Wintrust Financial Corporation
727 North Bank Lane, Lake Forest, Illinois 60045
NEWS RELEASE
FOR IMMEDIATE RELEASE July 18, 2002
- ---------------------
FOR MORE INFORMATION CONTACT:
Edward J. Wehmer, President & Chief Executive Officer
David A. Dykstra, Senior Executive Vice President, Chief Operating Officer &
Chief Financial Officer
(847) 615-4096
Website address: www.wintrust.com
WINTRUST FINANCIAL CORPORATION REPORTS
--------------------------------------
SECOND QUARTER EARNINGS;
------------------------
SECOND QUARTER NET EARNINGS UP 45%
----------------------------------
LAKE FOREST, ILLINOIS -- Wintrust Financial Corporation ("Wintrust")
(Nasdaq: WTFC) announced quarterly net income of $6.3 million for the quarter
ended June 30, 2002, an increase of $1.9 million, or 45%, over the $4.4 million
recorded in the second quarter of 2001. On a per share basis, net income for the
second quarter of 2002 totaled $0.37 per diluted common share, a $0.05 per
share, or 16%, increase as compared to the 2001 second quarter total of $0.32
per diluted common share. The lower growth rate in the earnings per share as
compared to net income was primarily due to the issuance of 1,488,750 additional
shares of common stock in June 2001, 762,742 shares issued in the February 2002
acquisition of the Wayne Hummer Companies and the issuance of 1,185,000
additional shares of common stock in June 2002. The return on average equity for
the second quarter of 2002 stood at 14.75%.
For the first six months of 2002, net income totaled $12.7 million, or
$0.77 per diluted common share, an increase of $4.4 million, or 53%, when
compared to $8.3 million, or $0.61 per diluted common share, for the same period
in 2001. Return on average equity for the first six months of 2002 was 15.85%
versus 15.81% for the same period of 2001.
"We are very pleased with our financial results for the first half of
2002, which was characterized by strong deposit and loan growth and sound asset
quality," commented Edward J. Wehmer, President and Chief Executive Officer.
"Our net interest margin continues to improve and the integration of the Wayne
Hummer
1
Companies is progressing. We continue to be excited about the full-service
financial provider capabilities that the Wayne Hummer Companies make available
and are working diligently to continue our unique growth story while improving
our earnings level. We completed a successful common stock offering to support
our growth. We remain comfortable that we will be able to meet or exceed the
analysts' consensus earnings estimate for 2002 of $1.52 per share."
On January 24, 2002, Wintrust's Board of Directors declared a 3-for-2
stock split of its common stock, effected in the form of a 50% stock dividend,
paid on March 14, 2002 to shareholders of record as of March 4, 2002. All
historical share data and per share amounts have been restated to reflect this
split.
On February 20, 2002, Wintrust completed its acquisition of Wayne
Hummer Investments, LLC (including its wholly owned subsidiary, Focused
Investments LLC) and Wayne Hummer Asset Management Company (collectively, the
"Wayne Hummer Companies"). Accounted for as a purchase, the Wayne Hummer
Companies results of operations are included only since the effective date of
acquisition in Wintrust's first six months of 2002 results. The integration of
the Wayne Hummer Companies into the Wintrust organization is proceeding
smoothly. As of June 30, 2002, we have migrated approximately $97.5 million of
customers' funds from the money market mutual fund into insured bank deposits of
the Wintrust banks. The introduction of bank and trust products to customers of
the Wayne Hummer Companies has started, as well as the referral of banking
customers to Wayne Hummer's brokerage operation. We now are actively pursuing
the placement of brokerage representatives into the markets served by Wintrust
banks and expect to have brokers on location at the majority of our banks before
the end of the year.
On June 14, 2002 Wintrust announced the closing of an underwritten
offering of 1,185,000 shares of common stock at a price of $28.70 per share.
Wintrust sold all 1,185,000 shares of common stock. In connection with the
offering, Wintrust granted the underwriters of the offering a 30-day
over-allotment option to purchase up to an additional 177,750 shares, which was
exercised and closed in July, 2002. Net proceeds to the Company, including the
over-allotment option and after deducting the underwriting discount and
estimated
2
offering expenses, were approximately $36.5 million. The net proceeds of this
offering will be used to increase the capital at our existing banks, to pursue
growth opportunities (internal, additional de novo locations and possible
acquisitions) and for general corporate purposes.
The results for the first six months of 2002 include pre-tax income of
$1.25 million, or $754,000 after-tax, for a partial settlement related to a
non-recurring charge recorded in 2000. Excluding this settlement income, net
income in the first six months of 2002 was $11.9 million, or $0.72 per diluted
share. Included in the first six months of 2001, is a cumulative effect of a
change in accounting for interest rate caps, which resulted in an after-tax
charge of $254,000, or $0.02 per diluted share.
Wintrust's key operating measures continue to show impressive growth
rates in 2002 as compared to the prior year as evidenced by the table below:
SIX MONTHS Six Months
ENDED Ended % or
JUNE 30, June 30, basis point (bp)
(Dollars in thousands, except per share data) 2002 2001 change
- ------------------------------------------------------ ------------------ ----------------- -------------------
Net income $ 12,669 $ 8,267 53.2 %
Net income per common share - Diluted $ 0.77 $ 0.61 26.2 %
Net revenues $ 73,108 $ 49,532 47.6 %
Net interest income $ 46,585 $ 35,291 32.0 %
Net interest margin 3.52 % 3.63 % (11)bp
Core net interest margin (1) 3.72 % 3.89 % (17)bp
Net overhead ratio (2) 1.54 % 1.68 % (14)bp
Return on average assets 0.88 % 0.77 % 11 bp
Return on average equity 15.85 % 15.81 % 4 bp
At end of period
Total assets $ 3,219,400 $ 2,322,083 38.6 %
Total loans, net of unearned income $ 2,308,945 $ 1,787,257 29.2 %
Total deposits $ 2,608,507 $ 2,055,345 26.9 %
Book value per common share $ 12.15 $ 9.20 32.1 %
Market price per common share $ 34.57 $ 16.57 108.6 %
Common shares outstanding (in thousands) 16,955 14,456 17.3 %
- -------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Core net interest margin excludes interest expense associated with
Wintrust's Long-term Debt - Trust Preferred Securities.
(2) The net overhead ratio is calculated by netting total non-interest
expense and total non-interest income, annualizing this amount, and
dividing by that period's total average assets.
</FN>
3
Total assets rose to $3.22 billion at June 30, 2002, an increase of
$897 million, or 39%, compared to $2.32 billion a year ago, and an increase of
$514 million, or 38% on an annualized basis, since December 31, 2001. Total
deposits as of June 30, 2002 were $2.61 billion, an increase of $553 million, or
27%, as compared to $2.06 billion at June 30, 2001, and an increase of $294
million, or 26% on an annualized basis, since year-end 2001. Total loans grew to
$2.31 billion as of June 30, 2002, a $522 million, or 29%, increase over the
$1.79 billion balance as of a year ago, and a $290 million, or 29% on an
annualized basis, increase since December 31, 2001.
For the second quarter of 2002, net interest income totaled $24.4
million, increasing $6.4 million, or 36%, compared to the second quarter of 2001
and $2.2 million, or 10%, over the first quarter of 2002. Average earning assets
grew $736 million over the second quarter of 2001, a 36% increase. Strong loan
growth in the second quarter of 2002 continued to fuel earning asset growth as
average loans increased over the first quarter of 2002 by $117 million, or 22%
on an annualized basis. The net interest margin for the second quarter of 2002
was 3.56 %, compared to 3.48% in the first quarter of 2002.
Non-interest income totaled $26.5 million for the first six months of
2002, increasing $12.3 million, or 86%, over the same period in 2001 and totaled
$13.8 million in the second quarter of 2002, increasing $6.4 million, or 86%,
over the second quarter of 2001. The primary contributor to these increases was
the additional fees realized from the trust, asset management and brokerage
services of the Wayne Hummer Companies acquired in the first quarter of 2002.
Non-interest expense totaled $48.6 million for the first six months of
2002, increasing $16.3 million, or 51%, over the first six months of 2001 and
totaled $25.9 million in the second quarter of 2002, increasing $9.6 million, or
59%, over the second quarter of 2001. Excluding the impact of the Wayne Hummer
Companies, non-interest expense for the first six months of 2002 increased by
$4.4 million, or 14%, compared to the first six months of 2001, while
non-interest expense for the second quarter of 2002 increased by $2.5 million,
or 16%, compared to the second quarter of 2001. The growth in non-interest
expense, excluding the impact of the Wayne Hummer Companies, is attributable to
increases in salaries and benefits and operating costs as a result of continued
growth and expansion of the de novo banks, normal annual increases in salaries
and increased costs of employee benefits. The net overhead ratio for the first
six months of 2002 declined to 1.54% from 1.68% in the same period last year.
4
Non-performing assets totaled $11.9 million, or 0.37% of total assets,
at June 30, 2002, reflecting a decrease from both the December 31, 2001 level of
$13.1 million, or 0.48% of total assets, and the June 30, 2001 level of $12.9
million, or 0.55% of total assets. The level of non-performing assets in the
Company's loan portfolio remains low and very manageable.
Wintrust is a financial holding company whose common stock is traded on
the Nasdaq Stock Market(R). Its seven 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 & Trust Company,
Hinsdale Bank & Trust Company, North Shore Community Bank & Trust Company in
Wilmette, Libertyville Bank & Trust Company, Barrington Bank & Trust Company,
Crystal Lake Bank & Trust Company and Northbrook Bank & Trust Company. The banks
also operate facilities in Lake Bluff, Highland Park, Hoffman Estates, Highwood,
Glencoe, Winnetka, Clarendon Hills, Western Springs, Skokie, Wauconda, McHenry
and Riverside, Illinois. Additionally, the Company operates various non-bank
subsidiaries. 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. Wayne Hummer Trust Company, a
trust subsidiary, allows Wintrust to service customers' trust and investment
needs at each banking location. Tricom, Inc. of Milwaukee provides short-term
accounts receivable financing and value-added out-sourced administrative
services, such as data processing of payrolls, billing and cash management
services, to temporary staffing service clients located throughout the United
States. Wayne Hummer Investments, LLC is a broker-dealer providing a full range
of private client and brokerage services to clients located primarily in the
Midwest. Focused Investments LLC is a broker-dealer that provides a full range
of investment solutions to clients through a network of community-based
financial institutions throughout the Midwest. Wayne Hummer Asset Management
Company provides money management services and advisory services to individual
accounts as well as the Wayne Hummer Companies' four proprietary mutual funds.
Wintrust Information Technology Services Company provides information technology
support, item capture and statement preparation services to the Wintrust
subsidiaries.
Currently, Wintrust operates a total of 31 banking offices and is in
the process of constructing several additional branch facilities. 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.
# # #
5
WINTRUST FINANCIAL CORPORATION
SELECTED FINANCIAL HIGHLIGHTS
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------------ ---------------------------------
(Dollars in thousands, except per share data) 2002 2001 2002 2001
--------------------------------------------------------------------- ------------------ ---------------- ----------------
SELECTED FINANCIAL CONDITION DATA (AT END OF PERIOD):
Total assets $ 3,219,400 $ 2,322,083
Total deposits 2,608,507 2,055,345
Total loans, net of unearned income 2,308,945 1,787,257
Long-term debt - trust preferred securities 51,050 51,050
Total shareholders' equity 205,999 132,969
-------------------------------------------------------------------------------------
SELECTED STATEMENTS OF INCOME DATA:
Net interest income $ 24,417 $ 18,015 $ 46,585 $ 35,291
Net revenues 38,188 25,406 73,108 49,532
Income before taxes and cumulative effect of
accounting change 9,799 6,860 19,692 13,377
Net income before cumulative effect of
accounting change 6,307 4,363 12,669 8,521
Net income 6,307 4,363 12,669 8,267
Net income per common share - Basic 0.40 0.34 0.82 0.64
Net income per common share - Diluted 0.37 0.32 0.77 0.61
--------------------------------------------------------------------------------------------------------------------------
SELECTED FINANCIAL RATIOS AND OTHER DATA:
Performance Ratios:
Net interest margin 3.56 % 3.59 % 3.52 % 3.63%
Core net interest margin (1) 3.74 3.84 3.72 3.89
Non-interest income to average assets 1.85 1.34 1.85 1.33
Non-interest expense to average assets 3.47 2.95 3.38 3.01
Net overhead ratio (2) 1.63 1.61 1.54 1.68
Efficiency ratio (3) 67.61 63.77 65.96 65.05
Return on average assets 0.85 0.79 0.88 0.77
Return on average equity 14.75 16.21 15.85 15.81
Average total assets $ 2,992,133 $ 2,214,280 $ 2,897,465 $ 2,162,430
Average shareholders' equity 171,469 107,981 161,161 105,428
Average loan-to-average deposit ratio 89.8 % 88.2 % 89.2 % 87.7%
--------------------------------------------------------------------------------------------------------------------------
Common Share Data at end of period:
Market price per common share $ 34.57 $ 16.57
Book value per common share $ 12.15 $ 9.20
Common shares outstanding (in thousands) 16,955 14,456
Other Data at end of period:
Allowance for loan losses $ 16,009 $ 12,111
Non-performing assets $ 11,921 $ 12,876
Allowance for loans losses to total loans 0.69 % 0.68 %
Non-performing assets to total assets 0.37 % 0.55 %
Number of:
Bank subsidiaries 7 7
Non-bank subsidiaries 7 3
Banking offices 31 29
--------------------------------------------------------------------------------------------------------------------------
<FN>
(1) The core net interest margin excludes the interest expense associated
with Wintrust's Long-term Debt - Trust Preferred Securities.
(2) The net overhead ratio is calculated by netting total non-interest
expense and total non-interest income, annualizing this amount, and
dividing by that period's total average assets.
(3) The efficiency ratio is calculated by dividing total non-interest
expense by tax-equivalent net revenues (less securities gains or
losses).
</FN>
6
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
(UNAUDITED) (Unaudited)
JUNE 30, December 31, June 30,
(In thousands) 2002 2001 2001
--------------------------------------------------------------------------------------------------------------------------
ASSETS
Cash and due from banks $ 60,055 $ 71,575 $ 46,282
Federal funds sold and securities purchased
under resale agreements 198,089 51,955 162,845
Interest-bearing deposits with banks 543 692 60
Available-for-sale securities, at fair value 380,833 385,350 179,858
Trading account securities 4,618 -- --
Brokerage customer receivables 68,844 -- --
Mortgage loans held-for-sale 27,735 42,904 19,049
Loans, net of unearned income 2,308,945 2,018,479 1,787,257
Less: Allowance for loan losses 16,009 13,686 12,111
--------------------------------------------------------------------------------------------------------------------------
Net loans 2,292,936 2,004,793 1,775,146
Premises and equipment, net 109,509 99,132 91,202
Accrued interest receivable and other assets 49,775 38,936 37,218
Goodwill 25,091 9,976 10,280
Other intangibles 1,372 109 143
--------------------------------------------------------------------------------------------------------------------------
Total assets $ 3,219,400 $ 2,705,422 $ 2,322,083
--------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 257,298 $ 254,269 $ 205,414
Interest bearing 2,351,209 2,060,367 1,849,931
--------------------------------------------------------------------------------------------------------------------------
Total deposits 2,608,507 2,314,636 2,055,345
Notes payable 58,650 46,575 25,000
Federal Home Loan Bank advances 140,000 90,000 --
Other borrowings 71,712 28,074 15,217
Long-term debt - trust preferred securities 51,050 51,050 51,050
Accrued interest payable and other liabilities 83,482 33,809 42,502
--------------------------------------------------------------------------------------------------------------------------
Total liabilities 3,013,401 2,564,144 2,189,114
--------------------------------------------------------------------------------------------------------------------------
Shareholders' equity:
Preferred stock -- -- --
Common stock 16,955 14,532 14,456
Surplus 147,616 97,956 96,986
Common stock warrants 96 99 99
Treasury stock, at cost -- -- --
Retained earnings 42,789 30,995 21,500
Accumulated other comprehensive loss (1,457) (2,304) (72)
--------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 205,999 141,278 132,969
--------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 3,219,400 $ 2,705,422 $ 2,322,083
--------------------------------------------------------------------------------------------------------------------------
7
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------ ------------------------------
(In thousands, except per share data) 2002 2001 2002 2001
------------------------------------------------------------------------------------------- ------------------------------
INTEREST INCOME
Interest and fees on loans $ 38,366 $ 37,542 $ 75,027 $ 74,405
Interest bearing deposits with banks 5 1 8 3
Federal funds sold and securities purchased under resale
agreements 205 1,196 498 2,318
Securities 5,211 2,651 9,711 6,446
Trading account securities 56 -- 80 --
Brokerage customer receivables 695 -- 1,185 --
--------------------------------------------------------------------------------------------------------------------------
Total interest income 44,538 41,390 86,509 83,172
--------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Interest on deposits 16,585 21,423 33,260 43,595
Interest on Federal Home Loan Bank advances 1,078 -- 1,975 --
Interest on notes payable and other borrowings 1,170 664 2,113 1,710
Interest on long-term debt - trust preferred securities 1,288 1,288 2,576 2,576
--------------------------------------------------------------------------------------------------------------------------
Total interest expense 20,121 23,375 39,924 47,881
--------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 24,417 18,015 46,585 35,291
Provision for loan losses 2,483 2,264 4,831 3,902
--------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 21,934 15,751 41,754 31,389
--------------------------------------------------------------------------------------------------------------------------
NON-INTEREST INCOME
Trust, asset management and brokerage fees 7,431 523 12,001 973
Fees on mortgage loans sold 1,934 1,948 3,951 3,472
Service charges on deposit accounts 753 606 1,491 1,153
Gain on sale of premium finance receivables 828 1,449 1,594 2,391
Administrative services revenue 931 1,121 1,753 2,142
Net securities gains (losses) 62 86 (153) 372
Other 1,832 1,658 5,886 3,738
--------------------------------------------------------------------------------------------------------------------------
Total non-interest income 13,771 7,391 26,523 14,241
--------------------------------------------------------------------------------------------------------------------------
NON-INTEREST EXPENSE
Salaries and employee benefits 15,400 8,735 28,762 17,213
Occupancy, net 1,609 1,178 3,153 2,422
Equipment expense 1,796 1,582 3,526 3,066
Data processing 1,042 822 2,056 1,652
Advertising and marketing 533 426 1,057 733
Professional fees 685 534 1,296 1,065
Amortization of goodwill -- 152 -- 313
Amortization of other intangibles 100 17 117 34
Other 4,741 2,836 8,618 5,755
--------------------------------------------------------------------------------------------------------------------------
Total non-interest expense 25,906 16,282 48,585 32,253
--------------------------------------------------------------------------------------------------------------------------
Income before taxes and cumulative effect of accounting 9,799 6,860 19,692 13,377
change
Income tax expense 3,492 2,497 7,023 4,856
--------------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of accounting change 6,307 4,363 12,669 8,521
Cumulative effect of change in accounting for derivatives,
net of tax -- -- -- (254)
--------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 6,307 $ 4,363 $ 12,669 $ 8,267
--------------------------------------------------------------------------------------------------------------------------
BASIC EARNINGS PER SHARE:
Income before cumulative effect of accounting change $ 0.40 $ 0.34 $ 0.82 $ 0.66
Cumulative effect of accounting change, net of tax -- -- -- (0.02)
--------------------------------------------------------------------------------------------------------------------------
NET INCOME PER COMMON SHARE - BASIC $ 0.40 $ 0.34 $ 0.82 $ 0.64
--------------------------------------------------------------------------------------------------------------------------
DILUTED EARNINGS PER SHARE:
Income before cumulative effect of accounting change $ 0.37 $ 0.32 $ 0.77 $ 0.63
Cumulative effect of accounting change, net of tax -- -- -- (0.02)
--------------------------------------------------------------------------------------------------------------------------
NET INCOME PER COMMON SHARE - DILUTED $ 0.37 $ 0.32 $ 0.77 $ 0.61
--------------------------------------------------------------------------------------------------------------------------
CASH DIVIDENDS DECLARED PER COMMON SHARE $ 0.000 $ 0.000 $ 0.060 $ 0.047
--------------------------------------------------------------------------------------------------------------------------
Weighted average common shares outstanding 15,948 12,992 15,513 12,957
Dilutive potential common shares 1,080 693 1,013 587
--------------------------------------------------------------------------------------------------------------------------
Average common shares and dilutive common shares 17,028 13,685 16,526 13,544
--------------------------------------------------------------------------------------------------------------------------
8
LOANS, NET OF UNEARNED INCOME
% Growth % Growth
from From
JUNE 30, December 31, June 30, June 30, December 31,
(Dollars in thousands) 2002 2001 2001 2001 2001 (1)
- --------------------------------------------------------- ----------------- ---------------- ------------- ----------------
BALANCE:
Commercial and commercial real estate $ 1,134,082 $ 1,007,580 $ 826,364 37 % 25 %
Home equity 318,397 261,049 209,149 52 44
Residential real estate 138,595 140,041 135,429 2 (2)
Premium finance receivables 459,558 348,163 345,789 33 65
Indirect auto loans 183,855 184,209 190,141 (3) --
Tricom finance receivables 19,228 18,280 16,824 14 10
Other loans 55,230 59,157 63,561 (13) (13)
--------------- ---------------- --------------- ------------- ----------------
Total loans, net of unearned income $ 2,308,945 $ 2,018,479 $ 1,787,257 29 % 29 %
--------------- ---------------- --------------- ------------- ----------------
MIX:
Commercial and commercial real estate 49 % 50 % 46 %
Home equity 14 13 12
Residential real estate 6 7 8
Premium finance receivables 20 17 19
Indirect auto loans 8 9 11
Tricom finance receivables 1 1 1
Other loans 2 3 3
--------------- ---------------- ---------------
Total loans, net of unearned income 100 % 100 % 100 %
--------------- ---------------- ---------------
<FN>
(1) Annualized
</FN>
DEPOSITS % Growth % Growth
from From
JUNE 30, December 31, June 30, June 30, December 31,
(Dollars in thousands) 2002 2001 2001 2001 2001 (1)
- --------------------------------------------------------- ----------------- ---------------- ------------- ----------------
BALANCE:
Non-interest bearing $ 257,298 $ 254,269 $ 205,414 25 % 2 %
NOW 292,370 286,860 193,752 51 4
Money market 356,352 335,881 296,362 20 12
Brokerage customer deposits 97,531 -- -- -- --
Savings 133,110 132,514 105,097 27 1
Time certificate of deposits 1,471,846 1,305,112 1,254,720 17 26
--------------- ---------------- --------------- ------------- ----------------
Total deposits $ 2,608,507 $ 2,314,636 $ 2,055,345 27 % 26 %
--------------- ---------------- --------------- ------------- ----------------
MIX:
Non-interest bearing 10 % 11 % 10 %
NOW 11 12 9
Money market 14 15 15
Brokerage customer deposits 4 -- --
Savings 5 6 5
Time certificate of deposits 56 56 61
--------------- ---------------- ---------------
Total deposits 100 % 100 % 100 %
--------------- ---------------- ---------------
<FN>
(1) Annualized
</FN>
Previously, Wintrust indicated its intentions to attempt to migrate funds from
the money market mutual fund balances managed by Wayne Hummer Asset Management
Company into deposit accounts of the Wintrust affiliate banks. Consistent with
reasonable interest rate risk parameters, the funds will generally be invested
in excess loan production of the affiliate banks as well as other investments
suitable for banks. As of June 30, 2002, $97.5 million had migrated into the
insured bank deposit product at the affiliate banks. The migration of additional
funds to the affiliate banks is subject to the desire of the customers to make
the transition of their funds into FDIC insured bank accounts, capital capacity
of the Company and the availability of suitable investments in which to deploy
the funds. Wintrust estimates that approximately $200-$300 million in total may
be migrated to bank deposits by year-end.
9
NET INTEREST INCOME
The following table presents a summary of Wintrust's net interest income and
related net interest margins, calculated on a fully tax-equivalent basis, for
the three-month periods ended June 30, 2002 and 2001:
FOR THE QUARTER ENDED For the Quarter Ended
JUNE 30, 2002 June 30, 2001
---------------------------------------- -----------------------------------------
(Dollars in thousands) AVERAGE INTEREST RATE Average Interest Rate
---------------------------------------- -----------------------------------------
Liquidity management assets (1) (2) $ 484,483 $ 5,444 4.51 % $ 302,848 $ 3,863 5.12 %
Other earning assets (3) 71,100 751 4.24 -- -- --
Loans, net of unearned income (2) (4) 2,218,968 38,534 6.97 1,735,696 37,741 8.72
---------------------------------------- -----------------------------------------
Total earning assets $ 2,774,551 $ 44,729 6.47 % $ 2,038,544 $ 41,604 8.19 %
---------------------------------------- -----------------------------------------
Interest-bearing deposits $ 2,203,247 $ 16,585 3.02 % $ 1,769,910 $ 21,423 4.85 %
Federal Home Loan Bank advances 104,938 1,078 4.12 -- -- --
Notes payable and other borrowings 164,587 1,170 2.85 46,915 664 5.68
Long-term debt - trust preferred securities 51,050 1,288 10.09 51,050 1,288 10.09
---------------------------------------- -----------------------------------------
Total interest-bearing liabilities $ 2,523,822 $ 20,121 3.20 % $ 1,867,875 $ 23,375 5.02 %
---------------------------------------- -----------------------------------------
Tax-equivalent net interest income $ 24,608 $ 18,229
-------------- --------------
Net interest margin 3.56 % 3.59 %
------------- ------------
Core net interest margin (5) 3.74 % 3.84 %
------------- ------------
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Liquidity management assets include available-for-sale 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 35%. The total adjustments for the quarters ended June 30, 2002
and 2001 were $191,000 and $214,000, respectively.
(3) Other earning assets include brokerage customer receivables and trading
account securities.
(4) Loans, net of unearned income includes mortgages held for sale and
non-accrual loans.
(5) The core net interest margin excludes the impact of Wintrust's
Long-term Debt - Trust Preferred Securities.
</FN>
Net interest income, which is the difference between interest income and fees on
earning assets and interest expense on deposits and borrowings, is the major
source of earnings for Wintrust. Tax-equivalent net interest income for the
quarter ended June 30, 2002 totaled $24.6 million, an increase of $6.4 million,
or 35%, as compared to the $18.2 million recorded in the same quarter of 2001.
Average loans in the second quarter of 2002 increased $483 million, or 28%, over
the second quarter of 2001. This growth helped offset the lower spreads as a
result of the eleven rate cuts by the Federal Reserve in 2001 totaling 475 basis
points.
Net interest margin represents tax-equivalent net interest income as a
percentage of the average earning assets during the period. For the second
quarter of 2002 the net interest margin was 3.56%, a decrease of three basis
points when compared to the net interest margin of 3.59% in the prior year
second quarter. This decline resulted primarily from the effects of continued
decreases during 2001 in short-term rates causing compression in the spread
between the rates on interest-bearing liabilities and the yields on earning
assets. Spread compression results when deposit rates cannot be reduced
commensurate with changes in market rates due to current low level of rates paid
on certain deposit accounts. The core net interest margin, which excludes the
interest expense related to Wintrust's Long-term Debt - Trust Preferred
Securities, was 3.74% for the second quarter of 2002, and decreased 10 basis
points when compared to the prior year second quarter's core margin of 3.84%. In
the absence of additional rate cuts by the Federal Reserve and a changing yield
curve, Wintrust's net interest margin improved by eight basis points when
compared to the first quarter of 2002. This improvement was a result of total
funding costs declining by 21 basis points while the yield on total earning
assets declined by nine basis points. Interest-bearing deposits accounted for
the majority of the decline in the cost of funding, decreasing by 20 basis
points from the first quarter of 2002.
10
The yield on total earning assets for the second quarter of 2002 was 6.47% as
compared to 8.19% in 2001, a decrease of 172 basis points resulting primarily
from the effect of decreases in general market rates on liquidity management
assets and loans. The other earning assets shown in the second quarter of 2002
reflect interest-bearing brokerage customer receivables and trading account
securities managed at the Wayne Hummer Companies. The yield on earning assets is
heavily dependent on the yield on loans since average loans comprised
approximately 80% of total average earning assets. The second quarter 2002 yield
on loans was 6.97%, a 175 basis point decrease when compared to the prior year
second quarter yield of 8.72%. The average prime lending rate was 4.75% during
the second quarter of 2002 versus 7.35% for the second quarter of 2001,
reflecting a decrease of 260 basis points. Wintrust's loan portfolio does not
re-price in a parallel fashion to decreases or increases in the prime rate due
to a portion of the portfolio being longer-term fixed rate loans.
The rate paid on interest-bearing liabilities for the second quarter of 2002 was
3.20%, compared to 5.02% in the second quarter of 2001, a decline of 182 basis
points. Interest-bearing deposits accounted for 87% of total interest-bearing
funding in the second quarter of 2002, compared to 95% in the same period of
2001. The rate paid on interest-bearing deposits averaged 3.02% for the second
quarter of 2002 versus 4.85% for the same quarter of 2001, a decrease of 183
basis points. During 2001, Wintrust initiated borrowing from the Federal Home
Loan Bank ("FHLB"). The Company initially borrowed from the FHLB in the third
and fourth quarters of 2001 and borrowed an additional $50 million in the second
quarter of 2002. The increase in notes payable and other borrowings in the
second quarter of 2002 was a result of the funding at the Wayne Hummer Companies
for the brokerage customer receivables, additional funding required for the
purchase of the Wayne Hummer Companies and borrowings utilized to fund the
additional capital requirements of the subsidiary banks. The rate paid on
Federal Home Loan Bank advances, notes payable and other borrowings decreased
233 basis points to 3.35% in the second quarter of 2002 as compared to 5.68% in
the second quarter of 2001.
The following table presents a summary of Wintrust's net interest income and
related net interest margins, calculated on a fully tax-equivalent basis, for
the six-month periods ended June 30, 2002 and 2001:
FOR THE SIX MONTHS ENDED For the Six Months Ended
JUNE 30, 2002 June 30, 2001
---------------------------------------- -----------------------------------------
(Dollars in thousands) AVERAGE INTEREST RATE Average Interest Rate
---------------------------------------- -----------------------------------------
Liquidity management assets (1) (2) $ 468,103 $ 10,260 4.42 % $ 310,887 $ 8,796 5.71 %
Other earning assets (3) 58,082 1,265 4.39 -- -- --
Loans, net of unearned income (2) (4) 2,162,593 75,383 7.03 1,674,309 74,795 9.01
---------------------------------------- -----------------------------------------
Total earning assets $ 2,688,778 $ 86,908 6.52 % $ 1,985,196 $ 83,591 8.49 %
---------------------------------------- -----------------------------------------
Interest-bearing deposits $ 2,151,117 $ 33,260 3.12 % $ 1,720,246 $ 43,595 5.11 %
Federal Home Loan Bank advances 97,735 1,975 4.08 -- -- --
Notes payable and other borrowings 139,325 2,113 3.06 57,348 1,710 6.01
Long-term debt - trust preferred securities 51,050 2,576 10.09 51,050 2,576 10.09
---------------------------------------- -----------------------------------------
Total interest-bearing liabilities $ 2,439,227 $ 39,924 3.30 % $ 1,828,644 $ 47,881 5.28 %
---------------------------------------- -----------------------------------------
Tax-equivalent net interest income $ 46,984 $ 35,710
--------------- --------------
Net interest margin 3.52 % 3.63 %
------------ ------------
Core net interest margin (5) 3.72 % 3.89 %
------------ ------------
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Liquidity management assets include available-for-sale 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 35%. The total adjustments for the six months ended June 30,
2002 and 2001 were $399,000 and $419,000, respectively.
(3) Other earning assets include brokerage customer receivables and trading
account securities.
(4) Loans, net of unearned income includes mortgages held for sale and
non-accrual loans.
(5) The core net interest margin excludes the impact of Wintrust's
Long-term Debt - Trust Preferred Securities.
</FN>
11
NON-INTEREST INCOME
For the second quarter of 2002, non-interest income totaled $13.8 million and
increased $6.4 million over the prior year quarter. Significant increases were
realized in trust, asset management and brokerage fees as a result of the Wayne
Hummer Companies acquisition during the first quarter of 2002. The increase in
trust, asset management and brokerage fees was offset by decreases in gains from
the sale of premium finance receivables, administrative services revenue from
Tricom, Inc. and income from certain covered call option transactions.
Trust, asset management and brokerage fees is comprised of the asset management
revenue of Wayne Hummer Trust Company (name changed from Wintrust Asset
Management Company in May 2002) and the asset management fees, brokerage
commissions, trading commissions and insurance product commissions at the Wayne
Hummer Companies. The increase in this category, up $6.9 million over the second
quarter of 2001, is primarily attributable to the revenues from the Wayne Hummer
Companies. Wintrust is committed to growing the trust and investment business in
order to better service its customers and create a more diversified revenue
stream. This commitment is evidenced by the acquisition of the Wayne Hummer
Companies. Non-interest income comprised approximately 29% of total net revenues
in the second quarter of 2001. Primarily as a result of the Wayne Hummer
Companies acquisition, this has increased to approximately 36% for the second
quarter of 2002.
Fees on mortgage loans sold include income from originating and selling
residential real estate loans into the secondary market. For the quarter ended
June 30, 2002, these fees totaled $1.9 million, a slight decrease of $14,000, or
1%, from the prior year second quarter and down slightly from the $2.0 million
recorded in the first quarter of 2002. Although these fees are a continuous
source of revenue, these fees continue to be benefited by higher levels of
mortgage origination volumes, particularly refinancing activity, caused by the
low level of mortgage interest rates. Management anticipates that the levels of
refinancing activity may taper off for the remainder of 2002, barring any
further reductions in mortgage interest rates.
Service charges on deposit accounts totaled $753,000 for the second quarter of
2002, an increase of $147,000, or 24%, when compared to the same quarter of
2001. This increase was mainly due to a higher deposit base and a larger number
of accounts at the banking subsidiaries. The majority of deposit service charges
relates 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.
As a result of continued strong loan originations of premium finance
receivables, Wintrust sold premium finance receivables to an unrelated third
party in the second quarter of 2002 and recognized gains of $828,000 related to
this activity, compared with $1.4 million of recognized gains in the second
quarter of 2001. Wintrust has a philosophy of maintaining its average
loan-to-deposit ratio in the range of 85-90%. During the second quarter of 2002,
the ratio was approximately 90%. Accordingly, Wintrust sold excess premium
finance receivables volume to an unrelated third party financial institution.
Consistent with Wintrust's strategy to be asset-driven and the desire to
maintain our loan-to-deposit ratio in the aforementioned range, it is probable
that similar sales of premium finance receivables will occur in the future.
The administrative services revenue contributed by Tricom added $931,000 to
total non-interest income in the second quarter of 2002, a decrease of $190,000
from the second quarter of 2001 and an increase of $109,000 from the first
quarter of 2002. This revenue comprises income from administrative services,
such as data processing of payrolls, billing and cash management services, to
temporary staffing service clients located throughout the United States. The
revenue growth at Tricom had stagnated in previous quarters due to the general
slowdown in the United States economy and the reduction in the placement of
temporary staffing individuals by Tricom's customers. This business segment
appears to be rebounding as exhibited by the higher levels of revenue recorded
by Tricom when compared to the first quarter of 2002. Tricom also earns interest
and fee income from providing short-term accounts receivable financing to this
same client base, which is included in the net interest income category.
12
For the first six months of 2002, total non-interest income was $26.5 million
and increased $12.3 million, or 86%, when compared to the same period in 2001.
Excluding the impact of the Wayne Hummer Companies, contributing $11.2 million
of fee revenue, and the $1.25 million partial settlement related to the premium
finance defalcation that was recovered in the first quarter of 2002,
non-interest income for the first six months of 2002 decreased by $186,000, or
1%, compared to the first six months of 2001. This slight decrease was comprised
of decreases in recognized gains related to the sale of premium finance
receivables to an unrelated third party of $797,000, lower administrative
services revenue contributed by Tricom of $389,000 and lower net securities
gains of $525,000. These decreases were offset by an increase in fees on
mortgage loans sold from originating and selling residential real estate loans
into the secondary market of $479,000, higher service charges on deposit
accounts of $338,000 due to a higher deposit base and a larger number of
accounts at the banking subsidiaries and higher other miscellaneous sources of
revenue totaling $549,000.
NON-INTEREST EXPENSE
Non-interest expense for the second quarter of 2002 totaled $25.9 million and
increased $9.6 million, or 59%, from the second quarter 2001 total of $16.3
million. Operating expenses of the Wayne Hummer Companies, the continued growth
and expansion of the banks with additional branches and the growth in the
premium finance business are the major causes for this increase. Since June 30,
2001 total deposits and total loans have increased 27% and 29%, respectively,
requiring higher levels of staffing and other costs to both attract and service
the larger customer base. Excluding the impact of the Wayne Hummer Companies,
total non-interest expense increased $2.5 million, or 16%, when compared to the
second quarter of 2001, well below the pace of the balance sheet growth.
Salaries and employee benefits totaled $15.4 million for the second quarter of
2002, an increase of $6.7 million, or 76%, as compared to the prior year's
second quarter total of $8.7 million. This increase was primarily due to the
employee costs associated with the Wayne Hummer Companies, increases in salaries
and employee benefit costs as a result of continued growth and expansion of the
de novo banks and normal annual increases in salaries and the employee benefit
costs. Excluding the impact of the Wayne Hummer Companies, total salaries and
employee benefits expense increased $1.5 million, or 18%, when compared to the
second quarter of 2001 and decreased slightly by $59,000, or less than 1%, when
compared to the first quarter of 2002.
Other categories of non-interest expense, such as occupancy costs, equipment
expense and data processing, also increased over the prior year second quarter
due to the acquisition of the Wayne Hummer Companies and the general growth and
expansion of the banks. Other non-interest expense, which includes loan
expenses, correspondent bank service charges, postage, insurance, stationery and
supplies, telephone, directors fees, and other sundry expenses, also increased
when compared to the prior year first quarter due mainly to the factors
mentioned earlier.
On a year-to-date basis non-interest expense totaled $48.6 million and increased
$16.3 million, or 51%, over the first six months of 2001. The Wayne Hummer
Companies contributed $11.9 million of this increase. The $4.4 million increase,
excluding the Wayne Hummer Companies, is predominantly due to a $2.8 million
increase in salaries and employee benefits costs and the higher general
operating costs associated with operating additional and larger banking offices.
Despite balance sheet growth in loans and deposits of near 30%, Wintrust's net
overhead ratio, excluding the impact of the Wayne Hummer Companies, decreased
from 1.68% for the first six months of 2001 to 1.49% for the comparable period
in 2002.
13
ASSET QUALITY
Allowance for Loan Losses
A reconciliation of the activity in the balance of the allowance for loan losses
for the three and six months ended June 30, 2002 and 2001 is shown as follows:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------------- ----------------------------------
(Dollars in thousands) 2002 2001 2002 2001
- ---------------------------------------------------- ---------------- ---------------- ---------------- ----------------
BALANCE AT BEGINNING OF PERIOD $ 14,697 $ 11,067 $ 13,686 $ 10,433
PROVISION FOR LOAN LOSSES 2,483 2,264 4,831 3,902
CHARGE-OFFS:
Commercial and commercial real estate loans 178 278 403 375
Home equity loans -- -- -- --
Residential real estate loans -- 13 -- 13
Consumer and other loans 73 10 148 20
Premium finance receivables 977 836 1,844 1,548
Indirect automobile loans 187 203 475 2,490
Tricom finance receivables 9 -- 9 --
---------------- ---------------- ---------------- ----------------
Total charge-offs 1,424 1,340 2,879 2,446
---------------- ---------------- ---------------- ----------------
RECOVERIES:
Commercial and commercial real estate loans 115 2 135 4
Home equity loans -- -- -- --
Residential real estate loans -- -- -- --
Consumer and other loans 12 -- 12 --
Premium finance receivables 66 83 129 129
Indirect automobile loans 40 35 70 89
Tricom finance receivables 20 -- 25 --
---------------- ---------------- ---------------- ----------------
Total recoveries 253 120 371 222
---------------- ---------------- ---------------- ----------------
NET CHARGE-OFFS (1,171) (1,220) (2,508) (2,224)
---------------- ---------------- ---------------- ----------------
BALANCE AT JUNE 30 $ 16,009 $ 12,111 $ 16,009 $ 12,111
---------------- ---------------- ---------------- ----------------
ANNUALIZED NET CHARGE-OFFS (RECOVERIES) AS A
PERCENTAGE OF AVERAGE:
Commercial and commercial real estate loans 0.02 % 0.15 % 0.05 % 0.11 %
Home equity loans -- -- -- --
Residential real estate loans -- 0.03 -- 0.02
Consumer and other loans 0.41 0.06 0.44 0.06
Premium finance receivables 0.84 0.84 0.82 0.81
Indirect automobile loans 0.32 0.36 0.44 0.42
Tricom finance receivables (0.24) -- (0.18) --
---------------- ---------------- ---------------- ----------------
Total loans, net of unearned income 0.21 % 0.28 % 0.24 % 0.27 %
---------------- ---------------- ---------------- ----------------
Net charge-offs as a percentage of the
provision for loan losses 47.16 % 53.89 % 51.91 % 57.00 %
---------------- ---------------- ---------------- ----------------
Loans at June 30 $ 2,308,945 $ 1,787,257
---------------- ----------------
Allowance as a percentage of loans at period-end 0.69 % 0.68 %
---------------- ----------------
14
Past Due Loans and Non-performing Assets
The following table sets forth Wintrust'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.
JUNE 30, March 31, December 31, June 30,
(Dollars in thousands) 2002 2002 2001 2001
- ----------------------------------------------------------------- --------------- ------------- ---------------- --------------
PAST DUE GREATER THAN 90 DAYS AND STILL ACCRUING:
Residential real estate and home equity $ 16 $ 136 $ 168 $ 389
Commercial, consumer and other 1,055 208 1,059 866
Premium finance receivables 2,141 1,582 2,402 2,982
Indirect automobile loans 340 249 361 372
Tricom finance receivables -- -- -- --
--------------- ------------- ---------------- --------------
Total past due greater than 90 days and still accruing 3,552 2,175 3,990 4,609
--------------- ------------- ---------------- --------------
NON-ACCRUAL LOANS:
Residential real estate and home equity 401 1,912 1,385 411
Commercial, consumer and other 1,528 742 1,180 978
Premium finance receivables 5,417 6,277 5,802 6,392
Indirect automobile loans 163 266 496 274
Tricom finance receivables 104 104 104 112
--------------- ------------- ---------------- --------------
Total non-accrual 7,613 9,301 8,967 8,167
--------------- ------------- ---------------- --------------
TOTAL NON-PERFORMING LOANS:
Residential real estate and home equity 417 2,048 1,553 800
Commercial, consumer and other 2,583 950 2,239 1,844
Premium finance receivables 7,558 7,859 8,204 9,374
Indirect automobile loans 503 515 857 646
Tricom finance receivables 104 104 104 112
--------------- ------------- ---------------- --------------
Total non-performing loans 11,165 11,476 12,957 12,776
--------------- ------------- ---------------- --------------
OTHER REAL ESTATE OWNED 756 100 100 100
--------------- ------------- ---------------- --------------
TOTAL NON-PERFORMING ASSETS $ 11,921 $ 11,576 $ 13,057 $ 12,876
--------------- ------------- ---------------- --------------
TOTAL NON-PERFORMING LOANS BY CATEGORY AS A PERCENT
OF ITS OWN RESPECTIVE CATEGORY:
Residential real estate and home equity 0.09% 0.48% 0.39% 0.23%
Commercial, consumer and other 0.22 0.08 0.21 0.21
Premium finance receivables 1.64 1.90 2.36 2.71
Indirect automobile loans 0.27 0.28 0.47 0.34
Tricom finance receivables 0.54 0.59 0.57 0.67
--------------- ------------- ---------------- --------------
Total non-performing loans 0.48% 0.53% 0.64% 0.71%
--------------- ------------- ---------------- --------------
Total non-performing assets as a
percentage of total assets 0.37% 0.39% 0.48% 0.55%
--------------- ------------- ---------------- --------------
Allowance for loan losses as a
percentage of non-performing loans 143.39% 128.07% 105.63% 94.79%
--------------- ------------- ---------------- --------------
15
The provision for loan losses totaled $2.5 million for the second quarter of
2002, an increase of $219,000 from a year earlier. For the quarter ended June
30, 2002 net charge-offs totaled $1.2 million, essentially unchanged from the
$1.2 million of net charge-offs recorded in the same period of 2001. On a ratio
basis annualized net charge-offs as a percentage of average loans decreased to
0.21% in the second quarter of 2002 from 0.28% in the same period in 2001.
On a year-to-date basis the provision for loan losses totaled $4.8 million for
the first six months of 2002, an increase of $929,000 over the same period last
year. Net charge-offs for the first six months of 2002 increased slightly to
$2.5 million, a $284,000 or 13% increase over the $2.2 million recorded in the
same period last year. On a ratio basis, annualized net charge-offs as a
percentage of average loans decreased to 0.24% for the first six months of 2002
from 0.27% in the first six months of 2001.
Management has actively monitored and pursued methods to reduce the level of
delinquencies in the indirect auto and premium finance portfolios (See "Past Due
Loans and Non-performing Assets"). Management believes the allowance for loan
losses is adequate to provide for inherent 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 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.
Non-performing Residential Real Estate, Commercial, Consumer and Other Loans
Total non-performing loans for Wintrust's residential real estate, commercial,
consumer and other loans were $3.0 million, unchanged from the $3.0 million
reported at March 31, 2002, but down from the $3.8 million reported at December
31, 2001. These loans consist primarily of a small number of commercial,
residential real estate and home equity loans, which management believes are
well secured and in the process of collection. The small number of such
non-performing loans allows management to monitor the status of these credits
and work with the borrowers to resolve these problems effectively.
Non-performing Premium Finance Receivables
The table below presents the level of non-performing premium finance receivables
as of June 30, 2002 and 2001, and the amount of net charge-offs for the six
months then ended.
(Dollars in thousands) JUNE 30, 2002 June 30, 2001
- ------------------------------------------------------------------------------ --------------------- ----------------------
Non-performing premium finance receivables $ 7,558 $ 9,374
- as a percent of premium finance receivables 1.64% 2.71%
Net charge-offs of premium finance receivables $ 1,715 $ 1,419
- annualized as a percent of premium finance receivables 0.82% 0.81%
- ------------------------------------------------------------------------------ --------------------- ----------------------
The improvement in the level of non-performing premium finance receivables since
June 30, 2001 is indicative of actions taken by management. As noted in
Wintrust's prior quarterly earnings releases in 2001 Wintrust has eliminated
more than 1,300 relationships with insurance agents that were referring new
business to our premium finance subsidiary that had relatively small balances
and higher than normal delinquency rates. The business associated with those
accounts has become a less significant percent of the entire portfolio and is
nearly extinguished. Management continues to see progress in this portfolio and
continues to expect the level of non-performing loans related to this portfolio
to remain at relatively low levels.
16
The ratio of non-performing premium finance receivables fluctuates throughout
the year due to the nature and timing of canceled account collections from
insurance carriers. 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 Wintrust 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 Indirect Automobile Loans
Total non-performing indirect automobile loans were $503,000 at June 30, 2002,
decreasing from $857,000 at December 31, 2001 and $646,000 at June 30, 2001. The
ratio of these non-performing loans to total indirect automobile loans decreased
to 0.27% of total indirect automobile loans at June 30, 2002 from 0.47% at
December 31, 2001 and 0.34% at June 30, 2001. As noted in the Allowance for Loan
Losses table net charge-offs as a percent of total indirect automobile loans has
decreased from 0.36% in the second quarter of 2001 to 0.32% in the second
quarter of 2002. The level of non-performing and net charge-offs of indirect
automobile loans continues to be below standard industry ratios for this type of
lending. Due to the impact of the current economic and competitive environment
surrounding this type of lending, management continues to de-emphasize, in
relation to other loan categories, growth in the indirect automobile loan
portfolio. Indirect automobile loans at June 30, 2002 were $184 million,
unchanged from December 31, 2001 but down $6 million, or 3% from June 30, 2001.
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements related to Wintrust's
financial performance that are based on estimates. Wintrust intends such
forward-looking statements to be covered by the safe harbor provision for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995, and is including this statement for purposes of invoking these safe
harbor provisions. Actual results could differ materially from those addressed
in the forward-looking statements due to factors such as changes in economic
conditions, competition, or other factors that may influence the anticipated
growth rate of loans and deposits, the quality of the loan portfolio and loan
and deposit pricing, unanticipated changes in interest rates that negatively
impact net interest income, future events that may cause unforeseen loan or
lease losses, slower than anticipated development and growth of Tricom and the
trust and investment business, unanticipated changes in the temporary staffing
industry, the ability to adapt successfully to technological changes to compete
effectively in the marketplace, competition and the related pricing of brokerage
and asset management products, unforeseen difficulties in integrating the
acquisition of the Wayne Hummer Companies, the ability to pursue acquisition and
expansion strategies 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.
17