Wintrust Financial Corporation (WTFC) Q3 2012 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to Wintrust Financial Corporation's 2012 Third Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. Following a 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. The company's forward-looking assumptions are detailed in the third quarter earnings press release and in the company's Form 10-K and 10-Q on file with the SEC. I will now turn the conference call over to Mr. Edward Wehmer.

Good afternoon, everybody. And welcome to the Wintrust third quarter earnings call. With me as always are, Dave Dykstra, as mentioned with the big long title, Dave Stoehr, our Chief Financial Officer; and Lisa Pattis, our General Counsel. Format for the call is going to be usual drill. I'm going to start with some general comments about the quarter's performance, Dave Dykstra will then get into the numbers with a little bit more specificity, especially as they relate to other income and other expense. He will then turn it back to me for some closing comments, where I'll try to focus on our thoughts on the future, and then there will be time for questions, so we can help all of you out there reconcile your models. Overall, we are very, very pleased with the results achieved in this quarter. The quarter is highlighted by $32.6 million in earnings, a 26% increase over the second quarter, and $0.66 a share. It's a record quarter for us and we feel good about that. Year-to-date earnings of $81.1 million or $1.70 a share, this is almost $4 million over the amount that we earned in all of 2011, so it's safe to say that hopefully we're on record year pace. Total assets grew to just over $17 billion, a $443 million increase despite the fact that we retired the remaining $361 million of our twelfth [ph] securitization during the-- mid-point during the quarter. Taking that into consideration, core assets grew by almost $800 million in the quarter. The Second Federal FDIC-Assisted acquisition added $170 million of assets. The First United FDIC acquisition, which occurred on really the last business day of the month added $316 million and then core growth of approximately $314 million, so it was a good growth quarter for…

Thank you, Ed. As normal, I'll briefly touch on the other non-interest income and noninterest expense sections. Starting with the non-interest income, our wealth management revenues remained relatively steady at $13.3 million in the third quarter of 2012, compared to the previous quarter total of $13.4 million, and increased nicely from the year ago quarter of $12 million. The increase in this wealth management revenue from the prior year quarter came primarily from the trust and asset management business, which increased $1 million. And as we noted last quarter and this quarter's news release, we did close on an acquisition of a trust company on March 30, and so the second and third quarters benefited from that acquisition by about $300 million to $400 million per core customer $400,000 per quarter, and the remaining balances of the increase was due primarily to new business development efforts. On the mortgage banking revenue side, Ed talked about it, but it improved begin the quarter to $31.1 million in the third quarter from $25.6 million recorded in the second quarter, and was actually more than twice as much as the $14.5 million recorded in the third quarter of last year. The company originated and sold $1.1 billion of mortgage loans in the third quarter, compared to $854 million of mortgage loans originated in the prior quarter and $642 million of loans originated in the year ago quarter. The mortgage banking revenues improved as a result of the favorable environment obviously, continuing strong volumes related to purchased home activity. This quarter we had between 40% and 41% of our volume was related to purchased home activity, and otherwise good pricing metrics in the market as Ed talked about. Slightly offsetting the positive revenue from the mortgage origination was the decline in the fair market…

Thanks. Clear as mud I think. In subsequent quarters, we will actually put a reconciliation in the press release for you, so we don't have to listen to Dave's accounting class, which I have to hear all the time.

Ed, if I can go back. We had the same issue in the third quarter of last year, and there weren't that many questions, so we apologize for not putting the table in, but it applies to both, third quarter of '12 and third quarter of '11, but the intervening quarters were calculated in the alternative method.

Thanks, Dave. To summarize, as I said we're very pleased with the quarter, with our year-to-date results and really where we are right now, and with our prospects for continued growth in both, earnings and in franchise value. In maintaining margin, you've heard this on all the calls so far this year, I am sure, from all of our brethren in the banking business, maintaining the margin is going to be a challenge. However, we believe that there are there are levers that we can still pull, and hopefully that we can maintain this margin going forward. Next year,[ph] we'll see what happens. But as I briefly mentioned earlier, there still is a lot of operating leverage in our system. Like I said, we put the plumbing in before we flush and we have done that. We have lots of room to grow and to build without commensurate increases in expenses, so we think that even if the margin were to go down a bit next year, that the growth that we will be putting on will be extremely profitable to us and come to the bottom line and we continue to position ourselves for rising rates. I think as rates, the lower they stay, the longer they stay, the greater probability they're going to go up. [indiscernible] you may think, Dave mentioned that we have taken hits on interest rate caps we bought, we consider those and they're not treated as hedges. We consider those to be insurance policies for us. Basel III goes through and they take other comprehensive income any fixed rate portfolios you can take the decrement and other comprehensive on your fixed rate securities portfolios against capital, that's going to hurt and what we feel is that by laddering in a number of caps and…

[Operator Instructions] The first question comes from Jon Arfstrom from RBC Capital Markets.

Question on loan pricing and terms do you feel like it's -- I guess what I'm trying to get at is how much pressure is there from your point of view in terms of pricing and are you starting to see signs of irrationality? Are you competing against better than Fed funds-type guys or do you feel like you can still get appropriate pricing for what you are doing?

That's a good question. Probably [ph] by saying that maybe that old quote I gave you from Omar Bradley, "we set our course by the stars and not by the lights of other passing ships." Our profitability models have not changed. Our underwriting parameters have not changed. We do not change them to fit the times. So from our perspective, we are doing what we have always done and going right down the middle of the path. As it relates to the overall market, you are seeing, in certain sectors you are seeing rate battles going on, and you are seeing terms being like the bid. This is not, it's not to the extent that was back in '06, '07 yet, because you really don't have this -there's still so many competitors who are on their back right now, and who aren't unable to go out and to do stupid things. But if these low interest rates as they continue to go on, we can't help, but believe that you're going to see that same phenomena take place that took place from 2002 and really through to 2008, where there will be a little bit of feeding frenzy for earning assets, and there will be a little better than Fed funds mentality out there, but all that being said, we just pass on it. Our pipelines are strong enough and we build it into our probability. If we believe that it's going to be at that pricing war and we are not going win. We're not going to wish the time on it. We'll continue to cultivate that client down the road especially as it relates to terms. If you start doing bad deals for clients. A deal with bad terms is a bad deal for your client too, I…

Okay. Just one maybe finer point on the loan growth. Obviously you had the Canadian premium finance acquisition, but you had stronger growth this quarter in premium finance as well. I'm just curious if there's anything to report in terms of what the drivers might be.

Third quarter -- July is our second biggest month. Usually the month after quarter end is a very strong month for us. But I think -- the Canadian operations since we've owned it has had 3 record months. We're excited about that and their prospects. We had a great crew up there that's really energized, being able to offer some of the additional products and services that we offer here in the States to the market up in Canada has been very beneficial for us and they are growing. We've actually also seen, not to a great extent, but the average ticket size has gone from what was $20,000 last year. We considered $27,000 as an average ticket size on our property and casualty business to be the norm. We've been operating at $19,000 to $20,000 during the crisis. It's now moved up to about $22,000. So as those portfolios re-price, because remember -or refinance, because remember these are 9-month full payout loans and 12 months later they come back to the market, we are getting a higher ticket size on this turnover, so it's been market share pickup in Canada, continued market share pickup in United States, plus additional average ticket size, plus July is probably our second strongest month. So those are the facets of that, but the business still continue to grow well. If we could just get back to $27,000 in average ticket size. And you think about that growth, what that would do to the portfolio raising it 20% without any additional work, and those are still good yielding assets where they are best [ph] other than covered assets that would be a very good thing, so we hope for catastrophes where nobody gets hurt in the insurance market.

Our next question comes from Stephen Geyen from Stifel, Nicolaus.

Just curious, yield on liquidity management assets declined 28 basis points in the last quarter. Just curious what the major drivers to the decline were and if there were any increases in the Fed funds sold that could eventually put the work at high OREO?

Depends on, are you looking at month end numbers, Stephen? I'm sorry.

The average rate down. We had some securities call at the end of last quarter, and we reinvested in the rates on longer-term Freddies and Fannies and agencies that we replace some of those with the yields were down, so as we are replacing those securities and the yield curve has come down we're placing them in lower yielding securities, so we would hope to take those excess funds and loan them out. So the premium finance business that we just talk about is strong and our pipelines are strong and the mortgage business was strong, so hopefully we'll be able to put that liquidity to work in loans. Our portfolio is pretty well barbelled between overnight money and the longer-term securities, so there is a opportunity to put Fed funds to work and this is going to be an ebb and flow. If everything keeps playing out as it is, some of these acquisitions that if we are successful in continuing on the acquisition side of things, you do pick up extra liquidity there and it is going to take time to deploy it, so we're not able to do it over in a quarter it would be nice if we could do that. So it will ebb and flow in terms of total efficiency of our liquidity, and right now we probably have a bit more on the short end of the barbell than we would like, but we will continue to manage that. And if loan pipelines remained strong, we continue to look by the way to add additional niches to our niche lending programs. We believe in diversification of those program and we do look at a lot of different things. I think that we've looked at every leasing company in the country twice and take it at that, but we are -- -- I'm being facetious there. Lisa just gave me a funny look. But it's all going to be about earning assets going forward and diversification of earning assets and that's really going to drive a lot of things, but we do have additional liquidity that we can put to work. Pipelines remains strong. We continue on the diversified earning asset front to try to put it to work.

Okay. And Dave you did touch on this a little bit, but I was just curious for a little bit more color. Historically Wintrust has had some pretty good success offsetting the margin compression with call strategy, the covered call strategy. I am just curious if they're in a very low rate environment if there is a point where that strategy no longer makes sense?

As Ed said, we sort of out barbell our portfolio and to the extent that we have the long end out there that we put some of that excess liquidity to work there'll be a little bit to the extent that securities get called and we reinvest that we would always write on those, but where that would probably goes away is if rates start to rise a little bit, and securities don't called then you won't get as much premium on those, and so you just won't be able to write against them and get any premium. But if rates stay relatively flat, the securities will get called or they won't, but you'll be close enough in the money that you can always rewrite on those securities, so it's just there's not as much volatility at the low end of the market right now, so we're not getting as bigger premiums as we maybe have during higher volatility times. I think with the Fed saying rates are going to stay low for an extended period time it takes some of that volatility out of the market, but as long we are investing in agencies and treasuries, we will write against them if we can. So if rates stay relatively flat, we'll probably stay in this $2 million to $3 million range. And if they go up a little bit, then they could actually fall -- if rates go up a little bit that income could fall a little bit because the securities won't get called away and you won't get as much premium for writing against a security that's out of the money a little bit, but our margin should respond favorably to offset and that's the whole purpose of the program.

If rates go up, the barbell is uneven right now. We probably have more in liquidity in overnight liquidity than we have invested and that makes sense. I mean, we invested long and if rates start moving up, you would see us actually laddering and going a little bit longer with the portfolio if rate start moving up also, but the margin would covered as Dave said, so there is a scenario where they could decrease, but in most scenarios because they'll increase if there is growth, they'll increase if there's rising rates. If nothing happens, then you just keep writing and you'd write on the growth. So there is a scenario where it could go to 0, but it really depends on growth and where interest rates move. And the other thing is that on the sensitivity analysis, why we're barbelled right now and uneven barbelled, is because of this Basel III stuff, and if we have to take our long-term portfolio and then you decrement that against our capital, that could, that's a brutal concept. That's why we put those caps in place is just to cover for that. So we're trying to protect capital and predict shareholder value in a lot of different ways and we do it in how we can think about our investment and the rate environment that we're in

Just 1 small last question. Regarding the bonus of $2.3 million. You had mentioned that part of that was catch-up or was all of it catch-up?

It's ALTIP and bonus. It's the long-term incentive, plus the short-term incentive. I'll let Dave answer that.

No. No. It's not all catch-up. As we get bigger and we've added more people, you have some additional there. And as you make more money just gradually the short-term bonus accrual will go up. On ALTIP that those are sort of multi-year plan and as your target goes up, there is a little bit of a of a catch up there, so it's a little bit of growth and catch-up and just the normal increased accruals as we project throughout the year to have higher performance and better performance our bonus accruals go up, and we just sort of true it up to what we think the performance is now. We run the models and we book what it is, but on the long-term incentive plans, there is some catch up, because they cover multiple periods.

One thing to remember is, we are doing better than we anticipated, so -- but at the end of the year we reset that bar. So there'll be new short-term incentives for everybody that'll obviously, we'll stretch these guys for next year, but the payout would be what the normal payout would be this year if you follow what I am saying. So we're doing this year, but we do reset the bar. We won't be resetting what peoples' target bonuses are, we'll be resetting the target. And I would like to be in the same position next year in the third quarter to tell everybody that, yes, we had to do catch-up because we're doing lot better.

Our next question comes from Brad Milsaps from Sandler O'Neill.

Ed, I think you mentioned it brief in your comments, or maybe it was Dave, but that you mentioned you had a large pay down in the covered loan category. I was just trying to see if you could add a little more color to that, because you had I think roughly 170 million in covered assets that came over into a larger deal you did in the quarter, I was just trying to see if I can understand that a little bit better.

It wasn't 1 large pay down. It's just continued pay down. Our purchased assets does a fine job and you can validate that by just looking at the rates that we earn on our covered asset portfolio, but I think you would see some that went into OREO. Our OREO went up on covered assets and the rest were actually paid down of those loans that we've been able to. The quickly you can pay those things down, the better the yield and the better earnings you're going to get on the discount you took on them, so it was just same old, same old of continued progress on that portfolio and it was just a really good quarter in terms of cleaning some of that stuff up.

Okay. And then, Dave, I know you guys typically like to bring in and then it can be a quarter delay, and how you look at the different pools of the assets of the individual bank that you bring over. Do you think the yield on the cover book could get a bump in the fourth quarter based on how you guys, you have another 90 days to really look at it and see kind of how things fallout?

Well trying to figure out that, Brad is like to figure out the units on your phone bills. It's so complicated.

That's why I am asking.

Obviously, Brad, this occurred on the last business of the quarter. We've spent a lot of time digging through that and doing our best estimates, and we will continue to just make sure we have it right. We think we have it right. We've put a lot of effort into it. But and so, I think the answer is, you don't expect it to go up, but if our purchase asset division does a lot better than what we projected as they have on the prior deals then it could go up, but GAAP will tell you value that it should be level yield until they show better progress than what we booked it at and if you get 3, 4 months out, maybe you find out new information on some of these credits as you get further into them our situations change which we have on the prior deals and then the yield would go up, so I think from a GAAP perspective you'd say you had to book at it right here and that's what we think is the right answer, but once we get our purchase asset guys and really working it hard, they sometimes, most of the time actually surprise us, they do a great job early on and blow some of the stuff out, which helps us increase yield. So I'm not sure that's a great answer, but you really can't predict until the guys get in there...

It's usually 2 quarters before you see anything material come out of there, one way or another. But the existing portfolio. We have a big existing portfolio of pooled loans from the previous transactions and those can move one way or another by 50 basis points in a quarter. Just because we recast the cash flows on all those loans every quarter, and you could have 1 big one payoff that comes in early and that discount comes in and gets amortized. It could go 50 basis points either way and, so the probability that notwithstanding an additional transaction, but the probability of any rate movement could probably be better stuck on the existing portfolio than the new portfolio coming in, in that next 6 months.

Our next question comes from Steve Scinicariello from UBS.

Just a quick one for you, so it was strong as your asset generation has been lately, some of these FDIC deals have actually boosted up your deposit funding even more so your loan deposit ratio has gone from 91% down to sub-87%, and so I was just kind of wondering if you could talk a little bit about kind of this leveraging opportunity that you guys have to kind of loan up some of these deposit franchises, I think HPK is a good example with a 55% loan deposit ratio, so just kind of wondering is that one big source of operating leverage as you look ahead and just looking to get a little more color on that.

Well, it certainly is. I think, our ability to bring those up to optimization is a critical part in our thinking, and it's very hard now to, even though we were able to do it in the third quarter or yes, in the third quarter, the core growth is harder to come by. And just because of the rate environment and trying to get people to move, we're doing good and it is working, but to be able to pick up a great franchise like Hyde Park and it has the capacity to put loans on the books is an integral part of our thinking here, but we can't do it all in the same quarter. We're not going to chase assets build. There will be periods where we have excess liquidity that will affect the margin and when we don't have enough liquidity. The first quarter of this year I remember we were scrambling to get liquidity in here, so I say it's like climbing up a ladder. Hey, I need deposits, I need loans, I need deposits, I need loans, but that's a terrific opportunity, because we get great core deposits and then we're able to run them out and get a great spread out of them. When we really have the leverages in our existing infrastructure, when we can bring on good growth, good asset growth without commensurate increases in expenses. That's really -- so if you figure let's just hypothetically say, and I am not projecting anything, but if you had a margin of 351, let's say it fell to 3.25 next year; just hypothetically. But your cost of bringing on new loans and new growth is only 40 basis points. That growth would come on at after tax. That's like 1.60. I mean that 1.6 on assets for that additional growth, so leveraging those expenses and managing those expenses is really where we see the benefit of the leverage we have in our system.

Our next question comes from Chris McGratty from KBW.

Dave, on the 2 deals, the deal [indiscernible] and the Hyde deal, can you just break out the assts between loans and deposits? Or excuse me loans and the securities?

On which deals, Chris?

On the one that's slated, the one that closed, the FDIC deal that closed this quarter and the one that's closing, the one that closed in September. The Hyde it says it was $300 million in assets, I was just wondering I was just wondering how that $390 million of assets broke out between...

Well, Second Federal was $170 million and it was deposit only. Is that what you were asking?

Yes. I guess, I am asking the Hyde Park one, the $390 million.

Well, the one that was closed in the fourth quarter?

Right.

Yes. I actually don't have the number right in front of me right now. The call report is out there, but there's like, was said there's about 55% loan to deposit, so the number is in the $100 million to $200 million range. I just don't know exactly what the number is right now, Chris.

And then the Old Plank deal the $310 million of assets, do you have that in front of you or is that something you can check?

I think it's in the press release. Actually, we picked up, on the deposit side, we picked up $316 million and only $310 million of assets and it added 100 something million to covered loans? I am pausing, because it depends on how you present this. If you apply the discount that we put against this loan, then you will then have gross loans but you have to bring them over net of the credit discount that you applied loan. It was closer to $75 million that would run through the loan item, but if it goes to the covered loan section, not the our normal loan line in the balance sheet.

I just wanted to make sure I have it correct. If the level of profitability continues or grows from here, the 48.7 is the shared count we should be using to calculate earnings and only the adjustment would be to not forecast the preferred dividends. Is that correct?

That would be correct.

And that's assuming everything including the potential convert. That's basically the mash [ph] average portfolio to the share count even with the TEUs and everything, that's everything?

The TEUs are at, and we shuffle that in our adjusted net income section, but the TEUs are at $6,133 million and that's as low they can go, because we are over the 37.5 cap on that. So if our stock price come below 37.5, that TEU number could go up a little bit and you can see in the prior quarter it was $6.7 million and $6.5 million. The highest it could go would be $7.6 million, but as long as the stock price stays relatively close to where it's at right now, then you shouldn't see any change in those TEUs. So you're right, you would take, all things being equal with the stock price you take the 48.7 and then you would take the net income number and assume 0 preferred dividends.

Okay. And then the book value calculation, we obviously had in the past had TEUs, is the 48.7 give or take a little bit, is that the right book value number of shares to use going forward?

I mean the EPS is a just a GAAP measure. What we do, if you look on page 19 is, we use our actual shares outstanding of $36 million for '11, and add in the TEUs of $6,133 million, so for book value calculation, we use 42,544 million. Yes. We don't assume that the preferred converts for book value calculation.

Our next question comes from Emlen Harmon from Jefferies.

I guess the question that I had just more big picture in nature, but you lay out for us kind of what the CD re-pricing opportunities you have coming up are. Historically, you guys have carried a bit higher deposit costs than peers just kind of given your footprint and customer base. Could you talk a little bit about kind of where you think your deposit costs go relativity to the industry given that your footprint has changed some, and then also just the fact that we're in kind of a lower rate environment and customers are just getting less yield elsewhere and just kind of what your ability is to bring that pricing level down a little closer where the industry average is?

We think exactly like that, that we can bring it closer to where the industry average is. People are not fighting up and down for 3 basis points or 5. We think that there is good opportunity, the continued opportunity there to bring our cost down and to have them closer. And to grow DDA, although you don't get as much out of DDA as you used to, you will someday, and we're going to continue to grow that, but we would like to get and what we're pushing for also is a better deposit mix. You've seen our CD numbers come down as a percentage of totals. Well why we have CDs than anybody else was really a function of our growth in the past in trying to do and get people in without cannibalizing the rates and everything else, but in this market we can direct people to the savings in the money markets where we can be a little more inelastic in terms of raising rates when they finally do go up, so I think you hit the nail on the head. It's not just the CD re-pricing, but overall quarterly pricing is what we're doing also and we would expect over the course of the next year to be able to bring it down probably not totally to peer group, because we still are in a number of market that wouldn't accept that but to continue to narrow that gap.

And then one on the Hyde Park deal. I think, just reading kind of the deal box, it mentioned that there is a kind of TARP walk away provision on the deal. Can you just explain us kind of how that works and is it contingent on the Hyde Park paying back TARP prior to deal close or is that the function of you being able to do it. Just maybe give us some color around that?

Well, what we put in the 8-K is that a condition of the closing of the transaction is that the TARP no longer be outstanding. So we have a right to walk away if the TARP is still outstanding at closing. We could waive the condition of closing and close if we wanted to, but right now the condition of closing is that the TARP be repaid before we consummate that that deal.

And I would probably tell you that the probability of us going ahead if the TARP wasn't paid off is there are more probability me having a dead rat in my mouth than that occurring, so been there done that. We don't want to go back to TARP.

Our next question from Peyton Green from Sterne Agee.

The overnight liquidity and kind of just blow yielding liquidity management assets has kind of been this way for a couple years. And certainly you have done a lot of FDIC-assisted deals, which have contributed liquidity. I guess I'm just wondering. I mean, what level can you drive it down to as a percent of earning assets? I mean how much of the overnight liquidity is for deposit purposes or pledging purposes?

That's a good question. We obviously had more and it's not like you haven't talked to me about this before, Peyton.

I think the way to look at that, Peyton, we generally have said we want to be 85% to 90% loan to deposit. In this rate environment, you might go a little bit higher and then the -- I mean if you establish those goals and then hit them, then your liquidity just sort of falls out. I mean we're not maintaining liquidity for the sole purpose of collateral I mean we'll use it to if we have in municipal deposits and alike, but we're not going out and buying it just so we can go get new deposits. That's not profitable business. You can't make money doing that. So the driving force is really how much you have in loans.

But I think Dave was addressing, they're asking about the uneven barbell right now that we really have a lot more overnight liquidity than we have invested in, and that is a conscious effort, Peyton, because could we get better yield if we went out took half of our overnight liquidity and turned it into longer term assets, yes. But when you run the sensitivities on that and you look what a rise in rates would do 2% or 3%, what that would do, and if that was then had to go against your capital, your returns on that could be awful and it could really turn around and boomerang at you and that's why we are very careful. That's why we put to the interest rate caps in place for the portfolio that we have the long-term securities, because, if I have a $1 billion of mortgage-backs on the books and borrowing at these levels and rates went up, we could lose $400 million, $500 million worth of capital. That wouldn't make my shareholders very happy. So would we like to do it, yes. It certainly, would make life easy to be the short-term situation to maintain margin, but long-term I think it would turn around and bite you. So we look at it all the time. What is the appropriate level and maybe we'll do it on percentages, but where should we be in terms of the duration of all our liquidity and right now we're leaning towards shorter as opposed longer. As we grow, you would probably see us maintain that same percentage of long versus short, and we'll just see where times, where things time and where Basel ends up. If it ends up at all, I just thought is a short-term fix for long-term headache to try to go out and invest more right now as you know that's not what we do. We look long-term, but it is always is enticing to say, man if I could invest a little bit higher then I could be king and pope, but I would be run out of office in a couple of years and I am not excited about that prospect.

Okay. Maybe another way to look at it is, when you got about $450 million in FHLB advances and probably about $500 million or so in notes payable and other borrowings, that yield around 2.25 blended, why not restructure those with the bargain purchase gains and get the term better at a lower cost or just run more deposit fund where your spread would be better?

Always under review looking at that. We have driven those costs down on the Federal Home Loan Bank advances, a lot of those, overall liability purposes, but that's where the purpose they want, but that's always under review as to how to bring those costs down and it is now our leading cost of fund is on our Federal Home Loan Bank numbers, so it is something that we look at all the time.

Okay. In terms of taking loan yield kind of out of the margin, if you know it, what was blended organic loan yield on originations and renewals in the third quarter?

It's not something we've disclosed, so maybe it's something we'll put in future disclosures if that's of interest to everybody. We can run a lapse schedule of what runs off, what runs on, what's renewed, but well we'll take a look at that but it's not something we've disclosed yet and I am hesitant to do it now with my General Counsel has put a shock collar on me, I have to be very careful about what I say.

Okay. Then the last question is, I mean certainly you get credit for the bargain purchase gains over time and book value and the multiples you get on book value. No doubt about it, but in thinking about kind of the near-term income statement effect, I mean, in looking at the quarter, I mean you had about $7 million of good strong, kind of core revenue growth but there was about $6 million in kind of core expense growth. And I guess, how much of the expense growth would you expect to receive in the fourth quarter where you might get some more operating leverage out of such a strong revenue number.

As you know there the expense the growth was all on the salary side, and Dave kind of went through that. Some of it's catch-up. Some of it's just the fact that we're doing a lot better than we thought we were going to do and it's got to be put into those variable rate plans. Half of it basically is plus or minus is due to the mortgage side of the business doing as well as it's doing, and so the mortgage business continues to do well. It's a net positive for us and the rest of it is just going to be based on how well we do. So there's -- we're going to continue to increased revenues and the like. We -- good growth here, good leverage built in here. We would much rather have not seen that increase, but it is what it is. It's $1 million and 2 of it relates to the 2 very good acquisitions that we did. And it does takes some time on the bank side acquisitions, especially the FDIC ones to weed out some of those costs. I think you've seen us do it in the past. We've done, I think, more FDIC deals than anybody else, but it takes you a good 6 months. At least till you get through conversion. Before you would really experience the conversion of the data processing systems before you can experience the real cost savings there And given the number of deals we've done, we had conversions lined up like planes over O'Hare, so it's just it might be 3 or 4 months before we can get that accomplished and get those numbers down, but pushing continued revenue growth and maintain the margin and to keep our expenses notwithstanding acquisition expenses keep them flat to up a little is our goal for the for the next year. On a same-store sales basis, that's what the goal is, is to keep expenses relatively flat next year and so we can deal with and take advantage of that leverage even if our margin has to go down a little bit, it would still be really good profitable growth.

Okay. I mean, looking at it this way I guess, if revenue growth was 7% in '11, and we're projecting it to be around 13% for '12 and you've had expense growth of 10% in '11 and estimated at 15% for '12, you would expect those to flip-flop in '13. And revenue growth or expense should be less on a percentage rate basis than revenue growth. Is that fair?

Depends on the number of deals you do. I mean, on same-store sales, we would like to keep our relative run rate basis, when we hit December, we you take out the on a same-store sales basis, we'd like to keep those expenses [indiscernible]. That's what the goal is, now budgets are being good now and we'll see where that ends up, but we expect to be very active in the acquisitions side, which certainly adds to your expense base going forward maybe not the commensurate add to your revenue base right out of the box, because it does take us some time to achieve those expense savings and to get those banks loaned up. So if you would view it on a same-store sales, which we don't present anywhere, we would -- that's what our goal is, so it's kind of hard to be able to reconcile those numbers, because there's a ton of variables into it.

But I'm sure over a beer or 2 you and I can figure it all out. Next time I see you.

I'm showing no further questions at this time.

Well, thank you very much everybody. We'll talk to you after the end of the fourth quarter and everyone have great holiday season, starting with Halloween I guess that's when it kicks in, so thanks everybody for dialing in.

Ladies and gentlemen, thanks for participating in today's conference. This concludes the program. You may all disconnect and have a wonderful day.