February, 2001
Dear Shareholders,
This letter provides a brief update on our financial performance
through the fourth quarter of 2000 and other news of Wintrust Financial
Corporation. Attached to this letter is a copy of our January 22, 2001 news
release of our earnings for the quarter and year ended December 31, 2000. A more
detailed analysis will be available shortly in our 2000 Annual Report.
HIGHLIGHTS FOR FISCAL YEAR 2000
We achieved record earnings in 2000 and surpassed the $2.1 billion
asset level. Here is a high level summary of our financial results and
accomplishments during 2000:
o Wintrust generated record earnings for the year. Net income for the
year was up 46% excluding a $4.3 million pre-tax charge related to a
fraudulent scheme perpetrated against our premium finance subsidiary
in the third quarter. Actual net income was up 18% over the prior year
including the impact of the charge;
o Fourth quarter earnings increased 36% over the prior year quarter and
reached $3.8 million;
o Our compound growth rate in earnings (excluding the aforementioned
charge) over the last five years is in excess of 55% and is in excess
of 41% measured over a three-year period;
o Similarly, our compound growth rate in revenues, measured over one,
three and five year periods, has consistently approximated 35%;
o For 2000, we grew our assets by 25% over a year ago. And our compound
growth rates over the last three and five-year periods have been 26%
and 35%, respectively. We are proud of the strong growth we are
consistently achieving;
o During 2000, all of our community banks reached record asset levels
and improved upon their profitability;
o Accordingly, we continue to be one of the fastest growing de novo bank
groups in the country, not only in assets, but in earnings and
revenues as well;
- 1 -
o Tricom, Inc. experienced record volume and earnings for the year and
the transition of that acquisition went smoothly. 2000 was our first
full year of ownership of Tricom and its results exceeded our
expectations;
o In November, we opened our seventh de novo bank in Northbrook,
Illinois. At the end of January 2001, it has already surpassed the $35
million asset level. We also opened three other branch locations
during the year;
o The Company initiated its first ever dividend in 2000;
o The Company initiated and substantially completed a share repurchase
program that took advantage of a stock market that seemingly was
under-valuing our common stock; and,
o Our asset quality remains strong, as the level of non-performing
assets is very manageable.
RECENT STOCK PRICE PERFORMANCE
While we recognize that we cannot control the movements of the stock
market, we can continue to execute a strategy designed to produce consistent
growth in earnings, revenues and assets. Such results will be rewarded in due
course.
We are pleased that at the date of this writing (January 30, 2001) the
stock price of Wintrust stood at $19.00 per share, or 29% higher than a year
earlier. By contrast the Nasdaq Bank Index was up 20% and the Nasdaq Composite
Index was down 31%. We continue to believe that we can achieve further
meaningful increases in share value as we continue to execute our strategy.
ANNUAL MEETING
The 2001 Annual Meeting of Shareholders is scheduled to be held on
Thursday, May 24, 2001 at 10:00 a.m. Please reserve the date. We hope to see you
there.
SUMMARY
In summary, we are pleased with the Company's significant growth in the
fourth quarter and for the year. This was a very good year in terms of executing
our strategy of balancing growth in the balance sheet with growth in earnings.
For the future, we are confident in our corporate strategy and believe we have
strong momentum going into 2001. We are comfortable that we will be able to meet
or exceed the analysts' consensus earnings estimates for 2001 of $1.83 per
share.
- 2 -
We are grateful for your support of our organization and are
enthusiastic about making the year 2001 another good year in terms of growth in
earnings and assets.
Yours truly,
/s/ John S. Lillard /s/ Edward J. Wehmer
John S. Lillard Edward J. Wehmer
Chairman President and CEO
- --------------------------------------------------------------------------------
FORWARD-LOOKING STATEMENTS
This letter contains forward-looking statements related to the Company's
financial performance that are based on estimates. The Company intends such
forward-looking statements to be covered by the safe harbor provisions 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
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, the ability to attract and retain
experienced senior management, and the ability to recover on the loss resulting
from the fraudulent loan scheme perpetrated against the Company's premium
finance subsidiary. Therefore, there can be no assurances that future actual
results will correspond to these forward-looking statements.
- --------------------------------------------------------------------------------
- 3 -
Wintrust Financial Corporation
727 North Bank Lane, Lake Forest, Illinois 60045
NEWS RELEASE
FOR IMMEDIATE RELEASE January 22, 2001
- ---------------------
FOR MORE INFORMATION CONTACT:
Edward J. Wehmer, President & Chief Executive Officer
David A. Dykstra, Executive Vice President & Chief Financial Officer
(847) 615-4096
Website address: www.wintrust.com
WINTRUST FINANCIAL CORPORATION REPORTS RECORD EARNINGS
------------------------------------------------------
FOR THE FOURTH QUARTER AND YEAR.
--------------------------------
FOURTH QUARTER NET EARNINGS UP 36%; YEAR UP 18%
-----------------------------------------------
LAKE FOREST, ILLINOIS -- Wintrust Financial Corporation ("Wintrust")
(Nasdaq: WTFC) announced record net income of $3.8 million for the quarter ended
December 31, 2000, an increase of $1.0 million, or 36%, over the $2.8 million
recorded in the fourth quarter of 1999. On a per share basis, net income for the
fourth quarter of 2000 totaled $0.43 per diluted common share, an $0.11 per
share, or 35%, increase as compared to the 1999 fourth quarter total of $0.32
per diluted common share. The results for the fourth quarter of 2000 include a
pre-tax recovery of $200,000 related to the non-recurring loss reported in the
third quarter of 2000. Excluding the $200,000 recovery, net income in the fourth
quarter was $3.7 million, an increase of $888,000 or 32%, over the fourth
quarter of 1999.
For the year ended December 31, 2000, net income totaled a record $11.2
million, or $1.25 per diluted common share, an increase of $1.7 million, or 18%,
compared to the $9.4 million, or $1.10 per diluted common share reported for
1999. The year to date results for 2000 include a non-recurring pre-tax charge
of $4.5 million and a partial recovery of $200,000, related to a fraudulent loan
scheme perpetrated against the Company's premium finance subsidiary. Excluding
the net non-recurring charge of $4.3 million, net income for 2000 totaled $13.8
million, or $1.54 per diluted common share, an increase of $4.3 million, or 46%,
compared to 1999.
"We are pleased with the Company's continued growth in earnings and
assets in the fourth quarter and for the year," commented Edward J. Wehmer,
President and Chief Executive Officer. "This was a very good year for the
Company in terms of executing our strategy of balancing growth in the balance
sheet with growth in earnings. The Company's compound growth rates in revenues
have exceeded 35% when measured over one and three year periods. Our compound
growth in loans and deposits over the same time periods have ranged between 20%
and 30%."
- 4 -
Mr. Wehmer added, "2000 was character-building year for us. We achieved
record earnings despite the loss incurred related to the fraudulent loan scheme
perpetrated against us in the third quarter. Turning our focus to the future, we
are confident in our corporate strategy and believe 2001 will continue to
reflect good growth in assets and earnings. We are comfortable that we will be
able to meet or exceed the analysts' consensus earnings estimate for 2001 of
$1.83 per share."
Total assets increased to $2.10 billion at December 31, 2000, an
increase of $423 million, or 25%, compared to $1.68 billion a year ago. Total
loans grew to $1.56 billion as of December 31, 2000, a $280 million, or 22%,
increase over the $1.28 billion balance a year earlier. Total deposits as of
December 31, 2000 were $1.83 billion, an increase of $363 million, or 25%, as
compared to $1.46 billion as of December 31, 1999.
Wintrust's key operating measures, excluding the non-recurring charge
reported in 2000, continue to show impressive growth rates in 2000 as compared
to the prior year, as evidenced by the table below:
12/31/2000
over
Year Year 12/31/1999
Ended Ended Percent
Dollars in thousands, except per share data 12/31/2000 12/31/1999 Improvement
------------------------------------------- ---------- ---------- -----------
Net income* $ 13,761 $ 9,427 46.0%
Net income per common share - Diluted* $ 1.54 $ 1.10 40.0%
Net revenues $ 79,306 $ 57,542 37.8%
Net interest income $ 61,000 $ 47,734 27.8%
Net interest margin 3.66% 3.54% 3.4%
Core net interest margin 3.91% 3.75% 4.3%
Net overhead ratio* 1.90% 2.00% 5.1%
Return on average assets* 0.74% 0.63% 17.5%
Return on average equity* 14.20% 11.58% 22.6%
At end of period
----------------
Total assets $2,102,806 $1,679,382 25.2%
Total loans, net of unearned income $1,558,020 $1,278,249 21.9%
Total deposits $1,826,576 $1,463,622 24.8%
Book value per common share $ 11.87 $ 10.60 12.0%
<FN>
* Excludes non-recurring charge of $4.520 million, net of a $200,000 partial
recovery, ($2.606 million after tax) reported in 2000 related to a
fraudulent loan scheme perpetrated against the Company's premium finance
subsidiary.
</FN>
- 5 -
For the fourth quarter of 2000, net interest income totaled $16.6
million and increased $3.5 million, or 27%, compared to the prior year quarterly
total of $13.1 million. Noninterest income totaled $5.0 million for the fourth
quarter of 2000, and increased $1.7 million, or 50%, over the fourth quarter of
1999. The increase in noninterest income over the prior year same quarter was
primarily attributable to increases in the gains on the sale of premium finance
receivables and from fees on mortgage loans sold, reflecting increases in
refinancing activity as mortgage rates began to decline. Noninterest expense in
the fourth quarter totaled $14.7 million, reflecting an increase of $3.5
million, or 31%, over the same period in 1999. The primary component of the
increase in noninterest expense was an increase in salaries and employee
benefits of $2.3 million, or 41%, over the prior year amount. The increase in
salaries and benefits was a result of the expansion of the trust and investment
business, the expansion of the premium finance business, four additional banking
offices including the staffing of the Company's seventh de novo bank which
opened in 2000.
The level of non-performing assets remained low and very manageable for
the Company's core banking loans at only $1.4 million, or only 0.14% of the core
banking loan portfolio. The non-performing asset level for the indirect
automobile portfolio remained fairly constant at approximately $600,000, or
0.30% of that portfolio. The non-performing asset level for the premium finance
category has increased due to seasonal fluctuations and an increase of
delinquent accounts associated with a marketing agreement entered into in
mid-1999. The Company has begun initiatives to substantially curtail the new
volume generated from this relationship and to aggressively collect the
outstanding delinquent accounts.
Wintrust is a multi-bank 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, Highwood, Glencoe, Winnetka, Clarendon
Hills, Western Springs, Skokie and Wauconda, Illinois. Additionally, the Company
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, a trust subsidiary, allows Wintrust to service
customers' trust and investment needs at each banking location. Tricom, Inc.
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 28 banking offices
and is in the process of constructing two additional banking facilities.
Wintrust Financial Corporation has been one of the fastest growing de novo bank
groups in Illinois.
- 6 -
WINTRUST FINANCIAL CORPORATION
SELECTED FINANCIAL HIGHLIGHTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
- ------------------------------------------------------------------------------------------------------------------------------
Three Months Year Ended
Ended December 31, December 31,
2000 1999 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------
SELECTED FINANCIAL CONDITION DATA
(AT END OF PERIOD):
Total assets $ 2,102,806 $ 1,679,382
Total deposits 1,826,576 1,463,622
Total loans, net of unearned income 1,558,020 1,278,249
Notes payable 27,575 8,350
Long-term debt - trust preferred securities 51,050 31,050
Total shareholders' equity 102,276 92,947
- ------------------------------------------------------------------------------------------------------------------------------
SELECTED STATEMENTS OF INCOME DATA:
Net interest income $ 16,643 $ 13,098 $ 61,000 $ 47,734
Net revenues 21,674 16,463 79,306 57,542
Income before income taxes 5,611 4,273 16,448 14,151
Net income 3,815 2,806 11,155 9,427
Net income per common share - Basic 0.44 0.33 1.28 1.14
Net income per common share - Diluted 0.43 0.32 1.25 1.10
- ------------------------------------------------------------------------------------------------------------------------------
SELECTED FINANCIAL RATIOS AND OTHER DATA:
Performance Ratios:
Net interest margin 3.65% 3.55% 3.66% 3.54%
Core net interest margin (1) 3.93% 3.75% 3.91% 3.75%
Net interest spread 3.24% 3.23% 3.29% 3.23%
Non-interest income to average assets 0.99% 0.82% 0.99% 0.66%
Non-interest expense to average assets 2.90% 2.71% 3.12% 2.65%
Net overhead ratio 1.90% 1.89% 2.13% 2.00%
Net overhead ratio - excluding fraud charge (2) 1.94% 1.89% 1.90% 2.00%
Return on average assets 0.75% 0.68% 0.60% 0.63%
Return on average equity 15.44% 12.66% 11.51% 11.58%
Average total assets $ 2,014,873 $ 1,637,658 $ 1,853,582 $ 1,496,566
Average shareholders' equity 98,283 87,924 96,918 81,381
Average loan-to-average deposit ratio 87.5% 87.4% 87.7% 86.6%
Common Share Data at end of period:
Market price per common share $ 15.94 $ 15.25
Book value per common share 11.87 10.60
Other Data at end of period:
Number of:
Bank subsidiaries 7 6
Non-bank subsidiaries 3 3
Banking offices 28 24
- ------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) The core net interest margin excludes the interest expense associated with
the Company's Trust Preferred Securities.
(2) Excludes non-recurring charge of $4.52 million and a partial recovery of
$200,000 reported in the third and fourth quarter of 2000, respectively
related to a fraudulent loan scheme perpetrated against the Company's
premium finance subsidiary.
</FN>
- 7 -
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION (UNAUDITED)
(In thousands)
December 31, December 31,
2000 1999
- ----------------------------------------------------------------------------------------------------------------------
ASSETS
Cash and due from banks $ 65,413 $ 53,066
Federal funds sold and securities purchased under resale agreements 164,641 28,231
Interest-bearing deposits with banks 182 2,547
Available-for-Sale securities, at fair value 193,105 205,795
Loans, net of unearned income 1,558,020 1,278,249
Less: Allowance for possible loan losses 10,433 8,783
- ----------------------------------------------------------------------------------------------------------------------
Net loans 1,547,587 1,269,466
Premises and equipment, net 86,386 72,851
Accrued interest receivable and other assets 34,722 35,943
Goodwill and other intangible assets, net 10,770 11,483
- ----------------------------------------------------------------------------------------------------------------------
Total assets $ 2,102,806 $1,679,382
======================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 198,319 $ 154,034
Interest bearing 1,628,257 1,309,588
- ----------------------------------------------------------------------------------------------------------------------
Total deposits 1,826,576 1,463,622
Short-term borrowings 43,639 59,843
Notes payable 27,575 8,350
Long-term debt - trust preferred securities 51,050 31,050
Accrued interest payable and other liabilities 51,690 23,570
- ----------------------------------------------------------------------------------------------------------------------
Total liabilities 2,000,530 1,586,435
- ----------------------------------------------------------------------------------------------------------------------
Shareholders' equity:
Preferred stock - -
Common stock 8,857 8,771
Surplus 83,710 82,792
Common stock warrants 100 100
Treasury stock, at cost (3,863) -
Retained earnings 13,835 3,555
Accumulated other comprehensive loss (363) (2,271)
- ----------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 102,276 92,947
- ----------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 2,102,806 $ 1,679,382
======================================================================================================================
- 8 -
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,
2000 1999 2000 1999
- ----------------------------------------------------------------------------------------------------------------------------
INTEREST INCOME
Interest and fees on loans $36,948 $27,277 $ 130,910 $ 97,270
Interest bearing deposits with banks 2 39 26 204
Federal funds sold 571 462 1,627 1,536
Securities 4,372 3,077 15,621 10,321
- ----------------------------------------------------------------------------------------------------------------------------
Total interest income 41,893 30,855 148,184 109,331
- ----------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Interest on deposits 22,823 15,859 78,670 56,026
Interest on short-term borrowings and notes payable 1,139 1,163 4,371 2,633
Interest on long-term debt - trust preferred securities 1,288 735 4,143 2,938
- ----------------------------------------------------------------------------------------------------------------------------
Total interest expense 25,250 17,757 87,184 61,597
- ----------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 16,643 13,098 61,000 47,734
Provision for possible loan losses 1,384 1,006 5,055 3,713
- ----------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for possible loan losses 15,259 12,092 55,945 44,021
- ----------------------------------------------------------------------------------------------------------------------------
NON-INTEREST INCOME
Fees on mortgage loans sold 894 456 2,911 3,206
Service charges on deposit accounts 510 482 1,936 1,562
Trust fees 497 401 1,971 1,171
Gain on sale of premium finance receivables 954 393 3,831 1,033
Administrative services revenue 1,064 996 4,402 996
Net securities gains (losses) 54 (10) (40) 5
Other 1,058 647 3,295 1,835
- ----------------------------------------------------------------------------------------------------------------------------
Total non-interest income 5,031 3,365 18,306 9,808
- ----------------------------------------------------------------------------------------------------------------------------
NON-INTEREST EXPENSE
Salaries and employee benefits 7,852 5,552 28,119 20,808
Occupancy, net 1,141 903 4,252 2,991
Equipment expense 1,455 1,073 5,101 3,199
Data processing 723 625 2,837 2,169
Advertising and marketing 411 361 1,309 1,402
Professional fees 551 375 1,681 1,203
Amortization of intangibles 178 144 713 251
Premium finance defalcation (200) - 4,320 -
Other 2,568 2,151 9,471 7,655
- ----------------------------------------------------------------------------------------------------------------------------
Total non-interest expense 14,679 11,184 57,803 39,678
- ----------------------------------------------------------------------------------------------------------------------------
Income before income taxes 5,611 4,273 16,448 14,151
Income tax expense 1,796 1,467 5,293 4,724
- ----------------------------------------------------------------------------------------------------------------------------
Net income $ 3,815 $ 2,806 $ 11,155 $ 9,427
============================================================================================================================
Net income per common share - Basic $ 0.44 $ 0.33 $ 1.28 $ 1.14
============================================================================================================================
Net income per common share - Diluted $ 0.43 $ 0.32 $ 1.25 $ 1.10
============================================================================================================================
Cash dividends declared per common share $ 0.00 $ 0.00 $ 0.10 $ 0.00
- ----------------------------------------------------------------------------------------------------------------------------
Weighted average common shares outstanding 8,614 8,497 8,711 8,249
Dilutive potential common shares 242 274 230 309
- ----------------------------------------------------------------------------------------------------------------------------
Average common shares and dilutive common shares 8,856 8,771 8,941 8,558
============================================================================================================================
- 9 -
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, 2000 and 1999:
For the Quarter Ended For the Quarter Ended
December 31, 2000 December 31, 1999
----------------------------------------- ---------------------------------------
(dollars in thousands) Average Interest Rate Average Interest Rate
- ---------------------- ---------------- ------------- ---------- --------------- ------------- ---------
Liquidity management assets (1) (2) $ 294,690 $ 4,960 6.69% $ 241,026 $ 3,585 5.90%
Loans, net of unearned income (2) 1,537,385 37,112 9.60 1,232,346 27,364 8.81
---------------- ------------- ---------- --------------- ------------- ---------
Total earning assets 1,832,075 42,072 9.14% 1,473,372 30,949 8.33%
---------------- ------------- ---------- --------------- ------------- ---------
Interest-bearing deposits 1,574,841 22,823 5.77% 1,270,749 15,859 4.95%
Short-term borrowings and notes payable 76,227 1,139 5.95 80,815 1,163 5.71
Long-term debt - trust preferred securities 51,050 1,288 10.09 31,050 735 9.47
---------------- ------------- ---------- --------------- ------------- ---------
Total interest-bearing liabilities 1,702,118 25,250 5.90% 1,382,614 17,757 5.10%
---------------- ------------- ---------- --------------- ------------- ---------
Tax-equivalent net interest income $ 16,822 $ 13,192
============= =============
Net interest margin 3.65% 3.55%
========== =========
Core net interest margin (3) 3.93% 3.75%
========== =========
For the Year Ended For the Year Ended
December 31, 2000 December 31, 1999
----------------------------------------- ---------------------------------------
(dollars in thousands) Average Interest Rate Average Interest Rate
- ---------------------- ---------------- ------------- ---------- --------------- ------------- ---------
Liquidity management assets (1) (2) $ 263,666 $ 17,322 6.57% $ 221,942 $ 12,076 5.44%
Loans, net of unearned income (2) 1,416,419 131,428 9.28 1,135,200 97,529 8.59
---------------- ------------- ---------- --------------- ------------- ---------
Total earning assets 1,680,085 148,750 8.85% 1,357,142 109,605 8.08%
---------------- ------------- ---------- --------------- ------------- ---------
Interest-bearing deposits 1,449,837 78,670 5.43% 1,184,657 56,026 4.73%
Short-term borrowings and notes payable 74,893 4,371 5.84 53,076 2,633 4.96
Long-term debt - trust preferred securities 41,990 4,143 9.87 31,050 2,938 9.46
---------------- ------------- ---------- --------------- ------------- ---------
Total interest-bearing liabilities 1,566,720 87,184 5.56% 1,268,783 61,597 4.85%
---------------- ------------- ---------- --------------- ------------- ---------
Tax-equivalent net interest income $ 61,566 $ 48,008
============= =============
Net interest margin 3.66% 3.54%
========== =========
Core net interest margin (3) 3.91% 3.75%
========== =========
- -------------------------------
<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
35%. This total adjustment for the quarters ended December 31, 2000 and
1999 was $179,000 and $94,000, respectively, and for the twelve-month
periods ended December 31, 2000 and 1999 was $566,000 and $274,000,
respectively.
(3) The core net interest margin excludes the interest expense associated with
the Company's Trust Preferred Securities.
</FN>
- 10 -
Tax-equivalent net interest income for the quarter ended December 31, 2000
totaled $16.8 million, an increase of $3.6 million, or 28%, as compared to the
$13.2 million recorded in the same quarter of 1999. This increase is primarily a
result of a 24% increase in average earning assets in the fourth quarter of 2000
compared to the prior year quarter. For the fourth quarter of 2000, the net
interest margin was 3.65%, an increase of 10 basis points when compared to the
margin of 3.55% in the prior year quarter. The core net interest margin, which
excludes the impact of the interest expense on the Company's trust preferred
securities was 3.93% for the fourth quarter of 2000, and increased 18 basis
points when compared to the prior year quarterly core margin of 3.75%. The
increase in the core net interest margin in these two periods was attributable
to the increase in the actual net interest margin and enhanced by the investment
of funds from the issuance of $20.0 million of the Company's 10.5% trust
preferred securities in June 2000.
The yield on total earning assets for the fourth quarter of 2000 was 9.14%, an
increase of 81 basis points over the earning asset yield of 8.33% in the fourth
quarter of 1999. Average loans comprised 84% of average earning assets in the
fourth quarters of 2000 and 1999. The yield on loans increased 79 basis points
to 9.60% in the fourth quarter of 2000 compared to the yield of 8.81% in the
same quarter of 1999. The increase in the yield on loans was due primarily to a
higher average prime rate during the periods. The average prime lending rate was
9.50% during the fourth quarter of 2000 versus an average prime lending rate of
8.38% for the fourth quarter of 1999. Tax-equivalent interest and fees on loans
for the quarter ended December 31, 2000 totaled $37.1 million, an increase of
$9.7 million, or 36%, over the prior year quarterly total of $27.4 million.
Average total loans were $305 million, or 25%, higher in the fourth quarter of
2000 compared to the prior year quarter.
The rate paid on interest-bearing deposits averaged 5.77% for the fourth quarter
of 2000 versus 4.95% for the same quarter of 1999, an increase of 82 basis
points. This increase was caused by increases in market rates in 2000 and the
offering of higher introductory rates on certain promotional deposit products at
the Company's new banking locations and 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 5.95% in
the fourth quarter of 2000 as compared to 5.71% in the same quarter of 1999; the
increase due primarily to general market rate increases that have occurred
during 2000. The yield on the trust preferred securities in the fourth quarter
of 2000 was 10.09%, compared to 9.47% in the same period of 1999. The increase
was due to the issuance of $20.0 million of 10.5% trust preferred securities in
June 2000.
For the year ended December 31, 2000, tax-equivalent net interest income totaled
$61.6 million and increased $13.6 million, or 28%, over the $48.0 million
recorded in 1999. This increase was primarily due to an increase in average
earning assets of $323 million, or 24% in 2000 compared to 1999, coupled with a
slightly higher spread on the yield on earning assets over the rates on
interest-bearing liabilities. The net interest margin for the year ended
December 31, 2000 was 3.66%, an increase of 12 basis points when compared to the
prior year. The core net interest margin for 2000 was 3.91% and increased 16
basis points over the same margin in 1999. The change in the core net interest
margin was attributable to the increase in the actual net interest margin and
enhanced by the investment of funds from the issuance of $20.0 million of 10.5%
trust preferred securities in June 2000.
Interest and fees on loans, on a tax-equivalent basis, totaled $131.4 million
for the year ended December 31, 2000 and increased $33.9 million, or 35%, over
1999. Average loans in 2000 totaled $1.42 billion and grew $281 million, or 25%,
over the average for 1999. The loan yield during 2000 was 9.28%, reflecting an
increase of 69 basis points over the 1999 loan yield. This increase was
primarily due to a higher average prime lending rate of 9.23% in 2000 versus an
average prime lending rate of 8.00% in 1999. The yield on total interest-bearing
liabilities was 5.56% in 2000 compared to 4.85% in 1999. The increase reflects
general market rate increases that occurred during 2000 as well as the effect of
the issuance of the $20.0 million of 10.5% trust preferred securities in June
2000.
- 11 -
NON-INTEREST INCOME
For the fourth quarter of 2000, non-interest income totaled $5.0 million and
increased $1.7 million over the prior year quarter. Increases on gains from the
sale of premium finance receivables and fees on mortgage loans sold were the
primary contributors to the increase in non-interest income.
Tricom, the Company's subsidiary that provides short-term account receivable
financing and administrative services to clients in the temporary staffing
industry, contributed $1.1 million of administrative services revenue to the
Company's non-interest income in the fourth quarter of 2000. It was the largest
component of the Company's non-interest income, representing 21% of the total
non-interest income in this period. Tricom also earns interest and fee income
from providing short-term account receivable financing to this same client base,
which is included in the net interest income category.
During the fourth quarter of 2000 the Company sold approximately $52.6 million
of premium finance receivables to an unrelated third party and recognized a gain
of $954,000 on the sale. Consistent with Wintrust's strategy to be asset-driven,
the Company has been selling premium finance receivables since the second
quarter of 1999. In the fourth quarter of 1999 the Company sold approximately
$29 million of premium finance receivables and reported a gain from the sale of
$393,000. 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 represents income from originating and selling
residential real estate loans to the secondary market. For the quarter ended
December 31, 2000, these fees totaled $894,000, an increase of $438,000, or 96%,
from the prior year quarter. This increase is indicative of declining mortgage
interest rates and as a result higher levels of mortgage origination volumes,
particularly refinancing activity.
Service charges on deposit accounts totaled $510,000 for the fourth quarter of
2000, an increase of $28,000, or 6%, when compared to the same quarter of 1999.
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 $497,000 for the fourth quarter of 2000, a $96,000, or 24%,
increase over the fourth quarter of 1999. 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 2000 totaled $1.1 million
and increased $411,000 over the prior year quarterly total of $647,000. Included
in this category is $411,000 of rental income from equipment leased through the
Medical and Municipal Funding division of the Lake Forest Bank, representing an
increase of $239,000, or 38%, over the prior year amount. Also included in this
category is $278,000 of premium income from certain call option transactions,
representing an increase of $19,000, or 7%, over the fourth quarter of 1999.
These call option transactions were designed to increase the total return
associated with holding certain securities as earning assets and yield
additional fee income.
- 12 -
For the year ended December 31, 2000, total non-interest income was $18.3
million and increased $8.5 million, or 87%, when compared to 1999. Contributing
to this year to date increase were increases of $3.4 million related to the
administrative services revenue from Tricom and $2.8 million of gains from the
sale of premium finance receivables. These year to date increases were the
result of the Company acquiring Tricom in the fourth quarter of 1999 and
beginning the sale of premium finance receivables to an unrelated third party in
the second quarter of 1999. Also contributing to the year to date increase in
non-interest income were increases in trust fees of $800,000 or 68%, increases
in rental income from leased equipment of $866,000, or 218%, and increases in
premium income from certain call option transactions of $374,000, or 74%, over
the amounts reported in 1999.
NON-INTEREST EXPENSE
Non-interest expense for the fourth quarter of 2000 totaled $14.7 million and
increased $3.5 million, or 31%, from the fourth quarter 1999 total of $11.2
million. The continued growth and expansion of the de novo banks, the
development of the trust and investment business, and the growth in the premium
finance business were the primary causes for this increase. Since the end of
1999, total deposits have grown 25% and total loan balances have risen 22%,
requiring higher levels of staffing and other costs to both attract and service
the larger customer base.
Salaries and employee benefits totaled $7.9 million for the fourth quarter of
2000, an increase of $2.3 million, or 41%, as compared to the prior year fourth
quarter total of $5.6 million. This increase was primarily due to those reasons
noted in the preceding paragraph.
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. The Company opened several new banking
facilities, including its seventh de novo bank subsidiary, acquired Tricom (in
October 1999) and continues to build and develop its trust and investment
business. 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.
In the fourth quarter of 2000 the Company received a partial recovery of
$200,000 related to the fraud loss it reported in the third quarter of 2000. The
recovery was recorded in non-interest expense as a reduction of the previously
reported loss.
For the year ended December 31, 2000, non-interest expense totaled $57.8 million
and increased $18.1 million, or 46%, over 1999. Excluding the net non-recurring
charge of $4.3 million related to the fraud perpetrated against the Company's
premium finance subsidiary, non-interest expense increased $13.8 million, or
35%, over 1999. This increase was predominantly due to the continued growth of
loan and deposit accounts, the opening of new bank facilities, the development
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, the Company's net overhead ratio for 2000
(excluding the non-recurring charge) declined to 1.90% as compared to its 1999
ratio of 2.00%. 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%. The Company continues to compare favorably in its
efficiency ratios to its peer group.
- 13 -
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, 2000 and 1999 is
shown as follows (dollars in thousands):
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2000 1999 2000 1999
----------------- --------------- ------------------ ------------------
Balance at beginning of period $ 10,231 $ 8,200 $ 8,783 $7,034
Provision for possible loan losses 1,384 1,006 5,055 3,713
Acquired allowance for loan losses -- 175 -- 175
Charge-offs
-----------
Core banking loans 292 244 1,050 837
Indirect automobile loans 360 361 1,339 1,156
Tricom finance receivables -- -- 73 --
Premium finance receivables 647 73 1,294 456
----------------- --------------- ------------------ ------------------
Total charge-offs 1,299 678 3,756 2,449
----------------- --------------- ------------------ ------------------
Recoveries
----------
Core banking loans 37 23 58 42
Indirect automobile loans 44 40 164 101
Tricom finance receivables -- -- -- --
Premium finance receivables 36 17 129 167
----------------- --------------- ------------------ ------------------
Total recoveries 117 80 351 310
----------------- --------------- ------------------ ------------------
Net charge-offs (1,182) (598) (3,405) (2,139)
----------------- --------------- ------------------ ------------------
Balance at December 31 $ 10,433 $ 8,783 $ 10,433 $8,783
================= =============== ================== ==================
Loans at December 31 $1,558,020 $1,278,249
================== ==================
Allowance as a percentage of loans 0.67% 0.69%
================== ==================
Net charge-offs as a percentage of average:
Core banking loans 0.11% 0.12%
Indirect automobile loans 0.50% 0.44%
Tricom finance receivables 0.35% --
Premium finance receivables 0.43% 0.14%
------------------ ------------------
Total loans 0.24% 0.19%
------------------ ------------------
Provision for possible loan losses 67.36% 57.61%
================== ==================
The provision for possible loan losses totaled $1.4 million for the fourth
quarter of 2000, an increase of $378,000 from the $1.0 million recorded in the
fourth quarter of 1999. For the year ended December 31, 2000, the provision
totaled $5.1 million and increased $1.3 million from the prior year total. The
higher provisions in 2000 were a result of overall growth in the loan portfolio
of 22% and a slightly higher level of net charge-offs as a percentage of average
loans in 2000 compared to 1999.
- 14 -
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,
2000 2000 1999
---- ---- ----
Past Due greater than 90 days
and still accruing:
Core banking loans $ 651 $ 539 $ 713
Indirect automobile loans 397 323 391
Premium finance receivables 4,306 2,107 1,523
--------------------- ---------------------- ---------------------
Total 5,354 2,969 2,627
--------------------- ---------------------- ---------------------
Non-accrual loans:
Core banking loans 770 600 1,895
Indirect automobile loans 221 271 298
Premium finance receivables 3,338 3,232 2,145
--------------------- ---------------------- ---------------------
Total non-accrual loans 4,329 4,103 4,338
--------------------- ---------------------- ---------------------
Total non-performing loans:
Core banking loans 1,421 1,139 2,608
Indirect automobile loans 618 594 689
Premium finance receivables 7,644 5,339 3,668
--------------------- ---------------------- ---------------------
Total non-performing loans 9,683 7,072 6,965
--------------------- ---------------------- ---------------------
Other real estate owned - - -
--------------------- ---------------------- ---------------------
Total non-performing assets $ 9,683 $ 7,072 $ 6,965
===================== ====================== =====================
Total non-performing loans by category as a percent of its own respective
category:
Core banking loans 0.14% 0.12% 0.32%
Indirect automobile loans 0.30% 0.27% 0.27%
Premium finance receivables 2.44% 1.85% 1.67%
--------------------- ---------------------- ---------------------
Total non-performing loans 0.62% 0.48 0.54%
--------------------- ---------------------- ---------------------
Total non-performing assets as a
percentage of total assets 0.46% 0.35% 0.41%
Allowance for possible loan losses as
a percentage of non-performing loans 107.75% 144.67% 126.10%
- 15 -
Non-performing Core Banking Loans
Total non-performing loans for the Company's core banking business were $1.4
million, or 0.14%, of the Company's core banking loans as of December 31, 2000,
and declined from the ratio of 0.32% as of December 31, 1999. The outstanding
core loan portfolio has increased $235 million, or 30%, from a year ago, yet the
amount of non-performing core loans has decreased $1.2 million, or 46%, from the
prior year total. Non-performing core banking loans consist primarily of a small
number of commercial and real estate loans, 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, 2000 and 1999, and the amount of net charge-offs for the
years then ended.
12/31/00 12/31/99
------------ ------------
Non-performing premium finance receivables $7,644,000 3,668,000
- as a percent of premium finance receivables 2.44% 1.67%
Net charge-offs of premium finance receivables $1,165,000 $289,000
- as a percent of average premium finance receivables 0.43% 0.14%
Non-performing premium finance loans have increased over the course of the last
year. At year-end 2000, the increase is a result of two primary factors: (1)
delinquencies historically trend up in December and January in this industry and
(2) the volume of small balance delinquent accounts has placed an increased
burden on the collection efforts of the premium finance subsidiary.
Approximately 44% of the delinquent accounts and 29% of the delinquent balances
relate to accounts associated with a marketing arrangement entered into in July,
1999. Although these accounts were underwritten by our premium finance
subsidiary, the accounts generated from this arrangement have generally had
higher delinquencies than our core portfolio generated from established higher
balance relationships. The Company has significantly curtailed volume generated
from this arrangement and is focusing significant resource to resolving the
level of delinquencies. Management believes the delinquency levels should begin
to trend down over the next two quarters and begin to reach more normalized
levels by the end of the third quarter of 2001. As such, during the next two
quarters, management anticipates a continuation of the higher levels of
charge-offs incurred during the fourth quarter of 2000.
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.
- 16 -
Non-performing Indirect Automobile Loans
Total non-performing indirect automobile loans were $618,000 at December 31,
2000 and $689,000 at December 31, 1999. The ratio of these non-performing loans
has increased slightly to 0.30% of total indirect automobile loans at December
31, 2000 from 0.27% at December 31, 1999. 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 0.44% in 1999 to 0.50% in 2000. Despite
the increase in the level of net charge offs, these ratios continue to be below
standard industry ratios for this type of lending. However, based on the impact
of the current economic and competitive environment surrounding this type of
lending, management has begun to reduce the level of new loans originated and is
dedicating additional resources to reduce the level of delinquencies. Total
indirect automobile loans were $204 million at December 31, 2000, a decrease of
$52 million, or 20%, from the prior year balance.
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements related to the Company's
financial performance that are based on estimates. The Company intends such
forward-looking statements to be covered by the safe harbor provisions 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
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, the ability to attract and retain
experienced senior management, and the ability to recover on the loss resulting
from the fraudulent loan scheme perpetrated against the Company's premium
finance subsidiary. Therefore, there can be no assurances that future actual
results will correspond to these forward-looking statements.
- 17 -