May, 2001
Dear Shareholders,
This letter provides a brief update on our financial performance
through the first quarter of 2001 and other news of Wintrust Financial
Corporation. Our April 20, 2001 news release of our earnings for the quarter
ended March 31, 2001 is also attached for your information.
HIGHLIGHTS FOR FIRST QUARTER OF 2001
We again achieved record earnings for this quarter while assets also
increased to record levels. Here is a summary of our financial results and
accomplishments for the three months ending March 31, 2001:
o Net income of $3.9 million for the quarter ended March 31, 2001
increased 25% over the first quarter of 2000;
o On a per share basis, net income totaled $0.44 per diluted common
share for the first quarter of 2001, a 26% increase as compared to
year ago;
o Excluding a required charge for a change in an accounting principle,
net income increased 33% over the prior year and earnings per diluted
common share increased 34%;
o Return on average equity increased to 15.39% from 13.32% for the prior
year quarter;
o Total assets rose to $2.17 billion as of March 31, 2001, an increase
of $395 million, or 22%, compared to a year ago;
o Total deposits were $1.92 billion as of March 31, 2001, an increase of
$383 million, or 25%, compared to a year ago;
o Total loans grew to $1.66 billion as of March 31, 2001, an increase of
$348 million, or 27%, compared to a year ago;
o Net overhead ratio declined to 1.75% from 1.84% in the prior year
quarter; and
o In February 2001, we opened a new branch in McHenry, Illinois under
the name, McHenry Bank & Trust. This gives Crystal Lake Bank & Trust a
total of four facilities in the fast growing McHenry County area. MB&T
is also off to a very fast start as folks from McHenry are beginning
to experience community banking the way it ought to be.
- 1 -
INCOME AND EARNINGS
Although the interest rate environment was quite volatile in the first
quarter with substantial rate cuts by the Federal Reserve Bank, we were able to
maintain a relatively stable net interest margin and net interest income
increased 25% as compared to the prior year.
Non-interest income showed a sharp increase in the first quarter and
totaled $6.9 million, an increase of 60% over the prior year. The growth in this
category was mainly a result of a higher level of fees from originating and
selling residential mortgage loans into the secondary market and enhanced fee
income received from covered call option transactions which are designed to
increase the returns on certain U.S. Treasury and agency securities held in the
Company's investment portfolio.
Non-interest expenses totaled $16.0 million for the first quarter of
2001 representing an increase of 32% over a year ago. These increases are
attributable to the general growth of the Company's balance sheet and costs
associated with supporting our additional fee revenue.
Also, the first quarter of 2001 earnings included a cumulative effect
of a change in accounting principle for interest rate cap contracts, which
resulted in an after-tax charge of $254,000. Without this required change in
accounting practice, our earnings per share would have been $0.03 higher on a
diluted share basis. This change in accounting principle was simply a change in
the timing of recognizing the cost of our interest rate cap contracts and not an
economic loss to the Company.
YEAR-TO-DATE PERFORMANCE VERSUS GOAL
At Wintrust, we set aggressive goals and evaluate our performance
versus those goals. Reaching these financial goals over the next few years will
make our Company a high performing bank relative to its peers. We have made good
progress towards achieving most of these goals and expect continued improvement
as our young franchises-- the de novo community banks, and our other
subsidiaries Wintrust Asset Management, First Insurance Funding and
Tricom--mature. The following performance statistics indicate that we are making
overall improvement in these areas.
QUARTER ENDED
-------------------------------------------------------------------
MARCH DEC. SEPT. JUNE MARCH 31, DEC.
31, 31, 30, 30, 31,
GOAL 2001 2000 2000(1) 2000 2000 1999
---- ---- ---- ---- ---- ---- ----
Core Net Interest Margin (2) 4 - 4.5% 3.94% 3.93% 3.92% 3.94% 3.84% 3.75%
Net Overhead Ratio 1.5 - 2% 1.75% 1.90% 1.90% 1.89% 1.84% 1.89%
Return on Average Equity 20 - 25% 15.39% 15.44% 14.74% 13.86% 13.32% 12.66%
Return on Average Assets 1.5% 0.75% 0.75% 0.75% 0.75% 0.73% 0.68%
Earnings per diluted
Common share $0.44 $0.43 $0.41 $0.37 $0.35 $0.32
Non-Performing Assets
as a percent of total assets 0.64% 0.46% 0.35% 0.33% 0.41% 0.41%
- ----------------------------
<FN>
(1) Excludes the impact of a one-time charge of to $2.7 million to its third
quarter earnings.
(2) By definition, our Core Net Interest Margin excludes the impact of interest
expense associated with the Company's Trust Preferred Securities offerings.
</FN>
- 2 -
NON-PERFORMING ASSETS
Relative to the problems some other banks are having, our core loan
portfolio is very solid. The level of non-performing assets in our core banking
loan portfolio remained low and very manageable at $2.5 million, or 0.22% of the
core banking loan portfolio. The non-performing assets in the indirect auto
portfolio remained fairly constant at approximately $600,000, or 0.31% of that
portfolio. The Tricom finance receivable portfolio had only $112,000 of
non-performing assets.
Non-performing premium finance receivables increased to $10.7 million,
or 3.22% of that portfolio. The increase in non-performing premium finance
receivables over the course of recent quarters is primarily a result of a
proportionately large number of delinquent accounts associated with new business
derived from a marketing arrangement entered into in July, 1999. Management
identified the issue in the second half of 2000 and began to take corrective
measures to eliminate a significant number of these new business relationships
that were generating disproportionately high delinquencies. Specifically, the
Company has eliminated more than 1,300 relationships with insurance agents that
were referring new business to our premium finance subsidiary. These agents
represented about 30% of our transactions but only accounted for 13% of the
total dollar amount of our premium finance loan volume. The volume of work
associated with those small balance accounts placed an increased burden on the
collection efforts of the premium finance subsidiary. The impact of this prior
business is still reflected in the non-performing asset totals as these accounts
customarily take 60-150 days to convert the collateral held by insurance company
into cash collections. Because of the longer-term nature of converting the
collateral to cash, we believe our corrective actions and increased resources
devoted to collections should result in significant improvement during the
second quarter of 2001 and that the non-performing totals have reached their
peak in the first quarter. As such, the delinquency levels should show
improvement over the next two quarters.
DE NOVO EXPANSION ACTIVITIES
Our seventh separately chartered de novo bank, Northbrook Bank & Trust,
is off to a terrific start after opening in November 2000. At the writing of
this report, they have assets over $45 million and are ahead of their earning
goals as well. That's remarkable given that they are operating out of a very
small temporary facility with no drive-through location. NB&T recently broke
ground on their new permanent main bank facility with an attached drive-through
at the corner of Shermer Road and Waukegan Road. Their grand opening is
scheduled for early 2002.
We have also made good progress on a number of new branches for our
existing banks.
o Renovation of a new facility in Winnetka, which will be an upgrade
from the current branch, is coming along fine. That facility should be
opened during the summer.
o Construction has started on Hoffman Estates Community Bank, a branch
of Barrington Bank & Trust. This beautiful facility is scheduled to
open in the latter half of 2001.
o As noted above, in February, we opened a new facility in McHenry,
Illinois.
o Wauconda Community Bank, a branch of Libertyville Bank & Trust, has
just broken ground on a new permanent main bank and drive-through
facility on our property centrally located across the street from the
big bank competitor in town.
- 3 -
NEW INVESTOR RELATIONS WEB SITE
Check out our new state-of-the-art investor relations web site at
www.wintrust.com. It is powered by PR Newswire, the same firm that distributes
financial press releases. We created a new look and utilized some advanced web
navigation features that are befitting a progressive company like Wintrust
Financial Corporation. The new site also allows for e-mail alerts for news
releases and stock price targets. Hope you like it. Please let us know any
comments you might have.
ANNUAL MEETING
The 2001 Annual Meeting of Shareholders will be held on Thursday, May
24, 2001 at 10:00 a.m. at the Hyatt Deerfield Hotel at 1750 Lake Cook Road in
Deerfield, Illinois. You should have already received your 2000 Annual Report to
Shareholders and proxy statement. If you have not done so already, please return
the proxy card or vote via the telephone or the internet. We hope to see you at
our annual meeting. We will look forward to providing you with additional
details about our improving results and presenting to you our strategy for the
future.
SUMMARY
In summary, we are very pleased with the continued growth in earnings
and assets in the first quarter. We are working diligently to continue our
unique growth story while improving our earnings level. We remain comfortable
that we will be able to meet or exceed the analysts' consensus earnings estimate
for 2001 of $1.84 per share.
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.
- --------------------------------------------------------------------------------
- 4 -
Wintrust Financial Corporation
727 North Bank Lane, Lake Forest, Illinois 60045
NEWS RELEASE
FOR IMMEDIATE RELEASE April 20, 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 FIRST QUARTER EARNINGS AHEAD 25% OVER PRIOR YEAR
-------------------------------------------------------
LAKE FOREST, ILLINOIS -- Wintrust Financial Corporation ("Wintrust")
(Nasdaq: WTFC) announced record quarterly net income of $3.9 million for the
quarter ended March 31, 2001, an increase of $782,000, or 25%, over the $3.1
million recorded in the first quarter of 2000. On a per share basis, net income
for the first quarter of 2001 totaled $0.44 per diluted common share, a $0.09
per share, or 26%, increase as compared to the 2000 first quarter total of $0.35
per diluted common share. Included in the first quarter of 2001, is a cumulative
effect of a change in accounting for interest rate caps, which resulted in an
after-tax charge of $254,000, or $0.03 per diluted share. The return on average
equity for the first quarter of 2001 increased to 15.39% from 13.32% for the
prior year quarter.
Total assets rose to $2.17 billion at March 31, 2001, an increase of
$395 million, or 22%, compared to $1.77 billion a year ago, and an increase of
$64 million, or 3%, since December 31, 2000. Total deposits as of March 31, 2001
were $1.92 billion, an increase of $383 million, or 25%, as compared to $1.53
billion at March 31, 2000, and an increase of $90 million, or 5%, since year-end
2000. Total loans grew to $1.66 billion as of March 31, 2001, a $348 million, or
27%, increase over the $1.31 billion balance as of a year ago, and a $98
million, or 6%, increase since December 31, 2000.
For the first quarter of 2001, net interest income totaled $17.3
million and increased $3.4 million, or 25%, as compared to the prior year
quarterly total of $13.9 million. Non-interest income totaled $6.9 million for
the first quarter of 2001 and increased $2.6 million, or 60%, over the first
quarter of 2000. The increase was mainly a result of increases in fees from
originating and selling residential mortgage loans into the secondary market and
from
- 5 -
fees from ongoing transactions designed to increase the returns on certain U.S.
Treasury and agency securities in the Company's investment portfolio. Partially
offsetting these increases was a decline in gains on the sale of premium finance
receivables. Non-interest expense totaled $16.0 million for the first quarter of
2001 and increased $3.9 million, or 32%, over the first quarter of 2000.
Increases are attributable to the general growth of the Company's balance sheet
and fee-based businesses. The net overhead ratio declined to 1.75% from 1.84% in
the prior year quarter.
"We are very pleased with the continued growth in earnings and assets
in the first quarter," commented Edward J. Wehmer, President and Chief Executive
Officer. "We are working diligently to continue our unique growth story while
improving our earnings level and we remain comfortable that we will be able to
meet or exceed the analysts' consensus earnings estimate for 2001 of $1.84 per
share."
Wintrust's key operating measures continue to show impressive growth
rates in 2001 as compared to the prior year as evidenced by the table below:
Quarter Quarter
Ended Ended Percent
In thousands, except per share data 3/31/01 3/31/00 Improvement
----------------------------------- ------- ------- -----------
Net income $ 3,904 $ 3,122 25.1%
Net income per common share - Diluted $ 0.44 $ 0.35 25.7%
Net revenues $ 24,126 $ 18,146 33.0%
Net interest income $ 17,276 $ 13,868 24.6%
Net interest margin 3.67% 3.65% 0.5%
Core net interest margin(1) 3.94% 3.84% 2.6%
Net overhead ratio 1.75% 1.84% 4.9%
Return on average assets 0.75% 0.73% 2.7%
Return on average equity 15.39% 13.32% 15.5%
Total assets $2,166,630 $1,771,891 22.3%
Total loans, net of unearned income $1,655,543 $1,307,796 26.6%
Total deposits $1,916,756 $1,533,661 25.0%
Book value per common share $ 12.29 $ 10.83 13.5%
<FN>
(1) Core net interest margin excludes interest expense associated with the
Company's Trust Preferred Securities.
</FN>
- 6 -
Wintrust is a financial services 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, Wauconda and McHenry, 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. of Milwaukee provides short-term accounts receivable financing and
value-added out-sourced administrative services, such as data processing of
payrolls, billing and cash management services, to temporary staffing service
clients located throughout the United States. Currently, Wintrust operates a
total of 29 banking offices and is in the process of constructing several
additional branch facilities. All of the Company's banking subsidiaries are
locally managed with large local boards of directors. Wintrust Financial
Corporation has been one of the fastest growing de novo bank groups in Illinois.
- 7 -
WINTRUST FINANCIAL CORPORATION
SELECTED FINANCIAL HIGHLIGHTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
- ------------------------------------------------------------------------------------------------------------------
THREE MONTHS
ENDED MARCH 31,
2001 2000
- ------------------------------------------------------------------------------------------------------------------
SELECTED FINANCIAL CONDITION DATA
(AT END OF PERIOD):
Total assets $ 2,166,630 $ 1,771,891
Total deposits 1,916,756 1,533,661
Total loans, net of unearned income 1,655,543 1,307,796
Notes payable 38,875 14,050
Long-term debt - trust preferred securities 51,050 31,050
Total shareholders' equity 105,872 94,835
- ------------------------------------------------------------------------------------------------------------------
SELECTED STATEMENTS OF INCOME DATA:
Net interest income $ 17,276 $ 13,868
Net revenues 24,126 18,146
Income before taxes and cumulative effect of accounting change 6,517 4,896
Net income before cumulative effect of accounting change 4,158 3,122
Net income 3,904 3,122
Net income per common share - Basic 0.45 0.35
Net income per common share - Diluted 0.44 0.35
- ------------------------------------------------------------------------------------------------------------------
SELECTED FINANCIAL RATIOS AND OTHER DATA:
Performance Ratios:
Net interest margin 3.67% 3.65%
Core net interest margin (1) 3.94% 3.84%
Non-interest income to average assets 1.32% 1.01%
Non-interest expense to average assets 3.07% 2.85%
Net overhead ratio 1.75% 1.84%
Return on average assets 0.75% 0.73%
Return on average equity 15.39% 13.32%
Average total assets $ 2,110,058 $ 1,708,494
Average shareholders' equity 102,851 94,281
Average loan-to-average deposit ratio 87.1% 88.4%
Common Share Data at end of period:
Market price per common share $ 18.63 $ 14.25
Book value per common share 12.29 10.83
Common shares outstanding 8,616,976 8,752,643
Other Data at end of period:
Number of:
Bank subsidiaries 7 6
Non-bank subsidiaries 3 3
Banking offices 29 25
- ------------------------------------------------------------------------------------------------------------------
<FN>
(1) The core net interest margin excludes the interest expense associated with
the Company's Trust Preferred Securities.
</FN>
- 8 -
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION (UNAUDITED)
(In thousands)
MARCH 31, December 31, March 31,
2001 2000 2000
- ---------------------------------------------------------------------------------------------------------------------------------
ASSETS
Cash and due from banks $ 48,152 $ 65,413 $ 42,664
Federal funds sold and securities purchased under resale agreements 170,696 164,641 97,099
Interest-bearing deposits with banks 74 182 288
Available-for-Sale securities, at fair value 168,365 193,105 210,825
Loans, net of unearned income 1,655,543 1,558,020 1,307,796
Less: Allowance for possible loan losses 11,067 10,433 9,359
- ---------------------------------------------------------------------------------------------------------------------------------
Net loans 1,644,476 1,547,587 1,298,437
Premises and equipment, net 87,717 86,386 74,891
Accrued interest receivable and other assets 36,558 34,722 36,382
Goodwill and other intangible assets, net 10,592 10,770 11,305
- ---------------------------------------------------------------------------------------------------------------------------------
Total assets $ 2,166,630 $2,102,806 $1,771,891
=================================================================================================================================
Liabilities and Shareholders' Equity
Deposits:
Non-interest bearing $ 182,364 $ 198,319 $ 155,507
Interest bearing 1,734,392 1,628,257 1,378,154
- ---------------------------------------------------------------------------------------------------------------------------------
Total deposits 1,916,756 1,826,576 1,533,661
Short-term borrowings 14,727 43,639 68,721
Notes payable 38,875 27,575 14,050
Long-term debt - trust preferred securities 51,050 51,050 31,050
Accrued interest payable and other liabilities 39,350 51,690 29,574
- ---------------------------------------------------------------------------------------------------------------------------------
Total liabilities 2,060,758 2,000,530 1,677,056
- ---------------------------------------------------------------------------------------------------------------------------------
Shareholders' equity:
Preferred stock - - -
Common stock 8,859 8,857 8,838
Surplus 83,745 83,710 83,487
Common stock warrants 100 100 100
Treasury stock, at cost (3,863) (3,863) (1,306)
Retained earnings 17,137 13,835 6,235
Accumulated other comprehensive loss (106) (363) (2,519)
- ---------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 105,872 102,276 94,835
- ---------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 2,166,630 $ 2,102,806 $ 1,771,891
=================================================================================================================================
- 9 -
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED
MARCH 31,
2001 2000
- -----------------------------------------------------------------------------------------
INTEREST INCOME
Interest and fees on loans $ 36,863 $ 28,738
Interest bearing deposits with banks 2 16
Federal funds sold and securities purchased under resale agreements 1,122 247
Securities 3,795 3,308
- -----------------------------------------------------------------------------------------
Total interest income 41,782 32,309
- -----------------------------------------------------------------------------------------
INTEREST EXPENSE
Interest on deposits 22,172 16,599
Interest on short-term borrowings and notes payable 1,046 1,107
Interest on long-term debt - trust preferred securities 1,288 735
- -----------------------------------------------------------------------------------------
Total interest expense 24,506 18,441
- -----------------------------------------------------------------------------------------
NET INTEREST INCOME 17,276 13,868
Provision for possible loan losses 1,638 1,141
- -----------------------------------------------------------------------------------------
Net interest income after provision for possible loan losses 15,638 12,727
- -----------------------------------------------------------------------------------------
NON-INTEREST INCOME
Fees on mortgage loans sold 1,524 483
Service charges on deposit accounts 547 469
Trust fees 450 472
Gain on sale of premium finance receivables 942 1,241
Administrative services revenue 1,021 1,013
Net securities gains 286 3
Other 2,080 597
- -----------------------------------------------------------------------------------------
Total non-interest income 6,850 4,278
- -----------------------------------------------------------------------------------------
NON-INTEREST EXPENSE
Salaries and employee benefits 8,478 6,335
Occupancy, net 1,244 1,010
Equipment expense 1,484 1,149
Data processing 830 680
Advertising and marketing 307 249
Professional fees 531 295
Amortization of intangibles 178 178
Other 2,919 2,213
- -----------------------------------------------------------------------------------------
Total non-interest expense 15,971 12,109
- -----------------------------------------------------------------------------------------
Income before taxes and cumulative effect of accouting change 6,517 4,896
Income tax expense 2,359 1,774
- -----------------------------------------------------------------------------------------
Income before cumulative effect of accounting change 4,158 3,122
Cumulative effect of accounting change, net of tax 254 -
- -----------------------------------------------------------------------------------------
NET INCOME $ 3,904 $ 3,122
=========================================================================================
BASIC EARNINGS PER SHARE:
Income before cumulative effect of accounting change $ 0.48 $ 0.35
Cumulative effect of accounting change, net of tax 0.03 -
- -----------------------------------------------------------------------------------------
NET INCOME PER COMMON SHARE - BASIC $ 0.45 $ 0.35
=========================================================================================
DILUTED EARNINGS PER SHARE:
Income before cumulative effect of accounting change $ 0.47 $ 0.35
Cumulative effect of accounting change, net of tax 0.03 -
- -----------------------------------------------------------------------------------------
NET INCOME PER COMMON SHARE - DILUTED $ 0.44 $ 0.35
=========================================================================================
- -----------------------------------------------------------------------------------------
CASH DIVIDENDS DECLARED PER COMMON SHARE $ 0.07 $ 0.05
=========================================================================================
Weighted average common shares outstanding 8,615 8,798
Dilutive potential common shares 303 213
- -----------------------------------------------------------------------------------------
Average common shares and dilutive common shares 8,918 9,011
=========================================================================================
- 10 -
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-month periods ended March 31, 2001 and 2000:
FOR THE QUARTER ENDED For the Quarter Ended
MARCH 31, 2001 March 31, 2000
----------------------------------------- ---------------------------------------
(dollars in thousands) AVERAGE INTEREST RATE Average Interest Rate
- ---------------------- ---------------- ------------- ---------- --------------- ------------- ---------
Liquidity management assets (1) (2) $ 319,028 $ 4,933 6.27% $ 228,838 $ 3,548 6.24%
Loans, net of unearned income (2) 1,612,617 37,054 9.32 1,309,355 28,844 8.86
---------------- ------------- ---------- --------------- ------------- ---------
Total earning assets 1,931,645 41,987 8.82% 1,538,193 32,392 8.47%
---------------- ------------- ---------- --------------- ------------- ---------
Interest-bearing deposits 1,669,942 22,172 5.38% 1,333,012 16,598 5.01%
Short-term borrowings and notes payable 67,897 1,046 6.25 74,048 1,108 6.02
Long-term debt - trust preferred securities 51,050 1,288 10.09 31,050 735 9.47
---------------- ------------- ---------- --------------- ------------- ---------
Total interest-bearing liabilities 1,788,889 24,506 5.56% 1,438,110 18,441 5.16%
---------------- ------------- ---------- --------------- ------------- ---------
Tax-equivalent net interest income $ 17,481 $ 13,951
============= =============
Net interest margin 3.67% 3.65%
========== =========
Core net interest margin (3) 3.94% 3.84%
========== =========
- -------------------------------
<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%. The total adjustments for the quarters ended March 31, 2001 and 2000
were $205,000 and $83,000, respectively.
(3) The core net interest margin excludes the impact of the Company's
Cumulative Trust Preferred Securities.
</FN>
Net interest income, which is the difference between interest income and fees on
earning assets and interest expense on deposits and borrowings, is the major
source of earnings for the Company. Tax-equivalent net interest income for the
quarter ended March 31, 2001 totaled $17.5 million, an increase of $3.5 million,
or 25%, as compared to the $14.0 million recorded in the same quarter of 2000.
This increase mainly resulted from loan growth and management's ability to
control funding costs. Tax-equivalent interest and fees on loans for the quarter
ended March 31, 2001 totaled $37.1 million, an increase of $8.2 million, or 28%,
over the prior year quarterly total of $28.8 million. This growth was
predominantly due to a $303 million, or 23%, increase in average total loans.
Net interest margin represents net interest income as a percentage of the
average earning assets during the period. For the first quarter of 2001, the net
interest margin was 3.67%, an increase of two basis points when compared to the
margin of 3.65% in the prior year quarter. The core net interest margin, which
excludes the interest expense related to the Company's Trust Preferred
Securities, was 3.94% for the first quarter of 2001, and increased ten basis
points when compared to the prior year quarterly core margin of 3.84%.
The rate paid on interest-bearing deposits averaged 5.38% for the first quarter
of 2001 versus 5.01% for the same quarter of 2000, an increase of 37 basis
points. The rate in the first quarter of 2001 reflects a 39 basis
- 11 -
point decrease from the rate on interest-bearing deposits in the fourth quarter
of 2000. This increase in rate over the same period last year reflects continued
increases in market rates throughout most of 2000 and the decrease in rate over
the fourth quarter of 2000 reflects the decreases in market rates beginning in
the fourth quarter of 2000 and continuing through the first quarter of 2001. The
rate paid on short-term borrowings and notes payable increased to 6.25% in the
first quarter of 2001 as compared to 6.02% in the same quarter of 2000. The rate
on the trust preferred securities in the first quarter of 2001 was 10.09%,
compared to 9.47% in the same period of 2000. The increase was due to the
issuance of $20.0 million of 10.5% trust preferred securities in June 2000.
The yield on total earning assets for the first quarter of 2001 was 8.82% as
compared to 8.47% in 2000, an increase of 35 basis points. The yield on earnings
assets is heavily dependent on the yield on loans since average loans comprised
approximately 83% of average earning assets. During the first quarter 2001 the
yield on loans was 9.32%, a 46 basis point increase when compared to the prior
year quarterly yield of 8.86%. The average prime lending rate was 8.62% during
the first quarter of 2001 versus 8.69% for the first quarter of 2000. The
Company's loan portfolio does not re-price in a parallel fashion to increases in
the prime rate due to a portion of the portfolio being longer-term fixed rate
loans.
NON-INTEREST INCOME
For the first quarter of 2001, non-interest income totaled $6.9 million and
increased $2.6 million over the prior year quarter. Significant increases were
realized in fees from the origination and sale of mortgage loans into the
secondary market and income from certain covered call option transactions and
were partially offset by a decrease in gains from the sale of premium finance
receivables.
Fees on mortgage loans sold include income from originating and selling
residential real estate loans into the secondary market. For the quarter ended
March 31, 2001, these fees totaled $1.5 million, an increase of $1.0 million, or
216%, from the prior year quarter. This increase was due to significantly higher
levels of mortgage origination volumes, particularly refinancing activity,
caused by the recent decreases in mortgage interest rates. Management expects
continuation of higher refinancing activity to continue at least through the
next quarter.
The administrative services revenue contributed by Tricom added $1.0 million to
total non-interest income in the first quarter of 2001 and was relatively
consistent with the level of revenue in the prior year quarter. 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.
As a result of continued strong loan originations of premium finance
receivables, the Company sold approximately $51 million of receivables to an
unrelated third party in the first quarter of 2001 and recognized gains of
$942,000 related to this activity, compared to the sale of approximately $74
million of premium finance receivables in the first quarter of 2000 that
resulted in gains of $1.2 million. The Company has a philosophy of maintaining
its average loan-to-deposit ratio in the range of 85-90%. During the first
quarter of 2001, the ratio was approximately 87%. Accordingly, the Company sold
excess premium finance receivables volume to an unrelated third party financial
institution. Consistent with Wintrust's strategy to be asset-driven and the
desire to maintain our loan-to-deposit ratio in the aforementioned range, it is
probable that similar sales of premium finance receivables will occur in the
future.
- 12 -
Service charges on deposit accounts totaled $547,000 for the first quarter of
2001, an increase of $78,000, or 17%, when compared to the same quarter of 2000.
This increase was mainly due to a higher deposit base and a larger number of
accounts at the banking subsidiaries. The majority of deposit service charges
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 $450,000 for the first quarter of 2001, a $22,000, or 5%
decrease over the first quarter of 2000. This decrease is reflective of the
decrease in value of assets under management as a result of significant
decreases in the overall stock market. Wintrust is committed to growing the
trust and investment business in order to better service its customers and
create a more diversified revenue stream.
Other non-interest income for the first quarter of 2001 totaled $2.1 million and
increased $1.5 million over the prior year quarterly total of $597,000. This
increase was due primarily to a $1.3 million increase in premium income from
certain covered call option transactions. The Company routinely enters into
these transactions with the goal of enhancing its overall return on its
investment portfolio. The Company generally writes the call options against
certain U.S. Treasury and agency issues held in its portfolio for liquidity and
other purposes. Also contributing to the increase in other non-interest income
was a $150,0000 increase in rental income from equipment leased through the MMF
Leasing division of Lake Forest Bank.
NON-INTEREST EXPENSE
Non-interest expense for the first quarter of 2001 totaled $16.0 million and
increased $3.9 million, or 32%, from the first quarter 2000 total of $12.1
million. The continued growth and expansion of the de novo banks with additional
branches, the opening of the Company's seventh de novo bank (Northbrook Bank &
Trust) in November 2000 and the growth in the premium finance business are the
major causes for this increase. Since March 31, 2000, total deposits and total
loans have increased 25% and 27%, respectively, requiring higher levels of
staffing and other costs to both attract and service the larger customer base.
Salaries and employee benefits totaled $8.5 million for the first quarter of
2001, an increase of $2.1 million, or 34%, as compared to the prior year's first
quarter total of $6.3 million. This increase was primarily due to the opening of
Northbrook Bank & Trust and three additional branch offices since the first
quarter of 2000 and increased staffing at the Company's premium finance
subsidiary.
Other categories of non-interest expense, such as occupancy costs, equipment
expense and data processing, also increased over the prior year first quarter
due to the general growth of the Company. Amortization expense related to
goodwill and other intangibles totaled $178,000 for the first quarters of 2001
and 2000. Other non-interest expense, which includes loan expenses,
correspondent bank service charges, postage, insurance, stationery and supplies,
telephone, directors fees, and other sundry expenses, also increased when
compared to the prior year quarter due mainly to the factors mentioned earlier.
- 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 ended March 31, 2001 and 2000 is shown as
follows (dollars in thousands):
THREE MONTHS ENDED MARCH 31,
2001 2000
-------------------- --------------------
Balance at beginning of period $ 10,433 $ 8,783
Provision for possible loan losses 1,638 1,141
Charge-offs
Core banking loans 108 128
Indirect automobile loans 286 311
Tricom finance receivables -- 2
Premium finance receivables 712 201
-------------------- --------------------
Total charge-offs 1,106 642
-------------------- --------------------
Recoveries
Core banking loans 2 8
Indirect automobile loans 54 43
Tricom finance receivables -- --
Premium finance receivables 46 26
-------------------- --------------------
Total recoveries 102 77
-------------------- --------------------
Net charge-offs (1,004) (565)
-------------------- --------------------
Balance at March 31 $ 11,067 $ 9,359
-------------------- --------------------
Loans at March 31 $1,655,543 $1,307,796
-------------------- --------------------
Allowance as a percentage of loans 0.67% 0.72%
-------------------- --------------------
Annualized net charge-offs as a percentage of average:
Core banking loans 0.04% 0.06%
Indirect automobile loans 0.47% 0.43%
Tricom finance receivables -- 0.04%
Premium finance receivables 0.77% 0.29%
-------------------- --------------------
Total loans 0.25% 0.17%
-------------------- --------------------
Annualized provision for
possible loan losses 61.29% 49.52%
-------------------- --------------------
The provision for possible loan losses totaled $1.6 million for the first
quarter of 2001, an increase of $497,000 from a year earlier. The higher
provision was due to a $348 million, or 27%, increase in loan balances compared
to March 31, 2000 and a higher level of net charge-offs, primarily in the
premium finance portfolio. For the quarter ended March 31, 2001, net charge-offs
totaled $1.0 million and increased from the $565,000 of
- 14 -
net charge-offs recorded in the same period of 2000. On a ratio basis, net
charge-offs as a percentage of average loans increased slightly to 0.25% in the
first quarter of 2001 from 0.17% in the same period in 2000 and from 0.24% for
the full year 2000. This increase is the result of a higher level of
delinquencies in the premium finance receivables portfolio. Management is
actively monitoring and pursuing methods to reduce the level of delinquencies in
the indirect auto and premium finance portfolios. 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).
MARCH 31, December 31, March 31,
2001 2000 2000
---- ---- ----
Past Due greater than 90 days
and still accruing:
Core banking loans $ 1,778 $ 651 $ 362
Indirect automobile loans 350 397 466
Tricom finance receivables -- -- --
Premium finance receivables 4,881 4,306 2,273
--------------------- ---------------------- ---------------------
Total 7,009 5,354 3,101
--------------------- ---------------------- ---------------------
Non-accrual loans:
Core banking loans 720 770 1,582
Indirect automobile loans 234 221 266
Tricom finance receivables 112 -- --
Premium finance receivables 5,872 3,338 2,334
--------------------- ---------------------- ---------------------
Total non-accrual loans 6,938 4,329 4,182
--------------------- ---------------------- ---------------------
Total non-performing loans:
Core banking loans 2,498 1,421 1,944
Indirect automobile loans 584 618 732
Tricom finance receivables 112 -- --
Premium finance receivables 10,753 7,644 4,607
--------------------- ---------------------- ---------------------
Total non-performing loans 13,947 9,683 7,283
--------------------- ---------------------- ---------------------
Other real estate owned -- -- --
--------------------- ---------------------- ---------------------
Total non-performing assets $ 13,947 $ 9,683 $ 7,283
===================== ====================== =====================
- 15 -
MARCH 31, December 31, March 31,
2001 2000 2000
---- ---- ----
Total non-performing loans by category as
a percent of its own respective category:
Core banking loans 0.22% 0.14% 0.24%
Indirect automobile loans 0.31% 0.30% 0.29%
Tricom finance receivables 0.60% -- --
Premium finance receivables 3.22% 2.44% 2.04%
--------------------- ---------------------- ---------------------
Total non-performing loans 0.84% 0.62% 0.56%
--------------------- ---------------------- ---------------------
Total non-performing assets as a
percentage of total assets 0.64% 0.46% 0.41%
Allowance for possible loan losses as
a percentage of non-performing loans 79.35% 107.75% 128.50%
Non-performing Core Banking Loans
Total non-performing loans for the Company's core banking business were $2.5
million, or 0.22%, of the Company's core banking loans as of March 31, 2001,
compared to 0.14% and 0.24% as of December 31, 2000 and March 31, 2000,
respectively. 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 March 31, 2001 and 2000, and the amount of net charge-offs for the
quarters then ended.
MARCH 31, March 31,
2001 2000
-------------------- ---------------------
Non-performing premium finance receivables $10,753,000 $4,607,000
- as a percent of premium finance receivables 3.22% 2.04%
Net charge-offs of premium finance receivables $ 666,000 $ 175,000
- annualized as a percent of premium finance receivables 0.77% 0.29%
- 16 -
The increase in non-performing premium finance receivables over the course of
recent quarters is primarily a result of a proportionately large number of
delinquent accounts associated with new business derived from a marketing
arrangement entered into in July, 1999. Management identified the issue in the
second half of 2000 and began to take corrective measures to eliminate a
significant number of these new business relationships that were generating
disproportionately high delinquencies. Specifically, the Company has eliminated
more than 1,300 relationships with insurance agents that were referring new
business to our premium finance subsidiary. The volume associated with this
business includes a large number of small balance accounts which place an
increased burden on the collection efforts of the premium finance subsidiary.
The impact of this prior business is still reflected in the non-performing asset
totals as these accounts customarily take 60-150 days to convert the collateral
held by insurance company into cash collections. Because of the longer-term
nature of converting the collateral to cash, we believe our corrective actions
and increased resources devoted to collections should result in significant
improvement during the second quarter of 2001 and that the non-performing totals
have reached their peak in the first quarter. As such, the delinquency levels
should show improvement over the next two quarters.
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 $584,000 at March 31, 2001,
decreasing from $618,000 at December 31, 2000 and $732,000 at March 31, 2000.
The ratio of these non-performing loans to total indirect automobile loans has
increased slightly to 0.31% of total indirect automobile loans at March 31, 2001
from 0.30% at December 31, 1999 and 0.29% at March 31, 2000. The increase in the
ratios despite a decrease in the amount of non-performing loans is reflective of
the runoff in this portfolio. As noted in the Allowance for Possible Loan Losses
table, net charge-offs as a percent of total indirect automobile loans increased
slightly from 0.43% in the first quarter of 2000 to 0.47% in the first quarter
of 2001. These ratios continue to be below standard industry ratios for this
type of loan category.
- 17 -
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 provision for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995, and is including this statement for purposes of invoking these safe
harbor provisions. Actual results could differ materially from those addressed
in the forward-looking statements due to factors such as changes in economic
conditions, competition, or other factors, that may influence the anticipated
growth rate of loans and deposits, the quality of the loan portfolio and loan
and deposit pricing, unanticipated changes in interest rates that negatively
impact net interest income, future events that may cause unforeseen loan or
lease losses, slower than anticipated development and growth of Tricom and the
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, 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.
- 18 -