Wintrust Financial Corporation Reports Third Quarter 2009 Results
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LAKE FOREST, Ill., Oct. 27, 2009 (GLOBE NEWSWIRE) -- Wintrust Financial Corporation ("Wintrust" or "the Company") (Nasdaq: WTFC) announced net income of $32.0 million or $1.07 per diluted common share for the quarter ended September 30, 2009. This compares with earnings of $6.5 million ($0.06 per diluted common share) for the second quarter of 2009 and a $2.4 million loss (($0.13) per diluted common share) for the third quarter of 2008.
Edward J. Wehmer, President and Chief Executive Officer, commented, "We are pleased to report both solid corporate earnings and strong progress on all strategic fronts during a very active quarter. The acquisition of the life insurance premium finance portfolio during the quarter resulted in both immediate and prospective financial gains. The securitization of a portion of our commercial premium finance loan portfolio, also completed this quarter, enhanced our regulatory capital position, our balance sheet liquidity and our earnings."
Mr. Wehmer noted, "The Company's net interest margin for the quarter increased to 3.25% from 2.91% in the second quarter and 2.74% in the third quarter of 2008 reflecting both positive results from deposit and asset re-pricing and solid balance sheet growth at reasonable and commensurate pricing levels. Fee and other income remained relatively strong while expenses, other than credit related expenses, were in line with expectations."
Commenting on credit, Mr. Wehmer said, "Wintrust recorded a provision for loan losses of $91 million to accommodate net charge-offs approximating $80 million during the quarter. In addition to these charge-offs, we also recorded approximately $10 million of expense related to write downs of other real estate owned. Approximately $29 million of the quarter's charge-offs relate to loans where specific reserves had been previously established. Approximately $12 million of the charge-offs related to either dispositions or new problem assets. The remaining $39 million related to continued downward revaluation of collateral values primarily related to real estate development. This revaluation, along with the $10 million other real-estate owned charge can be attributed to the Company's commitment to liquidate problem assets in a very aggressive manner and, more importantly, to recent changes in overall market conditions. As an increasing amount of troubled assets are being liquidated in the market as a whole, appraised values are dropping accordingly, reflecting the adverse impact of the additional supply. These reduced valuations are further supported by liquidation bids we are receiving on our problem asset portfolio. The charges taken reflect this along with our intention to dispose of problem assets on an expedited basis.
Quarter-end non-performing loans include approximately $17 million of administrative past due loans which have been made current by the borrower. Further, non-performing assets have been reduced by an additional $8 million after September 30, 2009 as of the date of this earnings release. We anticipate continued aggressive disposition of existing problem assets in the fourth quarter. Our allowance for loan losses increased to $95 million or 1.15% of total loans. Adding our reserve for unfunded lending-related commitments and credit discounts on purchased assets brings the Company's total credit reserves to $134 million or 1.62% of total loans."
Mr. Wehmer summarized, "We continue to focus on increasing core earnings and clearing our balance sheet of problem assets. Significant core earnings opportunities remain in the areas of deposit re-pricing, core franchise growth and liquidity redeployment. At quarter end, the Company had approximately $1 billion in overnight liquid assets and was operating at an 84% loan to deposit ratio -- just below the low end of the desired 85% to 90% range. Redeploying a portion of those liquid assets into safe, higher yielding loans is a priority."
He added, "We adopted a long-term strategy in 2006 which anticipated a negative credit cycle. Our goal was to be in a position to not just make it through the cycle but to do so in a manner which would allow us to take advantage of the opportunities which result from these occurrences -- specifically a material dislocation of assets, banks and people in the overall market. To date, we have had good success and we will continue to seek out additional opportunities on all three fronts while continuing to build a strong core franchise."
Net income for the nine months ended September 30, 2009 was $44.9 million, or $1.25 per diluted common share compared to $18.5 million or $0.75 per diluted common share for the same period in 2008. Earnings per diluted common share in the first nine months of 2009 compared to the first nine months of 2008 were reduced by preferred share dividends including discount accretion, related to our issuances of preferred stock in the second half of 2008, reducing comparative net income available to common shareholders by $14.1 million, or $0.58 per diluted common share.
Total assets of $12.1 billion at September 30, 2009 increased $776 million from June 30, 2009 and $2.3 billion from September 30, 2008. The $776 million of asset growth in the third quarter of 2009 was concentrated in liquidity management assets. Total deposits as of September 30, 2009 were $9.8 billion, an increase of $656 million from June 30, 2009 and $2.0 billion from September 30, 2008. The $656 million of deposit growth in the third quarter of 2009 was well distributed amongst all deposit types with $277 million from certificates of deposit, $314 million from NOW, savings and money markets, $16 million from wealth management and $49 million from non-interest bearing deposits. Only $17 million of the $277 million of certificate of deposit growth was due to an increase in brokered certificates of deposits. At the end of the second quarter of 2009, in anticipation of completing the securitization in the third quarter of 2009, the Company reclassified $520 million of premium finance receivables to a held-for-sale classification to comply with accounting requirements related to assets that are held with the intent to sell. At the end of the second quarter, the Company's loans held-for-sale included $301 million of residential mortgages and $520 million of premium finance receivables compared to only $193 million of residential mortgages at September 30, 2009. Total loans, including loans held for sale, grew to $8.5 billion as of September 30, 2009, an increase of $52 million, over the $8.4 billion balance as of June 30, 2009 and an increase of $1.1 billion over the September 30, 2008 balance of $7.4 billion. During the third quarter of 2009 the Company completed the acquisition of the life insurance premium finance receivables portfolio and the securitization of commercial premium finance receivables (see "Acquisitions" and "Securitization" for the impact of these transactions).The Company's loan portfolio includes a wide variety of loan types. Please see the tables included in the remainder of this release for additional disclosures regarding the components of the commercial and commercial real estate portfolio, the allowance for credit losses and loan portfolio aging statistics.
Total shareholders' equity was $1.1 billion, or a book value of $34.10 per common share, at September 30, 2009, compared to $809 million, or a book value of $32.07 per common share, at September 30, 2008.
Wintrust's key operating measures and growth rates for the third quarter of 2009 as compared to the sequential and linked quarters are shown in the table below:
% or % or
basis basis
point point
(bp) (bp)
change change
($ in Three Months Ended from from
thousands, ----------------------------------- 2nd 3rd
except per Sept. 30, June 30, Sept. 30, Quarter Quarter
share data) 2009 2009 2008 2009(4) 2008
------------- ----------- ----------- ---------- -------- --------
Net income $ 31,995 $ 6,549 $ (2,448) 389% 1,407%
Net income per
common share -
diluted $ 1.07 $ 0.06 $ (0.13) 1,683% 923%
Net revenue(1) $ 238,343 $ 117,949 $ 82,810 102% 188%
Net interest
income $ 87,663 $ 72,497 $ 60,680 21% 44%
Net interest
margin(2) 3.25% 2.91% 2.74% 34 bp 51 bp
Net overhead
ratio(3) (1.95)% 1.41% 1.65% (336)bp (360)bp
Return on
average assets 1.08% 0.24% (0.10)% 84 bp 118 bp
Return on
average common
equity 13.79% 0.79% (1.59)% 1,300 bp 1,538 bp
At end of
period
---------
Total assets $12,136,021 $11,359,536 $9,864,920 27% 23%
Total loans $ 8,275,257 $ 7,595,476 $7,322,545 36% 13%
Total loans,
including
loans
held-for-sale $ 8,468,512 $ 8,416,576 $7,390,943 15% 2%
Total deposits $ 9,847,163 $ 9,191,332 $7,829,527 28% 26%
Total equity $ 1,106,082 $ 1,065,076 $ 809,331 15% 37%
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(1) Net revenue is net interest income plus non-interest income.
(2) See "Supplemental Financial Measures/Ratios" for additional
information on this performance measure/ratio.
(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) Period-end balance sheet percentage changes are annualized.
----------------------------------------------------------------------
Certain returns, yields, performance ratios, or quarterly growth rates are "annualized" in this presentation to represent an annual time period. This is done for analytical purposes to better discern for decision-making purposes underlying performance trends when compared to full-year or year-over-year amounts. For example, balance sheet growth rates are most often expressed in terms of an annual rate like 20%. As such, a 5% growth rate for a quarter would represent an annualized 20% growth rate. Additional supplemental financial information showing quarterly trends can be found on the Company's web site at www.wintrust.com by choosing "Financial Reports" and then choosing "Supplemental Financial Info."
Impacting Comparative Financial Results: Acquisitions, Securitization and Stock Offerings/Regulatory Capital
Acquisitions
On July 28, 2009 the Company announced that its indirect, wholly-owned subsidiary, First Insurance Funding Corp. ("FIFC") completed the purchase of a majority of the U.S. life insurance premium finance assets of A.I. Credit Corp. and A.I. Credit Consumer Discount Company ("the seller"), subsidiaries of American International Group, Inc. In doing so, FIFC acquired one of the largest life insurance premium finance portfolios in the industry, as well as certain other assets related to the life insurance premium finance business and the assumption of certain related liabilities. Subsequent to post-closing adjustments, an aggregate unpaid principal balance of $949.3 million was purchased for $685.3 million in cash. At closing, a portion of the portfolio, with an aggregate unpaid principal balance of approximately $317 million, and a corresponding portion of the purchase price of approximately $230 million were placed in escrow, pending the receipt of required third party consents. To the extent any of the required consents are not obtained prior to October 28, 2010, the portion of the portfolio for which such required consents are not obtained will be reassumed by the seller, and the corresponding portion of the purchase price will be returned to FIFC. Also, as a part of this purchase, an aggregate of $84.4 million of additional life insurance premium finance assets were available for future purchase by FIFC subject to satisfying certain conditions. As discussed below, on October 2, 2009, upon the satisfaction of these conditions, the Company completed the purchase of the majority of these additional loans.
The purchase was accounted for as a business combination as required by FASB Statement of Financial Accounting Standards No. 141 (revised 2007) which is now part of Accounting Standards Codification (ASC)805 Business Combinations ("ASC 805"), which became effective for the Company beginning on January 1, 2009. ASC 805 establishes principles and requirements for the acquirer in a business combination, including the recognition and measurement of the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquired entity as of the acquisition date; the recognition and measurement of the goodwill acquired in the business combination or gain from a bargain purchase as of the acquisition date; and the determination of additional disclosures needed to enable users of the financial statements to evaluate the nature and financial effects of the business combination. Under ASC 805, nearly all acquired assets and liabilities assumed are required to be recorded at fair value at the acquisition date, including loans. ASC 805 eliminated recognition at the acquisition date of an allowance for loan losses on acquired loans; rather, credit-related factors are now incorporated directly into the fair value of the loans. Other significant changes include recognizing transaction costs and most restructuring costs as expenses when incurred. The accounting requirements of ASC 805 are applied on a prospective basis for all transactions completed after the effective date and early adoption was not permitted. Under ASC 805 a bargain purchase gain is recorded equal to the amount by which the fair value of net assets acquired exceeds the consideration paid. The Company recognized a $113.1 million gain in the third quarter of 2009 relating to all of the loans it acquired which have all contingencies removed as of September 30, 2009. This gain is shown as a component of non-interest income on our statement of income. The difference between the fair value of the loans acquired and the outstanding principal balance of these loans represents a discount of $113.3 million and is comprised of two components, an accretable component totaling $74.8 million and a non-accretable component totaling $38.5 million. The accretable component will be recognized into interest income using the effective yield method over its estimated remaining life. The non-accretable portion will be evaluated each quarter and if the loans' credit related conditions improve, a relative portion will be transferred to the accretable component and accreted over future periods. In the event of a prepayment, accretion of both the accretable and non-accretable component is accelerated into the quarter in which a specific loan prepays in whole. Currently, we have not established an allowance for loan losses relating to the portfolio purchased in this transaction. If credit related conditions deteriorate, an allowance related to these loans will be established as part of our provision for loan losses. The impact related to this transaction is included in Wintrust's consolidated financial results only since the effective date of acquisition.
On October 2, 2009, the conditions were satisfied in relation to the majority of the additional life insurance premium finance assets which were available for purchase and FIFC purchased $83.4 million of the$84.4 million of life insurance premium finance assets available for an aggregate purchase price of $60.5 million. The Company anticipates recording an additional $14.5 million bargain purchase gain relating to this additional purchase, all of which will be immediately recognizable in the fourth quarter. The difference between the fair value of these loans acquired on October 2, 2009 and the outstanding principal balance of theses loans represents a discount of $8.4 million and is comprised of two components, an accretable component totaling $5.7 million and a non-accretable component totaling $2.7 million. These discount components will be accounted in a similar fashion as the discounts described above. The impact related to this transaction will be included in Wintrust's consolidated financial results only since the effective date of acquisition.
On April 20, 2009 Wayne Hummer Asset Management Company completed its previously announced agreement to purchase certain assets and assume certain liabilities of Advanced Investment Partners, LLC ("AIP"). AIP is an investment management firm specializing in the active management of domestic equity investment strategies. The impact related to the AIP transaction is included in Wintrust's consolidated financial results only since the effective date of acquisition.
On December 23, 2008, the Company announced the acquisition by Wintrust Mortgage Corporation of certain assets and the assumption of certain liabilities of the mortgage banking business of Professional Mortgage Partners ("PMP") of Downers Grove, Illinois. PMP was founded in 1999 and had approximately $1.6 billion in annual mortgage originations in 2008. The terms of the cash transaction were not disclosed; however, a significant portion of the net purchase price for the PMP assets is conditioned upon certain future profitability measures. The impact related to the PMP transaction is included in Wintrust's consolidated financial results only since the effective date of acquisition.
Securitization
On September 11, 2009 Wintrust's indirect, wholly-owned subsidiary, FIFC Premium Funding I, LLC (the "Issuer"), closed on the sale of $600,000,000 aggregate principal amount of its Series 2009-A Premium Finance Asset Backed Notes, Class A (the "Notes"). The Notes were issued in a securitization transaction sponsored by First Insurance Funding Corp. This is an off-balance sheet financing transaction for the Company.
The Notes bear interest at an annual rate equal to one-month LIBOR plus 1.45% and have an expected average term of 2.93 years; provided, however, that the entire unpaid balance of the Notes shall be due and payable in full on February 17, 2014. At the time of issuance, the Notes were eligible collateral under the Federal Reserve Bank of New York's Term Asset-Backed Securities Loan Facility ("TALF"). The Notes are rated Aaa by Moody's and AAA by Standard & Poor's. The Issuer's obligations under the Notes are secured by revolving loans made to buyers of property and casualty insurance policies to finance the related premiums payable by the buyers to the insurance companies for the policies. The premium finance loans will be transferred from time to time by FIFC to FIFC Funding, I LLC (the "Depositor") and by the Depositor to the Issuer.
The Notes have not been and will not be registered under the Securities Act of 1933, as amended (the "Securities Act"), or any applicable state securities laws and may not be offered or sold in the United States without registration under the Securities Act or any applicable exemption from registration. The Notes were sold in a private placement to qualified institutional buyers only pursuant to an exemption under Rule 144A of the Securities Act. The Notes are restricted securities and may only be resold to qualified institutional buyers in a transaction meeting the requirements of Rule 144A and may not otherwise be reoffered, resold, pledged or otherwise transferred.
As a result of this transaction the Company recognized a gain of $3.6 million in the third quarter of 2009. A total of $695 million in premium finance property and casualty receivables were initially transferred into the securitization. The Company retained interests of approximately $84 million and a sellers interest in loans of $11 million. Approximately $50 million of the retained interests are classified as debt securities on the Company's balance sheet and the remainder is classified in other assets. In the event FIFC transfers loans to the Depositor in the fourth quarter, additional gains should be recognized.
Stock Offerings/Regulatory Capital
The Company announced on December 19, 2008 that it had received the proceeds from the $250 million investment in Wintrust by the U.S. Treasury Department. The investment was made as part of the U.S. Treasury Department's Capital Purchase Program, which is designed to infuse capital into the nation's healthy banks in order to expand the flow of credit to U.S. consumers and businesses on competitive terms to promote the sustained growth and vitality of the U.S. economy.
The investment by the U.S. Treasury Department was comprised of $250 million in preferred shares, with a warrant to purchase 1,643,295 shares of Wintrust common stock at a per share exercise price of $22.82 and a term of 10 years. If declared, dividends on the senior preferred stock are payable quarterly in arrears at a rate of 5% annually for the first five years and 9% thereafter. This investment can, with the approval of the Federal Reserve, be repurchased. The Company filed a shelf registration statement to fulfill the requirement of the Capital Purchase Program that the U.S. Department of Treasury be able to publicly sell the preferred shares and warrant it purchased from Wintrust.
On August 26, 2008, the Company sold $50 million ($49.4 million net of issuance costs) of non-cumulative perpetual convertible preferred stock in a private transaction. If declared, dividends on the preferred stock are payable quarterly in arrears at a rate of 8.00% per annum. The shares are convertible into common stock at the option of the holder at a price per share of $25.72. On and after August 26, 2010, the preferred stock will be subject to mandatory conversion into common stock under certain circumstances.
Financial Performance Overview - Third Quarter of 2009
For the third quarter of 2009, net interest income totaled $87.7 million, an increase of $27.0 million as compared to the third quarter of 2008 and an increase of $15.2 million as compared to the second quarter of 2009. Average earning assets for the third quarter of 2009 increased by $1.9 billion compared to the third quarter of 2008. Earning asset growth over the past 12 months was primarily a result of the $1.3 billion increase in average loans and $534 million increase in liquidity management assets. The average earning asset growth of $1.9 billion over the past 12 months was funded by a $1.1 billion increase in the average balances of savings, NOW, MMA and Wealth Management deposits, an increase in the average balance of net free funds of $354 million, an increase in the average balance of brokered certificates of deposit of $166 million, an increase in the average balance of retail certificates of deposit of $442 million offset by a decrease in the average balance of wholesale borrowings of $168 million. At September 30, 2009, $913 million of retail deposits were held in the Company's MaxSafe(R) suite of products (certificates of deposit, MMA and NOW). MaxSafe(R) is an innovative investment alternative that provides up to 15 times the FDIC insurance security of a traditional banking deposit or a total of $3.75 million for an individual interest-bearing account, by capitalizing on the Company's multiple banking charters and depositing a customer's funds across all 15 of the Company's community banks.
The net interest margin for the third quarter of 2009 was 3.25%, compared to 2.74% in the third quarter of 2008 and 2.91% in the second quarter of 2009. The increase in the net interest margin in the third quarter of 2009 when compared to the second quarter of 2009 is attributable to the acquisition of the life insurance premium finance portfolio and lower costs of interest-bearing deposits. In the third quarter of 2009, the yield on loans increased 40 basis points and the rate on interest-bearing deposits decreased 22 basis points compared to the second quarter of 2009. The bulk of the increase in yield on loans is attributable to premium finance receivables. Management believes opportunities during the remainder of 2009 for increasing credit spreads in commercial loan portfolio and re-pricing of maturities of retail certificates of deposits should contribute to continued net interest margin expansion.
Non-interest income totaled $150.7 million in the third quarter of 2009, increasing $128.6 million, or 581%, compared to the third quarter of 2008 and increasing $105.2 million, or 919% on an annualized basis, compared to the second quarter of 2009. The increase, in comparison to both prior periods, was primarily attributable to the activities described earlier under "Acquisitions" and "Securitization." Another component of non-interest income with meaningful changes between comparable quarters was mortgage banking revenue. Mortgage banking revenue increased $8.7 million when compared to the third quarter of 2008 and decreased $9.4 million when compared to the second quarter of 2009. These changes were primarily attributable to varying levels of activity in mortgage loans originated for sale to the secondary market during 2009. Mortgages originated for sale totaled over $960 million in the third quarter of 2009 compared to over $1.5 billion in the second quarter of 2009 and $344 million in the third quarter of 2008.
Non-interest expense totaled $92.6 million in the third quarter of 2009, increasing $29.4 million, or 46%, compared to the third quarter of 2008 and $8.3 million, or 39% on an annualized basis, compared to the second quarter of 2009. The increase compared to the second quarter of 2009 was attributable to a $9.2 million increase in other real estate expenses (including losses recognized on sales), a $2.1 million increase in salaries and employee benefits, and a $1.2 million increase in professional fees, offset by a $4.8 million decrease in the FDIC deposit insurance expense as the second quarter of 2009 contained the industry-wide special assessment.
Financial Performance Overview - First Nine Months of 2009
The net interest margin for the first nine months of 2009 was 2.98%, compared to 2.83% in the first nine months of 2008. The increase in the net interest margin in the first nine months of 2009 when compared to the first nine months of 2008 is primarily attributable to the positive impact of controlling interest-bearing deposit costs. The yield on earning assets decreased by 86 basis points compared to the first nine months of 2008 while the rate paid on total interest-bearing deposits decreased by 110 basis points compared to the first nine months of 2008.
Non-interest income totaled $232.6 million in the first nine months of 2009, increasing $152.3 million, or 190%, compared to the first nine months of 2008. The increase was primarily attributable to the $113.1 million bargain purchase gain and an increase of $33.9 million in mortgage banking revenue. The increase in mortgage banking revenue is primarily attributable to a significant increase in mortgage loans originated and sold to the secondary market. Mortgages originated for sale totaled over $3.7 billion in the first nine months of 2009 compared to over $1.3 billion in the first nine months of 2008. During the first nine months of 2009, the Company recognized an increase of $22.9 million in trading income. Partially offsetting the increase in trading income was the decrease of $19.6 million on fees from covered call options compared to the first nine months of 2008. The majority of the increase in trading income resulted from an increase in the market value of certain collateralized mortgage obligations held as trading assets. The Company purchased these securities at a significant discount during the first quarter of 2009. These securities have increased in value since their purchase due to market spreads tightening, increased mortgage prepayments due to a favorable mortgage rate environment and the resultant refinancing activity taking place in the market and lower than projected default rates.
Non-interest expense totaled $253.8 million in the first nine months of 2009, increasing $62.5 million, or 33%, compared to the first nine months of 2008. The change compared to the first nine months of 2008 was attributable to a $29.5 million increase in salaries and employee benefits and a $12.5 million increase in FDIC insurance expense related to deposit insurance rate increases, the one-time industry-wide FDIC deposit insurance special assessment in the second quarter of 2009 and growth in the assessable deposit base. Additionally, $12.3 million of increased expenses related to other real-estate owned (including losses on sales) and $3.4 million from increased professional fees, primarily as a result of the elevated level of non-performing assets contributed to the $62.5 million non-interest expense growth. The $29.5 million increase in salaries and employee benefits is largely attributable to an increase in variable pay (commissions) of $15.6 million primarily as a result of the higher mortgage loan origination volumes.
Financial Performance Overview - Credit Quality
Non-performing loans totaled $231.7 million, or 2.80% of total loans, at September 30, 2009, compared to $238.2 million, or 3.14% of total loans, at June 30, 2009 and $113.1 million, or 1.54% of total loans, at September 30, 2008. Other real-estate owned ("OREO") of $40.6 million at September 30, 2009 was down slightly compared to June 30, 2009 and increased $28.1 million compared to September 30, 2008. During the third quarter of 2009, 48 individual properties, representing 20 lending relationships, were acquired by the Company via foreclosure or deed in lieu of foreclosure. The fair value of these properties totaled $17.1 million. Changes in fair value of properties held and properties sold reduced the OREO balance by $17.9 million during the third quarter of 2009.
The provision for credit losses totaled $91.2 million for the third quarter of 2009 compared to $23.7 million for the second quarter of 2009 and $24.1 million in the third quarter of 2008. Net charge-offs for the third quarter totaled 365 basis points on an annualized basis compared to 84 basis points on an annualized basis in the third quarter of 2008 and 63 basis points on an annualized basis in the second quarter of 2009. The provision for credit losses totaled $129.3 million for the first nine months of 2009 compared to $43.0 million for the first nine months of 2008. Net charge-offs for the first nine months totaled 166 basis points on an annualized basis compared to 50 basis points on an annualized basis in the first nine months of 2008.
The allowance for credit losses at September 30, 2009 totaled $98.2 million and increased to 1.19% of total loans compared to $86.7 million or 1.14% of total loans at June 30, 2009 and $66.8 million, or 0.91% of total loans at September 30, 2008. At September 30, 2009, an additional $36.2 million of non-accretable discounts on the purchased life insurance premium finance receivables remains. Including this amount as part of the allowance for credit losses would increase the allowance for credit losses as a percentage of total loans outstanding to 1.62% at September 30, 2009.
WINTRUST FINANCIAL CORPORATION
SELECTED FINANCIAL HIGHLIGHTS
Three Months Ended Nine Months Ended
(Dollars in September 30, September 30,
thousands, except ------------------------ ------------------------
per share data) 2009 2008 2009 2008
------------------------------ ----------- ----------- -----------
Selected Financial
Condition Data (at
end of period):
Total assets $12,136,021 $ 9,864,920
Total loans 8,275,257 7,322,545
Total deposits 9,847,163 7,829,527
Junior subordinated
debentures 249,493 249,537
Total shareholders'
equity 1,106,082 809,331
-------------------------------------------
Selected Statements
of Income Data:
Net interest income$ 87,663 $ 60,680 $ 224,942 $ 181,822
Net revenue (1) 238,343 82,810 457,501 262,127
Income before taxes 54,587 (4,518) 74,402 27,914
Net income 31,995 (2,448) 44,902 18,533
Net income per
common share
- Basic 1.14 (0.13) 1.26 0.76
Net income per
common share
- Diluted 1.07 (0.13) 1.25 0.75
---------------------------------------------------------------------
Selected Financial
Ratios and
Other Data:
Performance Ratios:
Net interest
margin (2) 3.25% 2.74% 2.98% 2.83%
Non-interest income
to average assets 5.07 0.89 2.79 1.11
Non-interest
expense to
average assets 3.11 2.54 3.04 2.65
Net overhead
ratio (3) (1.95) 1.65 0.25 1.54
Efficiency
ratio (2) (4) 38.69 76.64 55.15 72.28
Return on average
assets 1.08 (0.10) 0.54 0.26
Return on average
equity 13.79 (1.59) 5.16 3.20
Average total
assets $11,797,520 $ 9,881,554 $11,154,193 $ 9,646,060
Average total
shareholders'
equity 1,070,095 765,892 1,066,447 756,801
Average loans to
average deposits
ratio 90.5% 94.1% 91.9% 94.5%
---------------------------------------------------------------------
Common Share Data
at end of period:
Market price per
common share $ 27.96 $ 29.35
Book value per
common share $ 34.10 $ 32.07
Common shares
outstanding 24,103,068 23,693,799
Other Data at end
of period:
Leverage ratio (5) 7.7% 8.1%
Tier 1 capital to
risk-weighted
assets (5) 8.8% 9.2%
Total capital to
risk-weighted
assets (5) 12.1% 10.7%
Allowance for
credit losses (6) $ 98,225 $ 66,820
Credit discounts
on purchased
loans (7) 36,195 --
Total credit
reserves 134,420 66,820
Non-performing
loans 231,659 113,041
Allowance for
credit losses to
total loans (6) 1.19% 0.91%
Total credit
reserves to
total loans (8) 1.62% 0.91%
Non-performing
loans to
total loans 2.80% 1.54%
Number of:
Bank subsidiaries 15 15
Non-bank
subsidiaries 8 8
Banking offices 78 79
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(1) Net revenue is net interest income plus non-interest income.
(2) See "Supplemental Financial Measures/Ratios" for additional
information on this performance measure/ratio.
(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) Capital ratios for current quarter-end are estimated.
(6) The allowance for credit losses includes both the allowance for
loan losses and the allowance for lending-related commitments.
(7) Represents the remaining non-accretable portion of the discounts
on the purchased life insurance premium finance loans that were
purchased.
(8) The sum of allowance for credit losses and credit discounts on
purchased loans divided by total loans outstanding plus the
credit discounts on purchased loans.
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
(Unaudited) (Unaudited)
Sept. 30, Dec. 31, Sept. 30,
(In thousands) 2009 2008 2008
---------------------------------------------------------------------
Assets
Cash and due from banks $ 128,898 $ 219,794 $ 158,201
Federal funds sold and
securities purchased under
resale agreements 22,863 226,110 35,181
Interest bearing deposits
with banks 1,168,362 123,009 4,686
Available-for-sale securities,
at fair value 1,434,248 784,673 1,469,500
Trading account securities 29,204 4,399 2,243
Brokerage customer receivables 19,441 17,901 19,436
Loans held-for-sale 193,255 61,116 68,398
Loans, net of unearned income 8,275,257 7,621,069 7,322,545
Less: Allowance for loan losses 95,096 69,767 66,327
---------------------------------------------------------------------
Net loans 8,180,161 7,551,302 7,256,218
Premises and equipment, net 352,890 349,875 349,388
Accrued interest receivable
and other assets 315,806 240,664 209,970
Trade date securities receivable -- 788,565 --
Goodwill 276,525 276,310 276,310
Other intangible assets 14,368 14,608 15,389
---------------------------------------------------------------------
Total assets $12,136,021 $10,658,326 $ 9,864,920
---------------------------------------------------------------------
Liabilities and
Shareholders' Equity
Deposits:
Non-interest bearing $ 841,668 $ 757,844 $ 717,587
Interest bearing 9,005,495 7,618,906 7,111,940
---------------------------------------------------------------------
Total deposits 9,847,163 8,376,750 7,829,527
Notes payable 1,000 1,000 42,025
Federal Home Loan Bank advances 433,983 435,981 438,983
Other borrowings 252,071 336,764 296,391
Subordinated notes 65,000 70,000 75,000
Junior subordinated debentures 249,493 249,515 249,537
Trade date securities payable -- -- 2,000
Accrued interest payable and
other liabilities 181,229 121,744 122,126
---------------------------------------------------------------------
Total liabilities 11,029,939 9,591,754 9,055,589
---------------------------------------------------------------------
Shareholders' equity:
Preferred stock 284,061 281,873 49,379
Common stock 26,965 26,611 26,548
Surplus 580,988 571,887 551,453
Treasury stock (122,437) (122,290) (122,290)
Retained earnings 342,873 318,793 318,066
Accumulated other
comprehensive loss (6,368) (10,302) (13,825)
---------------------------------------------------------------------
Total shareholders' equity 1,106,082 1,066,572 809,331
---------------------------------------------------------------------
Total liabilities and
shareholders' equity $12,136,021 $10,658,326 $ 9,864,920
---------------------------------------------------------------------
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
(In thousands, except per ------------------ -------------------
share data) 2009 2008 2009 2008
------------------------------------------------- -------------------
Interest income
Interest and fees on loans $126,448 $108,495 $343,637 $336,251
Interest bearing deposits
with banks 778 27 2,205 215
Federal funds sold and
securities purchased under
resale agreements 106 197 233 1,303
Securities 14,106 17,599 44,252 50,233
Trading account securities 7 23 86 69
Brokerage customer receivables 132 228 372 834
---------------------------------------------------------------------
Total interest income 141,577 126,569 390,785 388,905
---------------------------------------------------------------------
Interest expense
Interest on deposits 42,806 53,405 132,261 168,697
Interest on Federal Home
Loan Bank advances 4,536 4,583 13,492 13,696
Interest on notes payable and
other borrowings 1,779 2,661 5,401 8,331
Interest on subordinated notes 333 786 1,341 2,716
Interest on junior
subordinated debentures 4,460 4,454 13,348 13,643
---------------------------------------------------------------------
Total interest expense 53,914 65,889 165,843 207,083
---------------------------------------------------------------------
Net interest income 87,663 60,680 224,942 181,822
Provision for credit losses 91,193 24,129 129,329 42,985
---------------------------------------------------------------------
Net interest income after
provision for credit losses (3,530) 36,551 95,613 138,837
---------------------------------------------------------------------
Non-interest income
Wealth management 7,501 7,044 20,310 22,680
Mortgage banking 13,204 4,488 52,032 18,120
Service charges on
deposit accounts 3,447 2,674 9,600 7,612
Gain on sales of commercial
premium finance receivables 3,629 456 4,147 2,163
(Losses) gains on available
-for-sale securities, net (412) 920 (910) (553)
Gain on bargain purchase 113,062 -- 113,062 --
Other 10,249 6,548 34,318 30,283
---------------------------------------------------------------------
Total non-interest income 150,680 22,130 232,559 80,305
---------------------------------------------------------------------
Non-interest expense
Salaries and employee benefits 48,088 35,823 138,923 109,471
Equipment 4,069 4,050 12,022 12,025
Occupancy, net 5,884 5,666 17,682 16,971
Data processing 3,226 2,850 9,578 8,566
Advertising and marketing 1,488 1,343 4,003 3,709
Professional fees 4,089 2,195 9,843 6,490
Amortization of other
intangible assets 677 781 2,040 2,348
Other 25,042 10,491 59,679 31,648
---------------------------------------------------------------------
Total non-interest expense 92,563 63,199 253,770 191,228
---------------------------------------------------------------------
Income before taxes 54,587 (4,518) 74,402 27,914
Income tax expense 22,592 (2,070) 29,500 9,381
---------------------------------------------------------------------
Net income $ 31,995 $ (2,448) $ 44,902 $ 18,533
---------------------------------------------------------------------
Preferred stock dividends and
discount accretion 4,668 544 14,668 544
---------------------------------------------------------------------
Net income applicable to
common shares $ 27,327 $ (2,992) $ 30,234 $ 17,989
---------------------------------------------------------------------
Net income per common share
- Basic $ 1.14 $ (0.13) $ 1.26 $ 0.76
---------------------------------------------------------------------
Net income per common share
- Diluted $ 1.07 $ (0.13) $ 1.25 $ 0.75
---------------------------------------------------------------------
Cash dividends declared per
common share $ 0.09 $ 0.18 $ 0.27 $ 0.36
---------------------------------------------------------------------
---------------------------------------------------------------------
Weighted average common
shares outstanding 24,052 23,644 23,958 23,590
Dilutive potential
common shares 2,493 -- 323 525
---------------------------------------------------------------------
Average common shares and
dilutive common shares 26,545 23,644 24,281 24,115
---------------------------------------------------------------------
SUPPLEMENTAL FINANCIAL MEASURES/RATIOS
The accounting and reporting policies of Wintrust conform to generally accepted accounting principles ("GAAP") in the United States and prevailing practices in the banking industry. However, 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) and the efficiency ratio. Management believes that these measures and ratios provide users of the Company's financial information a more meaningful view of the performance of the interest-earning and interest-bearing liabilities and of the Company's operating efficiency. Other financial holding companies may define or calculate these measures and ratios differently.
Management reviews yields on certain asset categories and the net interest margin of the Company and its banking subsidiaries on a fully taxable-equivalent ("FTE") basis. 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 FTE 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.
A reconciliation of certain non-GAAP performance measures and ratios used by the Company to evaluate and measure the Company's performance to the most directly comparable GAAP financial measures is shown below:
----------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------------------
(Dollars in thousands) 2009 2008 2009 2008
----------------------------------------------------------------------
(A) Interest income (GAAP) $141,577 $126,569 $390,785 $388,905
Taxable-equivalent adjustment:
- Loans 93 142 360 499
- Liquidity management assets 413 423 1,314 1,362
- Other earning assets 9 12 30 31
---------------------------------------
Interest income - FTE $142,092 $127,146 $392,489 $390,797
(B) Interest expense (GAAP) 53,914 65,889 165,843 207,083
---------------------------------------
Net interest income - FTE $ 88,178 $ 61,257 $226,646 $183,714
---------------------------------------
(C) Net interest income (GAAP)
(A minus B) $ 87,663 $ 60,680 $224,942 $181,822
---------------------------------------
(D) Net interest margin (GAAP) 3.23% 2.71 2.95% 2.80%
Net interest margin - FTE 3.25% 2.74% 2.98% 2.83%
(E) Efficiency ratio (GAAP) 38.77% 77.18% 55.36% 72.80%
Efficiency ratio - FTE 38.69% 76.64% %55.15 72.28%
----------------------------------------------------------------------
Loans
---------------------------------------------------------------------
Loan Portfolio Mix and Growth Rates
% Growth
-------------------
From From
(Dollars in Sept. 30, Dec. 31, Sept. 30, Dec. 31, Sept. 30,
thousands) 2009 2008 2008 2008(1) 2008
------------- ---------- ---------- ---------- --------- ---------
Balance:
--------
Commercial and
commercial
real estate $5,035,859 $4,778,664 $4,673,682 7% 8%
Home equity 928,548 896,438 837,127 5 11
Residential
real estate 281,151 262,908 247,203 9 14
Premium
finance
receivables -
commercial 752,032 1,243,858 1,164,256 (53) (35)
Premium
finance
receivables -
life
insurance 1,045,653 102,728 41,120 NM NM
Indirect
consumer
loans(2) 115,528 175,955 199,845 (46) (42)
Other loans 116,486 160,518 159,312 (36) (27)
---------- ---------- ---------- --------- ---------
Total loans,
net of
unearned
income $8,275,257 $7,621,069 $7,322,545 11% 13%
---------- ---------- ---------- --------- ---------
Mix:
----
Commercial and
commercial
real estate 61% 63% 64%
Home equity 11 12 11
Residential
real estate 4 3 4
Premium finance
receivables -
commercial 9 16 16
Premium finance
receivables -
life insurance 13 2 1
Indirect
consumer
loans(2) 1 2 3
Other loans 1 2 1
---------- ---------- ----------
Total loans,
net of
unearned
income 100% 100% 100%
----------- ----------- -----------
(1) Annualized
(2) Includes autos, boats, snowmobiles and other indirect consumer
loans.
NM = Not Meaningful
---------------------------------------------------------------------
---------------------------------------------------------------------
Commercial and Commercial Real Estate Loans
As of September 30, 2009
> 90 Days Allowance
% of Past Due For Credit
(Dollars in Total Non- and Still Losses
thousands) Balance Loans accrual Accruing Allocation
---------------- ---------- ------ -------- --------- ----------
Commercial:
Commercial and
Industrial $1,345,111 16.3% $ 16,689 $ 605 $ 21,799
Franchise 107,447 1.3 -- -- 1,619
Mortgage
warehouse lines
of credit 73,816 0.9 -- -- 985
Community
Advantage -
homeowner
associations 60,146 0.7 -- -- 145
Aircraft 41,606 0.5 -- 153 164
Other 15,595 0.2 2,346 -- 424
---------- ------ -------- --------- ----------
Total
Commercial $1,643,721 19.9% $ 19,035 $ 758 $ 25,136
---------- ------ -------- --------- ----------
Commercial Real
Estate:
Land and
development $1,041,641 12.6% $103,573 $ 10,090 $ 25,231
Office 544,772 6.6 10,029 -- 7,079
Industrial 466,725 5.6 8,476 355 7,012
Retail 570,589 6.9 10,698 12,161 7,846
Mixed use and
other 768,411 9.3 14,915 13 10,686
---------- ------ -------- --------- ----------
Total Commercial
Real Estate
Loans $3,392,138 41.0% $147,691 $ 22,619 $ 57,854
---------- ------ -------- --------- ----------
Total Commercial
and Commercial
Real Estate $5,035,859 60.9% $166,726 $ 23,377 $ 82,990
---------- ------ -------- --------- ----------
---------------------------------------------------------------------
Commercial Real
Estate-collateral
location by state:
Illinois $2,729,454 80.5%
Wisconsin 375,911 11.1
---------- ------
Total primary
markets $3,105,365 91.6%
---------- ------
Indiana 48,300 1.4
Florida 43,164 1.3
Arizona 42,226 1.2
Other (no
individual state
greater than
0.6%) 153,083 4.5
---------- ------
Total $3,392,138 100.0%
---------- ------
DEPOSITS
---------------------------------------------------------------------
Deposit Portfolio Mix and Growth Rates % Growth
-------------------
From From
(Dollars in Sept. 30, Dec. 31, Sept. 30, Dec. 31, Sept. 30,
thousands) 2009 2008 2008 2008(1) 2008
------------- ---------- ---------- ---------- --------- ---------
Balance:
--------
Non-interest
bearing $ 841,668 $ 757,844 $ 717,587 15% 17%
NOW 1,245,689 1,040,105 1,012,393 26 23
Wealth
Management
deposits(2) 935,740 716,178 583,715 41 60
Money market 1,468,228 1,124,068 997,638 41 47
Savings 513,239 337,808 317,108 69 62
Time
certificates
of deposit 4,842,599 4,400,747 4,201,086 13 15
---------- ---------- ---------- --------- ---------
Total
deposits $9,847,163 $8,376,750 $7,829,527 23% 26%
---------- ---------- ---------- --------- ---------
Mix:
----
Non-interest
bearing 9% 9% 9%
NOW 13 12 13
Wealth
Management
deposits(2) 9 9 7
Money market 15 13 13
Savings 5 4 4
Time
certificates
of deposit 49 53 54
---------- ---------- ----------
Total
deposits 100% 100% 100%
----------- ----------- -----------
(1) Annualized
(2) Represents deposit balances at the Company's subsidiary banks
from brokerage customers of Wayne Hummer Investments, trust and
asset management customers of Wayne Hummer Trust Company and
brokerage customers from unaffiliated companies which have been
placed into deposit accounts of the Banks.
---------------------------------------------------------------------
---------------------------------------------------------------------
Deposit Maturity Analysis Weighted-
As of September 30, 2009 Average
Rate of
Maturing
Non- Time
Interest Savings Time Certifi-
Bearing And Wealth Certifi- ficates
(Dollars in And Money Mgt cates Total of
thousands) NOW(1) Market(1) (1)(2) of Deposit Deposits Deposit
------------------ ---------- -------- ---------- ---------- --------
1 - 3
months $2,087,357 $1,981,467 $615,898 $1,392,088 $6,076,810 2.38%
4 - 6
months -- -- 121,294 851,034 972,328 2.46
7 - 9
months -- -- -- 720,427 720,427 2.61
10 - 12
months -- -- -- 605,530 605,530 2.39
13 - 18
months -- -- 198,548 668,256 866,804 2.67
19 - 24
months -- -- -- 284,965 284,965 3.54
24+
months -- -- -- 320,299 320,299 3.57
---------- ---------- -------- ---------- ---------- --------
Total $2,087,357 $1,981,467 $935,740 $4,842,599 $9,847,163 2.62%
---------- ---------- -------- ---------- ---------- --------
----------------------------------------------------------------------
(1) Balances of non-contractual maturity deposits are shown as
maturing in the earliest time frame. These deposits do not have
contractual maturities and re-price in varying degrees to changes
in overall interest rates.
(2) Wealth management deposit balances from unaffiliated companies
are shown maturing in the period in which the current contractual
obligation to hold these funds matures.
----------------------------------------------------------------------
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 third quarter of 2009 compared to the third quarter of 2008 (linked quarters):
---------------------------------------------------------------------
For the Three Months Ended For the Three Months Ended
September 30, 2009 September 30, 2008
(Dollars in---------------------------- ----------------------------
thousands) Average Interest Rate Average Interest Rate
--------------------------------------- ----------------------------
Liquidity
management
assets (1)
(2) (7) $ 2,078,330 $ 15,403 2.94% $ 1,544,465 $ 18,247 4.70%
Other
earning
assets (2)
(3) (7) 24,874 148 2.36 21,687 262 4.81
Loans, net
of
unearned
income (2)
(4) (7) 8,665,281 126,541 5.79 7,343,845 108,637 5.89
---------------------------- ----------------------------
Total
earning
assets
(7) $10,768,485 $142,092 5.24% $ 8,909,997 $127,146 5.68%
---------------------------- ----------------------------
Allowance
for loan
losses (85,300) (57,751)
Cash and
due from
banks 109,645 133,527
Other
assets 1,004,690 895,781
----------- -----------
Total
assets $11,797,520 $ 9,881,554
=========== ===========
Interest
-bearing
deposits $ 8,799,578 $ 42,806 1.93% $ 7,127,065 $ 53,405 2.98%
Federal
Home Loan
Bank
advances 434,134 4,536 4.14 438,983 4,583 4.15
Notes
payable
and other
borrowings 245,352 1,779 2.88 398,911 2,661 2.65
Subordinated
notes 65,000 333 2.01 75,000 786 4.10
Junior
subordinated
debentures 249,493 4,460 6.99 249,552 4,454 6.98
---------------------------- ----------------------------
Total
interest
-bearing
liabil
-ities $ 9,793,557 $ 53,914 2.18% $ 8,289,511 $ 65,889 3.16%
---------------------------- ----------------------------
Non-interest
bearing
deposits 775,202 678,651
Other
liabilities 158,666 147,500
Equity 1,070,095 765,892
----------- -----------
Total
liabil
-ities
and share
-holders'
equity $11,797,520 $ 9,881,554
=========== ===========
Interest
rate
spread (5)
(7) 3.06% 2.52%
Net free
funds/
contri
-bution
(6) $ 974,928 0.19 $ 620,486 0.22
---------------------------- ----------------------------
Net
interest
income/Net
interest
margin (7) $ 88,178 3.25% $ 61,257 2.74%
--------------- ---------------
---------------------------------------------------------------------
---------------------------------------------------------------------
(1) Liquidity management assets include available-for-sale
securities, interest earning deposits with banks, federal funds
sold and securities purchased under resale agreements.
(2) Interest income on tax-advantaged loans, trading account
securities and securities reflects a tax-equivalent adjustment
based on a marginal federal corporate tax rate of 35%. The total
adjustments for the three months ended September 30, 2009 and
2008 were $515,000 and $576,000, respectively.
(3) Other earning assets include brokerage customer receivables and
trading account securities.
(4) Loans, net of unearned income, include loans 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) See "Supplemental Financial Measures/Ratios" for additional
information on this performance measure/ratio.
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 third quarter of 2009 compared to the second quarter of 2009 (sequential quarters):
---------------------------------------------------------------------
For the Three Months Ended For the Three Months Ended
September 30, 2009 June 30, 2009
(Dollars in---------------------------- ----------------------------
thousands) Average Interest Rate Average Interest Rate
--------------------------------------- ----------------------------
Liquidity
management
assets (1)
(2) (7) $ 2,078,330 $ 15,403 2.94% $ 1,851,179 $ 17,102 3.71%
Other
earning
assets (2)
(3) (7) 24,874 148 2.36 22,694 185 3.27
Loans, net
of
unearned
income (2)
(4) (7) 8,665,281 126,541
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