UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1997
Commission File Number 0-21923
WINTRUST FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Illinois 36-3873352
_--------------------------------------- ------------------------------------
(State of incorporation of organization) (I.R.S. Employer Identification No.)
727 North Bank Lane
Lake Forest, Illinois 60045
-----------------------------------------------------
(Address of principal executive offices)
(847) 615-4096
----------------------------------------------------------------
(Registrant's telephone number, including area code)
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 X No
--- ---
Indicate the number of shares outstanding of each of issuer's class of common
stock, as of the last practicable date.
Common Stock - no par value, 8,019,893 shares, as of May 13, 1997.
<PAGE>
TABLE OF CONTENTS
PART I. -- FINANCIAL INFORMATION
Page
----
ITEM 1. Financial Statements and Notes (Unaudited) .................... 1-6
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations .................................... 7-19
PART II. -- OTHER INFORMATION
ITEM 1. This item has been omitted from this Form since it is
inapplicable or would contain a negative response ........ 20
ITEM 2. Changes in Securities ......................................... 20
ITEM 3. This item has been omitted from this Form since it is
inapplicable or would contain a negative response ........ 20
ITEM 4. Matters submitted to a Vote of Security Holders ............... 20
ITEM 5. Other information ............................................. 20
ITEM 6. Exhibits and Reports on Form 8-K .............................. 20
Signatures .................................................... 21
Exhibit Index ................................................. 22
<PAGE>
<TABLE>
<CAPTION>
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION (UNAUDITED)
(IN THOUSANDS)
MARCH 31, December 31, March 31,
ASSETS 1997 1996 1996
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash and due from banks-noninterest bearing $ 23,976 $ 36,581 $ 10,869
Federal funds sold 46,319 38,835 49,236
Interest-bearing deposits with banks 15,001 18,732 19,100
Available-for-Sale securities, at market value 62,650 69,387 103,173
Held-to-Maturity securities, at amortized cost 5,001 5,001 5,001
Loans, net of unearned income 566,894 492,548 299,773
Less: Allowance for possible loan losses 4,073 3,636 2,961
- -------------------------------------------------------------------------------------------------------------------------------
Net loans 562,821 488,912 296,812
Premises and equipment, net 31,892 30,277 25,361
Accrued interest receivable and other assets 14,997 16,426 10,103
Goodwill and organizational costs 1,914 1,886 509
- -------------------------------------------------------------------------------------------------------------------------------
Total assets $ 764,571 $ 706,037 $ 520,164
===============================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest bearing $ 74,850 $ 67,164 $ 47,416
Interest bearing 607,343 550,865 407,812
- -------------------------------------------------------------------------------------------------------------------------------
Total deposits 682,193 618,029 455,228
Short-term borrowings - 7,058 -
Notes payable 6,503 22,057 12,512
Other liabilities 12,344 16,273 11,362
- -------------------------------------------------------------------------------------------------------------------------------
Total liabilities 701,040 663,417 479,102
- -------------------------------------------------------------------------------------------------------------------------------
Shareholders' equity
Preferred stock - - 503
issued and outstanding at December 31, 1996, and 113,063
issued and outstanding at December 31, 1995
Common stock 7,997 6,603 5,905
6,515,880 and 5,830,866 issued and outstanding at December 31,
1996 and 1995, respectively
Surplus 71,678 52,871 50,917
Common stock warrants 100 100 75
Retained deficit (16,234) (16,963) (16,346)
Net, unrealized gains (losses) on Available-for-Sale
securities, net of tax (10) 9 8
- -------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 63,531 42,620 41,062
- -------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 764,571 $ 706,037 $ 520,164
===============================================================================================================================
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
WINTRUST FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
PERIODS ENDED MARCH 31, 1997 AND 1996
(IN THOUSANDS EXCEPT PER SHARE DATA)
THREE MONTHS ENDED
MARCH 31,
- ---------------------------------------------------------------------------------------
1997 1996
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Interest income $ 13,078 $ 8,287
Interest expense 7,826 5,207
- ---------------------------------------------------------------------------------------
Net interest income 5,252 3,080
Provision for possible loan losses 679 410
- ---------------------------------------------------------------------------------------
Net interest income after provision for
possible loan losses 4,573 2,670
- ---------------------------------------------------------------------------------------
Noninterest income 1,592 2,014
Securities gains, net -- --
- ---------------------------------------------------------------------------------------
Total noninterest income 1,592 2,014
- ---------------------------------------------------------------------------------------
Noninterest expense 6,354 4,958
Merger related expenses -- --
- ---------------------------------------------------------------------------------------
Total noninterest expense 6,354 4,958
- ---------------------------------------------------------------------------------------
Income before income taxes (189) (274)
Income tax (benefit) expense (918) 82
- ---------------------------------------------------------------------------------------
Net income (loss) $ 729 $ (356)
=======================================================================================
Net income (loss) per common share $ 0.10 $ (0.06)
=======================================================================================
Weighted average common shares and
common share equivalents outstanding 7,293 5,862
=======================================================================================
</TABLE>
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<TABLE>
<CAPTION>
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
(IN THOUSANDS)
NET
UNREALIZED
GAIN (LOSS)
ON SECURITIES TOTAL
PREFERRED COMMON RETAINED AVAILABLE SHAREHOLDERS'
STOCK STOCK SURPLUS WARRANTS (DEFICIT) FOR SALE EQUITY
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 $ 503 $ 5,831 $ 50,053 $ 75 $ (15,990) $ 15 $ 40,487
Net loss (356) (356)
Common stock issuance - 78 908 - - - 986
epurchase of common stock - (4) (44) - - - (48)
Change in net unrealized gain on securities
available-for-sale, net of tax effect - - - - - (7) (7)
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 1996 $ 503 $ 5,905 $ 50,917 $ 75 $ (16,346) $ 8 $ 41,062
- --------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 $ - $ 6,603 $ 52,871 $ 100 $ (16,963)$ 9 $ 42,620
Net income - - - - 729 - 729
Common stock issued upon exercise
of stock options - 16 79 - - - 95
Common stock issued in conjunction with
public offering, net of issuance costs - 1,378 18,728 - - - 20,106
Change in net unrealized gain on securities
available-for-sale, net of tax effect - - - - - (19) (19)
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 1997 $ - $ 7,997 $ 71,678 $ 100 $ (16,234)$ (10) $ 63,531
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNADUDITED)
(IN THOUSANDS)
THREE MONTHS ENDED
MARCH 31,
- ------------------------------------------------------------------------------------------------------
1997 1996
- ------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $ 729 ($356)
Adjustments to reconcile net income (loss) to net cash
used for, or provided by, operating activities:
Provision for possible loan losses 679 410
Depreciation and amortization 518 440
Deferred income tax (benefit) expense (918) 82
Net accretion/amortization of investment securities (163) (209)
Decrease (increase) in other assets, net 2,288 (1,266)
Decrease in other liabilities, net (3,949) (1,766)
- ------------------------------------------------------------------------------------------------------
NET CASH USED FOR OPERATING ACTIVITIES (817) (2,665)
- ------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Proceeds from maturities of Available-for-Sale securities 30,170 100,966
Purchases of securities (23,270) (146,042)
Net decrease in interest bearing deposits 3,731 31,500
Net increase in loans (74,587) (41,753)
Purchases of premises and equipment, net (2,102) (1,730)
- ------------------------------------------------------------------------------------------------------
NET CASH USED FOR INVESTING ACTIVITIES (66,057) (57,059)
- ------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Increase in deposit accounts 64,164 49,570
Decrease in short-term borrowings, net (7,058) (867)
Proceeds from notes payable - 1,754
Repayment of notes payable (15,554) -
Issuance of common stock, net of issuance costs 20,201 938
- ------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 61,753 51,395
- ------------------------------------------------------------------------------------------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (5,121) (8,329)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 75,416 68,434
- ------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 70,295 $ 60,105
======================================================================================================
</TABLE>
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<PAGE>
WINTRUST FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
---------------------
The consolidated financial statements of Wintrust Financial Corporation and
Subsidiaries ("Wintrust" or "Company") presented herein are unaudited, but in
the opinion of management reflect all necessary adjustments for a fair
presentation of results as of the dates and for the periods covered by the
consolidated financial statements.
The consolidated Wintrust entity was formed on September 1, 1996 through a
merger transaction whereby the holding companies of Lake Forest, Hinsdale,
Libertyville and First Premium were merged with newly formed wholly-owned
subsidiaries of North Shore Community Bancorp, Inc. (which changed its name to
Wintrust Financial Corporation concurrent with the merger). The merger
transaction was accounted for in accordance with the pooling-of-interest method
of accounting for a business combination. Accordingly, the consolidated
financial statements included herein reflect the combination of the historical
financial results of the five entities and the recorded assets and liabilities
have been carried forward to the consolidated company at their historical cost.
In October 1996, Wintrust purchased a company known as Wolfhoya Investments,
Inc. ("Wolfhoya") for a purchase price of approximately $1.3 million. Wolfhoya
was a company organized prior to the merger transaction by certain directors and
officers of the Company for purposes of organizing a de novo banking operation
in Barrington, Illinois. At the date of purchase by Wintrust, Wolfhoya had
purchased real estate for a permanent banking location and constructed a
temporary banking location in downtown Barrington. Wolfhoya had also secured the
services of its top three executive officers to run the new de novo bank. On
December 19, 1996, Wintrust opened Barrington Bank and Trust Company, the bank
that Wolfhoya had begun to organize prior to the acquisition. The acquisition
was accounted for using the purchase method of accounting and the purchase price
was paid for by issuing approximately 88,000 shares of Wintrust common stock to
the shareholders of Wolfhoya.
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. Operating results for the three-month
periods presented are not necessarily indicative of the results which may be
expected for the entire year.
(2) Statement of Financial Accounting Standard No. 122:
--------------------------------------------------
In May 1995, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standard No. 122, "Accounting for Mortgage Servicing
Rights, an amendment of Financial Accounting Standard No. 65" (SFAS No. 122).
The statement requires the recognition as separate assets the rights to service
mortgage loans for others, however those rights are acquired. SFAS No. 122
requires that when a definitive plan exists to sell the loan and retain
servicing rights, the cost of the mortgage will be allocated between the loan
and the related mortgage servicing right based on their relative fair values at
the date of origination or purchase; otherwise the date of sale will be used.
Mortgage servicing rights are amortized ratably over the period of the
associated estimated net servicing income. SFAS No. 122 also requires assessing
the
- 5 -
<PAGE>
capitalized mortgage servicing rights for impairment by comparing the recorded
book value to the fair value of those rights.
(3) Statement of Financial Accounting Standard No. 114 and No. 118:
--------------------------------------------------------------
The Company follows the guidance of Statement of Financial Accounting Standard
No. 114 (as amended by Statement of Financial Accounting Standard No. 118),
"Accounting by Creditors for Impairment of a Loan - Income Recognition and
Disclosures" to account for impaired loans. A loan is considered impaired when,
based on current information and events, it is probable that a creditor will be
unable to collect all amounts due. Impaired loans under SFAS No. 114 and SFAS
No. 118 are considered by the Company to be nonaccrual loans, restructured loans
and loans with principal and/or interest at risk, even if the loan is current
with all payments of principal and interest. Impairment is measured by
determining the fair value of the loan based on the present value of expected
cash flows, the market price of the loan, or the fair value of the underlying
collateral. If the fair value of the loan is less than the recorded book value,
a valuation allowance is established as a component of the allowance for
possible loan losses.
Interest income is not accrued on loans where management has determined that the
borrowers may be unable to meet contractual principal and/or interest
obligations, or where interest or principal is 90 days or more past due, unless
the loans are adequately secured and in the process of collection. Cash receipts
on nonaccrual loans are generally applied to the principal balance until the
remaining balance is considered collectible, at which time interest income may
be recognized when received.
(4) Statement of Financial Accounting Standard No. 125
--------------------------------------------------
As of January 1, 1997, the Company adopted Financial Accounting Standards Board
Statement No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities" (SFAS No. 125). SFAS No. 125 is effective
for transfers and servicing of financial assets and extinguishments of
liabilities occurring after December 31, 1996, and is applied prospectively.
SFAS No. 125 provides accounting and reporting standards for transfers and
servicing of financial assets and extingushments of liabilities based on
consistent application of a financial components approach that focuses on
control. It distinguishes transfers of financial assets that are sales from
transfers that are secured borrowings. The adoption of SFAS No. 125 did not have
a material impact on the Company's financial position, results of operations or
liquidity.
(5) Cash and Cash Equivalents
-------------------------
For the purposes of the Consolidated Statements of Cash Flows, the Company
considers cash and cash equivalents to include cash and due from banks and
federal funds sold which have an original maturity of 90 days or less.
(6) Per Common Share Data
---------------------
Earnings per share are calculated by dividing net income, after consideration of
preferred stock dividends, by the weighted average number of shares of common
stock and common stock equivalents outstanding during the period. Common stock
equivalents are calculated using the treasury stock method.
- 6 -
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Wintrust Financial Corporation ("Wintrust" or "Company") is a multi-bank holding
company currently engaged in the business of providing financial services
primarily through its banking subsidiaries to customers in the Chicago
metropolitan area and financing the payment of insurance premiums, on a national
basis, through its subsidiary, First Premium Services, Inc. ("First Premium").
As of March 31, 1997, Wintrust owned five bank subsidiaries ("Banks"), all of
which started as de novo institutions, including Lake Forest Bank & Trust
Company ("Lake Forest"), Hinsdale Bank & Trust Company ("Hinsdale"), North Shore
Community Bank & Trust Company ("North Shore"), Libertyville Bank & Trust
Company ("Libertyville") and Barrington Bank & Trust Company ("Barrington").
The consolidated Wintrust entity was formed on September 1, 1996 through a
merger transaction whereby the holding companies of Lake Forest, Hinsdale,
Libertyville and First Premium were merged with newly formed wholly-owned
subsidiaries of North Shore Community Bancorp, Inc. (which changed its name to
Wintrust Financial Corporation concurrent with the merger). The merger
transaction was accounted for in accordance with the pooling-of-interest method
of accounting for a business combination. Accordingly, the consolidated
financial statements included herein reflect the combination of the historical
financial results of the five entities and the recorded assets and liabilities
have been carried forward to the consolidated company at their historical cost.
In October 1996, Wintrust purchased a company known as Wolfhoya Investments,
Inc. ("Wolfhoya") for a purchase price of approximately $1.3 million. Wolfhoya
was a company that had a sole business purpose of organizing a de novo banking
operation in Barrington, Illinois. At the date of purchase by Wintrust, Wolfhoya
had secured a permanent banking location and constructed a temporary banking
location in downtown Barrington. Wolfhoya had also secured the services of its
top three executive officers to run the new de novo bank. Barrington opened on
December 19, 1996. The acquisition was accounted for using the purchase method
of accounting and the purchase price was paid for by issuing approximately
88,000 shares of Wintrust common stock to the shareholders of Wolfhoya.
Accordingly, the Company's consolidated financial statements reflects the
financial condition and results of operations of Barrington since the date of
acquisition.
Each of Lake Forest, Hinsdale, Libertyville and First Premium are wholly-owned
by mid-tier holding companies known as Lake Forest Bancorp, Inc., Hinsdale
Bancorp, Inc., Libertyville Bancorp, Inc., and Crabtree Capital Corporation,
respectively. These mid-tier holding companies are all owned 100% by Wintrust.
The existing operating subsidiaries have all started operations within the last
seven years. Each of the operating subsidiaries were started in an effort to
fulfill a financial services need in the banking and insurance premium financing
industries. Lake Forest, Hinsdale, North Shore, Libertyville and Barrington
began banking operations in December 1991, October 1993, September 1994, October
1995 and December 1996, respectively. Subsequent to those initial dates of
operations, each of the banks, except Libertyville and Barrington have
established additional full service banking facilities. First Premium began
operations in 1990 and is primarily involved in the financing of property and
casualty insurance premiums written through independent insurance
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<PAGE>
brokers on a national basis for commercial customers. Since its commencement of
operations, First Premium has consistently expanded its umbrella of operations
to include additional states in which it can operate. As such, Wintrust is a
growth oriented company which is still undertaking to establish additional
market share in the communities and industry segments it serves.
The management of Wintrust presents the following discussion and analysis of its
financial condition as of March 31, 1997 compared with December 31, 1996 and
March 31, 1996 and the results of operations for the periods ending March 31,
1997 and 1996. This discussion should be read in conjunction with Wintrust's
unaudited consolidated financial statements contained in this report.
OVERVIEW
Wintrust reported net income for the quarter ended March 31, 1997 of $729,000
compared to a net loss of $356,000 in the prior year. A significant factor
contributing to the net income in 1997 was the recording of a net tax benefit of
$918,000. The income tax benefit recorded in 1997 reflected management's
determination that certain of the Company's subsidiaries earnings history and
projected future earnings were sufficient to make a judgment that the
realization of a portion of the net deferred tax assets not previously valued
was more likely than not to occur. Excluding the impact of income taxes, the
Company recorded pre-tax losses of approximately $189,000 and $274,000 in the
first three months of 1997 and 1996, respectively. The reduction in the pre-tax
net loss was a result of improved results at the Company's four banking
subsidiaries that existed as of March 1996 and at the Company's premium finance
subsidiary. However, the improvement accomplished at those subsidiaries was
offset by an expected pre-tax loss of approximately $483,000 at Barrington, the
Company's newest de novo bank opened in December, 1996. Additionally, the 1997
results were negatively impacted by the costs associated with the first year of
operations at the Company's full services banking facilities opened in Winnetka,
Illinois and Clarendon Hills, Illinois in May 1996 and August 1996, and the
opening a new drive-up banking facility in Lake Forest, Illinois during February
1997.
The loss in 1996 was attributable in part to start up costs associated with full
service banking operations in (a) Libertyville, Illinois via a newly chartered
de novo bank during October 1995, and (b) Glencoe, Illinois in October 1995 via
a full service branch banking facility. Additionally, North Shore and Hinsdale
opened separately located drive-up/walk-up facilities in the fourth quarter of
1995. Generally, a community bank's results of operations are reliant upon the
net interest income to produce an overall profit for the bank. However, as these
banking locations were only operational for less than one year, the revenues
generated through the net interest income were not sufficient to offset
organizational expenses and the overhead established to support full service
banking operations, as has been typical during the first twelve to fifteen
months of the Company's start-up banking operations and was anticipated by
management during its planning of these facilities.
Total assets grew $58.5 million, or 8% to $764.6 million as of March 31, 1997
compared to December 31, 1996. Loans increased $74.4 million, up 15% from year
end. Over the same period, deposits grew $64.2 million, up 10%. Shareholders'
equity increased $20.9 million to $63.5 million at March 31, 1997 compared with
$42.6 million at December 31, 1996 due primarily to the proceeds received from
the Company's common stock offering.
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<PAGE>
CONSOLIDATED RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income is defined as the difference between interest income and
fees on earning assets and interest expense on deposits and borrowings. The
related net interest margin represents the net interest income on a fully tax
equivalent basis as a percentage of average earning assets during the period.
The following table presents a summary of Wintrust's net interest income and
related net interest margin, calculated on a fully taxable equivalent basis
(dollars in thousands).
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1997 MARCH 31, 1996
----------------------------------------- -------------------------------------------
AVERAGE INTEREST RATE AVERAGE INTEREST RATE
--------------- ------------- ----------- --------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Interest bearing deposits with banks $ 16,167 $ 227 5.62% $ 33,910 $ 47 5.59%
Federal funds sold 51,213 651 5.09 53,171 706 5.31
Investment securities* 72,136 970 5.38 94,475 1,245 5.27
Loans, net of unearned discount* 516,717 11,257 8.71 265,177 5,876 8.86
--------------- ------------- ----------- --------------- ------------- -----------
Total earning assets $ 656,233 $13,105 7.99% $446,733 $ 8,301 7.43%
--------------- ------------- ----------- --------------- ------------- -----------
Interest-bearing deposits $ 580,814 $ 7,481 5.15% $383,937 $ 4,886 5.09%
Short-term borrowings 818 7 3.35 508 6 4.72
Term debt 19,015 338 7.11 13,251 315 9.51
--------------- ------------- ----------- --------------- ------------- -----------
Total interest-bearing liabilities $ 600,647 $ 7,826 5.21% $397,696 $ 5,207 5.24%
--------------- ------------- ----------- --------------- ------------- -----------
Taxable equivalent net interest income $ 5,279 $ 3,094
============= =============
Net interest spread 2.78% 2.20%
=========== ===========
Net interest margin 3.22% 2.77%
=========== ===========
<FN>
* Interest income on tax advantaged investment securities and loan reflects a
tax equivalent adjustment based on a marginal federal corporate tax of 34%.
The total tax-equivalent adjustment reflected in the above table is $27,000
and $14,000 in 1997 and 1996, respectively.
</FN>
</TABLE>
The net interest margin increased 0.45% to 3.22% in the first quarter of 1997
from 2.77% in the year ago period. The increase in the net interest margin was
primarily the result of a shift in the composition of the earning asset
portfolio whereby loans constituted approximately 79% of the average earning
assets during the first quarter of 1997 compared to only 59% in the first
quarter of 1996. Contributing to the increase of loans is the fact that the
Company is now maintaining the premium finance loans originated by First Premium
as assets of the subsidiary banks. First Premium had previously funded its loan
generation through a securitization facility whereby most loans were sold into
the secondary market, with servicing retained by First Premium. The cost of
First Premium's funding was more expensive than the cost of funds that could be
provided by the subsidiary banks' deposit base. As such, subsequent to the
consummation of the merger in September 1996, First Premium has sold their loan
production to the subsidiary banks. The sale of the loans to the banks has
enabled the
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<PAGE>
consolidated Wintrust entity to enjoy a larger net interest margin in the first
quarter of 1997 as the high yielding insurance premium loans remain on the books
of the Company using a lower overall cost of funds.
Additionally, the Company's borrowing costs have been reduced by lower rates
charged on term debt. During the first quarter of 1996, each of the predecessor
companies were distinct entities with a relatively higher borrowing rates. As a
result of the consummation of the merger and consolidation of the debt
outstanding at each of the predecessor companies, Wintrust was able to secure
more favorable interest rate terms from its lender.
Despite an increase in the net interest margin as discussed above, the Company's
net interest margin is low compared to industry standards for a variety of
reasons. First, as de novo banking institutions, Wintrust's subsidiary banks
have been aggressive in attempting to provide competitive interest rates to the
communities they serve. This strategy fulfills the organization's objectives of
providing the communities with favorable banking products and thereby garnering
high market penetration and deposit growth. Management believes that a strong
core deposit base will allow the organization to fund various diversified asset
niches in the future that will provide long-term shareholder value. Next, as de
novo banking institutions, Wintrust's subsidiary banks have been cautious to
originate high quality loans as opposed to originating higher yielding loans
that bring more credit risk with them. Also, the subsidiary banks have
purposefully maintained an investment portfolio that is short-term in nature in
order to facilitate the funding of quality loan demand as it emerged and to keep
the banks in a liquid condition in the event that deposit levels fluctuated. In
the current interest rate environment, the short-term investment portfolio has
been yielding less than a portfolio with extended maturities; however,
management believed that this method of investing was prudent given de novo
status of the banks.
RECONCILIATION OF THE NET INTEREST INCOME ACCORDING TO RATE AND VOLUME VARIANCES
The following table presents a reconciliation of Wintrust's net interest income,
calculated on a fully taxable equivalent basis between the three month periods
ended March 31, 1996 and March 31, 1997. The reconciliation sets forth the
change in the net interest income as a result of changes in volumes, changes in
rates and the change due to the combination of volume and rate changes (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
Fully tax equivalent net interest income for the three months ended March 31, 1996 $ 3,094
Change due to average earning assets fluctuations (volume) 1,451
Change due to interest rate fluctuations (rate) 503
Change due to rate/volume fluctuations (mix) 231
----------
Fully tax equivalent net interest income for the three months ended March 31, 1997 $ 5,279
==========
</TABLE>
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<PAGE>
NONINTEREST INCOME
Total noninterest income decreased approximately $422,000, or 21%, to $1.6
million for the first three months of 1997, as compared to $2.0 million in the
same period in 1996. The following table presents noninterest income by category
(in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1997 1996
------------------- -------------------
<S> <C> <C>
Fees on mortgage loans sold $ 425 $320
Gains on sale of premium finance loans -
967
Loan servicing fees 176 335
Service charges on deposit accounts 158 73
Trust fees 154 115
Securities gains, net - 49
Other income 679 155
------------------- -------------------
Total noninterest income $ 1,592 $ 2,014
=================== ===================
</TABLE>
Beginning in the fourth quarter of 1996 First Premium began selling premium
finance loans to the banking subsidiaries. Previously, such loans had been sold
to a third-party securitization facility whereby gains on the sale of such loans
and related servicing fees were recorded. Fee income earned in 1997 by First
Premium in conjunction with the sale and servicing of such loans to the
subsidiary banks was eliminated as an intercompany transaction. Consequently,
gains on the sale of premium finance loans sold and loan servicing fees
decreased from 1996 to 1997. Although these income categories declined in 1997,
the Company's net interest margin was impacted positively by the additional
interest income that the bank subsidiaries earn over the life of such loans.
Fees on mortgage loans sold relate to income derived by the subsidiary banks for
services rendered in originating and selling residential real estate loans into
the secondary market. Such fees rose $105,000 or 33% in the first quarter of
1997 to $425,000 from $320,000 in 1996. The increase came as a result of a
favorable interest rate environment and the efforts of experienced lenders.
Service charges on deposit accounts more than doubled to $158,000 for the three
months ended March 31, 1997 from $73,000 from the year ago period. The increase
is primarily a result of the 50% increase in deposit balances from March 31,
1996 to March 31, 1997. The majority of service charges on deposit accounts
relates to customary fees on accounts in overdraft positions and for returned
items on an account. The level of service charges received on deposit accounts
is substantially below peer group levels as management believes in the
philosophy of providing high quality service without encumbering that service
with numerous activity charges. That philosophy has contributed to the growth in
retail deposits.
Trust fees increased 34% to $154,000 from $115,000 for the three months ended
March 31, 1997 and 1996, respectively. The continuing efforts of the trust
management team to establish new account relationships and the "hands on"
customer service provided to our trust customers has resulted in a steady
increase in trust fees. Management anticipates adding additional trust
departments to existing banks during the remainder of 1997 and during 1998.
- 11 -
<PAGE>
Other noninterest income in 1997 increased to $679,000 from $155,000 one year
earlier. The increase is primarily related to the settlement of a lawsuit.
Excluding the impact of such settlement, other noninterest income remained
relatively stable.
NONINTEREST EXPENSE
Total noninterest expense increased approximately $1.4 million, or 28%, to $6.4
million for the first three months of 1997, as compared to $5.0 million in the
same period of 1996. The following table presents noninterest expenses by
category (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------------------
1997 1996
----------------- -----------------
<S> <C> <C>
Salaries and employee benefits $ 3,456 $2,497
Net occupancy expense 482 398
Data processing 321 223
Advertising and marketing 296 141
Other 1,799 1,699
----------------- -----------------
Total noninterest expense $6,354 $4,958
================= =================
</TABLE>
Salaries and employee benefits increased to $3.5 million for the three months
ended March 31, 1997 as compared to $2.5 million for the same period of the
prior year. The increase of approximately $1.0 million is partially the result
of one additional bank (Barrington), two additional full-service branch banking
facilities (located in Winnetka, Illinois and Clarendon Hills, Illinois), and a
drive-up banking facility in Lake Forest that were in the operations of the
first quarter of 1997 but that were not operational during the first quarter of
1996. Barrington accounted for $0.3 million of the salaries and employee
benefits expense in the first quarter of 1997 and the additional branch banking
facilities contributed approximately $0.2 million to the increase. In addition
to the increased staffing to support the new banking facilities, the growth in
deposit and loan accounts at the previously existing banking locations required
additional staffing to maintain our standard of excellent customer service.
Also, contributing to the increase in salaries were normal salary increases.
Occupancy expenses increased $84,000, or 21%, for the three months ended March
31, 1997 to $482,000 from $398,000 for the same period of 1996, due primarily to
the addition of Barrington and additional branch locations. The Company performs
significant research into the demographic nature of a location before entering a
new community with a physical banking presence. Management believes the
communities have embraced our commitment to the true community banking concept
as evidenced by the significant growth in deposits subsequent to the opening of
each of these new facilities.
For the three months ended March 31, 1997, data processing expenses increased by
$98,000 to $321,000, or 44%, over the first three months of 1996. Data
processing expenses are highly dependent on the number of accounts processed by
the Banks. As a result, the increase of deposit and loan balances from the
year-ago level of approximately 50% and 89%, respectively, was the primary
reason for increase in this expense category.
- 12 -
<PAGE>
Additionally, the first three months of 1997 included data processing costs for
Barrington which opened in December 1996.
Advertising and marketing expenses increased to $296,000 for the first three
months of 1997 compared to $141,000 for the first three months of 1996. Wintrust
considers effective marketing to be a cornerstone of establishing effective
market share in the communities served. The Company's strategy in establishing
new banking locations is to develop community oriented deposit and loan products
to attract its deposit base and achieve a relatively high level of penetration
into the communities' population of households. Accordingly, the continued
growth in banking locations caused the level of marketing expenses to increase.
Management anticipates that similar levels of marketing expense will be incurred
in future quarters as Wintrust continues to establish its base of customers and
promotes the opening of additional banking locations.
Other noninterest expenses increased by $100,000, or 6%, to $1.8 million for the
three months ended March 31, 1997 from $1.7 million for the first three months
of 1996. This category of expenses contains insurance expense, stationary and
supplies expense, postage expense, legal fees, audits and examinations expense,
amortization of organizational costs, and other sundry expenses. The 6% increase
in this category is a general increase due to the higher volume of accounts
outstanding at the banking subsidiaries.
Despite the increases in various noninterest expense categories during the first
three months of 1997 compared to 1996, Wintrust's ratio of noninterest expenses
to total average assets declined to 3.5% in 1997 from 4.0% in 1996, reflecting
management's commitment to maintaining low overhead costs while providing
superior customer service. Additionally, Wintrust's net overhead ratio of 2.6%
for the three months ended March 31, 1997 is approximately the same as
Wintrust's peer group. Thus, despite the significant expansion of banking
operations over the last year, the Company has controlled its noninterest
expenses in a fashion that is comparable to bank holding companies in its peer
group.
INCOME TAXES
The Company recorded an income tax benefit of $918,000 for the first three
months of 1997, whereas an income tax expense of approximately $82,000 was
recorded in the same period of 1996. Prior to the merger date of September 1,
1996, each of the merging companies except Lake Forest had net operating losses
and, based upon the start-up nature of the organization, there was not
sufficient evidence to justify the full realization of the net deferred tax
assets generated by those losses. Accordingly, during 1996, certain valuation
allowances were established against deferred tax assets with the combined result
being that a minimal amount of federal tax expense or benefit was recorded. As
the entities become profitable, the recognition of previously unvalued tax loss
benefits are available, subject to certain limitations, to offset tax expense
generated from profitable operations. The income tax benefit recorded in 1997
reflected management's determination that certain of the Company's subsidiaries
earnings history and projected future earnings were sufficient to make a
judgment that the realization of a portion of the net deferred tax assets not
previously valued was more likely than not to occur.
- 13 -
<PAGE>
FINANCIAL CONDITION
INTEREST-EARNING ASSETS
Wintrust's consolidated total assets at March 31, 1997 were $764.6 million, an
8% increase from the prior year-end level of $706.0 million, and a 47% increase
from the March 31, 1996 level as a result of strong deposit growth. Total loans
at March 31, 1997 were $566.9 million, an increase of $74.3 million, or 15%,
from year-end, and an increase of $267.1 million or 89% from the level one year
ago. As can be seen from the table below, the growth in the loan portfolio has
been diversified amongst all categories of loans with each categories'
percentage to total earning assets staying relatively constant. However, the
level of premium finance loans in relation to total earning assets has increased
more than other earning assets since the prior year-end. The increase in premium
finance receivables reflects the change to internally financing First Premium
loans by the Company's banking subsidiaries from being sold through a
securitization facility as was done during the first three quarters of 1996.
At March 31, 1997 total securities and other money market investments (i.e.
federal funds sold and interest-bearing deposits with banks) were $129.0
million, down 2% from $132.0 million at December 31, 1996, and 27% lower than
their year-ago level. The decline in securities and money market investments is
a result of funds being invested in the previously mentioned growth in the loan
portfolio. As of March 31, 1997, total securities and money market investments
were comprised of 25% in U.S. Treasury and government agency securities, 12% in
short-term interest-bearing deposits with banks, 36% in overnight federal funds
sold, and 27% in other debt and equity securities. As a result of the
significant growth in deposit and loans, it has been Wintrust's policy to
maintain its investment portfolio in short-term, liquid, and diversified high
credit quality investments. Wintrust maintained no trading account securities at
March 31, 1997 or in any of the other previous reporting periods.
The following table sets forth Wintrust's end of period earning assets by
category and their respective balance and percent of total earning assets.
<TABLE>
<CAPTION>
MARCH 31, 1997 December 31, 1996 March 31, 1996
----------------------------- -----------------------------------------------------------
Loans: BALANCE PERCENT Balance Percent Balance Percent
--------------- ------------- -------------------------------------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Commercial $199,323 29% $182,403 29% $121,404 26%
Home equity 91,832 13 87,303 14 59,288 12
Indirect auto 98,650 14 89,999 15 43,428 9
Residential real estate 55,087 8 51,673 8 12,654 3
Premium finance 94,503 14 57,453 9 13,127 3
Other 27,499 4 23,717 4 49,872 10
--------------- ------------- -------------------------------------------- --------------
Total loans 566,894 82 492,548 79 299,773 63
--------------- ------------- -------------------------------------------- --------------
Federal funds sold, money
market deposits and securities 128,971 18 131,955 21 176,510 37
--------------- ------------- -------------------------------------------- --------------
Total earning assets $695,865 100% $624,503 100% $476,283 100%
=============== ============= ============================================ ==============
</TABLE>
- 14 -
<PAGE>
DEPOSITS
Total deposits at March 31, 1997 were $682.2 million or 50% higher than the
year-ago level of $455.2 million and 10% higher than the year-end 1996 level of
$618.0 million. The following table sets forth the composition of the deposit
balances by category and those categories' relative percentage of the total
deposits as of the date specified.
<TABLE>
<CAPTION>
MARCH 31, 1997 December 31, 1996 March 31, 1996
----------------------------- ----------------------------- -----------------------------
PERCENT Percent Percent
BALANCE OF TOTAL Balance of Total Balance of Total
----------------------------- ----------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
Demand $ 74,850 11% $ 67,164 11% $ 47,416 11%
NOW 59,377 9 57,490 9 40,481 9
Money market 122,195 18 105,508 17 82,679 18
Savings 57,001 8 63,469 10 51,061 11
Certificates of deposit 368,770 54 324,398 53 233,591 51
----------------------------- ----------------------------- -----------------------------
Total $ 682,193 100% $ 618,029 100% $ 455,228 100%
============================= ============================= =============================
</TABLE>
The continued growth in deposit accounts for the three months ended March 31,
1997 is due primarily to the Company's desire to increase market share in
communities they serve and to establishing market share in communities which
were previously lacking a true community managed bank, that is, banks with local
management and boards of directors. Specifically, the opening of Barrington in
December 1996 and its growth in deposits contributed to the increase during
1997. As each of the new banking locations is opened, special deposit account
promotions are offered to the households in those communities. Customers who
open a combination of accounts (generally a combination of an interest-bearing
and a non-interest bearing account) during the initial months of operations are
afforded special privileges as a "founder" depositor of the bank. These
privileges customarily include rights to receive free safe deposit boxes,
favorable loan and deposit rates as compared to stated market rates, and other
selected perquisites. This "founder" account has been highly successful with the
most popular interest-bearing account option being the certificate of deposit
account. The banks continue to aggressively promote their products to the
communities they serve and attempt to meld the competitive products with
superior customer service. The result has been and should continue to be growth
in all deposit categories.
SHAREHOLDERS' EQUITY
Shareholders' equity grew to $63.5 million at March 31, 1997, from $42.6 million
at December 31, 1996. The primary components of the change in shareholders'
equity are the additional issuance of equity capital through an common stock
offering of $20.1 million and the year-to-date net income of approximately $0.7
million. The proceeds of the stock offering in the first quarter were used to
retire debt and general corporate purposes.
During the first quarter of 1997, the Company completed its direct subscription
and community offering of its Common Stock. The aggregate sale was 1,377,512
shares of common stock at a price of $15.50 per share, including 400,000 shares
which were underwritten by EVEREN Securities, Inc. The net proceeds (gross
proceeds less issuance costs) from the sale of these shares were approximately
$20.1 million. Also, subsequent
- 15 -
<PAGE>
to March 31, 1997, an additional 20,000 shares were sold to EVEREN Securities,
Inc., at a price of $15.50 per share, under an option provided by the Company in
conjunction with the previously underwritten shares.
The following table reflects various consolidated measures of capital at March
31, 1997 and December 31, 1996:
s<TABLE>
<CAPTION>
MARCH 31, December 31,
1997 1996
---------------------- -------------------
<S> <C> <C>
Leverage ratio 8.5% 6.4%
Ending tier 1 capital to risk-adjusted asset ratio 10.1% 7.3%
Ending total capital to risk-adjusted asset ratio 10.8% 8.0%
Dividend payout ratio 0.0% 0.0%
</TABLE>
The Company's consolidated leverage ratio (Tier 1 capital less
intangibles/average quarterly assets less intangibles) was 8.5% at March 31,
1997 which places the Company above the "well capitalized" regulatory level.
Consolidated Tier 1 and total risk-based capital ratios were also above the
"well capitalized" regulatory levels at 10.1% and 10.8%, respectively. Based on
guidelines established by the Federal Reserve Bank, a bank holding company is
required to maintain a Tier 1 capital to risk-adjusted asset ratio of 4.0% and a
total capital to risk-adjusted asset ratio of 8.0%. Management is not aware of
any known trends, events, regulatory recommendations or uncertainties that will
have any adverse effect on Wintrust's capital resources.
ASSET QUALITY
Allowance for Possible Loan Losses
- ----------------------------------
A reconciliation of the activity in the balance of the allowance for possible
loan losses for the three month periods under review is shown as follows
(dollars in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-------------------------------------------
1997 1996
------------------ -------------------
<S> <C> <C>
Balance at beginning of period $ 3,636 $ 2,763
Provision for possible loan losses 679 410
Charge-offs (265) (216)
Recoveries 23 4
------------------ -------------------
Balance at March 31 $ 4,073 $ 2,961
================== ===================
Loans at March 31 $ 566,894 $ 299,773
================== ===================
Allowance as a percentage of loans 0.72% 0.99%
================== ===================
Annualized net charge-offs as a percentage of :
Loans 0.17% 0.28%
================== ===================
Annualized provision for possible
loan losses 35.64% 51.71%
================== ===================
</TABLE>
- 16 -
<PAGE>
Management believes that the loan portfolio is well diversified and well
secured, without undue concentration in any specific risk area. Control of loan
quality is continually monitored by management and is reviewed by the Board of
Directors and its Credit Committee on a monthly basis. Independent external
review of the loan portfolio is provided by the examinations conducted by
regulatory authorities, independent public accountants in conjunction with their
annual audit, and an independent loan review performed by an entity engaged by
the Board of Directors. The amount of additions to the allowance for possible
loan losses which are charged to earnings through the provision for possible
loan losses are determined based on a variety of factors, including actual
charge-offs during the year, historical loss experience, delinquent loans, and
an evaluation of current and prospective economic conditions in the market area.
Management believes the allowance for possible loan losses is adequate to cover
any potential losses.
Loan losses related to commercial insurance premium financing are minimal since
they are generally fully secured by unearned insurance premiums. If a borrower
defaults, First Premium seeks to obtain a refund of unearned premiums from the
insurer. First Premium bears the credit risk of collections from the insurer. In
the event an insurer becomes insolvent and unable to pay claims to an insured or
refund unearned premiums upon cancellation of a policy to a finance company,
each state provides a state guaranty fund that will pay such a refund, less a
per claim deductible in certain states. First Premium diversifies its financing
activities among a wide range of brokers and insurers.
Past Due Loans and Non-performing Assets
The following table presents the Company's non-performing assets as of March 31,
1997 and December 31, 1996.
<TABLE>
<CAPTION>
MARCH 31, December 31,
1997 1996
------------------- -------------------
<S> <C> <C>
Nonaccrual loans $ 977 $ 1,686
Loans past due 90 days or more 979 95
Restructured loans - -
------------------- -------------------
Total non-performing loans 1,956 1,781
Other real estate owned - -
------------------- -------------------
Total non-performing assets $ 1,956 $ 1,781
=================== ===================
Total non-performing loans to total loans 0.35% 0.36%
Total non-performing assets to total assets 0.26% 0.25%
Nonaccrual loans to total loans 0.17% 0.34%
</TABLE>
As of March 31, 1997, the allowance for possible loan losses as a percentage of
non-performing loans was 208%.
As of March 31, 1997, two individual credits represent approximately $1.3
million of the total non-performing assets. The remaining $0.6 million of
non-performing assets are generally comprised of small consumer and
- 17 -
<PAGE>
auto loan delinquencies, loans secured by residential real estate and commercial
loans that are partially secured by residential real estate properties. Due to
the small number of loans past due, collection of the loans is very manageable
and management is vigorously pursuing the full collection of each account.
The recorded investment in loans considered to be impaired under SFAS No. 114,
at March 31, 1997 and December 31, 1996 was approximated $1.5 million and $1.4
million, respectively, for which no specific allowance for possible loan losses
was required in accordance with SFAS No. 114.
Potential Problem Loans
- -----------------------
In addition to those loans disclosed under "Past Due Loans and Non-performing
Assets", there are certain loans in the portfolio which management has
identified, through its problem loan identification system which exhibit a
higher than normal credit risk. However, these loans do not represent
non-performing loans to the Company. Management's review of the total loan
portfolio to identify loans where there is concern that the borrower will not be
able to continue to satisfy present loan repayment terms includes factors such
as review of individual loans, recent loss experience and current economic
conditions. Loans in this category include those with characteristics such as
those past maturity more than 45 days, those that have recent adverse operating
cash flow or balance sheet trends, or have general risk characteristics that the
loan officer feels might jeopardize the future timely collection of principal
and interest payments. The principal amount of loans in this category as of
March 31, 1997 and December 31, 1996 were approximately $1.3 million and $1.1
million, respectively.
LIQUIDITY AND INTEREST RATE SENSITIVITY
Wintrust manages the liquidity position of its banking operations to ensure that
sufficient funds are available to meet customers' needs for loans and deposit
withdrawals. The liquidity to meet the demand is provided by maturing assets,
liquid assets that can be converted to cash, and the ability to attract funds
from external sources. Liquid assets refer to federal funds sold and to
marketable, unpledged securities which can be quickly sold without material loss
of principal.
Interest rate sensitivity is the fluctuation in earnings resulting from changes
in market interest rates. Wintrust continuously monitors not only the
organization's current net interest margin, but also the historical trends of
these margins. In addition, Wintrust also attempts to identify potential adverse
swings in net interest income in future years, as a result of interest rate
movements, by performing computerized simulation analysis of potential interest
rate environments. If a potential adverse swing in net interest margin and/or
net income are identified, Wintrust then would take appropriate actions within
its asset/liability structure to counter these potential adverse situations.
Please refer to the section entitled "Net Interest Income" for further
discussion.
INFLATION
A banking organization's assets and liabilities are primarily monetary. Changes
in the rate of inflation do not have as great an impact on the financial
condition of a bank as do changes in interest rates. Moreover, interest rates do
not necessarily change at the same percentage as does inflation. An analysis of
a banking organization's asset and liability structure provides the best
indication of how a banking organization is positioned to respond to changing
interest rates and maintain profitability.
- 18 -
<PAGE>
IMPACT OF NEW ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 128:
- ---------------------------------------------------
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS No. 128).
SFAS No. 128 supersedes APB Opinion 15, "Earnings Per Share," and specifies the
computation, presentation and disclosure requirements for earnings per share
(EPS) for entities with publicly held common stock or potential common stock.
SFAS No. 128 was issued to simplify the computations of EPS and to make the
United States standard more compatible with EPS standards of the International
Accounting Standards Committee. It replaces the presentation of primary and
fully-diluted EPS, respectively. It also requires dual presentation of basic and
diluted EPS on the face of the income statement for all entities with complex
capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS computation.
Basic EPS, unlike primary EPS, excludes dilution and is computed by dividing
income available to common stockholders by the weighted-average number of common
shares outstanding for the period. Diluted EPS reflects the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity. Diluted EPS is computed
similarly to fully-diluted EPS under APB 15.
SFAS No. 128 is effective for financial statements for both interim and annual
periods ending after December 15, 1997 and is not expected to have a material
impact on the Company.
Statement of Financial Accounting Standards No. 129:
- ----------------------------------------------------
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 129, "Disclosure of Information about Capital
Structure" (SFAS No. 129). SFAS No. 129 provides required disclosures for the
capital structure of companies and is effective for financial statements for
periods ending after December 15, 1997. The required disclosures had been
included in a number of separate statements and opinions. As such, the issuance
of SFAS No. 129 is not expected to require significant revision of prior
disclosures.
- 19 -
<PAGE>
PART II
ITEMS 1:
This item has been omitted from this Form 10-Q since it is inapplicable or would
contain a negative response.
ITEM 2: CHANGE IN SECURITIES
RECENT SALES OF UNREGISTERED SECURITIES.
- ----------------------------------------
In January 1997, as a result of an exercise of stock options, the Company issued
an aggregate of 16,411 shares of Common Stock of the Company in reliance on the
exemption from registration pursuant to Section 4(2) of the Securities Act. An
aggregate of $95,200 was received as payment for the exercise price.
ITEMS 3:
This item has been omitted from this Form 10-Q since it is inapplicable or would
contain a negative response.
ITEM 4: MATTERS SUBMITTED TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5: OTHER INFORMATION
None.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
--------
Computation of Net Income Per Common Share - Exhibit 11
Financial Data Schedule - Exhibit 27
(b) Reports on Form 8-K.
--------------------
No reports on Form 8-K were filed by the Company during the quarter ended March
31, 1997.
- 20 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WINTRUST FINANCIAL CORPORATION
(Registrant)
Date: May 14, 1997 /s/ Edward J. Wehmer
President & Chief Operating Officer
Date: May 14, 1997 /s/ David A. Dykstra
Executive Vice President
& Chief Financial Officer
(Principal Accounting Officer)
- 21 -
<PAGE>
EXHIBIT INDEX
Exhibit 11 Computation of Net Income Per Common Share
Exhibit 27 Financial Data Schedule
- 22 -
<TABLE>
<CAPTION>
EXHIBIT 11
WINTRUST FINANCIAL CORPORATION
COMPUTATION OF NET INCOME PER COMMON SHARE
(in thousands, except per share data)
THREE MONTHS ENDED MARCH 31
-----------------------------------
1997 1996
---------------- -----------------
<S> <C> <C>
Net income (loss) (A) $ 729 $ (356)
================ =================
Average common shares outstanding 6,816 5,862
Average common share equivalents (1) 477 -
---------------- -----------------
Weighted average common shares and
common share equivalents (B) 7,293 5,862
================ =================
Net income (loss) per average
common share (A/B) $ 0.10 $ (0.06)
================ =================
<FN>
(1) Common share equivalents result from stock options, stock rights and stock
warrants being treated as if they had been exercised and are computed by
application of the treasury stock method. No common share equivalents were
assumed to be outstanding for the three-months period ended March 31, 1996
because accounting standards require that the computation of earnings per share
shall not give effect to common stock equivalents for any period in which their
inclusion would have the effect decreasing the loss per share amount otherwise
computed.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
quarterly unaudited financial statements of Wintrust Financial Corporation for
the quarter ended March 31, 1997, and is qualified in its entirety by reference
to such financial statements
</LEGEND>
<CIK> 0001015328
<NAME> Wintrust Financial Corporation
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 23,976
<INT-BEARING-DEPOSITS> 15,001
<FED-FUNDS-SOLD> 46,319
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 62,650
<INVESTMENTS-CARRYING> 5,001
<INVESTMENTS-MARKET> 4,881
<LOANS> 566,894
<ALLOWANCE> 4,073
<TOTAL-ASSETS> 764,571
<DEPOSITS> 682,193
<SHORT-TERM> 0
<LIABILITIES-OTHER> 12,344
<LONG-TERM> 6,503
0
0
<COMMON> 7,997
<OTHER-SE> 55,534
<TOTAL-LIABILITIES-AND-EQUITY> 764,571
<INTEREST-LOAN> 11,230
<INTEREST-INVEST> 1,848
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 13,078
<INTEREST-DEPOSIT> 7,481
<INTEREST-EXPENSE> 7,826
<INTEREST-INCOME-NET> 5,252
<LOAN-LOSSES> 679
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 6,354
<INCOME-PRETAX> (189)
<INCOME-PRE-EXTRAORDINARY> 729
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 729
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0.10
<YIELD-ACTUAL> 3.22
<LOANS-NON> 977
<LOANS-PAST> 1,956
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,338
<ALLOWANCE-OPEN> 3,636
<CHARGE-OFFS> (265)
<RECOVERIES> 23
<ALLOWANCE-CLOSE> 4,073
<ALLOWANCE-DOMESTIC> 2,505
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,568
</TABLE>
