• Changes in the interest rate environment, which may influence, among other things, the growth of loans and deposits, the quality of the Company's loan portfolio, the pricing of loans and deposits and interest income.

• The extent of defaults and losses on the Company's loan portfolio, which may require further increases in its allowance for credit losses.

• Distressed global credit and capital markets.

• The ability of the Company to obtain liquidity and income from the sale of premium finance receivables in the future and the unique collection and delinquency risks associated with such loans.

• Legislative or regulatory changes, particularly changes in the regulation of financial services companies and/or the products and services offered by financial services companies.

• Failure to identify and complete acquisitions in the future or unexpected difficulties or unanticipated developments related to the integration of acquired entities with the Company.

• Significant litigation involving the Company.

• Changes in general economic conditions in the markets in which the Company operates.

• The ability of the Company to receive dividends from its subsidiaries.

• Unexpected difficulties or unanticipated developments related to the Company's strategy of de novo bank formations and openings. De novo banks typically require over 13 months of operations before becoming profitable, due to the impact of organizational and overhead expenses, the startup phase of generating deposits and the time lag typically involved in redeploying deposits into attractively priced loans and other higher yielding earning assets.

• The loss of customers as a result of technological changes allowing consumers to complete their financial transactions without the use of a bank.

• The ability of the Company to attract and retain senior management experienced in the banking and financial services industries.

• The risk that the terms of the U.S. Treasury Departments' Capital Purchase Program could change.

• The effect of continued margin pressure on the Company's financial results.

• Additional deterioration in asset quality.

• Additional charges related to asset impairments.

• The other risk factors set forth in the Company's filings with the Securities and Exchange Commission.

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

30 Wintrust Financial Corporation

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion highlights the significant factors affecting the operations and financial condition of Wintrust for the three years ended December 31, 2008. This discussion and analysis should be read in conjunction with the Company's Consolidated Financial Statements and Notes thereto, and Selected Financial Highlights appearing elsewhere within this Form 10-K.

OPERATING SUMMARY
Wintrust's key measures of profitability and balance sheet changes are shown in
the following table (dollars in thousands, except per share data):

                                                                                                                  % or                % or
                                                                   Years Ended                                basis point         basis point
                                                                   December 31,                                (bp)change          (bp)change
                                                 2008                  2007                  2006             2007 to 2008        2006 to 2007

Net income                                  $     20,488          $     55,653          $     66,493               (63 )%              (16 )%
Net income per common share - Diluted       $       0.76          $       2.24          $       2.56               (66 )%              (13 )%
Net revenue (1)                             $    343,161          $    341,638          $    340,118                 - %                 - %
Net interest income                         $    244,567          $    261,550          $    248,886                (6 )%                5 %
Net interest margin (5)                             2.81 %                3.11 %                3.10 %           (30)bp               1 bp
Core net interest margin(2)(5)                      3.10 %                3.38 %                3.32 %           (28)bp               6 bp
Net overhead ratio (3)                              1.60 %                1.72 %                1.54 %           (12)bp              18 bp
Efficiency ratio (4)(5)                            72.92 %               71.06 %               66.96 %           186 bp              410 bp
Return on average assets                            0.21 %                0.59 %                0.74 %           (38)bp              (15)bp
Return on average common equity                     2.44 %                7.64 %                9.47 %          (520)bp             (183)bp

At end of period:
Total assets                                $ 10,658,326          $  9,368,859          $  9,571,852                14 %                (2 )%
Total loans                                 $  7,621,069          $  6,801,602          $  6,496,480                12 %                 5 %
Total deposits                              $  8,376,750          $  7,471,441          $  7,869,240                12 %                (5 )%
Total equity                                $  1,066,572          $    739,555          $    773,346                44 %                (4 )%
Book value per common share                 $      33.03          $      31.56          $      30.38                 5 %                 4 %
Market price per common share               $      20.57          $      33.13          $      48.02               (38 )%              (31 )%
Common shares outstanding                     23,756,674            23,430,490            25,457,935                 1 %                (8 )%

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

(2) Core net interest margin excludes the effect of the net interest expense associated with Wintrust's junior subordinated debentures and the interest expense incurred to fund any common stock repurchases.

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

(4) The efficiency ratio is calculated by dividing total non-interest expense by tax-equivalent net revenue (excluding securities gains or losses). A lower ratio indicates more efficient revenue generation.

(5) See "Non-GAAP Financial Measures/Ratios" for additional information on this performance measure/ratio.

Please refer to the Consolidated Results of Operations section later in this discussion for an analysis of the Company's operations for the past three years.

NON-GAAP FINANCIAL MEASURES/RATIOS
The accounting and reporting policies of 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), net interest margin (including its individual components), core net interest margin and the efficiency ratio. Management believes that these measures and ratios provide users of the Company's financial information with a more meaningful view of the performance of the interest-earning assets and interest-bearing liabilities and of the Company's operating efficiency. Other financial holding companies may define or calculate these measures and ratios differently.
Management reviews yields on certain asset categories and the net interest margin of the Company and its banking subsidiaries on a fully taxable-equivalent ("FTE") basis. In this non-GAAP presentation, net interest income is adjusted to reflect tax-exempt interest income on an equivalent before-tax basis. This measure ensures the 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 also evaluates the net interest margin excluding the interest expense associated with the Company's junior subordinated debentures and the interest expense incurred to fund any common stock repurchases ("Core Net Interest Margin"). Because junior subordinated debentures are utilized by the Company primarily as capital instruments and the cost incurred to fund any common stock repurchases is capital utilization related, management finds it useful to view the net interest margin excluding these expenses and deems it to be a more meaningful view of the operational net interest margin of the Company. The following table presents a reconciliation of certain non-GAAP performance measures and ratios used by the Company to evaluate and measure the Company's performance to the most directly comparable GAAP financial measures for the years ended December 31, 2008, 2007 and 2006 (dollars in thousands):

                                                                        Years Ended
                                                                       December 31,
                                                          2008             2007             2006

(A) Interest income (GAAP)                              $ 514,723        $ 611,557        $ 557,945
Taxable-equivalent adjustment
- Loans                                                       645              826              409
- Liquidity management assets                               1,795            2,388            1,195
- Other earning assets                                         47               13               17

Interest income - FTE                                   $ 517,210        $ 614,784        $ 559,566
(B) Interest expense (GAAP)                               270,156          350,007          309,059

Net interest income - FTE                               $ 247,054        $ 264,777        $ 250,507


(C) Net interest income (GAAP) (A minus B)              $ 244,567        $ 261,550        $ 248,886

Net interest income - FTE                               $ 247,054        $ 264,777        $ 250,507
Add: Interest expense on junior subordinated
debentures and interest cost incurred for common
stock repurchases(1)                                       25,418           23,170           17,838

Core net interest income - FTE(2)                       $ 272,472        $ 287,947        $ 268,345


(D) Net interest margin (GAAP)                               2.78 %           3.07 %           3.07 %
Net interest margin - FTE                                    2.81 %           3.11 %           3.10 %
Core net interest margin - FTE(2)                            3.10 %           3.38 %           3.32 %

(E) Efficiency ratio (GAAP)                                 73.44 %          71.74 %          67.28 %
Efficiency ratio - FTE                                      72.92 %          71.06 %          66.96 %

(1) Interest expense from the junior subordinated debentures is net of the interest income on the Common Securities owned by the Trusts and included in interest income. Interest cost incurred for any common stock repurchases is estimated using current period average rates on certain debt obligations.

(2) Core net interest income and core net interest margin are by definition non-GAAP measures/ratios.
The GAAP
equivalents are
the net interest
income and net
interest margin
determined in
accordance with
GAAP (lines C
and D in the
table).

32 Wintrust Financial Corporation

OVERVIEW AND STRATEGY
Wintrust is a financial holding company, providing traditional community banking services as well as a full array of wealth management services and certain other specialty lending business. The Banks have been among the fastest growing community-oriented de novo banking operations in Illinois and the country. The Company grew rapidly from its inception, but this growth has moderated recently. As of December 31, 2008, the Company operated 15 community-oriented bank subsidiaries (the "Banks") with 79 banking locations. During 2008, the Company opened two new bank branches. During 2007, the Company acquired a premium finance company and opened five new bank branches. During 2006, the Company acquired one bank with five locations, opened its ninth de novo bank and opened five new branches. The historical financial performance of the Company has been affected by costs associated with growing market share in deposits and loans, establishing new banks and opening new branch facilities, and building an experienced management team. The Company's experience has been that it generally takes over 13 months for new banking offices to achieve operational profitability.
Management's ongoing focus is to balance further asset growth with earnings growth by seeking to fully leverage the existing capacity within each of the Banks and non-bank subsidiaries. One aspect of this strategy is to continue to pursue specialized lending or earning asset niches in order to maintain the mix of earning assets in higher-yielding loans as well as diversify the loan portfolio. Another aspect of this strategy is a continued focus on less aggressive deposit pricing at the Banks with significant market share and more established customer bases.
Wintrust also provides a full range of wealth management services through its trust, asset management and broker-dealer subsidiaries. De Novo Bank Formations, Branch Openings and Acquisitions The Company developed its community banking franchise through the formation of nine de novo banks, the opening of branch offices of the Banks and acquisitions. Following is a summary of the expansion of the Company's banking franchise through newly chartered banks, new branching locations and acquisitions over the last three years.
2008 Banking Expansion Activity
Opened the following branch locations
• Vernon Hills, Illinois, a branch of Libertyville Bank

• Deerfield, Illinois, a branch of Northbrook Bank

2007 Banking Expansion Activity
Opened the following branch locations
• Hoffman Estates, Illinois, a branch of Barrington Bank

• Hartland, Wisconsin, a branch of Town Bank

• Bloomingdale, Illinois, a branch of Advantage Bank

• Island Lake, Illinois, a branch of Libertyville Bank

• North Chicago, Illinois, a branch of Lake Forest Bank

Closed the following branch location

• Glen Ellyn Bank, temporary facility opened in 2005, a branch of Wheaton Bank

2006 Banking Expansion Activity
Opened the Company's ninth de novo bank
• Old Plank Trail Bank in Frankfort, Illinois

Opened the following branch locations
• St. Charles, Illinois, a branch of St. Charles Bank

• Algonquin, Illinois, a branch of Crystal Lake Bank

• Mokena, Illinois, a branch of Old Plank Trail Bank

• Elm Grove, Wisconsin, a branch of Town Bank

• New Lenox, Illinois, a branch of Old Plank Trail Bank

Acquired the following banks
• Hinsbrook Bank with Illinois locations in Willowbrook, Downers Grove, Glen Ellyn, Darien and Geneva

Earning Assets, Wealth Management and Other Business Niches As previously mentioned, the Company continues to pursue specialized earning asset and business niches in order to maximize the Company's revenue stream as well as diversify its loan portfolio. A summary of the Company's more significant earning asset niches and non-bank operating subsidiaries follows. Wayne Hummer Investments LLC ("WHI"), a registered broker-dealer, provides a full-range of investment products and services tailored to meet the specific needs of individual and institutional investors throughout the country, but primarily in the Midwest. In addition, WHI provides a full range of investment services to clients through a network of relationships with community-based financial institutions located primarily in Illi-nois. Although headquartered in Chicago, WHI also operates an office in Appleton, Wisconsin that opened in 1936 and serves the greater Appleton area. As of December 31, 2008, WHI had branch locations in offices in a majority of the Company's 15 Banks and approximately $4.0 billion of client assets in custody.

Wayne Hummer Asset Management ("WHAMC"), a registered investment advisor, is the investment advisory affiliate of WHI. WHAMC provides money management, financial planning and investment advisory services to individuals and institutional, municipal and tax-exempt organizations. WHAMC also provides portfolio management and financial supervision for a wide-range of pension and profit sharing plans. At December 31, 2008, assets under management totaled approximately $407 million.
Wayne Hummer Trust Company ("WHTC") was formed to offer trust and investment management services to all communities served by the Banks. In addition to offering trust services to existing bank customers at each of the Banks, the Company believes WHTC can successfully compete for trust business by targeting small to mid-size businesses and affluent individuals whose needs command the personalized attention offered by WHTC's experienced trust professionals. Services offered by WHTC typically include traditional trust products and services, as well as investment management services. Assets under administration by WHTC as of December 31, 2008 were approximately $1.2 billion. First Insurance Funding Corp. ("FIFC") is the Company's most significant specialized earning asset niche, originating approximately $3.2 billion in loan (premium finance receivables) volume during 2008. FIFC makes loans to businesses to finance the insurance premiums they pay on their commercial insurance policies. The loans are originated by FIFC working through independent medium and large insurance agents and brokers located throughout the United States. The insurance premiums financed are primarily for commercial customers' purchases of liability, property and casualty and other commercial insurance. This lending involves relatively rapid turnover of the loan portfolio and high volume of loan originations. Because of the indirect nature of this lending and because the borrowers are located nationwide, this segment may be more susceptible to third party fraud, however no material third party fraud has occurred since the third quarter of 2000. The majority of these loans are purchased by the Banks in order to more fully utilize their lending capacity, and these loans generally provide the Banks with higher yields than alternative investments. However, excess FIFC originations over the capacity to retain such loans within the Banks' loan portfolios may be sold to an unrelated third party with servicing retained. 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.
Additionally, 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. Wintrust Mortgage Corporation ("WMC") (formerly known as WestAmerica Mortgage Company) engages primarily in the origination and purchase of residential mortgages for sale into the secondary market. WMC sells its loans with servicing released and does not currently engage in servicing loans for others. WMC maintains principal origination offices in nine states, including Illinois, and originates loans in other states through wholesale and correspondent offices. WMC provides the Banks with the ability to use an enhanced loan origination and documentation system which allows WMC and each Bank to better utilize existing operational capacity and expand the mortgage products offered to the Banks' customers. WMC's production of adjustable rate mortgage loans may be retained by the Banks in their loan portfolios, resulting in additional earning assets to the combined organization, thus adding further desired diversification to the Company's earning asset base. In December 2008, WMC acquired certain assets and assumed certain liabilities of the mortgage banking business of Professional Mortgage Partners ("PMP").
Tricom, Inc. ("Tricom"), operating since 1989, specializes in providing high-yielding, short-term accounts receivable financing and value-added out-sourced administrative services, such as data processing of payrolls, billing and cash management services to clients in the temporary staffing industry. Tricom's clients, located throughout the United States, provide staffing services to businesses in diversified industries. These receivables may involve greater credit risks than generally associated with the loan portfolios of more traditional community banks depending on the marketability of the collateral. The principal sources of repayments on the receivables are payments received by the borrowers from their customers who are located throughout the United States. Tricom mitigates this risk by employing lock-boxes and other cash management techniques to protect its interests. Tricom's revenue principally consists of interest income from financing activities and fee-based revenues from administrative services. Tricom processed payrolls with associated client billings of approximately $312 million in 2008 and $467 million in 2007. In addition to the earning asset niches provided by the Company's non-bank subsidiaries, several earning asset niches operate within the Banks. In addition, Hinsdale Bank operates a mortgage warehouse lending program that provides loan and deposit services to mortgage brokerage companies located predominantly in the Chicago metropolitan area, Crystal Lake Bank has a specialty in small aircraft lending and Lake Forest Bank has a

34 Wintrust Financial Corporation

franchise lending program. The Company continues to pursue the development or acquisition of other specialty lending businesses that generate assets suitable for bank investment and/or secondary market sales. Indirect auto lending which until recently was conducted through Hinsdale Bank, and Barrington Bank's Community Advantage program that provides lending, deposit and cash management services to condominium, homeowner and community associations.
In the third quarter of 2008, the Company ceased the origination of indirect automobile loans. This niche business served the Company well over the past 12 years in helping de novo banks quickly, and profitably, grow into their physical structures. Competitive pricing pressures have significantly reduced the long-term potential profitably of the niche business. Given the current economic environment and the retirement of the founder of this niche business, exiting the origination of this business was deemed to be in the best interest of the Company. The Company will continue to service its existing portfolio for the duration of the life of the existing credits. Treasury Capital Purchase Program
On October 3, 2008, the EESA was signed into law. Under EESA, the U.S. Department of the Treasury (the "Treasury") has the authority to, among other things, invest in financial institutions for the purpose of stabilizing and . . .