WTFC - Earnings call transcript Q2 2018 | Wintrust Financial Corporation

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Operator

Welcome to Wintrust Financial Corporation's Second Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Following review of the results by Edward Wehmer, Chief Executive Officer and President; and David Dykstra, Senior Executive Vice President and Chief Operating Officer, there will be a formal question-and-answer session.

During the course of today's call, Wintrust's management may make statements that constitute projections, expectations, beliefs or similar forward-looking statements. Actual results could differ materially from the results anticipated or projected in any such forward-looking statements. XXXX that the the call recent information in second assumptions differ results are Form forward-looking and the the from release SEC. subsequent materially discussed quarter file XX-K company's and could company's filings actual cause to detailed in any The the press on most with earnings during this

Edward As conference call the would now a reminder, turn this conference to call Wehmer. Mr. is being recorded. I over

Edward Wehmer

summer to Thank Chief call, happy Officer. you. our Welcome and usual, Dave as Financial second to Operating and our Stoehr, Boege, our all. earnings quarter you are everybody our Kate General Dykstra, me, Council; Chief With a David Officer;

very last to basis XX%, year, going up $X.XX share increase of million we're up the over We last $X.XX quarter, for to expense, and I turn of XX% with and will format then still difficulty]. other was per then same some Net compared year. more earnings $XXX.X future, the other year-over-year, $X.XX call time -- the over income, almost a in last me Year-to-date back million our for over $XX.X as the thoughts to about quarter and for to Dave is results, detailed will consecutive the Long, it first to XX% conduct the analysis quarter-to-quarter. $XXX.X Dykstra the in a usual. recorded row. and We're income to million comments On X.XX% million. general $X.XX the and $XX in the David under some year-to-date, $X.XX Nick in taxes, $XX give quarter, last over there's always for comments the earnings million first regarding XX% XXth pleased Papagiorgio and [technical same period about year's report summary year, questions. for record

$XXX million, quarter the quarter XX.X%, million the the million Just in perspective earnings; pretax in XX.X% XXXX. earnings over $XXX.X pretax in were second and put up of [ph] over second $XXX and had also about we up

pretax the -- earnings over up $XXX year, or million, For million at XX%. $XXX.X above

the So, board. results good across

increased, XX XX in year-to-date over by year. compared year. basis points first basis seven the last all up at ROI for the the to we're release. return equity on quarter, tangible we're the to are as margin points and basis of first Our last equity points in you XXX XXX quarter, numbers year-to-date And our know, compared and XXX from

X.XX%. environment. million XXXX to The interest it income, appearing, Net income quarter, net rate As readily is quarter trends more growth over due interest basis good and earning loan over points the margin the the basis to NIM net interest rising our increased and asset consistently positive. seven grew first growth remain operating points XX $XX.X one good including over first day the

So, to a really base. earning both larger the higher rate environment, increases were driven of asset level

or deposit the or we demand quarter, was made the while as funny ratio was -- margin. remember now It's to betas. Our about me, earning difference XX% increased later. to there increased talk points. asset betas year little a amount a earnings pre-provision relates in up million points, yield $XXX had pretax our the of paying We'll bit ago XX basis I years it buzzword, XX base The free two of basis it's liabilities earning the cost deposits average asset of grew funds the ago

range than lone-to-deposit our to XX.X%, average to desired obviously the rose higher for ratio quarter XX%. XX% of slightly Our

$XXX At million, well which due deposit good stood Some loans loan-to-deposit at for of loans by the was this Ending earnings. end, very XX.X% loans QX backend-loaded growth. exceeded average in ratio caused to the period quarter. bodes by

was a QX deposit, of Speaking quarter growth. great core for

opening branches successful in with contributed coupled $X.X new five growth. Our billion deposit of marketing

deposit towards this to summer increased Accordingly, ratio targeted begin is -- receding prior than as expect ratio. Our the quarter receding just more loan-to-deposit rates this our we'd our in deposit quarters. kicking so we marketing in, expect that

if includes does six which were at two Our about look Main betas, the it's deposits you include increase, for beta, not X.XX%, interest-bearing XX%. historical was cycle-to-date, increase or quarter June increases.

you in this. last we to quarter, If time be XX% range we to recall in said expect over the XX%

our we I increase but be to going going to, than balls underwater its heard system. up catch I our industry we'll to pong that overnight, have but increases. a expect good organic turns more the a ping points well basis growth growth rate below to consistent. with through the It's still our like beach we think As last would these -- be days. acquisitive more not going ball takes think I which full is our stay that's XX not towards be But to continue It that said work as I we'll But close happen average year underwater. margin quarter, for way forward

Our models $XX to quarter about point still adds to pretax million $XX ever earnings us. of show million

that comes ratably -- comments when so to think but XX we any expect and know the that that we that. so basis just other with on or later maybe I our in compared XX get with to ending it to interest to point on And increase, we'll on out four regard. So more rates questions continue save three bigger I'll in betas, overtime margin to but range

on of talk we at went to our basis. up still previous quarter. will we the gap continue still discussions long bringing up We're increases begin that to sensitive, move, should ever-increasing the one waiting so move we work actually Like, an to rate will now. our continue for in balance size the will about additional We interest $XX June, the the little rate hasn't happened continue end in a -- to rates as will add, to annualized our second. interest to It down. of from right bit that we sheet the end as asset excluding million add a and for It changed are -- very our net income

curve constant of We is past. ratio in to debt better. this yet in wait short with expect is cards, loan-to-deposit XXs the and our end the Now to the and the little low the play This time the for the a on and bank in later. in long-term initiative move discussed stay spreads gets liquidity the the still we till end. have we more it bit long such end as on strong Again,

to future truly. slowly grow increase As that expect continue rate the our to interest but margin net such, we

are and down side, their a were from NPLs remains million credit the -- $X.X to so NPLs Both million, already OREO loans was continue valuation out non-performing numbers. decrease There's down low credit On modestly. historically $X.X were push we total million, $X.X NPAs. in NPAs all charges down now balances the down great. were assets,

Net falling tenant actively of older properties. through charge-offs and recovery. totaled basic X.X our $X.X on to work our by continue million, We being on looking dispose conservative of on operating to offset charge-offs charge-offs were of $X.X million, recoveries good

is book had commercial recoveries materialize. couple and starting As and we behind charge-offs there finance is a is also numbers to are the us, premium in the NPA evident in

XXX%, decreased bips XX remains credit quarter assets end two summary, to XX up So percent the XXX% points. from as decreased in Reserves total X.XX% of basis percent points net the quarter. very from good, a one, of was charge-offs a of in as at NPAs and to at NPLs basis

to OREO We expeditiously to portfolio also We'll our aggressive portfolio we'll when call our continue out for continue and cracks work to decks. said clear cracks assets move are found. the

in the momentarily, Dave detail comments. other and these just is expense, into general some On income to go other going

were the front On one. from revenues mortgage up and quarter volumes

to said, cost where and processing. cost going Dodd-Frank working over I to fewer are got more demand we're our and execution of without out a function you valiant we as days, a bit our on cost old a lots X.X side supply our will. loan. the being inflations spreads just of However, times mean, that commensurate the reduce reduce I here overall profitability up decrease deals. from decreased But That after to to diligently people due and umbers. if end, like fewer like to due stood in good there little of That's decreasing with provider of a it's These

how that our to looking that's results fully in at be product, by the expect the are business to of We're on comment detail a of all any Dave them on live that of decrease mortgage be in initiatives of mortgage our three. in fully implemented a results went also number to implemented use time we is and area. all is as aspects system, Mortgage all through in the in year. quarterly that we show our Zoom all soon test of almost the this processing front-end going Rocket will other Early in version two So end, a of And We're we quarter, money. you. and -- and moment. of know quarter cost will know important this now, but this time days you we to end explaining be this there basis area know, not

note this we're for please the long-term. that business committed So to

second continue fell grew market at broker less billion quarter from operations one. overall and our quarter. end slightly to management to for to the the the $XXX $XX.X assets general due under administration the the quarter in improve, $XX.X billion wealth Revenues from Our in of trading million dealer,

was one, better. Our overhead point quarter above one X.XX%, down our but little ratio X.X% from basis or bit

the driven delaying without point expenses. we previously decrease include factors the is as of liquidity of competitive announced. percent we volume as sheet balance a Other mortgage revenue Some initiative are on this trigger in

due loans on the results, we there opened you no growth assets to we to of and included full-quarter higher detail. grew grew overhead $X.XX expense, anticipated, quarter, better or grew our in that's front, if will Our X.X% as comp discuss million. again in better -- Again work with and will continue the seasonably Dave still incentive were goal, organic billion, balance remains million accordance high expenses, our billion, it. $XXX branches a Net single-digit ratio acquisitions accruals $XX.XXX in sheet new loans of five we X.X% First initiatives. growth additional marketing $XXX average In Veterans to

So talked or over an the XX% we're $X.XX side, we about loan in quarter deposit previous shape annualized basis. up pretty good the on on

my [ph] in the real most in projected where current there. categories market our was grew worryness the good final So offs about in balance single-digits being comments. competitive estate, nicely. negated and talk look, I'll as exception the growth high as sheet with pay about growth Loan acquisition commercial the market

choosy are the underwriting they and increase strong standards. quarter, two had We we meet Loan the about highest consistently this our deals forward and though we're and standards standards in our level about be going years. very pricing making will our sure pipelines second

but due us we're known some of has flip marketplace, reputation, changes and the our more growth growths acquisitions back we'll to other about we we high in to sad during due going that's deals. the our think is moved flip gives stay rest take in our as we're our at pricing that, still and we that the I'm the we've now us approach that number say interested to bones to away now, us that to were the to we just of talk it. of see any we the look, switches the to in people of that. to very there. over and at relatively where And inflection Dave start event, you as We organic our to pricing lot from income out planned In market however good, growth past, in is and branches Deposit is it's five continue have the the for right been disciplined by expected branches and momentum what So expense. and of good continue But quarter came success nice other organic new turn point, on made have not many switch a and year. hurt growth

Dave Stoehr

you, Thank Ed.

our had first the quarter million section, $XX.X quarter held and Veteran's origination of earnings year. $XX.X our are briefly $XXX quarter million the the was compared the prior quarter due most our million approximately $XX a decreased customer million normal, Overall, similar $XX.X last this increase was from channel, sections first amount of current interest recorded those originated up level of policy. category our quarter mortgage in million the quarter. up mortgage to from the second quarter compared mix XX% In second of originations originated on on income that this decline to the of million combined loans from management of brokerage offset of reason to and quarter component prior last of non-interest the trading of second the also fairly wealth was to a This modest changes. quarter, of to the origination first non-interest provides and on lease income compares to, productions the in revenue $XX.X just second of million was from banking the the from the volume increase reduced second quarter higher and totaling in purchased loans Mortgage this increase had revenue reasons second Ed XX the in $X Other volume non-interest direct the by quarter non-interest approximately million solid recorded the quarter, originations. of the on slightly obviously Operating the the As reduction a year. million for of touch higher of second level recorded year. revenue our year. of capital including the certain compared $XXX,XXX to early detailed the bully and a in of $X.X $XX.X wealth that's The $XXX,XXX of $X.X quarter and in as in origination First second release attributable consumer origination calculation the operating primarily $X the million in origination currently components of past for the was the XXXX. result and primarily quarter, in then in recorded management pay areas the revenue, corresponding acquisition, significant a $XXX,XXX of was $X.X fees, the loan XX% on million loan A home the channel related company to pipelines, was to another we in adjustments $X.X second this quarter from in MSR settlement The and quarter generation. year-ago steady the Page existing increase be prior in $XX depending in This offs primary prior gain prior leases, quarter, XXXX. quarter. from the full less slightly expect in conditions the approximately third production million equipment during in the from in in of net remainder sale revenue, the the leases retail quarter There The income million $XX.X the of rate in this including or ultimately slight $X.X million on billion downs, increased gains increase revenue XXX loans million income year. a the could the the in totaled $XXX I'll given decline we revenue. but fair million banking And estimate approximately approximately soften variety to as the approximately category's income. MSR capitalizations, of value from quarter billion, quarter billion result quarter. this increase from realized pay And up and year. revenue, or higher XXXX XX% first of at of the servicing the market the alluded more as quarter this of mortgage volumes. swap in This in indication in activity fees, The was of revenue $XX

of our sheet. the of growth categories; the to X, And of at related prior a full primarily dollar early talk minimum impact $X.X quarter to Both Veterans in approximately XXXX, growth this March, expenses quarter salary in expense to base for maintained, of the few employees, those The some employ Turning quarter. base continues as annual quarter. February the the the bringing that the million non-interest of runoff million the to of eligible to fully these and company to advertising of $X will took of on of slightly from million per second items marketing approximately the on a totaled more the and other as payroll came than staffing normal million the million increase The was non-interest new of in the in $XXX.X branches and of million to changes expense. related quarter increasing than wage took Slightly to balance expenses, were salary was second more retained approximately payroll $XX expand increased remaining $XX.X in attributable now employees to full the they other in second employees $X.X and quarter. about increase team the higher benefit five of fully of higher hour on increase interest. and expense quarter generally related the is non-commissioned which comment over more and I increase that volume million detail growth the to our for First first and effect in impact the as effect quarter handle $X.X its a the on second increases of portion company. of revenue First the the the their well significant year. $X.X Veterans

of higher increase is quarter's from expense company increased in commission the million million million the and $X and approximately fully The $X.X higher prior with Commissions million, rate to compensation them accruals expense quarter. earnings expenses approximately to incentive experienced $X long-term $XX.X $XX.X run approximately by the company. second for now. So staffed to up annual million higher with associated Marketing first volumes, tied experienced to due origination increase quarter mortgage the the $XX.X and by the million. incentive from remaining compensation increased the

had all other $X.X and only as A expense, categories offset postage discussed due our categories. our expenses have marketing primarily marketing the expense well XX.X% as $XXX previous to by efficiency expenses be as to in portfolios. and in on corporate Sox, quarter third these other from calls, just the of company's and the value year, on higher Ed Cubs our believe basis expense by than we And And FDIC base As processing enhancing the the the ratio I spending a from quarter related discussed, overhead X.XX%. effective and million insurance, and were fully and first other the Chicago company's with increased benefits second OREO on increased the of as White expense mentioned, second and this sponsorships ratio quarter. decreased Other expense in categories marketing brand activities Chicago the the miscellaneous our such the tend of expenses data tax expense, a equipment to the category to effort the that higher quarter. XX.X% deposit awareness an up loan deposit levels point And and the declined to in salary basis the clearly categories we reduction equivalent variety are as employee prior grow of company. efforts franchise aggregate to and generation by was slightly a expense, of

turn the income over with the other were to Ed. expenses. those So it will other that, I back and of highlights And

Edward Wehmer

Thank you, Dave.

being fronts. well core and in growth on future Reduced earnings summary, and rates all, all continues are throughout taxes all growth, future all that good growth bodes quarter value. to sheet and and So, interest been and the balance to has organization. for very for earnings us, growth in higher beneficial franchise pretty our Wintrust good, Momentum

where We general designated we our present. in regard, at organic XX our growth expensive. new number currently are saw and agendas pushing next the become in we neighborhoods of are planned acquisitions market relatively over on that In area branches months

picked earnest both the counts and at to become And branches of in today, our Our mentioned up had gestation pulling well the We areas rates respects going, protect you in calls retial we sensitivity. great we which it's working with new get. are the of as relationships high mean great as remain rise our our in acquisition future all business spree on good very rate that gradually during as new doesn't are small resulted periods we immediately Credit in do the this in year, that opinion. going the branches in after business by well positioned unrealistic to interest recession. is marketing business. and become prepared beginning during combinations previous downside underutilized long. the investigating programs, get and in and and not as some But has embarked This in overall decreasing when and something pricing rates we

for continue to sites cracks any exiting are portfolio expeditiously our early when deals are We apparent. and review

and at cracks, staff turn XX day good As to noted to push remains we very dues we in credit organizational continue and past people ability get growth time. and some quicker our past reports part make not to much things of are things sure Loan for strong. is and our on XX done that not around your pipeline and due which of most have the decreased dues. Many to as can have

work to continue us. well with businesses niche Our very

other and you the because know all we as to businesses concentrations for past niche look We our continue said to portfolio kill. diversify as in

And are time to looking I we the guys little should We and initiatives maybe in interest have on liquidity treasuries end and point very some get us. be would the treasury good have at pop those long embark in in we keep for here will the which we market, results. are right, desired prepared our short at the desire strategic should the --

us, summary, where occurring like that's good us matter is as good The We of well-positioned. in we fact. are So very disruption sit. market in a for we for the

future. continue made to want we who and may the the customers why still As refugees we in target and our from bonds do past be that's to big banks, in

think that where said, feel being keep like last We quarter, good it. boogeyman. the we we looking about sit said as But I we for now. under table So the we right

to continue these fortress reaching -- a deals. number clean. and loans, to loan fact the type come balance new Not credit maintain We growth and to have critical our clear that such continues for hardened do in by prepare we exception keeping good down our

we're We're you deals and our you not around are comes think assuming normal. profitability to got bites looking that you. prepared to models good is and bringing when our are in we still the us. we in are know So be are balance us being funding, strong. are to event know core and are seasoned holding with for whatever I this all very we sheet those many new that we that getting know and bring But good meet handle it at we chasing when making on we to we've gets profitability any of in in happens prepared think all We diversification that shape pricing this keep And this that built of said, -- sure is organization just number way the relationships let we're want enough laurels of and you things I the thrown -- standing with this to goals. something just up

double-digit of of share net per rates, earnings asset the the value said, by the increases, being -- to good company. that efforts and earnings of value growth you protecting assured your book both company So can best sheet, through long-term maintaining ensure franchise the maintaining growth of that fortress be balance our

who So now have we questions, knows. right go. and let's pretty now time feel we for but good But

Operator

comes [Operator from Instructions] of Our question the Arfstrom with line Capital Jon Markets. first RBC

open. now is line Your

Jon Arfstrom

guys. Thanks. Good morning,

Edward Wehmer

Hi, Jon.

Jon Arfstrom

Hi.

bullish just Ed, on more where of give big maybe the best on you? see commercial are us real Just pretty think best healthy, environment, guess opportunities for and as bit with But seems bit more little things estate, the saying your bit prepared you're everything you a lending where it end irrational a on little comments, what your but C&I. are a towards cautious picture, I you touched is start you the but

Edward Wehmer

fours. the from real commercial -- pricing Well, fixed just in some five in is seeing smaller some billing the estate you're of XX-year deals irrational and banks rate coming

our number You're all seeing We're payoffs we development a in we down in slow those, those of well, sponsors. just That's criteria, we loans wont kind grew it's Life nor of our look the at with it's early on commercial area commercial do is having we a steady continues that doing criteria, businesses strong. The growth policy leasing franchise loan again. very of cycle, not And all our meeting finance, had business, Premium apparently bit. not have premium And loan difficulty] pricing those are really but Nicks portfolio. the good business, very our but as to popping to that the are pipeline did development also the done and nicely. insurance in up its say [technical

the But to look yet the with two turmoil recent we of then market the as us local of a we both for continue, other we is businesses. of market. smaller continue -- the types in here I in So bit competitor, competitors have our said, acquisitions, largest

there. seeing are opportunities We

have hadn't we beautiful hitting a up really the market there, something franchise we're a middle We We concentrated Wisconsin top. on running we on where Chicago hard like also where there market that's up in are up here, spending done. money and blending

competition taking way. model where Wisconsin same big bank nobody a but there's lot really up we're it does Now of to that our

already, at. we're there good results they'd that never a thought never up these get So booking the shot seeing guys deals

worry is pipelines estate, about bit But strong momentum the we real board. across the good, are board. commercial is reputation our good but as as again, across a So the they've been

the low our and get that done feel year. we'll deals pricing, So single-digit pretty good on about so terms our of on knock rest wood, the number we for

Jon Arfstrom

right? single-digit, High

Edward Wehmer

single-digit Yes, the the high sorry, of for year. -- rest

Jon Arfstrom

We're rope-a-dope yet? not at

Edward Wehmer

of No. interesting. That's kind

the banks curve deal, doughs, come or or investments or Ginnies Volcker down right said, flattening somewhat of that with alternative and means a taken long-term have X%, down curve X% all they're the have that Fed to and We I'm using [ph] pundits TV we the big get six soon. Goldman's the lot out long to verified bit to the banks And now. the high. You clubs coming are is of XX% yield It's curve closely a -- a was a and lot looked we recession we negative, were we and a had I talk like lock president. about different about and a from buying their banks from anything on our big hear means are research, point on technical that a of XX%, in top double about work how at the is like. big yield about in which say lot a any that you had or the little the that $X.X I'm they're XX% and five get did has meant -- always lot read trillion worth we talk sitting meant. the their yield to and that's flattening rid But yield The hearing because go very time. Fed the treasuries the rope-a-dope,. what this curve were that this to faster of it, a any I if yield proponents Rule inverted the

out Our came it, guys but did something out enough Goldman with of interestingly two.

well. now labor. about asset. that are not very see right all concerned with clients they're So don't doing only issue the We our -- having that I'm The is

well. an really all and than that some having that's really But issue. are doing clients other labor, And they're trouble good getting

horizon, the see about yet we're thinking don't storm -- about just guess. we're ropes, problems clouds rope-a-dope, dope. don't the No so real not I thinking in I the on see I just area, estate dopes So

Jon Arfstrom

Okay.

and my address thought on a But understand than I need of an sense cost that it you in out Thanks. maybe the where but feel idea it's deposit to flatten to bigger more it, one like you year Just the this is want I can in us little would be. like you increase. something give of just step-up, defend it. cost yourself, maybe is the terms later

Edward Wehmer

at rise did -- take a up most if June the increase as lagged for at and think. with long cycle, the for and points cycle, take for, it basis a and this only We just wasn't end like over cycle. and deposits, you, for in this XX% for the more you catch it for quarter interest-bearing this quarter. rise, you XX% we of quarter we much Well, rate XXth growth the does you if were wasn't as as a this that with quarter high time, that the on is our to us pop took little, XX% are but that as effect time than the brought it at we XX But the it look

points demand for including basis total for get quarter. we're cycle, and basis at the points XX XX the You'll deposits,

forward, going a total expect going quarters XX. those increases working way cycle numbers bit are now you're to on system. their the that in that get have or is rates, the We two that to get To going to after go catching to two still however up, more you're three higher or three through XX little rate up the

the will is it the And that from of And point the first closely. XX we cycle two the We or up in So lot or this up. XX. of look we'll of a with year, next it's quarter at be probably this or then number year we end at lag for XX basis by had that catch but XX past, balanced. very

greater make will sense? see to that. you should earning that So continue Does asset increase than that

Jon Arfstrom

sense. Yes, makes

you. thank Okay,

Edward Wehmer

Hoping to we're going you end we're at up, the to where giving the deal. be of but catch

Jon Arfstrom

Thanks. okay, Yes, sense. makes that

Operator

David Our next question Raymond comes the from Long of James. with line

open. line now Your is

David Long

Good morning, gentlemen.

Edward Wehmer

you? are how David,

David Long

Good. How are you guys doing?

Edward Wehmer

every day. the Living dream

David Long

the pace the and call end growth on and, in deposit are the build your between the now build, and to about liquidity today you where it, Thinking liquidity mind, the Good. of then the curve ultimate year, of next that impact be you yield pace does failure to that? fully much the you or size? will how cooperate that And do of think with where

Edward Wehmer

the like run don't love a to it the at on to range. the we're XX, of want year going we're that's to want well in make XX% what is that like sense? -- we'd in move we're this XX. so XX.X. that's kind can loan-to-deposit, get middle middle the what to the XX to desired rush to important. to to too that XX.X of rest knowing but -- rates, would the -- range year, unless plan. the that in achieve to We're to like on Well, our do. it's get something you of you type love which rush to that to I we'd the end it. get trying I So we'd we'd of going end at to to fine, tell be we're end variable we that liquidity the high not XX.X to If Does but we that's think If of not growth still by our do long-term, sleep the XX comment XXs, of the or takes answer. the Dave, loan-to-deposit were it of rates we the If to to should that? the end were if maximum, XX% get so right to by to of get long number,

Dave Stoehr

it with I we'll And a No, mean our brought that. targeted branch continue with marketing. I to think right. opening down our that's quarter we little plug and this away

we of been net-net think with long up that would've to more investments, the deposits with aggressive and hasn't been I we longer them those end a work put but could've happened. hoped the curve little that bit that had

get pop it'll put to increase could billion gradual that that's And and deposits XX%. like which billion so end Ed yield pops of indication long there's to if probably a and down plug it the $X go it as the thing, or curve. was it if to curve and XX% the Otherwise happen, be another away But and would if get up we'll gradually we steepness it And at would quicker. to range. we'll says, going add work up, that no we $X.X won't it there below out just happen

David Long

Got looking the you of now? What are it. what yields liquidity investing securities doing of building what today, in? And and right at are with you types types you're that

Dave Stoehr

and that. gone into but dramatically haven't just with we Ginnies a little increased Well, Fannies, we've bit

So the liquidity Fannies is either but sitting in yet. cash and we've been legging dramatically in and slightly not with Ginnies

Edward Wehmer

hedge muni bit a to to -- number were of see a rates never to XX% In in XX% great the end long portfolio. closer against move number, coming the to or the If be on more taxes. taxable hedge move against inside love of large they down for a XX% the it'd raising administration muni we us up of different the would a that move a to up number, kind had number road we've perfect little and

lot in very it, you had have be municipal bit, rates move that gap environment closely appears still too. very so carefully; good watch right we served one slowing get that which -- never carefully. us may be that, liquidity large probably rates see the We for might area and the could and portfolio, growth watch a an faster that, we now of a bring into little things as think about calls side has very of in really If too. We've watch things are us there overall to a But and be long that So the go it to a we the might because and make backwards time well. past. time not hedge those the to on expected on the down doing our

have higher and As have the gap rates vulnerability. we to that want don't downside that huge get

So strategies. different we're a of looking at lot

they're stress extra tests these. mathematicians have from hands a but little they test left quantitative them stress have the days, the so time economists of we have doing of lot We their over and running on still foreign days, lots a

thing, So watch this very we'll we're it carefully. over all

Dave Stoehr

slightly. one loan that long see some a down is you of you'll our used and other advances those little deposits look David, the first quarter, investments thing of actually We just up came really quarter they the bank at bit. fund to at there, home our if the just But from end were portfolio, the federal

than the rather the mortgage as much loan those banks home portfolio, borrowing them. fund have we we just So federal deposits used since to

invest So part before securities. quarter, for to the less in waiting so first of it was we're end to we that just long in move borrow still heavily

David Long

about average. And billion Got to much last the I deposits ahead it. just the quarter ask quickly wanted end of period was, $X thing higher, the were

came growth at I am deposit that quarter end assuming So of in the in lot the the right of quarter? a the

Dave Stoehr

Yes.

David Long

Okay.

Edward Wehmer

part in to we Well, an around never Bank Evanston, of of June, fairly May, positioning. successful was too. parochial Chicago start which selling large we've a great right two opened And Evanston been in middle open First of of up that'll an at opportunity very is one a in the with branches right first -- that's that come area pick we the off to branch for Byline us beginning Wrigley to the and opened at suburb

part the So of the last branches many taking did they off. and really of quarter, in opened the well

open to that want to we people when nice it's So come. see still

David Long

it. Got guys. it. Thanks lot, a Appreciate

Operator

Our of next question comes Chris line from KBW. McGratty the with

Your line is now open.

Chris McGratty

there Ed by has time about a time target? a next should I the question. full-year not thanks you with be the the overhead in whether aspirational point there? Could given but doing what's is it how or a or year, sheet Hey get guess thinking good of over get kind a basis, XXX end morning, maybe Dave, for the we on obviously or to early guidance realistic of longer next been time, the the you're balance what

Edward Wehmer

right loan-to-deposit the Well, billion goal. $X put there now, if be -- we we'd XX.X% ultimate

do where has to of with in yield balance are being we sheet So curve. it a lot not the the

of profits book statement Some growth. cost not the he statement mortgage taking putting in too expenses his we organic but high, income of to said that's the due opposed and intangible per are the to being having the quarters as for big And costs value was it through to buying income share. and number the go investing the growth

before we when aspirational. think we it whole growth doing the splurge really used now. organic the But got So we we of -- can there acquisitions. argument have be We is into were we'd to get

to at probably the work to be we'd slop it. but there any yield curve had continue you If we now,

bounce, liquidity You're see you that XXX we until think, every I to quarter really, get going play number us the underway. between and XXX

Chris McGratty

recent is a of years. we guys peers basis for XXX maybe still given you're And are? basis leverage that of kind up, leverage, some range XXX it revenue if double-digit kind and of operating your I the between revenue making, just XXX the to Is the in Great. -- at fair the XXX the given investments to look at to growth which the way about when follow company is point where revenue look growth realistic could the growth expense, of kind for spread and a operating you

Dave Stoehr

Chris, run banks. them, haven't about as we way but talking have you're these we the small numbers I is really operating something up leverage think grow the we clearly

we want loans we But generation is the expenses quarter. some of don't off numbers, parts, the to ratio don't without far net their it so like moving that I were at reports at generate top look sponsorships the this lot up. the was was and it So the to were lots of but the head We advertising people there's surprise revenue sort of expenses a in said up the really because and look the the overhead talk running And of -- the had, my up, way. at because and endgame, up a to deposits obviously. it generate the the mortgages is was deposits were that

far that so look leveraging present well ratio, go overhead we as way. And at it money, but and that we study that really numbers a net just looking so make to to are back at have from we you're money relationship I'd spend the don't and you the as because the

Chris McGratty

fair Thanks Dave. Ed. enough. lot Okay, a Thanks

Operator

Our next comes Brock from UBS. with Vanderbilt question

now is Your open. line

Brock Vanderbilt

taking the question. for Thanks

are verticals be mortgage So generally what I you there could or are where attractive? plug-ins you guess kind businesses, or mortgage you now find review you and product on business in have to you the that of want more

Edward Wehmer

verticals Well, where to want can we have the about about talk we're going? I you -- and talk

Dave Stoehr

get And other belt as it is with office comfortable that and the direct under if First fully VA long we on loans. three can is Veterans that as as as that we our direct there lines could more standard originators we of show consumer consumer The expand that the a to the product origination soon we as just channel obviously bring type have and besides we fine channel, channel. our would can we just retail make be Well, profitable.

want way, which Zoom our direct expand early more on, a others, product As the as what of have for call government but loans better we're although consumer pricing we could now. bit processing expand now. I -- of than a more moving it But maybe channel, certainly to Ed the little right that just be the like we would we efficient mentioned it consumer in type haven't out. towards on more tends really we is own than product, line used towards we the our our on other what those consumer we put product think be short-term the We to to using that more more the here direct right of

Edward Wehmer

now and really we're other than organic without deals on right not. or leaves getting of of going us earn-out basis concentrate we've least past working lot been We're -- out not looking on efficiencies now to done as of these number which our process. out producers, year a for and of growth But this a on an we're the we've mortgage at the rest of in acquisitions stress

to pick, kind to to out. profitability. now talk beginning has not going a there interests. that that We to processing the our have commissions. to in and half; about, story, the hopefully we that figure to cannot on but go detail We different of you is advantage and profits commissions a whole that find about different Commission are you can take commissions, up, now will way concepts number the of And than proven take processing, got concepts not mention Structure down volume total we but of interesting First to number and that thing of screw in a Veterans of I'm retail drop cost Dodd-Frank be

stay Commission three going biggest that So cost the we they dealing us And down, people stay with all hell and can our everybody processing but to backroom spreads is very think if has here. six that of hope issue to down to going if by time that have on on them something are with now, time. general without smaller Structure cost point cut on I to we the not deal rates actual we're The But costs there months, next can is of ideas. industry are implemented where that the our side. theme in the tamper the we're we same with working have, over than in issue think the volumes hard have, be whole

Brock Vanderbilt

just great. of Dave, toward housekeeping, deposits came any considered that Okay, those quarter-end And wholesale? were in

Dave Stoehr

but deposit it They mean to somewhere relatively relatively just ran did was changed wholesale on bring our No, and number I deposits broker off replacement, brokerage we flat. flat. were marginally, some the

Brock Vanderbilt

Okay, great. you. Thank

Operator

D.A. the from comes line question Kevin Reevey of next Our Davidson. with

is line open. now Your

Kevin Reevey

gentlemen. morning, Good

Edward Wehmer

Hello, Kevin.

Kevin Reevey

are you? How

Edward Wehmer

Long time no see.

Kevin Reevey

on congrats quarter. a yes, Yes, great

Edward Wehmer

you. Thank

Kevin Reevey

the utilization, has my moved question we it loan was or the it first when XX% much talked last in quarter same? is stayed or is So it pretty XX% around up

Edward Wehmer

still Dave the The got number is phenomena but… has here, same, the

Dave Stoehr

it much trending in pretty Yes, the last same is few months. the have we as

So utilization rates about are the same.

Edward Wehmer

still But -- is people they anticipatory still on. have are alliance, taking going big there line increase

increasing but So borrowing is up, the proportionally. are lines

Kevin Reevey

a that's thing, good But absolutely.

Edward Wehmer

We think so.

Kevin Reevey

And you that you some end businesses, to your of for niche Ed, at those continue Yes. us the other can businesses of look kind are? prepared about then remarks what give on talked color you

Edward Wehmer

thought A to we we before. of be we've any like $XXX doing heard across I'd million. million to of never niche be run knew businesses things businesses we think scale, these of to where able things to go $XXX them. that them of things one can of. interesting -- go I never we we we different to are the think are lot little that -- should haven't There If Many

we X.X right started because room expensive our that a we pretty on front some them. two-and-a-half at volume into in moves billion been leasing, interestingly good stress too. years we It's are they're there. bigger are is run portfolio We up now have like opening them, the but about standard read did while pretty them, Chicago made a banking opportunities see leasing ago. growth not leasing We're Before look we on we big

in that haven't the diversification by businesses. of existing in within So some had additional get we additional niches some that existing leases, believe products we or adding can we

Different of. stuff lot concepts our heard niche afraid or never we are not to businesses either. ideas, of naturally we go is a it with So,

let So know. me we here, are

Kevin Reevey

any And just do. you talent then, about seeing disruption early acquisition? in far Chicago, the are customers, I will with you recent as as as as opportunities gaining talked opportunity far

Edward Wehmer

are. Yes, let's we Yes, leave at it that.

cost the imagine we can in the announced deals cuts that of simply that this involved uncertainty would all business. areas put You

when so our opportunities people We are on the going serial various operational be And position of the or aren't or in a are botched. number our -- in we numbers or of BSA compliance, apps side still numbers deposit be position season in the were and come we our compliance wanting open to because seeing always to here.

other around. the way it's Now

that. good So and to is not our comment -- to a the as you that be has side, has to we to And like but we this place I'm staff. year-ago place going taken is will us, -- particular, been disruption see to continue lending us and do taking add good

disciplined intend just to be we people, them. So, of advantage lots taking and on of dislocation is assets going and in

Kevin Reevey

Great. Thank you.

Operator

Our of question next line with Terry comes the from McEvoy Stephens.

line Your now is open.

Terry McEvoy

morning. Good Thanks.

Edward Wehmer

Terry. Hi,

Terry McEvoy

Hi.

we've the balance quarter well discussed So, with how talked terms benefit that about some the third in along of actions about you betas at of the rate are hike as the thinking that margin higher the deposit June you've getting sheet on as call? the

Dave Stoehr

Well, quarters, mentioned, the we have Ed are potential asset-sensitive. we but Deposit still up prior we very upward betas in are over margin. think as

once those nine So, portfolio portfolio to and year. re-prices the re-pricing, loan for premium now turnover significant and we initiatives finance niche, the commercial pipelines takes some finance more are have our of months like it that premium a a wise

advantage those loans prior are of some taking re-pricing couple So, of that a now are re-prices too. of

deposit to expect margins our continue our costs upward. So expect would to trend yields so that we still could slightly, we asset outpace and

Terry McEvoy

discuss business? $XXX that the loans, million becoming could the and you of anymore then, at underlying health just you within portfolio, franchise And selective are that Okay. of all

Dave Stoehr

the their bring been for brands The than the But We've help that with is if brands have quarter. report is with we I'll that that in that under very the in an they and lot other stress of go -- inside the I much don't largest it in don't the now very here, and portfolio the it me. any always we doesn't get nicely look let a and have me stay every good, no, diversification of portfolio the support We a last are and front still next there. goodwill But they have time make have. in exposure business, of McDonalds want you really and where we stress, business. guy I'll grew again franchise that issue. of them then to selective

So the healthy, it, of where very look growth have you issues good with no is forward it. portfolio to

Terry McEvoy

And just one think last remain more proactive a seasonal? and you question, bit expenses will advertising because or advertising do disruption market marketing there and year, the and you be later the side? decline Will a this on of will little marketing the

David Dykstra

I comments. as my No, in indicated

the quarter I Chicago of is our we the of to Cubs stay in heavier happened a and clearly second and elevated, and the are during the again in sponsorships sponsorships summertime will Sox the think White lot them a Chicago what quarter. due baseball third the do, that's third generally season which lot and

Edward Wehmer

fourth quarter in heavy of sponsorship World it in will Cubs hoping has the are means be again. a Series We bit playoffs the

Dave Stoehr

trail off in then But back would and again quarter, fourth again. quarter up a expect pop then in and it the first bit we the

year. of middle the is the seasonality quarters there to So that in

Edward Wehmer

doing marketing. pivoted what to marketing - Yes, expense the basic done are more we grow it brand product marketing is should from overall what - have we

for a just expense. in these summer pivot us grow overall The should it's the so, blips organization And with our for sponsorships. the expense core measured little of with baseball

Terry McEvoy

both. Thank you Great.

Edward Wehmer

you. Thank

Operator

with Piper Nathan comes question Race next from Jaffray. Our

Your line is open. now

Nathan Race

Hi, guys.

the loan first yields and back yields going am this Just on are that benefit previous we question the loan than in this may loan in saw is was an obviously increase curious understand yields, loan have we higher Fed? prepayment the there you last the hikes of quarters quarter. - that pricing. the in I I quarter few guess increase yields but saw the Terry's rate to I by impacted in little following got any fees full just

Edward Wehmer

most business won't still ordinary. we but we didn't be fully of at implemented leasing And unusual, there. Prepayments through of have ordinary rate; two the last are the two not for are the and the the of or way nothing it out by quarters. you prepays that's said had anything we usually leased really those out No, comes another

us. kind are hill So we a down those. of growth rolling of still for snowball the experiencing the It's

David Dykstra

estate elevation companies for but end of on those, the those outside payoffs but insurance little see we some to as maturity side, a And bit in of are and those planned. or commercial like, more did term went real then terms of

Edward Wehmer

deal. banking McDonald's maturity. to a of a the We And are rolling into system, a so… head Chicago on quarters as those that lead lead big was America. those Bank permanent off That outside see new Like construction. in McDonald's the We with coming financing

David Dykstra

But don't are those with maturity, at unusual the generally in penalties come nothing prepayment they because so quarter.

Nathan Race

quarter, and continue see to and both just core kind the across increases given broader having so growth to the Got raise that you. Then the implemented to deliver rate see deposit number guys across during quarter deposit marketing this that products it do number yourself products on guess kind this the back half continue growth you magnitude of of of spend of forth of on rates this a growth. guys perhaps of changing sustainable or we year? question more is and gears you over I deposit

Edward Wehmer

grow think I of the advertising pivot the that's should question And come board. Well, to advertising. product size same is where with our new advertising across more are time, answered a there organization growing of that coming with And number growth core We we pricing. the the that the on from of advertising. side, brand proportionately branches the kind at we and branches, of that

coming it higher without are lot like is structured, That's of have we because how a model in -- our to of brand. Not we So, big bank. don't everywhere. raise growth rates

-- it they to that's rates I As go raise raise grow inefficient to raise where have it, want to to the across increase bank a and at board. am I growing and want I there they can where time, elevated banks to I want at not those new efficient in cost but the get or rates. to, expenses bank with no existing one at

is they the over So at plan next to have two you aggregate have our What I - look aggregate. think more raises.

XX% Our overall the range. will data be in

of saying, our that. are ball know So we income. to be that help and water, to will have that's ping-pong the we rates have that a up. asset ball kind margins materially in always which assets larger the believe gather earning that that will earning water base, not beach in will And under increases go should under as interest surpass margins. -- Ping-pong And we ball increases net continue in

Nathan Race

Thank color I appreciate Got it, the guys. you.

Operator

question from Michael next comes Our SunTrust. Young with

line open. now Your is

Michael Young

question. the about Hey, curve comments to of to some earlier in higher. the end for call wanted potential maybe our the thanks of for to go I move long back Ed, the

you you now, while enough that make If sense? moving doesn't or are to direction, so sensitive the place look asset that CD in rates just start see are taking things would out book or that you lower to term

Edward Wehmer

continue We at sensitivity. reducing and to to the rates up both relates rate going balance of move sheet rates sides up our it as interest look

would So, look at both of sheet. we balance sides

to are want lock-in that. rates when longer they are We there. we doing Yes,

now that side asset asset want liability certainly lock we in -- would like we extent. look to before at But, we doing liability side. some probably going -- gap forward. we assets we the side side the to would than are also yes, But side We trying look the will your more to to -- at the reduce

Michael Young

Okay, point? continue of But thanks. credit more at absolute credit on and spreads. up. spreads just broad in pricing being to And rates new comment back kind move maybe that just much this given of Obviously, base is on production a how

Edward Wehmer

But Small it areas We're we market do Saw for doesn't are --how policy pricing That's history particular. seeing and in the in life previous loan calls that. won't operate change is it. or we don't question. have been good specific doing we our large the it's our for model fortunately, banks a really banks our do some anything. throughout it. If here said work, as I in

moving able fortunately -- have we seeing are beat we been and at left little to we is And it, our we a business get the but our are the right. bit, terms. other So, guys market

not market. chase the are to We going

We down are going rates. to not chase the

go, we hence estate deals real let that will We runoff have the commercial had.

of And it runoff always estate don't us, been good doesn't another commercial to It's we completed are that we a projects secondary contractual seeing that's -- to are bank price good, and it. for has little there. make real a going into that solid for Some the that been sense seeing are chase market. we

go, mean well be. can On I as side the it to as commercial low been as going commercial it's has it's the as side,

as commercial be portfolio. you private We are the last In in low So our tell equity see seeing don't sponsors should middle are buy that for three market as it been side which the has that much. steady something. portfolio, years. occurring can sell that or But the we we holding

the in we way area our non-banks that of deals, that out comfortable pretty XXX XXX that the good, And but sponsors rates areas over, still We that would are not XXX they was anterius over the of are -- control. world like think I seeing come with to the air doing. in with not balls be look or

playing. Our sponsors are

something that are sponsors to selling. us. Our And means

on that private So estate rationality throwing so. mostly make on side seeing equity to But us side, deals don't real at non-banks private we commercial market side. the some are in sense the being money the equity

Michael Young

Thanks. Okay.

David Dykstra

words I for other In in think holding are spreads there us.

Edward Wehmer

Yes.

Michael Young

Thanks, Dave.

Edward Wehmer

color, That's man. good a

Operator

Securities. [Operator Instructions] David of Our Chiaverini from next comes line the with question Wedbush

is line now open. Your

David Chiaverini

thanks. Hi,

estate. So commercial followup was very the growth wanted on on high been has single to about digit despite discussion real guidance maintained the I loan And good. caution which

I enough generate premium and to in acceleration the demand side demand C&I continue curious finance in an So on are seeing you was growth? or and of type that

Edward Wehmer

business Yes, just people. from on the commercial taking side, we're

taken we to continuing grow As lots disruption our we recognized other utilization our market, in looks with of low place. and be this the continuing of the But reputation are and rates get deals also our the the bringing because banks with in good of in still our XXs in. Dave in because a said, abilities to and that's area, lives are market from the disruption

talk Dave, On to finance side, the you about that? want premium

David Dykstra

SunTrust is pretty They we in The and one get premium continue I competitors. market strong. of finance recently disruption new to clients. mean the marketplace. which larger business to is sold just sold our

to give product. And good that great and service do so and a helpful us, is we

So, -- we our we door, the feet door. the the continue to and feet our build in get business in

continue business We to there. build the

that of business us keeping release that we tackling. There going going some companies. to hope But the are road that's which compete insurance in to we come we would down a be that's that blocking may was Hopefully be or don't and some to because And to we So to regulations help banks apply non-regulated would and with pop have regulatory us. entities. apply another soon. tailwind lost resolved hopeful non-banks shortly that

So we are that compared forward. pipelines might are be our working recent mentioned on and high up the history. But as back levels a tailwind to for relatively us their going front-end, way

it. we is business sustain we and can So, there think the

David Chiaverini

And the is for from terms hiring in you Or, Thanks able that. pre-requisite benefiting from disruption, hiring a other to disruption? benefit the from without to benefit of are organizations? these

Edward Wehmer

benefit additive, selective for you just to are most very in really we just we hiring but of out the And need hire. the part the regard. former, is that that's box, The

hiring the but across have board, to additional the capacity business out We take don't hurt.

David Chiaverini

Thanks very much.

David Dykstra

you. Thank

Operator

time. not in queue I this turn the back remarks. am showing Wehmer Mr. I like And call further any closing for to to questions at would

Edward Wehmer

rest and talk we with earnings Thanks hopefully very much eleventh of our when of will in back quarter everybody. Have we summer consecutive a great October.

you to Thank soon. you. talk So,

Operator

Everyone Ladies great and and disconnect. now have in may you gentlemen, today's concludes thank program for you conference. participation your day. This a the

Wintrust Financial (WTFC) 18 Jul 182018 Q2 Earnings call transcript