PROSPECTUS Filed pursuant to Rule 424(b)(3)
File No. 333-115898
WINTRUST FINANCIAL CORPORATION
275,000 SHARES OF COMMON STOCK
Certain shareholders of Wintrust Financial Corporation are offering for
sale from time to time up to 275,000 shares of our common stock under this
prospectus. The selling shareholders may offer the shares:
o to or through one or more underwriters;
o directly to purchasers;
o on the Nasdaq National Market in typical brokerage
transactions;
o in negotiated transactions, or otherwise.
The selling shareholders may sell the shares of common stock covered by
this prospectus:
o at market prices prevailing at the time of sale;
o at prices related to the then-prevailing market price; or
o at negotiated prices.
We will not receive any proceeds from the sale of the shares of common
stock by the selling shareholders. No minimum purchase is required and no
arrangement has been made to have funds received by the selling shareholders
and/or any registered representatives placed in an escrow, trust or similar
account or arrangement.
Our common stock is traded on the Nasdaq National Market under the
symbol "WTFC." On June 8, 2004, the closing price of our common stock as
reported on Nasdaq was $48.83 per share.
YOU SHOULD CONSIDER, AMONG OTHER THINGS, THE INFORMATION SET FORTH IN
THE "RISK FACTORS" SECTION BEGINNING ON PAGE 6 OF THIS PROSPECTUS.
THE SHARES OF COMMON STOCK THAT ARE BEING OFFERED ARE NOT SAVINGS
ACCOUNTS OR DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND ARE NOT INSURED OR
GUARANTEED BY THE BANK INSURANCE FUND OR THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY GOVERNMENTAL AGENCY.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is June 8, 2004.
TABLE OF CONTENTS
PAGE
Summary Information............................................................1
Risk Factors...................................................................6
Use of Proceeds...............................................................11
Price Range of Common Stock and Dividend Policy...............................11
Selling Shareholders..........................................................12
Plan of Distribution..........................................................13
Transfer Agent................................................................14
Legal Matters.................................................................14
Experts .....................................................................14
Where You Can Find More Information...........................................14
Documents Incorporated by Reference...........................................14
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The information in this prospectus is complete and accurate as of the
date on the front cover, but the information may have changed since that date.
You should carefully consider the information provided in and incorporated by
reference in this prospectus. We have not authorized any other person to provide
you with different information. This prospectus is not an offer to sell, nor is
it seeking an offer to buy, these securities in any state where the offer or
sale is not permitted.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
We make certain forward-looking statements in this prospectus that are
based upon our current expectations and projections about current events. We
intend these forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995, and we are including this statement for purposes
of these safe harbor provisions. You can identify these statements from our use
of the words "may," "will," "should," "could," "would," "plan," "potential,"
"estimate," "project," "believe," "intend," "anticipate," "expect," "target" and
similar expressions. These forward-looking statements include statements
relating to:
o our goals, intentions and expectations;
o our business plans and growth strategies; and
o estimates of our risks and future costs and benefits.
Forward-looking statements are subject to significant risks,
assumptions and uncertainties, including among other things, changes in general
economic and business conditions and the risks and other factors set forth in
the "Risk Factors" section beginning on page 6.
Because of these and other uncertainties, our actual future results,
performance or achievements, or industry results, may be materially different
from the results indicated by forward-looking statements. In addition, our past
results of operations do not necessarily indicate our future results. You should
not place undue reliance on any forward-looking statement, which speak only as
of the date they were made. We may not update these forward-looking statements,
even though our situation may change in the future, unless we are obligated to
do so under the federal securities laws. We qualify all of our forward-looking
statements by these cautionary statements.
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SUMMARY INFORMATION
This summary highlights information about Wintrust and our business and
should be read in conjunction with the documents incorporated by reference into
this prospectus. Because this is a summary, it may not contain all of the
information that is important to you. Therefore, you should also read the more
detailed information that is included in the documents incorporated by
reference, as well as the "Risk Factors" section of this prospectus beginning on
page 6, before making a decision to invest in our common stock.
This prospectus relates to the offer and sale from time to time by the
selling shareholders named in this prospectus of up to 275,000 shares of common
stock. We newly issued 180,438 of these shares on May 19, 2004 to the selling
shareholders in connection with our acquisitions of SGB Corporation and Guardian
Real Estate Services, Inc. As part of the acquisition of SGB Corporation, we
paid $10.8 million in cash to the selling shareholders. We also agreed to pay
additional consideration contingent upon the attainment of certain performance
measures over the next five years. This prospectus covers up to 94,562
additional shares that we may issue to the selling shareholders if they become
eligible to receive additional purchase price amounts. Because we were not
required to register the issuance of shares in these transactions with the SEC,
the selling shareholders have "restricted stock." We are registering the shares
to enable the selling shareholders to resell the shares in the public market
from time to time or on a delayed basis and to permit secondary trading of the
shares after they are sold by the selling shareholders.
All of the selling shareholders were the former owners of SGB Corporation
and Guardian, and each of them is currently employed by us pursuant to
employment agreements entered into in connection with the transaction.
ABOUT WINTRUST FINANCIAL CORPORATION
We are a financial holding company headquartered in Lake Forest,
Illinois, with total assets of approximately $5.0 billion at March 31, 2004. We
currently operate ten community banks, all located in the Chicago metropolitan
area, which provide community-oriented, personal and commercial banking services
primarily to individuals and small to mid-size businesses through 40 banking
facilities as of April 30, 2004. Each of our banks provides a full complement of
commercial and consumer loan and deposit products and services. We provide
wealth management services through our trust company, investment adviser and
broker-dealer subsidiaries to customers primarily located in the Midwest, as
well as to customers of our banks. In addition, we are involved in specialty
lending through operating subsidiaries or divisions of certain of our banks. Our
specialty lending niches include commercial insurance premium finance; accounts
receivable financing and administrative services to the temporary staffing
industry; and indirect auto lending in which we purchase loans through
Chicago-area automobile dealerships.
COMMUNITY BANKING
We have developed our community banking franchise through the formation
of de novo banks, the opening of branch offices of the banks and acquisitions.
Of our 10 banking subsidiaries, eight are de novo banks organized by us or our
management team and two are banks we acquired within the past year that were
started by others in 1995 and 2001. Our first bank was organized in December
1991, and in early April 2004, we opened our tenth bank subsidiary, Beverly Bank
& Trust Company, N.A., on the southwest side of Chicago to service the Beverly
Hills/Morgan Park communities as well as the surrounding communities of
Evergreen Park and Merrionette Park. On May 10, 2004, we announced the signing
of a definitive agreement to acquire Northview Financial Corporation, the parent
company of Northview Bank and Trust, with locations in Northfield, Mundelein and
Wheaton, Illinois. We expect this transaction to close late in the third quarter
of 2004.
We have grown from $1.1 billion in assets at December 31, 1997 to
approximately $5.0 billion in assets at March 31, 2004. Our financial
performance has been affected by costs associated with growing market share in
deposits and loans, establishing and acquiring new banks and opening new branch
facilities, and building an experienced management team. Our recent financial
performance generally reflects the improved profitability of our operating
subsidiaries as they mature, offset by the costs of establishing and acquiring
new banks and opening new branch facilities. Our experience has been that it
generally takes 13 to 24 months for new banks to first achieve operational
profitability depending on the number and timing of branch facilities added.
WEALTH MANAGEMENT SERVICES
We currently offer a full range of wealth management services through
four separate subsidiaries, including trust and investment services, asset
management and securities brokerage services marketed primarily under the Wayne
Hummer name. We acquired the Wayne Hummer operations, based in the Chicago area,
in February 2002. Wayne Hummer Investments, our broker-dealer subsidiary, has
been in operation since 1931.
Through Wayne Hummer Trust Company we offer trust and investment
services to existing bank customers and are also targeting small to mid-size
businesses and affluent individuals whose needs command the personalized
attention offered by our experienced trust professionals. Assets under
administration at the trust company were approximately $600.6 million at March
31, 2004.
Through Wayne Hummer Investments, a registered broker-dealer, we
provide a full range of private client and securities brokerage services to
clients located primarily in the Midwest. Client assets at the brokerage firm
were approximately $4.8 billion at March 31, 2004. Focused Investments, LLC, a
broker-dealer and wholly-owned subsidiary of Wayne Hummer Investments, provides
a full range of investment services to individuals through a network of
relationships with community-based financial institutions primarily in Illinois.
Through Wayne Hummer Asset Management Company, a registered investment
adviser, we provide money management services and advisory services to
individuals and institutional, municipal and tax-exempt organizations as well as
three proprietary mutual funds, and also provides portfolio management and
financial supervision for a wide range of pension and profit-sharing plans. At
March 31, 2004, individual accounts managed by Wayne Hummer Asset Management
Company totaled approximately $817.9 million, while the three managed mutual
funds had approximately $188.0 million in total assets.
SPECIALTY LENDING
We conduct our specialty lending businesses through indirect non-bank
subsidiaries and divisions of our banks.
Through First Insurance Funding, our most significant specialized
lending niche, we make loans to businesses to finance the insurance premiums
they pay on their commercial insurance policies. The loans are originated by
First Insurance Funding working through independent medium and large insurance
agents and brokers located throughout the United States. The insurance premiums
we finance are primarily for commercial customers' purchases of liability,
property and casualty and other commercial insurance. This lending involves
relatively rapid turnover of the loan portfolio and high volume of loan
originations. Because of the indirect nature of this lending and because the
borrowers are located nationwide, this segment may be more susceptible to third
party fraud. The majority of these loans are purchased by our banks in order to
more fully utilize their lending capacity. These loans generally provide the
banks higher yields than alternative investments. Since the second quarter of
1999,
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we have also been selling some of the loan originations to an unrelated
third party with servicing retained. We sold approximately $90 million, or 13%,
of the receivables generated during the first quarter of 2004. The purchasers of
the loans have limited recourse rights against us if they suffer losses
associated with the loans we sold.
Through Tricom, Inc. we provide high-yielding, short-term accounts
receivable financing and value-added, outsourced administrative services, such
as data processing of payrolls, billing and cash management services to the
temporary staffing industry. Tricom's clients, located throughout the United
States, provide staffing services to businesses in diversified industries.
During 2003, Tricom processed payrolls with associated client billings of
approximately $305 million and contributed $7.8 million of revenues, net of
interest expense, to us.
We engage in other specialty lending through divisions of our banks,
including indirect auto lending, medical and municipal equipment leasing, small
aircraft lending, mortgage broker warehouse lending and loans to condominium,
homeowner and community associations. These other specialty loans and leases
together comprised approximately 9.1% of our loan and lease portfolio at March
31, 2004.
We continue to pursue the development and/or acquisition of other
specialty lending businesses that generate assets suitable for bank investment
and/or secondary market sales. On May 19, 2004, we acquired SGB Corporation
d/b/a WestAmerica Mortgage Company and WestAmerica's affiliate, Guardian Real
Estate Services, Inc. WestAmerica engages primarily in the origination and
purchase of residential mortgages for sale into the secondary market, and
Guardian provides document preparation and other loan closing services to
WestAmerica and its mortgage broker affiliates. We expect our acquisition of
these firms will allow us to enhance the loan origination and document system
and improve the mortgage product offerings of our banks, will further augment
and diversify our revenue stream and will provide additional earning assets as
well as further diversification of our earning asset base.
OPERATIONAL STRATEGY
Since our first bank was opened in 1991, we have been committed to the
same fundamental operational strategy, the key elements of which include the
following:
o MAINTAINING DECISION-MAKING AUTHORITY LOCALLY WITHIN EACH OF
OUR OPERATING SUBSIDIARIES AND PROVIDING A HIGH LEVEL OF
PERSONAL AND PROFESSIONAL SERVICE. Our community banking
philosophy is driven by our emphasis on local independence and
decision-making authority within each of our banks. While
senior management of Wintrust provides expertise to each of
our subsidiaries in the areas of capital planning, long-term
strategic planning, marketing and advertising, financial
management, investment and asset/liability management, and
technology, the separate management teams of each of the
banks, as well as First Insurance, Wayne Hummer Trust Company,
Tricom, the Wayne Hummer Companies, WestAmerica and Guardian
have full managerial responsibilities for customer service and
the ongoing day-to-day operations of their respective
organizations, subject to the oversight of our Board of
Directors and the boards of our subsidiaries. Our operating
subsidiaries enjoy the competitive advantages of being able to
tailor products and services to meet the differing needs of
the customers that they serve, to quickly make decisions
affecting customers, and to participate actively in their
communities.
o EMPLOYING FEWER, BUT HIGHLY QUALIFIED AND PRODUCTIVE
INDIVIDUALS AT RELATIVELY HIGH COMPENSATION RATES AND FOCUSING
ON LOW NET OVERHEAD RATIOS. Key to our growth and
profitability is our management's extensive experience in
providing community banking and financial services, and
retaining highly qualified managers is critical to our
strategy. Our banks' presidents and chief executive officers
were selected not only for their years of
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banking experience but also for their business development
skills and their strong ties to the communities they serve.
Although our management compensation levels may be relatively
high, we believe our organizational structure allows us to
continue to improve and maintain favorable net overhead ratios
as the banks, First Insurance, Wayne Hummer Trust Company and
Tricom mature.
o MARKETING COMPETITIVE DEPOSIT AND LOAN PRODUCTS. Each of our
banks has developed a strong customer base within its
communities through the utilization of innovative
community-oriented marketing programs. Our banks market their
products aggressively through creative newspaper and other
advertising, special promotions and frequently sponsored
community events. While competitive pricing may create
pressure on our net interest margin at times, to be more
responsive to the needs of consumers in their specific
markets, the banks have also introduced a variety of deposit
and loan products to appeal to the unique needs of different
types of bank customers, such as different age groups and
other special segments of the target markets. Each of our
banks has a large board of directors comprised of experienced
business persons and other individuals prominent within their
respective communities who assist the banking officers with
business development.
o PURSUING A NUMBER OF SPECIALTY LENDING NICHES. We currently
finance loans in several different specialty lending niches to
more fully utilize our lending capacity, to diversify our loan
portfolio, and to enhance the profitability of our banks. In
addition to premium finance loans originated by First
Insurance, short-term accounts receivables financed by Tricom,
and indirect auto loans, we also engage in mortgage warehouse
lending, medical and municipal equipment leasing, homeowners
and condominium association lending and small aircraft
lending. Loans in our specialty lending niches tend to be
higher yielding than other commercial and consumer loans in
our banks' portfolios, but may involve greater credit risks
than generally associated with loan portfolios of more
traditional community banks due to marketability of the
collateral or because we do not have direct customer
relationships with the underlying borrowers.
o FOCUS ON GENERATING FEE INCOME TO AUGMENT NET INTEREST INCOME.
During 2003 and the first quarter of 2004, we generated fee
income from a variety of sources including the origination and
sale of mortgage loans, account service charges, trust, asset
management and brokerage fees, premium income from selling
covered call option contracts on fixed income securities we
own, as well as gains on sales of premium finance receivables
and securities. In addition, we earn administrative fees at
Tricom related to its payroll processing business.
Non-interest income as a percentage of net revenues was 38%
for the years ended December 31, 2003 and 2002, and was 34%
for the first three months of 2004.
GROWTH STRATEGY
Key elements of our growth strategy include the following:
o INTERNAL GROWTH OF OUR EXISTING BANKS. Due to our de novo
strategy, we believe we have not yet realized the full deposit
and asset generation potential in the communities now served
by our existing banking facilities. We believe we can leverage
our existing infrastructure to support additional business
while maintaining a high level of personalized customer
service and responsiveness. As consolidation and the trend
toward nationwide franchises continue in the financial
services industry, management expects that more individuals
and small businesses will become disenchanted with the
perceived lower level of service offered by the larger
institutions, providing continuing market share opportunity
for us. We may from time to time compete for deposits,
particularly in our newer markets, with aggressive pricing,
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which may reduce our net interest margin. With management's
focus on balancing further asset growth with earnings growth,
our current strategy is to continue less aggressive deposit
pricing at those banks with significant market share and more
established customer bases.
o EXPANDING INTO ATTRACTIVE MARKETS WITH LIMITED LOCAL BANKING
COMPETITION. We plan to continue our geographic expansion by
leveraging our existing banks and opening new branch
facilities in nearby communities where management believes
targeted customers would be attracted to a community banking
alternative. We have plans to add seven new branches of our
existing banks over the next 12 months. We also intend to
continue the formation of additional de novo banks in
attractive markets in and around the Chicago metropolitan
area. We will continue to be impacted by start-up costs to the
extent we undertake additional de novo bank and branch
formations.
In addition, part of our strategy is to continue to pursue
potential acquisitions of other community-oriented banks that
are already operating in desirable markets in the greater
Chicago metropolitan area not currently served by our existing
banks. For example, we recently announced the signing of a
definitive agreement to acquire Northview Financial
Corporation, the parent company of Northview Bank and Trust.
Acquisitions may have a short-term dilutive effect on earnings
per share, although the pending acquisition of Northview is
not expected to have any material impact on 2004 earnings per
share.
o AUGMENTING THE LOAN PORTFOLIO WITH OUR SPECIALTY LENDING
NICHES TO ALLOW THE BANKS TO MORE FULLY UTILIZE THEIR LENDING
CAPACITY AND ADDING RELATED FINANCIAL SERVICES BUSINESSES TO
INCREASE FEE INCOME. Our specialty lending niches have
enhanced the profitability of our community banks by
optimizing their earning asset base and allowing them to
diversify their loan portfolios. We plan to continue to build
our sales staff at First Insurance to further increase loan
volume in our premium finance business, seeking to increase
our market penetration in selected geographic markets. We may
pursue acquisitions or development of additional specialty
lending businesses engaged in asset generation suitable for
bank investment and/or secondary market sales. We may also
pursue acquisitions or development of related financial
services businesses to augment fee income, such as our recent
acquisition of WestAmerica Mortgage Company and Guardian Real
Estate Services, Inc. Management intends to continue to
explore various commercial and consumer finance activities and
to seek attractive potential acquisition candidates.
Acquisitions could have a short-term dilutive effect on
earnings per share.
o GROWTH OF WEALTH MANAGEMENT SERVICES PROVIDED TO SMALL AND
MID-SIZED BUSINESSES AND AFFLUENT INDIVIDUALS. As part of our
strategy to build and grow our wealth management business, we
are continuing to recruit talented brokers, cross-market our
expanded base of brokerage and investment management products
and services to our banking clients while offering trust
services and estate planning products, as well as traditional
banking services, to wealth management customers.
OFFICE LOCATION
Our principal executive offices are located at 727 North Bank Lane,
Lake Forest, Illinois 60045-1951, and our telephone number is (847) 615-4096.
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RISK FACTORS
You should carefully consider the following risk factors before you
decide to buy our common stock. You should also consider the other information
in this prospectus, as well as the documents incorporated by reference in this
prospectus.
DE NOVO OPERATIONS AND BRANCH OPENINGS IMPACT OUR PROFITABILITY.
Our financial results have been and will continue to be impacted by our
strategy of de novo bank formations and branch openings. We have employed this
strategy to build an infrastructure that management believes can support
additional internal growth in our banks' respective markets. We opened our
eighth de novo bank in April 2004, and expect to undertake additional de novo
bank formations or branch openings as we expand into additional communities in
and around Chicago. Based on our experience, management believes that it
generally takes from 13 to 24 months for new banks to first achieve operational
profitability, depending on the number of branch facilities opened, the impact
of organizational and overhead expenses, the start-up phase of generating
deposits and the time lag typically involved in redeploying deposits into
attractively priced loans and other higher yielding earning assets. However, it
may take longer than expected or than the amount of time we have historically
experienced for new banks and/or branch facilities to reach profitability, and
there can be no guarantee that these new banks or branches will ever be
profitable. To the extent we undertake additional de novo bank, branch and
business formations, our level of reported net income, return on average equity
and return on average assets will be impacted by start-up costs associated with
such operations, and we are likely to continue to experience the effects of
higher expenses relative to operating income from the new operations. These
expenses may be higher than we expected or than our experience has shown.
WE COULD ENCOUNTER DIFFICULTIES OR UNEXPECTED DEVELOPMENTS RELATED TO OUR RECENT
AND ANY FUTURE ACQUISITIONS.
We recently completed our acquisition of WestAmerica and Guardian, and
are currently in the process of integrating that business into our organization.
While we expect this process will go smoothly, to the extent we experience any
significant difficulties or challenges with this integration, our business may
be adversely impacted.
Our pending acquisition of Northview Financial is subject to bank
regulatory approval as well as approval of Northview's shareholders. While we
currently expect to close the transaction late in the third quarter of 2004,
subject to receipt of these approvals, we may not be successful in completing
the acquisition as planned if, for example, all of the closing conditions are
not met. If we do complete the acquisition, we may be adversely impacted if we
have difficulty integrating the bank into our organization or if the composition
or quality of the bank's assets or liabilities that we acquire differ
significantly from our expectations. In addition, our net income and earnings
per share could be adversely impacted if we incur greater than anticipated costs
associated with operating this bank, if we have difficulty retaining key
personnel at the bank, or if we are unable to grow the business of the bank as
contemplated.
We plan to continue to pursue potential acquisitions of other
community-oriented banks as well as additional specialty lending and related
financial services businesses which could also present challenges relating to
the integration of the operations of acquired businesses into our organization.
To the extent acquisitions divert a significant amount of management time and
attention, our business could be disrupted.
WE DEPEND ON OUR ABILITY TO ATTRACT AND RETAIN KEY PERSONNEL; WE RELY HEAVILY ON
OUR MANAGEMENT TEAM, AND THE UNEXPECTED LOSS OF KEY MANAGERS MAY ADVERSELY
AFFECT OUR OPERATIONS.
Our success to date has been influenced strongly by our ability to
attract and to retain senior management experienced in banking and financial
services. Retention of senior managers and
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appropriate succession planning will continue to be critical to the successful
implementation of our strategies. We have entered into 72 employment contracts
with our executive officers and certain senior officers who we consider to be
key employees. It is also important as we grow to be able to attract and retain
additional qualified senior and middle management. We maintain a limited number
of key-man life insurance policies and maintain bank-owned life insurance
policies on most of our executive and senior officers to offset liabilities
under employment contracts. The unexpected loss of services of any key
management personnel, or the inability to recruit and retain qualified personnel
in the future, could have an adverse effect on our business and financial
results.
OUR ALLOWANCE FOR LOAN LOSSES MAY PROVE TO BE INSUFFICIENT TO ABSORB LOSSES THAT
MAY OCCUR IN OUR LOAN PORTFOLIO.
Our allowance for loan losses is established in consultation with
management of our operating subsidiaries and is maintained at a level considered
adequate by management to absorb loan and lease losses that are inherent in the
portfolios. At March 31, 2004, our allowance for loan losses was 133.53% of
total non-performing loans and 0.78% of total loans. The amount of future losses
is susceptible to changes in economic, operating and other conditions, including
changes in interest rates, that may be beyond our control, and such losses may
exceed current estimates. Rapidly growing and de novo bank loan portfolios are,
by their nature, unseasoned. As a result, estimating loan loss allowances for
our newer banks is more difficult, and therefore the banks may be more
susceptible to changes in loss estimates, and to losses exceeding estimates,
than banks with more seasoned loan portfolios. Although management believes that
the allowance for loan losses is adequate to absorb losses that may develop in
our existing portfolios of loans and leases, there can be no assurance that the
allowance will prove sufficient to cover actual loan or lease losses in the
future.
OUR PREMIUM FINANCE BUSINESS INVOLVES UNIQUE OPERATIONAL RISKS AND COULD EXPOSE
US TO SIGNIFICANT LOSSES.
Of our total loans at March 31, 2004, 23%, or $783.7 million, were
comprised of commercial insurance premium finance receivables that we generated
through First Insurance. These loans, intended to enhance the average yield of
earning assets of our banks, involve a different, and possibly higher, level of
risk of delinquency or collection than generally associated with loan portfolios
of more traditional community banks. First Insurance also faces unique
operational and internal control challenges due to the relatively rapid turnover
of the premium finance loan portfolio and high volume of new loan originations.
The average term to maturity of these loans is less than 12 months, and the
average loan size when originated is approximately $30,000.
Because we conduct lending in this segment primarily through
relationships with a large number of unaffiliated insurance agents and because
the borrowers are located nationwide, risk management and general supervisory
oversight may be more difficult than in our banks. We may also be more
susceptible to third party fraud. Acts of fraud are difficult to detect and
deter, and we cannot assure investors that our risk management procedures and
controls will prevent losses from fraudulent activity. For example, in the third
quarter of 2000, we recorded a non-recurring after-tax charge of $2.6 million in
connection with a series of fraudulent loan transactions perpetrated against
First Insurance by one independent insurance agency located in Florida. Although
we have since enhanced our internal control system at First Insurance, we may
continue to be exposed to the risk of significant loss in our premium finance
business.
Due to continued growth in origination volume of premium finance
receivables, since the second quarter of 1999, we have been selling some of the
loans First Insurance originates to an unrelated third party. We have recognized
gains on the sales of the receivables, and the proceeds of sales have provided
us with additional liquidity. Consistent with our strategy to be asset driven,
we expect to pursue similar sales of premium finance receivables in the future;
however, we cannot assure you that there will continue to be a market for sale
of these loans and the extent of our future sales of these loans will depend on
the level of new volume growth in relation to our capacity to retain the loans
within our subsidiary banks'
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loan portfolios. Because we have a recourse obligation to the purchaser of
premium finance loans that we sell, we could incur losses in connection with the
loans sold if collections on the underlying loans prove to be insufficient to
repay to the purchaser the principal amount of the loans sold plus interest at
the negotiated buy-rate and if the collection shortfall on the loans sold
exceeds our estimate of losses at the time of sale.
OUR STRATEGY OF PURSUING SPECIALTY LENDING NICHES MAY EXPOSE US TO CREDIT RISKS
THAT ARE UNIQUE FOR A COMMUNITY BANKING ORGANIZATION OF OUR SIZE.
At March 31, 2004, 32.4% of our total loan portfolio consisted of loans
we make in what we consider to be specialty lending niches. In addition to our
premium finance loans, we engage in indirect auto lending, accounts receivable
financing, mortgage broker warehouse lending, loans to condominium, homeowner
and community associations, and to a much lesser extent, medical and municipal
equipment leasing and small aircraft lending.
Our portfolio of automobile loans are originated indirectly through
unaffiliated automobile dealers located throughout the Chicago metropolitan
area. At March 31, 2004, our indirect auto loans were $177.6 million and
comprised approximately 5% of our loan portfolio. Because we are lending through
third-party originators, our indirect auto portfolio may be relatively riskier
than direct consumer lending. Also, because the indirect auto loan industry is
highly competitive, the cost of collection and repossession of the underlying
collateral may significantly reduce the profitability of this portfolio,
particularly in a recessionary environment.
Through Tricom we finance payrolls of companies engaged in the
temporary staffing business. At March 31, 2004, these finance receivables
totaled of $23.1 million and represented approximately 1% of our loan portfolio.
The principal source of repayments on the loans we make in this niche are
payments to our borrowers from their customers who are located throughout the
United States. While we employ lockboxes and other cash management techniques to
protect our interests, to the extent third parties fail to pay or fraudulently
engage in the conversion of funds through misuse or nonuse of the lockbox or the
creation of ghost payrolls, we may suffer losses.
Our lease financing niche may involve a higher degree of credit risk
than mortgage or consumer lending due primarily to the potential for relatively
rapid depreciation of medical equipment and other assets securing leases.
Similarly, in the event of a default of loans originated in our aircraft lending
program, the marketability of the collateral may make it more difficult to
convert this collateral to cash, especially in an adverse economic environment.
In our condominium and homeowner association lending niche, we may face
difficulties in securing repayment from our association borrowers to the extent
they are unable to collect assessments from their members, and we may suffer
losses if we are unable to enforce liens against homeowner properties.
OUR WEALTH MANAGEMENT BUSINESSES ARE VULNERABLE TO FLUCTUATIONS IN THE TRADING
VOLUME AND PRICE LEVELS OF SECURITIES; WE FACE STRONG COMPETITION FOR NEW
BROKERS WE SEEK TO HIRE.
The results of our wealth management subsidiaries depend heavily on
conditions in the financial markets and on economic conditions generally, both
domestically and abroad. Because currently a significant portion of our revenue
in these businesses is derived from commissions, margin interest revenue and
principal transactions, further declines in stock prices, trading volumes or
liquidity could result in the failure of buyers and sellers of securities to
fulfill their settlement obligations, and in the failure of our brokerage
clients to fulfill their credit obligations, which could adversely affect our
profitability.
The success of the strategy we are pursuing to grow our wealth
management business is largely dependent on our ability to identify, hire and
retain talented securities brokers with investment services experience. We face
strong competition for qualified brokers, and many potential candidates are
subject
8
to restrictive covenants with existing employers. If we are unable to
significantly increase the size of our investment services sales force as
planned, we may have difficulty attracting new accounts and increasing assets
under management and may be unable to improve the profitability of this segment
of our business.
WE MAY BE ADVERSELY AFFECTED BY INTEREST RATE CHANGES.
Our interest income and interest expense are affected by general
economic conditions and by the policies of regulatory authorities, including the
monetary policies of the Federal Reserve. Changes in interest rates may
influence the growth rate of loans and deposits, the quality of the loan
portfolio, loan and deposit pricing, the volume of loan originations in our
mortgage banking business and the value that we can recognize on the sale of
mortgage loans in the secondary market. We expect the success of WestAmerica,
our newly acquired mortgage banking business, in selling loans into the
secondary market at a gain will be impacted during periods of rising interest
rates. While we have taken measures intended to manage the risks of operating in
a changing interest rate environment, there can be no assurance that such
measures will be effective in avoiding undue interest rate risk. If market
interest rates should move contrary to our "gap" position on interest earning
assets and interest bearing liabilities, the "gap" will work against us and our
net interest income may be negatively affected.
The success of our covered call option program, which we have used in
effect to hedge our interest rate risk, may also be affected by changes in
interest rates. With the decline in interest rates over the last three years to
historically low levels, we have been able to augment the total return of our
investment securities portfolio by selling call options on fixed-income
securities we own. We recorded fee income of $7.9 million during 2003 compared
to $6.0 million in 2002, from premiums earned on these covered call option
transactions. During the first quarter of 2004, we recorded fee income of $2.2
million on these transactions. In a rising interest rate environment,
particularly if the yield curve remains steep, the amount of premium income we
earn on these transactions will likely decline. Our opportunities to sell
covered call options may be limited in the future if rates continue to rise.
OUR FUTURE SUCCESS IS DEPENDENT ON OUR ABILITY TO COMPETE EFFECTIVELY IN THE
HIGHLY COMPETITIVE BANKING INDUSTRY.
The financial services business is highly competitive, and we encounter
strong direct competition for deposits, loans and other financial services in
all of our market areas. In recent years, several major bank holding companies
have entered or expanded into the Chicago metropolitan market, and are pursuing
aggressive branching initiatives in the area. Generally, these financial
institutions are significantly larger than we are and have greater access to
capital and other resources. Our ability to compete effectively in the
marketplace is also dependent on our ability to adapt successfully to
technological changes within the banking and financial services industries.
OUR BUSINESS MAY BE ADVERSELY AFFECTED BY THE HIGHLY REGULATED ENVIRONMENT IN
WHICH WE OPERATE.
We are subject to extensive federal and state legislation, regulation
and supervision. The burden of regulatory compliance has increased under current
legislation and banking regulations and is likely to continue to have or may
have a significant impact on the financial services industry. Recent legislative
and regulatory changes, as well as changes in regulatory enforcement policies
and capital adequacy guidelines, are increasing our costs of doing business and,
as a result, may create an advantage for our competitors who may not be subject
to similar legislative and regulatory requirements. In addition, future
regulatory changes, including changes to regulatory capital requirements, could
have an adverse impact on our future results. Self regulatory organizations,
such as the New York Stock Exchange and the National Association of Securities
Dealers, require our securities brokerage subsidiaries to comply with extensive
rules and regulations, and we could be adversely affected by applicable changes
in these regulations.
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SINCE OUR BUSINESS IS CONCENTRATED IN THE CHICAGO METROPOLITAN AREA, A DOWNTURN
IN THE CHICAGO ECONOMY MAY ADVERSELY AFFECT OUR BUSINESS.
Currently, our lending and deposit gathering activities are
concentrated primarily in the greater Chicago metropolitan area. Our success
depends on the general economic condition of Chicago and its surrounding areas.
Declining economic conditions could reduce our growth rate, impair our ability
to collect loans, and generally affect our financial condition and results of
operations.
THERE IS FLUCTUATION IN THE TRADING MARKET FOR OUR COMMON STOCK; YOU MAY NOT BE
ABLE TO RESELL SHARES AT OR ABOVE THE PRICE YOU PAY FOR THEM.
The price of our common stock has been, and will likely continue to be,
subject to fluctuations based on, among other things, economic and market
conditions for financial services companies and the stock market in general, as
well as changes in investor perceptions of our company.
Our common stock is traded on the Nasdaq National Market under the
symbol "WTFC". The maintenance of an active public trading market depends,
however, upon the existence of willing buyers and sellers, the presence of which
is beyond our control or the control of any market maker, and there can be no
assurance that you will be able to resell shares at or above the price you pay
for them. A number of shares of our common stock are covered by resale
registration statements in addition to the shares offered hereby. We estimate
that there are currently up to approximately 800,000 of those shares outstanding
that have not yet been resold. These remaining shares may be freely sold from
time to time in the market. The market price of our common stock could drop
significantly if shareholders sell or are perceived by the market as intending
to sell large blocks of our shares. In addition, we have plans to issue up to a
maximum of approximately 625,000 shares in our pending acquisition of Northview
Financial, expected to close late in the third quarter of 2004, the majority of
which will be freely tradeable when issued.
OUR SHAREHOLDER RIGHTS PLAN AND PROVISIONS IN OUR ARTICLES OF INCORPORATION AND
OUR BY-LAWS MAY DELAY OR PREVENT AN ACQUISITION OF US BY A THIRD PARTY.
Our board of directors has implemented a shareholder rights plan. The
rights, which are attached to our shares and trade together with our common
stock, have certain anti-takeover effects. The plan may discourage or make it
more difficult for another party to complete a merger or tender offer for our
shares without negotiating with our board of directors or to launch a proxy
contest or to acquire control of a larger block of our shares. If triggered, the
rights will cause substantial dilution to a person or group that attempts to
acquire us without approval of our board of directors, and under certain
circumstances, the rights beneficially owned by the person or group may become
void. The plan also may have the effect of limiting shareholder participation in
certain transactions such as mergers or tender offers whether or not such
transactions are favored by incumbent directors and key management. In addition,
our executive officers may be more likely to retain their positions with us as a
result of the plan, even if their removal would be beneficial to shareholders
generally.
Our articles of incorporation and our by-laws contain provisions,
including a staggered board provision, that make it more difficult for a third
party to gain control or acquire us without the consent of our board of
directors. These provisions also could discourage proxy contests and may make it
more difficult for dissident shareholders to elect representatives as directors
and take other corporate actions.
These provisions of our governing documents may have the effect of
delaying, deferring or preventing a transaction or a change in control that
might be in the best interest of our shareholders.
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USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares of
common stock by the selling shareholders. We expect to incur expenses in
connection with this offering in the amount of approximately $30,000 for
registration, legal, accounting and miscellaneous fees and expenses. We will not
pay for expenses such as commissions and discounts of brokers, dealers or agents
or the fees and expenses of counsel, if any, for the selling shareholders. See
"Selling Shareholders" and "Plan of Distribution."
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
Our common stock is traded on the Nasdaq National Market under the
symbol "WTFC". The following table sets forth the high and low sales prices
reported on the Nasdaq National Market for our common stock for the periods
indicated and the semi-annual dividends paid by us during such periods. The
following information gives effect to a 3-for-2 stock split effective as of
March 14, 2002.
HIGH LOW DIVIDEND
---- --- --------
2004
----
First Quarter....................... $50.10 $45.61 $0.100
Second Quarter (through June 8,
2004)............................ 50.44 41.85 --
2003
----
First Quarter....................... $33.65 $27.19 $0.08
Second Quarter...................... 32.40 27.74 --
Third Quarter....................... 38.89 29.30 0.08
Fourth Quarter...................... 46.85 37.64 --
2002
----
First Quarter....................... $22.99 $18.33 $0.06
Second Quarter...................... 34.58 22.22 --
Third Quarter....................... 36.00 26.54 0.06
Fourth Quarter...................... 32.66 25.45 --
As of June 8, 2004, there were 1,333 shareholders of record of our
common stock.
DIVIDEND POLICY
In January 2000, our board of directors approved the payment of our
first semi-annual cash dividend on our common stock. We have continued to pay a
semi-annual cash dividend since that time. The final determination of timing,
amount and payment of dividends on our common stock is at the discretion of our
board of directors and will depend upon our profitability, financial condition,
capital requirements and other relevant factors, including the restrictions
described below. We continue to target an earnings retention ratio of
approximately 90% to support our continued growth.
Because the principal source of our income at the holding company level
is dividends from our banks, our ability to pay dividends on common stock in the
future may be largely dependent on the banks' ability to pay dividends to us.
Any payment of dividends by the banks is subject to certain restrictions imposed
by federal and state banking laws and regulations.
Our ability to pay cash dividends on our common stock is also subject
to statutory restrictions and restrictions arising under the terms of our
outstanding and any future debt securities and trust preferred securities. The
terms of such securities generally restrict payment of dividends on common stock
until required payments and distributions are made on those securities and may
impose additional restrictions in the future. Under applicable corporate law, we
are permitted to pay dividends only to the extent of our
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shareholders' equity. Federal regulation of bank holding companies may also
impose restrictions on the ability of a bank holding company to pay dividends.
SELLING SHAREHOLDERS
This prospectus relates to the offer and sale from time to time by the
selling shareholders named in this prospectus of up to 275,000 shares of common
stock. We newly issued 180,438 of these shares to the selling shareholders on
May 19, 2004 in connection with our acquisition of SGB Corporation and Guardian
from them. As part of the acquisition of SGB, we paid $10.8 million in cash to
the selling shareholders.
In connection with the acquisition of both companies, we also agreed to
pay additional consideration contingent upon the attainment of certain
performance measures over the next five years. In each case, this additional
consideration is payable in cash unless, in the case of our acquisition of
Guardian, the payment of any portion of such payments would cause the merger not
to be treated as a reorganization under Section 368(a) of the Internal Revenue
Code of 1986, as amended, in which case the balance of the cash payments due
will be paid through the issuance of shares. Accordingly, this prospectus also
covers up to a total of 94,562 additional shares that may be issuable to the
selling shareholders if they are eligible to receive these additional purchase
price amounts.
The three selling shareholders were the former owners of SGB
Corporation and Guardian, who together received all of the merger consideration
we paid in the two transactions. We have agreed to continue to employ each of
them as executive officers of SGB Corporation pursuant to the terms of
employment agreements entered into with them in connection with the transaction.
Because the issuance of the shares in each of the transactions was not
registered with the SEC, the selling shareholders have "restricted stock." We
are registering the shares to enable the selling shareholders to resell the
shares in the public market from time to time or on a delayed basis and to
permit secondary trading of the shares after they are sold by the selling
shareholders. We are paying for the registration of such securities but will not
pay for the fees, commissions, and other similar expenses, if any, of the
selling shareholders, their attorneys or other representatives, as a result of
the sale of such securities by the selling shareholders. See "Use of Proceeds"
and "Plan of Distribution."
The following table sets forth, to the best of our knowledge,
information concerning the selling shareholders, the number of shares to be
offered and sold by the selling shareholders and the amount of common stock that
will be owned by the selling shareholders following the offering (assuming the
sale of all the shares of common stock being offered hereby).
NUMBER OF
SHARES OWNED NUMBER OF SHARES PERCENTAGE OF SHARES
PRIOR TO NUMBER OF SHARES TO BE OWNED AFTER TO BE OWNED AFTER
SELLING SHAREHOLDER OFFERING TO BE OFFERED(1) OFFERING OFFERING
------------------- -------- ---------------- ----------------- --------------------
Laurence J. Bryar...... 60,146 60,146 -- *
Richard P. George...... 60,146 60,146 -- *
Robert J. Santostefano. 60,146 60,146 -- *
------- ------- ------ -----
Total............... 180,438 180,438 -- *
======= ======= ====== =====
------------------
* Less than 1%
(1) Excludes an aggregate of 94,562 additional shares also covered by this
prospectus, up to all of which may be issued to the selling shareholders
in certain circumstances if they are eligible to receive additional
purchase price amounts that are contingent upon the financial
performance of Guardian over the next five years. If any such additional
shares are issued by us, the selling shareholders may offer and sell
them pursuant hereto in addition to the shares shown in the table above.
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PLAN OF DISTRIBUTION
The common stock offered by this prospectus may be offered and sold
from time to time by the selling shareholders. As used in this prospectus,
"selling shareholders" includes those individuals or entities who may have had
shares of common stock given to them as a gift by a named selling shareholder
after the date of this prospectus and any individuals or entities who may have
shares of common stock pledged to them as collateral by a named selling
shareholder after the date of this prospectus. If we are notified by a selling
shareholder that a donee or pledgee intends to sell more than 500 shares, a
supplement to this prospectus will be filed naming any donee or pledgee offering
the shares before such a sale is permissible under this prospectus.
The shares of common stock covered by this prospectus may be sold, from
time to time, by the selling shareholders in one or more types of transactions
(which may include block transactions) on Nasdaq, in the over-the-counter
market, in negotiated transactions, through put or call options transactions
relating to the shares of common stock, through short sales of shares of common
stock, or a combination of such methods of sale, or otherwise at prices and at
terms then prevailing or at prices related to the then current market price, or
in negotiated transactions. The shares of common stock may be sold by one or
more of the following methods: (a) a block trade in which the broker or dealer
so engaged will attempt to sell the shares of common stock as agent but may
position and resell a portion of the block as principal in order to facilitate
the transaction; (b) a purchase by a broker or dealer as principal, and the
resale by such broker or dealer for its account pursuant to this prospectus,
including resale to another broker or dealer; or (c) ordinary brokerage
transactions and transactions in which the broker solicits purchasers. Thus, the
period of distribution of these shares of common stock may occur over an
extended period of time.
The selling shareholders may effect such transactions by selling the
shares of common stock directly to purchasers or to or through a broker or
dealer, who may act as an agent or principal. Such broker or dealer may receive
compensation in the form of discounts, concessions, or commissions from the
selling shareholders and/or the purchasers of shares of common stock for whom
such broker or dealer may act as agent or to whom he sells as principal, or both
(which compensation as to a particular broker or dealer might be in excess of
customary commissions). We know of no existing agreements, understandings or
arrangements between any selling shareholder, broker, dealer, underwriter or
agent relating to the sale or distribution of the shares of common stock. In
offering the securities, the selling shareholders and any broker-dealers and any
other participating broker-dealers who execute sales for the selling
shareholders may be deemed to be "underwriters" within the meaning of Section
2(11) of the Securities Act of 1933 in connection with such sales, and any
profits realized by the selling shareholders and the compensation of such
broker-dealers may be deemed to be underwriting discounts and commissions.
The selling shareholders will not pay any of the proceeds from the sale
of the shares of common stock to us. We expect to incur expenses in connection
with this offering in the amount of approximately $30,000 for registration,
legal, accounting and miscellaneous fees and expenses. The selling shareholders
will be solely responsible for commissions and discounts of brokers, dealers or
agents, other selling expenses and the fees and expenses of their own counsel,
if any, none of which will be borne by us.
Any shares covered by this prospectus which qualify for sale pursuant
to Rule 144 may be sold by the selling shareholders under Rule 144 rather than
pursuant to this prospectus.
We have informed the selling shareholders that while they are selling
the securities, they (1) are required to comply with Regulation M under the
Securities Exchange Act of 1934 (as described in more detail below), (2) may not
engage in any stabilization activity, except as permitted under the Exchange
Act, (3) are required to furnish each broker-dealer (who may offer this common
stock) copies of this prospectus, and (4) may not bid for or purchase any
securities of Wintrust or attempt to induce any person to purchase any such
securities except as permitted under the Exchange Act.
13
Regulation M under the Exchange Act prohibits, with certain exceptions,
participants in a distribution from bidding for or purchasing, for an account in
which the participant has a beneficial interest, any of the securities that are
the subject of the distribution. Regulation M also governs bids and purchases
made in order to stabilize the price of a security in connection with a
distribution of the security.
TRANSFER AGENT
The transfer agent for our common stock is Illinois Stock Transfer
Company, 209 West Jackson Boulevard, Suite 903, Chicago, Illinois 60606.
LEGAL MATTERS
Certain legal matters relating to the common stock offered by this
prospectus have been passed upon for us by Vedder, Price, Kaufman & Kammholz,
P.C., Chicago, Illinois.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our Annual Report on Form 10-K for the year
ended December 31, 2003, as set forth in their report, which is incorporated by
reference in this prospectus. Our financial statements are incorporated by
reference in reliance on Ernst & Young LLP's report, given on their authority as
experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is a part of a Registration Statement on Form S-3 that
we filed with the SEC under the Securities Act. This prospectus does not contain
all the information set forth in the registration statement, certain parts of
which are omitted in accordance with the rules and regulations of the SEC. For
further information with respect to us and the securities offered by this
prospectus, reference is made to the registration statement, including the
exhibits to the registration statement and the documents incorporated by
reference.
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. Our filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and copy
any document we file with the SEC at its public reference facilities at 450
Fifth Street, N.W., Washington, D.C. 20549. You can also obtain copies of the
documents at prescribed rates by writing to the Public Reference Section of the
SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
facilities. Our SEC filings are also available on our web site at
http://www.wintrust.com, and at the office of the Nasdaq National Market. For
further information on obtaining copies of our public filings at the Nasdaq
National Market, you should call (212) 656-5060.
DOCUMENTS INCORPORATED BY REFERENCE
We "incorporate by reference" into this prospectus the information we
file with the SEC, which means that we can disclose important information to you
by referring you to those documents. The information incorporated by reference
is an important part of this prospectus.
14
Some information contained in this prospectus updates and supersedes
the information incorporated by reference and some information that we file
subsequently with the SEC will automatically update this prospectus. We
incorporate by reference the documents listed below:
o our Annual Report on Form 10-K for the fiscal year ended
December 31, 2003, filed with the SEC on March 15, 2004 (File
No. 0-21923);
o our Quarterly Report on Form 10-Q for the quarter ended March
31, 2004, filed with the SEC on May 10, 2004 (File No.
0-21923);
o our Current Report on Form 8-K filed with the SEC on January
21, 2004 (File No. 0-21923);
o our Current Report on Form 8-K filed with the SEC on April 20,
2004 (File No. 0-21923);
o our Current Report on Form 8-K filed with the SEC on May 5,
2004 (File No. 0-21923);
o our Current Report on Form 8-K filed with the SEC on May 11,
2004 (File No. 0-21923);
o our Current Report on Form 8-K filed with the SEC on May 20,
2004 (File No. 0-21923); and
o the descriptions of (a) our Common Stock contained in our
Registration Statement on Form 8-A dated January 3, 1997 (File
No. 0-21923), and (b) the associated preferred share purchase
rights contained in our Registration Statement on Form 8-A
dated August 28, 1998 (File No. 0-21923).
We also incorporate by reference any filings we make with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after
the initial filing of the registration statement that contains this prospectus
and before the time that all of the shares offered by this prospectus are sold.
You may request, either orally or in writing, and we will provide, a
copy of these filings at no cost by contacting David A. Dykstra, our Chief
Operating Officer, at the following address and phone number:
Wintrust Financial Corporation
727 North Bank Lane
Lake Forest, Illinois 60045-1951
(847) 615-4096
15