Filed by Wintrust Financial Corporation
(Commission File No. 0-21923)
pursuant to Rule 425 under the
Securities Act of 1933, as amended
Subject Company: Advantage National Bancorp, Inc.
ON JULY 17, 2003, WINTRUST FINANCIAL CORPORATION ISSUED THE FOLLOWING PRESS
RELEASE:
[WINTRUST FINANCIAL CORPORATION LETTERHEAD]
NEWS RELEASE
FOR IMMEDIATE RELEASE July 17, 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
SECOND QUARTER EARNINGS;
SECOND QUARTER NET EARNINGS UP 43%
LAKE FOREST, ILLINOIS -- Wintrust Financial Corporation ("Wintrust")
(Nasdaq: WTFC) announced quarterly net income of $9.0 million for the quarter
ended June 30, 2003, an increase of $2.7 million, or 43%, over the $6.3 million
recorded in the second quarter of 2002. On a per share basis, net income for the
second quarter of 2003 totaled $0.49 per diluted common share, a $0.12 per
share, or 32%, increase as compared to the 2002 second quarter total of $0.37
per diluted common share. The lower growth rate in the earnings per share as
compared to net income was primarily due to the issuance of 1,362,750 additional
shares of common stock in June and July of 2002. The return on average equity
for the second quarter of 2003 stood at 14.95% versus 14.75% for the second
quarter of 2002.
For the first six months of 2003, net income totaled $17.3 million, or
$0.94 per diluted common share, an increase of $4.6 million, or 36%, when
compared to $12.7 million, or $0.77 per diluted common share, for the same
period in 2002. The results for the first six months of the prior year included
pretax income of $1.25 million, or $754,000 after-tax ($0.05 per common diluted
share), for a partial settlement related to a non-recurring charge recorded in
2000. Return on average equity for the first six months of 2003 was 14.74%
versus 15.85% for the same period of 2002.
"We are very pleased with the results for the first half of 2003, given the
challenging interest rate environment," commented Edward J. Wehmer, President
and Chief Executive Officer. "The results reflect our ability to generate growth
to offset continued net interest margin pressures. On an annualized basis, loans
have grown 27% and deposits 22% since the end of last year."
1
Mr. Wehmer added, "So far this year, we strengthened our capital position,
developed plans for our 8th de novo bank, announced our first bank acquisition
and continued to add experienced customer-oriented brokerage representatives in
our banking facilities to bolster our wealth management capabilities. We remain
comfortable with the existing range of the analysts' earnings estimate for 2003
of $1.75 to $1.90 per share."
Wintrust's key operating measures and growth rates for the first six months
of 2003 as compared to the prior year period are shown in the table below:
SIX MONTHS Six Months
ENDED Ended % or
JUNE 30, June 30, basis point (bp)
(Dollars in thousands, except per share data) 2003 2002 Change
------------------------------------------------- ------------------ ----------------- -------------------
Net income $ 17,282 $ 12,669 36%
Net income per common share - Diluted $ 0.94 $ 0.77 22%
Net revenue (1) $ 91,780 $ 73,108 26%
Net interest income $ 54,932 $ 46,585 18%
Net interest margin (4) 3.14% 3.52% (38)bp
Core net interest margin (2) (4) 3.26% 3.72% (46)bp
Net overhead ratio (3) 1.18% 1.54% (36)bp
Return on average assets 0.90% 0.88% 2 bp
Return on average equity 14.74% 15.85% (111)bp
At end of period
Total assets $ 4,132,394 $ 3,219,400 28%
Total loans $ 2,896,148 $ 2,308,945 25%
Total deposits $ 3,419,946 $ 2,608,507 31%
Book value per common share $ 14.31 $ 12.15 18%
Market price per common share $ 29.79 $ 34.57 (14)%
Common shares outstanding 17,428,118 16,954,850 3%
-------------------------------------------------------------------------------------------------------------------------
(1) Net revenue is net interest income plus non-interest income.
(2) Core net interest margin excludes interest expense associated with
Wintrust's Long-term Debt - Trust Preferred Securities.
(3) 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. A lower ratio indicates a higher degree
of efficiency.
(4) See "Supplemental Financial Measures/Ratios" for additional information on
this performance measure/ratio.
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"). The Wayne Hummer Companies' results of operations are included only
since the effective date of acquisition (February 1, 2002) in Wintrust's
results. As of June 30, 2003, approximately $261 million of customers' funds
have migrated from the money market mutual fund managed by Wayne Hummer Asset
Management Company into insured bank deposits of the Wintrust
2
banks. The introduction of bank and trust products to customers of the Wayne
Hummer Companies continues, as well as the referral of banking customers to
Wayne Hummer's brokerage operation. We are actively pursuing the placement of
brokerage representatives into the markets served by Wintrust banks.
On February 4, 2003, Wintrust completed the acquisition of Lake Forest
Capital Management Company based in Lake Forest, Illinois. Lake Forest Capital
Management has been merged into and is operating as a separate division of Wayne
Hummer Asset Management Company, Wintrust's existing asset management
subsidiary. Lake Forest Capital Management Company's results of operations are
included only since the effective date of acquisition (February 1, 2003) in
Wintrust's 2003 results. Lake Forest Capital Management Company further expands
our wealth management business in the Chicago metropolitan area.
Subsequent second to quarter-end, Wintrust announced the signing of a
definitive agreement to acquire Advantage National Bancorp, Inc. ("Advantage").
Advantage is the parent company of Advantage National Bank that has locations in
Elk Grove Village and Roselle, Illinois. Advantage began operations in January
2001 and had total assets of approximately $107 million as of June 30, 2003.
Subject to approval by regulators, shareholders of Advantage and certain closing
conditions, closing is expected to occur in the fourth quarter of 2003.
Total assets rose to $4.13 billion at June 30, 2003, an increase of $913
million, or 28%, compared to $3.22 billion a year ago, and an increase of $411
million, or 22% on an annualized basis, since December 31, 2002. Total deposits
as of June 30, 2003 were $3.42 billion, an increase of $811 million, or 31%, as
compared to $2.61 billion at June 30, 2002, and an increase of $331 million, or
22% on an annualized basis, since year-end 2002. Total loans grew to $2.90
billion as of June 30, 2003, a $587 million, or 25%, increase over the $2.31
billion balance as of a year ago, and an increase of $340 million, or 27% on an
annualized basis, since December 31, 2002.
For the second quarter of 2003, net interest income totaled $28.3 million,
increasing $3.9 million, or 16%, compared to the second quarter of 2002 and $1.7
million, or 26% on an annualized basis, over the first quarter of 2003. Average
earning assets grew $879 million over the second quarter of 2002, a 32%
increase. Strong loan growth in the second quarter of 2003 continued to fuel
earning asset growth as average loans increased over the first quarter of 2003
by $162 million, or 24% on an annualized basis. The net interest margin
3
for the second quarter of 2003 was 3.14%, compared to 3.15% in the first quarter
of 2003 and 3.56% in the second quarter of 2002. Net interest income totaled
$54.9 million for the first six months of 2003, increasing $8.3 million, or 18%,
over the same period in 2002. The net interest margin for the first six months
of 2003 was 3.14% compared to 3.52% in 2002.
Non-interest income totaled $36.8 million for the first six months of 2003,
increasing $10.3 million, or 39%, over the same period in 2002 and totaled $19.1
million in the second quarter of 2003, increasing $5.3 million, or 39%, over the
second quarter of 2002. The primary contributors to the increase in non-interest
income were the additional fees realized from mortgage loans sold and premium
income received on covered call option transactions.
Non-interest expense totaled $59.4 million for the first six months of
2003, increasing $10.8 million, or 22%, over the first six months of 2002 and
totaled $30.5 million in the second quarter of 2003, increasing $4.6 million, or
18%, over the second quarter of 2002. The growth in non-interest expense is
attributable to increases in salaries and benefits and operating costs as a
result of continued growth and expansion of the de novo banks, normal annual
increases in salaries and increased costs related to employee benefits. The net
overhead ratio for the first six months of 2003 improved to 1.18% from 1.54% in
the same period last year.
Non-performing assets totaled $14.5 million, or 0.35% of total assets, at
June 30, 2003, compared to the December 31, 2002 level of $12.6 million, or
0.34% of total assets, and the June 30, 2002 level of $11.9 million, or 0.37% of
total assets. On July 1, 2003 a customer brought a single credit in the amount
of $1.9 million, classified as non-performing at June 30, 2003, into a
performing status.
4
Wintrust is a financial holding company whose common stock is traded on the
Nasdaq Stock Market(R) (Nasdaq: WTFC). 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, Cary,
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. 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 accounts as well as the Wayne
Hummer Companies' four proprietary mutual funds. Wayne Hummer Trust Company, a
trust subsidiary, allows Wintrust to service customers' trust and investment
needs at each banking location. Wintrust Information Technology Services Company
provides information technology support, item capture and statement preparation
services to the Wintrust subsidiaries.
Currently, Wintrust operates a total of 32 banking offices and is in the
process of constructing several additional branch facilities. All of the
Company's banking subsidiaries are locally managed with large local boards of
directors. Wintrust Financial Corporation has been one of the fastest growing de
novo bank groups in Illinois.
# # #
5
WINTRUST FINANCIAL CORPORATION
SELECTED FINANCIAL HIGHLIGHTS
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------------- -----------------------------------
(Dollars in thousands, except per share data) 2003 2002 2003 2002
--------------------------------------------------------------------- ------------------ -----------------------------------
SELECTED FINANCIAL CONDITION DATA (AT END OF PERIOD):
Total assets $ 4,132,394 $ 3,219,400
Total loans 2,896,148 2,308,945
Total deposits 3,419,946 2,608,507
Long-term debt - trust preferred securities 76,816 51,050
Total shareholders' equity 249,399 205,999
-------------------------------------------------------------------------------------
SELECTED STATEMENTS OF INCOME DATA:
Net interest income $ 28,328 $ 24,417 $ 54,932 $ 46,585
Net revenue (1) 47,433 38,188 91,780 73,108
Income before taxes 14,072 9,799 26,867 19,692
Net income 9,019 6,307 17,282 12,669
Net income per common share - Basic 0.52 0.40 1.00 0.82
Net income per common share - Diluted 0.49 0.37 0.94 0.77
----------------------------------------------------------------------------------------------------------------------------
SELECTED FINANCIAL RATIOS AND OTHER DATA:
Performance Ratios:
Net interest margin (5) 3.14% 3.56% 3.14% 3.52%
Core net interest margin (2) (5) 3.26 3.74 3.26 3.72
Non-interest income to average assets 1.93 1.85 1.92 1.85
Non-interest expense to average assets 3.08 3.47 3.10 3.38
Net overhead ratio (3) 1.16 1.63 1.18 1.54
Efficiency ratio (4) (5) 64.30 67.61 64.86 65.96
Return on average assets 0.91 0.85 0.90 0.88
Return on average equity 14.95 14.75 14.74 15.85
Average total assets $ 3,971,542 $ 2,992,133 $3,866,918 $2,897,465
Average total shareholders' equity 241,944 171,469 236,466 161,161
Average loans to average deposits ratio 86.6% 90.8% 86.1% 90.4%
----------------------------------------------------------------------------------------------------------------------------
Common Share Data at end of period:
Market price per common share $ 29.79 $ 34.57
Book value per common share $ 14.31 $ 12.15
Common shares outstanding 17,428,118 16,954,850
Other Data at end of period:
Allowance for loan losses $ 21,310 $ 16,009
Non-performing assets $ 14,545 $ 11,921
Allowance for loan losses to total loans 0.74% 0.69%
Non-performing assets to total assets 0.35% 0.37%
Number of:
Bank subsidiaries 7 7
Non-bank subsidiaries 7 7
Banking offices 32 31
----------------------------------------------------------------------------------------------------------------------------
(1) Net revenue is net interest income plus non-interest income.
(2) The core net interest margin excludes interest expense associated with
Wintrust's Long-term Debt - Trust Preferred Securities.
(3) 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. A lower ratio indicates a higher
degree of efficiency
(4) The efficiency ratio is calculated by dividing total non-interest expense
by tax-equivalent net revenues (less securities gains or losses). A lower
ratio indicates more efficient revenue generation.
(5) See "Supplemental Financial Measures/Ratios" for additional information on
this performance measure/ratio.
6
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
(UNAUDITED) (Unaudited)
JUNE 30, December 31, June 30,
(In thousands) 2003 2002 2002
----------------------------------------------------------------------------------------------------------------------------
ASSETS
Cash and due from banks $ 123,439 $ 105,671 $ 60,055
Federal funds sold and securities purchased under resale agreements 223,142 151,251 198,089
Interest-bearing deposits with banks 5,748 4,418 543
Available-for-sale securities, at fair value 508,289 547,679 380,833
Trading account securities 4,913 5,558 4,618
Brokerage customer receivables 34,457 37,592 68,844
Mortgage loans held-for-sale 84,643 90,446 27,735
Loans, net of unearned income 2,896,148 2,556,086 2,308,945
Less: Allowance for loan losses 21,310 18,390 16,009
----------------------------------------------------------------------------------------------------------------------------
Net loans 2,874,838 2,537,696 2,292,936
Premises and equipment, net 141,488 118,961 109,509
Accrued interest receivable and other assets 99,193 95,852 49,775
Goodwill 29,835 25,266 25,091
Other intangible assets 2,409 1,165 1,372
----------------------------------------------------------------------------------------------------------------------------
Total assets $4,132,394 $3,721,555 $3,219,400
----------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 317,104 $ 305,540 $ 257,298
Interest bearing 3,102,842 2,783,584 2,351,209
----------------------------------------------------------------------------------------------------------------------------
Total deposits 3,419,946 3,089,124 2,608,507
Notes payable 26,000 44,025 58,650
Federal Home Loan Bank advances 140,000 140,000 140,000
Subordinated notes 50,000 25,000 --
Other borrowings 57,439 46,708 71,712
Long-term debt - trust preferred securities 76,816 50,894 51,050
Accrued interest payable and other liabilities 112,794 98,802 83,482
----------------------------------------------------------------------------------------------------------------------------
Total liabilities 3,882,995 3,494,553 3,013,401
----------------------------------------------------------------------------------------------------------------------------
Shareholders' equity:
Preferred stock -- -- --
Common stock 17,428 17,216 16,955
Surplus 158,597 153,614 147,616
Common stock warrants 1,030 81 96
Retained earnings 72,861 56,967 42,789
Accumulated other comprehensive loss (517) (876) (1,457)
----------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 249,399 227,002 205,999
----------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $4,132,394 $3,721,555 $3,219,400
----------------------------------------------------------------------------------------------------------------------------
7
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------------------------------------------
(In thousands, except per share data) 2003 2002 2003 2002
-----------------------------------------------------------------------------------------------------------------------------
INTEREST INCOME
Interest and fees on loans $42,238 $38,366 $82,829 $75,027
Interest bearing deposits with banks 28 5 57 8
Federal funds sold and securities purchased under resale
agreements 1,080 205 1,469 498
Securities 5,534 5,211 11,369 9,711
Trading account securities 46 56 84 80
Brokerage customer receivables 339 695 696 1,185
-----------------------------------------------------------------------------------------------------------------------------
Total interest income 49,265 44,538 96,504 86,509
-----------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Interest on deposits 17,013 16,585 34,115 33,260
Interest on Federal Home Loan Bank advances 1,473 1,078 2,930 1,975
Interest on subordinated notes 625 -- 1,069 --
Interest on notes payable and other borrowings 671 1,170 1,375 2,113
Interest on long-term debt - trust preferred securities 1,155 1,288 2,083 2,576
-----------------------------------------------------------------------------------------------------------------------------
Total interest expense 20,937 20,121 41,572 39,924
-----------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 28,328 24,417 54,932 46,585
Provision for loan losses 2,852 2,483 5,493 4,831
-----------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 25,476 21,934 49,439 41,754
-----------------------------------------------------------------------------------------------------------------------------
NON-INTEREST INCOME
Wealth management fees 7,002 7,431 12,953 12,001
Fees on mortgage loans sold 4,544 1,934 9,142 3,951
Service charges on deposit accounts 867 753 1,722 1,491
Gain on sale of premium finance receivables 1,108 828 2,270 1,594
Administrative services revenue 1,068 931 2,159 1,753
Net available-for-sale securities gains (losses) 220 62 606 (153)
Other 4,296 1,832 7,996 5,886
-----------------------------------------------------------------------------------------------------------------------------
Total non-interest income 19,105 13,771 36,848 26,523
-----------------------------------------------------------------------------------------------------------------------------
NON-INTEREST EXPENSE
Salaries and employee benefits 18,265 15,400 35,715 28,762
Equipment expense 1,916 1,796 3,758 3,526
Occupancy, net 1,887 1,609 3,785 3,153
Data processing 1,026 1,042 2,079 2,056
Advertising and marketing 504 533 1,043 1,057
Professional fees 922 685 1,704 1,296
Amortization of other intangible assets 159 100 298 117
Other 5,830 4,741 11,038 8,618
-----------------------------------------------------------------------------------------------------------------------------
Total non-interest expense 30,509 25,906 59,420 48,585
-----------------------------------------------------------------------------------------------------------------------------
Income before taxes 14,072 9,799 26,867 19,692
Income tax expense 5,053 3,492 9,585 7,023
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 9,019 $ 6,307 $17,282 $12,669
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
NET INCOME PER COMMON SHARE - BASIC $ 0.52 $ 0.40 $ 1.00 $ 0.82
-----------------------------------------------------------------------------------------------------------------------------
NET INCOME PER COMMON SHARE - DILUTED $ 0.49 $ 0.37 $ 0.94 $ 0.77
-----------------------------------------------------------------------------------------------------------------------------
CASH DIVIDENDS DECLARED PER COMMON SHARE $ 0.00 $ 0.00 $ 0.08 $ 0.06
-----------------------------------------------------------------------------------------------------------------------------
Weighted average common shares outstanding 17,411 15,948 17,360 15,513
Dilutive potential common shares 1,106 1,080 1,113 1,013
-----------------------------------------------------------------------------------------------------------------------------
Average common shares and dilutive common shares 18,517 17,028 18,473 16,526
-----------------------------------------------------------------------------------------------------------------------------
8
SUPPLEMENTAL FINANCIAL MEASURES/RATIOS
In accordance with new SEC rules required by the Sarbanes-Oxley Act of 2002
regarding the use of financial measures and ratios not calculated in accordance
with generally accepted accounting principles ("GAAP"), a reconciliation must be
provided that shows these measures and ratios calculated according to GAAP and a
statement why management believes these measures and ratios provide a more
accurate view of performance.
Certain non-GAAP performance measures and ratios are used by management to
evaluate and measure the Company's performance. These include taxable-equivalent
net interest income (including its individual components), net interest margin
(including its individual components), core net interest margin and the
efficiency ratio. Management believes that these measures and ratios provide
users of the Company's financial information a more accurate view of the
performance of the interest-earning assets and interest-bearing liabilities and
of the Company's operating efficiency for comparative purposes. Other financial
holding companies may define or calculate these measures and ratios differently.
See the table below for supplemental data and the corresponding reconciliation
to GAAP financial measures for the three and six-month periods ended June 30,
2003 and 2002.
Management reviews yields on certain asset categories and the net interest
margin of the Company, and its banking subsidiaries, on a fully
taxable-equivalent basis ("FTE"). In this non-GAAP presentation, net interest
income is adjusted to reflect tax-exempt interest income on an equivalent
before-tax basis. This measure ensures comparability of net interest income
arising from both taxable and tax-exempt sources. Net interest income on a
taxable-equivalent basis is also used in the calculation of the Company's
efficiency ratio. The efficiency ratio, which is calculated by dividing
non-interest expense by total taxable-equivalent net revenue (less securities
gains or losses), measures how much it costs to produce one dollar of revenue.
Securities gains or losses are excluded from this calculation to better match
revenue from daily operations to operational expenses.
Management also evaluates the net interest margin excluding the interest expense
associated with the Company's Long-term Debt - Trust Preferred Securities ("Core
Net Interest Margin".) Because these instruments are utilized by the Company
primarily as capital instruments, management finds it useful to view the net
interest margin excluding this expense and deems it to be a more accurate view
of the operational net interest margin of the Company.
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------------------------------------
(Dollars in thousands) 2003 2002 2003 2002
---------------------------------------------------------------------------------------------------------------------------------
(A) INTEREST INCOME (GAAP) $49,265 $44,538 $96,504 $86,509
Taxable-equivalent adjustment - Loans 124 168 265 356
Taxable-equivalent adjustment - Liquidity management assets 73 23 134 43
Taxable-equivalent adjustment - Other earning assets 39 -- 39 --
------- ------- ------- -------
Interest income - FTE $49,501 $44,729 $96,942 $86,908
(B) INTEREST EXPENSE (GAAP) 20,937 20,121 41,572 39,924
------- ------- ------- -------
Net interest income - FTE $28,564 $24,608 $55,370 $46,984
------- ------- ------- -------
(C) NET INTEREST INCOME (GAAP) (A MINUS B) $28,328 $24,417 $54,932 $46,585
Net interest income - FTE $28,564 $24,608 $55,370 $46,984
Add: Interest expense on long-term debt - trust preferred
securities 1,155 1,288 2,083 2,576
------- ------- ------- -------
Core net interest income - FTE (1) $29,719 $25,896 $57,453 $49,560
------- ------- ------- -------
(D) NET INTEREST MARGIN (GAAP) 3.11% 3.53% 3.12% 3.49%
Net interest margin - FTE 3.14% 3.56% 3.14% 3.52%
Core net interest margin - FTE (1) 3.26% 3.74% 3.26% 3.72%
(E) EFFICIENCY RATIO (GAAP) 64.62% 67.95% 65.17% 66.32%
Efficiency ratio - FTE 64.30% 67.61% 64.86% 65.96%
---------------------------------------------------------------------------------------------------------------------------------
(1) Core net interest income and core net interest margin are by definition a
non-GAAP measure/ratio. The GAAP equivalents are the net interest income
and net interest margin determined in accordance with GAAP (lines C and D
in the table).
9
LOANS, NET OF UNEARNED INCOME
% Growth % Growth
from from
JUNE 30, December 31, June 30, June 30, December 31,
(Dollars in thousands) 2003 2002 2002 2002 2002 (1)
--------------------------------------------------------- ----------------- ---------------- -------------------------------
BALANCE:
Commercial and commercial real estate $1,458,566 $1,320,598 $1,134,082 28.6 % 21.1 %
Home equity 412,787 365,521 318,397 29.6 26.1
Residential real estate 140,365 156,213 138,595 1.3 (20.5)
Premium finance receivables 625,840 461,614 459,558 36.2 71.7
Indirect auto loans 167,198 178,234 183,855 (9.1) (12.5)
Tricom finance receivables 24,062 21,048 19,228 25.1 28.9
Other loans 67,330 52,858 55,230 21.9 % 55.2
---------- ---------- ---------- ---- ----
Total loans, net of unearned income $2,896,148 $2,556,086 $2,308,945 25.4 26.8 %
---------- ---------- ---------- ---- ----
MIX:
Commercial and commercial real estate 50% 52% 49%
Home equity 14 14 14
Residential real estate 5 6 6
Premium finance receivables 22 18 20
Indirect auto loans 6 7 8
Tricom finance receivables 1 1 1
Other loans 2 2 2
---------- ---------- ----------
Total loans, net of unearned income 100% 100% 100%
---------- ---------- ----------
(1) Annualized
DEPOSITS
% Growth % Growth
from from
JUNE 30, December 31, June 30, June 30, December 31,
(Dollars in thousands) 2003 2002 2002 2002 2002 (1)
--------------------------------------------------------- ----------------- ---------------- -------------------------------
BALANCE:
Non-interest bearing $ 317,104 $ 305,540 $ 257,298 23.2% 7.6%
NOW 393,462 354,499 292,370 34.6 22.2
NOW - Brokerage customer deposits 261,475 231,700 97,531 168.1 25.9
Money market 435,830 399,441 356,352 22.3 18.4
Savings 161,116 147,669 133,110 21.0 18.4
Time certificate of deposits 1,850,959 1,650,275 1,471,846 25.8 24.5
---------- ---------- ---------- ----- ----
Total deposits $3,419,946 $3,089,124 $2,608,507 31.1% 21.6%
---------- ---------- ---------- ----- ----
MIX:
Non-interest bearing 9% 10% 10%
NOW 11 11 11
NOW - Brokerage customer deposits 8 8 4
Money market 13 13 14
Savings 5 5 5
Time certificate of deposits 54 53 56
---------- ---------- ----------
Total deposits 100% 100% 100%
---------- ---------- ----------
(1) Annualized
As part of its strategy for integrating its February 2002 acquisition of the
Wayne Hummer Companies, Wintrust sought to attempt 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 June 30, 2003, approximately $261 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 average balances, net
interest income and related net interest margins, calculated on a fully
tax-equivalent basis, for the three-month periods ended June 30, 2003 and 2002:
FOR THE THREE MONTHS ENDED For the Three Months Ended
JUNE 30, 2003 June 30, 2002
----------------------------------------------------------------------------------
(Dollars in thousands) AVERAGE INTEREST RATE Average Interest Rate
----------------------------------------------------------------------------------
Liquidity management assets (1) (2) (8) $ 756,598 $ 6,715 3.56 % $ 484,483 $ 5,444 4.51 %
Other earning assets (3) 40,162 424 4.23 71,100 751 4.24
Loans, net of unearned income (2) (4) (8) 2,856,728 42,362 5.95 2,218,968 38,534 6.97
---------------------------------------- ----------------------------------------
Total earning assets (8) $3,653,488 $49,501 5.43 % $2,774,551 $44,729 6.47 %
---------------------------------------- ----------------------------------------
Interest-bearing deposits $2,988,099 $17,013 2.28 % $2,203,247 $16,585 3.02 %
Federal Home Loan Bank advances 140,000 1,473 4.22 104,938 1,078 4.12
Notes payable and other borrowings 91,433 671 2.94 164,587 1,170 2.85
Subordinated notes 42,033 625 5.88 -- -- --
Long-term debt - trust preferred securities 70,830 1,155 6.52 51,050 1,288 10.09
---------------------------------------- ----------------------------------------
Total interest-bearing liabilities $3,332,395 $20,937 2.52 % $2,523,822 $20,121 3.20 %
---------------------------------------- ----------------------------------------
Interest rate spread (5) (8) 2.91% 3.27 %
Net free funds/contribution (6) $ 321,093 0.23% $ 250,729 0.29 %
---------------- ------------ --------------- ----------
Net interest income/Net interest margin (8) $28,564 3.14 % $24,608 3.56 %
------------------------- --------------
----------
Core net interest margin (7) (8) 3.26 % 3.74 %
------------- ----------
-------------------------------------------------------------------------------------------------------------------
(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 June 30, 2003 and
2002 were $236,000 and $191,000, 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 estimated contribution to
net interest margin from net free funds is calculated using the rate paid
for total interest-bearing liabilities.
(7) The core net interest margin excludes interest expense associated with
Wintrust's Long-term Debt - Trust Preferred Securities.
(8) See "Supplemental Financial Measures/Ratios" for additional information on
this performance measure/ratio.
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 June 30, 2003 totaled $28.6 million, an increase of $4.0 million,
or 16%, as compared to the $24.6 million recorded in the same quarter of 2002.
Average loans in the second quarter of 2003 increased $638 million, or 29%, over
the second quarter of 2002.
Net interest margin represents tax-equivalent net interest income as a
percentage of the average earning assets during the period. For the second
quarter of 2003 the net interest margin was 3.14%, a decrease of 42 basis points
when compared to the net interest margin of 3.56% in the prior year second
quarter and was essentially unchanged compared to the net interest margin of
3.15% in the first quarter of 2003. 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 second quarter of 2003, and decreased 48 basis
points when compared to the prior year second quarter's core net interest margin
of 3.74%.
11
The yield on total earning assets for the second quarter of 2003 was 5.43% as
compared to 6.47% in 2002, a decrease of 104 basis points resulting primarily
from the effect of decreases in general market rates on liquidity management
assets and loans. The yield on earning assets is heavily dependent on the yield
on loans since average loans comprised approximately 78% of total average
earning assets. The second quarter 2003 yield on loans was 5.95%, a 102 basis
point decrease when compared to the prior year second quarter yield of 6.97%.
The rate paid on wholesale funding, consisting of Federal Home Loan Bank of
Chicago advances, notes payable, subordinated notes and other borrowings, rose
to 4.06% in the second quarter of 2003 compared to 3.35% in the second quarter
of 2002. The increase in the rate paid on total wholesale funding is primarily
attributable to two $25 million subordinated debt agreements with an
unaffiliated bank that qualify as Tier II regulatory capital that were completed
in the fourth quarter of 2002 and the second quarter of 2003, respectively. The
Company utilizes these borrowing sources to fund the additional capital
requirements of the subsidiary banks, manage its capital, manage its interest
rate risk position, funding at the Wayne Hummer Companies and for general
corporate purposes.
On a year-to-date basis, tax-equivalent net interest income for the period ended
June 30, 2003 totaled $55.4 million, an increase of $8.4 million, or 18%, as
compared to the $47.0 million recorded in the same period of 2002. The net
interest margin was 3.14%, a decrease of 38 basis points when compared to the
net interest margin of 3.52% in the prior year period. Year to date average loan
growth of $615 million, or 28%, helped offset the decline in interest rate
spread over the last 12 months.
The following table presents a summary of Wintrust's average balances, net
interest income and related net interest margins, calculated on a fully
tax-equivalent basis, for the six-month periods ended June 30, 2003 and 2002:
FOR THE SIX MONTHS ENDED For the Six Months Ended
JUNE 30, 2003 June 30, 2002
--------------------------------------- ----------------------------------------
(Dollars in thousands) AVERAGE INTEREST RATE Average Interest Rate
--------------------------------------- ----------------------------------------
Liquidity management assets (1) (2) (8) $ 736,041 $13,029 3.57 % $ 468,103 $10,260 4.42 %
Other earning assets (3) 40,571 819 4.07 58,082 1,265 4.39
Loans, net of unearned income (2) (4) (8) 2,777,958 83,094 6.03 2,162,593 75,383 7.03
--------------------------------------- ----------------------------------------
Total earning assets (8) $3,554,570 $96,942 5.50 % $2,688,778 $86,908 6.52 %
--------------------------------------- ----------------------------------------
Interest-bearing deposits $2,921,536 $34,115 2.35 % $2,151,117 $33,260 3.12 %
Federal Home Loan Bank advances 140,000 2,930 4.22 97,735 1,975 4.08
Notes payable and other borrowings 91,946 1,375 3.02 139,325 2,113 3.06
Subordinated notes 33,564 1,069 6.33 -- -- --
Long-term debt - trust preferred securities 60,917 2,083 6.84 51,050 2,576 10.09
--------------------------------------- ----------------------------------------
Total interest-bearing liabilities $3,247,963 $41,572 2.58 % $2,439,227 $39,924 3.30 %
--------------------------------------- ----------------------------------------
Interest rate spread (5) (8) 2.92 % 3.22 %
Net free funds/contribution (6) $ 306,607 0.22 % $ 249,551 0.30 %
-------------- ----------- --------------- --------
Net interest income/Net interest margin (8) $55,370 3.14 % $46,984 3.52 %
----------------------- -----------------
Core net interest margin (7) (8) 3.26 % 3.72 %
----------- --------
--------------------------------------------------------------------------------------------------------------------
(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 six months ended June 30, 2003 and
2002 were $438,000 and $399,000, 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 estimated contribution to
net interest margin from net free funds is calculated using the rate paid
for total interest-bearing liabilities.
(7) The core net interest margin excludes interest expense associated with
Wintrust's Long-term Debt - Trust Preferred Securities.
(8) See "Supplemental Financial Measures/Ratios" for additional information on
this performance measure/ratio.
12
NON-INTEREST INCOME
For the second quarter of 2003, non-interest income totaled $19.1 million and
increased $5.3 million over the prior year second quarter. The increase in
non-interest income is primarily a result of an increase in fees on mortgage
loans sold and premium income from covered call option transactions.
Non-interest income as a percentage of net revenue increased to 40% in the
second quarter of 2003, up from 36% in the second quarter of 2002.
Wealth management fees are comprised of the trust and asset management revenue
of Wayne Hummer Trust Company and the asset management fees, brokerage
commissions, trading commissions and insurance product commissions at the Wayne
Hummer Companies (including the recently acquired Lake Forest Capital Management
Company). Wealth management fees totaled $7.0 million in the second quarter of
2003, a $429,000 decrease from the $7.4 million recorded in the second quarter
of 2002. However, wealth management fees increased $1.1 million when compared to
the first quarter of 2003. The substantial decline in the market values of
securities managed and client trading activity in the last 12 months more than
offset the impact of the addition of Lake Forest Capital Management Company and
new business development.
Fees on mortgage loans sold include income from originating and selling
residential real estate loans into the secondary market. For the quarter ended
June 30, 2003, these fees totaled $4.5 million, an increase of $2.6 million, or
135%, from the prior year second quarter. 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 level of refinancing
activity may taper off during the later half of 2003, barring any further
reductions in mortgage interest rates.
Service charges on deposit accounts totaled $867,000 for the second quarter of
2003, an increase of $114,000, or 15%, when compared to the same quarter of
2002. This increase was mainly due to a larger deposit base and a greater 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 excess premium finance receivables volume to an
unrelated third party financial institution in the second quarter of 2003 and
recognized gains of $1.1 million related to this activity, compared with
$828,000 of recognized gains in the second quarter of 2002. Wintrust has a
philosophy of maintaining its average loan-to-deposit ratio in the range of
85-90%. During the second quarter of 2003, the ratio was approximately 87%.
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 $1.1 million to
total non-interest income in the second quarter of 2003, an increase of $137,000
from the second 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 increase over the second quarter of 2002 is
primarily attributable to the acquisition of a competitor's customer base in
early January 2003. 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 second quarter of 2003 totaled $4.3 million
and increased $2.5 million, or 135%, from the prior year quarterly total of $1.8
million. This is attributable to a $1.8 million increase in premium income from
certain covered call option transactions and an increase of $559,000 in the
value of Bank Owned Life Insurance ("BOLI"). The premium income from the covered
call option transactions totaled $2.6 million in the second quarter of 2003
compared to $789,000 in the same period of 2002. 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
of 2002, the Company purchased $41.1 million of BOLI. The BOLI policies were
purchased to consolidate existing term life insurance
13
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.
For the first six months of 2003, total non-interest income was $36.8 million
and increased $10.3 million, or 39%, when compared to the same period in 2002.
The higher level of non-interest income was comprised of increases in fees on
mortgage loans sold from originating and selling residential real estate loans
into the secondary market of $5.2 million, wealth management fees of $952,000,
recognized gains related to the sale of premium finance receivables to an
unrelated third party of $676,000, administrative services revenue contributed
by Tricom of $406,000, net securities gains of $759,000, service charges on
deposit accounts of $231,000 due to a higher deposit base and a larger number of
accounts at the banking subsidiaries and higher other miscellaneous sources of
revenue totaling $2.1 million. The rise in other miscellaneous sources of
revenue was attributable to increases in premium income from certain covered
call option transactions of $2.4 million and BOLI revenue of $969,000 offset by
$1.25 million for a partial settlement related to a non-recurring charge
recorded in 2000 that was collected in the first quarter of 2002.
NON-INTEREST EXPENSE
Non-interest expense for the second quarter of 2003 totaled $30.5 million and
increased $4.6 million, or 18%, from the second quarter 2002 total of $25.9
million. The increase in non-interest expense, particularly salaries and
employee benefits, over the second quarter of 2002, reflects the continued
growth and expansion of the banks with additional branches, the growth in the
premium finance business, the addition of Lake Forest Capital Management in the
first quarter of 2003 and the expansion of the Wayne Hummer Companies.
Salaries and employee benefits totaled $18.3 million for the second quarter of
2003, an increase of $2.9 million, or 19%, as compared to the prior year's
second quarter total of $15.4 million. This increase was primarily due to
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, normal annual increases in salaries and the
employee benefit costs and to the salary and benefit costs of Lake Forest
Capital Management Company.
The remaining categories of non-interest expense, such as occupancy costs,
equipment expense, professional fees and other increased by $1.7 million over
the prior year second quarter due primarily to the general growth and expansion
of the banks and the acquisition of Lake Forest Capital Management Company.
On a year-to-date basis non-interest expense totaled $59.4 million and increased
$10.8 million, or 22%, over the first six months of 2002. The increase is
predominantly due to a $7.0 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 of 25% and 31%, respectively, Wintrust's net overhead ratio improved
from 1.54% for the first six months of 2002 to 1.18% for the comparable period
in 2003.
14
ASSET QUALITY
Allowance for Loan Losses
-------------------------
A reconciliation of the activity in the balance of the allowance for loan losses
for the three and six months ended June 30, 2003 and 2002 is shown as follows:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------------- ----------------------------------
(Dollars in thousands) 2003 2002 2003 2002
----------------------------------------------------- --------------- --------------- ---------------- ----------------
BALANCE AT BEGINNING OF PERIOD $ 19,773 $ 14,697 $ 18,390 $ 13,686
PROVISION FOR LOAN LOSSES 2,852 2,483 5,493 4,831
CHARGE-OFFS:
Commercial and commercial real estate loans 366 178 811 403
Home equity loans -- -- -- --
Residential real estate loans -- -- -- --
Consumer and other loans 27 73 130 148
Premium finance receivables 817 977 1,490 1,844
Indirect automobile loans 314 187 530 475
Tricom finance receivables -- 9 -- 9
----------- --------- ------------ -----------
Total charge-offs 1,524 1,424 2,961 2,879
----------- --------- ------------ -----------
RECOVERIES:
Commercial and commercial real estate loans 95 115 138 135
Home equity loans -- -- -- --
Residential real estate loans 13 -- 13 --
Consumer and other loans 1 12 24 12
Premium finance receivables 58 66 125 129
Indirect automobile loans 42 40 84 70
Tricom finance receivables -- 20 4 25
----------- --------- ------------ -----------
Total recoveries 209 253 388 371
----------- --------- ------------ -----------
NET CHARGE-OFFS (1,315) (1,171) (2,573) (2,508)
----------- --------- ------------ -----------
BALANCE AT JUNE 30 $ 21,310 $ 16,009 $ 21,310 $ 16,009
----------- --------- ------------ -----------
ANNUALIZED NET CHARGE-OFFS (RECOVERIES) AS A PERCENTAGE
OF AVERAGE:
Commercial and commercial real estate loans 0.08 % 0.02 % 0.10 % 0.05 %
Home equity loans -- -- -- --
Residential real estate loans (0.02) -- (0.01) --
Consumer and other loans 0.18 0.41 0.37 0.44
Premium finance receivables 0.52 0.84 0.49 0.82
Indirect automobile loans 0.65 0.32 0.52 0.44
Tricom finance receivables -- (0.24) (0.03) (0.18)
----------- --------- ------------ -----------
Total loans, net of unearned income 0.18 % 0.21 % 0.19 % 0.23 %
----------- --------- ------------ -----------
Net charge-offs as a percentage of the
provision for loan losses 46.11 % 47.16 % 46.84 % 51.91 %
----------- --------- ------------ -----------
Loans at June 30 $ 2,896,148 $ 2,308,945
------------ -----------
Allowance as a percentage of loans at period-end 0.74 % 0.69 %
------------ -----------
15
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.
JUNE 30, March 31, December 31, June 30,
(Dollars in thousands) 2003 2003 2002 2002
----------------------------------------------------------------- --------------- -------------- ---------------- ---------------
PAST DUE GREATER THAN 90 DAYS AND STILL ACCRUING:
Residential real estate and home equity $ 61 $ 13 $ 32 $ 16
Commercial, consumer and other 2,829 2,053 3,047 1,055
Premium finance receivables 2,673 1,574 2,198 2,141
Indirect automobile loans 324 399 423 340
Tricom finance receivables -- -- -- --
-------- ------- ------- -------
Total past due greater than 90 days and still accruing 5,887 4,039 5,700 3,552
-------- ------- ------- -------
NON-ACCRUAL LOANS:
Residential real estate and home equity 415 375 711 401
Commercial, consumer and other 2,543 2,053 1,132 1,528
Premium finance receivables 4,575 5,694 4,725 5,417
Indirect automobile loans 196 246 254 163
Tricom finance receivables 8 14 20 104
-------- ------- ------- -------
Total non-accrual 7,737 8,382 6,842 7,613
-------- ------- ------- -------
TOTAL NON-PERFORMING LOANS:
Residential real estate and home equity 476 388 743 417
Commercial, consumer and other 5,372 4,106 4,179 2,583
Premium finance receivables 7,248 7,268 6,923 7,558
Indirect automobile loans 520 645 677 503
Tricom finance receivables 8 14 20 104
-------- ------- ------- -------
Total non-performing loans 13,624 12,421 12,542 11,165
-------- ------- ------- -------
OTHER REAL ESTATE OWNED 921 984 76 756
-------- ------- ------- -------
TOTAL NON-PERFORMING ASSETS $14,545 $13,405 $12,618 $11,921
-------- ------- ------- -------
TOTAL NON-PERFORMING LOANS BY CATEGORY AS A PERCENT OF ITS OWN
RESPECTIVE CATEGORY:
Residential real estate and home equity 0.09% 0.07% 0.14% 0.09%
Commercial, consumer and other 0.35 0.30 0.30 0.22
Premium finance receivables 1.16 1.37 1.50 1.64
Indirect automobile loans 0.31 0.38 0.38 0.27
Tricom finance receivables 0.03 0.06 0.10 0.54
-------- ------- ------- -------
Total non-performing loans 0.47% 0.47% 0.49% 0.48%
-------- ------- ------- -------
Total non-performing assets as a
percentage of total assets 0.35% 0.34% 0.34% 0.37%
-------- ------- ------- -------
Allowance for loan losses as a
percentage of non-performing loans 156.42% 159.19% 146.63% 143.39%
-------- ------- ------- -------
16
The provision for loan losses totaled $2.9 million for the second quarter of
2003, an increase of $369,000 from a year earlier. For the quarter ended June
30, 2003 net charge-offs totaled $1.3 million, up from the $1.2 million of net
charge-offs recorded in the same period of 2002. On a ratio basis, annualized
net charge-offs as a percentage of average loans decreased to 0.18% in the
second quarter of 2003 from 0.21% in the same period in 2002.
On a year-to-date basis the provision for loan losses totaled $5.5 million for
the first six months of 2003, an increase of $662,000 over the same period last
year. Net charge-offs for the first six months of 2003 were $2.6 million,
essentially unchanged from the net charge-offs recorded in the same period last
year. On a ratio basis, annualized net charge-offs as a percentage of average
loans decreased to 0.19% for the first six months of 2003 from 0.23% in the
first six months of 2002.
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 management's assessment of the adequacy of the
allowance based on its evaluation of economic conditions, 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 $5.8 million compared to the $4.5 million reported
at March 31, 2003 and $4.9 million reported at December 31, 2002. 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. On July 1, 2003 a single credit in the amount of
$1.9 million classified as past due greater than 90 days and still accruing at
June 30, 2003 (included in the $5.8 million of non-performing residential real
estate, commercial, consumer and other loans) was brought into a performing
status by the customer.
Non-performing Premium Finance Receivables
The table below presents the level of non-performing premium finance receivables
as of June 30, 2003 and 2002, and the amount of net charge-offs for the six
months then ended.
(Dollars in thousands) JUNE 30, 2003 June 30, 2002
------------------------------------------------------------------------------ --------------------- ----------------------
Non-performing premium finance receivables $7,248 $7,558
- as a percent of premium finance receivables 1.16% 1.64%
Net charge-offs of premium finance receivables $1,365 $1,715
- annualized as a percent of premium finance receivables 0.49% 0.82%
------------------------------------------------------------------------------ --------------------- ----------------------
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.
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
17
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 $520,000 at June 30, 2003,
compared to $677,000 at December 31, 2002 and $503,000 at June 30, 2002. The
ratio of these non-performing loans to total indirect automobile loans was 0.31%
of total indirect automobile loans at June 30, 2003 compared to 0.38% at
December 31, 2002 and 0.27% at June 30, 2002. As noted in the Allowance for Loan
Losses table, net charge-offs as a percent of total indirect automobile loans
were 0.52% in the first six months of 2003 compared to 0.44% in the same period
in 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 June 30, 2003 were $167 million, down
from $178 million at December 31, 2002 and $184 million at June 30, 2002.
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements related to Wintrust's
financial performance that are based on estimates. Wintrust intends such
forward-looking statements to be covered by the safe harbor provision for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995, and is including this statement for purposes of invoking these safe
harbor provisions. Actual results could differ materially from those addressed
in the forward-looking statements due to factors such as changes in economic
conditions, competition, or other factors that may influence the anticipated
growth rate of loans and deposits, the quality of the loan portfolio and loan
and deposit pricing, unanticipated changes in interest rates that negatively
impact net interest income, future events that may cause unforeseen loan or
lease losses, slower than anticipated development and growth of Tricom and the
trust and investment business, unanticipated changes in the temporary staffing
industry, the ability to adapt successfully to technological changes to compete
effectively in the marketplace, competition and the related pricing of brokerage
and asset management products, unforeseen difficulties in integrating the
acquisition of Lake Forest Capital Management with Wintrust, difficulties or
unanticipated developments related to the pending acquisition of Advantage
National Bancorp, Inc., 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.
NOTE: THE FOLLOWING NOTICE IS INCLUDED TO MEET CERTAIN LEGAL REQUIREMENTS
-------------------------------------------------------------------------
Wintrust will be filing a registration statement with the Securities and
Exchange Commission in connection with its previously announced proposed
acquisition of Advantage National Bancorp, Inc. ("Advantage") in a stock merger
transaction. Advantage is the parent company of Advantage National Bank that has
locations in Elk Grove Village and Roselle, Illinois. The registration
statement will include a proxy statement/prospectus that will be sent to the
shareholders of Advantage National Bancorp, Inc. seeking their approval of the
proposed transaction.
Shareholders of Advantage are advised to read the important information
concerning the proposed transaction contained in the proxy statement/prospectus
and other documents filed by Wintrust with the Securities and Exchange
Commission when they become available. When filed, these documents can be
obtained free of charge from the web site maintained by the Securities and
Exchange Commission at http://www.sec.gov. or upon written request to Wintrust
Financial Corporation, Attn: Investor Relations, 727 North Bank Lane, Lake
Forest, Illinois 60045 or by calling (847) 615-4096, or upon written request to
Advantage National Bancorp, Inc., Attn: President, 75 East Turner Avenue, Elk
Grove Village, Illinois 60007 or by calling (847) 364-0100.
18