Wintrust(WTFC) - 2021 Q4 - Annual Report

Capital Adequacy - As of December 31, 2021, the Company's Common Equity Tier 1 Capital Ratio was 8.6%, exceeding the minimum regulatory requirement of 4.5%[74] - The Tier 1 Capital Ratio stood at 9.6%, above the minimum requirement of 6.0%[74] - The Total Capital Ratio was reported at 11.6%, surpassing the minimum requirement of 8.0%[74] - The Company maintained a Tier 1 Leverage Ratio of 8.0%, well above the minimum requirement of 4.0%[74] - The Capital Conservation Buffer is currently at 2.5%, which is fully phased in and necessary to avoid restrictions on capital distributions[78] - The Company and its subsidiary banks are expected to continue exceeding all applicable well-capitalized regulatory capital requirements[73] - Failure to maintain well-capitalized status could lead to restrictions on capital distributions and growth, adversely affecting operations[71] - The Federal Reserve has not revised the well-capitalized standard for bank holding companies to reflect higher capital requirements under the U.S. Basel III Rule[75] Regulatory Compliance - The Company remains in compliance with specific net worth requirements for participation in mortgage programs with government-sponsored entities[76] - The FDIC's restoration plan aims to exceed a DIF reserve ratio of 1.35% within eight years without increasing deposit insurance assessment rates[89] - The Community Reinvestment Act (CRA) requires insured depository institutions to meet the credit needs of their entire community, including low and moderate-income neighborhoods, and all subsidiary banks received a "satisfactory" or better rating on their most recent CRA performance evaluation[96] - The OCC adopted a final rule in December 2021 to rescind the June 2020 CRA rules, reverting to prior regulations established in 1995, indicating a shift in regulatory focus[97] - The company’s subsidiary banks are subject to various federal and state consumer protection laws, with the CFPB having broad rulemaking authority over these laws[98] - Interchange fees for electronic debit transactions are capped at 21 cents plus 0.05% of the transaction value, plus an additional one cent for fraud adjustments, reflecting regulatory limits on fees[105] - The Bank Secrecy Act and USA PATRIOT Act require depository institutions to maintain anti-money laundering programs, including employee training and annual audits[106] - The Anti-Money Laundering Act of 2020 mandates the U.S. Treasury to issue priorities that may alter due diligence and reporting requirements for banks[108] - The Office of Foreign Assets Control (OFAC) administers economic sanctions that can restrict transactions with designated foreign countries and individuals, impacting compliance requirements[109] - The company must comply with the California Consumer Privacy Act (CCPA), which imposes additional obligations regarding consumer data protection and privacy[111] - A new regulation adopted in November 2021 requires banking organizations to notify regulators within 36 hours of identifying a significant computer-security incident[114] - Violations of legal requirements may expose the company to regulatory actions and private litigation, including claims for damages and penalties[115] Workforce and Employment - Wintrust employed 5,239 full-time equivalent employees as of December 31, 2021, with approximately 97% classified as full-time[125] - In 2021, Wintrust filled approximately 1,069 positions, with 54% of new hires identifying as female and 39% as racially or ethnically diverse[126] - The turnover rate for Wintrust in 2021 was approximately 20%, with voluntary departures accounting for about 81% of total turnover[126] - Wintrust invested more than 117,000 total hours in training for employees in 2021, providing access to over 16,000 course offerings[128] - Women represent more than 58% of Wintrust's workforce, while racially/ethnically diverse representation is approximately 31%[128] Financial Risk Management - The Company is subject to SEC's net capital rule, which requires maintaining a minimum amount of net assets in liquid form, potentially limiting operations[118] - Wintrust is a member of the Securities Investor Protection Corporation (SIPC), providing up to $500,000 protection for customers' securities accounts[118] - The Company continuously monitors interest rate risk and conducts simulation analysis to identify potential adverse changes in net interest income[535] - Interest rate scenarios indicate potential percentage changes in net interest income over a one-year horizon, assuming increases and decreases of 100 and 200 basis points[538] - Wintrust's asset-liability management policies are established to balance interest rate risk, credit risk, and liquidity risk[534] - As of December 31, 2021, the Static Shock Scenarios showed a 25.3% increase compared to 25.0% in 2020, while Ramp Scenarios increased from 11.4% in 2020 to 13.9% in 2021[539] - The Company utilized derivative financial instruments, including interest rate swaps and options, to manage interest rate risk and enhance profitability[539] - Covered call option transactions were employed to hedge positions and mitigate net interest margin compression, contributing to overall profitability despite being recorded as non-interest income[540] - There were no covered call options outstanding as of December 31, 2021, or 2020, indicating a strategic shift in risk management[540] - The Company may acquire fixed rate term debt or use financial derivative instruments to further mitigate interest rate risk exposure[540]