UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1999
Commission File Number 0-21923
WINTRUST FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Illinois 36-3873352
- ---------------------------------------- ------------------------------------
(State of incorporation of organization) (I.R.S. Employer Identification No.)
727 North Bank Lane
Lake Forest, Illinois 60045
-------------------------------------------------------
(Address of principal executive offices)
(847) 615-4096
------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of issuer's class of common
stock, as of the last practicable date.
Common Stock - no par value, 8,165,313 shares, as of April 30, 1999.
TABLE OF CONTENTS
PART I. -- FINANCIAL INFORMATION
Page
----
ITEM 1. Financial Statements.__________________________________________ 1-7
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. __________________________________ 8-25
ITEM 3. Quantitative and Qualitative Disclosures About Market Risks. __ 26-28
PART II. -- OTHER INFORMATION
ITEM 1. Legal Proceedings. ____________________________________________ 29
ITEM 2. Changes in Securities. ________________________________________ 29
ITEM 3. Defaults Upon Senior Securities. ______________________________ 29
ITEM 4. Submission of Matters to a Vote of Security Holders.___________ 29
ITEM 5. Other Information. ____________________________________________ 29
ITEM 6. Exhibits and Reports on Form 8-K. _____________________________ 29
Signatures ____________________________________________________ 30
Exhibit Index _________________________________________________ 31
PART I
ITEM 1 FINANCIAL STATEMENTS
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION (UNAUDITED)
(In thousands)
March 31, December 31, March 31,
1999 1998 1998
- ------------------------------------------------------------------------------------------------------------------------------
Assets
Cash and due from banks-non-interest bearing $ 32,989 $ 33,924 $ 33,822
Federal funds sold 28,945 18,539 36,701
Interest-bearing deposits with banks 3,545 7,863 71,271
Available-for-Sale securities, at fair value 195,142 209,119 183,443
Held-to-Maturity securities, at amortized cost - 5,000 5,001
Loans, net of unearned income 1,071,016 992,062 758,235
Less: Allowance for possible loan losses 7,518 7,034 5,665
- ------------------------------------------------------------------------------------------------------------------------------
Net loans 1,063,498 985,028 752,570
Premises and equipment, net 61,966 56,964 48,418
Accrued interest receivable and other assets 31,972 30,082 18,993
Goodwill and organizational costs 1,379 1,529 1,708
- ------------------------------------------------------------------------------------------------------------------------------
Total assets $1,419,436 $1,348,048 $1,151,927
==============================================================================================================================
Liabilities and Shareholders' Equity
Deposits:
Non-interest bearing $ 117,463 $ 131,309 $ 95,705
Interest bearing 1,135,336 1,097,845 950,029
- ------------------------------------------------------------------------------------------------------------------------------
Total deposits 1,252,799 1,229,154 1,045,734
Short-term borrowings 40,033 - -
Notes payable 2,000 - 22,903
Long-term debt - trust preferred securities 31,050 31,050 -
Accrued interest payable and other liabilities 16,330 12,639 13,326
- ------------------------------------------------------------------------------------------------------------------------------
Total liabilities 1,342,212 1,272,843 1,081,963
- ------------------------------------------------------------------------------------------------------------------------------
Shareholders' equity:
Preferred stock - - -
Common stock 8,161 8,150 8,137
Surplus 73,001 72,878 72,796
Common stock warrants 100 100 100
Retained deficit (4,038) (5,872) (11,075)
Accumulated other comprehensive income (loss) - (51) 6
- ------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 77,224 75,205 69,964
- ------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 1,419,436 $ 1,348,048 $ 1,151,927
==============================================================================================================================
See accompanying notes to unaudited consolidated financial statements.
- 1 -
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)
Three Months Ended
March 31,
1999 1998
- -----------------------------------------------------------------------------------------------------------------
Interest income
Interest and fees on loans $21,663 $16,368
Interest bearing deposits with banks 71 990
Federal funds sold 193 813
Securities 2,351 1,729
- -----------------------------------------------------------------------------------------------------------------
Total interest income 24,278 19,900
- -----------------------------------------------------------------------------------------------------------------
Interest expense
Interest on deposits 12,550 11,514
Interest on short-term borrowings and notes payable 177 382
Interest on long-term debt - trust preferred securities 735 -
- -----------------------------------------------------------------------------------------------------------------
Total interest expense 13,462 11,896
- -----------------------------------------------------------------------------------------------------------------
Net interest income 10,816 8,004
Provision for possible loan losses 784 1,267
- -----------------------------------------------------------------------------------------------------------------
Net interest income after provision for possible loan losses 10,032 6,737
- -----------------------------------------------------------------------------------------------------------------
Non-interest income
Fees on mortgage loans sold 1,298 1,191
Service charges on deposit accounts 334 211
Trust fees 225 166
Loan servicing fees - mortgage loans 49 34
Other 402 81
- -----------------------------------------------------------------------------------------------------------------
Total non-interest income 2,308 1,683
- -----------------------------------------------------------------------------------------------------------------
Non-interest expense
Salaries and employee benefits 5,079 4,278
Occupancy, net 676 572
Equipment expense 628 496
Data processing 482 398
Advertising and marketing 369 407
Professional fees 310 326
Other 1,992 1,455
- -----------------------------------------------------------------------------------------------------------------
Total non-interest expense 9,536 7,932
- -----------------------------------------------------------------------------------------------------------------
Income before income taxes 2,804 488
Income tax expense (benefit) 970 (554)
- -----------------------------------------------------------------------------------------------------------------
Net income $ 1,834 $ 1,042
=================================================================================================================
Net income per common share - Basic $ 0.22 $ 0.13
=================================================================================================================
Net income per common share - Diluted $ 0.22 $ 0.12
=================================================================================================================
Weighted average common shares outstanding 8,155 8,129
Dilutive potential common shares 323 321
- -----------------------------------------------------------------------------------------------------------------
Average common shares and dilutive common shares 8,478 8,450
=================================================================================================================
See accompanying notes to unaudited consolidated financial statements.
- 2 -
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
(In thousands)
Accumulated
other
Compre- Common Retained Compre- Total
hensive Common stock earnings hensive shareholders'
income stock Surplus warrants (deficit) income equity
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 $ 8,118 $ 72,646 $ 100 $(12,117) $ 43 $ 68,790
Comprehensive Income:
Net income $ 1,042 -- -- -- 1,042 -- 1,042
Other Comprehensive Income, net of tax:
Unrealized losses on securities, net of
reclassification adjustment (37) -- -- -- -- (37) (37)
--------
Comprehensive Income $ 1,005
========
Common stock issued upon exercise
of stock options 19 150 -- -- -- 169
- ------------------------------------------------- --------------------------------------------------------------------
Balance at March 31, 1998 $ 8,137 $ 72,796 $ 100 $(11,075) $ 6 $ 69,964
================================================= ====================================================================
Balance at December 31, 1998 $ 8,150 $ 72,878 $ 100 $ (5,872) $ (51) $ 75,205
Comprehensive Income:
Net income $ 1,834 -- -- -- 1,834 -- 1,834
Other Comprehensive Income, net of tax:
Unrealized gains on securities, net of
reclassification adjustment 51 -- -- -- -- 51 51
--------
Comprehensive Income $ 1,885
========
Common stock issued upon exercise
of stock options 11 123 -- -- -- 134
- ------------------------------------------------- --------------------------------------------------------------------
Balance at March 31, 1999 $ 8,161 $ 73,001 $ 100 $ (4,038) $ -- $ 77,224
================================================= ====================================================================
Three Months Ended March 31,
1999 1998
-------------- -------------
Disclosure of reclassification amount:
Unrealized holding gains (losses) arising during the period $ 51 $ (37)
Less: Reclassification adjustment for gains or losses included in net income - -
------------------------------
Unrealized gains (losses) on securities $ 51 $ (37)
==============================
See accompanying notes to unaudited consolidated financial statements.
- 3 -
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
Three Months Ended
March 31,
- --------------------------------------------------------------------------------------------------------------------------
1999 1998
- --------------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES:
Net income $ 1,834 $ 1,042
Adjustments to reconcile net income to net cash
used for, or provided by, operating activities:
Provision for possible loan losses 784 1,267
Depreciation and amortization 993 638
Deferred income tax benefit (370) (554)
Net accretion/amortization of securities (135) 80
Originations of mortgage loans held for sale (89,574) (84,192)
Proceeds from sales of mortgage loans held for sale 88,575 80,538
Increase in other assets, net (1,614) (3,546)
Increase in other liabilities, net 3,691 2,275
- --------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES 4,184 (2,452)
- --------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Proceeds from maturities of Available-for-Sale securities 144,025 144,564
Proceeds from maturities of Held-to-Maturity securities 5,000 -
Purchases of Available-for-Sale securities (129,854) (226,153)
Net decrease in interest-bearing deposits with banks 4,318 13,829
Net increase in loans (78,255) (42,667)
Purchases of premises and equipment, net (5,759) (4,802)
- --------------------------------------------------------------------------------------------------------------------------
NET CASH USED FOR INVESTING ACTIVITIES (60,525) (115,229)
- --------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Increase in deposit accounts 23,645 128,033
Increase (decrease) in short-term borrowings, net 40,033 (35,493)
Proceeds from notes payable 2,000 2,501
Common stock issued upon exercise of stock options 134 169
- --------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 65,812 95,210
- --------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 9,471 (22,471)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 52,463 92,994
- --------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $61,934 $ 70,523
==========================================================================================================================
See accompanying notes to unaudited consolidated financial statements.
- 4 -
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
---------------------
The consolidated financial statements of Wintrust Financial Corporation and
Subsidiaries ("Wintrust" or "Company") presented herein are unaudited, but in
the opinion of management reflect all necessary adjustments for a fair
presentation of results as of the dates and for the periods covered by the
consolidated financial statements.
Wintrust is a financial services holding company currently engaged in the
business of providing community banking services through its banking
subsidiaries to customers in the Chicago metropolitan area and financing for the
payment of commercial insurance premiums ("premium finance receivables"), on a
national basis, through its subsidiary, First Insurance Funding Corporation
("FIFC"). As of March 31, 1999, Wintrust had six wholly-owned bank subsidiaries
(collectively, "Banks"), all of which started as de novo institutions, including
Lake Forest Bank & Trust Company ("Lake Forest Bank"), Hinsdale Bank & Trust
Company ("Hinsdale Bank"), North Shore Community Bank & Trust Company ("North
Shore Bank"), Libertyville Bank & Trust Company ("Libertyville Bank"),
Barrington Bank & Trust Company, N.A. ("Barrington Bank") and Crystal Lake Bank
& Trust Company, N.A. ("Crystal Lake Bank"). FIFC is a wholly-owned subsidiary
of Crabtree Capital Corporation ("Crabtree") which is a wholly-owned subsidiary
of Lake Forest Bank. On September 30, 1998, Wintrust began operating a new trust
and investment subsidiary, Wintrust Asset Management Company, N.A. ("WAMC").
This wholly-owned subsidiary currently provides trust and investment services at
four of the Wintrust banks. Previously, the Company provided trust services
through the trust department of Lake Forest Bank.
The accompanying consolidated financial statements are unaudited and do not
include information or footnotes necessary for a complete presentation of
financial condition, results of operations or cash flows in accordance with
generally accepted accounting principles. The consolidated financial statements
should be read in conjunction with the consolidated financial statements and
notes included in the Company's Annual Report and Form 10-K for the year ended
December 31, 1998. Operating results for the three-month periods presented are
not necessarily indicative of the results which may be expected for the entire
year. Reclassifications of certain prior period amounts have been made to
conform with the current period presentation.
(2) Cash and Cash Equivalents
-------------------------
For the purposes of the Consolidated Statements of Cash Flows, the Company
considers cash and cash equivalents to include cash and due from banks and
federal funds sold which have an original maturity of 90 days or less.
- 5 -
(3) Earnings Per Share
------------------
The following table shows the computation of basic and diluted earnings per
share (in thousands, except per share data):
For the Three Months
Ended March 31,
1999 1998
--------- ---------
Net income (A) $ 1,834 $ 1,042
========= =========
Average common shares outstanding (B) 8,155 8,129
Effect of dilutive common shares 323 321
--------- ---------
Weighted average common shares and
effect of dilutive common shares (C) 8,478 8,450
========= =========
Net income per average common share - Basic (A/B) $ 0.22 $ 0.13
========= =========
Net income per average common share - Diluted (A/C) $ 0.22 $ 0.12
========= =========
The effect of dilutive common shares outstanding results from stock options,
stock warrants and shares to be issued under the Employee Stock Purchase Plan,
all being treated as if they had been either exercised or issued, and are
computed by application of the treasury stock method.
(4) Long-term Debt - Trust Preferred Securities
-------------------------------------------
In October 1998, the Company completed its offering of $31.05 million of 9.00%
Cumulative Trust Preferred Securities. For purposes of generally accepted
accounting principles, these securities are considered to be debt securities and
not a component of shareholders' equity. The Trust Preferred Securities offering
has increased Wintrust's regulatory capital under Federal Reserve guidelines.
Interest expense on the Trust Preferred Securities is also deductible for income
tax purposes. For further information on the Trust Preferred Securities, please
refer to Note 10 of the Company's Consolidated Financial Statements included in
the Annual Report and Form 10-K for the year ended December 31, 1998.
(5) Segment Information
-------------------
The segment financial information provided in the following tables has been
derived from the internal profitability reporting system used by management and
the chief decision makers to monitor and manage the financial performance of the
Company. The Company evaluates segment performance based on after-tax profit or
loss and other appropriate profitability measures common to each segment.
Certain indirect expenses have been allocated based on actual volume
measurements and other criteria, as appropriate. Inter-segment revenue and
transfers are generally accounted for at current market prices. The other
category, as shown in the following table, reflects parent company information.
- 6 -
The net interest income and segment profit of the banking segment includes
income and related interest costs from portfolio loans that were purchased from
the premium finance and indirect auto segments. For purposes of internal segment
profitability analysis, management reviews the results of its premium finance
and indirect auto segments as if all loans originated and sold to the banking
segment were retained within that segment's operations; thereby causing the
inter-segment elimination amounts shown in the following table.
The following is a summary of certain operating information for reportable
segments for the three month periods ended March 31, 1999 and 1998 (in
thousands):
For the Three Months Ended
March 31,
--------------------------------------
1999 1998
---------------- ----------------
Net Interest Income:
Banking $ 10,056 $ 7,324
Premium Finance 3,132 2,183
Indirect Auto 1,864 1,122
Trust 108 66
Inter-segment eliminations (3,609) (2,331)
Other (735) (360)
---------------- ----------------
Total $ 10,816 $ 8,004
================ ================
Non-interest Income:
Banking $ 2,140 $ 1,593
Premium Finance - -
Indirect Auto - 1
Trust 225 166
Inter-segment eliminations (57) (77)
---------------- ----------------
Total $ 2,308 $ 1,683
================ ================
Segment Profit (Loss):
Banking $ 2,361 $ 521
Premium Finance 944 391
Indirect Auto 671 339
Trust (232) 78
Inter-segment eliminations (1,206) 40
Other (704) (327)
---------------- ----------------
Total $ 1,834 $ 1,042
================ ================
Segment Assets:
Banking $1,450,907 $1,165,568
Premium Finance 274,444 186,835
Indirect Auto 236,718 153,516
Trust 2,672 412
Inter-segment eliminations (549,907) (358,414)
Other 4,602 4,010
---------------- ----------------
Total $1,419,436 $1,151,927
================ ================
- 7 -
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of financial condition as of March 31,
1999, compared with December 31, 1998, and March 31, 1998, and the results of
operations for the three month periods ended March 31, 1999 and 1998 should be
read in conjunction with the Company's unaudited consolidated financial
statements and notes contained in this report. This discussion contains
forward-looking statements that involve risks and uncertainties and, as such,
future results could differ significantly from management's current
expectations. See the last section of this discussion for further information on
forward-looking statements.
OVERVIEW AND STRATEGY
The Company's operating subsidiaries were organized within the last eight years,
with an average life of its six subsidiary banks of less than four years.
Wintrust has grown rapidly during the past few years and its Banks have been
among the fastest growing community-oriented de novo banking operations in
Illinois and the country. Because of the rapid growth, the historical
performance of the Banks and FIFC has been affected by costs associated with
growing market share, establishing new de novo banks, opening new branch
facilities, and building an experienced management team. The Company's financial
performance over the past several years generally reflects improving
profitability of the Banks, as they mature, offset by the significant costs of
opening new banks and branch facilities. The Company's experience has been that
it generally takes 13-24 months for new banking offices to first achieve
operational profitability. Similarly, management currently expects a start-up
phase for WAMC of a few years before its operations become profitable.
Lake Forest Bank, Hinsdale Bank, North Shore Bank, Libertyville Bank, Barrington
Bank and Crystal Lake Bank began operations in December 1991, October 1993,
September 1994, October 1995, December 1996 and December 1997, respectively.
Subsequent to those initial dates of operations, each of the Banks, except
Barrington Bank and Crystal Lake Bank, have established additional full-service
banking facilities. FIFC began operations in 1990 and is primarily engaged in
the business of financing insurance premiums written through independent
insurance agents or brokers on a national basis for commercial customers. On
September 30, 1998, WAMC began operations and offers a full range of trust and
investment services at many of the Wintrust banks.
Crystal Lake Bank, since moving into its permanent location in downtown Crystal
Lake in September 1998, opened a new drive-thru facility in March 1999, and is
planning to open a new full-service branch facility in south Crystal Lake in
mid-1999. In April and May 1998, North Shore Bank opened new branch facilities
in Wilmette and Glencoe, Illinois, respectively. In October 1998, the
Libertyville Bank opened a new branch facility that is located in south
Libertyville, which is near Vernon Hills, Illinois. In December 1998, the Lake
Forest Bank opened a new branch in the newly constructed, upscale senior housing
development known as Lake Forest Place. Also in late 1998, Hinsdale Bank's
Western Springs operation moved into its new, permanent full-service facility.
Expenses related to these new banking operations and the start-up of WAMC
predominantly impact only the first quarter 1999 operating results.
While committed to a continuing growth strategy, management's current focus is
to balance further asset growth with earnings growth by seeking to more fully
leverage the existing capacity within each of the Banks and FIFC. One aspect of
this strategy is to continue to pursue specialized earning asset niches, and to
shift the mix of earning assets to higher-yielding loans. In addition to Lake
Forest Bank's July 1998 acquisition of the
- 8 -
operations of a small business engaged in medical and municipal equipment
leasing, the Company may pursue acquisitions of other specialty finance
businesses that generate assets that are suitable for bank investment and/or
secondary market sales. To further balance growth with increased earnings,
management will continue to focus on less aggressive deposit pricing at the
Banks that have more established customer bases.
With the formation of WAMC, the Company intends to expand the trust and
investment management services that have already been provided during the past
several years through the trust department of the Lake Forest Bank. With a
separately chartered trust subsidiary, the Company is now able to offer trust
and investment management services to all communities served by Wintrust banks,
which management believes are some of the best trust markets in Illinois. In
addition to offering these services to existing bank customers at each of the
Banks, the Company believes WAMC can successfully compete for trust business by
targeting small to mid-size businesses and newly affluent individuals whose
needs command the personalized attention that will be offered by WAMC's
experienced trust professionals. During the fourth quarter of 1998, WAMC added
experienced trust professionals at North Shore Bank, Hinsdale Bank and
Barrington Bank. As in the past, a full complement of trust professionals will
continue to operate from offices at the Lake Forest Bank. Services offered by
WAMC typically will include traditional trust products and services, as well as
investment management, financial planning and 401(k) management services.
Similar to starting a de novo bank, the introduction of expanded trust services
is expected to cause relatively high overhead levels when compared to initial
fee income generated by WAMC. The overhead will consist primarily of the
salaries and benefits of experienced trust professionals. Management anticipates
that WAMC will be successful in attracting trust business over the next few
years, to a level that trust fees absorb the overhead of WAMC at that time.
RESULTS OF OPERATIONS
EARNINGS SUMMARY
Net income for the quarter ended March 31, 1999 totaled $1.8 million, an
increase of $792,000, or 76%, over the first quarter 1998 total of $1.0 million.
Net income per common share, on a diluted basis, totaled $0.22 per share for the
first quarter of 1999, compared to $0.12 per share for the first quarter of
1998, an increase of $0.10 per share, or 83%.
A significant factor that contributed to the prior year quarterly net income was
the recognition of income tax benefits from the realization of previously
unvalued tax loss benefits. For the three months ended March 31, 1998, the
Company recorded income tax benefits of $554,000. In the current year quarter
ended March 31, 1999, the Company, for financial reporting purposes, was
fully-taxable for Federal and state income tax purposes and recorded $970,000 of
income tax expense. See the Income Taxes section later in this discussion for
further information.
Due to the prior year recognition of tax benefits, the Company's true growth in
profitability over the past year has been masked. Therefore, a comparison of
pre-tax operating income is more representative of the Company's improvement in
operating results. On a pre-tax basis, operating income totaled $2.8 million for
the first three months of 1999, an increase of $2.3 million, or 475%, over the
$488,000 recorded in the first quarter of 1998. This significant improvement in
operating results has primarily been the result of enhanced performance of the
Company's more established subsidiaries.
- 9 -
NET INTEREST INCOME
Net interest income is defined as the difference between interest income and
fees on earning assets and interest expense on deposits, borrowings and
long-term debt. The related net interest margin represents the net interest
income on a tax equivalent basis as a percentage of average earning assets
during the period. The following table presents a summary of Wintrust's net
interest income and related net interest margin for the three months ended March
31, 1999 and 1998, calculated on a tax equivalent basis (dollars in thousands):
Three Months Ended Three Months Ended
March 31, 1999 March 31, 1998
----------------- -------------- --------- --------------- --------------- ----------
Average Interest Rate Average Interest Rate
----------------- -------------- --------- --------------- --------------- ----------
Interest-bearing deposits with banks $ 5,299 $ 71 5.43% $ 70,510 $ 990 5.69%
Federal funds sold 17,405 193 4.50 60,122 813 5.48
Investment securities 178,761 2,351 5.33 121,942 1,729 5.75
Loans, net of unearned income (1) 1,029,591 21,700 8.55 729,496 16,388 9.11
----------------- -------------- --------- --------------- --------------- ----------
Total earning assets 1,231,056 24,315 8.01% 982,070 19,920 8.23%
----------------- -------------- --------- --------------- --------------- ----------
Interest-bearing deposits 1,093,156 12,550 4.66% 877,652 11,514 5.32%
Short-term borrowings and notes payable 15,946 177 4.50 22,269 382 6.96
Long-term debt - trust preferred securities 31,050 735 9.47 - - -
----------------- -------------- --------- --------------- --------------- ----------
Total interest-bearing liabilities 1,140,152 13,462 4.79% 899,921 11,896 5.36%
----------------- -------------- --------- --------------- --------------- ----------
Tax equivalent net interest income $ 10,853 $ 8,024
============== ===============
Net interest spread 3.22% 2.87%
========= ==========
Net interest margin 3.58% 3.31%
========= ==========
- -------------------------------
<FN>
(1) Interest income on tax advantaged loans reflects a tax equivalent
adjustment based on a marginal federal corporate tax rate of 34%. The total
tax-equivalent adjustment is $37,000 and $20,000 for the quarters ended
March 31, 1999 and 1998, respectively.
</FN>
Tax equivalent net interest income for the quarter ended March 31, 1999 totaled
$10.9 million, an increase of $2.8 million, or 35%, as compared to the $8.0
million recorded in the same quarter of 1998. This increase was mainly the
result of loan growth coupled with a decline in overall funding cost rates.
Interest and fees on loans for the quarter ended March 31, 1999 totaled $21.7
million, an increase of $5.3 million, or 32%, over the prior year quarterly
total of $16.4 million. This growth was predominantly due to a $300 million, or
41%, increase in average total loans.
The net interest margin of 3.58% for the quarter ended March 31, 1999 improved
by 27 basis points over the first quarter 1998 margin of 3.31% mostly as a
result of lower rates paid on interest-bearing deposits and a higher proportion
of average loans to total average earning assets. The rate paid on
interest-bearing deposits averaged 4.66% for the first quarter of 1999 versus
5.32% for the same quarter in 1998, a decline of 66 basis points. This decline
was caused by a general market decline in rates coupled with management's
decision to be less aggressive on its deposit pricing at the more mature banks.
Although the yield on loans declined 56 basis points to 8.55% when compared to
the prior year quarter yield of 9.11%, the proportion of average loans to
average total earning assets increased from 74% in the first quarter of 1998 to
84% in the first quarter of 1999. This improved loan proportion creates a higher
net interest margin, as loans earn interest at a higher rate than
- 10 -
other earning assets. The loan yield declined when compared to the prior year
quarter due mainly to reductions in the prime lending rate during the last half
of 1998 and competitive pressures on commercial loan rates. The yield on total
earning assets for the first quarter of 1999 was 8.01% as compared to 8.23% in
1998; the decline of 22 basis points due to the lower yields on both loans and
other earning assets, offset somewhat by the higher proportion of average total
loans.
In early October 1998, the Company completed its 9.00% Cumulative Trust
Preferred Securities offering totaling $31.05 million, which is reflected as
long-term debt in the above table. The rate of 9.47% is higher than the 9.00%
coupon rate of the securities as it reflects the amortization of offering costs,
including underwriting fees, legal and professional fees, and other related
costs. These securities are considered capital for regulatory purposes and the
interest is deductible for tax purposes. The proceeds from this offering have
provided for, and will continue to provide for, the Company's growth and
expansion. The rate paid on short-term borrowings and notes payable declined to
4.50% in the first quarter of 1999 as compared to 6.96% in the first quarter of
1998. A general decline in market rates and a change in composition of this
category were the primary factors causing this 246 basis point decline. In 1998,
most of the average balance comprised notes payable under a line of credit
agreement with an unaffiliated bank, the rate of which was based on 125 basis
points over the LIBOR rate. In 1999, the average balance mainly comprised
short-term repurchase agreements, which generally have lower rates when compared
to the terms of the bank line of credit agreement.
The net interest margin for the first quarter of 1999 increased 25 basis points
as compared to the fourth quarter 1998 margin of 3.33%. This improvement was
mainly due to management's decision to be less aggressive on the pricing of
certain deposit products, as mentioned earlier. Excluding the impact of the
Trust Preferred Securities capital offering, the first quarter 1999 net interest
margin would have been 3.66%.
The following table presents a reconciliation of Wintrust's tax equivalent net
interest income, calculated on a tax equivalent basis, for the three month
periods between March 31, 1998 and March 31, 1999. The reconciliation sets forth
the change in the net interest income as a result of changes in volumes, changes
in rates and the change due to the combination of volume and rate changes (in
thousands):
Amount
------
Tax equivalent net interest income for the period ended March 31, 1998..... $ 8,024
Change due to average earning assets fluctuations (volume)............ 2,032
Change due to interest rate fluctuations (rate)....................... 654
Change due to rate/volume fluctuations (mix).......................... 143
-------------
Tax equivalent net interest income for the period ended March 31, 1999..... $ 10,853
=============
- 11 -
NON-INTEREST INCOME
For the first quarter of 1999, non-interest income increased $625,000, or 37%,
over the prior year quarter and totaled $2.3 million. This increase was
primarily the result of higher fees from the sale of mortgage loans, increased
deposit service charges and income from call option transactions related to
certain securities held by the Company. The following table presents
non-interest income by category (in thousands):
Three Months Ended
March 31,
------------------------------------
1999 1998
----------------- -----------------
Fees on mortgage loans sold $ 1,298 $ 1,191
Service charges on deposit accounts 334 211
Trust fees 225 166
Loan servicing fees - mortgage loans 49 34
Securities gains, net - -
Other income 402 81
----------------- -----------------
Total non-interest income $ 2,308 $ 1,683
================= =================
Fees on mortgage loans sold includes income from originating and selling
residential real estate loans into the secondary market, the majority of which
are sold without retaining servicing rights. For the three months ended March
31, 1999, these fees totaled $1.3 million and increased $107,000, or 9%, over
the 1998 quarterly total. A favorable mortgage rate environment, the related
high levels of refinancing activity, and a healthy residential real estate
market continued to result in high levels of fee income. There can be no
assurances, however, that any or all of these favorable factors will continue.
Accordingly, future fee income on mortgage loans sold may not be at the levels
that have been experienced during 1998 and the first quarter of 1999.
Service charges on deposit accounts totaled $334,000 for the first quarter of
1999, an increase of $123,000 as compared to the 1998 quarter. This increase was
due to a higher deposit base and a larger number of accounts at both the more
mature banks and the newer de novo banks. The majority of deposit service
charges relate to customary fees on overdrawn accounts and returned items. The
level of service charges received is substantially below peer group levels as
management believes in the philosophy of providing high quality service without
encumbering that service with numerous activity charges.
During the first quarter of 1999, the Company recognized approximately $173,000
in premium income from certain call option transactions. These transactions were
designed to utilize excess capital at certain banks, increase the total return
associated with holding certain securities as earning assets, and yield
additional fee income. This income is included in the category of other
non-interest income in the Consolidated Statements of Income, and was the
primary reason for the increase in this category when compared to the prior year
quarter.
Trust fees totaled $225,000 for the quarter ended March 31, 1999, a $59,000, or
36%, increase over the prior year quarter. This increase was mainly the result
of new business development efforts generated from a larger staff of experienced
trust officers. With the September 30, 1998 start-up of WAMC, it is anticipated
that additional fee income will be generated in the future from the expansion of
personalized trust and investment services to each bank subsidiary. The
introduction of these expanded services, however, is expected to cause
relatively high overhead levels when compared to the initial fee income
generated by WAMC, as more fully discussed in the previous Overview and Strategy
section.
- 12 -
NON-INTEREST EXPENSE
Non-interest expense for the first quarter of 1999 totaled $9.5 million and
increased $1.6 million, or 20%, over the first quarter 1998 total of $7.9
million. The continued growth and expansion of the de novo banks and the
development of WAMC were the primary causes for this increase. Since March 31,
1998, total deposits have grown 20% and total loan balances have risen 41%,
requiring higher levels of staffing and other costs to both attract and service
the larger customer base. The following table presents non-interest expense by
category (in thousands):
Three Months
Ended March 31,
---------------------------------------
1999 1998
------------------- -----------------
Salaries and employee benefits $ 5,079 $ 4,278
Occupancy, net 676 572
Equipment expense 628 496
Data processing 482 398
Advertising and marketing 369 407
Professional fees 310 326
Other 1,992 1,455
------------------- -----------------
Total non-interest expense $ 9,536 $ 7,932
=================== =================
Total salaries and employee benefits expense was $5.1 million for the first
quarter of 1999, an increase of $801,000, or 19%, as compared to $4.3 million
for the prior year quarter. As noted above, this increase was primarily due to
growth in the Company and the hiring of experienced trust professionals for the
new WAMC subsidiary. As a percent of average total assets, on an annualized
basis, salaries and employee benefits were 1.52% for the first quarter of 1999,
an improvement from 1.62% in the first quarter of 1998.
Occupancy costs, equipment expense and data processing for the first quarter of
1999 increased $104,000, $132,000 and $84,000, respectively, over the first
quarter 1998 totals due to the opening of new facilities, as discussed in the
Overview and Strategy section, and the general growth of the Company's customer
base.
Other non-interest expenses for the three months ended March 31, 1999 totaled
$2.0 million, an increase of $537,000, or 37%, over the same period in 1998 due
mainly to general growth of the Company and its customer base, including the
related higher levels of loan and deposit activities. This category of expense
includes the amortization of organizational costs and intangible assets, loan
expenses, correspondent bank service charges, postage, insurance, stationary and
supplies and other sundry expenses. Approximately $200,000 of this category's
total for the first quarter of 1999 relates to previously unamortized deferred
organizational costs, which were expensed in connection with the required
adoption of Statement of Position 98-5, "Reporting on the Costs of Start-up
Activities". This new accounting principle, which became effective as of January
1, 1999, requires companies to write-off previously capitalized start-up costs
and expense future start-up costs as incurred. In the first quarter of 1998,
approximately $22,000 was expensed for the normal amortization of deferred
organizational costs.
Despite the growth of the Company and the related increases in many of the
non-interest expense categories, Wintrust's ratio of non-interest expense to
total average assets declined from 3.00% in the first quarter of 1998 to 2.86%
for the first quarter of 1999, and is favorable to the Company's most recent
peer group ratio.
- 13 -
INCOME TAXES
The Company recorded income tax expense of $970,000 for the three months ended
March 31, 1999 versus the realization of $554,000 in income tax benefits for the
same period of 1998. Prior to the September 1, 1996 merger transaction that
formed Wintrust, each of the merging companies, except Lake Forest Bank, had net
operating losses and, based upon the start-up nature of the organization, there
was not sufficient evidence to justify the full realization of the net deferred
tax assets generated by those losses. Accordingly, during 1996, certain
valuation allowances were established against deferred tax assets with the
combined result being that a minimal amount of federal tax expense or benefit
was recorded. As the entities become profitable, the recognition of previously
unvalued tax loss benefits become available, subject to certain limitations, to
offset tax expense generated from profitable operations. The income tax benefit
recorded in first quarter of 1998 reflected management's determination that
certain of the subsidiaries' earnings history and projected future earnings were
sufficient to make a judgment that the realization of a portion of the net
deferred tax assets not previously valued was more likely than not to occur.
Full recognition of the net operating losses, for financial accounting purposes,
was completed in 1998.
OPERATING SEGMENT RESULTS
As shown in Note 5 to the Unaudited Consolidated Financial Statements, the
Company's operations consist of four primary segments: banking, premium finance,
indirect auto, and trust. The Company's profitability is primarily dependent on
the net interest income, provision for possible loan losses, non-interest income
and operating expenses of its banking segment. For the first quarter of 1999,
the banking segment's net interest income totaled $10.1 million, an increase of
$2.7 million, or 37%, as compared to the $7.3 million recorded in the same
quarter of 1998. This increase was the direct result of earning asset growth,
particularly in the loan portfolio, as earlier discussed in the Net Interest
Income section. The banking segment's non-interest income totaled $2.1 million
for the first quarter of 1999, an increase of $547,000, or 34%, over first
quarter of 1998. This increase was due mainly to higher fees from the sale of
mortgage loans, increased deposit service charges on a larger deposit base and
premium income from certain call option transactions, as discussed earlier. The
banking segment's after-tax profit for the quarter ended March 31, 1999 totaled
$2.4 million, an increase of $1.8 million, or 353%, as compared to the prior
year quarterly total of $521,000. This improved profitability was caused mainly
from higher levels of net interest income and non-interest income, as mentioned
above, created from the continued growth and maturation of the more established
de novo banks.
Net interest income from the premium finance segment totaled $3.1 million for
the quarter ended March 31, 1999, an increase of $949,000, or 43%, over the $2.2
million recorded in the same quarter of 1998. After-tax profit for the premium
finance segment totaled $944,000 for the first quarter of 1999 and increased
$553,000, or 141%, over the first quarter 1998 profit of $391,000. These
increases were due mostly to higher levels of premium finance receivables
created from new product offerings and targeted marketing programs, coupled with
the control of servicing costs by enhancing systems capabilities and capacity.
The indirect auto segment recorded $1.9 million of net interest income for the
first quarter of 1999, an increase of $742,000, or 66%, as compared to the prior
year quarterly total of $1.1 million. The first quarter 1999 after-tax segment
profit almost doubled when compared to the prior year quarter and totaled
$671,000. These increases were caused by growth in outstanding indirect auto
loans resulting from higher origination volumes from both existing dealers and
new dealer relationships.
- 14 -
The trust segment recorded non-interest income of $225,000 for the first quarter
of 1999 as compared to $166,000 in the same quarter of 1998, an increase of
$59,000, or 36%. This increased fee income was the result of new business
development efforts by a larger staff of experienced trust professionals that
were hired in connection with the start-up of WAMC. The trust segment after-tax
loss totaled $232,000 for the first three months of 1999 as compared to an
after-tax profit of $78,000 for the same period in 1998. The 1998 profit relates
to operations of the Lake Forest Bank trust department and, accordingly, certain
expenses of the bank were allocated as indirect costs to the trust segment. The
segment loss in 1999 was caused by the start-up of WAMC and the related salary
and employee benefit costs of hiring experienced trust professionals. As more
fully discussed in the Overview and Strategy section of this analysis,
management expects a start-up phase for the trust segment of a few years before
its operations become profitable.
FINANCIAL CONDITION
Total assets were $1.42 billion at March 31, 1999, an increase of $267.5
million, or 23%, over the $1.15 billion a year earlier, and $71.4 million, or
5%, over the $1.35 billion at December 31, 1998. Growth at the newer de novo
banks coupled with continued market share growth at the more mature banks fueled
these increases. Total funding liabilities, which include deposits, short-term
borrowings and long-term debt, were $1.33 billion at March 31, 1999, and
increased $257.2 million, or 24%, over the prior year, and $65.7 million, or 5%,
since December 31, 1998. These funding increases were primarily utilized to fund
growth in the loan portfolio.
Interest-Earning Assets
The following table sets forth, by category, the composition of earning asset
balances and the relative percentage of total earning assets as of the date
specified (dollars in thousands):
March 31, 1999 December 31, 1998 March 31, 1998
------------------------------- ------------------------------ -----------------------------
Loans: Balance Percent Balance Percent Balance Percent
------------------ ------------ ------------------ ----------- ----------------- ----------
Commercial and commercial
real estate $ 383,841 30% $ 366,229 30% $ 253,597 24%
Premium finance, net 210,169 16 178,138 14 143,373 13
Indirect auto, net 229,203 18 209,983 17 150,776 14
Home equity 111,070 8 111,537 9 113,765 11
Residential real estate 101,612 8 91,525 7 60,250 6
Installment and other 35,121 3 34,650 3 36,474 4
------------------ ------------ ------------------ ----------- ----------------- ----------
Total loans, net of
unearned income 1,071,016 83 992,062 80 758,235 72
------------------ ------------ ------------------ ----------- ----------------- ----------
Securities and money
market investments 227,632 17 240,521 20 296,416 28
------------------ ------------ ------------------ ----------- ----------------- ----------
Total earning assets $ 1,298,648 100% $ 1,232,583 100% $ 1,054,651 100%
================== ============ ================== =========== ================= ==========
Earning assets as of March 31, 1999 increased $244.0 million, or 23%, over the
balance a year earlier, and $66.1 million, or 5%, over the balance at the end of
1998. Earning assets as a percent of total assets at March 31, 1999 were 91.5%,
relatively constant with the ratios of 91.4% and 91.6% as of December 31, 1998
and March 31, 1998, respectively.
- 15 -
Total net loans were $1.07 billion at March 31, 1999, an increase of $79.0
million, or 8%, from $992.1 million at December 31, 1998, and an increase of
$312.8 million, or 41%, since March 31, 1998. Solid loan growth in commercial
loans and the specialty premium finance and indirect auto segment portfolios
were the main factors for these increases. Due to this growth, total net loans
comprised 83% of total earning assets at March 31, 1999 as compared to 80% as of
the end of 1998 and 72% at March 31, 1998. The loan-to-deposit ratio also
increased to 85.5% as of March 31, 1999 as compared to 80.7% at the end of 1998
and 72.5% as of March 31, 1998.
Commercial and commercial real estate loans, the largest loan category,
comprised 36% of total loans as of March 31, 1999 and has increased $130.2
million, or 51%, since March 31, 1998 and $17.6 million, or 5%, since the end of
1998. The strong growth over the past year has resulted mainly from the low
interest rate environment, a healthy economy and the hiring of additional
experienced lending officers.
Net indirect auto loans comprised 21% of total net loans as of March 31, 1999
and increased $78.4 million, or 52%, over a year ago, and $19.2 million, or 9%,
over the end of 1998. These increases were primarily the result of business
development efforts that added new dealers to the established network of
metropolitan Chicago auto dealer relationships. The Company utilizes credit
underwriting routines that management believes results in a high quality new and
used auto loan portfolio. The Company does not currently originate any
significant level of sub-prime loans, which are made to individuals with
impaired credit histories at generally higher interest rates, and accordingly,
with higher levels of credit risk. Management continually monitors the dealer
relationships and the Banks are not dependent on any one dealer as a source of
such loans.
Net premium finance receivables totaled $210.2 million at March 31, 1999 and
comprised 20% of the total loan portfolio. This total balance increased $66.8
million, or 47%, since March 31, 1998 and $32.0 million, or 18%, since the end
of 1998. This growth was primarily the result of increased market penetration
from new product offerings and targeted marketing programs. All premium finance
receivables originated by FIFC are currently being sold to the Banks and
consequently remain an asset of the Company. In the future, it is possible that
a portion of these receivables could be funded through an asset securitization
facility or sold to other non-affiliated entities. All premium finance
receivables, however financed, are subject to the Company's stringent credit
standards, and substantially all such loans are made to commercial customers.
The total of home equity loans has remained relatively constant when compared to
both March 31, 1998 and balance at the end of 1998, despite the large volume of
home equity loans that have been refinanced into first mortgage loans over the
past year as a result of low mortgage loan interest rates. Unused commitments on
home equity lines of credit have increased $41.4 million, or 24%, over the
balance at March 31, 1998 and totaled $173.5 million at March 31, 1999.
Residential real estate loans totaled $101.6 million as of March 31, 1999 and
increased $41.4 million, or 69%, over a year ago and $10.1 million, or 11%,
since December 31, 1998. Mortgage loans held for sale are included in this
category and totaled $19.0 million as of March 31, 1999, $18.0 million as of
December 31, 1998 and $13.2 million as of March 31, 1998. The Company collects a
fee on the sale of these loans into the secondary market, as discussed earlier
in the Non-interest Income section of this analysis. As these loans are
predominantly long-term fixed rate loans, the Company eliminates the interest
rate risk associated with these loans by selling them into the secondary market.
The remaining residential real estate loans in this category are maintained
within the Banks' portfolios and comprise mostly adjustable rate mortgage loans
and shorter-term fixed rate mortgage loans. The growth in this loan category
over the past year has been due mainly to the low mortgage interest rate
environment and related high levels of refinancing activity.
- 16 -
Securities and money market investments (i.e. federal funds sold and
interest-bearing deposits with banks) totaled $227.6 million at March 31, 1999,
a decline of $68.8 million, or 23%, since March 31, 1998 and $12.9 million, or
5%, since December 31, 1998. This decline was mostly caused by a reduction of
short-term interest-bearing deposits with banks, which was necessary to fund the
solid growth of the loan portfolio. The Company maintained no trading account
securities at March 31, 1999 or in any of the other previous reporting periods.
The balances of securities and money market investments fluctuate frequently
based upon deposit inflows and loan demand. As a result of anticipated
significant growth in the development of de novo banks, it has been Wintrust's
policy to maintain its securities portfolio in short-term, liquid, and
diversified high credit quality securities at the Banks in order to facilitate
the funding of quality loan demand as it emerges and to keep the Banks in a
liquid condition in the event that deposit levels fluctuate. Furthermore, since
short-term investment yields are generally comparable to long-term investment
yields in the current interest rate environment, there is little incentive to
invest in securities with extended maturities.
DEPOSITS
Total deposits at March 31, 1999 were $1.25 billion, an increase of $207.1
million, or 20%, over the March 31, 1998 total and an increase of $23.6 million,
or 2%, since December 31, 1998. The following table sets forth, by category, the
composition of deposit balances and the relative percentage of total deposits as
of the date specified (dollars in thousands):
March 31, 1999 December 31, 1998 March 31, 1998
--------------------------------- --------------------------------- --------------------------------
Percent Percent Percent
Balance of Total Balance of Total Balance of Total
----------------- -------------- ------------------ -------------- ------------------ -------------
Demand $ 117,463 9% $ 131,309 11% $ 95,705 9%
NOW 112,542 9 114,283 9 76,728 7
Money market 232,184 19 227,668 18 223,955 22
Savings 74,258 6 70,264 6 67,185 7
Certificates of deposit 716,352 57 685,630 56 582,161 55
----------------- -------------- ------------------ -------------- ------------------ -------------
Total $ 1,252,799 100% $ 1,229,154 100% $ 1,045,734 100%
================= ============== ================== ============== ================== =============
The percentage mix of deposits as of March 31, 1999 was relatively consistent
with the deposit mix as of the prior year dates. Growth in both the number of
accounts and balances has been the result of newer de novo bank and branch
growth, and continued marketing efforts at the more established banks to create
additional deposit market share.
SHORT-TERM BORROWINGS AND NOTES PAYABLE
As of March 31, 1999, the Company's short-term borrowings totaled $40.0 million
and consisted primarily of short-term repurchase agreements. At March 31, 1999,
the Company also had $2.0 million outstanding on its $40 million revolving
credit line with an unaffiliated bank. The outstanding balance on this credit
line as of March 31, 1998 was $22.9 million, which was subsequently paid-off in
October 1998 from the proceeds of the Company's Trust Preferred Securities
offering, as more fully explained below. The Company continues to maintain the
revolving credit line for corporate purposes such as to provide capital to fund
continued growth at the Banks, expansion of WAMC, possible future acquisitions
and for other general corporate matters.
- 17 -
LONG-TERM DEBT - TRUST PREFERRED SECURITIES
At March 31, 1999, long-term debt totaled $31.05 million of 9.00% Cumulative
Trust Preferred Securities, which were publicly sold in an offering that was
completed on October 9, 1998. The proceeds were used to pay-off the outstanding
balance on the revolving credit line, as mentioned above. The Trust Preferred
Securities offering has increased the Company's regulatory capital, has provided
for the continued growth of its banking and trust franchise, and will continue
to provide for growth and possible future acquisitions of other banks or finance
related companies. The ability to treat these Trust Preferred Securities as
regulatory capital under Federal Reserve guidelines, coupled with the Federal
income tax deductibility of the related interest expense, provides the Company
with a cost-effective form of capital. See Note 4 to the Unaudited Consolidated
Financial Statements for further information on these Trust Preferred
Securities.
SHAREHOLDERS' EQUITY
Total shareholders' equity was $77.2 million at March 31, 1999 and increased
$7.3 million since March 31, 1998 and $2.0 million since the end of 1998. These
increases were created mostly by the retention of net income and, to a lesser
extent, the exercise of certain options to acquire common stock.
The following table reflects various consolidated measures of capital at March
31, 1999, December 31, 1998 and March 31, 1998:
March 31, December 31, March 31,
1999 1998 1998
---------------------- ------------------- --------------------
Leverage ratio 7.5% 7.5% 6.0%
Ending tier 1 capital to risk-based asset ratio 8.2% 8.5% 7.4%
Ending total capital to risk-based asset ratio 9.2% 9.7% 8.0%
Dividend payout ratio 0.0% 0.0% 0.0%
The Company's capital ratios as of March 31, 1999 were higher in comparison to
the ratios a year earlier as a result of the Trust Preferred Securities
offering, as mentioned earlier. The continued asset growth of the Company,
coupled with slow capital growth primarily due to expenses associated with the
newer de novo banks, necessitated additional capital to both support the growth
and maintain the Company in the "adequately capitalized" category for total
risk-based capital. Partially for this reason, the Company issued the Trust
Preferred Securities, which qualify as regulatory capital under Federal Reserve
guidelines. To be "adequately capitalized", an entity must maintain a leverage
ratio of at least 4.0%, a Tier 1 risk-based capital ratio of at least 4.0%, and
a total risk-based capital ratio of at least 8.0%. To be considered "well
capitalized," an entity must maintain a leverage ratio of at least 5.0%, a Tier
1 risk-based capital ratio of at least 6.0%, and a total risk-based capital
ratio of at least 10.0%. As of March 31, 1999, the Company was considered "well
capitalized" under both the leverage ratio and the Tier 1 risk-based capital
ratio, and was considered "adequately capitalized" under the total risk-based
capital ratio.
- 18 -
ASSET QUALITY
ALLOWANCE FOR POSSIBLE LOAN LOSSES
A reconciliation of the activity in the balance of the allowance for possible
loan losses for the three month periods is shown as follows (dollars in
thousands):
Three Months Ended
March 31,
---------------------------------------------
1999 1998
------------------- ----------------
Balance at beginning of period $ 7,034 $ 5,116
Provision for possible loan losses 784 1,267
Loans charged-off
-----------------
Core banking loans 101 612
Premium finance 95 140
Indirect auto 160 112
------------------- ----------------
Total loans charged-off 356 864
------------------- ----------------
Recoveries
----------
Core banking loans 6 107
Premium finance 36 30
Indirect auto 14 9
------------------- ----------------
Total recoveries 56 146
------------------- ----------------
Net loans charged off (300) (718)
------------------- ----------------
Balance at March 31 $ 7,518 $ 5,665
=================== ================
Loans at March 31 $ 1,071,016 $ 758,235
=================== ================
Allowance as a percentage of loans 0.70% 0.75%
=================== ================
Annualized net charge-offs
as a percentage of average:
Core banking loans 0.06% 0.45%
Premium finance 0.12% 0.33%
Indirect auto 0.27% 0.30%
------------------- ----------------
Total loans 0.12% 0.38%
=================== ================
Annualized provision for
possible loan losses 38.27% 56.70%
=================== ================
- 19 -
Management believes that the loan portfolio is well diversified and well
secured, without undue concentration in any specific risk area. Control of loan
quality is continually monitored by management and is reviewed by the Banks'
Board of Directors and their Credit Committees on a monthly basis. Independent
external review of the loan portfolio is provided by the examinations conducted
by regulatory authorities and an independent loan review performed by an entity
engaged by the Board of Directors. The amount of additions to the allowance for
possible loan losses, which are charged to earnings through the provision for
possible loan losses, are determined based on a variety of factors, including
actual charge-offs during the year, historical loss experience, delinquent and
other potential problem loans, and an evaluation of economic conditions in the
market area.
The provision for possible loan losses totaled $784,000 for the first quarter of
1999, a decline of $483,000 from the $1.3 million recorded a year earlier. The
higher provision in 1998 was necessary to cover increased core loan charge-offs
that occurred at one banking office in early 1998. For the first quarter of
1999, net charge-offs totaled $300,000 and were significantly lower than the
$718,000 of net charge-offs recorded in 1998. As a percentage of average loans,
annualized net charge-offs for the first quarter of 1999 declined to 0.12%
versus 0.38% in the prior year quarter, the decline due to the prior year
charge-offs noted above.
Management believes the allowance for possible loan losses is adequate to cover
potential losses in the portfolio. There can be no assurance, however, that
future losses will not exceed the amounts provided for, thereby affecting future
results of operations. The amount of future additions to the allowance for
possible loan losses will be dependent upon the economy, changes in real estate
values, interest rates, the view of regulatory agencies toward adequate reserve
levels, the level of past-due and non-performing loans, and other factors.
- 20 -
PAST DUE LOANS AND NON-PERFORMING ASSETS
The following table sets forth the Company's non-performing assets at the dates
indicated. The information in the table should be read in conjunction with the
detailed discussion following the table (dollars in thousands).
March 31, December 31, March 31,
1999 1998 1998
---- ---- ----
Past Due greater than 90 days
and still accruing:
Core banking loans $ 335 $ 800 $ 381
Indirect automobile loans 317 274 47
Premium finance receivables 1,021 1,214 1,082
---------------------- -------------------- -------------------
Total 1,673 2,288 1,510
---------------------- -------------------- -------------------
Non-accrual loans:
Core banking loans 1,423 1,487 4,225
Indirect automobile loans 195 195 19
Premium finance receivables 1,439 1,455 2,039
---------------------- -------------------- -------------------
Total non-accrual loans 3,057 3,137 6,283
---------------------- -------------------- -------------------
Total non-performing loans:
Core banking loans 1,758 2,287 4,606
Indirect automobile loans 512 469 66
Premium finance receivables 2,460 2,669 3,121
---------------------- -------------------- -------------------
Total non-performing loans 4,730 5,425 7,793
---------------------- -------------------- -------------------
Other real estate owned 590 587 -
---------------------- -------------------- -------------------
Total non-performing assets $ 5,320 $ 6,012 $ 7,793
====================== ==================== ===================
Total non-performing loans by category as
a percent of its own respective category:
Core banking loans 0.28% 0.38% 0.99%
Indirect automobile loans 0.22% 0.22% 0.04%
Premium finance receivables 1.17% 1.50% 2.23%
---------------------- -------------------- -------------------
Total non-performing loans 0.44% 0.55% 1.03%
---------------------- -------------------- -------------------
Total non-performing assets as a
percentage of total assets 0.37% 0.45% 0.68%
Allowance for possible loan losses as
a percentage of non-performing loans 158.94% 129.66% 72.69%
- 21 -
Non-performing Core Banking Loans and Other Real Estate Owned
Total non-performing loans for the Company's core banking business were $1.8
million, or 0.28%, of the Company's core banking loans as of March 31, 1999, an
improvement from the $2.3 million, or 0.38%, of core banking loans as of
December 31, 1998. Non-performing core banking loans consist primarily of a
small number of commercial and real estate loans, of which management believes
are well secured and in the process of collection. The small number of such
non-performing loans allows management the opportunity to monitor closely the
status of these credits and work with the borrowers to resolve these problems
effectively. The other real estate owned balance of $590,000 consists of one
local residential real estate property that is currently listed for sale.
Management believes the Company is well secured and does not expect to incur a
loss on the property.
Non-performing Premium Finance Loans
Another significant category of non-performing loans is premium finance
receivables. Due to the nature of the collateral, it customarily takes 60-150
days to convert the collateral into cash collections. Accordingly, it is
important to note that the level of non-performing premium finance receivables
is not necessarily indicative of the loss inherent in the portfolio. In
financing insurance premiums, the Company does not assume the risk of loss
normally borne by insurance carriers. Typically the insured buys an insurance
policy from an independent insurance agent or broker who offers financing
through FIFC. The insured makes a down payment of approximately 15% to 25% of
the total premium and signs a premium finance agreement with FIFC for the
balance due, which amount FIFC disburses directly to the insurance carrier or
its agents to satisfy the unpaid premium amount. As the insurer earns the
premium ratably over the life of the policy, the unearned portion of the premium
secures payment of the balance due to FIFC by the insured. Under the terms of
FIFC's standard financing contract, FIFC has the right to cancel the insurance
policy if there is a default in the payment and to collect the unearned portion
of the premium from the insurance carrier. In the event of cancellation of a
policy, 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 as well. In the event an insurer becomes insolvent and unable
to pay claims to an insured or refund unearned premiums upon cancellation of a
policy to a finance company, each state provides a state guaranty fund that will
pay such a refund, less a per claim deductible in certain states. FIFC
diversifies its financing activities among a wide range of brokers and insurers.
Due to the notification requirements and the time to process the return of the
unearned premium by most insurance carriers, many receivables will become
delinquent beyond 90 days while the processing of the unearned premium refund to
the Company occurs. Management continues to accrue interest until maturity as
the unearned premium by the insurance carrier is ordinarily sufficient to
pay-off the outstanding principal and contractual interest due.
Total non-performing premium finance receivables as of March 31, 1999 totaled
$2.5 million, or 1.17%, of total premium finance receivables. This compares
favorably with 1.50% as of December 31, 1998 and 2.23% at March 31, 1998. This
ratio fluctuates throughout the year due to the nature and timing of canceled
account collections from insurance carriers.
Non-performing Indirect Automobile Loans
Total non-performing indirect automobile loans were $512,000 at March 31, 1999
as compared to $469,000 at December 31, 1998. These loans as a percent of total
indirect auto loans were 0.22% at both March 31, 1999 and December 31, 1998, and
0.04% at March 31, 1998, ratios that are well below standard industry ratios for
this type of loan category. Individual loans comprise smaller dollar amounts and
collection efforts are active.
- 22 -
Potential Problem Loans
In addition to those loans disclosed under "Past Due Loans and Non-performing
Assets," there are certain loans in the portfolio which management has
identified, through its problem loan identification system, which exhibit a
higher than normal credit risk. However, these loans are still considered
performing and, accordingly, are not included in non-performing loans. Examples
of these potential problem loans include certain loans that are in a past-due
status, loans with borrowers that have recent adverse operating cash flow or
balance sheet trends, or loans with general risk characteristics that the loan
officer feels might jeopardize the future timely collection of principal and
interest payments. Management's review of the total loan portfolio to identify
loans where there is concern that the borrower will not be able to continue to
satisfy present loan repayment terms includes factors such as review of
individual loans, recent loss experience and current economic conditions. The
principal amount of potential problem loans as of March 31, 1999 and December
31, 1998 were approximately $4.6 million and $5.1 million, respectively.
LIQUIDITY
Wintrust manages the liquidity position of its banking operations to ensure that
sufficient funds are available to meet customers' needs for loans and deposit
withdrawals. The liquidity to meet the demand is provided by maturing assets,
liquid assets that can be converted to cash, and the ability to attract funds
from external sources. Liquid assets refer to federal funds sold and to
marketable, unpledged securities which can be quickly sold without material loss
of principal.
INFLATION
A banking organization's assets and liabilities are primarily monetary. Changes
in the rate of inflation do not have as great an impact on the financial
condition of a bank as do changes in interest rates. Moreover, interest rates do
not necessarily change at the same percentage as does inflation. Accordingly,
changes in inflation are not expected to have a material impact on the Company.
An analysis of the Company's asset and liability structure provides the best
indication of how the organization is positioned to respond to changing interest
rates.
YEAR 2000 READINESS DISCLOSURE
A critical issue has emerged in the banking industry and generally for all
industries that are heavily reliant upon computers regarding how existing
software application programs and operating systems can accommodate the date
value for the "Year 2000." The Year 2000 issue is the result of computer
programs being written using two digits (rather than four) to define the
applicable year. As such, certain programs that have time-sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000. As a
result, the year 1999 (i.e. `99') could be the maximum date value these systems
will be able to accurately process. Like most financial service providers, the
Company may be significantly affected by the Year 2000 problem due to the nature
of financial information. Furthermore, if computer systems are not adequately
changed to properly identify the Year 2000, many computer applications could
fail or generate erroneous reports.
- 23 -
During 1997, management began the process of working with its two outside data
processors and other software vendors to ensure that the Company is prepared for
the Year 2000. Management has been in frequent contact with the outside data
providers and has developed the Company's testing strategy and Year 2000 plan
with the knowledge and understanding of each of the data providers' plans and
timetables. Preliminary testing by the Company of its outside data providers'
Year 2000 compliance efforts has already taken place and final testwork is
anticipated to be completed in the second quarter of 1999. Additionally,
critical in-house hardware and related systems are being reviewed and upgraded,
if necessary, to be Year 2000 compliant. Testing of these critical hardware
systems, such as workstations, file servers, the wide area network and all local
area networks, is expected to be completed no later than June 30, 1999. The
completion of upgraded software installations, where previous software versions
were not Year 2000 compliant, is anticipated to be completed prior to June 30,
1999. The Company has also completed customer assessments to determine whether
any significant potential exposure exists.
The Company is in the process of finalizing its contingency plan and it is
currently anticipated that applicable testing of this plan will be completed by
June 30, 1999. The Company is regulated by the Federal Reserve Bank, the Office
of the Comptroller of the Currency and the State of Illinois bank regulatory
agency, all of which are active in monitoring preparedness planning for
systems-related Year 2000 issues. Total estimated Year 2000 compliance costs are
not expected to exceed $200,000 and, accordingly, are not expected to be
material to the Company's financial position or results of operations in any
given year. This cost does not include internal salary and employee benefit
costs for persons that have responsibilities, or are involved, with the Year
2000 project.
The above estimated dates and costs are based on management's best estimates and
include assumptions of future events, including availability of certain
resources, third party modification plans and other factors. However, there can
be no guarantee that current estimates will be achieved, and actual results
could differ significantly from these plans. In the event the Company does
experience Year 2000 systems failures or malfunctions and despite the testing
preparedness efforts, or if the outside data processors prove not to be Year
2000 compliant, the Company's operations would be disrupted until the systems
are restored, and the Company's ability to conduct its business may be adversely
impacted in connection with processing customer transactions related to its
banking operations. Management anticipates, however, that the contingency plans
being developed would enable the Company to continue to conduct transactions on
a manual basis, if necessary, for a limited period of time until the Year 2000
problems are rectified. In addition, there can be no guarantee that the systems
of the Company's outside data providers, of which the Company relies upon, will
be timely converted, or that failure to convert would not have a significant
adverse impact to the Company.
- 24 -
FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements within the meaning of Section
27A of the Securities Act and Section 21E of the Securities Exchange Act of
1934. 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. Such forward-looking
statements may be deemed to include, among other things, statements relating to
anticipated improvements in financial performance and management's long-term
performance goals, as well as statements relating to the anticipated effects on
financial results of condition from expected development or events, the
Company's business and growth strategies, including anticipated internal growth,
plans to form additional de novo banks and to open new branch offices, and to
pursue additional potential development or acquisition of banks or specialty
finance businesses. Actual results could differ materially from those addressed
in the forward-looking statements as a result of numerous factors, including the
following:
o The level of reported net income, return on average assets and return on
average equity for the Company will in the near term continue to be
impacted by start-up costs associated with de novo bank formations, branch
openings, and expanded trust operations. De novo banks may typically
require 13 to 24 months of operations before becoming profitable, due to
the impact of organizational and overhead expenses, the start-up phase of
generating deposits and the time lag typically involved in redeploying
deposits into attractively priced loans and other higher yielding earning
assets. Similarly, the expansion of trust services through the Company's
new trust subsidiary, WAMC, is expected to be in a start-up phase for
approximately the next few years, before becoming profitable.
o The Company's success to date has been and will continue to be strongly
influenced by its ability to attract and retain senior management
experienced in banking and financial services.
o Although management believes the allowance for possible loan losses is
adequate to absorb losses that may develop in the existing portfolio of
loans and leases, there can be no assurance that the allowance will prove
sufficient to cover actual future loan or lease losses.
o If market interest rates should move contrary to the Company's gap position
on interest earning assets and interest bearing liabilities, the "gap" will
work against the Company and its net interest income may be negatively
affected.
o The financial services business is highly competitive which may affect the
pricing of the Company's loan and deposit products as well as its services.
o The Company's ability to adapt successfully to technological changes to
compete effectively in the marketplace.
o The extent of the Company's success, and that of its outside data
processing providers, software vendors, and customers, in implementing and
testing Year 2000 compliant hardware, software and systems, and the
effectiveness of appropriate contingency plans being developed.
o Changes in the economic environment may influence the growth rate of loans
and deposits, the quality of the loan portfolio and loan and deposit
pricing.
- 25 -
ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
As a continuing part of its financial strategy, the Company attempts to manage
the impact of fluctuations in market interest rates on net interest income. This
effort entails providing a reasonable balance between interest rate risk, credit
risk, liquidity risk and maintenance of yield. Asset-liability management
policies are established and monitored by management in conjunction with the
boards of directors of the Banks, subject to general oversight by the Company's
Board of Directors. The policy establishes guidelines for acceptable limits on
the sensitivity of the market value of assets and liabilities to changes in
interest rates.
Derivative Financial Instruments
One method utilized by financial institutions to limit market risk is to enter
into derivative financial instruments. A derivative financial instrument
includes interest rate swaps, interest rate caps and floors, futures, forwards,
option contracts and other financial instruments with similar characteristics.
The Company had not previously entered into any such derivative financial
instruments until August 1998, when the Company purchased an interest rate cap
contract that matures in December 1999 and has a notional principal amount of
$100 million. In April 1999, the Company entered into another interest rate cap
contract with a $60 million notional principal amount that matures in April
2000. These contracts were purchased to mitigate the effect of rising rates on
certain of its floating rate deposit products and fixed rate loan products.
During the first quarter of 1999, the Company also entered into certain covered
call option transactions related to certain securities held by the Company.
These transactions were designed to utilize excess capital at certain banks and
increase the total return associated with holding these securities as earning
assets. The Company may enter into other derivative financial instruments in the
future to more effectively manage its market risk.
Commitments To Extend Credit And Standby Letters Of Credit
In addition, the Company is a party to financial instruments with off-balance
sheet risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend credit and
standby letters of credit. These instruments involve, to varying degrees,
elements of credit and interest rate risk in excess of the amount recognized in
the consolidated statements of condition. Commitments to extend credit are
agreements to lend to a customer as long as there is no violation on any
condition established in the contract. Commitments may require collateral from
the borrower if deemed necessary by the Company and generally have a fixed
expiration date. Standby letters of credit are conditional commitments issued by
the Banks to guarantee the performance of a customer to a third party up to a
specified amount and with specific terms and conditions. Commitments to extend
credit and standby letters of credit are not recorded as an asset or liability
by the Company until the instrument is exercised.
Interest Rate Sensitivity Analysis
Interest rate sensitivity is the fluctuation in earnings resulting from changes
in market interest rates. Wintrust continuously monitors not only the
organization's current net interest margin, but also the historical trends of
these margins. In addition, Wintrust also attempts to identify potential adverse
swings in net interest income in future years, as a result of interest rate
movements, by performing computerized simulation analysis of potential interest
rate environments. If a potential adverse swing in net interest margin and/or
net income are identified, management then would take appropriate actions within
its asset/liability structure to counter these potential adverse situations.
Please refer to the "Net Interest Income" section for further discussion of the
net interest margin.
- 26 -
The Company's exposure to market risk is reviewed on a regular basis by
management and the boards of directors of the Banks and the Company. The
objective is to measure the effect on net income and to adjust balance sheet and
off-balance sheet instruments to minimize the inherent risk while at the same
time maximize income. Tools used by management include a standard gap report and
a rate simulation model whereby changes in net interest income are measured in
the event of various changes in interest rate indices. An institution with more
assets than liabilities repricing over a given time frame is considered asset
sensitive and will generally benefit from rising rates and conversely, a higher
level of repricing liabilities versus assets would be beneficial in a declining
rate environment. The following table illustrates the Company's gap position as
of March 31, 1999.
Time to Maturity or Repricing
-----------------------------
0-90 91-365 1-5 Over 5
Days Days Years Years Total
---- ---- ----- ----- -----
(Dollars in thousands)
Assets:
Loans, net of unearned income........ $ 482,235 $ 254,006 $ 292,167 $ 42,608 $ 1,071,016
Securities........................... 140,858 18,637 35,548 99 195,142
Interest-bearing bank deposits....... 749 2,796 - - 3,545
Federal funds sold................... 28,945 - - - 28,945
Other................................ 2,796 - - 117,992 120,788
--------------- ---------------- ---------------- -------------- -----------------
Total rate sensitive assets (RSA) 655,583 275,439 327,715 160,699 1,419,436
=============== ================ ================ ============== =================
Liabilities and Shareholders' Equity:
NOW.................................. 112,542 - - - 112,542
Savings and money market............. 292,562 - - 13,880 306,442
Time deposits........................ 362,898 251,694 99,759 2,001 716,352
Short term borrowings................ 40,033 - - - 40,033
Notes payable........................ 2,000 - - - 2,000
Demand deposits & other
Liabilities....................... 27,994 - - 105,799 133,793
Trust preferred securities........... - - - 31,050 31,050
Shareholders' equity................. - - - 77,224 77,224
--------------- ---------------- ---------------- -------------- -----------------
Total rate sensitive liabilities
and equity (RSL)............... 838,029 251,694 99,759 229,954 1,419,436
=============== ================ ================ ============== =================
Cumulative gap
(GAP = RSA - RSL) (1)................ $ (182,446) $ (158,701) $ 69,255 $ -
=============== ================ ================ ==============
Cumulative RSA/RSL (1).................. 0.78 0.85 1.06
RSA/Total assets........................ 0.46 0.19 0.23
RSL/Total assets (1).................... 0.59 0.18 0.07
GAP/Total assets (1).................... (13)% (11)% 5%
GAP/Cumulative RSA (1).................. (28)% (17)% 6%
- ------------------------------------------------------
<FN>
(1) The gap amount and related ratios do not reflect $160 million notional
amount of interest rate caps, as discussed on the following page.
</FN>
- 27 -
While the gap position illustrated on the previous page is a useful tool that
management can assess for general positioning of the Company's and its
subsidiaries' balance sheets, it is only as of a point in time and does not
reflect the impact of either the $100 million notional principal amount interest
rate cap purchased in August 1998 or the $60 million notional principal amount
interest rate cap that was recently purchased in April 1999. These interest rate
caps were purchased to mitigate the effect of rising rates on certain floating
rate deposit products and fixed rate loan products. The $100 million notional
amount interest rate cap contract expires in December 1999 and the $60 million
notional amount interest rate cap contract expires in April 2000. Both interest
rate caps reprice on a monthly basis.
Management uses an additional measurement tool to evaluate its asset/liability
sensitivity which determines exposure to changes in interest rates by measuring
the percentage change in net interest income due to changes in interest rates
over a two-year time horizon. Management measures its exposure to changes in
interest rates using many different interest rate scenarios. One interest rate
scenario utilized is to measure the percentage change in net interest income
assuming an instantaneous permanent parallel shift in the yield curve of 200
basis points, both upward and downward. This analysis also includes the impact
of the $100 million notional amount interest rate cap agreement mentioned above.
Utilizing this measurement concept, the interest rate risk of the Company,
expressed as a percentage change in net interest income over a two-year time
horizon due to changes in interest rates, at March 31, 1999, is as follows:
+200 Basis -200 Basis
Points Points
====== ======
Percentage change in net interest income due to an immediate 200 basis point
change in interest rates over a two-year time horizon.... 2.1% 1.0%
=============== ===============
- 28 -
PART II
ITEM 1: LEGAL PROCEEDINGS.
This item has been omitted from this Form 10-Q since it is inapplicable or would
contain a negative response.
ITEM 2: CHANGES IN SECURITIES.
This item has been omitted from this Form 10-Q since it is inapplicable or would
contain a negative response.
ITEM 3: DEFAULTS UPON SENIOR SECURITIES.
This item has been omitted from this Form 10-Q since it is inapplicable or would
contain a negative response.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
This item has been omitted from this Form 10-Q since it is inapplicable or would
contain a negative response.
ITEM 5: OTHER INFORMATION.
None.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
--------
27 Financial Data Schedule.
(b) Reports on Form 8-K.
-------------------
No reports on Form 8-K were filed by the Company during the quarter
ended March 31, 1999.
- 29 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WINTRUST FINANCIAL CORPORATION
(Registrant)
Date: May 13, 1999 /s/ Edward J. Wehmer
President & Chief Executive Officer
Date: May 13, 1999 /s/ David A. Dykstra
Executive Vice President & Chief Financial Officer
(Principal Financial Officer)
Date: May 13, 1999 /s/ Todd A. Gustafson
Vice President - Finance
(Principal Accounting Officer)
- 30 -
EXHIBIT INDEX
Exhibit 27 Financial Data Schedule
- 31 -