þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Exact name of registrant as specified in its charter)

Illinois		36-3873352
(State of incorporation or organization)		(I.R.S. Employer Identification No.)

727 North Bank Lane
Lake Forest, Illinois 60045

(847) 615-4096

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.      Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer þ		Accelerated Filer o		Non-Accelerated Filer o		Smaller Reporting Company o
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock — no par value, 23,973,495 shares, as of May 7, 2009

 

 

		Page
PART I. — FINANCIAL INFORMATION
ITEM 1. Financial Statements.		1-23
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.		24-51
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.		52-53
ITEM 4. Controls and Procedures.		54
PART II. — OTHER INFORMATION
ITEM 1. Legal Proceedings.		NA
ITEM 1A. Risk Factors.		55
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.		55
ITEM 3. Defaults Upon Senior Securities.		NA
ITEM 4. Submission of Matters to a Vote of Security Holders.		NA
ITEM 5. Other Information.		NA
ITEM 6. Exhibits.		55
Signatures.		56
EX-10.1:
EX-31.1:
EX-31.2:
EX-32.1:

PART I

WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION

		(Unaudited)								(Unaudited)
		March 31,				December 31,				March 31,
(In thousands)		2009				2008				2008
Assets
Cash and due from banks		$	122,207			$	219,794			$	160,890
Federal funds sold and securities purchased under resale agreements			98,454				226,110				280,408
Interest bearing deposits with banks			266,512				123,009				11,280
Available-for-sale securities, at fair value			1,413,576				784,673				1,110,854
Trading account securities			13,815				4,399				1,185
Brokerage customer receivables			15,850				17,901				22,786
Mortgage loans held-for-sale, at fair value			207,107				51,029				86,634
Mortgage loans held-for-sale, at lower of cost or market			11,600				10,087				15,690
Loans, net of unearned income			7,841,447				7,621,069				6,874,916
Less: Allowance for loan losses			74,248				69,767				53,758
Net loans			7,767,199				7,551,302				6,821,158
Premises and equipment, net			349,245				349,875				344,863
Accrued interest receivable and other assets			263,145				240,664				188,607
Trade date securities receivable			—				788,565				395,041
Goodwill			276,310				276,310				276,121
Other intangible assets			13,921				14,608				16,949
Total assets		$	10,818,941			$	10,658,326			$	9,732,466
Liabilities and Shareholders’ Equity
Deposits:
Non-interest bearing		$	745,194			$	757,844			$	670,433
Interest bearing			7,880,783				7,618,906				6,813,149
Total deposits			8,625,977				8,376,750				7,483,582
Notes payable			1,000				1,000				70,300
Federal Home Loan Bank advances			435,981				435,981				434,482
Other borrowings			250,488				336,764				293,091
Subordinated notes			70,000				70,000				75,000
Junior subordinated debentures			249,502				249,515				249,621
Trade date securities payable			7,170				—				236,217
Accrued interest payable and other liabilities			115,596				121,744				136,880
Total liabilities			9,755,714				9,591,754				8,979,173
Shareholders’ equity:
Preferred stock			282,662				281,873				—
Common stock			26,766				26,611				26,416
Surplus			575,166				571,887				544,594
Treasury stock			(122,302	)			(122,290	)			(122,252	)
Retained earnings			315,855				318,793				314,038
Accumulated other comprehensive loss			(14,920	)			(10,302	)			(9,503	)
Total shareholders’ equity			1,063,227				1,066,572				753,293
Total liabilities and shareholders’ equity		$	10,818,941			$	10,658,326			$	9,732,466

See accompanying notes to unaudited consolidated financial statements.

		Three Months Ended
		March 31,
(In thousands, except per share data)		2009				2008
Interest income
Interest and fees on loans		$	106,887			$	118,953
Interest bearing deposits with banks			660				120
Federal funds sold and securities purchased under resale agreements			61				634
Securities			14,327				16,081
Trading account securities			24				31
Brokerage customer receivables			120				357
Total interest income			122,079				136,176
Interest expense
Interest on deposits			45,953				61,430
Interest on Federal Home Loan Bank advances			4,453				4,556
Interest on notes payable and other borrowings			1,870				2,770
Interest on subordinated notes			580				1,087
Interest on junior subordinated debentures			4,441				4,591
Total interest expense			57,297				74,434
Net interest income			64,782				61,742
Provision for credit losses			14,473				8,555
Net interest income after provision for credit losses			50,309				53,187
Non-interest income
Wealth management			5,926				7,865
Mortgage banking			16,232				6,096
Service charges on deposit accounts			2,970				2,373
Gain on sales of premium finance receivables			322				1,141
Losses on available-for-sale securities, net			(2,038	)			(1,333	)
Other			13,015				8,430
Total non-interest income			36,427				24,572
Non-interest expense
Salaries and employee benefits			44,820				36,672
Equipment			3,938				3,926
Occupancy, net			6,190				5,867
Data processing			3,136				2,798
Advertising and marketing			1,095				999
Professional fees			2,883				2,068
Amortization of other intangible assets			687				788
Other			14,213				9,731
Total non-interest expense			76,962				62,849
Income before taxes			9,774				14,910
Income tax expense			3,416				5,205
Net income			6,358				9,705
Dividends on preferred shares			5,000				—
Net income applicable to common shares		$	1,358			$	9,705
Net income per common share — Basic		$	0.06			$	0.41
Net income per common share — Diluted		$	0.06			$	0.40
Cash dividends declared per common share		$	0.18			$	0.18
Weighted average common shares outstanding			23,855				23,518
Dilutive potential common shares			221				582
Average common shares and dilutive common shares			24,076				24,100

																						Accumulated
																						Other
																						Compre-				Total
		Preferred				Common								Treasury				Retained				hensive				Shareholders’
(In thousands)		Stock				Stock				Surplus				Stock				Earnings				Income (Loss)				Equity
Balance at December 31, 2007		$	—			$	26,281			$	539,586			$	(122,196	)		$	309,556			$	(13,672	)		$	739,555
Comprehensive income:
Net income			—				—				—				—				9,705				—				9,705
Other comprehensive income, net of tax:
Unrealized gains on securities, net of reclassification adjustment			—				—				—				—				—				8,091				8,091
Unrealized losses on derivative Instruments			—				—				—				—				—				(3,922	)			(3,922	)
Comprehensive income																							—				13,874
Cash dividends declared on common stock			—				—				—				—				(4,231	)			—				(4,231	)
Common stock repurchases			—				—				—				(56	)			—				—				(56	)
Stock-based compensation			—				—				2,498				—				—				—				2,498
Cumulative effect of change in accounting for split-dollar life insurance							—				—				—				—				(992	)			(992	)
Common stock issued for:																											—
Exercise of stock options and warrants			—				62				1,703				—				—				—				1,765
Restricted stock awards			—				44				(324	)			—				—				—				(280	)
Director compensation plan							29				1,131				—				—				—				1,160
Balance at March 31, 2008		$	—			$	26,416			$	544,594			$	(122,252	)		$	314,038			$	(9,503	)		$	753,293
Balance at December 31, 2008		$	281,873			$	26,611			$	571,887			$	(122,290	)		$	318,793			$	(10,302	)		$	1,066,572
Comprehensive income:
Net income			—				—				—				—				6,358				—				6,358
Other comprehensive income, net of tax:
Unrealized losses on securities, net of reclassification adjustment			—				—				—				—				—				(5,694	)			(5,694	)
Unrealized gains on derivative instruments			—				—				—				—				—				1,076				1,076
Comprehensive income																											1,740
Cash dividends declared on common stock			—				—				—				—				(4,296	)			—				(4,296	)
Dividends on preferred stock			789				—				—				—				(5,000	)			—				(4,211	)
Common stock repurchases			—				—				—				(12	)			—				—				(12	)
Stock-based compensation			—				—				1,772				—				—				—				1,772
Common stock issued for:
Exercise of stock options and warrants			—				46				575				—				—				—				621
Restricted stock awards			—				60				(705	)			—				—				—				(645	)
Director compensation plan			—				49				1,637				—				—				—				1,686
Balance at March 31, 2009		$	282,662			$	26,766			$	575,166			$	(122,302	)		$	315,855			$	(14,920	)		$	1,063,227

		Three Months Ended March 31,
		2009				2008
Other Comprehensive Income:
Unrealized (losses) gains on available-for-sale securities arising during the period, net		$	(11,314	)		$	11,434
Unrealized gains (losses) on derivative instruments arising during the period, net			1,707				(6,380	)
Less: Reclassification adjustment for losses included in net income, net			(2,038	)			(1,333	)
Less: Income tax (benefit) expense			(2,951	)			2,218
Other Comprehensive (loss) income		$	(4,618	)		$	4,169

		Three Months Ended
		March 31,
(In thousands)		2009				2008
Operating Activities:
Net income		$	6,358			$	9,705
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses			14,473				8,555
Depreciation and amortization			5,109				5,018
Stock-based compensation expense			1,772				2,498
Tax (expense) benefit from stock-based compensation arrangements			(576	)			555
Excess tax benefits from stock-based compensation arrangements		(68		)			(394	)
Net (accretion) amortization of premium on securities			(158	)			(286	)
Mortgage servicing rights fair value change and amortization, net			1,659				829
Originations and purchases of mortgage loans held-for-sale			(1,245,129	)			(462,860	)
Proceeds from sales of mortgage loans held-for-sale			1,099,747				473,723
Bank owned life insurance income, net of claims			(286	)			(613	)
Gain on sales of premium finance receivables			(322	)			(1,141	)
(Increase) decrease in trading securities, net			(9,416	)			386
Net decrease in brokerage customer receivables			2,051				1,420
Gain on mortgage loans sold			(12,209	)			(3,635	)
Losses on available-for-sale securities, net			2,038				1,333
Loss on sales of premises and equipment, net			11				—
(Increase) decrease in accrued interest receivable and other assets, net			490				(2,865	)
(Decrease) increase in accrued interest payable and other liabilities, net			(2,004	)			15,846
Net Cash (Used for) Provided by Operating Activities			(136,460	)			48,074
Investing Activities:
Proceeds from maturities of available-for-sale securities			665,932				364,956
Proceeds from sales of available-for-sale securities			992,398				187,292
Purchases of available-for-sale securities			(1,504,650	)			(400,110	)
Proceeds from sales of premium finance receivables			—				114,805
Net increase in interest-bearing deposits with banks			(143,503	)			(870	)
Net increase in loans			(251,507	)			(200,808	)
Purchases of premises and equipment, net			(3,766	)			(9,896	)
Net Cash (Used for) Provided by Investing Activities			(245,096	)			55,369
Financing Activities:
Increase in deposit accounts			249,221				12,106
(Decrease) increase in other borrowings, net			(86,276	)			38,657
Increase in notes payable, net			—				9,600
Increase in Federal Home Loan Bank advances, net			—				19,301
Issuance of preferred stock, net of issuance costs			—				—
Excess tax benefits from stock—based compensation arrangements		68					394
Issuance of common shares resulting from exercise of stock options, employee stock purchase plan and conversion of common stock warrants			553				930
Common stock repurchases			(12	)			(56	)
Dividends paid			(7,241	)			(4,231	)
Net Cash Provided by Financing Activities			156,313				76,701
Net (Decrease) Increase in Cash and Cash Equivalents			(225,243	)			180,144
Cash and Cash Equivalents at Beginning of Period			445,904				261,154
Cash and Cash Equivalents at End of Period		$	220,661			$	441,298

WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(1) Basis of Presentation

The consolidated financial statements of Wintrust Financial Corporation and Subsidiaries (“Wintrust” or “the Company”) presented herein are unaudited, but in the opinion of management reflect all necessary adjustments of a normal or recurring nature for a fair presentation of results as of the dates and for the periods covered by the consolidated financial statements.

Wintrust is a financial holding company currently engaged in the business of providing traditional community banking services to customers in the Chicago metropolitan area and southern Wisconsin. Additionally, the Company operates various non-bank subsidiaries. Wintrust has 15 wholly-owned bank subsidiaries (collectively, “the Banks”), nine of which the Company started as de novo institutions, including Lake Forest Bank & Trust Company (“Lake Forest Bank”), Hinsdale Bank & Trust Company (“Hinsdale Bank”), North Shore Community Bank & Trust Company (“North Shore Bank”), Libertyville Bank & Trust Company (“Libertyville Bank”), Barrington Bank & Trust Company, N.A. (“Barrington Bank”), Crystal Lake Bank & Trust Company, N.A. (“Crystal Lake Bank”), Northbrook Bank & Trust Company (“Northbrook Bank”), Beverly Bank & Trust Company, N.A. (“Beverly Bank”) and Old Plank Trail Community Bank, N.A. (“Old Plank Trail Bank”). The Company acquired Advantage National Bank (“Advantage Bank”) in October 2003, Village Bank & Trust (“Village Bank”) in December 2003, Northview Bank & Trust (“Northview Bank”) in September 2004, Town Bank in October 2004, State Bank of The Lakes in January 2005, First Northwest Bank in March 2005 and Hinsbrook Bank and Trust (“Hinsbrook Bank”) in May 2006. In December 2004, Northview Bank’s Wheaton branch became its main office, it was renamed Wheaton Bank & Trust (“Wheaton Bank”) and its two Northfield locations became branches of Northbrook Bank and its Mundelein location became a branch of Libertyville Bank. In May 2005, First Northwest Bank was merged into Village Bank. In November 2006, Hinsbrook Bank’s Geneva branch was renamed St. Charles Bank & Trust (“St. Charles Bank”), its Willowbrook, Downers Grove and Darien locations became branches of Hinsdale Bank and its Glen Ellyn location became a branch of Wheaton Bank.

The Company provides, on a national basis, loans to businesses to finance insurance premiums on their commercial insurance policies (“premium finance receivables”) through First Insurance Funding Corporation (“FIFC”). In November 2007, the Company acquired Broadway Premium Funding Corporation (“Broadway”). Broadway also provides loans to businesses to finance insurance premiums, mainly through insurance agents and brokers in the northeastern portion of the United States and California. On October 1, 2008, Broadway merged with its parent, FIFC, but continues to utilize the Broadway brand in serving its segment of the marketplace.

In 2007, FIFC began financing life insurance policy premiums for high net-worth individuals. These loans are originated through independent insurance agents with assistance from financial advisors and legal counsel. The life insurance policy is the primary form of collateral. In addition, these loans can be secured with a letter of credit or certificate of deposit. FIFC is a wholly-owned subsidiary of Lake Forest Bank.

Wintrust, through Tricom, Inc. of Milwaukee (“Tricom”), provides high-yielding short-term accounts receivable financing (“Tricom finance receivables”) and value-added out-sourced administrative services, such as data processing of payrolls, billing and cash management services, to the temporary staffing industry, with clients located throughout the United States. Tricom is a wholly-owned subsidiary of Hinsdale Bank.

The Company provides a full range of wealth management services through its trust, asset management and broker-dealer subsidiaries. Trust and investment services are provided at the Banks through the Company’s wholly-owned subsidiary, Wayne Hummer Trust Company, N.A. (“WHTC”), a de novo company started in 1998. Wayne Hummer Investments, LLC (“WHI”) is a broker-dealer providing a full range of private client and securities brokerage services to clients located primarily in the Midwest. WHI has office locations staffed by one or more registered financial advisors in a majority of the Company’s Banks. WHI also provides a full range of investment services to individuals through a network of relationships with community-based financial institutions primarily in Illinois. WHI is a wholly-owned subsidiary of North Shore Bank. Wayne Hummer Asset Management Company (“WHAMC”) provides money management services and advisory services to individuals, institutions and municipal and tax-exempt organizations, in addition to portfolio management and financial supervision for a wide range of pension and profit-sharing plans. WHI

and WHAMC were acquired in 2002, and in February 2003, the Company acquired Lake Forest Capital Management (“LFCM”), a registered investment advisor, which was merged into WHAMC. WHTC, WHI and WHAMC are referred to collectively as the “Wayne Hummer Companies.”

In May 2004, the Company acquired Wintrust Mortgage Corporation (“WMC”) (formerly known as WestAmerica Mortgage Company) and its affiliate, Guardian Real Estate Services, Inc. (“Guardian”). WMC engages primarily in the origination and purchase of residential mortgages for sale into the secondary market. WMC maintains principal origination offices in ten states, including Illinois, and originates loans in other states through wholesale and correspondent offices. WMC is a wholly-owned subsidiary of Barrington Bank. Guardian provided document preparation and other loan closing services to WMC and a network of mortgage brokers. Guardian was merged into Barrington Bank in November 2008. In December 2008, WMC acquired certain assets and assumed certain liabilities of the mortgage banking business of Professional Mortgage Partners (“PMP”).

Wintrust Information Technology Services Company (“WITS”) provides information technology support, item capture, imaging and statement preparation services to the Wintrust subsidiaries and is a wholly-owned subsidiary of Wintrust.

The accompanying consolidated financial statements are unaudited and do not include information or footnotes necessary for a complete presentation of financial condition, results of operations or cash flows in accordance with generally accepted accounting principles. The consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report and Form 10-K for the year ended December 31, 2008. Operating results reported for the three-month period are not necessarily indicative of the results which may be expected for the entire year. Reclassifications of certain prior period amounts have been made to conform to the current period presentation.

The preparation of the financial statements requires management to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities. Management believes that the estimates made are reasonable, however, changes in estimates may be required if economic or other conditions develop differently from management’s expectations. Certain policies and accounting principles inherently have a greater reliance on the use of estimates, assumptions and judgments and as such have a greater possibility of producing results that could be materially different than originally reported. Management views critical accounting policies to be those which are highly dependent on subjective or complex judgments, estimates and assumptions, and where changes in those estimates and assumptions could have a significant impact on the financial statements. Management currently views the determination of the allowance for loan losses and the allowance for losses on lending-related commitments, estimations of fair value, the valuations required for impairment testing of goodwill, the valuation and accounting for derivative instruments and income taxes as the accounting areas that require the most subjective and complex judgments, and as such could be the most subject to revision as new information becomes available. Descriptions of our significant accounting policies are included in Note 1 (Summary of Significant Accounting Policies) of the Company’s 2008 Form 10-K.

(2) Recent Accounting Developments

In April 2009, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position No. 141R-1, “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies (“FSP 141R-1”). FSP 141R-1 amends and clarifies SFAS No. 141(R), “Business Combinations” (SFAS 141R), to address application issues raised by preparers, auditors, and members of the legal profession on initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. FSP 141R-1 is effective for assets or liabilities arising from contingencies in business combinations for which the acquisition date is on or after the first annual reporting period beginning on or after December 15, 2008. The adoption of FSP 141R-1 did not have a material impact on the Company’s financial statements.

In April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (“FSP FAS 107-1 and APB 28-1”). FSP FAS 107-1 and APB 28-1 amends FASB Statement No. 107, "Disclosures about Fair Value of Financial Instruments”, to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. FSP FAS 107-1 and APB 28-1 is effective for interim reporting periods ending after June 15, 2009, with early adoption permitted. The Company did not early adopt this FSP. The adoption will expand the Company’s disclosures regarding the use of fair value in interim periods. The Company is currently evaluating the potential impact the new pronouncement will have on its financial statements.

In April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (“FSP FAS 115-2 and FAS 124-2”). FSP FAS 115-2 and FAS 124-2 amends the other-than-temporary impairment (“OTTI”) guidance in GAAP for debt securities and the presentation and disclosure requirements of OTTI on debt and equity securities in the financial statements. This FSP does not amend existing recognition and measurement guidance related to OTTI of equity securities. FSP FAS 115-2 and FAS 124-2 requires separate display of losses related to credit deterioration and losses related to other market factors. When an entity does not intend to sell the security and it is more likely than not that an entity will not have to sell the security before recovery of its cost basis, it must recognize the credit component of OTTI in earnings and the remaining portion in other comprehensive income. FSP FAS 115-2 and FAS 124-2 is effective for interim reporting periods ending after June 15, 2009, with early adoption permitted. The Company did not early adopt this FSP. The Company is currently evaluating the potential impact the new pronouncement will have on its financial statements.

In April 2009, the FASB issued FSP No. FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP FAS 157-4”). FSP FAS 157-4 provides additional guidance for estimating fair value in accordance with SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), when the volume and level of activity for the asset or liability have significantly decreased. FSP FAS 157-4 also includes guidance on identifying circumstances that indicate a transaction is not orderly. FSP FAS 157-4 is effective for interim reporting periods ending after June 15, 2009, with early adoption permitted. The Company did not early adopt this FSP. The Company is currently evaluating the potential impact the new pronouncement will have on its financial statements.

In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133” (“SFAS 161”). Effective for fiscal years and interim periods beginning after November 15, 2008, SFAS 161 amends and expands the disclosure requirements of Statement No. 133 by requiring enhanced disclosures for how and why an entity uses derivative instruments; how derivative instruments and related hedged items are accounted for under Statement No. 133 and its related interpretations; and how derivative instruments and related items affect an entity’s financial position, financial performance and cash flows. SFAS 161 only relates to disclosures and did not have an impact on the Company’s financial condition or results of operations.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, “Noncontrolling Interests in Consolidated Financial Statements-an amendment of ARB No. 51” (“SFAS 160”). SFAS 160 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. The guidance is effective for fiscal years beginning after December 15, 2008. The adoption of SFAS 160 did not have a material impact on the Company’s financial statements.

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations” (“SFAS 141R”). SFAS 141R requires the acquiring entity in a business combination to recognize the full fair value of the assets acquired and liabilities assumed in a transaction at the acquisition date; the immediate expense recognition of transaction costs; and accounting for restructuring plans separately from the business combination. SFAS 141R eliminates separate recognition of the acquired allowance for loan losses on the acquirer’s balance sheet as credit related factors will be incorporated directly into the fair value of the loans recorded at the acquisition date. SFAS 141R is effective for business combinations occurring after December 15, 2008. The adoption of SFAS 141R did not have a material impact on the Company’s financial statements.

(3) Cash and Cash Equivalents

For purposes of the Consolidated Statements of Cash Flows, the Company considers cash and cash equivalents to include cash on hand, cash items in the process of collection, non-interest bearing amounts due from correspondent banks, federal funds sold and securities purchased under resale agreements with original maturities of three months or less.

(4) Available-for-sale Securities

The following table is a summary of the available-for-sale securities portfolio as of the dates shown:

		March 31, 2009								December 31, 2008								March 31, 2008
		Amortized				Fair				Amortized				Fair				Amortized				Fair
(Dollars in thousands)		Cost				Value				Cost				Value				Cost				Value
U.S. Treasury		$	122,160			$	120,287			$	—			$	—			$	—			$	—
U.S. Government agencies			605,911				604,336				297,191				298,729				195,457				196,094
Municipal			66,223				67,093				59,471				59,295				58,458				58,753
Corporate notes and other debt			82,301				72,145				36,157				28,041				43,997				40,339
Mortgage-backed			426,646				437,261				272,492				285,307				698,594				701,482
Federal Reserve/FHLB stock and other equity securities			115,663				112,454				115,414				113,301				114,507				114,186
Total available-for-sale securities		$	1,418,904			$	1,413,576			$	780,725			$	784,673			$	1,111,013			$	1,110,854

The fair value of available-for-sale securities includes investments totaling approximately $18.3 million with unrealized losses of $5.4 million, which have been in an unrealized loss position for greater than 12 months. Available-for-sale securities are reviewed for possible OTTI on a quarterly basis. During this review, the Company considers the severity and duration of the unrealized losses as well as its intent and ability to hold the securities until recovery, taking into account balance sheet management strategies and its market view and outlook. The Company also assesses the nature of the unrealized losses taking into consideration market factors, such as the widening of general credit spreads, the industry in which the issuer operates and market supply and demand, as well as the creditworthiness of the issuer. As a result of OTTI reviews during the three months ended March 31, 2009 and 2008, the Company recognized $2.1 million and $1.9 million, respectively, of OTTI losses on certain corporate notes and other debt securities. The Company concluded that none of the other unrealized losses on the available-for-sale securities portfolio represents an OTTI as of March 31, 2009 and 2008. The Company has the intent and ability to hold these investments until such time as the values recover or until maturity.

(5) Loans

The following table is a summary of the loan portfolio as of the dates shown:

		March 31,				December 31,				March 31,
(Dollars in thousands)		2009				2008				2008
Balance:
Commercial and commercial real estate		$	4,933,355			$	4,778,664			$	4,534,383
Home equity			920,412				896,438				695,446
Residential real estate			280,808				262,908				233,556
Premium finance receivables			1,418,156				1,346,586				1,017,011
Indirect consumer loans			154,257				175,955				230,771
Other loans			134,459				160,518				163,749
Total loans, net of unearned income		$	7,841,447			$	7,621,069			$	6,874,916
Mix:
Commercial and commercial real estate			63	%			63	%			66	%
Home equity			12				12				10
Residential real estate			4				3				3
Premium finance receivables			18				18				15
Indirect consumer loans			2				2				4
Other loans			1				2				2
Total loans, net of unearned income			100	%			100	%			100	%

Indirect consumer loans include auto, boat, snowmobile and other indirect consumer loans. Premium finance receivables are recorded net of unearned income. The unearned income portions of premium finance receivables were $28.8 million at March 31, 2009, $27.1 million at December 31, 2008 and $21.8 million at March 31, 2008. Total loans include net deferred loan fees and costs and fair value purchase accounting adjustments totaling $9.6 million at March 31, 2009, $9.4 million at December 31, 2008 and $7.4 million at March 31, 2008.

(6) Deposits

The following table is a summary of deposits as of the dates shown:

		March 31,				December 31,				March 31,
(Dollars in thousands)		2009				2008				2008
Balance:
Non-interest bearing deposits		$	745,194			$	757,844			$	670,433
NOW accounts			1,064,663				1,040,105				1,013,603
Wealth management deposits			833,291				716,178				647,798
Money market accounts			1,313,157				1,124,068				797,215
Savings accounts			406,376				337,808				325,096
Time certificates of deposit			4,263,296				4,400,747				4,029,437
Total deposits		$	8,625,977			$	8,376,750			$	7,483,582
Mix:
Non-interest bearing deposits			9	%			9	%			9	%
NOW accounts			12				12				13
Wealth management deposits			10				9				9
Money market accounts			15				13				11
Savings accounts			5				4				4
Time certificates of deposit			49				53				54
Total deposits			100	%			100	%			100	%

Wealth management deposits represent deposit balances at the Company’s subsidiary banks from brokerage customers of Wayne Hummer Investments, trust and asset management customers of Wayne Hummer Trust Company and brokerage customers from unaffiliated companies which have been placed into deposit accounts of the Banks.

(7) Notes Payable, Federal Home Loan Bank Advances, Other Borrowings and Subordinated Notes

     The following table is a summary of notes payable, Federal Home Loan Bank advances, other borrowings and subordinated notes as of the dates shown:

		March 31,				December 31,				March 31,
(Dollars in thousands)		2009				2008				2008
Notes payable		$	1,000			$	1,000			$	70,300
Federal Home Loan Bank advances			435,981				435,981				434,482
Other borrowings:
Federal funds purchased			—				—				639
Securities sold under repurchase agreements			248,660				334,925				290,585
Other			1,828				1,839				1,867
Total other borrowings			250,488				336,764				293,091
Subordinated notes			70,000				70,000				75,000
Total notes payable, Federal Home Loan Bank advances, other borrowings and subordinated notes		$	757,469			$	843,745			$	872,873

The $1.0 million balance at March 31, 2009 represents the outstanding balance on a $101.0 million loan agreement (“Agreement”) with an unaffiliated bank. The Agreement consists of a $100.0 million revolving note, with a maturity date of August 31, 2009, and a $1.0 million note that matures on June 1, 2015. At March 31, 2009, there was no outstanding balance on the $100.0 million revolving note. Interest is calculated, at the Company’s option, at a floating rate equal to either: (1) LIBOR plus 200 basis points or (2) the greater of the lender’s prime rate or the Federal Funds Rate plus 50 basis points. The Agreement is secured by the stock of some of the Banks and contains several restrictive covenants, including the maintenance of various capital adequacy levels, asset quality and profitability ratios, and certain restrictions on dividends and other indebtedness. On May 11, 2009 the Company and lender entered into an amendment to the Agreement which waived the prior violation of a debt covenant and amended the covenant to require that the Company have a return on assets in excess of zero percent based on quarterly regulatory filings through June 30, 2009 and in excess of 0.35 percent thereafter. The Agreement may be utilized, as needed, to provide capital to fund continued growth at the Company’s Banks and to serve as an interim source of funds for acquisitions, common stock repurchases or other general corporate purposes.

Federal Home Loan Bank advances consist of fixed rate obligations of the Banks and are collateralized by qualifying residential real estate and home equity loans and certain securities. FHLB advances are stated at par value of the debt adjusted for unamortized fair value adjustments recorded in connection with advances acquired through acquisitions.

At March 31, 2009, securities sold under repurchase agreements represent $64.9 million of customer balances in sweep accounts in connection with master repurchase agreements at the Banks and $183.8 million of short-term borrowings from brokers.

The subordinated notes represent three notes, issued in October 2002, April 2003 and October 2005 (funded in May 2006). The balances of the notes as of March 31, 2009 were $20.0 million, $25.0 million and $25.0 million, respectively. Each subordinated note requires annual principal payments of $5.0 million beginning in the sixth year, with final maturities in the tenth year. The Company may redeem the subordinated notes at any time prior to maturity. Interest on each note is calculated at a rate equal to LIBOR plus 130 basis points.

(8) Junior Subordinated Debentures

As of March 31, 2009, the Company owned 100% of the common securities of nine trusts, Wintrust Capital Trust III, Wintrust Statutory Trust IV, Wintrust Statutory Trust V, Wintrust Capital Trust VII, Wintrust Capital Trust VIII, Wintrust Capital Trust IX, Northview Capital Trust I, Town Bankshares Capital Trust I, and First Northwest Capital Trust I (the “Trusts”) set up to provide long-term financing. The Northview, Town and First Northwest capital trusts were acquired as part of the acquisitions of Northview Financial Corporation, Town Bankshares, Ltd., and First Northwest Bancorp, Inc., respectively. The Trusts were formed for purposes of issuing trust preferred securities to third-party investors and investing the proceeds from the issuance of the trust preferred securities and common securities solely in junior subordinated debentures issued by the Company (or assumed by the Company in connection with an acquisition), with the same maturities and interest rates as the trust preferred securities. The junior subordinated debentures are the sole assets of the Trusts. In each Trust, the common securities represent approximately 3% of the junior subordinated debentures and the trust preferred securities represent approximately 97% of the junior subordinated debentures.

The Trusts are reported in the Company’s consolidated financial statements as unconsolidated subsidiaries. Accordingly, in the Consolidated Statements of Condition, the junior subordinated debentures issued by the Company to the Trusts are reported as liabilities and the common securities of the Trusts, all of which are owned by the Company, are included in available-for-sale securities.

The following table provides a summary of the Company’s junior subordinated debentures as of March 31, 2009. The junior subordinated debentures represent the par value of the obligations owed to the Trusts and basis adjustments for unamortized fair value adjustments recognized at the respective acquisition dates for the Northview, Town and First Northwest obligations.

Trust

Junior

Contractual

Earliest

Preferred

Subordinated

Rate

Interest Rate

Issue

Maturity

Redemption

(Dollars in thousands)

Securities

Debentures

Structure

at 3/31/09

Date

Date

Date

Wintrust Capital Trust III

$

25,000

$

25,774

L+3.25

4.34

%

04/2003

04/2033

04/2008

Wintrust Statutory Trust IV

20,000

20,619

L+2.80

4.02

%

12/2003

12/2033

12/2008

Wintrust Statutory Trust V

40,000

41,238

L+2.60

3.82

%

05/2004

05/2034

06/2009

Wintrust Capital Trust VII

50,000

51,550

L+1.95

3.27

%

12/2004

03/2035

03/2010

Wintrust Capital Trust VIII

40,000

41,238

L+1.45

2.67

%

08/2005

09/2035

09/2010

Wintrust Capital Trust IX

50,000

51,547

Fixed

6.84

%

09/2006

09/2036

09/2011

Northview Capital Trust I

6,000

6,186

L+3.00

4.17

%

08/2003

11/2033

08/2008

Town Bankshares Capital Trust I

6,000

6,186

L+3.00

4.17

%

08/2003

11/2033

08/2008

First Northwest Capital Trust I

5,000

5,164

L+3.00

4.22

%

05/2004

05/2034

05/2009

Total

$

249,502

4.24

%

The junior subordinated debentures totaled $249.5 million at March 31, 2009 and December 31, 2008 and $249.6 million at March 31, 2008.

The interest rates on the variable rate junior subordinated debentures are based on the three-month LIBOR rate and reset on a quarterly basis. The interest rate on the Wintrust Capital Trust IX junior subordinated debentures, currently fixed at 6.84%, changes to a variable rate equal to three-month LIBOR plus 1.63% effective September 15, 2011. At March 31, 2009, the weighted average contractual interest rate on the junior subordinated debentures was 4.24%. The Company entered into $175 million of interest rate swaps to hedge the variable cash flows on certain junior subordinated debentures. The hedge-adjusted rate on the junior subordinated debentures on March 31, 2009, was 7.16%. Distributions on all issues are payable on a quarterly basis.

The Company has guaranteed the payment of distributions and payments upon liquidation or redemption of the trust preferred securities, in each case to the extent of funds held by the Trusts. The Company and the Trusts believe that, taken together, the obligations of the Company under the guarantees, the junior subordinated debentures, and other related agreements provide, in the aggregate, a full, irrevocable and unconditional guarantee, on a subordinated basis, of all of the obligations of the Trusts under the trust preferred securities. Subject to certain limitations, the Company has the right to defer the payment of interest on the junior subordinated debentures at any time, or from time to time, for a period not to exceed 20 consecutive quarters. The trust preferred securities are subject to mandatory redemption, in whole or in part, upon repayment of the junior subordinated debentures at maturity or their earlier redemption. The junior subordinated debentures are redeemable in whole or in part prior to maturity at any time after the earliest redemption dates shown in the table, and earlier at the discretion of the Company if certain conditions are met, and, in any event, only after the Company has obtained Federal Reserve approval, if then required under applicable guidelines or regulations.

The junior subordinated debentures, subject to certain limitations, qualify as Tier 1 capital of the Company for regulatory purposes. The amount of junior subordinated debentures and certain other capital elements in excess of the limit could be included in Tier 2 capital, subject to restrictions.

The segment financial information provided in the following tables has been derived from the internal profitability reporting system used by management to monitor and manage the financial performance of the Company. The Company evaluates segment performance based on after-tax profit or loss and other appropriate profitability measures common to each segment. Certain indirect expenses have been allocated based on actual volume measurements and other criteria, as appropriate. Inter-segment revenue and transfers are generally accounted for at current market prices. The parent and inter-segment eliminations reflect parent company information and inter-segment eliminations. In the first quarter of 2009, the Company combined the premium finance and Tricom segments into the specialty finance segment. Prior period information has been restated to reflect this change.

The net interest income and segment profit of the banking segment includes income and related interest costs from portfolio loans that were purchased from the specialty finance segment. For purposes of internal segment profitability analysis, management reviews the results of its specialty finance segment as if all loans originated and sold to the banking segment were retained within that segment’s operations, thereby causing inter-segment eliminations. Similarly, for purposes of analyzing the contribution from the wealth management segment, management allocates the net interest income earned by the banking segment on deposit balances of customers of the wealth management segment to the wealth management segment. (See “Wealth management deposits” discussion in Deposits section of this report for more information on these deposits.) The following table presents a summary of certain operating information for each reportable segment for the three months ended for the period shown:

		Three Months Ended
		March 31,								$ Change in				% Change in
(Dollars in thousands)		2009				2008				Contribution				Contribution
Net interest income:
Banking		$	61,809			$	60,684			$	1,125				2	%
Specialty finance			19,015				17,543				1,472				8
Wealth management			6,492				4,806				1,686				35
Parent and inter-segment eliminations			(22,534	)			(21,291	)			(1,243	)			6
Total net interest income		$	64,782			$	61,742			$	3,040				5	%
Non-interest income:
Banking		$	23,476			$	17,280			$	6,196				36	%
Specialty finance			804				1,855				(1,051	)			(57	)
Wealth management			8,004				9,685				(1,681	)			(17	)
Parent and inter-segment eliminations			4,143				(4,248	)			8,391				(197	)
Total non-interest income		$	36,427			$	24,572			$	11,855				48	%
Segment profit (loss):
Banking		$	5,840			$	14,557			$	(8,717	)			(60)	%
Specialty finance			8,205				8,532				(327	)			(4	)
Wealth management			3,148				2,769				379				14
Parent and inter-segment eliminations			(10,835	)			(16,153	)			(5,318	)			(33	)
Total segment profit (loss)		$	6,358			$	9,705			$	(3,347	)			(34)	%
Segment assets:
Banking		$	10,703,998			$	9,563,882			$	1,140,116				12	%
Specialty finance			1,493,495				1,097,674				395,821				36
Wealth management			52,867				61,293				8,426				(14	)
Parent and inter-segment eliminations			(1,431,419	)			(990,383	)			(441,036	)			45
Total segment assets		$	10,818,941			$	9,732,466			$	1,086,475				11	%

(10) Derivative Financial Instruments

Management uses derivative financial instruments to protect against the risk of interest rate movements on the value of certain assets and liabilities and on future cash flows. The instruments that have been used by the Company include interest rate swaps and interest rate caps with indices that relate to the pricing of specific liabilities and covered call options that relate to specific investment securities. In addition, interest rate lock commitments provided to customers for the origination of mortgage loans that will be sold into the secondary market as well as forward agreements the Company enters into to sell such loans to protect itself against adverse changes in interest rates are deemed to be derivative instruments.

Derivative instruments have inherent risks, primarily market risk and credit risk. Market risk is associated with changes in interest rates and credit risk relates to the risk that the counterparty will fail to perform according to the terms of the agreement. The amounts potentially subject to market and credit risks are the streams of interest payments under the contracts and the market value of the derivative instrument which is determined based on the interaction of the notional amount of the contract with the underlying, and not the notional principal amounts used to express the volume of the transactions. Management monitors the market risk and credit risk associated with derivative financial instruments as part of its overall Asset/Liability management process.

In accordance with SFAS 133, the Company recognizes all derivative financial instruments in the consolidated financial statements at fair value regardless of the purpose or intent for holding the instrument. Derivative financial instruments are included in other assets or other liabilities, as appropriate, on the Consolidated Statements of Condition. Changes in the fair value of derivative financial instruments are either recognized periodically in income or in shareholders’ equity as a component of other comprehensive income depending on whether the derivative financial instrument qualifies for hedge accounting, and if so, whether it qualifies as a fair value hedge or cash flow hedge. Generally, changes in fair values of derivatives accounted for as fair value hedges are recorded in income in the same period and in the same income statement line as changes in the fair values of the hedged items that relate to the hedged risk(s). Changes in fair values of derivative financial instruments accounted for as cash flow hedges, to the extent they are effective hedges, are recorded as a component of other comprehensive income, net of deferred taxes. Changes in fair values of derivative financial instruments not qualifying as hedges pursuant to SFAS 133 are reported in non-interest income. Derivative contracts are valued by a third party and are periodically validated by comparison with valuations provided by the respective counterparties.

Interest Rate Swaps — Designated as Cash Flow Hedges

The tables below identify the Company’s interest rate swaps at March 31, 2009 and December 31, 2008, which were entered into to hedge certain LIBOR-based junior subordinated debentures and designated as cash flow hedges pursuant to SFAS 133 (dollars in thousands):

March 31, 2009
		Notional				Fair Value				Receive Rate				Pay Rate				Type of Hedging
Maturity Date		Amount				Gain (Loss)				(LIBOR)				(Fixed)				Relationship
Pay Fixed, Receive Variable:
September 2011		$	20,000			$	(1,758	)			1.22	%			5.25	%		Cash Flow
September 2011			40,000				(3,489	)			1.22	%			5.25	%		Cash Flow
October 2011			25,000				(1,083	)			1.09	%			3.39	%		Cash Flow
September 2013			50,000				(6,286	)			1.32	%			5.30	%		Cash Flow
September 2013			40,000				(5,058	)			1.22	%			5.30	%		Cash Flow
Total		$	175,000			$	(17,674	)

December 31, 2008
		Notional				Fair Value				Receive Rate				Pay Rate				Type of Hedging
Maturity Date		Amount				Gain (Loss)				(LIBOR)				(Fixed)				Relationship
Pay Fixed, Receive Variable:
September 2011		$	20,000			$	(1,902	)			1.46	%			5.25	%		Cash Flow
September 2011			40,000				(3,789	)			1.46	%			5.25	%		Cash Flow
October 2011			25,000				(1,104	)			4.75	%			3.39	%		Cash Flow
September 2013			50,000				(6,916	)			2.00	%			5.30	%		Cash Flow
September 2013			40,000				(5,603	)			1.46	%			5.30	%		Cash Flow
Total		$	175,000			$	(19,314	)

The fair values, or unrealized losses, of $17.7 million at March 31, 2009 and $19.3 million at December 31, 2008 are included in other liabilities. The Company estimates that $6.9 million of the unrealized loss at March 31, 2009, will be reclassified to interest expense over the next 12 months. The Company uses the hypothetical derivative method to assess and measure effectiveness. These hedges were considered highly effective during the quarter ended March 31, 2009, and none of the change in fair value of these derivatives was attributed to hedge ineffectiveness. The changes in fair value, net of tax, are separately disclosed in the statement of changes in shareholders’ equity as a component of comprehensive income. Net cash flows from these interest rate swaps are included in interest expense on junior subordinated debentures.

In September 2008, the Company terminated an interest rate swap with a notional amount of $25.0 million (maturing in October 2011) that was designated in a cash flow hedge and entered into a new interest rate swap with another counterparty to effectively replace the terminated swap. The interest rate swap was terminated by the Company in accordance with the default provisions in the swap agreement. The unrealized loss on the interest rate swap at the date of termination is being amortized out of other comprehensive income to interest expense over the remaining term of the terminated swap. At March 31, 2009, other comprehensive income included $691,000 of unrealized loss, net of tax, related to the terminated swap. During the first quarter of 2009, $112,000 was reclassified from accumulated other comprehensive income to interest expense, and at March 31, 2009, accumulated other comprehensive income included $1.1 million of unrealized loss ($691,000 net of tax) related to the terminated swap.

A rollfoward of the amounts in accumulated other comprehensive income related to interest rate swaps designated as cash flow hedges follows:

		Three Months Ended
		March 31,				March 31,
		2009				2008
Unrealized gain (loss) at beginning of period		$	(20,547)			$	(9,067)
Amount reclassified from accumulated other comprehensive income to interest expense on junior subordinated debentures		$	1,603			$	262
Amount of gain (loss) recognized in other comprehensive income		$	148			$	(6,642	)
Unrealized gain (loss) at end of period		$	(18,796)			$	(15,447)

Interest Rate Swaps — Not Designated as Hedging Instruments Under SFAS 133

The Company’s banking subsidiaries offer certain derivative products directly to qualified commercial borrowers. These transactions allow the Company’s commercial borrowers to effectively convert a variable rate loan to a fixed rate. The Company economically hedges customer derivative transactions by entering into offsetting derivatives executed with third parties upon the origination of a derivative contract with a customer. Derivative transactions executed as part of this program are not designated in SFAS 133 hedge relationships and are, therefore, marked-to-market through earnings each period. In most cases the derivatives have mirror-image terms, which result in the positions’ changes in fair value offsetting completely through earnings each period. However, to the extent that the derivatives are not a mirror-image, changes in fair value will not completely offset, resulting in some earnings impact each period. Changes in the fair value of these interest rate swaps are included in other non-interest income. The following table summarizes these interest rate swaps as of March 31, 2009 and December 31, 2008 (dollars in thousands):

		March 31, 2009								December 31, 2008
		Notional				Fair Value				Notional				Fair Value Gain
		Amount				Gain (Loss)				Amount				(Loss)
Interest rate swaps on variable rate loans
• with commercial borrowers		$	123,851			$	(9,752	)		$	101,136			$	(9,295	)
• mirror-image interest rate swaps with third party financial institutions		$	123,851			$	9,959			$	101,136			$	9,115

At March 31, 2009, other assets included $10.0 of derivative assets and other liabilities included $9.8 million of derivative liabilities related to these swap transactions. At December 31, 2008, other assets included $9.1 million of derivative assets and other liabilities included $9.3 million of derivative liabilities related to these interest rate swap transactions. At March 31, 2009, these interest rate swaps had maturity dates ranging from August 2010 to March 2019.

Mortgage Banking Derivatives

The Company’s mortgage banking derivatives have not been designated in SFAS 133 hedge relationships. These derivatives include commitments to fund certain mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of residential mortgage loans. It is the Company’s practice to enter into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of changes in interest rates on its commitments to fund the loans as well as on its portfolio of mortgage loans held-for-sale. The following table summarizes these mortgage banking derivatives as of March 31, 2009 and December 31, 2008 (dollars in thousands):

		March 31, 2009												December 31, 2008
		Notional				Fair Value								Notional				Fair Value
		Amount				Gains				Losses				Amount				Gains				Losses
Interest rate lock commitments		$	600,280			$	1,328			$	(318	)		$	176,115			$	55			$	(387	)
Forward commitments to sell mortgage loans		$	814,408			$	379			$	(2,219	)		$	237,320			$	402			$	(190	)
Totals						$	1,707			$	(2,537	)						$	457			$	(577	)

At March 31, 2009, other assets included $1.7 million of mortgage banking derivatives and other liabilities included $2.5 million of mortgage banking derivatives. At December 31, 2008, other assets included $457,000 of mortgage banking derivatives and other liabilities included $577,000 of mortgage banking derivatives. The fair values of these derivatives were estimated based on changes in mortgage rates from the dates of the commitments. Changes in the fair value of these mortgage banking derivatives are included in mortgage banking revenue.

Amounts included in the consolidated statement of income related to derivative instruments not designated in hedge relationships were as follows:

				Three Months Ended
		Location in
		income statement		March 31, 2009				March 31, 2008
Derivatives not designated in hedge relationships:
• Interest rate swaps		Other income		$	724			$	5
• Mortgage banking derivatives		Mortgage banking		$	(708	)		$	27

Other Derivatives

Periodically, the Company will sell options to a bank or dealer for the right to purchase certain securities held within the Banks’ investment portfolios (covered call options). These option transactions are designed primarily to increase the total return associated with the investment securities portfolio. These options do not qualify as hedges pursuant to SFAS 133, and, accordingly, changes in fair value of these contracts are recognized as other non-interest income. The Company recognized premium income from these call option transactions of $2.0 million and $6.8 in the first quarters of 2009 and 2008, respectively. There were no covered call options outstanding as of March 31, 2009, December 31, 2008 or March 31, 2008.

(11) Fair Values of Assets and Liabilities

Effective January 1, 2008, upon adoption of SFAS 157, the Company began to group financial assets and financial liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the observability of the assumptions used to determine fair value. These levels are:

	•		Level 1 — unadjusted quoted prices in active markets for identical assets or liabilities.
	•		Level 2 — inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
	•		Level 3 — significant unobservable inputs that reflect the Company’s own assumptions that market participants would use in pricing the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

A financial instrument’s categorization within the above valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the assets or liabilities. Following is a description of the valuation methodologies used for the Company’s assets and liabilities measured at fair value on a recurring basis.

Available-for-sale and Trading account securities - Fair values for available-for-sale and trading account securities are based on quoted market prices when available or through the use of alternative approaches, such as matrix or model pricing or indicators from market makers.

Mortgage loans held-for-sale — Mortgage loans originated by WMC on or after January 1, 2008 are carried at fair value. The fair value of mortgage loans held-for-sale is determined by reference to investor price sheets for loan products with similar characteristics.

Mortgage servicing rights — Fair value for mortgage servicing rights is determined utilizing a third party valuation model which stratifies the servicing rights into pools based on product type and interest rate. The fair value of each servicing rights pool is calculated based on the present value of estimated future cash flows using a discount rate commensurate with the risk associated with that pool, given current market conditions. Estimates of fair value include assumptions about prepayment speeds, interest rates and other factors which are subject to change over time.

Derivative instruments — The Company’s derivative instruments include interest rate swaps, commitments to fund mortgages for sale into the secondary market (interest rate locks) and forward commitments to end investors for the sale of mortgage loans. Interest rate swaps are valued by a third party, using models that primarily use market observable inputs, such as yield curves, and are validated by comparison with valuations provided by the respective counterparties. The fair value for mortgage derivatives is based on changes in mortgage rates from the date of the commitments.

Nonqualified deferred compensation assets — The underlying assets relating to the nonqualified deferred compensation plan are included in a trust and primarily consist of non-exchange traded institutional funds.

Retained interests from the sale of premium finance receivables — The fair value of retained interests, which include servicing rights and interest only strips, from the sale of premium finance receivables are based on certain observable inputs such as interest rates and credits spreads, as well as unobservable inputs such as prepayments, late payments and estimated net charge-offs.

The following table presents the balances of assets and liabilities measured at fair value on a recurring basis.

		March 31, 2009
(Dollars in thousands)		Total				Level 1				Level 2				Level 3
Available-for-sale securities (1)		$	1,334,487			$	—			$	1,111,561			$	222,926
Trading account securities			13,815				204				1,393				12,218
Mortgage loans held-for-sale			207,107				—				207,107				—
Mortgage servicing rights			4,163				—				—				4,163
Nonqualified deferred compensation assets			2,131				—				2,131				—
Derivative assets			11,666				—				11,666				—
Retained interests from the sale of premium finance receivables			301				—				—				301
Total		$	1,573,670			$	204			$	1,333,858			$	239,608
Derivative liabilities		$	29,963			$	—			$	29,963			$	—