May, 2002
Dear Shareholders,
This letter provides a brief update on our financial performance
through the first quarter of 2002 and other news of Wintrust Financial
Corporation. Our April 19, 2002 news release of our earnings for the quarter
ended March 31, 2002 is also attached for your information.
HIGHLIGHTS FOR FIRST QUARTER OF 2002
We again achieved record earnings for this quarter while deposits and
assets also increased to record levels. Here is a summary of our financial
results and accomplishments for the three months ending March 31, 2002:
o Net income of $6.4 million for the quarter ended March 31, 2002
increased 63% over the first quarter of 2001;
o On a per share basis, net income totaled $0.40 per diluted common
share for the first quarter of 2002, a 38% increase as compared to
year ago;
o Return on average equity increased to 17.12% from 15.39% for the prior
year quarter;
o Total assets rose to $2.96 billion as of March 31, 2002, an increase
of $789 million, or 36%, compared to a year ago;
o Total deposits were $2.42 billion as of March 31, 2002, an increase of
$501 million, or 26%, compared to a year ago;
o Total loans grew to $2.17 billion as of March 31, 2002, an increase of
$542 million, or 33%, compared to a year ago;
o Our net overhead ratio, a measure of operating efficiency, improved to
1.43% in the first quarter of 2002 from 1.75% in the prior year
quarter;
o Our asset quality remains strong and very manageable, as the level of
non-performing assets declined from the year ago level and from the
prior quarter level;
o On February 20, 2002, we completed the acquisition of Wayne Hummer
Investments, LLC and Wayne Hummer Management Company. These
acquisitions provide Wintrust with much broader and deeper products
for providing wealth management services to our customers;
o In January 2002, Hinsdale Bank & Trust opened a new branch in
Riverside, Illinois under the name Riverside Bank. This gives Hinsdale
Bank & Trust a total of five banking offices in the west suburban
Chicago area;
o Construction is under way on four additional facilities--Highland Park
Bank & Trust (temporary facility), Wauconda Community Bank (permanent
facility), McHenry Bank & Trust (permanent facility) and Libertyville
Bank & Trust's South Libertyville facility; and
o Land has been purchased and architectural plans are being developed
for North Shore Community Bank & Trust-Skokie (new drive-through),
Deerfield Bank & Trust (branch of Northbrook Bank & Trust) and
Highland Park Bank & Trust (permanent facility).
2002 RECOVERY RELATED TO 2000 FRAUD
In the first quarter of 2002, as a result of continuing efforts to
obtain recovery of a loss recorded in 2000, we were able to secure proceeds of
$1.25 million (in pre-tax dollars) as a partial settlement in the matter. The
recovery relates to a loss that we recorded in the third quarter of 2000 where
we recognized a one-time charge of $4.5 million to our pre-tax earnings. The
charge was attributable to the discovery of a series of fraudulent loan
transactions against the Company's premium finance subsidiary perpetrated by and
isolated to one independent insurance agency. The recovery is included in other
non-interest income in our Consolidated Statements of Income. Excluding this
settlement income of $1.25 million, or $754,000 after-tax, net income in the
first quarter of 2002 would have been $5.6 million, or $0.35 per diluted common
share. We continue our efforts to seek further recovery.
INCOME AND EARNINGS
The stability of the interest rate environment allowed our net interest
margin to improve 0.19% over the prior quarter level. The apparent end to the
reduction of interest rates by the Federal Reserve Bank has allowed our maturing
term certificate of deposits to reprice at current interest rates, whereas the
majority of our assets had already repriced to lower levels in prior quarters.
The stability of the interest rate environment along with growth in our total
earning assets helped to increase our net interest income by 28% as compared to
the prior year.
Non-interest income showed a sharp increase in the first quarter and
totaled $12.8 million, an increase of 86% over the prior year. The growth in
this category was mainly a result of new fee income from our Wayne Hummer
Companies, the proceeds from a $1.25 million partial settlement related to the
premium finance defalcation recorded in 2000, continued strength in fees
received from mortgage loan activity 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 $22.7 million for the first quarter of
2002 representing an increase of 42% over a year ago. These increases are
attributable to the general growth of the Company's balance sheet, the
acquisition of Wayne Hummer Investments LLC and Wayne Hummer Management Company,
and costs associated with supporting our additional fee revenue.
YEAR-TO-DATE PERFORMANCE VERSUS GOAL
At Wintrust, we set aggressive goals and evaluate our performance
versus those goals. Reaching these financial goals 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, Wintrust Asset Management, First
Insurance Funding and Tricom--mature, and the synergies with the Wayne Hummer
companies are realized. The following performance statistics indicate that we
are making overall improvement in these areas.
Quarter Ended
------------------------------------------------------------
MAR. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
Goal 2002 2001 2001 2001 2001
---- ---- ---- ---- ---- ----
Core Net Interest Margin (1) 4 - 4.5% 3.68% 3.50% 3.69% 3.84% 3.94%
Net Overhead Ratio 1.5 - 2% 1.43% 1.50% 1.52% 1.61% 1.75%
Return on Average Equity 20 - 25% 17.12% 14.74% 14.87% 16.21% 15.39%
Return on Average Assets 1.5% 0.92 0.80% 0.83% 0.79% 0.75%
Earnings per diluted
Common share $0.40 $0.33 $0.33 $0.32 $0.29
Non-Performing Assets
As a percent of total assets 0.39% 0.48% 0.54% 0.55% 0.64%
- ----------------------------
<FN>
(1) By definition, our Core Net Interest Margin excludes the impact of interest
expense associated with the Company's Trust Preferred Securities offerings.
</FN>
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 $3.0 million. Of the total
$3.0 million amount, $2.0 million relates to residential real estate loans and
home equity loans that are primarily secured by homes with advance rates that
allow us to be well secured. The remaining $1.0 million relates to a variety of
smaller commercial and consumer loans. We are pleased with the low levels of
non-performing core loans but recognize that continued diligence in underwriting
and monitoring our loan portfolio is critical to our growth and profitability
objectives. In other words, we will never become complacent in our loan
administration.
Non-performing premium finance receivables have decreased to $7.9
million, or 1.90% of that portfolio. The non-performing assets in the indirect
auto portfolio remained fairly constant at approximately $515,000, or 0.28% of
that portfolio. The Tricom finance receivable portfolio had only $104,000 of
non-performing assets, or 0.59% of that portfolio. Our efforts to reduce the
delinquent loans in these categories have paid off. We are pleased with the
overall reduction in the non-performing assets in the niche portfolios and will
strive to keep the non-performing assets in these categories at relatively low
levels.
WAYNE HUMMER COMPANIES UPDATE
In February we announced the completion of its previously announced
pending acquisition of 100% of the ownership interest of Wayne Hummer
Investments LLC, Wayne Hummer Management Company and Focused Investments LLC
(collectively the "Wayne Hummer Companies"). The Wayne Hummer Companies are
based in Chicago, Illinois and have seventy-one years' history of providing
financial services. The Wayne Hummer brand name is well respected in the Chicago
metropolitan area and its client base is nationwide. In fact, Wayne Hummer
Investments is the oldest brokerage firm headquartered in Chicago that has
continuously operated using the same brand name. Accordingly, we intend to use
the Wayne Hummer name in all of our brokerage, trust and asset management
operations.
This transaction is a win-win situation for both our companies and,
more importantly, for our customers. In both firms, the clients' interests
always come first. As we have worked together since announcing the transaction,
we have become even more convinced about the positive impact this merger will
have on the combined organization.
As we discussed in prior correspondence, we are working diligently to
convert funds currently invested in Wayne Hummer's money market mutual funds
into bank deposits. This will provide the Company with additional low cost funds
that can be invested in earning assets at our Banks and will give the investors
at the Wayne Hummer Companies access to an FDIC insured account with competitive
rates. We are also diligently working on integrating the Wayne Hummer brokerage
operation into our Banks' delivery systems. We are moving cautiously on both
fronts in order to ensure that the service associated with these products is up
to the high standards that both firms have historically set and delivered upon.
ANNUAL MEETING
The 2002 Annual Meeting of Shareholders will be held on Thursday, May
23, 2002 at 10:00 a.m. at the Hyatt Deerfield Hotel at 1750 Lake Cook Road in
Deerfield, Illinois. You should have already received your 2001 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.
Yours truly,
/s/ John S. Lillard /s/ Edward J. Wehmer /s/ David A. Dykstra
- ------------------- -------------------- --------------------
John S. Lillard Edward J. Wehmer David A. Dykstra
Chairman President & CEO Sr. EVP & COO
- --------------------------------------------------------------------------------
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, loan and
deposit pricing, unanticipated changes in interest rates that negatively impact
net interest income, future events that may cause unforeseen loan or lease
losses, slower than anticipated development and growth of Tricom and the trust
and investment business, unanticipated changes in the temporary staffing
industry, the ability to adapt successfully to technological changes to compete
effectively in the marketplace, failure to obtain the necessary approvals to
consummate the purchase of the Wayne Hummer Companies, competition and the
related pricing of brokerage and asset management products, unforeseen
difficulties in integrating the acquisition of the Wayne Hummer Companies, the
ability to pursue acquisition and expansion strategies and the ability to
attract and retain experienced senior management. Therefore, there can be no
assurances that future actual results will correspond to these forward-looking
statements.
- --------------------------------------------------------------------------------
Wintrust Financial Corporation
727 North Bank Lane, Lake Forest, Illinois 60045
NEWS RELEASE
FOR IMMEDIATE RELEASE April 19, 2002
- ---------------------
FOR MORE INFORMATION CONTACT:
Edward J. Wehmer, President & Chief Executive Officer
David A. Dykstra, Senior Executive Vice President,
Chief Operating Officer & Chief Financial Officer
(847) 615-4096
Website address: www.wintrust.com
WINTRUST FINANCIAL CORPORATION REPORTS
--------------------------------------
RECORD FIRST QUARTER EARNINGS;
------------------------------
FIRST QUARTER NET EARNINGS UP 63%
---------------------------------
LAKE FOREST, ILLINOIS -- Wintrust Financial Corporation ("Wintrust")
(Nasdaq: WTFC) announced record quarterly net income of $6.4 million for the
quarter ended March 31, 2002, an increase of $2.5 million, or 63%, over the $3.9
million recorded in the first quarter of 2001. On a per share basis, net income
for the first quarter of 2002 totaled $0.40 per diluted common share, an $0.11
per share, or 38%, increase as compared to the 2001 first quarter total of $0.29
per diluted common share. The lower growth rate in the earnings per share as
compared to net income was primarily due to the issuance of 1,488,750 additional
shares of common stock in June 2001 and 762,742 shares issued in the February
2002 acquisition of the Wayne Hummer Companies. The return on average equity for
the first quarter of 2002 increased to 17.12% from 15.39% for the prior year
quarter.
The results for the first quarter of 2002 include pre-tax income of
$1.25 million, or $754,000 after-tax, for a partial settlement related to the
premium finance defalcation recorded in 2000. Excluding this settlement income,
net income in the first quarter was $5.6 million, or $0.35 per diluted 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 $0.02 per diluted share.
"We continue to be pleased with the quality growth in earnings and new
assets in the first quarter, the credit quality of our loan portfolio and
continued improvement in our already low levels of non-performing assets,"
commented Edward J. Wehmer, President and Chief Executive Officer. "We are
excited about the full-service financial provider capabilities that the Wayne
Hummer Companies make available and are working
diligently to continue our unique growth story while improving our earnings
level. We remain comfortable that we will be able to meet or exceed the
analysts' consensus earnings estimate for 2002 of $1.47 per share."
On January 24, 2002, Wintrust's Board of Directors declared a 3-for-2
stock split of its common stock, effected in the form of a 50% stock dividend,
paid on March 14, 2002 to shareholders of record as of March 4, 2002. All
historical share data and per share amounts have been restated to reflect this
split.
On February 20, 2002, Wintrust completed its acquisition of Wayne
Hummer Investments, LLC (including its wholly owned subsidiary, Focused
Investments LLC) and Wayne Hummer Management Company (collectively, the "Wayne
Hummer Companies"). Wintrust paid $28 million for the Wayne Hummer Companies,
consisting of $8 million in cash, 762,742 shares of Wintrust's common stock
(valued at $15 million) and $5 million of deferred cash payments. Accounted for
as a purchase, the Wayne Hummer Companies results of operations are included
only since the effective date of acquisition in Wintrust's first quarter 2002
results.
Wintrust's key operating measures continue to show impressive growth
rates in 2002 as compared to the prior year as evidenced by the table below:
3/31/02
over
Quarter Ended Quarter 3/31/01
Ended Percent
Dollars in thousands, except per share data 3/31/02 3/31/01 Improvement
------------------------------------------- -------------- -------------- -----------------
Net income $ 6,362 $ 3,904 63.0%
Net income per common share - Diluted $ 0.40 $ 0.29 37.9%
Net revenues $ 34,920 $ 24,126 44.7%
Net interest income $ 22,168 $ 17,276 28.3%
Net interest margin 3.48% 3.67% (5.2)%
Core net interest margin(1) 3.68% 3.94% (6.6)%
Net overhead ratio 1.43% 1.75% 18.3%
Return on average assets 0.92% 0.75% 22.7%
Return on average equity 17.12% 15.39% 11.2%
At end of period
Total assets $2,955,153 $2,166,630 36.4%
Total loans, net of unearned income $2,167,550 $1,625,979 33.3%
Total deposits $2,417,315 $1,916,756 26.1%
Book value per common share $ 10.41 $ 8.19 27.1%
Market price per common share $ 22.97 $ 12.42 84.9%
<FN>
(1) Core net interest margin excludes interest expense associated with
Wintrust's Long-term Debt - Trust Preferred Securities.
</FN>
- 2 -
Total assets rose to $2.96 billion at March 31, 2002, an increase of
$789 million, or 36%, compared to $2.17 billion a year ago, and an increase of
$250 million, or 9%, since December 31, 2001. Total deposits as of March 31,
2002 were $2.42 billion, an increase of $501 million, or 26%, as compared to
$1.92 billion at March 31, 2001, and an increase of $103 million, or 4%, since
year-end 2001. Total loans grew to $2.17 billion as of March 31, 2002, a $542
million, or 33%, increase over the $1.63 billion balance as of a year ago, and a
$149 million, or 30% on an annualized basis, increase since December 31, 2001.
For the first quarter of 2002, net interest income totaled $22.2
million, increasing $4.9 million, or 28%, compared to the first quarter of 2001
and $2.6 million, or 13%, over the fourth quarter of 2001. Average earning
assets grew $674 million over the first quarter of 2001, a 35% increase. Strong
loan growth in the first quarter of 2002 continued to fuel earning asset growth
as average loans increased over the fourth quarter of 2001 by $158 million, or
33% on an annualized basis. The net interest margin for the first quarter of
2002 was 3.48%. While down 19 basis points from the first quarter of 2001, the
net interest margin improved 19 basis points from the fourth quarter of 2001.
Non-interest income totaled $12.8 million for the first quarter of
2002, increasing $5.9 million, or 86%, over the first quarter of 2001 and $5.3
million, or 71% over the fourth quarter of 2001. The Wayne Hummer Companies
fees, proceeds from a $1.25 million partial settlement related to the premium
finance defalcation recorded in 2000, and income from covered call option
transactions all contributed to the increases. Non-interest expense totaled
$22.7 million for the first quarter of 2002, increasing $6.7 million, or 42%,
over the first quarter of 2001 and $5.5 million, or 32% over the fourth quarter
of 2001. The Wayne Hummer Companies, increases in salaries and benefits as a
result of continued growth and expansion of the de novo banks and normal annual
increases in salaries and the costs of employee benefits contributed to the
increase in non-interest expense. The net overhead ratio declined to 1.43% from
1.75% in the prior year quarter.
Non-performing assets totaled $11.6 million, or 0.39% of total assets,
at March 31, 2002, reflecting a decrease from both the December 31, 2001 level
of $13.1 million, or 0.48% of total assets and the March 31, 2001 level of $13.9
million, or 0.64% of total assets. The level of non-performing assets in the
Company's core banking loans remains low and very manageable, consisting of $2.0
million in residential real estate and home equity loans and $1.0 million of
commercial, commercial real estate and consumer loans. Non-performing indirect
auto loans remained very low, decreasing to $515,000, or 0.28% of total indirect
loans as of March 31, 2002. The non-performing asset level for the premium
finance loan portfolio was $7.9 million, or 1.90% of
- 3 -
outstanding premium finance loans, at March 31, 2002, reflecting a decrease from
$8.2 million, or 2.36% of outstanding premium finance loans, at December 31,
2001 and a decrease from $10.8 million, or 3.22% of outstanding premium finance
loans, at March 31, 2001. The elimination of relationships with insurance
agencies that were referring business to our premium finance subsidiary that had
relatively small balances and higher than normal delinquency rates has helped
reduce the level of non-performing assets within this portfolio.
Wintrust is a financial holding company whose common stock is traded on
the Nasdaq Stock Market(R). Its seven suburban Chicago community bank
subsidiaries, each of which was founded as a de novo bank since December 1991,
are located in high income retail markets -- Lake Forest Bank & Trust Company,
Hinsdale Bank & Trust Company, North Shore Community Bank & Trust Company in
Wilmette, Libertyville Bank & Trust Company, Barrington Bank & Trust Company,
Crystal Lake Bank & Trust Company and Northbrook Bank & Trust Company. The banks
also operate facilities in Lake Bluff, Highwood, Glencoe, Winnetka, Clarendon
Hills, Western Springs, Skokie, Wauconda, McHenry and Riverside, Illinois.
Additionally, the Company operates various non-bank subsidiaries. First
Insurance Funding Corporation, one of the largest commercial insurance premium
finance companies operating in the United States, serves commercial loan
customers throughout the country. 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. Wayne
Hummer Investments, LLC is a broker-dealer providing a full range of private
client and brokerage services to clients located primarily in the Midwest.
Focused Investments LLC is a broker-dealer that provides a full range of
investment solutions to clients through a network of community-based financial
institutions throughout the Midwest. Wayne Hummer Management Company provides
money management services and advisory services to individual accounts as well
as the Wayne Hummer Companies' four proprietary mutual funds. Wintrust
Information Technology Services Company provides information technology support,
item capture and statement preparation services to the Wintrust subsidiaries.
Currently, Wintrust operates a total of 30 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.
# # #
- 4 -
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
-------------------------------------------------------------------------------------------------------------------------
THREE MONTHS
ENDED MARCH 31,
------------------------------------------
2002 2001
-------------------------------------------------------------------------------------------------------------------------
SELECTED FINANCIAL CONDITION DATA (AT END OF PERIOD):
Total assets $ 2,955,153 $ 2,166,630
Total deposits 2,417,315 1,916,756
Total loans, net of unearned income 2,167,550 1,625,979
Long-term debt - trust preferred securities 51,050 51,050
Total shareholders' equity 163,521 105,872
-------------------------------------------------------------------------------------------------------------------------
SELECTED STATEMENTS OF INCOME DATA:
Net interest income $ 22,168 $ 17,276
Net revenues 34,920 24,126
Income before taxes and cumulative effect of accounting change 9,893 6,517
Net income before cumulative effect of accounting change 6,362 4,158
Net income 6,362 3,904
Net income per common share - Basic 0.42 0.30
Net income per common share - Diluted 0.40 0.29
-------------------------------------------------------------------------------------------------------------------------
SELECTED FINANCIAL RATIOS AND OTHER DATA:
Performance Ratios:
Net interest margin 3.48% 3.67%
Core net interest margin (1) 3.68% 3.94%
Non-interest income to average assets 1.84% 1.32%
Non-interest expense to average assets 3.28% 3.07%
Net overhead ratio (2) 1.43% 1.75%
Efficiency ratio (3) 64.17% 66.42%
Return on average assets 0.92% 0.75%
Return on average equity 17.12% 15.39%
Average total assets $ 2,805,594 $ 2,110,058
Average shareholders' equity $ 150,743 $ 102,851
Average loan-to-average deposit ratio 88.5% 86.3%
Non-performing assets to total assets 0.39% 0.64%
Common Share Data at end of period:
Market price per common share $ 22.97 $ 12.42
Book value per common share $ 10.41 $ 8.19
Common shares outstanding 15,711,641 12,925,464
Other Data at end of period:
Number of:
Bank subsidiaries 7 7
Non-bank subsidiaries 7 3
Banking offices 30 29
-------------------------------------------------------------------------------------------------------------------------
<FN>
(1) The core net interest margin excludes the interest expense associated
with Wintrust's Long-term Debt - Trust Preferred Securities.
(2) The net overhead ratio is calculated by netting total non-interest
expense and total non-interest income, annualizing this amount, and
dividing by that period's total average assets.
(3) The efficiency ratio is calculated by dividing total non-interest
expense by tax-equivalent net revenues (less securities gains or
losses).
</FN>
- 5 -
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION (UNAUDITED)
(IN THOUSANDS)
MARCH 31, December 31, March 31,
2002 2001 2001
-------------------------------------------------------------------------------------------------------------------------
ASSETS
Cash and due from banks $ 55,793 $ 71,575 $ 48,152
Federal funds sold and securities purchased under resale agreements 97,287 51,955 170,696
Interest-bearing deposits with banks 1,028 692 74
Available-for-sale securities, at fair value 365,540 385,350 168,365
Trading account securities 5,298 -- --
Brokerage customer receivables 64,765 -- --
Mortgage loans held-for-sale 31,723 42,904 29,564
Loans, net of unearned income 2,167,550 2,018,479 1,625,979
Less: Allowance for loan losses 14,697 13,686 11,067
-------------------------------------------------------------------------------------------------------------------------
Net loans 2,152,853 2,004,793 1,614,912
Premises and equipment, net 104,780 99,132 87,717
Accrued interest receivable and other assets 50,059 38,936 36,558
Goodwill and other intangible assets, net 26,027 10,085 10,592
-------------------------------------------------------------------------------------------------------------------------
Total assets $ 2,955,153 $ 2,705,422 $ 2,166,630
=========================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 242,966 $ 254,269 $ 182,364
Interest bearing 2,174,349 2,060,367 1,734,392
-------------------------------------------------------------------------------------------------------------------------
Total deposits 2,417,315 2,314,636 1,916,756
Notes payable
66,125 46,575 38,875
Federal Home Loan Bank advances --
90,000 90,000
Other borrowings
113,624 28,074 14,727
Long-term debt - trust preferred securities 51,050
51,050 51,050
Accrued interest payable and other liabilities 53,518 33,809 39,350
-------------------------------------------------------------------------------------------------------------------------
Total liabilities 2,791,632 2,564,144 2,060,758
-------------------------------------------------------------------------------------------------------------------------
Shareholders' equity:
Preferred stock -- -- --
Common stock 15,712 14,532 13,289
Surplus 116,201 97,956 79,315
Common stock warrants 98 99 100
Treasury stock, at cost -- --
(3,863)
Retained earnings 36,482 30,995 17,137
Accumulated other comprehensive loss (4,972) (2,304) (106)
-------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 163,521 141,278 105,872
-------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 2,955,153 $ 2,705,422 $ 2,166,630
=========================================================================================================================
- 6 -
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
-------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA) 2002 2001
- --------------------------------------------------------------------------------------------------------------------------
INTEREST INCOME
Interest and fees on loans $ 36,661 $ 36,863
Interest bearing deposits with banks 3 2
Federal funds sold and securities purchased under resale agreements 293 1,122
Securities 4,500 3,795
Trading account securities 24 --
Brokerage customer receivables 490 --
- --------------------------------------------------------------------------------------------------------------------------
Total interest income 41,971 41,782
- --------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Interest on deposits 16,675 22,172
Interest on Federal Home Loan Bank advances 897 --
Interest on notes payable and other borrowings 943 1,046
Interest on long-term debt - trust preferred securities 1,288
1,288
- --------------------------------------------------------------------------------------------------------------------------
Total interest expense 19,803 24,506
- --------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 22,168 17,276
Provision for loan losses 2,348 1,638
- --------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 19,820 15,638
- --------------------------------------------------------------------------------------------------------------------------
NON-INTEREST INCOME
Trust, asset management and brokerage fees 4,570 450
Fees on mortgage loans sold 2,017 1,524
Service charges on deposit accounts 738 547
Gain on sale of premium finance receivables 766
942
Administrative services revenue 822
1,021
Net securities gains (losses) (215)
286
Other 4,054 2,080
- --------------------------------------------------------------------------------------------------------------------------
Total non-interest income 12,752 6,850
- --------------------------------------------------------------------------------------------------------------------------
NON-INTEREST EXPENSE
Salaries and employee benefits 13,362 8,478
Occupancy, net 1,544 1,244
Equipment expense 1,730 1,484
Data processing 1,014 830
Advertising and marketing 524 307
Professional fees 611 531
Amortization of intangibles 17 178
Other 3,877 2,919
- --------------------------------------------------------------------------------------------------------------------------
Total non-interest expense 22,679 15,971
- --------------------------------------------------------------------------------------------------------------------------
Income before taxes and cumulative effect of accounting change 9,893 6,517
Income tax expense 3,531 2,359
- --------------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of accounting change 6,362 4,158
Cumulative effect of change in accounting for derivatives, net of tax --
254
- --------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 6,362 $ 3,904
- --------------------------------------------------------------------------------------------------------------------------
BASIC EARNINGS PER SHARE:
Income before cumulative effect of accounting change $ 0.42 $ 0.32
Cumulative effect of accounting change, net of tax --
0.02
- --------------------------------------------------------------------------------------------------------------------------
NET INCOME PER COMMON SHARE - BASIC $ 0.42 $ 0.30
- --------------------------------------------------------------------------------------------------------------------------
DILUTED EARNINGS PER SHARE:
Income before cumulative effect of accounting change $ 0.40 $ 0.31
Cumulative effect of accounting change, net of tax --
0.02
- --------------------------------------------------------------------------------------------------------------------------
NET INCOME PER COMMON SHARE - DILUTED $ 0.40 $ 0.29
- --------------------------------------------------------------------------------------------------------------------------
CASH DIVIDENDS DECLARED PER COMMON SHARE $ 0.060 $ 0.047
- --------------------------------------------------------------------------------------------------------------------------
Weighted average common shares outstanding 15,078 12,923
Dilutive potential common shares 913 454
- --------------------------------------------------------------------------------------------------------------------------
Average common shares and dilutive common shares 15,991 13,377
- --------------------------------------------------------------------------------------------------------------------------
- 7 -
NET INTEREST INCOME
The following table presents a summary of Wintrust's net interest income and
related net interest margins, calculated on a fully tax-equivalent basis, for
the three-month periods ended March 31, 2002 and 2001:
FOR THE QUARTER ENDED For the Quarter Ended
MARCH 31, 2002 March 31, 2001
------------- ---------- ------- --- ------------ ---------- ----------
(dollars in thousands) AVERAGE INTEREST RATE Average Interest Rate
- ---------------------- ------------- ---------- ------- --- ------------ ---------- ----------
Liquidity management assets (1) (2) $458,922 $4,816 4.26% $319,028 $4,933 6.27%
Other earning assets (3) 44,920 514 4.64 -- -- --
Loans, net of unearned income (2) (4) 2,101,802 36,849 7.11 1,612,617 37,054 9.32
------------- ---------- ------- --- ------------ ---------- ----------
Total earning assets 2,605,644 42,179 6.56% 1,931,645 41,987 8.82%
------------- ---------- ------- --- ------------ ---------- ----------
Interest-bearing deposits 2,097,388 16,675 3.22% 1,669,942 22,172 5.38%
Federal Home Loan Bank advances 90,000 897 4.04 -- -- --
Notes payable and other borrowings 119,698 943 3.20 67,897 1,046 6.25
Long-term debt - trust preferred securities 51,050 1,288 10.09 51,050 1,288 10.09
------------- ---------- ------- --- ------------ ---------- ----------
Total interest-bearing liabilities 2,358,136 19,803 3.41% 1,788,889 24,506 5.56%
------------- ---------- ------- --- ------------ ---------- ----------
Tax-equivalent net interest income $22,376 $17,481
========== ==========
Net interest margin 3.48% 3.67%
======= === ==========
Core net interest margin (5) 3.68% 3.94%
======= === ==========
- -------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Liquidity management assets include available-for-sale securities,
interest earning deposits with banks and federal funds sold.
(2) Interest income on tax-advantaged loans and securities reflects a
tax-equivalent adjustment based on a marginal federal corporate tax
rate of 35%. The total adjustments for the quarters ended March 31,
2002 and 2001 were $208,000 and $205,000, respectively.
(3) Other earning assets include brokerage customer receivables and trading
account securities.
(4) Loans, net of unearned income includes mortgages held for sale and
non-accrual loans.
(5) The core net interest margin excludes the impact of Wintrust's
Long-term Debt - Trust Preferred Securities.
</FN>
Net interest income, which is the difference between interest income and fees on
earning assets and interest expense on deposits and borrowings, is the major
source of earnings for Wintrust. Tax-equivalent net interest income for the
quarter ended March 31, 2002 totaled $22.4 million, an increase of $4.9 million,
or 28%, as compared to the $17.5 million recorded in the same quarter of 2001.
This increase mainly resulted from loan growth offsetting narrower spreads.
Average loans in the first quarter of 2002 increased $489 million, or 30%, over
the first quarter of 2001. This growth helped offset the lower spreads as a
result of the eleven rate cuts by the Federal Reserve in 2001 totaling 475 basis
points.
Net interest margin represents tax-equivalent net interest income as a
percentage of the average earning assets during the period. For the first
quarter of 2002, the net interest margin was 3.48%, a decrease of 19 basis
points when compared to the net interest margin of 3.67% in the prior year first
quarter. This decline resulted primarily from the effects of continued decreases
during 2001 in short-term rates causing compression in the spread between the
rates on interest-bearing liabilities and the yields on earning assets. Spread
compression results when deposit rates cannot be reduced commensurate with
changes in market rates due to current low level of rates paid on certain
deposit accounts. The core net interest margin, which excludes the interest
expense related to Wintrust's Long-term Debt - Trust Preferred Securities, was
3.68% for the first quarter of 2002, and decreased 26 basis points when compared
to the prior year first quarter's core margin of 3.94%. In the absence of
additional rate cuts by the Federal Reserve and a changing yield curve,
Wintrust's net interest margin improved by 19 basis points when compared to the
fourth quarter of 2001. This improvement was a result of total funding costs
declining by 46 basis points while the yield on total earning assets declined by
24 basis points. Interest-bearing deposits accounted for the majority of the
decline in the cost of funding, decreasing by 48 basis points from the fourth
quarter of 2001.
- 8 -
The yield on total earning assets for the first quarter of 2002 was 6.56% as
compared to 8.82% in 2001, a decrease of 226 basis points resulting primarily
from the effect of decreases in general market rates on liquidity management
assets and loans. The other earning assets shown in the first quarter of 2002
reflect interest-bearing brokerage customer receivables and trading account
securities managed at the Wayne Hummer Companies. The yield on earning assets is
heavily dependent on the yield on loans since average loans comprised
approximately 81% of total average earning assets. The first quarter 2002 yield
on loans was 7.11%, a 221 basis point decrease when compared to the prior year
first quarter yield of 9.32%. The average prime lending rate was 4.75% during
the first quarter of 2002 versus 8.62% for the first quarter of 2001, reflecting
a decrease of 387 basis points. Wintrust's loan portfolio does not re-price in a
parallel fashion to decreases or increases in the prime rate due to a portion of
the portfolio being longer-term fixed rate loans.
The rate paid on interest-bearing liabilities for the first quarter of 2002 was
3.41%, compared to 5.56% in the first quarter of 2001, a decline of 215 basis
points. Interest-bearing deposits accounted for 89% of total interest-bearing
funding in the first quarter of 2002, compared to 93% in the same period of
2001. The rate paid on interest-bearing deposits averaged 3.22% for the first
quarter of 2002 versus 5.38% for the same quarter of 2001, a decrease of 216
basis points. During 2001, Wintrust's subsidiary banks initiated borrowing from
the Federal Home Loan Bank. Wintrust will continue to evaluate further advances
from the Federal Home Loan Bank as a funding source in the future. The increase
in notes payable and other borrowings in the first quarter of 2002 was primarily
a result of the funding at the Wayne Hummer Companies for the brokerage customer
receivables, additional funding required for the purchase of the Wayne Hummer
Companies and borrowings utilized to fund the additional capital requirements of
the subsidiary banks. The rate paid on Federal Home Loan Bank advances, notes
payable and other borrowings decreased 269 basis points to 3.56% in the first
quarter of 2002 as compared to 6.25% in the first quarter of 2001.
NON-INTEREST INCOME
For the first quarter of 2002, non-interest income totaled $12.8 million and
increased $5.9 million over the prior year quarter. Significant increases were
realized in trust, asset management and brokerage fees as a result of the Wayne
Hummer Companies acquisition during the first quarter of 2002. Fees from the
origination and sale of mortgage loans into the secondary market, income from
certain covered call option transactions and proceeds from a $1.25 million
partial settlement related to the premium finance defalcation recorded in 2000
were partially offset by a decrease in gains from the sale of premium finance
receivables, lower administrative services revenue from Tricom, Inc. and lower
net securities gains and losses.
Trust, asset management and brokerage fees is comprised of the asset management
revenue of Wintrust Asset Management Company and the asset management fees,
brokerage commissions, trading commissions and insurance product commissions at
the Wayne Hummer Companies. The increase in this category, up $4.1 million over
the first quarter of 2001, is primarily attributable to the revenues from the
Wayne Hummer Companies. The downturn in the stock market over the past year has
had a negative impact on the valuation of the equity securities under
management, similar to that of the broader market, and the fees earned thereon.
Wintrust is committed to growing the trust and investment business in order to
better service its customers and create a more diversified revenue stream. This
commitment is evidenced by the acquisition of the Wayne Hummer Companies.
Non-interest income comprised approximately 28% of total net revenues in the
first quarter of 2001. Primarily as a result of the Wayne Hummer Companies
acquisition, this has increased to approximately 37% for the first quarter of
2002.
Fees on mortgage loans sold include income from originating and selling
residential real estate loans into the secondary market. For the quarter ended
March 31, 2002, these fees totaled $2.0 million, an increase of $493,000, or
32%, from the prior year first quarter, but down from the $2.6 million recorded
in the fourth quarter of 2001. This increase, as compared to the first quarter
of 2001, was due to higher levels of mortgage origination volumes, particularly
refinancing activity, caused by the decreases in mortgage interest rates.
- 9 -
Management anticipates the levels of refinancing activity will continue to taper
off to more normalized levels throughout 2002, barring any further reductions in
mortgage interest rates.
Service charges on deposit accounts totaled $738,000 for the first quarter of
2002, an increase of $191,000, or 35%, when compared to the same quarter of
2001. This increase was mainly due to a higher deposit base and a larger number
of accounts at the banking subsidiaries. The majority of deposit service charges
relates to customary fees on overdrawn accounts and returned items. The level of
service charges received is substantially below peer group levels, as management
believes in the philosophy of providing high quality service without encumbering
that service with numerous activity charges.
The administrative services revenue contributed by Tricom added $822,000 to
total non-interest income in the first quarter of 2002, a decrease of $199,000
from the first quarter of 2001. This revenue comprises income from
administrative services, such as data processing of payrolls, billing and cash
management services, to temporary staffing service clients located throughout
the United States. The revenue growth at Tricom has stagnated in recent quarters
due to the general slowdown in the United States economy and the reduction in
the placement of temporary staffing individuals by Tricom's customers. 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, Wintrust sold premium finance receivables to an unrelated third
party in the first quarter of 2002 and recognized gains of $766,000 related to
this activity, compared with $942,000 of recognized gains in the first quarter
of 2001. Wintrust has a philosophy of maintaining its average loan-to-deposit
ratio in the range of 85-90%. During the first quarter of 2002, the ratio was
approximately 89%. Accordingly, Wintrust sold excess premium finance receivables
volume to an unrelated third party financial institution. Consistent with
Wintrust's strategy to be asset-driven and the desire to maintain our
loan-to-deposit ratio in the aforementioned range, it is probable that similar
sales of premium finance receivables will occur in the future.
Other non-interest income for the first quarter of 2002 totaled $4.1 million and
increased $2.0 million over the prior year quarter's total of $2.1 million. This
increase was due primarily to proceeds from a $1.25 million partial settlement
related to the premium finance defalcation recorded in 2000, increased premium
income of $221,000 from certain covered call option transactions and other
income from the Wayne Hummer Companies. Wintrust routinely enters into covered
call option transactions with the goal of enhancing its overall return on its
investment portfolio. Wintrust generally writes the call options against certain
U.S. Treasury and agency issues held in its portfolio for liquidity and other
purposes.
NON-INTEREST EXPENSE
Non-interest expense for the first quarter of 2002 totaled $22.7 million and
increased $6.7 million, or 42%, from the first quarter 2001 total of $16.0
million. Operating expenses of the Wayne Hummer Companies and the continued
growth and expansion of the banks with additional branches and the growth in the
premium finance business are the major causes for this increase. Since March 31,
2001, total deposits and total loans have increased 26% and 33%, respectively,
requiring higher levels of staffing and other costs to both attract and service
the larger customer base.
Salaries and employee benefits totaled $13.4 million for the first quarter of
2002, an increase of $4.9 million, or 58%, as compared to the prior year's first
quarter total of $8.5 million. This increase was primarily due to the employee
costs associated with the Wayne Hummer Companies; annual increases in salaries
and benefits as a result of continued growth and expansion of the de novo banks
and normal annual increases in salaries and the costs of employee benefits.
- 10 -
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 acquisition of the Wayne Hummer Companies and the general growth and
expansion of the banks. Other non-interest expense, which includes loan
expenses, correspondent bank service charges, postage, insurance, stationery and
supplies, telephone, directors fees, and other sundry expenses, also increased
when compared to the prior year first quarter due mainly to the factors
mentioned earlier.
Amortization expense related to goodwill and other intangibles totaled $17,000
for the first quarter of 2002, compared with $178,000 in the first quarter of
2001. In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 141 ("SFAS 141"), "Business Combinations" and
Statement of Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and
Other Intangible Assets." Effective July 1, 2001, Wintrust adopted SFAS 141 for
all business combinations. On January 1, 2002, Wintrust adopted SFAS 142. The
most significant change made by SFAS 142 is that goodwill and indefinite lived
intangible assets are no longer amortized as part of results of operations.
Management anticipates that applying the provisions of SFAS 141 to recent
acquisitions and the provisions of SFAS 142 to purchase acquisitions completed
prior to July 1, 2001, will increase after-tax income for the year ending
December 31, 2002, by approximately $413,000, or $.02 per diluted share. The
after-tax impact in the first quarter of 2002 resulting from changes in
amortization expenses was approximately $110,000 or less than $.01 per share,
compared to the first quarter of 2001. Additionally, SFAS 142 requires Wintrust
to evaluate its goodwill for impairment on an annual basis. Any impairment from
the initial test at the time of adoption is recognized as a "cumulative effect
of change in accounting principles." As a result of this initial impairment
test, Wintrust did not recognize any impairment.
- 11 -
ASSET QUALITY
Allowance for Loan Losses
- -------------------------
A reconciliation of the activity in the balance of the allowance for loan losses
for the three months ended March 31, 2002 and 2001 is shown as follows (dollars
in thousands):
THREE MONTHS ENDED MARCH 31,
2002 2001
---------------- ---------------
Balance at beginning of period $ 13,686 $ 10,433
Provision for loan losses 2,348 1,638
Charge-offs
Commercial and commercial real estate 225 97
Home equity loans -- --
Residential real estate -- --
Consumer and other 76 11
Premium finance receivables 867 712
Indirect automobile loans 287 286
Tricom finance receivables -- --
---------------- ---------------
Total charge-offs 1,455 1,106
---------------- ---------------
Recoveries
Commercial and commercial real estate 20 2
Home equity loans -- --
Residential real estate -- --
Consumer and other -- --
Premium finance receivables 63 46
Indirect automobile loans 30 54
Tricom finance receivables 5 --
---------------- ---------------
Total recoveries 118 102
---------------- ---------------
Net charge-offs (1,337) (1,004)
---------------- ---------------
Balance at March 31 $ 14,697 $ 11,067
================ ===============
Loans at March 31 $ 2,167,550 $1,625,979
================ ===============
Allowance as a percentage of loans 0.68% 0.68%
================ ===============
Annualized net charge-offs as a percentage of average:
Commercial and commercial real estate 0.08% 0.06%
Home equity -- --
Residential real estate -- --
Consumer and other 0.47% 0.07%
Premium finance receivables 0.79% 0.77%
Indirect automobile loans 0.56% 0.47%
Tricom finance receivables (0.11%) --
---------------- ---------------
Total loans 0.26% 0.25%
================ ===============
Annualized provision for loan losses 56.94% 61.29%
================ ===============
===================================================================================================================
- 12 -
The provision for loan losses totaled $2.3 million for the first quarter of
2002, an increase of $710,000 from a year earlier. The higher provision was due
to a $542 million, or 33%, increase in loan balances compared to March 31, 2001
and a higher level of net charge-offs, primarily in the commercial and
commercial real estate and the premium finance portfolio. For the quarter ended
March 31, 2002, net charge-offs totaled $1.3 million and increased from the $1.0
million of net charge-offs recorded in the same period of 2001. On a ratio
basis, annualized net charge-offs as a percentage of average loans increased
slightly to 0.26% in the first quarter of 2002 from 0.25% in the same period in
2001. Management has actively monitored and pursued methods to reduce the level
of delinquencies in the indirect auto and premium finance portfolios (See "Past
Due Loans and Non-performing Assets" below). Management believes the allowance
for loan losses is adequate to provide for inherent losses in the portfolio.
There can be no assurances, however, that future losses will not exceed the
amounts provided for, thereby affecting future results of operations. The amount
of future additions to the allowance for loan losses will be dependent upon the
economy, changes in real estate values, interest rates, the regulatory
environment, the level of past-due and non-performing loans, and other factors.
- 13 -
Past Due Loans and Non-performing Assets
- ----------------------------------------
The following table sets forth Wintrust's non-performing assets at the dates
indicated. The information in the table should be read in conjunction with the
detailed discussion following the table (dollars in thousands).
MARCH 31, December 31, March 31,
2002 2001 2001
------------------- ----------------- ----------------
Past Due greater than 90 days and still accruing: Core banking loans:
Residential real estate and home equity $ 136 $ 168 $ 367
Commercial, consumer and other 208 1,059 1,411
Premium finance receivables 1,582 2,402 4,881
Indirect automobile loans 249 361 350
Tricom finance receivables -- -- --
------------------- ----------------- ----------------
Total 2,175 3,990 7,009
------------------- ----------------- ----------------
Non-accrual loans:
Core banking loans:
Residential real estate and home equity 1,912 1,385 --
Commercial, consumer and other 742 1,180 720
Premium finance receivables 6,277 5,802 5,872
Indirect automobile loans 266 496 234
Tricom finance receivables 104 104 112
------------------- ----------------- ----------------
Total non-accrual loans 9,301 8,967 6,938
------------------- ----------------- ----------------
Total non-performing loans:
Core banking loans:
Residential real estate and home equity 2,048 1,553 367
Commercial, consumer and other 950 2,239 2,131
Premium finance receivables 7,859 8,204 10,753
Indirect automobile loans 515 857 584
Tricom finance receivables 104 104 112
------------------- ----------------- ----------------
Total non-performing loans 11,476 12,957 13,947
------------------- ----------------- ----------------
Other real estate owned 100 100 --
------------------- ----------------- ----------------
Total non-performing assets $ 11,576 $ 13,057 $ 13,947
=================== ================= ================
Total non-performing loans by category as a percent of its own respective
category:
Core banking loans
Residential real estate and home equity 0.48% 0.39% 0.12%
Commercial, consumer and other 0.08% 0.21% 0.27%
Premium finance receivables 1.90% 2.36% 3.22%
Indirect automobile loans 0.28% 0.47% 0.31%
Tricom finance receivables 0.59% 0.57% 0.60%
------------------- ----------------- ----------------
Total non-performing loans 0.53% 0.64% 0.86%
=================== ================= ================
Total non-performing assets as a
percentage of total assets 0.39% 0.48% 0.64%
=================== ================= ================
Allowance for loan losses as a
percentage of non-performing loans 128.07% 105.63% 79.35%
=================== ================= ================
- 14 -
Non-performing Core Banking Loans
Total non-performing loans for Wintrust's core banking business were $3.0
million, up from $2.5 million reported at March 31, 2001, but down from the $3.8
million reported at December 31, 2001. 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. The small
number of such non-performing loans allows management to monitor the status of
these credits and work with the borrowers to resolve these problems effectively.
Non-performing Premium Finance Receivables
The table below presents the level of non-performing premium finance receivables
as of March 31, 2002 and 2001, and the amount of net charge-offs for the
quarters then ended.
MARCH 31, March 31,
2002 2001
-------------------- --------------------
Non-performing premium finance receivables $7,859,000 $ 10,753,000
- as a percent of premium finance receivables 1.90% 3.22%
Net charge-offs of premium finance receivables $ 804,000 $ 666,000
- - annualized as a percent of premium finance receivables 0.79% 0.77%
The decrease in non-performing premium finance receivables since March 31, 2001
is indicative of actions taken by management. As noted in Wintrust's prior
quarterly earnings releases in 2001, Wintrust has eliminated more than 1,300
relationships with insurance agents that were referring new business to our
premium finance subsidiary that had relatively small balances and higher than
normal delinquency rates. The business associated with those accounts is
gradually becoming a less significant percent of the entire portfolio and should
be nearly extinguished by the end of 2002. Management continues to see progress
in this portfolio and continues to expect the level of non-performing loans
related to this portfolio to decline in future 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, Wintrust has the power to cancel the insurance policy
and collect the unearned portion of the premium from the insurance carrier. In
the event of cancellation, the cash returned in payment of the unearned premium
by the insurer should generally be sufficient to cover the receivable balance,
the interest and other charges due. Due to notification requirements and
processing time by most insurance carriers, many receivables will become
delinquent beyond 90 days while the insurer is processing the return of the
unearned premium. Management continues to accrue interest until maturity as the
unearned premium is ordinarily sufficient to pay-off the outstanding balance and
contractual interest due.
- 15 -
Non-performing Indirect Automobile Loans
Total non-performing indirect automobile loans were $515,000 at March 31, 2002,
decreasing from $857,000 at December 31, 2001 and $584,000 at March 31, 2001.
The ratio of these non-performing loans to total indirect automobile loans
decreased to 0.28% of total indirect automobile loans at March 31, 2002 from
0.47% at December 31, 2001 and 0.31% at March 31, 2001. As noted in the
Allowance for Loan Losses table, net charge-offs as a percent of total indirect
automobile loans increased slightly from 0.47% in the first quarter of 2001 to
0.56% in the first quarter of 2002. The level of non-performing and net
charge-offs of indirect automobile loans continues to be below standard industry
ratios for this type of lending. Due to the impact of the current economic and
competitive environment surrounding this type of lending, management continues
to de-emphasize, in relation to other loan categories, new indirect automobile
loans originated. Indirect automobile loans at March 31, 2002 were $184 million,
unchanged from December 31, 2001 but down $7 million, or 4% from March 31, 2001.
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements related to Wintrust's
financial performance that are based on estimates. Wintrust intends such
forward-looking statements to be covered by the safe harbor provision for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995, and is including this statement for purposes of invoking these safe
harbor provisions. Actual results could differ materially from those addressed
in the forward-looking statements due to factors such as changes in economic
conditions, competition, or other factors that may influence the anticipated
growth rate of loans and deposits, the quality of the loan portfolio and loan
and deposit pricing, unanticipated changes in interest rates that negatively
impact net interest income, future events that may cause unforeseen loan or
lease losses, slower than anticipated development and growth of Tricom and the
trust and investment business, unanticipated changes in the temporary staffing
industry, the ability to adapt successfully to technological changes to compete
effectively in the marketplace, competition and the related pricing of brokerage
and asset management products, unforeseen difficulties in integrating the
acquisition of the Wayne Hummer Companies, the ability to pursue acquisition and
expansion strategies and the ability to attract and retain experienced senior
management. Therefore, there can be no assurances that future actual results
will correspond to these forward-looking statements.
- 16 -