WINTRUST FINANCIAL CORPORATION
727 North Bank Lane, Lake Forest, Illinois 60045
NEWS RELEASE
FOR IMMEDIATE RELEASE January 24, 2000
- ---------------------
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
RECORD EARNINGS AHEAD 51% FOR THE YEAR
--------------------------------------
AND 35% FOR THE FOURTH QUARTER
------------------------------
LAKE FOREST, ILLINOIS -- Wintrust Financial Corporation ("Wintrust")
(Nasdaq: WTFC) announced record net income of $2.8 million for the quarter ended
December 31, 1999, an increase of $720,000, or 35%, over the $2.1 million
recorded in the fourth quarter of 1998. On a per share basis, net income for the
fourth quarter of 1999 totaled $0.32 per diluted common share, a $0.07 per
share, or 28%, increase as compared to the 1998 fourth quarter total of $0.25
per diluted common share. The return on average equity for the fourth quarter of
1999 increased to 12.66% from 11.09% for the prior year quarter. Pre-tax
operating earnings for the fourth quarter of 1999 totaled $4.3 million and
increased $2.7 million, or 169%, 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 year ended December 31, 1999, net income totaled a record $9.4
million, or $1.10 per diluted common share, increases of $3.2 million, or 51%,
and $0.36 per diluted common share, when compared to 1998. On a pre-tax basis,
operating earnings for 1999 totaled $14.2 million and increased $9.4 million, or
200%, over the 1998 total. The return on average equity for the year ended
December 31, 1999 rose to 11.58% versus 8.68% in 1998.
Total assets rose to $1.68 billion at December 31, 1999, an increase of
$331 million, or 25%, compared to $1.35 billion as of December 31, 1998. Total
deposits as of December 31, 1999 were $1.46 billion, an increase of $234
million, or 19%, as compared to $1.23 billion as of the prior year-end. Total
loans grew to $1.28 billion as of December 31, 1999, a $286 million, or 29%,
increase over the $992 million balance as of December 31, 1998.
- more -
"We are pleased with the continued earnings growth in the fourth
quarter. We realized solid growth in our core loan and premium finance
receivable portfolios and our net overhead ratio declined to 1.89% and is now
within our performance goal range of 1.50% - 2.00%," commented Edward J. Wehmer,
President and Chief Executive Officer. "The recent acquisition of Tricom, Inc.
of Milwaukee is progressing well and also helped to improve our fourth quarter
1999 earnings."
Mr. Wehmer added, "We are right on track in executing our strategy of
being an asset-driven company whereby our core and niche loan production is
expanding faster than retail deposit growth. This is a purposeful strategy that
allows us to immediately deploy new deposit funds into attractive yielding
assets. It also allows us to be competitive in our retail deposit pricing while
balancing growth and earnings. As a result of this strategy, Wintrust has
recently sold excess niche loan production into the marketplace to balance our
liquidity and produce gains on the sale of these loans. We expect to continue
operating Wintrust with this asset-driven strategy. "
Wintrust's income before income taxes increased by over 200% for the
second consecutive year. Additionally, Wintrust's key operating measures showed
impressive improvement in 1999 as evidence by the table below:
Year Ended Year Ended Percent
In thousands, except per share data 12/31/99 12/31/98 Improvement
----------------------------------- -------- -------- -----------
Income before income taxes $ 14,151 $ 4,709 200.5%
Net income 9,427 6,245 50.9%
Net income per common share - Diluted 1.10 0.74 48.6%
Net revenues 57,542 44,839 28.3%
Net interest income 47,734 36,764 29.8%
Net interest margin 3.54% 3.43% 3.2%
Net overhead ratio 2.00% 2.36% 15.3%
Return on average assets 0.63% 0.53% 18.9%
Return on average equity 11.58% 8.68% 33.4%
Book value per common share $ 10.60 $ 9.23 14.8%
- more -
For the fourth quarter of 1999, net interest income totaled $13.1
million and increased $3.1 million, or 31%, as compared to the prior year
quarterly total of $10.0 million. Non-interest income totaled $3.4 million for
the fourth quarter of 1999 and increased $971,000, or 41%, over the fourth
quarter of 1998, mainly as a result of a gain on the sale of premium finance
receivables and the administrative services revenue from the recently acquired
Tricom. Partially offsetting these increases and growth in other fee income
categories, such as trust fees and deposit service charges, was a decline in
fees on mortgage loans sold due mainly to the rise in mortgage interest rates,
which caused a significant drop in new loan volumes, particularly refinancing
activity. The fourth quarter of 1999 was also impacted by a non-recurring
after-tax charge of approximately $100,000, or $0.01 per share, for a severance
payment related to the termination of a former CEO of one bank subsidiary.
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 also operates three 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. Wintrust Asset Management
Company, N.A., a trust subsidiary, allows Wintrust to service customers' trust
and investment needs at each banking location. Tricom, Inc. of Milwaukee,
acquired in October 1999, 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. 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.
# # #
WINTRUST FINANCIAL CORPORATION
SELECTED FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share data)
Three Months Year Ended
Ended December 31, December 31,
1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------
SELECTED FINANCIAL CONDITION DATA
(AT END OF PERIOD):
Total assets $ 1,679,382 $ 1,348,048 $ 1,679,382 $ 1,348,048
Total deposits 1,463,622 1,229,154 1,463,622 1,229,154
Total loans, net of unearned income 1,278,249 992,062 1,278,249 992,062
Long-term debt and notes payable 39,400 31,050 39,400 31,050
Total shareholders' equity 92,947 75,205 92,947 75,205
- ---------------------------------------------------------------------------------------------------------------------------
Selected Statements of Income Data:
Net interest income $ 13,098 $ 9,977 $ 47,734 $ 36,764
Net revenues 16,463 12,371 57,542 44,839
Income before income taxes 4,273 1,590 14,151 4,709
Net income 2,806 2,086 9,427 6,245
Net income per common share - Basic 0.33 0.26 1.14 0.77
Net income per common share - Diluted (2) 0.32 0.25 1.10 0.74
- ---------------------------------------------------------------------------------------------------------------------------
Selected Financial Ratios and Other Data:
Performance Ratios:
Core net interest margin (1) 3.65% 3.41% 3.64% 3.45%
Net interest margin 3.55% 3.33% 3.54% 3.43%
Net interest spread 3.23% 2.94% 3.23% 3.00%
Non-interest income to average assets 0.82% 0.72% 0.66% 0.69%
Non-interest expense to average assets 2.71% 2.97% 2.65% 3.04%
Net overhead ratio 1.89% 2.24% 2.00% 2.36%
Return on average assets 0.68% 0.63% 0.63% 0.53%
Return on average equity 12.66% 11.09% 11.58% 8.68%
Average total assets $ 1,637,658 $ 1,310,134 $ 1,496,566 $ 1,177,745
Average shareholders' equity 87,924 74,619 81,381 71,906
Average loan-to-average deposit ratio 87.4% 82.4% 86.6% 80.1%
Common Share Data at end of period:
Market price per common share $ 15.25 $ 19.63
Book value per common share 10.60 9.23
Other Data at end of period:
Number of:
Bank subsidiaries 6 6
Non-bank subsidiaries 3 2
Banking offices 24 21
- ---------------------------------------------------------------------------------------------------------------------------
<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.
(2) Diluted earnings per common share, excluding the impact of intangible
amortization expense, was $0.33 and $0.25, respectively, for the three
months ended December 31, 1999 and 1998, and $1.12 and $0.75, respectively,
for the years ended December 31, 1999 and 1998. 1999 and 1998.
</FN>
- 1 -
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION (UNAUDITED)
(In thousands)
December 31, December 31,
1999 1998
- -----------------------------------------------------------------------------------------------------------------
ASSETS
Cash and due from banks $ 53,066 $ 33,924
Federal funds sold 28,231 18,539
Interest-bearing deposits with banks 2,547 7,863
Available-for-Sale securities, at fair value 205,795 209,119
Held-to-Maturity securities, at amortized cost - 5,000
Loans, net of unearned income 1,278,249 992,062
Less: Allowance for possible loan losses 8,783 7,034
- -----------------------------------------------------------------------------------------------------------------
Net loans 1,269,466 985,028
Premises and equipment, net 72,851 56,964
Accrued interest receivable and other assets 35,943 30,082
Goodwill and other intangible assets, net 11,483 1,529
- -----------------------------------------------------------------------------------------------------------------
Total assets $ 1,679,382 $1,348,048
=================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 154,034 $ 131,309
Interest bearing 1,309,588 1,097,845
- -----------------------------------------------------------------------------------------------------------------
Total deposits 1,463,622 1,229,154
Short-term borrowings 59,843 -
Notes payable 8,350 -
Long-term debt - trust preferred securities 31,050 31,050
Accrued interest payable and other liabilities 23,570 12,639
- -----------------------------------------------------------------------------------------------------------------
Total liabilities 1,586,435 1,272,843
- -----------------------------------------------------------------------------------------------------------------
Shareholders' equity:
Preferred stock - -
Common stock 8,771 8,150
Surplus 82,792 72,878
Common stock warrants 100 100
Retained earnings (deficit) 3,555 (5,872)
Accumulated other comprehensive loss (2,271) (51)
- -----------------------------------------------------------------------------------------------------------------
Total shareholders' equity 92,947 75,205
- -----------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 1,679,382 $ 1,348,048
=================================================================================================================
- 2 -
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)
Three Months Ended Year Ended
December 31, December 31,
1999 1998 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------
INTEREST INCOME
Interest and fees on loans $27,277 $20,724 $ 97,270 $ 75,369
Interest bearing deposits with banks 39 124 204 2,283
Federal funds sold 462 526 1,536 2,327
Securities 3,077 2,317 10,321 8,000
- ----------------------------------------------------------------------------------------------------------------------------
Total interest income 30,855 23,691 109,331 87,979
- ----------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Interest on deposits 15,859 12,903 56,026 49,069
Interest on short-term borrowings and notes payable 1,163 78 2,633 1,399
Interest on long-term debt - trust preferred securities 735 733 2,938 747
- ----------------------------------------------------------------------------------------------------------------------------
Total interest expense 17,757 13,714 61,597 51,215
- ----------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 13,098 9,977 47,734 36,764
Provision for possible loan losses 1,006 986 3,713 4,297
- ----------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for possible loan losses 12,092 8,991 44,021 32,467
- ----------------------------------------------------------------------------------------------------------------------------
NON-INTEREST INCOME
Fees on mortgage loans sold 456 1,667 3,206 5,569
Service charges on deposit accounts 482 318 1,562 1,065
Trust fees 401 210 1,171 788
Gain on sale of premium finance receivables 393 - 1,033 -
Administrative services revenue 996 - 996 -
Net securities gains (losses) (10) - 5 -
Other 647 199 1,835 653
- ----------------------------------------------------------------------------------------------------------------------------
Total non-interest income 3,365 2,394 9,808 8,075
- ----------------------------------------------------------------------------------------------------------------------------
NON-INTEREST EXPENSE
Salaries and employee benefits 5,552 4,591 20,808 18,944
Occupancy, net 903 670 2,991 2,435
Equipment expense 1,073 645 3,199 2,221
Data processing 625 442 2,169 1,676
Advertising and marketing 361 498 1,402 1,612
Professional fees 375 451 1,203 1,654
Amortization of intangibles 144 35 251 120
Other 2,151 2,463 7,655 7,171
- ----------------------------------------------------------------------------------------------------------------------------
Total non-interest expense 11,184 9,795 39,678 35,833
- ----------------------------------------------------------------------------------------------------------------------------
Income before income taxes 4,273 1,590 14,151 4,709
Income tax expense (benefit) 1,467 (496) 4,724 (1,536)
- ----------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 2,806 $ 2,086 $ 9,427 $ 6,245
============================================================================================================================
NET INCOME PER COMMON SHARE = BASIC $ 0.33 $ 0.26 $ 1.14 $ 0.77
============================================================================================================================
NET INCOME PER COMMON SHARE = DILUTED $ 0.32 $ 0.25 $ 1.10 $ 0.74
============================================================================================================================
Weighted average common shares outstanding 8,497 8,150 8,249 8,142
Dilutive potential common shares 274 341 309 353
- ----------------------------------------------------------------------------------------------------------------------------
Average common shares and dilutive common shares 8,771 8,491 8,558 8,495
============================================================================================================================
- 3 -
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 tax-equivalent basis, for
the three and twelve-month periods ended December 31, 1999 and 1998:
For the Quarter Ended For the Quarter Ended
December 31, 1999 December 31, 1998
----------------------------------------- ---------------------------------------
(dollars in thousands) Average Interest Rate Average Interest Rate
- ---------------------- ---------------- ------------- ---------- --------------- ------------- ---------
Liquidity management assets (1) (2) $ 241,026 $ 3,585 5.90% $ 221,571 $ 2,967 5.31%
Loans, net of unearned income (2) 1,232,346 27,364 8.81 969,352 20,756 8.50
---------------- ------------- ---------- --------------- ------------- ---------
Total earning assets 1,473,372 30,949 8.33% 1,190,923 23,723 7.90%
---------------- ------------- ---------- --------------- ------------- ---------
Interest-bearing deposits 1,270,749 15,859 4.95% 1,058,879 12,903 4.83%
Short-term borrowings and notes payable 80,815 1,163 5.71 6,138 78 5.04
Long-term debt - trust preferred securities 31,050 735 9.47 31,050 733 9.37
---------------- ------------- ---------- --------------- ------------- ---------
Total interest-bearing liabilities 1,382,614 17,757 5.10% 1,096,067 13,714 4.96%
---------------- ------------- ---------- --------------- ------------- ---------
Tax-equivalent net interest income $ 13,192 $ 10,009
============= =============
Net interest margin 3.55% 3.33%
========== =========
Core net interest margin (3) 3.65% 3.41%
========== =========
For the Year Ended For the Year Ended
December 31, 1999 December 31, 1998
----------------------------------------- ---------------------------------------
(dollars in thousands) Average Interest Rate Average Interest Rate
- ----------------------
---------------- ------------- ---------- --------------- ------------- ---------
Liquidity management assets (1) (2) $ 221,942 $ 12,075 5.44% $ 226,648 $ 12,610 5.56%
Loans, net of unearned income (2) 1,135,200 97,518 8.59 848,344 75,464 8.90
---------------- ------------- ---------- --------------- ------------- ---------
Total earning assets 1,357,142 109,593 8.08% 1,074,992 88,074 8.19%
---------------- ------------- ---------- --------------- ------------- ---------
Interest-bearing deposits 1,184,657 56,026 4.73% 957,806 49,069 5.12%
Short-term borrowings and notes payable 53,076 2,633 4.96 21,249 1,399 6.58
Long-term debt - trust preferred securities 31,050 2,938 9.46 7,915 747 9.44
---------------- ------------- ---------- --------------- ------------- ---------
Total interest-bearing liabilities 1,268,783 61,597 4.85% 986,970 51,215 5.19%
---------------- ------------- ---------- --------------- ------------- ---------
Tax-equivalent net interest income $ 47,996 $ 36,859
============= =============
Net interest margin 3.54% 3.43%
========== =========
Core net interest margin (3) 3.64% 3.45%
========== =========
- -------------------------------
<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 December 31, 1999 and
1998 was $94,000 and $32,000, respectively, and for the twelve-month
periods ended December 31, 1999 and 1998 was $262,000 and $95,000,
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>
- 4 -
Tax-equivalent net interest income for the quarter ended December 31, 1999
totaled $13.2 million, an increase of $3.2 million, or 32%, as compared to the
$10.0 million recorded in the same quarter of 1998. This increase mainly
resulted from loan growth and the October 1999 acquisition of Tricom, Inc. of
Milwaukee ("Tricom"). Tax-equivalent interest and fees on loans for the quarter
ended December 31, 1999 totaled $27.4 million, an increase of $6.6 million, or
32%, over the prior year quarterly total of $20.8 million. This growth was
predominantly due to a $263 million, or 27%, increase in average total loans.
For the fourth quarter of 1999, the net interest margin was 3.55%, an increase
of 22 basis points when compared to the margin of 3.33% in the prior year
quarter. This increase resulted primarily from higher yields on both loans and
securities coupled with solid loan growth and the addition of Tricom. The core
net interest margin, which excludes the impact of the 9.00% Cumulative Trust
Preferred Securities offering and certain discretionary investment leveraging
transactions, was 3.65% for the fourth quarter of 1999, and increased 24 basis
points when compared to the prior year quarterly margin of 3.41%.
The rate paid on interest-bearing deposits averaged 4.95% for the fourth quarter
of 1999 versus 4.83% for the same quarter of 1998, an increase of 12 basis
points. This increase was caused by recent market rate increases on floating
rate deposit products, which was somewhat offset by 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 increased to 5.71% in the fourth
quarter of 1999 as compared to 5.04% in the same quarter of 1998, the increase
due primarily to general market rate increases that have occurred during 1999.
The yield on total earning assets for the fourth quarter of 1999 was 8.33% as
compared to 7.90% in 1998, an increase of 43 basis points resulting primarily
from increases in the prime lending rate, general market rate increases on
liquidity management assets, and the acquisition of Tricom. The fourth quarter
1999 loan yield of 8.81% increased 31 basis points when compared to the prior
year quarterly yield of 8.50% and was due primarily to a higher average prime
lending rate of 8.38% during the fourth quarter of 1999 versus an average prime
lending rate of 7.93% for the fourth quarter of 1998.
For the year ended December 31, 1999, tax-equivalent net interest income totaled
$48.0 million and increased $11.1 million, or 30%, over the $36.9 million
recorded in 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 $97.5 million for the year ended December 31, 1999
and increased $22.1 million, or 29%, over 1998. Average loans in 1999 totaled
$1.14 billion and grew $287 million, or 34%, over the average for 1998. The net
interest margin for the year ended December 31, 1999 was 3.54%, an increase of
11 basis points when compared to the prior year. The core net interest margin
for 1999 was 3.64% and increased 19 basis points over the same margin in 1998.
These margin increases were directly the result of a decline in overall funding
cost rates and loan growth. The total deposit funding cost rate declined 39
basis points since the prior year and was 4.73% for year ended December 31,
1999. The growth in loans caused a higher proportion of average loans to average
total earning assets, and increased from 79% in 1998 to 84% in 1999. This
improved loan proportion creates a higher net interest margin, as loans earn
interest at a higher rate than other earning assets. The loan yield during 1999
declined 31 basis points to 8.59%, which was caused by a lower average prime
lending rate of 8.00% in 1999 versus an average prime lending rate of 8.36% in
1998.
- 5 -
NON-INTEREST INCOME
For the fourth quarter of 1999, non-interest income totaled $3.4 million and
increased $971,000 over the prior year quarter. Gains from the sale of premium
finance receivables, revenues from Tricom and increases in trust fees, deposit
services charges and leased equipment rental income were partially offset by a
lower level of fees from the sale of mortgage loans.
The October 1999 acquisition of Tricom added $996,000 of administrative services
revenue to total non-interest income in the fourth quarter of 1999. 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. 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.
During the fourth quarter of 1999, approximately $29 million of premium finance
receivables were sold to an unrelated third party and resulted in the
recognition of a $393,000 gain. Consistent with Wintrust's strategy to be
asset-driven, it is probable that similar future sales of premium finance
receivables will occur depending on the level of new volume growth in relation
to the capacity to retain such loans within the subsidiary banks' loan
portfolios.
Fees on mortgage loans sold includes income from originating and selling
residential real estate loans into the secondary market. For the quarter ended
December 31, 1999, these fees totaled $456,000, a decline of $1.2 million, or
73%, from the prior year quarter. This decline was due to significantly lower
levels of mortgage origination volumes, particularly refinancing activity,
caused by the increase in mortgage interest rates.
Service charges on deposit accounts totaled $482,000 for the fourth quarter of
1999, an increase of $164,000, or 52%, when compared to the same quarter of
1998. This increase was mainly 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 $401,000 for the fourth quarter of 1999, a $191,000, or 91%,
increase over the fourth quarter of 1998. This increase was the result of new
business development efforts generated from a larger staff of experienced trust
officers added in late 1998 with the formation of Wintrust Asset Management
Company. 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 fourth quarter of 1999 totaled $647,000 and
increased $448,000 over the prior year quarterly total of $199,000. This
increase was due primarily to $259,000 of premium income from certain call
option transactions and a $144,000 increase in 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 call option transactions
were designed to utilize the excess capital at certain banks, increase the total
return associated with holding certain securities as earning assets, and yield
additional fee income.
- 6 -
For the year ended December 31, 1999, total non-interest income was $9.8 million
and increased $1.7 million, or 21%, when compared to 1998. This increase was
mainly the result of $1.0 million of gains from the sale of premium finance
receivables, the $996,000 of administrative services revenue from Tricom, the
recognition of $508,000 in premium income from certain call option transactions,
a $497,000 increase in deposit service charges, a $383,000 increase in trust
fees and a $365,000 increase in rental income from leased equipment. These
increases were partially offset by a $2.4 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 origination volumes.
NON-INTEREST EXPENSE
Non-interest expense for the fourth quarter of 1999 totaled $11.2 million and
increased $1.4 million, or 14%, from the fourth quarter 1998 total of $9.8
million. The continued growth and expansion of the de novo banks, the
development of the trust and investment business, and the October 1999
acquisition of Tricom were the primary causes for this increase. Since the end
of 1998, total deposits have grown 19% and total loan balances have risen 29%,
requiring higher levels of staffing and other costs to both attract and service
the larger customer base.
Salaries and employee benefits totaled $5.6 million for the fourth quarter of
1999, an increase of $961,000, or 21%, as compared to the prior year fourth
quarter total of $4.6 million. This increase was primarily due to the
acquisition of Tricom and the expansion of the trust and investment business.
Other categories of non-interest expense, such as occupancy costs, equipment
expense and data processing, also increased over the prior year fourth quarter
due to the general growth of the Company including the opening of several new
banking facilities, the acquisition of Tricom and the development of the trust
and investment business. Goodwill and other intangibles amortization expense
totaled $144,000 for the fourth quarter of 1999 and increased $109,000 over the
prior year quarter due mainly to goodwill related to the Tricom acquisition.
Other non-interest expense, which includes loan expenses, correspondent bank
service charges, postage, insurance, stationary and supplies, telephone,
directors fees, and other sundry expenses, also increased when compared to the
prior year quarter due mainly to the factors mentioned earlier.
For the year ended December 31, 1999, non-interest expense totaled $39.7 million
and increased $3.8 million, or 11%, over 1998. This increase was predominantly
due to the continued growth of loan and deposit accounts, the opening of new
bank facilities, the September 1998 start-up of the trust and investment
business, and the October 1999 acquisition of Tricom. 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 3.04% for
the year ended December 31, 1998 to 2.65% for 1999, and is favorable to the
Company's most recent peer group ratio. In addition, the net overhead ratio for
1999 declined to 2.00% as compared to the 1998 ratio of 2.36%. The improvement
in this ratio has caused this key indicator of overhead to reach the upper end
of Wintrust's previously stated performance goal range of 1.50% - 2.00%. In
fact, the net overhead ratio was 1.89% in the fourth quarter of 1999,
demonstrating the continuing improvement in this performance measure.
- 7 -
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 months and years ended December 31, 1999 and 1998 is
shown as follows (dollars in thousands):
Three Months Ended Year Ended
December 31, December 31,
1999 1998 1999 1998
------------------- ---------------- ----------------- ----------------
Balance at beginning of period $ 8,200 $ 6,500 $ 7,034 $ 5,116
Provision for possible loan losses 1,006 986 3,713 4,297
Acquired allowance for loan losses 175 - 175 -
Charge-offs
Core banking loans 244 128 837 1,636
Indirect automobile loans 361 266 1,156 646
Premium finance receivables 73 96 456 455
------------------- ---------------- ----------------- ----------------
Total charge-offs 678 490 2,449 2,737
------------------- ---------------- ----------------- ----------------
Recoveries
Core banking loans 23 13 42 189
Indirect automobile loans 40 10 101 42
Premium finance receivables 17 15 167 127
------------------- ---------------- ----------------- ----------------
Total recoveries 80 38 310 358
------------------- ---------------- ----------------- ----------------
Net charge-offs (598) (452) (2,139) (2,379)
------------------- ---------------- ----------------- ----------------
Balance at December 31 $ 8,783 $ 7,034 $ 8,783 $ 7,034
=================== ================ ================= ================
Loans at December 31 $1,278,249 $ 992,062
================= ================
Allowance as a percentage of loans 0.69% 0.71%
================= ================
Net charge-offs as a percentage of average:
Core banking loans 0.12% 0.29%
Indirect automobile loans 0.44% 0.36%
Premium finance receivables 0.14% 0.18%
----------------- ----------------
Total loans 0.19% 0.28%
================= ================
Provision for possible loan losses 57.61% 55.36%
================= ================
The provision for possible loan losses totaled $1.0 million for the fourth
quarter of 1999, a slight increase from a year earlier. For the year ended
December 31, 1999, the provision totaled $3.7 million and declined $584,000 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 year ended December 31, 1999, net charge-offs totaled $2.1 million and
were down from the $2.4 million of net charge-offs recorded in 1998. On a ratio
basis, net charge-offs as a percentage of average loans declined to 0.19% in
1999 from 0.28% in 1998.
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Management believes the allowance for possible 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 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).
December 31, September 30, December 31,
1999 1999 1998
---- ---- ----
Past Due greater than 90 days and still accruing:
Core banking loans $ 713 $ 997 $ 800
Indirect automobile loans 391 354 274
Premium finance receivables 1,523 1,337 1,214
--------------------- ---------------------- ---------------------
Total 2,627 2,688 2,288
--------------------- ---------------------- ---------------------
Non-accrual loans:
Core banking loans 1,895 1,139 1,487
Indirect automobile loans 298 369 195
Premium finance receivables 2,145 1,726 1,455
--------------------- ---------------------- ---------------------
Total non-accrual loans 4,338 3,234 3,137
--------------------- ---------------------- ---------------------
Total non-performing loans:
Core banking loans 2,608 2,136 2,287
Indirect automobile loans 689 723 469
Premium finance receivables 3,668 3,063 2,669
--------------------- ---------------------- ---------------------
Total non-performing loans 6,965 5,922 5,425
--------------------- ---------------------- ---------------------
Other real estate owned - - 587
--------------------- ---------------------- ---------------------
Total non-performing assets $ 6,965 $ 5,922 $ 6,012
===================== ====================== =====================
Total non-performing loans by category as a percent of its own respective
category:
Core banking loans 0.32% 0.29% 0.38%
Indirect automobile loans 0.27% 0.28% 0.22%
Premium finance receivables 1.67% 1.42% 1.50%
--------------------- ---------------------- ---------------------
Total non-performing loans 0.54% 0.49% 0.55%
--------------------- ---------------------- ---------------------
Total non-performing assets as a
percentage of total assets 0.41% 0.38% 0.45%
Allowance for possible loan losses as
a percentage of non-performing loans 126.10% 138.47% 129.66%
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Non-performing Core Banking Loans
Total non-performing loans for the Company's core banking business were $2.6
million, or 0.32%, of the Company's core banking loans as of December 31, 1999,
and declined from the ratio of 0.38% as of December 31, 1998. Although the
outstanding core loan portfolio has increased 33% from a year ago, the amount of
non-performing core loans has only increased 14% from the prior year total.
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, the loans comprising the
non-performing core loan category total less than 30 individual credits. The
small number of such non-performing loans allows management to effectively
monitor the status of these credits and work with the borrowers to resolve these
problems.
Non-performing Premium Finance Receivables
The table below presents the level of non-performing premium finance receivables
as of December 31, 1999 and 1998, and the amount of net charge-offs for the
years then ended.
As of % of Premium As of % of Premium
12/31/99 Finance Rec. 12/31/98 Finance Rec.
-------- ------------ -------- ------------
Non-performing premium
finance receivables $3,668,000 1.67% $2,669,000 1.50%
Net charge-offs of premium
finance receivables 289,000 0.14% 328,000 0.18%
It is important to note that the ratio of net charge-offs is substantially less
than the ratio of non-performing assets. 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, 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 Indirect Automobile Loans
Total non-performing indirect automobile loans were $689,000 at December 31,
1999. The ratio of these non-performing loans has increased slightly to 0.27% of
total indirect automobile loans at December 31, 1999 from 0.22% at December 31,
1998. Despite the increase in the level of non-performing loans, these ratios
continue to be below standard industry ratios for this type of loan category. As
noted in the Allowance for Possible Loan Losses table, net charge-offs as a
percent of total indirect automobile loans increased from 0.36% in 1998 to 0.44%
in 1999. This increase was the result of an in-depth review of all problem
credits and the implementation of a more aggressive charge-off policy.
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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, 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 new 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, unknown
difficulties associated with the Year 2000 date change including services
performed by outside data processing providers, 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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