WINTRUST FINANCIAL CORPORATION
727 North Bank Lane, Lake Forest, Illinois 60045
NEWS RELEASE
FOR IMMEDIATE RELEASE January 16, 2003
- ---------------------
FOR MORE INFORMATION CONTACT:
Edward J. Wehmer, President & Chief Executive Officer
David A. Dykstra, Senior Executive Vice President & Chief Operating Officer
(847) 615-4096
Website address: www.wintrust.com
WINTRUST FINANCIAL CORPORATION REPORTS
--------------------------------------
RECORD EARNINGS FOR THE FOURTH QUARTER AND YEAR;
------------------------------------------------
FOURTH QUARTER NET EARNINGS UP 53%
----------------------------------
LAKE FOREST, ILLINOIS -- Wintrust Financial Corporation ("Wintrust")
(Nasdaq: WTFC) announced record net income of $7.9 million for the quarter ended
December 31, 2002, an increase of $2.7 million, or 53%, over the $5.2 million
recorded in the fourth quarter of 2001. On a per share basis, net income for the
fourth quarter of 2002 totaled $0.43 per diluted common share, a $0.10 per
share, or 30%, increase as compared to the 2001 fourth quarter total of $0.33
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 762,742 shares in
conjunction with the February 2002 acquisition of the Wayne Hummer Companies and
the issuance of 1,362,750 additional shares of common stock in June and July of
2002. The return on average equity for the fourth quarter of 2002 stood at
14.24%.
For the year ended December 31, 2002, net income totaled $27.9 million,
or $1.60 per diluted common share, an increase of $9.5 million, or 51%, when
compared to $18.4 million, or $1.27 per diluted common share, for 2001. Return
on average equity for 2002 was 14.76% versus 15.24% for 2001.
"We are pleased with the Company's continued growth in earnings and
assets in the fourth quarter and for the full year," commented Edward J. Wehmer,
President and Chief Executive Officer. "In 2002, we increased our assets by over
$1 billion and our earnings per share by 26%. This growth was accomplished
without compromising our commitment to asset quality."
- 1 -
Mr. Wehmer added, "We have positioned the Company's balance sheet to
take advantage of future interest rate increases. The most recent 50 basis point
rate cut by the Federal Reserve in November of 2002 applied additional near-term
interest margin compression. Continued earning asset growth, successful
residential mortgage lending activities and additional opportunities to enhance
the yield on liquidity management assets have offset this margin compression. We
are excited about the pending acquisition of Lake Forest Capital Management
Company that will further diversify our revenue streams and continue to grow our
wealth management business. Through the efforts of our most valuable asset, our
employees, we feel comfortable with the existing range of analysts' earnings
estimate for 2003 of $1.75 to $1.90 per share."
Wintrust's key operating measures continue to show impressive growth
rates in 2002 as compared to the prior year as evidenced by the table below:
YEAR Year
ENDED Ended % or
DECEMBER 31, December 31, basis point (bp)
(Dollars in thousands, except per share data) 2002 2001 change
- ---------------------------------------------------- ------------------- ------------------ -------------------
Net income $ 27,875 $ 18,439 51 %
Net income per common share - Diluted $ 1.60 $ 1.27 26 %
Net revenues $ 158,800 $ 102,812 54 %
Net interest income $ 98,128 $ 74,014 33 %
Net interest margin 3.34 % 3.49 % (15)bp
Core net interest margin (1) 3.51 % 3.73 % (22)bp
Net overhead ratio (2) 1.41 % 1.59 % (18)bp
Return on average assets 0.87 % 0.79 % 8 bp
Return on average equity 14.76 % 15.24 % (48)bp
At end of period
Total assets $ 3,721,555 $ 2,705,422 38 %
Total loans, net of unearned income $ 2,556,086 $ 2,018,479 27 %
Total deposits $ 3,089,124 $ 2,314,636 33 %
Book value per common share $ 13.19 $ 9.72 36 %
Market price per common share $ 31.32 $ 20.38 54 %
Common shares outstanding (in thousands) 17,216 14,532 18 %
- ------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Core net interest margin excludes interest expense associated with
Wintrust's Long-term Debt - Trust Preferred Securities.
(2) The net overhead ratio is calculated by netting total non-interest expense
and total non-interest income, annualizing this amount, and dividing by
that period's total average assets.
</FN>
- 2 -
On January 24, 2002, Wintrust's Board of Directors declared a 3-for-2
stock split of its common stock, effected in the form of a 50% stock dividend,
paid on March 14, 2002 to shareholders of record as of March 4, 2002. All
historical share data and per share amounts have been restated to reflect this
split.
On February 20, 2002, Wintrust completed its acquisition of Wayne
Hummer Investments, LLC (including its wholly owned subsidiary, Focused
Investments LLC) and Wayne Hummer Asset Management Company (collectively, the
"Wayne Hummer Companies"). Accounted for as a purchase, the Wayne Hummer
Companies results of operations are included only since the effective date of
acquisition in Wintrust's 2002 results. As of December 31, 2002, we have
migrated approximately $232 million of customers' funds from the money market
mutual fund managed by Wayne Hummer Asset Management Company into insured bank
deposits of the Wintrust banks. The introduction of bank and trust products to
customers of the Wayne Hummer Companies has started, as well as the referral of
banking customers to Wayne Hummer's brokerage operation. We now are actively
pursuing the placement of brokerage representatives into the markets served by
Wintrust banks.
On December 19, 2002, Wintrust announced the signing of a merger
agreement to acquire Lake Forest Capital Management Company based in Lake
Forest, Illinois. Additional asset management revenue will further diversify and
enhance Wintrust's revenue stream. Lake Forest Capital Management will retain
its name and be merged into and operate as a separate division of Wayne Hummer
Asset Management Company, Wintrust's existing asset management subsidiary.
Total assets rose to $3.7 billion at December 31, 2002, an increase of
$1.0 billion, or 38%, compared to $2.7 billion a year ago. Total deposits as of
December 31, 2002 were $3.1 billion, an increase of $774 million, or 33%, as
compared to $2.3 billion at December 31, 2001. Total loans, net of unearned
income, grew to $2.6 billion as of December 31, 2002, a $538 million, or 27%,
increase over the $2.0 billion of a year ago.
For the fourth quarter of 2002, net interest income totaled $26.1
million, increasing $6.5 million, or 33%, compared to the fourth quarter of
2001. Average earning assets grew $955 million over the fourth
- 3 -
quarter of 2001, a 40% increase. Despite the fourth quarter's economic
weaknesses and the current interest rate environment, net interest income in the
quarter increased by $713,000, or 3%, over the third quarter of 2002. Strong
loan growth in the fourth quarter of 2002 continued to fuel earning asset growth
as average loans increased over the third quarter of 2002 by $176 million, or
28% on an annualized basis. Offsetting the impact of this earning asset growth
in the quarter was a decline in the net interest margin for the fourth quarter
of 2002 to 3.13%, compared with 3.26% in the third quarter of 2002. The Company
has positioned its balance sheet to benefit from future rising interest rates.
The net interest margin contracted in the fourth quarter due to an additional 50
basis point rate cut by the Federal Reserve Bank on November 6, 2002. The
continued margin pressure was mitigated by a significant increase in fees on
mortgage loans sold and fees from covered call option transactions.
Non-interest income totaled $18.2 million for the fourth quarter of
2002, increasing $10.7 million, or 144%, over the same period in 2001. The
primary contributor to these increases was the additional fees realized from the
asset management and brokerage services of the recently acquired Wayne Hummer
Companies of $5.9 million in the fourth quarter of 2002. Fees on mortgage loans
sold were the other major contributor to the increase in non-interest income.
For the quarter ended December 31, 2002 these fees totaled $4.5 million, an
increase of $1.9 million, or 71%, from the prior year fourth quarter. Partially
offsetting the increased fees on mortgage loans sold were the commissions,
included in salaries and employee benefits expense, paid to the mortgage
originators, increasing $803,000 from the prior year fourth quarter. Fees from
covered call option transactions in the fourth quarter of 2002 totaled $2.3
million, compared to $910,000 in the fourth quarter of 2001.
Non-interest expense totaled $29.5 million for the fourth quarter of
2002, increasing $12.3 million, or 71%, over the fourth quarter of 2001.
Excluding the impact of the Wayne Hummer Companies, non-interest expense for the
fourth quarter of 2002 increased by $4.8 million, or 28%, compared to the fourth
quarter of 2001. The growth in non-interest expense, excluding the impact of the
Wayne Hummer Companies, is attributable to increases in salaries and benefits
and operating costs as a result of continued growth and expansion of the banking
franchise (including the commissions paid to mortgage originators described
above
- 4 -
and other costs related to increased mortgage loan activities), normal annual
increases in salaries and increased costs of employee benefits. The net overhead
ratio for the fourth quarter of 2002 declined to 1.23% from 1.50% in the same
period last year.
Non-performing assets totaled $12.6 million, or 0.34% of total assets,
at December 31, 2002, reflecting a decrease from the December 31, 2001 level of
$13.1 million, or 0.48% of total assets, and generally flat compared to the
September 30, 2002 level of $12.5 million, or 0.35% of total assets. The level
of non-performing assets in the Company's loan portfolio remains low and
manageable .
Wintrust is a financial holding company whose common stock is traded on
the Nasdaq Stock Market(R). Its seven suburban Chicago community bank
subsidiaries, each of which was founded as a de novo bank since December 1991,
are located in high income retail markets -- Lake Forest Bank & Trust Company,
Hinsdale Bank & Trust Company, North Shore Community Bank & Trust Company in
Wilmette, Libertyville Bank & Trust Company, Barrington Bank & Trust Company,
Crystal Lake Bank & Trust Company and Northbrook Bank & Trust Company. The banks
also operate facilities in Lake Bluff, Highland Park, Hoffman Estates, Highwood,
Glencoe, Winnetka, Clarendon Hills, Western Springs, Skokie, Wauconda, McHenry
and Riverside, Illinois. Additionally, the Company operates various non-bank
subsidiaries. First Insurance Funding Corporation, one of the largest commercial
insurance premium finance companies operating in the United States, serves
commercial loan customers throughout the country. Wayne Hummer Trust Company, a
trust subsidiary, allows Wintrust to service customers' trust and investment
needs at each banking location. Tricom, Inc. of Milwaukee provides short-term
accounts receivable financing and value-added out-sourced administrative
services, such as data processing of payrolls, billing and cash management
services, to temporary staffing service clients located throughout the United
States. Wayne Hummer Investments, LLC is a broker-dealer providing a full range
of private client and brokerage services to clients located primarily in the
Midwest. Focused Investments LLC is a broker-dealer that provides a full range
of investment solutions to clients through a network of community-based
financial institutions throughout the Midwest. Wayne Hummer Asset Management
Company provides money management services and advisory services to individual
- 5 -
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 and lockbox services to the
Wintrust subsidiaries.
Currently, Wintrust operates a total of 32 banking offices, including
the opening of a new temporary facility in Cary (a branch of Crystal Lake Bank)
in January 2003, 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.
# # #
- 6 -
WINTRUST FINANCIAL CORPORATION
SELECTED FINANCIAL HIGHLIGHTS
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
------------------------------------- ------------------------------------
(Dollars in thousands, except per share data) 2002 2001 2002 2001
---------------------------------------------------------------------- ------------------ ------------------ -----------------
SELECTED FINANCIAL CONDITION DATA (AT END OF PERIOD):
Total assets $ 3,721,555 $ 2,705,422
Total loans, net of unearned income 2,556,086 2,018,479
Total deposits 3,089,124 2,314,636
Long-term debt - trust preferred securities 50,894 51,050
Total shareholders' equity 227,002 141,278
--------------------------------------------------------------------------------------
SELECTED STATEMENTS OF INCOME DATA:
Net interest income $ 26,128 $ 19,593 $ 98,128 $ 74,014
Net revenues 44,320 27,049 158,800 102,812
Income before taxes and cumulative effect of
accounting change 11,879 7,960 42,495 29,129
Net income before cumulative effect of
accounting change 7,922 5,164 27,875 18,693
Net income 7,922 5,164 27,875 18,439
Net income per common share - Basic 0.46 0.36 1.71 1.34
Net income per common share - Diluted 0.43 0.33 1.60 1.27
------------------------------------------------------------------------------------------------------------------------------
SELECTED FINANCIAL RATIOS AND OTHER DATA:
Performance Ratios:
Net interest margin 3.13 % 3.29 % 3.34 % 3.49 %
Core net interest margin (1) 3.26 3.50 3.51 3.73
Non-interest income to average assets 1.98 1.15 1.89 1.24
Non-interest expense to average assets 3.21 2.65 3.30 2.83
Net overhead ratio (2) 1.23 1.50 1.41 1.59
Efficiency ratio (3) 66.16 63.12 66.41 63.66
Return on average assets 0.86 0.80 0.87 0.79
Return on average equity 14.24 14.74 14.76 15.24
Average total assets $ 3,637,851 $ 2,574,812 $ 3,212,467 $ 2,328,032
Average shareholders' equity 220,710 139,027 188,849 120,995
Average loan-to-average deposit ratio 84.5 % 87.2 % 86.9 % 87.4 %
------------------------------------------------------------------------------------------------------------------------------
Common Share Data at end of period:
Market price per common share $ 31.32 $ 20.38
Book value per common share $ 13.19 $ 9.72
Common shares outstanding (in thousands) 17,216 14,532
Other Data at end of period:
Allowance for loan losses $ 18,390 $ 13,686
Non-performing assets $ 12,618 $ 13,057
Allowance for loans losses to total loans 0.72 % 0.68 %
Non-performing assets to total assets 0.34 % 0.48 %
Number of:
Bank subsidiaries 7 7
Non-bank subsidiaries 7 3
Banking offices 31 29
==============================================================================================================================
<FN>
(1) The core net interest margin excludes the interest expense associated with
Wintrust's Long-term Debt - Trust Preferred Securities.
(2) The net overhead ratio is calculated by netting total non-interest expense
and total non-interest income, annualizing this amount, and dividing by
that period's total average assets.
(3) The efficiency ratio is calculated by dividing total non-interest expense
by tax-equivalent net revenues (less securities gains or losses).
</FN>
- 7 -
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
(UNAUDITED)
DECEMBER 31, December 31,
(In thousands) 2002 2001
==========================================================================================================================
ASSETS
Cash and due from banks $ 105,671 $ 71,575
Federal funds sold and securities purchased under resale agreements 151,251 51,955
Interest-bearing deposits with banks 4,418 692
Available-for-sale securities, at fair value 547,679 385,350
Trading account securities 5,558 --
Brokerage customer receivables 37,592 --
Mortgage loans held-for-sale 90,446 42,904
Loans, net of unearned income 2,556,086 2,018,479
Less: Allowance for loan losses 18,390 13,686
--------------------------------------------------------------------------------------------------------------------------
Net loans 2,537,696 2,004,793
Premises and equipment, net 118,961 99,132
Accrued interest receivable and other assets 95,852 38,936
Goodwill 25,266 9,976
Other intangibles 1,165 109
--------------------------------------------------------------------------------------------------------------------------
Total assets $ 3,721,555 $ 2,705,422
==========================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 305,540 $ 254,269
Interest bearing 2,783,584 2,060,367
--------------------------------------------------------------------------------------------------------------------------
Total deposits 3,089,124 2,314,636
Notes payable 44,025 46,575
Federal Home Loan Bank advances 140,000 90,000
Subordinated note 25,000 --
Other borrowings 46,708 28,074
Long-term debt - trust preferred securities 50,894 51,050
Accrued interest payable and other liabilities 98,802 33,809
--------------------------------------------------------------------------------------------------------------------------
Total liabilities 3,494,553 2,564,144
--------------------------------------------------------------------------------------------------------------------------
Shareholders' equity:
Preferred stock -- --
Common stock 17,216 14,532
Surplus 153,614 97,956
Common stock warrants 81 99
Retained earnings 56,967 30,995
Accumulated other comprehensive loss (876) (2,304)
--------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 227,002 141,278
--------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 3,721,555 $ 2,705,422
==========================================================================================================================
- 8 -
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
-----------------------------------------------------------------
(UNAUDITED) (Unaudited) (UNAUDITED)
(In thousands, except per share data) 2002 2001 2002 2001
-------------------------------------------------------------------------------------------------------------------------------
INTEREST INCOME
Interest and fees on loans $ 41,889 $ 36,227 $ 158,314 $ 149,057
Interest bearing deposits with banks 28 6 45 10
Federal funds sold and securities purchased under resale
agreements 563 1,901 1,774 5,632
Securities 5,257 2,620 19,797 11,756
Trading account securities 43 -- 165 --
Brokerage customer receivables 399 -- 2,138 --
-------------------------------------------------------------------------------------------------------------------------------
Total interest income 48,179 40,754 182,233 166,455
-------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Interest on deposits 18,352 18,618 70,061 83,503
Interest on Federal Home Loan Bank advances 1,489 677 4,954 942
Interest on subordinated note 305 -- 305 --
Interest on notes payable and other borrowings 837 578 3,854 2,845
Interest on long-term debt - trust preferred securities 1,068 1,288 4,931 5,151
-------------------------------------------------------------------------------------------------------------------------------
Total interest expense 22,051 21,161 84,105 92,441
-------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 26,128 19,593 98,128 74,014
Provision for loan losses 2,986 1,898 10,321 7,900
-------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 23,142 17,695 87,807 66,114
-------------------------------------------------------------------------------------------------------------------------------
NON-INTEREST INCOME
Trust, asset management and brokerage fees 6,503 537 25,229 1,996
Fees on mortgage loans sold 4,514 2,634 12,259 7,831
Service charges on deposit accounts 832 714 3,121 2,504
Gain on sale of premium finance receivables 1,124 908 3,374 4,564
Administrative services revenue 807 947 3,501 4,084
Net securities gains 64 22 107 337
Other 4,348 1,694 13,081 7,482
-------------------------------------------------------------------------------------------------------------------------------
Total non-interest income 18,192 7,456 60,672 28,798
-------------------------------------------------------------------------------------------------------------------------------
NON-INTEREST EXPENSE
Salaries and employee benefits 17,817 9,384 63,442 35,628
Occupancy, net 1,838 1,161 6,691 4,821
Equipment expense 1,905 1,670 7,191 6,297
Data processing 1,032 881 4,161 3,393
Advertising and marketing 649 460 2,302 1,604
Professional fees 768 531 2,801 2,055
Amortization of goodwill -- 152 -- 616
Amortization of other intangibles 87 17 324 69
Other 5,359 2,935 19,072 11,300
-------------------------------------------------------------------------------------------------------------------------------
Total non-interest expense 29,455 17,191 105,984 65,783
-------------------------------------------------------------------------------------------------------------------------------
Income before taxes and cumulative effect of accounting change 11,879 7,960 42,495 29,129
Income tax expense 3,957 2,796 14,620 10,436
-------------------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of accounting change 7,922 5,164 27,875 18,693
Cumulative effect of change in accounting for derivatives,
net of tax -- -- -- (254)
-------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 7,922 $ 5,164 $ 27,875 $ 18,439
===============================================================================================================================
BASIC EARNINGS PER SHARE:
Income before cumulative effect of accounting change $ 0.46 $ 0.36 $ 1.71 $ 1.36
Cumulative effect of accounting change, net of tax -- -- -- (0.02)
-------------------------------------------------------------------------------------------------------------------------------
NET INCOME PER COMMON SHARE - BASIC $ 0.46 $ 0.36 $ 1.71 $ 1.34
===============================================================================================================================
DILUTED EARNINGS PER SHARE:
Income before cumulative effect of accounting change $ 0.43 $ 0.33 $ 1.60 $ 1.29
Cumulative effect of accounting change, net of tax -- -- -- (0.02)
-------------------------------------------------------------------------------------------------------------------------------
NET INCOME PER COMMON SHARE - DILUTED $ 0.43 $ 0.33 $ 1.60 $ 1.27
===============================================================================================================================
CASH DIVIDENDS DECLARED PER COMMON SHARE $ -- $ -- $ 0.120 $ 0.093
===============================================================================================================================
Weighted average common shares outstanding 17,194 14,527 16,334 13,734
Dilutive potential common shares 1,163 954 1,111 811
-------------------------------------------------------------------------------------------------------------------------------
Average common shares and dilutive common shares 18,357 15,481 17,445 14,545
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- 9 -
LOANS, NET OF UNEARNED INCOME % Growth
----------------------------------
12/31/02 12/31/01
DECEMBER 31, December 31, December 31, compared to compared to
(Dollars in thousands) 2002 2001 2000 12/31/01 12/31/00
- --------------------------------------------------------- ----------------- ------------------ --------------- ----------------
BALANCE:
-------
Commercial and commercial real estate $ 1,320,598 $ 1,007,580 $ 647,947 31.1 % 55.5 %
Home equity 365,521 261,049 179,168 40.0 45.7
Residential real estate 156,213 140,041 131,495 11.5 6.5
Premium finance receivables 461,614 348,163 313,065 32.6 11.2
Indirect auto loans 178,234 184,209 203,572 (3.2) (9.5)
Tricom finance receivables 21,048 18,280 20,354 15.1 (10.2)
Consumer and other loans 52,858 59,157 51,995 (10.6) 13.8
---------------- ----------------- ------------------ ----------------------------------
Total loans, net of unearned income $ 2,556,086 $ 2,018,479 $ 1,547,596 26.6 % 30.4 %
---------------- ----------------- ------------------ ----------------------------------
MIX:
---
Commercial and commercial real estate 52 % 50 % 42 %
Home equity 14 13 12
Residential real estate 6 7 9
Premium finance receivables 18 17 20
Indirect auto loans 7 9 13
Tricom finance receivables 1 1 1
Consumer and other loans 2 3 3
-------------------- ----------------- ----------------
Total loans, net of unearned income 100 % 100 % 100 %
-------------------- ----------------- ----------------
DEPOSITS % Growth
----------------------------------
12/31/02 12/31/01
DECEMBER 31, December 31, December 31, compared to compared to
(Dollars in thousands) 2002 2001 2000 12/31/01 12/31/00
- ------------------------------------------------------ ------------------ ---------------- --------------- -----------------
BALANCE:
-------
Non-interest bearing $ 305,540 $ 254,269 $ 198,319 20.2 % 28.2 %
NOW 354,499 286,860 180,898 23.6 58.6
Brokerage customer deposits 231,700 -- -- N/M N/M
Money market 399,441 335,881 295,771 18.9 13.6
Savings 147,669 132,514 74,460 11.4 78.0
Time certificate of deposits 1,650,275 1,305,112 1,077,128 26.4 21.2
---------------- ------------------ ---------------- ------------------------------------
Total deposits $ 3,089,124 $ 2,314,636 $ 1,826,576 33.5 % 26.7 %
---------------- ------------------ ---------------- ------------------------------------
MIX:
---
Non-interest bearing 10 % 11 % 11 %
NOW 12 12 10
Brokerage customer deposits 7 -- --
Money market 13 15 16
Savings 5 6 4
Time certificate of deposits 53 56 59
------------------- ---------------- -----------------
Total deposits 100 % 100 % 100 %
------------------- ---------------- -----------------
<FN>
N/M = Not Meaningful
</FN>
Previously, Wintrust indicated its strategy to attract funds from
the money market mutual fund balances managed by Wayne Hummer Asset Management
Company into deposit accounts of the Wintrust affiliate banks. Consistent with
reasonable interest rate risk parameters, the funds will generally be invested
in loan production of the affiliate banks as well as other investments suitable
for banks. As of December 31, 2002, approximately $232 million had migrated into
insured bank deposits at the affiliate banks. The migration of additional funds
to the affiliate banks is subject to the desire of the customers to make the
transition of their funds into FDIC insured bank accounts, capital capacity of
the Company and the availability of suitable investments in which to deploy the
funds.
- 10 -
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 December 31, 2002 and 2001:
FOR THE QUARTER ENDED For the Quarter Ended
DECEMBER 31, 2002 December 31, 2001
----------------------------------------------------------------------------------
(Dollars in thousands) AVERAGE INTEREST RATE Average Interest Rate
- ----------------------
----------------------------------------------------------------------------------
Liquidity management assets (1) (2) $ 671,887 $ 5,961 3.52 % $ 446,209 $ 4,545 4.04 %
Other earning assets (3) 44,431 442 3.95 -- -- --
Loans, net of unearned income (2) (4) 2,628,503 42,044 6.35 1,944,166 36,419 7.43
----------------------------------------------------------------------------------
Total earning assets $ 3,344,821 $ 48,447 5.75 % $ 2,390,375 $ 40,964 6.80 %
----------------------------------------------------------------------------------
Interest-bearing deposits $ 2,726,941 $ 18,352 2.67 % $ 1,997,256 $ 18,618 3.70 %
Federal Home Loan Bank advances 140,000 1,489 4.22 64,565 677 4.16
Notes payable and other borrowings 119,105 837 2.79 55,229 578 4.15
Subordinated note 17,391 305 6.86 -- -- --
Long-term debt - trust preferred securities 51,050 1,068 8.37 51,050 1,288 10.09
----------------------------------------------------------------------------------
Total interest-bearing liabilities $ 3,054,487 $ 22,051 2.86 % $ 2,168,100 $ 21,161 3.87 %
----------------------------------------------------------------------------------
Interest rate spread (5) 2.89 % 2.93 %
Net free funds/contribution (6) $ 290,334 0.24 $ 222,275 0.36
---------------- ------------------------------ ------------
Net interest income/Net interest margin $ 26,396 3.13 % $ 19,803 3.29 %
-------------- --------------
------------- ------------
Core net interest margin (7) 3.26 % 3.50 %
------------- ------------
- ------------------------------------------------------------------------------------------------------------------------------------
<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 December 31,
2002 and 2001 were $268,000 and $210,000, 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) Interest rate spread is the difference between the yield earned on
earning assets and the rate paid on interest-bearing liabilities.
(6) Net free funds are the difference between total average earning assets
and total average interest-bearing liabilities. The contribution is
based on the rate paid for total interest-bearing liabilities.
(7) 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 December 31, 2002 totaled $26.4 million, an increase of $6.6
million, or 33%, as compared to the $19.8 million recorded in the same quarter
of 2001. Average loans in the fourth quarter of 2002 increased $684 million, or
35%, over the fourth quarter of 2001.
Net interest margin represents tax-equivalent net interest income as a
percentage of the average earning assets during the period. For the fourth
quarter of 2002 the net interest margin was 3.13%, a decrease of 16 basis points
when compared to the net interest margin of 3.29% in the prior year fourth
quarter. The core net interest margin, which excludes the interest expense
related to Wintrust's Long-term Debt - Trust Preferred Securities, was 3.26% for
the fourth quarter of 2002, and decreased 24 basis points when compared to the
prior year fourth quarter's core margin of 3.50%. Wintrust's net interest margin
declined by 13 basis points when compared to the third quarter of 2002. The net
interest margin contracted due to the Company's preference for variable rate
commercial and commercial real estate loans and an additional 50 basis point
interest rate cut by the Federal Reserve Bank combined with the asset
sensitivity of the balance sheet.
- 11 -
The yield on total earning assets for the fourth quarter of 2002 was 5.75% as
compared to 6.80% in 2001, a decrease of 105 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 fourth 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 79% of total average earning assets. The fourth quarter 2002 yield
on loans was 6.35%, a 108 basis point decrease when compared to the prior year
fourth quarter yield of 7.43%. The average prime lending rate was 4.45% during
the fourth quarter of 2002 versus 5.60% for the fourth quarter of 2001,
reflecting a decrease of 115 basis points.
The rate paid on interest-bearing liabilities for the fourth quarter of 2002 was
2.86%, compared to 3.87% in the fourth quarter of 2001, a decline of 101 basis
points. Interest-bearing deposits accounted for 89% of total interest-bearing
funding in the fourth quarter of 2002, compared to 92% in the same period of
2001. The rate paid on interest-bearing deposits averaged 2.67% for the fourth
quarter of 2002 versus 3.70% for the same quarter of 2001, a decrease of 103
basis points.
During 2001, Wintrust initiated borrowing from the Federal Home Loan Bank of
Chicago ("FHLB"). The Company initially borrowed from the FHLB in the third and
fourth quarters of 2001 and borrowed an additional $50 million in the second
quarter of 2002. The increase in notes payable and other borrowings in the
fourth quarter of 2002 compared to the same quarter in 2001 was a result of the
funding at the Wayne Hummer Companies for the brokerage customer receivables,
additional funding required for the purchase of the Wayne Hummer Companies and
borrowings utilized to fund the additional capital requirements of the
subsidiary banks. During the fourth quarter, the Company renewed and increased
its revolving loan agreement with an unaffiliated bank. Additionally, during the
fourth quarter, the Company completed a $25 million subordinated debt agreement
with an unaffiliated bank that qualifies as Tier II regulatory capital. The
Company also entered into two separate derivative financial instruments. An
interest rate swap contract was entered into to convert the newly issued
subordinated debt from variable-rate to fixed-rate. Additionally, an interest
rate swap contract was entered into to convert the Company's 9% Trust Preferred
Securities from fixed-rate to variable-rate. Both of these interest rate swap
contracts qualify as perfect hedges pursuant to SFAS 133.
- 12 -
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 years ended December 31, 2002 and 2001:
FOR THE YEAR ENDED For the Year Ended
DECEMBER 31, 2002 December 31, 2001
---------------------------------------------------------------------------------
(Dollars in thousands) AVERAGE INTEREST RATE Average Interest Rate
- ---------------------- ---------------------------------------------------------------------------------
Liquidity management assets (1) (2) $ 555,861 $ 21,825 3.93% $ 360,443 $ 17,463 4.84 %
Other earning assets (3) 54,327 2,303 4.24 -- -- --
Loans, net of unearned income (2) (4) 2,355,020 158,999 6.75 1,786,596 149,850 8.39
---------------------------------------------------------------------------------
Total earning assets $ 2,965,208 $ 183,127 6.18% $ 2,147,039 $ 167,313 7.79 %
---------------------------------------------------------------------------------
Interest-bearing deposits $ 2,397,391 $ 70,061 2.92% $ 1,836,819 $ 83,503 4.55 %
Federal Home Loan Bank advances 119,041 4,954 4.16 21,945 942 4.29
Notes payable and other borrowings 127,244 3,854 3.03 53,649 2,845 5.30
Subordinated note 4,384 305 6.86 -- -- --
Long-term debt - trust preferred securities 51,050 4,931 9.66 51,050 5,151 10.09
---------------------------------------------------------------------------------
Total interest-bearing liabilities $ 2,699,110 $ 84,105 3.12% $ 1,963,463 $ 92,441 4.71 %
---------------------------------------------------------------------------------
Interest rate spread (5) 3.06 % 3.08 %
Net free funds/contribution (6) $ 266,098 0.28 $ 183,576 0.41
--------------- ----------- ----------------- ------------
Net interest income/Net interest margin $ 99,022 3.34 % $ 74,872 3.49 %
--------------- --------------
------------ ------------
Core net interest margin (7) 3.51 % 3.73 %
------------ ------------
- ----------------------------------------------------------------------------------------------------------------------------------
<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 years ended December 31,
2002 and 2001 were $894,000 and $858,000, 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) Interest rate spread is the difference between the yield earned on
earning assets and the rate paid on interest-bearing liabilities.
(6) Net free funds are the difference between total average earning assets
and total average interest-bearing liabilities. The contribution is
based on the rate paid for total interest-bearing liabilities.
(7) The core net interest margin excludes the impact of Wintrust's
Long-term Debt - Trust Preferred Securities.
</FN>
For the year ended December 31, 2002, tax-equivalent net interest income totaled
$99.0 million and increased $24.1 million, or 32%, over the $74.9 million
recorded in the same period of 2001. Consistent with the fourth quarter
analysis, the increase in net interest income was mainly due to the growth in
the Company's earning asset base, offset in part by lower yields and rates.
Average loans in 2002 increased $568 million, or 32%, over the average balance
in 2001. Interest-bearing deposits accounted for 89% of total interest-bearing
funding in 2002, compared to 94% in 2001. The net interest margin for the year
ended December 31, 2002 was 3.34%, a decrease of 15 basis points from the same
period of 2001.
NON-INTEREST INCOME
For the fourth quarter of 2002, non-interest income totaled $18.2 million and
increased $10.7 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. Trust, asset
management and brokerage fees is comprised of the trust and asset management
revenue of Wayne Hummer Trust Company (name changed from Wintrust Asset
Management Company in May 2002) and the asset management fees, brokerage
commissions, trading commissions and insurance product commissions at the Wayne
Hummer Companies. The increase in this category, up $6.0 million over the fourth
quarter of 2001, is primarily atributable to the revenues from the Wayne Hummer
Companies. The pending acquisition of Lake Forest Capital Management Company
(See Company's press release dated December 19, 2002) demonstrates Wintrust's
commitment to growing the trust and investment business in order
- 13 -
to better service its customers and create a more diversified revenue stream.
Non-interest income comprised approximately 28% of total net revenues in the
fourth quarter of 2001. Primarily as a result of the Wayne Hummer Companies
acquisition, this ratio has increased to approximately 41% for the fourth
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
December 31, 2002, these fees totaled $4.5 million, an increase of $1.9 million,
or 71%, from the prior year fourth quarter and up from the $3.8 million recorded
in the third quarter of 2002. Although these fees are a continuous source of
revenue, these fees continue to benefit from high levels of mortgage origination
volumes, particularly refinancing activity caused by the low level of mortgage
interest rates. Management anticipates that the levels of refinancing activity
may taper off in 2003, barring any further reductions in mortgage interest
rates.
Service charges on deposit accounts totaled $832,000 for the fourth quarter of
2002, an increase of $118,000, or 17%, when compared to the same quarter of
2001. This increase was mainly due to a higher deposit base and a larger number
of accounts at the banking subsidiaries. The majority of deposit service charges
relates to customary fees on overdrawn accounts and returned items. The level of
service charges received is substantially below peer group levels, as management
believes in the philosophy of providing high quality service without encumbering
that service with numerous activity charges.
As a result of continued strong loan originations of premium finance
receivables, Wintrust sold premium finance receivables to an unrelated third
party in the fourth quarter of 2002 and recognized gains of $1.1 million related
to this activity, compared with $908,000 of recognized gains in the fourth
quarter of 2001. Wintrust has a philosophy of maintaining its average
loan-to-deposit ratio in the range of 85-90%. During the fourth quarter of 2002,
the ratio was approximately 85%. Wintrust sold excess premium finance
receivables volume to an unrelated third party financial institution. Consistent
with Wintrust's strategy to be asset-driven and the desire to maintain our
loan-to-deposit ratio in the aforementioned range, it is probable that similar
sales of premium finance receivables will occur in the future.
The administrative services revenue contributed by Tricom added $807,000 to
total non-interest income in the fourth quarter of 2002, a decrease of $140,000
from the fourth quarter of 2001 and a decrease of $134,000 from the third
quarter of 2002. This revenue comprises income from administrative services,
such as data processing of payrolls, billing and cash management services, to
temporary staffing service clients located throughout the United States. The
revenue growth at Tricom stagnated in 2002 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.
Other non-interest income for the fourth quarter of 2002 totaled $4.3 million
and increased $2.6 million, or 157%, over the prior year quarterly total of $1.7
million. This increase was primarily due to a $1.4 increase in premium income
from certain covered call option transactions, $493,000 from of Bank Owned Life
Insurance ("BOLI") and $462,000 from loan servicing revenues. The premium income
from the covered call option transactions totaled $2.3 million in the fourth
quarter of 2002 and $910,000 in the same period of 2001. Management is able to
effectively use the proceeds from selling covered call options to offset net
interest margin compression and administers such sales in a coordinated process
with the Company's overall asset/liability management. During the third quarter,
the Company purchased $41.1 million of BOLI. The BOLI policies were purchased to
consolidate existing term life insurance contracts of executive officers and to
mitigate the mortality risk associated with death benefits provided for in the
executives' employment contracts. Adjustments to the cash surrender value of the
BOLI policies are recorded as non-interest income and totaled $493,000 in the
fourth quarter of 2002.
For the year ended December 31, 2002, total non-interest income was $60.7
million and increased $31.9 million, or 111%, when compared to the same period
in 2001. Excluding the impact of the Wayne Hummer Companies, contributing $23.8
million of non-interest revenue, and the $1.25 million partial settlement
related to the premium finance defalcation that was recovered in the first
quarter of 2002, non-interest income for 2002 increased by $6.8
- 14 -
million, or 24%, compared to 2001. This increase was comprised of increased fees
on mortgage loans sold from originating and selling residential real estate
loans into the secondary market of $4.4 million, increased premium income from
the covered call option transactions of $1.6 million, higher service charges on
deposit accounts of $617,000 due to a higher deposit base and a larger number of
accounts at the banking subsidiaries and higher other miscellaneous sources of
revenue totaling $1.9 million offset by decreases in recognized gains related to
the sale of premium finance receivables to an unrelated third party of $1.2
million, lower administrative services revenue contributed by Tricom of $583,000
and lower net securities gains of $230,000.
NON-INTEREST EXPENSE
Non-interest expense for the fourth quarter of 2002 totaled $29.5 million and
increased $12.3 million, or 71%, from the fourth quarter 2001 total of $17.2
million. Operating expenses of the Wayne Hummer Companies, the continued growth
and expansion of the banks with additional branches and the growth in the
premium finance business are the major causes for this increase. Since December
31, 2001 total deposits and total loans have both increased 33% and 27%,
respectively, requiring higher levels of staffing and other costs to both
attract and service the larger customer base. Excluding the impact of the Wayne
Hummer Companies, total non-interest expense increased $4.8 million, or 28%,
when compared to the fourth quarter of 2001, on par with the pace of the balance
sheet growth.
Salaries and employee benefits totaled $17.8 million for the fourth quarter of
2002, an increase of $8.4 million, or 90%, as compared to the prior year's
fourth quarter total of $9.4 million. This increase was primarily due to the
employee costs associated with the Wayne Hummer Companies, increases in salaries
and employee benefit costs as a result of continued growth and expansion of the
banking franchise, commissions associated with increased mortgage loan
origination activity and normal annual increases in salaries and the employee
benefit costs. Excluding the impact of the Wayne Hummer Companies, total
salaries and employee benefits expense increased $2.9 million, or 31%, when
compared to the fourth quarter of 2001 and increased by $652,000, or 6%, when
compared to the third quarter of 2002.
Other categories of non-interest expense, such as occupancy costs, equipment
expense and data processing, also increased over the prior year third 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 fourth quarter due mainly to the factors
mentioned earlier.
On a year-to-date basis non-interest expense totaled $106.0 million and
increased $40.2 million, or 61%, over the full year of 2001. The Wayne Hummer
Companies contributed $26.7 million of this increase. The $13.5 million
increase, excluding the Wayne Hummer Companies, is predominantly due to a $8.4
million increase in salaries and employee benefits costs and the higher general
operating costs associated with operating additional and larger banking offices.
Despite balance sheet growth in loans and deposits described earlier, Wintrust's
net overhead ratio decreased from 1.59% for the full year of 2001 to 1.41% for
the comparable period in 2002.
- 15 -
ASSET QUALITY
Allowance for Loan Losses
- -------------------------
A reconciliation of the activity in the balance of the allowance for loan losses
for the three months and years ended December 31, 2002 and 2001 is shown as
follows:
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
------------------------------------------------------------------------
(Dollars in thousands) 2002 2001 2002 2001
- -------------------------------------------------------------------------------------------------------------------------------
BALANCE AT BEGINNING OF PERIOD $ 17,199 $ 13,094 $ 13,686 $ 10,433
PROVISION FOR LOAN LOSSES 2,986 1,898 10,321 7,900
CHARGE-OFFS:
Commercial and commercial real estate loans 895 250 1,677 984
Home equity loans -- -- -- 25
Residential real estate loans -- 10 3 34
Consumer and other loans 122 7 294 34
Premium finance receivables 802 763 3,680 3,062
Indirect automobile loans 285 339 925 1,080
Tricom finance receivables -- 103 10 103
-------------- ------------- --------------- ---------------
Total charge-offs 2,104 1,472 6,589 5,322
-------------- ------------- --------------- ---------------
RECOVERIES:
Commercial and commercial real estate loans 35 7 314 163
Home equity loans -- 72 -- 72
Residential real estate loans -- -- -- --
Consumer and other loans 11 1 26 --
Premium finance receivables 216 43 456 245
Indirect automobile loans 47 43 150 194
Tricom finance receivables -- -- 26 --
-------------- ------------- --------------- ---------------
Total recoveries 309 166 972 675
-------------- ------------- --------------- ---------------
NET CHARGE-OFFS (1,795) (1,306) (5,617) (4,647)
-------------- ------------- ---------------
---------------
BALANCE AT DECEMBER 31 $ 18,390 $ 13,686 $ 18,390 $ 13,686
-------------- ------------- --------------- ---------------
ANNUALIZED NET CHARGE-OFFS (RECOVERIES) AS A
PERCENTAG OF AVERAGE:
Commercial and commercial real estate loans 0.27 % 0.11 % 0.12 % 0.10 %
Home equity loans -- (0.11) -- (0.02)
Residential real estate loans -- 0.03 -- 0.02
Consumer and other loans 0.71 0.03 0.44 0.05
Premium finance receivables 0.47 0.79 0.70 0.79
Indirect automobile loans 0.52 0.62 0.42 0.46
Tricom finance receivables -- 2.11 (0.08) 0.55
---------------------------------- -------------------------------------
Total loans, net of unearned income 0.28 % 0.27 % 0.24 % 0.26 %
---------------------------------- -------------------------------------
Net charge-offs as a percentage of the
provision for loan losses 60.11 % 68.81 % 54.42 % 58.82 %
---------------------------------- -------------------------------------
Loans at December 31 $ 2,556,086 $ 2,018,479
-------------------------------------
Allowance as a percentage of loans at period-end 0.72 % 0.68 %
-------------------------------------
- 16 -
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.
DECEMBER 31, September 30, June 30, December 31,
(Dollars in thousands) 2002 2002 2002 2001
- ---------------------------------------------------------------- ----------------- ---------------- ---------------- ---------------
PAST DUE GREATER THAN 90 DAYS AND STILL ACCRUING:
Residential real estate and home equity $ 32 $ 306 $ 16 $ 168
Commercial, consumer and other 3,047 2,247 1,055 1,059
Premium finance receivables 2,198 2,170 2,141 2,402
Indirect automobile loans 423 384 340 361
Tricom finance receivables -- -- -- --
----------------- ---------------- ---------------- ---------------
Total past due greater than 90 days and still accruing 5,700 5,107 3,552 3,990
----------------- ---------------- ---------------- ---------------
NON-ACCRUAL LOANS:
Residential real estate and home equity 711 346 401 1,385
Commercial, consumer and other 1,132 1,430 1,528 1,180
Premium finance receivables 4,725 4,731 5,417 5,802
Indirect automobile loans 254 409 163 496
Tricom finance receivables 20 75 104 104
----------------- ---------------- ---------------- ---------------
Total non-accrual 6,842 6,991 7,613 8,967
----------------- ---------------- ---------------- ---------------
TOTAL NON-PERFORMING LOANS:
Residential real estate and home equity 743 652 417 1,553
Commercial, consumer and other 4,179 3,677 2,583 2,239
Premium finance receivables 6,923 6,901 7,558 8,204
Indirect automobile loans 677 793 503 857
Tricom finance receivables 20 75 104 104
----------------- ---------------- ---------------- ---------------
Total non-performing loans 12,542 12,098 11,165 12,957
----------------- ---------------- ---------------- ---------------
OTHER REAL ESTATE OWNED 76 353 756 100
----------------- ---------------- ---------------- ---------------
TOTAL NON-PERFORMING ASSETS $ 12,618 $ 12,451 $ 11,921 $ 13,057
----------------- ---------------- ---------------- ---------------
TOTAL NON-PERFORMING LOANS BY CATEGORY AS A PERCENT OF ITS
OWN RESPECTIVE CATEGORY:
Residential real estate and home equity 0.14% 0.13% 0.09% 0.39%
Commercial, consumer and other 0.30 0.28 0.22 0.21
Premium finance receivables 1.50 1.47 1.64 2.36
Indirect automobile loans 0.38 0.43 0.27 0.47
Tricom finance receivables 0.10 0.36 0.54 0.57
----------------- ---------------- ---------------- ---------------
Total non-performing loans 0.49% 0.49% 0.48% 0.64%
----------------- ---------------- ---------------- ---------------
Total non-performing assets as a
percentage of total assets 0.34% 0.35% 0.37% 0.48%
----------------- ---------------- ---------------- ---------------
Allowance for loan losses as a
percentage of non-performing loans 146.63% 142.16% 143.39% 105.63%
----------------- ---------------- ---------------- ---------------
- 17 -
The provision for loan losses totaled $3.0 million for the fourth quarter of
2002, an increase of $1.1 million from a year earlier. For the quarter ended
December 31, 2002 net charge-offs totaled $1.8 million, up from the $1.3 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 0.28% in the fourth quarter of 2002 from 0.27% in the same period in 2001.
On a year-to-date basis the provision for loan losses totaled $10.3 million for
2002, an increase of $2.4 million over the same period last year. Net
charge-offs for 2002 increased to $5.6 million, a $970,000 or 21% increase over
the $4.6 million recorded in the same period last year. On a ratio basis, net
charge-offs as a percentage of average loans decreased to 0.24% in 2002 from
0.26% in 2001.
Management has actively monitored and pursued methods to reduce the level of
delinquencies in the indirect auto and premium finance portfolios. Management
believes the allowance for loan losses is adequate to provide for inherent
losses in the portfolio. There can be no assurances, however, that future losses
will not exceed the amounts provided for, thereby affecting future results of
operations. The amount of future additions to the allowance for loan losses will
be dependent upon the economy, changes in real estate values, interest rates,
the regulatory environment, the level of past-due and non-performing loans, and
other factors.
Non-performing Residential Real Estate, Commercial, Consumer and Other Loans
Total non-performing loans for Wintrust's residential real estate, commercial,
consumer and other loans were $4.9 million, up from the $4.3 million reported at
September 30, 2002, and the $3.8 million reported at December 31, 2001. These
loans consist primarily of a small number of commercial, residential real estate
and home equity loans, which management believes are well secured and in the
process of collection. The small number of such non-performing loans allows
management to monitor the status of these credits and work with the borrowers to
resolve these problems effectively.
Non-performing Premium Finance Receivables
The table below presents the level of non-performing premium finance receivables
as of December 31, 2002 and 2001, and the amount of net charge-offs for the
years then ended.
DECEMBER 31, December 31,
(Dollars in thousands) 2002 2001
- ------------------------------------------------------------------------- ------------------------- -----------------------
Non-performing premium finance receivables $ 6,923 $ 8,204
- as a percent of premium finance receivables 1.50% 2.36%
Net charge-offs of premium finance receivables $ 3,224 $ 2,817
- as a percent of premium finance receivables 0.70% 0.79%
- ------------------------------------------------------------------------- ------------------------- -----------------------
The improvement in the level of non-performing premium finance receivables since
December 31, 2001 is indicative of actions taken by management. As noted in
Wintrust's prior quarterly earnings releases in 2001 and 2002, Wintrust has
eliminated more than 1,300 relationships with insurance agents that were
referring new business to our premium finance subsidiary that had relatively
small balances and higher than normal delinquency rates. The business associated
with those accounts has become a less significant percent of the entire
portfolio and is nearly extinguished. Management continues to see progress in
this portfolio and continues to expect the level of non-performing loans related
to this portfolio to remain at relatively low levels.
- 18 -
The ratio of non-performing premium finance receivables fluctuates throughout
the year due to the nature and timing of canceled account collections from
insurance carriers. Due to the nature of collateral for premium finance
receivables it customarily takes 60-150 days to convert the collateral into cash
collections. Accordingly, the level of non-performing premium finance
receivables is not necessarily indicative of the loss inherent in the portfolio.
In the event of default, Wintrust has the power to cancel the insurance policy
and collect the unearned portion of the premium from the insurance carrier. In
the event of cancellation, the cash returned in payment of the unearned premium
by the insurer should generally be sufficient to cover the receivable balance,
the interest and other charges due. Due to notification requirements and
processing time by most insurance carriers, many receivables will become
delinquent beyond 90 days while the insurer is processing the return of the
unearned premium. Management continues to accrue interest until maturity as the
unearned premium is ordinarily sufficient to pay-off the outstanding balance and
contractual interest due.
Non-performing Indirect Automobile Loans
Total non-performing indirect automobile loans were $677,000 at December 31,
2002, decreasing from $793,000 at September 30, 2002 and from $857,000 at
December 31, 2001. The ratio of these non-performing loans to total indirect
automobile loans stood at 0.38% of total indirect automobile loans at December
31, 2002, 0.43% at September 30, 2002 and 0.47% at December 31, 2001. As noted
in the Allowance for Loan Losses table net charge-offs as a percent of total
indirect automobile loans has decreased from 0.62% in the fourth quarter of 2001
to 0.52% in the fourth quarter of 2002. The level of non-performing and net
charge-offs of indirect automobile loans continues to be below standard industry
ratios for this type of lending. Due to the impact of the current economic and
competitive environment surrounding this type of lending, management continues
to de-emphasize, in relation to other loan categories, growth in the indirect
automobile loan portfolio. Indirect automobile loans at December 31, 2002 were
$178.2 million, down from $184.2 million at December 31, 2001 and $203.6 million
at December 31, 2000.
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 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, unforeseen difficulties in
integrating the pending acquisition of Lake Forest Capital Management with
Wintrust, 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.
- 19 -