Wintrust Financial Corporation · NASDAQ:WTFC
Wintrust Financial — Howe Barnes Hoefer & Arnett 14th Annual Bank Conference 2009
56 slides from Wintrust Financial's conference presentation, Aug 18, 2009
Slide 1: Howe Barnes Hoefer & Arnett 14th Annual Bank Conference
1 Howe Barnes Hoefer & Arnett 14th Annual Bank Conference August 18, 2009 August 18, 2009 August 18, 2009 August 18, 2009 August 18, 2009
Slide 2: Forward-Looking Information
2 FORWARD-LOOKING INFORMATION During the course of our remarks today, you will hear us make certain predictive statements regarding our plans and strategies and anticipated financial effects to assist you better in understanding our company.These forward looking statements about future results are s
Slide 3: Agenda
3 WINTRUST FINANCIAL C O R P O R A T I O N Questions Who We Are Strategy &Tactics Commercial Initiative Market Share Position Financial Review De Novo Growth and Acquisitions Brands and Locations
Slide 4: Who We Are
4 Who We Are Seventeen year-old community focused banking organization with approximately $11.4 billion in assets.Fifteen community banks with strong ties to local residents and business leaders in the Chicago and Milwaukee metropolitan markets.9 charters started since 1991 and 7 bank acquisitions s
Slide 5: Who We Are
5 Who We Are Significant wealth management operation (Approximately $7 billion in assets under administration) through the 76 year old Wayne Hummer Companies acquired in 2002. Provide brokerage, asset management and trust capabilities to our retail and commercial customer bases.Two commercial financ
Slide 6: Who We Are - Core Strategy
6 Consistent strategy for seventeen years - though the last three years have required a temporary change in tacticsServe markets in Chicago and Milwaukee areas. Currently operating in the higher net worth areas of those markets.Have taken advantage of consolidation to grow quicklyPosition ourselves
Slide 7: Wintrust Banking & Wealth Management Locations
Wintrust Banking & Wealth Management Locations
Slide 8: Core Strategy - Operating Tenets
8 Core Strategy - Operating Tenets Operate at 85% to 90% loan-to-deposit ratio thereby providing for adequate liquidityGenerate about two-thirds of loan volume from banks with remaining coming from asset generation nichesFirst Insurance FundingP & C Life InsuranceTricom - Temporary help industry pro
Slide 9: Core Strategy - Deposits
9 Core Strategy - Deposits Philosophy has always been to create and maintain a strong, diversified right hand side of the balance sheet.Recent markets have proven the value of that approachFranchise is built on core deposits with approximately 92% of our deposit base being directly generated through
Slide 10: Deposit Market Share
10 Deposit Market Share De Novo Market Opening Acq. Market Share Bank Date Date Share Rank 1. Lake Forest Bank & Trust 12/91 34.8% 1 (out of 10)2. Hinsdale Bank & Trust 10/93 20.2% 2 (out of 13)3. North Shore Community Bank 09/94 30.1% 1 (out of 8)4. Libertyville Bank & Trust 10/95 40.8% 1 (out of 8
Slide 11: Deposit Market Share - Chicago MSA
11 Deposit Market Share-Chicago MSA As of June 30, 2007 and 2008 At June 30, 2007 At June 30, 2008 In-market Deposit In-market Deposit Deposit Market Deposit Market Bank Holding Company Dollars Share % Dollars Share %JP Morgan Chase & Co. ** $ 38.9 BB 14.5% $40.6 BB 14.9%Bank of America ** $ 34.6 BB
Slide 12: Strategy - Expansion Philosophy
12 Focus on community banks in areas not currently servedWithin 11/2 hours of Wintrust headquartersIncludes Chicago suburbs and SE WisconsinFocus on entities with existing management that wishes to continue to grow the businessConsider non-bank acquisitions in the earning asset and wealth management
Slide 13: Temporary Change in Tactics
13 Temporary Change in Tactics The aforementioned philosophy resulted in compound growth rates north of 20% for most of our vital statistics for the first fourteen years of our existence.Then the environment changed and we were forced to temporarily change our tactics.
Slide 14: Banking Environment Caused Temporary Change in Tactics
14 Banking Environment Caused Temporary Change in Tactics In the first quarter of 2005, we saw a dramatic change in the overall banking environmentDisadvantageous yield curveLoosened credit standardsCredit spreads moved to unacceptable levelsProfitable growth at acceptable risk levels was taken away
Slide 15: The Perfect Storm - What We Expected
15 The Perfect Storm What We Expected Increased credit costsPossible liquidity crisisBank stock multiples to decrease drastically as earnings plummet and the industry moves out of favorCapital raising difficultiesMarket disarray and dislocation
Slide 16: The Perfect Storm - What We Expected
16 The Perfect Storm What We Expected Opportunities for those with dry powderLending opportunitiesAcquisition opportunities for bruised banks and asset generatorsNeed to be first out ^ cannot be burdened by a troubled loan portfolio, lack of funding or capital"It's times like this where money return
Slide 17: Our Response - The Rope-a-Dope Strategy
17 Our Response - The "Rope-a-Dope" Strategy No change in loan underwriting - do not chase the herd!!Slow growth Shrink larger banks (run-off of CD-only customers)Grow newer banksReduce relative cost of fundsDisciplineMixGet paid for making loans - hand out credit with an eye dropperControl expenses
Slide 18: Rope-a-Dope Interim Report Card
18 Rope-a-Dope Interim Report Card 2008 Results Of the 14 publicly traded bank holding companies in our market area, 6 were profitable and 8 lost money. We are in the 6!Net charge offs to average loans for the competitor group was 1.98% (1.46% if you eliminate the one Industrial Charter) - Wintrust
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Slide 21: A Word on Reserve Levels
21 A Word on Reserve Levels We are continually challenged on the adequacy of our reserve levels versus competitors.As the preceding data illustrates, portfolio characteristics (charge-offs and NPAs) were less than half of the local competitive group. Thus, although reserves levels have historically
Slide 22: Timing and TARP
22 Timing and TARP Capital was always key in the timing as to when to move off of our defensive strategy.Unwilling to dilute shareholdersIn the third quarter of last year and in anticipation of this move, we raised $50 million of convertible preferred stock through a private placement.This capital p
Slide 23: Time to Come off the Ropes - But Cautiously
23 Time to Come off the Ropes- But Cautiously Aided by $300 million of new capital, we began "coming off the ropes" in the 4th quarter 2008.Loans grew $793 million since 9/30/08 (over 3 qtrs)Deposits grew $1.4 billion since 9/30/08 (over 3 qtrs)The above growth was accomplished at pricing commensura
Slide 24: Time to Come off the Ropes - But Cautiously
24 Time to Come off the Ropes- But Cautiously As anticipated, tremendous market dislocation, competitive disarray, and non-bank de- leveraging are affording numerous opportunities to those with dry powder.Our loan pipeline is strong but we are obviously being more discerning than usual:Commercial re
Slide 25: Purchase of Life Insurance Premium Finance Loan Portfolio
25 Purchase of Life Insurance Premium Finance Loan Portfolio On July 28, 2009, First Insurance Funding Corp. entered into an Asset Purchase Agreement with American International Group, Inc. ("AIG"), pursuant to which FIFC purchased a portfolio of domestic life insurance premium finance loans and cer
Slide 26: Characteristics of Purchased Life Insurance Premium Finance Loan Portfolio
26 Characteristics of Purchased Life Insurance Premium Finance Loan Portfolio Generally used for estate planning purposes of high net worth borrowersGenerally collateralized by the cash surrender value of life insurance policies, letters of credit, annuities, cash and marketable securities.Purchased
Slide 27: Annual Pre-tax Pre-Provision Earnings
27 Annual Pre-tax Pre-Provision for Loan Losses Earnings 2000 2001 2002 2003 2004 2005 2006 2007 2008 4TH QTR '08 1ST QTR '09 2ND QTR '09 Pre-tax Pre-Provision Earnings 21503 37029 52816 70343 87185 111626 111298 98703 88082 68732 96988 134816 (in 000s) (Qtrs are Annualized)
Slide 28: Expected Earnings Improvements
28 Expected Earnings Improvements Pre-Tax Subject to market and other conditions, including interest rate environments, credit loss costs, special FDIC assessments and other factors influencing growth, pre-tax, pre-provision earnings could benefit from the following:Continued Margin ImprovementDepos
Slide 29: Time to Come off the Ropes
29 Time to Come off the Ropes Low rates should help mortgage business. Also will be aided by less competitors and a saner marketplace Deposit growth remains strongGeneral retail deposit growthCommercial relationship growthIBD and Max Safe productsContinue to be focused on identifying and resolving a
Slide 30: Annual Pre-tax Pre-Provision Earnings (Pro Forma)
30 Annual Pre-tax Pre-Provision for Loan Losses Earnings 2000 2001 2002 2003 2004 2005 2006 2007 2008 4TH QTR '08 1ST QTR '09 2ND QTR '09 Pro Forma (+/-) Pre-tax Pre-Provision Earnings 21503 37029 52816 70343 87185 111626 111298 98703 88082 68732 96988 134816 244816 (in 000s) (Qtrs are Annualized) P
Slide 31: Goals for the Remainder of 2008
31 Goals for the Remainder of 2008 Continue to concentrate on core earningsClear the "junk" off the balance sheetContinue to scour the market for dislocated assets Subject to market and other conditions, commence P & C Premium Finance asset saleMaintain disciplined core growthStart 2010 with strong
Slide 32: Summary
32 Summary Our goal is to take advantage of current market opportunities to get earnings on track. Hopefully this will result in a higher stock price.Retire TARP when it makes sense to do so. Opportunities are abundant.......
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Slide 34: Financial Results
Financial Results
Slide 35: Historical Growth
35 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2Q09 Bank and Trust Subsidiaries 2 2 3 4 5 6 7 8 9 10 10 14 16 22 23 23 23 22 23 Banking Offices 1 1 3 5 11 14 17 21 24 28 29 31 36 50 62 73 77 79 79 Historical Growth
Slide 36: Banking Locations
36 Banking Locations 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2Q09 Internal 1 1 3 5 11 14 17 21 24 28 29 31 32 40 45 51 56 58 58 Acquisition 4 10 17 22 21 21 21
Slide 37: Total Assets
37 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2Q09 Crystal Lake 7 40 Total 52 83 189 354 471 706 1053 1348 1679 2103 2705 3722 4747 6419 8177 9572 9369 10658 11360 Barrington 11 72 105 Libertyville 35 76 124 174 North Shore 44 105 169 266 287 Hinsdale 2
Slide 38: Asset Growth - Internal / Acquired
38 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2Q09 7 40 Internal Growth 52 83 189 354 471 706 1053 1348 1650 2074 2676 3619 4450 5399 6456 7363 7098 8387 9089 Acquired Growth 29 29 29 103 297 1020 1721 2209 2271 2271 2271 Asset Growth - Internal / Acqui
Slide 39: Asset Growth of Banks by Year
39 Asset Growth of Banks by Year 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2Q09 Lake Forest 8 49 96 143 195 270 380 441 499 581 667 897 1087 1256 1334 1458 1504 1654 1553 Hinsdale 0 23 67 115 167 223 281 350 401 508 642 746 887 980 1401 1270 1314 1362
Slide 40: Consolidated Net Income
40 Consolidated Net Income (before Preferred Dividends, in 000s) 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 1H08 1H09 -2236 1497 -973 4846 6245 9427 11155 18439 27875 38118 51334 67016 66493 55653 20488 20981 12907 West 31.6 2606 North 43.9
Slide 41: EPS Growth
41 EPS Growth 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Annual 0.4 0.49 0.73 0.83 1.27 1.6 1.98 2.34 2.75 2.56 2.24 0.76 Quarterly 0.07 0.09 0.1 0.13 0.08 0.08 0.17 0.16 0.15 0.18 0.2 0.21 0.23 0.24 0.07 0.29 0.29 0.32 0.33 0.33 0.4 0.37 0.4 0.43 0.45 0.49 0.53 0.52 0.54 0.58 0.6 0
Slide 42: Revenue Growth by Quarter
42 Revenue Growth by Quarter 1Q97 2Q97 3Q97 4Q97 1Q98 2Q98 3Q98 4Q98 1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 Net Int Inc 5252 6789
Slide 43: Net Interest Margin
43 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 1H09 Net Interst Margin 0.0335 0.0296 0.0291 0.0341 0.0343 0.0354 0.0366 0.0349 0.0334 0.032 0.0317 0.0316 0.031 0.0311 0.0281 0.0281 Net Interest Margin (fully taxable equivalent)
Slide 44: Net Overhead Ratio & Efficiency Ratio
44 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 1H09 Net Overhead Ratio 0.0357 0.0201 0.0271 0.026 0.0236 0.02 0.0213 0.0159 0.0141 0.0122 0.013 0.0139 0.0154 0.0172 0.016 0.0147 Efficiency Ratio 0.8603 0.7975 0.6863 0.7233 0.6366 0.6641 0.6352 0.6445 0.6397 0.6696 0.71
Slide 45: Individual Bank Efficiency Ratios - 2008
45 LFBT HBT LBT NSCBT BBT NBT SBOTL VBT TOWN CLBT ANB WBT OPTCB BVBT SCB Average Assets 1543379 1241484 973234 956822 804156 688380 608415 592609 589865 571492 363002 336655 187319 186812 124521 Efficiency Ratio 0.4132 0.5978 0.4659 0.7426 0.5828 0.5644 0.6034 0.5515 0.6608 0.5155 0.9799 0.6851 1.60
Slide 46: Loan Portfolio Composition
46 Loan Portfolio Composition As of June 30, 2009 - $7.6 Billion (excludes loans held for sale) Comm'l Premium Finance Indirect Auto Other Niches Res. Real Estate Home Equity Other Loan comp 0.65 0.14 0.02 0.02 0.03 0.12 0.02 Comm'land Comm'lR/E Premium Finance Indirect Consumer Res. R/E Home Equity
Slide 47: Ending Loan-to-Deposit Ratio
47 Ending Loan-to-Deposit Ratio (excludes loans held for sale) 1996 2001 2002 2003 2004 2005 2006 2007 2008 2Q09 BV per share 0.872 0.827 0.851 0.852 0.775 0.826 0.91 0.91 0.8264
Slide 48: Non-Performing Assets to Total Assets
48 Non-Performing Assets to Total Assets 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2Q09 Core NPA/TA 0 0.0017 0.0007 0.0016 0.0021 0.0016 0.000676 0.001402 0.0013 0.003 0.0011 0.0019 0.0025 0.0059 0.0138 0.0218 NPA/TA 0.0001 0.0041 0.0025 0.004 0.0045 0.0041 0.0046 0.
Slide 49: Net Charge-offs to Total Loans
49 Net Charge-offs to Total Loans 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2Q09 Net Charge-offs/Average Loans 0.0018 0.002 0.0031 0.0031 0.0028 0.0019 0.0024 0.0026 0.0024 0.0018 0.0007 0.001 0.0009 0.0016 0.0051 0.0057 Total Loans 194 258 493 713 992 1278 1558 2061
Slide 50: Credit Loss Reserve Analysis
50 Credit Loss Reserve Analysis Non- Non- Performing Performing Loans, net Loans (%) Core Banking $6,391,154 $206,192 3.23% Indirect Consumer 133,808 1,920 1.44% Premium Finance Rec. 1,070,514 30,107 2.81% Total $7,595,476 $238,219 3.14% $5,229 2003 Calendar Year Net Charge-offs $5,450 6/30/09 Credi
Slide 51: Financial Overview - Capital Components
51 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2Q09 Capital Growth 14583 11291 17227 25366 40487 42620 68790 75205 92947 102276 141278 227002 349837 473912 627911 773346 739555 784699 781558 Preferred 0 0 0 0 0 0 0 0 0 0 281873 283518 Trust Pfd 31050 310
Slide 52: Financial Overview - Common Book Value Per Share
52 Financial Overview - Common Book Value Per Share 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2Q09 BV per share 5.65 6.15 7.06 7.92 9.72 13.19 17.43 21.81 26.23 30.38 31.56 33.03 32.59
Slide 53: Forward-Looking Statements
53 FORWARD-LOOKING STATEMENTS This presentation contains forward-looking statements within the meaning of federal securities laws. Forward-looking information in this document can be identified through the use of words such as "may," "will," "intend," "plan," "project," "expect," "anticipate," "shou
Slide 54: Forward-Looking Statements (cont.)
54 FORWARD-LOOKING STATEMENTS (cont.) Competitive pressures in the financial services business which may affect the pricing of the Company's loan and deposit products as well as its services (including wealth management services).Changes in the interest rate environment, which may influence, among o
Slide 55: Forward-Looking Statements (cont.)
55 FORWARD-LOOKING STATEMENTS (cont.) Unexpected difficulties or unanticipated developments related to the Company's strategy of de novo bank formations and openings. De novo banks typically require over 13 months of operations before becoming profitable, due to the impact of organizational and over
Slide 56: Questions
56 Questions
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