UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): October 19, 1999
WINTRUST FINANCIAL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Commission File Number 0-21923
Illinois 36-3873352
- -------------------------------- ------------------------------------
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation)
727 North Bank Lane
Lake Forest, Illinois 60045
-------------------------------------------------------
(Address of Principal Executive Offices)
(847) 615-4096
---------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
<PAGE>
ITEM 5. OTHER EVENTS.
On October 19, 1999, Wintrust Financial Corporation ("Company") announced
earnings for the third quarter ended September 30, 1999. The Company's press
release related to this announcement is attached hereto as an Exhibit.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibit
Exhibit 99 - Press Release dated October 19, 1999.
- 2 -
<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: October 28, 1999 /s/ David A. Dykstra
--------------------
Executive Vice President
& Chief Financial Officer
- 3 -
<PAGE>
WINTRUST FINANCIAL CORPORATION
727 North Bank Lane, Lake Forest, Illinois 60045
NEWS RELEASE
FOR IMMEDIATE RELEASE October 19, 1999
- ---------------------
FOR MORE INFORMATION CONTACT:
Edward J. Wehmer, President & Chief Executive Officer
David A. Dykstra, Executive Vice President & Chief Financial Officer
(847) 615-4096
Website address: www.wintrust.com
WINTRUST FINANCIAL CORPORATION REPORTS
--------------------------------------
RECORD THIRD QUARTER 1999 RESULTS
---------------------------------
LAKE FOREST, ILLINOIS -- Wintrust Financial Corporation ("Wintrust")
(Nasdaq: WTFC) announced record net income of $2.5 million for the quarter ended
September 30, 1999, an increase of $373,000, or 17%, over the $2.2 million
recorded in the third quarter of 1998. On a per share basis, net income for the
third quarter of 1999 totaled $0.30 per diluted common share, a $0.05 per share,
or 20%, increase as compared to the 1998 third quarter total of $0.25 per
diluted common share. The return on average equity for the third quarter of 1999
increased to 12.46% from 11.80% for the prior year quarter. Pre-tax operating
earnings for the third quarter of 1999 totaled $3.8 million and increased $1.5
million, or 68%, over the prior year quarter; a more representative indicator of
improved operating results due to the impact of tax benefits from the
recognition of prior years' net operating tax losses.
For the nine months ended September 30, 1999, net income totaled $6.6
million, or $0.78 per diluted common share, an increase of $2.5 million, or 59%,
and $0.29 per diluted common share, when compared to the same period in 1998. On
a pre-tax basis, year-to-date operating earnings totaled $9.9 million and
increased $6.8 million, or 217%, over the 1998 year-to-date total. The return on
average equity for the nine months ended September 30, 1999 rose to 11.29%
versus 7.83% in the 1998 period.
"Our earnings improvement in the third quarter of 1999 was mainly the
result of solid loan growth in both the core and niche loan portfolios and a
decline in deposit funding costs," commented Edward J. Wehmer, President and
Chief Executive Officer. Mr. Wehmer added, "We are also pleased with the
improvement in our net overhead ratio, which was 1.91% for the third quarter of
1999 and is now within the range of our previously stated performance goal of
1.50% - 2.00%."
- more -
<PAGE>
For the third quarter of 1999, net interest income totaled $12.2
million and increased $2.3 million, or 24%, as compared to the prior year
quarterly total of $9.9 million. In addition, solid loan growth in the niche
premium finance portfolio necessitated the sale of approximately $20 million of
new volume to an unrelated third party, resulting in a third quarter gain of
$377,000. These earnings increases were partially offset by a $790,000 decline
in fees on mortgage loans sold due mainly to the rise in mortgage interest
rates, which caused a significant drop in refinancing activity.
Total assets rose to $1.56 billion at September 30, 1999, an increase
of $321 million, or 26%, compared to $1.24 billion a year ago, and an increase
of $217 million, or 16%, from $1.35 billion as of December 31, 1998. Total
deposits as of September 30, 1999 were $1.39 billion, an increase of $265
million, or 24%, as compared to $1.12 billion as of September 30, 1998, and an
increase of $159 million, or 13%, from the December 31, 1998 balance of $1.23
billion. Total loans grew to $1.20 billion as of September 30, 1999, a $294
million, or 32%, increase over the $908 million balance a year earlier, and a
$210 million, or 21%, increase over the $992 million balance as of December 31,
1998.
Third quarter 1999 results were also impacted by the additional costs
associated with establishing two new branch facilities. In September, the
Crystal Lake Bank subsidiary opened a branch located in south Crystal Lake and,
in October, the North Shore Community Bank subsidiary opened a full service
branch located in Skokie, Illinois. Wintrust continues with its plan to expand
through additional de novo bank and branch locations and possible acquisitions.
Wintrust is a financial services holding company whose common stock is
traded on the Nasdaq Stock Market(R). Its six suburban Chicago community bank
subsidiaries, each of which was founded as a de novo bank since December 1991,
are located in high income retail markets -- Lake Forest Bank and Trust Company,
Hinsdale Bank and Trust Company, North Shore Community Bank and Trust Company in
Wilmette, Libertyville Bank and Trust Company, Barrington Bank and Trust
Company, N.A., and Crystal Lake Bank and Trust Company, N.A.. The banks also
operate facilities in Lake Bluff, Glencoe, Winnetka, Clarendon Hills, Western
Springs and Skokie, Illinois. The Company's finance subsidiary, First Insurance
Funding Corporation, one of the largest commercial insurance premium finance
companies operating in the United States, serves commercial loan customers
throughout the country. Wintrust Asset Management Company, N.A., a new trust
subsidiary, allows Wintrust to service customers' trust and investment needs at
each banking location. Currently, Wintrust operates a total of 24 banking
offices and is in the process of constructing one additional branch facility.
All of the Company's banking subsidiaries are locally managed with large local
boards of directors. Wintrust Financial Corporation has been one of the fastest
growing de novo bank groups in Illinois.
# # #
<PAGE>
<TABLE>
<CAPTION>
WINTRUST FINANCIAL CORPORATION
SELECTED FINANCIAL HIGHLIGHTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------------------------------------------
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1999 1998 1999 1998
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SELECTED FINANCIAL CONDITION DATA
(AT END OF PERIOD):
Total assets $ 1,564,879 $ 1,243,556 $ 1,564,879 $ 1,243,556
Total deposits 1,388,442 1,123,756 1,388,442 1,123,756
Total loans, net of unearned income 1,202,256 908,276 1,202,256 908,276
Long-term debt and notes payable 38,400 30,703 38,400 30,703
Total shareholders' equity 80,854 73,155 80,854 73,155
- --------------------------------------------------------------------------------------------------------------------
SELECTED STATEMENTS OF INCOME DATA:
Net interest income $ 12,222 $ 9,873 $ 34,636 $ 26,787
Net revenues 14,239 11,882 41,079 32,468
Income before income taxes 3,819 2,272 9,878 3,119
Net income 2,527 2,154 6,621 4,159
Net income per common share - Basic 0.31 0.26 0.81 0.51
Net income per common share - Diluted 0.30 0.25 0.78 0.49
- --------------------------------------------------------------------------------------------------------------------
SELECTED FINANCIAL RATIOS AND OTHER DATA:
Performance Ratios:
Core net interest margin (1) 3.59% 3.61% 3.64% 3.46%
Net interest margin 3.47% 3.61% 3.53% 3.46%
Net interest spread 3.17% 3.19% 3.21% 3.03%
Non-interest income to average assets 0.52% 0.67% 0.59% 0.67%
Non-interest expense to average assets 2.43% 2.87% 2.63% 3.07%
Net overhead ratio 1.91% 2.20% 2.03% 2.40%
Return on average assets 0.65% 0.72% 0.61% 0.49%
Return on average equity 12.46% 11.80% 11.29% 7.83%
Average total assets $ 1,540,530 $ 1,193,210 $ 1,450,608 $ 1,133,615
Average shareholders' equity 80,440 72,429 78,417 71,002
Average loan-to-average deposit ratio 86.85% 82.47% 86.27% 79.29%
Common Share Data at end of period:
Market price per common share $ 17.25 $ 17.25
Book value per common share 9.89 8.98
Other Data at end of period:
Number of:
Bank subsidiaries 6 6
Banking offices 23 19
- --------------------------------------------------------------------------------------------------------------------
<FN>
(1) The core net interest margin excludes the net impact of the Company's 9.00%
Cumulative Trust Preferred Securities offering and certain discretionary
investment leveraging transactions.
</FN>
</TABLE>
- 1 -
<PAGE>
<TABLE>
<CAPTION>
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION (UNAUDITED)
(In thousands)
September 30, December 31, September 30,
1999 1998 1998
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks-non-interest bearing $ 38,391 $ 33,924 $ 28,048
Federal funds sold 59,161 18,539 18,250
Interest-bearing deposits with banks 3,746 7,863 10,231
Available-for-Sale securities, at fair value 164,747 209,119 193,037
Held-to-Maturity securities, at amortized cost - 5,000 5,000
Loans, net of unearned income 1,202,256 992,062 908,276
Less: Allowance for possible loan losses 8,200 7,034 6,500
- ------------------------------------------------------------------------------------------------------------------------------
Net loans 1,194,056 985,028 901,776
Premises and equipment, net 68,257 56,964 53,165
Accrued interest receivable and other assets 35,213 30,082 32,451
Goodwill and organizational costs 1,308 1,529 1,598
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 1,564,879 $1,348,048 $1,243,556
==============================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 125,870 $ 131,309 $ 106,090
Interest bearing 1,262,572 1,097,845 1,017,666
- ------------------------------------------------------------------------------------------------------------------------------
Total deposits 1,388,442 1,229,154 1,123,756
Short-term borrowings 40,025 - -
Notes payable 7,350 - 3,203
Long-term debt - trust preferred securities 31,050 31,050 27,500
Accrued interest payable and other liabilities 17,158 12,639 15,942
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 1,484,025 1,272,843 1,170,401
- ------------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY:
Preferred stock - - -
Common stock 8,174 8,150 8,150
Surplus 73,165 72,878 72,878
Common stock warrants 100 100 100
Retained earnings (deficit) 749 (5,872) (7,958)
Accumulated other comprehensive loss (1,334) (51) (15)
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 80,854 75,205 73,155
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,564,879 $ 1,348,048 $ 1,243,556
==============================================================================================================================
</TABLE>
- 2 -
<PAGE>
<TABLE>
<CAPTION>
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $24,990 $20,045 $ 69,993 $ 54,645
Interest bearing deposits with banks 44 378 165 2,159
Federal funds sold 504 542 1,074 1,801
Securities 2,546 1,976 7,244 5,683
- ----------------------------------------------------------------------------------------------------------------------------
Total interest income 28,084 22,941 78,476 64,288
- ----------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Interest on deposits 14,401 12,562 40,167 36,166
Interest on short-term borrowings and notes payable 727 506 1,470 1,335
Interest on long-term debt - trust preferred securities 734 - 2,203 -
- ----------------------------------------------------------------------------------------------------------------------------
Total interest expense 15,862 13,068 43,840 37,501
- ----------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 12,222 9,873 34,636 26,787
Provision for possible loan losses 990 971 2,707 3,311
- ----------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for possible loan losses 11,232 8,902 31,929 23,476
- ----------------------------------------------------------------------------------------------------------------------------
NON-INTEREST INCOME
Fees on mortgage loans sold 533 1,323 2,750 3,902
Service charges on deposit accounts 399 293 1,080 747
Trust fees 295 210 770 578
Gain on sale of premium finance receivables 377 - 640 -
Net securities gains 15 - 15 -
Other 398 183 1,188 454
- ----------------------------------------------------------------------------------------------------------------------------
Total non-interest income 2,017 2,009 6,443 5,681
- ----------------------------------------------------------------------------------------------------------------------------
NON-INTEREST EXPENSE
Salaries and employee benefits 4,984 4,565 15,256 14,353
Occupancy, net 743 589 2,088 1,765
Equipment expense 796 550 2,126 1,576
Data processing 551 440 1,544 1,234
Advertising and marketing 309 358 1,041 1,114
Professional fees 242 455 828 1,203
Other 1,805 1,682 5,611 4,793
- ----------------------------------------------------------------------------------------------------------------------------
Total non-interest expense 9,430 8,639 28,494 26,038
- ----------------------------------------------------------------------------------------------------------------------------
Income before income taxes 3,819 2,272 9,878 3,119
Income tax expense (benefit) 1,292 118 3,257 (1,040)
- ----------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 2,527 $ 2,154 $ 6,621 $ 4,159
- ----------------------------------------------------------------------------------------------------------------------------
NET INCOME PER COMMON SHARE - BASIC $ 0.31 $ 0.26 $ 0.81 $ 0.51
- ----------------------------------------------------------------------------------------------------------------------------
NET INCOME PER COMMON SHARE - DILUTED $ 0.30 $ 0.25 $ 0.78 $ 0.49
- ----------------------------------------------------------------------------------------------------------------------------
Weighted average common shares outstanding 8,173 8,150 8,166 8,141
Dilutive potential common shares 310 384 322 358
- ----------------------------------------------------------------------------------------------------------------------------
Average common shares and dilutive common shares 8,483 8,534 8,488 8,499
============================================================================================================================
</TABLE>
- 3 -
<PAGE>
NET INTEREST INCOME
The following tables present a summary of the Company's net interest income and
related net interest margins, calculated on a fully taxable equivalent basis,
for the quarterly and nine-month periods ended September 30, 1999 and 1998:
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED FOR THE QUARTER ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
----------------------------------------- ---------------------------------------
(dollars in thousands) AVERAGE INTEREST RATE AVERAGE INTEREST RATE
- ---------------------- ---------------- ------------- ---------- --------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Liquidity management assets (1) (2) $ 231,273 $ 3,096 5.31% $ 204,915 $ 2,896 5.61%
Loans, net of unearned income (2) 1,173,278 25,065 8.48 883,515 20,068 9.01
---------------- ------------- ---------- --------------- ------------- ---------
Total earning assets 1,404,551 28,161 7.95% 1,088,430 22,964 8.37%
---------------- ------------- ---------- --------------- ------------- ---------
Interest-bearing deposits 1,225,090 14,401 4.66% 969,591 12,562 5.14%
Short-term borrowings and notes payable 59,315 727 4.86 30,447 506 6.59
Long-term debt - trust preferred securities 31,050 734 9.46 - - -
---------------- ------------- ---------- --------------- ------------- ---------
Total interest-bearing liabilities 1,315,455 15,862 4.78% 1,000,038 13,068 5.18%
---------------- ------------- ---------- --------------- ------------- ---------
Tax-equivalent net interest income $ 12,299 $ 9,896
============= =============
Net interest margin 3.47% 3.61%
========== =========
Core net interest margin (3) 3.59% 3.61%
========== =========
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
----------------------------------------- ---------------------------------------
(dollars in thousands) AVERAGE INTEREST RATE AVERAGE INTEREST RATE
- ---------------------- ---------------- ------------- ---------- --------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Liquidity management assets (1) (2) $ 216,047 $ 8,490 5.25% $ 228,340 $ 9,643 5.65%
Loans, net of unearned income (2) 1,103,881 70,154 8.50 808,009 54,711 9.05
---------------- ------------- ---------- --------------- ------------- ---------
Total earning assets 1,319,928 78,644 7.97% 1,036,349 64,354 8.30%
---------------- ------------- ---------- --------------- ------------- ---------
Interest-bearing deposits 1,157,076 40,167 4.64% 924,048 36,166 5.23%
Short-term borrowings and notes payable 44,439 1,470 4.42 26,559 1,335 6.72
Long-term debt - trust preferred securities 31,050 2,203 9.46 - - -
---------------- ------------- ---------- --------------- ------------- ---------
Total interest-bearing liabilities 1,232,565 43,840 4.76% 950,607 37,501 5.27%
---------------- ------------- ---------- --------------- ------------- ---------
Tax-equivalent net interest income $ 34,804 $ 26,853
============= =============
Net interest margin 3.53% 3.46%
========== =========
Core net interest margin (3) 3.64% 3.46%
========== =========
- -------------------------------
<FN>
(1) Liquidity management assets include securities, interest earning deposits
with banks and federal funds sold.
(2) Interest income on tax-advantaged loans and securities reflects a
tax-equivalent adjustment based on a marginal federal corporate tax rate of
34%. This total adjustment for the quarters ended September 30, 1999 and
1998 was $77,000 and $23,000, respectively, and for the nine-month periods
ended September 30, 1999 and 1998 was $168,000 and $66,000, respectively.
(3) The core net interest margin excludes the net impact of the Company's 9.00%
Cumulative Trust Preferred Securities offering and certain discretionary
investment leveraging transactions.
</FN>
</TABLE>
- 4 -
<PAGE>
Tax-equivalent net interest income for the quarter ended September 30, 1999
totaled $12.3 million, an increase of $2.4 million, or 24%, as compared to the
$9.9 million recorded in the same quarter of 1998. This increase was mainly the
result of loan growth coupled with a decline in deposit funding cost rates.
Tax-equivalent interest and fees on loans for the quarter ended September 30,
1999 totaled $25.1 million, an increase of $5.0 million, or 25%, over the prior
year quarterly total of $20.1 million. This growth was predominantly due to a
$290 million, or 33%, increase in average total loans.
For the third quarter of 1999, the net interest margin was 3.47%, a decline of
14 basis points when compared to the margin of 3.61% in the prior year quarter.
This decline was due mainly to the net impact of the 9.00% Cumulative Trust
Preferred Securities offering and certain discretionary investment leveraging
transactions. The core net interest margin, which excludes the impact of these
items, was 3.59% for the third quarter of 1999, and declined only 2 basis points
when compared to the prior year quarterly margin of 3.61%.
The rate paid on interest-bearing deposits averaged 4.66% for the third quarter
of 1999 versus 5.14% for the same quarter in 1998, a decline of 48 basis points.
This decline was caused by a general market decline in rates coupled with
management's decision to be less aggressive on its deposit pricing at the more
mature banks. The rate paid on short-term borrowings and notes payable declined
to 4.86% in the third quarter of 1999 as compared to 6.59% in the same quarter
of 1998. A change in composition of this category coupled with a general decline
in market rates were the primary factors causing this 173 basis point decline.
In 1998, most of the average balance comprised notes payable under a line of
credit agreement with an unaffiliated bank at an interest rate indexed at 125
basis points over the LIBOR rate. In 1999, the average balance comprised mainly
short-term repurchase agreements, which generally have lower rates when compared
to the terms of the line of credit agreement.
The yield on total earning assets for the third quarter of 1999 was 7.95% as
compared to 8.37% in 1998, a decline of 42 basis points due to lower yields on
both loans and liquidity management assets, offset somewhat by a higher
proportion of average loans to average earning assets. The third quarter 1999
loan yield of 8.48% declined 53 basis points when compared to the prior year
quarterly yield of 9.01% and was due primarily to a higher prime lending rate of
8.50% during the entire third quarter of 1998 versus an average prime lending
rate of 8.10% for the third quarter of 1999.
For the nine months ended September 30, 1999, tax-equivalent net interest income
totaled $34.8 million and increased $8.0 million, or 30%, over the $26.9 million
recorded in the same period of 1998. This increase was primarily due to a
combination of loan growth and lower funding cost rates. Interest and fees on
loans, on a tax-equivalent basis, totaled $70.2 million for the nine-month
period ended September 30, 1999 and increased $15.4 million, or 28%, over the
same period of 1998. Average loans for the nine-month period of 1999 totaled
$1.10 billion and grew $296 million, or 37%, over the average for the same
period of 1998. The net interest margin for the nine months ended September 30,
1999 was 3.53%, an increase of 7 basis points when compared to the same period
in 1998. The core net interest margin for the nine-month period of 1999 was
3.64% and increased 18 basis points over the same margin in the prior year
period. These margin increases were directly the result of a decline in funding
cost rates and loan growth. The total deposit funding cost rate declined 59
basis points since the prior year nine-month period and was 4.64% for nine-month
period of 1999. The growth in loans caused a higher proportion of average loans
to average total earning assets, and increased from 78% in the 1998 period to
84% in the 1999 period. This improved loan proportion creates a higher net
interest margin, as loans earn interest at a higher rate than other earning
assets. The year-to-date loan yield declined 55 basis points to 8.50%, which was
due to a lower average prime lending rate of 7.87% in the year-to-date 1999
period versus and average prime lending rate of 8.50% in the 1998 year-to-date
period.
- 5 -
<PAGE>
NON-INTEREST INCOME
For the third quarter of 1999, non-interest income totaled $2.0 million and
increased $8,000 over the prior year quarter. Gains from the sale of premium
finance receivables and increases in trust fees, deposit services charges and
leased equipment rental income were offset by a lower level of fees from the
sale of mortgage loans.
Fees on mortgage loans sold, the largest category of non-interest income,
includes income from originating and selling residential real estate loans into
the secondary market. For the quarter ended September 30, 1999, these fees
totaled $533,000, a decline of $790,000, or 60%, from the prior year quarter.
This decline was due mainly to lower mortgage volumes caused by the recent
increases in mortgage interest rates. Accordingly, future fee income on mortgage
loans sold is not expected to be at the levels that were experienced in the last
half of 1998.
During the third quarter of 1999, approximately $20 million of premium finance
receivables were sold to an unrelated third party and resulted in the
recognition of a $377,000 gain. It is possible that similar future sales of
premium finance receivables may occur depending on the level of new volume
growth in relation to the capacity within the subsidiary banks' loan portfolios.
Service charges on deposit accounts totaled $399,000 for the third quarter of
1999, an increase of $106,000, or 36%, when compared to the same quarter of
1998. This increase was due to a higher deposit base and a larger number of
accounts at both the more mature banks and the newer de novo banks. The majority
of deposit service charges relate to customary fees on overdrawn accounts and
returned items. The level of service charges received 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.
Trust fees totaled $295,000 for the third quarter of 1999, an $85,000, or 40%,
increase over the same quarter of 1998. This increase was mainly the result of
new business development efforts generated from a larger staff of experienced
trust officers. Wintrust is committed to growing the trust and investment
business in order to better service its customers and create a more diversified
revenue stream. However, as the introduction of expanded trust and investment
services continues to unfold, it is expected that overhead levels will be high
when compared to the initial fee income that is generated. This overhead will
consist primarily of the salaries and benefits of experienced trust
professionals. It is anticipated that trust fees will eventually increase to a
level sufficient to absorb this overhead within a few years.
Other non-interest income for the third quarter of 1999 totaled $398,000 and
increased $215,000 over the prior year quarterly total of $183,000.
Approximately $105,000 of this increase resulted from rental income from
equipment leased through the Medical and Municipal Funding division of the Lake
Forest Bank, a business that was acquired in mid-1998. The remaining difference
primarily relates to income and fees earned from various bank services provided
to a growing customer base.
For the nine months ended September 30, 1999, total non-interest income was $6.4
million and increased $762,000, or 13%, when compared to the same period in
1998. This increase was mainly the result of a $640,000 gain from the sale of
premium finance receivables, a $333,000 increase in deposit service charges, the
recognition of $249,000 in premium income from certain call option transactions,
a $192,000 increase in trust fees and $212,000 of rental income from leased
equipment. These increases were partially offset by a $1.2 million decline in
fees from the sale of mortgage loans due principally to the increases in
mortgage loan interest rates, which caused a significant drop in refinancing
activity.
- 6 -
<PAGE>
NON-INTEREST EXPENSE
Non-interest expense for the third quarter of 1999 totaled $9.4 million and
increased $791,000, or 9%, from the third quarter 1998 total of $8.6 million.
The continued growth and expansion of the de novo banks and the development of
the new trust and investment subsidiary were the primary causes for this
increase. Since September 30, 1998, total deposits have grown 24% and total loan
balances have risen 32%, requiring higher levels of staffing and other costs to
both attract and service the larger customer base.
Salaries and employee benefits expense totaled $5.0 million for the third
quarter of 1999, an increase of $419,000, or 9%, as compared to the prior year
quarter total of $4.6 million. As mentioned earlier, this increase was primarily
due to the hiring of experienced trust professionals for the new trust and
investment subsidiary.
Other categories of non-interest expense, such as occupancy costs, equipment
expense and data processing, also increased over the prior year quarter due to
the general growth of the Company and the opening of several new banking
facilities. Other non-interest expense, which includes the amortization of
intangible assets, loan expenses, correspondent bank service charges, postage,
insurance, stationary and supplies and other sundry expenses, also increased
when compared to the prior year quarter due mainly to the factors mentioned
earlier.
For the nine-month period ended September 30, 1999, non-interest expense totaled
$28.5 million and increased $3.5 million, or 14%, over the same period of 1998,
excluding the second quarter 1998 non-recurring charge mentioned in earlier
reports. This increase was predominantly due to the continued growth of loan and
deposit accounts and the start-up of the new trust and investment subsidiary.
Despite this growth and the related increases in many of the non-interest
expense categories, Wintrust's ratio of non-interest expense to total average
assets declined from 2.95% for the nine-month period ended September 30, 1998,
exclusive of the previously mentioned non-recurring charge, to 2.63% for the
1999 period, and is favorable to the Company's most recent peer group ratio. In
addition, the net overhead ratio for the first nine months of 1999 declined to
2.03% as compared to the 1998 year-to-date ratio of 2.28%, excluding the
non-recurring charge. The improvement in this ratio has caused this key
indicator of overhead to reach the upper end of the previously stated
performance goal range of 1.50% - 2.00%.
- 7 -
<PAGE>
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 and nine months ended September 30, 1999 and 1998 is
shown as follows (dollars in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
------------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Balance at beginning of period $ 7,677 $ 5,856 $7,034 $ 5,116
Provision for possible loan losses 990 971 2,707 3,311
Charge-offs
Core banking loans 190 235 593 1,508
Indirect automobile loans 156 115 795 380
Premium finance receivables 193 62 383 359
------------------- ---------------- ----------------- ----------------
Total charge-offs 539 412 1,771 2,247
Recoveries
Core banking loans 9 14 19 176
Indirect automobile loans 33 19 61 32
Premium finance receivables 30 52 150 112
------------------- ---------------- ----------------- ----------------
Total recoveries 72 85 230 320
------------------- ---------------- ----------------- ----------------
Net charge-offs (467) (327) (1,541) (1,927)
------------------- ---------------- ----------------- ----------------
Balance at September 30 $ 8,200 $ 6,500 $8,200 $ 6,500
=================== ================ ================= ================
Loans at September 30 $1,202,256 $ 908,276
================= ================
Allowance as a percentage of loans 0.68% 0.72%
================= ================
Annualized net charge-offs as a percentage of average:
Core banking loans 0.12% 0.36%
Indirect automobile loans 0.42% 0.29%
Premium finance receivables 0.15% 0.21%
----------------- ----------------
Total loans 0.19% 0.32%
================= ================
Annualized provision for
possible loan losses 56.93% 58.20%
================= ================
</TABLE>
The provision for possible loan losses totaled $990,000 for the third quarter of
1999, a slight increase from a year earlier. For the first nine months of 1999,
the provision totaled $2.7 million and declined $604,000 from the prior year
total. The higher provision in 1998 was necessary to cover increased loan
charge-offs that occurred at one banking office in early 1998. For the first
nine months of 1999, net charge-offs totaled $1.5 million and were down from the
$1.9 million of net charge-offs recorded in 1998. On a ratio basis, annualized
net charge-offs as a percentage of average loans declined to 0.19% in 1999 from
0.32% in 1998.
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<PAGE>
Management believes the allowance for possible loan losses is adequate to
provide for potential losses in the portfolio. There can be no assurances,
however, that future losses will not exceed the amounts provided for, thereby
affecting future results of operations. The amount of future additions to the
allowance for possible loan losses will be dependent upon the economy, changes
in real estate values, interest rates, the regulatory environment, the level of
past-due and non-performing loans, and other factors.
Past Due Loans and Non-performing Assets
- ----------------------------------------
The following table sets forth the Company's non-performing assets at the dates
indicated. The information in the table should be read in conjunction with the
detailed discussion following the table (dollars in thousands).
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1999 1998 1998
<S> <C> <C> <C>
Past Due greater than 90 days
and still accruing:
Core banking loans $ 997 $ 800 $ 686
Indirect automobile loans 354 274 167
Premium finance receivables 1,337 1,214 778
--------------------- ---------------------- ---------------------
Total 2,688 2,288 1,631
--------------------- ---------------------- ---------------------
Non-accrual loans:
Core banking loans 1,139 1,487 3,387
Indirect automobile loans 369 195 129
Premium finance receivables 1,726 1,455 875
--------------------- ---------------------- ---------------------
Total non-accrual loans 3,234 3,137 4,391
--------------------- ---------------------- ---------------------
Total non-performing loans:
Core banking loans 2,136 2,287 4,073
Indirect automobile loans 723 469 296
Premium finance receivables 3,063 2,669 1,653
--------------------- ---------------------- ---------------------
Total non-performing loans 5,922 5,425 6,022
--------------------- ---------------------- ---------------------
Other real estate owned - 587 -
--------------------- ---------------------- ---------------------
Total non-performing assets $ 5,922 $ 6,012 $ 6,022
===================== ====================== =====================
Total non-performing loans by category as a percent of its own respective
category:
Core banking loans 0.29% 0.38% 0.75%
Indirect automobile loans 0.28% 0.22% 0.16%
Premium finance receivables 1.42% 1.50% 0.95%
--------------------- ---------------------- ---------------------
Total non-performing loans 0.49% 0.55% 0.66%
--------------------- ---------------------- ---------------------
Total non-performing assets as a
percentage of total assets 0.38% 0.45% 0.48%
Allowance for possible loan losses as
a percentage of non-performing loans 138.47% 129.66% 107.94%
</TABLE>
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<PAGE>
Non-performing Core Banking Loans
Total non-performing loans for the Company's core banking business were $2.1
million, or 0.29%, of the Company's core banking loans as of September 30, 1999,
and were down from the ratios of 0.38% as of December 31, 1998, and 0.75% one
year ago. Although the outstanding core loan portfolio has increased 34% from a
year ago, the amount of non-performing core loans has declined 48% from the
prior year totals. Non-performing core banking loans consist primarily of a
small number of commercial and real estate loans, of which management believes
are well secured and in the process of collection. In fact, about $455,000 of
the total relates to two residential real estate loans with appropriate advance
ratios that protect the Company from loss. The small number of such
non-performing loans allows management the opportunity to monitor closely the
status of these credits and work with the borrowers to resolve these problems
effectively.
Non-performing Premium Finance Receivables
Due to the nature of collateral for premium finance receivables, it customarily
takes 60-150 days to convert the collateral into cash collections. Accordingly,
the level of non-performing premium finance receivables is not necessarily
indicative of the loss inherent in the portfolio. In the event of default, the
Company has the power to cancel the insurance policy and collect the unearned
portion of the premium from the insurance carrier. In the event of cancellation,
the cash returned in payment of the unearned premium by the insurer should
generally be sufficient to cover the receivable balance, the interest and other
charges due. Due to notification requirements and processing time by most
insurance carriers, many receivables will become delinquent beyond 90 days while
the insurer is processing the return of the unearned premium. Management
continues to accrue interest until maturity as the unearned premium is
ordinarily sufficient to pay-off the outstanding balance and contractual
interest due. Non-performing premium finance receivables were $3.1 million, or
1.42% of total premium finance receivables, as of September 30, 1999. This ratio
compares favorably with the ratio of 1.50% at December 31, 1998. The ratio
fluctuates throughout the year due to the nature and timing of canceled account
collections from insurance carriers. It is important to note that the ratio of
losses is substantially less than the ratio of non-performing assets indicated
above. Please refer to the Allowance for Possible Loan Losses table where
annualized net charge-offs for the first nine months of 1999 were only 0.15% of
average premium finance receivables.
Non-performing Indirect Automobile Loans
Total non-performing indirect automobile loans were $723,000 at September 30,
1999. The ratio of these non-performing loans has increased slightly to 0.28% of
total indirect automobile loans at September 30, 1999 from 0.22% at December 31,
1998 and 0.16% at September 30, 1998. Despite the increase in the level of
non-performing loans, the ratios continue to be below standard industry ratios
for this type of loan category.
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements related to the Company's
financial performance that are based on estimates. Actual results could differ
materially from those addressed in the forward-looking statements due to factors
such as changes in economic conditions, unanticipated changes in interest rates
that negatively impact net interest income, competition and the related pricing
of loan and deposit products, future events that may cause unforeseen loan or
lease losses, slower than anticipated development and growth of the new trust
and investment business, the ability to adapt successfully to technological
changes to compete effectively in the marketplace, the Company's success, and
that of its outside data processing providers, in testing and implementing Year
2000 compliant hardware, software and systems, and the ability to attract and
retain experienced senior management. Therefore, there can be no assurances that
future actual results will correspond to these forward-looking statements.
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<PAGE>
