on non-interest-bearing and interest-bearing wealth management customer account balances on deposit at the banks. Wealth management customer account balances on deposit at the banks averaged $1.5 billion and $1.7 billion in the first nine months of 2024 and 2023, respectively. This segment recorded non-interest income of $37.4 million for the third quarter of 2024 compared to $37.3 million for the third quarter of 2023. On a year-to-date basis, this segment recorded non-interest income of $131.5 million for the first nine months of 2024 as compared to $101.0 million for the first nine months of 2023. The increase was primarily due to a $20.0 million gain recognized in the first quarter of 2024 related to the sale of the Company’s RBA division within the wealth management business. Distribution of wealth management services through each bank continues to be a focus of the Company. The Company is committed to growing the wealth management segment in order to better service its customers and create a more diversified revenue stream. The wealth management segment’s net income totaled $8.0 million for the third quarter of 2024 compared to $8.5 million for the third quarter of 2023. On a year-to-date basis, the wealth management segment’s net income totaled $40.8 million and $23.6 million for the nine month period ended September 30, 2024 and 2023, respectively.

Current wording

The wealth management segment reported net interest income of $5.4 million for the first quarter of 2025 compared to $7.8 million in the same quarter of 2024, a decrease of $2.4 million. Net interest income for this segment is primarily comprised of an allocation of the net interest income earned by the community banking segment on non-interest-bearing and interest-bearing wealth management customer account balances on deposit at the banks. Wealth management customer account balances on deposit at the banks averaged $1.2 billion and $1.5 billion in the first three months of 2025 and 2024, respectively. This segment recorded non-interest income of $33.8 million for the first quarter of 2025 compared to $58.5 million for the first quarter of 2024. The decrease was primarily due a $20.0 million gain recognized in the first quarter of 2024 related to the sale of the Company’s RBA division within its wealth management business. Non-interest expenses decreased by $1.1 million for the quarter ended March 31, 2025 compared to the same period in 2024, primarily because of decreased salary, commissions, and incentive compensation. Distribution of wealth management services through each bank continues to be a focus of the Company. The Company is committed to growing the wealth management segment in order to better service its customers and create a more diversified revenue stream. The wealth management segment’s net income totaled $4.5 million for the first quarter of 2025 compared to $24.7 million for the first quarter of 2024.

Previous wording

Total assets were $63.8 billion at September 30, 2024, representing an increase of $8.2 billion, or 15%, when compared to September 30, 2023 and an increase of approximately $4.0 billion, or 27% on an annualized basis, when compared to June 30, 2024. Total funding, which includes deposits, all notes and advances, including secured borrowings and the junior subordinated debentures, was $55.8 billion at September 30, 2024, $52.4 billion at June 30, 2024, and $48.7 billion at September 30, 2023. See Notes (5), (6), (10), (11) and (12) of the Consolidated Financial Statements presented under Item 1 of this report for additional period-end detail on the Company’s interest-earning assets and funding liabilities.

Current wording

Total assets were $65.9 billion at March 31, 2025, representing an increase of $8.3 billion, or 14%, when compared to March 31, 2024 and an increase of approximately $1.0 billion, or 6% on an annualized basis, when compared to December 31, 2024. Total funding, which includes deposits, all notes and advances, including secured borrowings and the junior subordinated debentures, was $57.8 billion at March 31, 2025, $56.8 billion at December 31, 2024, and $50.4 billion at March 31, 2024. See Notes (5), (6), (10), (11) and (12) of the Consolidated Financial Statements presented under Item 1 of this report for additional period-end detail on the Company’s interest-earning assets and funding liabilities.

Previous wording

Mortgage loans held-for-sale. Mortgage loans held-for-sale represents such loans awaiting subsequent sale in the secondary market with such sales eliminating the interest-rate risk associated with these loans, as they are predominantly long-term fixed rate loans, and provide a source of non-interest revenue. The increase in average balance for the third quarter of 2024 as compared to the sequential and prior year periods is primarily due to higher mortgage origination production.

Current wording

Mortgage loans held-for-sale. Mortgage loans held-for-sale represents such loans awaiting subsequent sale in the secondary market with such sales eliminating the interest-rate risk associated with these loans, as they are predominantly long-term fixed rate loans, and provide a source of non-interest revenue. The decrease in average balance for the first quarter of 2025 as compared to the sequential and prior year periods is primarily due to lower mortgage origination production.

Previous wording

Loans, net of unearned income. Growth realized in the combined commercial and commercial real estate loan categories for the third quarter of 2024 as compared to the sequential and prior year periods is primarily attributable to increased business development efforts as well as loans acquired through the Macatawa acquisition. The aggregate balances of these loan categories comprised 59%, 58% and 57% of the average loan portfolio in the third quarter of 2024, second quarter of 2024 and third quarter of 2023, respectively.

Current wording

Loans, net of unearned income. Growth realized in the combined commercial and commercial real estate loan categories for the first quarter of 2025 as compared to the sequential and prior year periods is primarily attributable to increased business development efforts. The aggregate balances of these loan categories comprised 59% in the first quarter of 2025 and fourth quarter of 2024 and 58% of the average loan portfolio in the first quarter of 2024.

Previous wording

Residential real estate loans averaged $3.2 billion in the third quarter of 2024, and increased $614.1 million, or 24%, from the average balance of $2.6 billion in the same period of 2023. Additionally, compared to the quarter ended June 30, 2024, the average balance increased $277.3 million, or 38% on an annualized basis. Growth is due to the Company continuing to allocate a portion of its mortgage production for investment instead of for subsequent sale into the secondary market.

Current wording

Residential real estate loans averaged $3.5 billion in the first quarter of 2025, and increased $811.3 million, or 30%, from the average balance of $2.7 billion in the same period of 2024. Additionally, compared to the quarter ended December 31, 2024, the average balance increased $163.8 million, or 20% on an annualized basis. Growth is due to the Company continuing to originate non-agency mortgages that are held-for-investment.

Previous wording

The increase in the premium finance receivables during the third quarter of 2024 compared to the third quarter of 2023 was the result of continued originations within the portfolio due to hardening insurance market conditions driving a higher average size of new property and casualty insurance premium finance receivables as well as effective marketing and customer servicing. Approximately $4.8 billion of premium finance receivables were originated in the third quarter of 2024 compared to $4.6 billion during the same period of 2023. Premium finance receivables consist of a property and casualty portfolio and a life portfolio comprising approximately 47% and 53%, respectively, of the average total balance of premium finance receivables for the third quarter of 2024, and 46% and 54%, respectively, for the third quarter of 2023.

Current wording

The increase in the premium finance receivables during the first quarter of 2025 compared to the first quarter of 2024 was the result of effective marketing and customer servicing. Approximately $4.8 billion of premium finance receivables were originated in the first quarter of 2025 compared to $4.6 billion during the same period of 2024. Premium finance receivables consist of a property and casualty portfolio and a life portfolio comprising approximately 47% and 53%, respectively, of the average total balance of premium finance receivables for the first quarter of 2025, and 46% and 54%, respectively, for the first quarter of 2024.