Company: WTFCN
Filing Date: 2025-05-05
Form Type: 10-Q
Source: 0001015328-25-000130
Chunk: 53

Company: WINTRUST FINANCIAL CORP
Filing Date: 2025-05-05
Form: 10-Q
Item: Item 1
Chunk 53
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 included in the Consolidated Statements of Income related to derivative instruments not designated in hedge relationships were as follows:(In thousands)Three Months EndedDerivativeLocation in income statementMarch 31,2025March 31,2024Interest rate swaps and capsTrading (losses) gains, net$(117)$595 Mortgage banking derivativesMortgage banking revenue3,641 (15)Commodity contractsTrading (losses) gains, net114 268 Foreign exchange contractsTrading (losses) gains, net8 8 Covered call optionsFees from covered call options3,446 4,847 Derivative contract held as economic hedge on MSRsMortgage banking revenue4,897 (2,577)Credit RiskDerivative instruments have inherent risks, primarily market risk and credit risk. Market risk is associated with changes in the value of an underlying asset. Credit risk relates to the risk that the counterparty will fail to perform according to the terms of the agreement. The Company is exposed to the credit risk of its commercial borrowers and third party financial institutions who are counterparties to interest rate derivatives with the Company.The counterparty credit risk associated with the mirror-image swaps executed with third party financial institutions is monitored and managed as part of the Company’s overall asset-liability management process, except that the counterparty credit risk related to derivatives entered into with certain qualified borrowers is managed through the Company’s standard loan underwriting process for commercial borrowers since these derivatives typically share in the collateral provided by the loan agreements. When deemed necessary, appropriate types and amounts of collateral are obtained to minimize credit exposure. The Company hedges the market risk of derivatives transactions with commercial borrowers by entering into offsetting transactions with large, highly rated financial institutions. These exposures are generally secured by cash under bilateral Credit Support Annexes, which are a component of the ISDA Master Agreements executed with counterparties. Aggregate counterparty exposures are monitored against various types of credit limits established to contain risk within parameters. Counterparty credit risk is managed by the Counterparty Credit Risk Management team in accordance with SR 11-10, Interagency Counterparty Credit Risk Management Guidance, which was issued in 2011 in response to the financial crisis of 2008. The guidance addresses counterparty credit risk governance, measurement, management, and systems. Specifically, counterparty risk is managed through the establishment and regular review of exposure limits, formalization of limits in policy and procedure, ongoing review of models, and having a single platform to allow for the timely aggregation of