Wintrust Financial Corporation (WTFC) Q1 2013 Earnings Report, Transcript and Summary

Welcome to Wintrust Financial Corporation’s 2013 First Quarter Earnings Conference Call. At this time all participants are in a listen-only mode (Operator Instructions). As a reminder this call may be 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 and instructions will be given at that time. The Company’s forward-looking assumptions are detailed in the first quarter’s earnings press release and then the Company’s most recent Form 10-K on file with the SEC. I will now turn the conference over to Mr. Edward Wehmer.

Good morning everybody and welcome to our first quarter earnings call. I would like to say with me as always but six inches of rain in the last 12 hours has kept me in Lake Forest and Dave Dykstra, Dave Stoehr and Lisa Pattis in Rosemont as we battle flooding in the system here. But we’re building an ark and we will survive. As usual, I’ll give a general overview of the quarter, Dave Dykstra will follow-up in a little bit more detail and then following with some summary remarks from me. We will have time for questions. And all-in-all, we were pleased with the first quarter. Earnings were $32.1 million or $0.65 a share, up 38% from last year and 7% from the fourth quarter. We were at the high-end of analyst estimates there and certainly beat the Street by again for the umpteenth quarter in a row by a lot. It’s kind of interesting to me that I think if you do go back and look how many times we beat the Street, but how many times it reconcile backwards into models that I just find that very interesting is to what’s normal and what isn’t normal anymore, it’s just with all the crazy accounting we have to do. And the opportunities that we have out here, we’ve been able to beat the Street just by making money which is what our goal is. Net interest margin was up 1% or one basis point, I wish it was 1%, but it’s just one basis point and our net overhead ratio was 1.47%. We always thought that in the days 1.5% net overhead ratio was really considered a very well run bank, thinking this market with these rates you really have to keep pushing that number down into the…

Thanks, Ed. As normal, I’ll just touch briefly on the noninterest income and noninterest expense sections. Turning to noninterst income first, our wealth management revenue improved by $1.2 million to $14.8 million in the first quarter of 2013, that compares to the previous quarter total of $13.6 million and it also increased nicely from the year-ago quarter of $12.4 million, the trust and asset management revenue increased by $331,000 to $7.6 million in the first quarter of this year, and that’s from $7.2 million in the prior quarter. And our brokerage business did very nicely and saw $863,000 increase in mix revenues over the client trading volumes increased during the quarter. Ed touched on the mortgage banking revenue, but in summary declined by 13% of $30.1 million in the first quarter of 2012 from $34.7 million recorded in the prior quarter and was up 63% from the $18.5 million recorded in the same quarter of last year. And, despite the decline in the overall mortgage banking revenue during the quarter, it was still as our third best result in the company’s history so still strong revenue there, strong production and we’re pleased with it this quarter. We originated and sold $974 million of mortgage loans in the first quarter compared to $1.2 billion of mortgage loan production in the prior quarter and $715 million in the year-ago quarter. The current quarter was benefited slightly from a higher valuation in the fair market value of our mortgage servicing rates that valuation increased to 72 basis points from 67 basis points in the prior quarter and that resulted in $594,000 of additional value in that portfolio. Fees from covered call options totaled $1.6 million from the first quarter of 2013 and that compared to $2.2 million in the prior quarter and $3.1…

Thanks, Dave. In summary, again it was a pretty good quarter. We have good momentum that appears more than sustainable. We remain committed to grow the franchise and all lines of businesses of the franchise without the commensurate increase in expenses that as we wanted to fully take advantage of the operating leverage inherent in our infrastructure right now. And I think we saw a little bit of that going to take place in the first quarter. We expect to continue that going forward. We continue to see a number of acquisition opportunities in all of our lines of business. You can be assured of our – that we will maintain our discipline in this area. It is inevitable that there will be consolidation in the Chicago and Milwaukee markets; it’s just going to take the longer extended period of time, which is a good thing for all of us I think. I think we’re at the right place, at the right time with the perfect vehicle to take advantage of this, but only in a way that will be accretive to shareholder value. We continue to or committed to continue to increase the current tangible equity and our tangible book value per share, which we believe that in this market is really only true measure of value, to increase value to shareholders. That’s always been what we do and we will continue to be guided by that going forward. So with that, we can open it up for questions.

Thank you. (Operator Instructions) Our first question is from Jon Arfstrom of RBC Capital Markets. Your line is open. Jon Arfstrom – RBC Capital Markets: Thanks, good morning.

Hi Jon. Jon Arfstrom – RBC Capital Markets: Hey a question for you just on lending, you touched on the competitive environment a little bit, when I see the loan growth number it’s little slower than you guys have had historically, I’m just curious if there is anything more to read into that other than the competitive environment and maybe if you could just comment on the pipeline and the outlook as well that would help?

Sure. The pipeline has been relatively consistent, the pull through rate had been consistent pretty much the last year and if you got a first quarter phenomena where things actually have slowed down a bit because people year end businesses, you got to wait and see the year end numbers in the like, so there is a little bit of seasonality that you see in the commercial side, we’re seeing opportunities on the commercial real estate side that there is still priced pretty well. The competitive environment as you know it is always been competitive and believe it or not Milwaukee is more competitive than that. We do see continued loosening of credit standards and pricing especially on the middle market commercial side, however as we stated before, we have our circuit breakers, so we have our profitability analysis and we have our loan policy and we don’t go outside of it. I don’t think that we usually been doing about $250 million a quarter, we did about call it $170 million around it on those two lines of businesses. I don’t see the first quarter is any sort of trend, I think there is still a lot of business out there that we can pick up, that was within our parameters, it’s not – I think if the shadow banking system was as strong as it was back in ‘06, ‘07 it would be a heck of a lot worse. It’s not that bad. There is still opportunities out there, but you’re starting to see better than FED funds taking come into place, and you’re starting to see people do irrational things again to run natural things. But to big market, there is less players in it and that allows us to be very selective and we believe we should be able to continue to grow the portfolio very nicely throughout the remainder of the year. Is that answered your question? Jon Arfstrom – RBC Capital Markets: Yeah that answered my question. And then just one follow-up on the margin, either for you or to Dave, but I know you guys aren’t giving margin guidance. But is there any big levers or pressures that you see on your margin going forward?

Dave?

No, I think the way we look at is, just as where does the commercial real estate long time competition take those yields, so as the new business comes on, that’s the thing that we need to watch and monitor and we’re being selective and we know, I think we held our own here, but if the market just gets too loopy that would be the pressure. But we continue to be able to bring down the deposit costs a little bit and that’s only so far you can go there, premium finance yields have held up pretty good, commercial real estate yields are still fairly decent. It’s just on the commercial side, where does competition go on and it’s not to the point where you won’t make growth. So I mean we can still be selective and still do it. But that’s the only thing that really works me out there.

Yeah, the other think Jon is the re-pricing both loans that are in the books, a good customers are coming up a higher rates just because of where the market is right now. And they still qualify, but then they set our parameters, but do not as profitable they once where because those are the compression of the overall market. So it’s that the new business. That’s really new business is coming out where we like it. But we are having to reprice, but we’re profitable bounds as they can do to maintain the business. So that’s what drives really the earning asset side and within the year it will be over and that reprice to everybody. So hopefully that will go through. But like we said our goal this year is to grow with not a commensurate increase in expenses. So we keep the expense base down, grow net interest income, realizing that the margin make them down little position ourselves for higher rates, which we all – everyday that goes by, we get close to higher rates, continue to position our self for higher rates down the road, that’s what the best we can do. Jon Arfstrom – RBC Capital Markets: Okay, all right. Thanks.

Thanks

Thank you. Our next question is from Brad Milsaps with Sandler O’Neill. Your line is open. Brad Milsaps – Sandler O’Neill & Partners, L.P: Hi, good morning guys.

Hi, Brad.

Hello, Brad. Brad Milsaps – Sandler O’Neill & Partners, L.P: Dave just wanted to follow-up on the mortgage banking line item. It looks like, I know there were couples of moving parts you had the MSR recovery and there was the put back reserve recovery. But even if I back those out, it looks like your that the gain amounts on margins stay pretty flat linked quarter and we’re seeing from other banks that coming quite a bit. Just kind of curious what your thoughts are there in terms of kind of what you see not only volumes, but also sort of the margin you’re seeing when you sell the loans in the secondary market?

As Ed mentioned, we think second quarter based upon the pipelines we have now, there’s going to another strong quarter for us. Obviously, they have to recall us, but pipelines are in good shape and we’ve sit on the quarter and started being on the sale, margins growth, anything started out in the first quarter little lower and improved throughout the quarter where we were maybe down actually 10 to 20 basis points range in the margin on those that wasn’t dramatic. Double-digit mix of business whether you’re doing more jumbos now or are the like and government programs and just what your mixes moves around a little bit, but it held up pretty good. And we tried to manage that, monitor our volumes as they come in and at the full actually gets too large. And as I talked about this in the past, we’ll increase our pricing a little bit, just to control the flow, so we don’t overload the system. But margins came in a little bit, not dramatically and the volume is strong for the second quarter.

All right thank you. If you look at the numbers, [they were in] lot about 13 basis points all in all, which basically was offset by the recourse than loan loss provision reduction. So I think you’re, so we were pretty flat on the overall business as you say. But they did come in a little bit and they probably will stay about this level and it’s just a function of the overall market, I mean when the overall market heats up and this is probably will in the second quarter for everybody that will drive up margins across the board again. But when it falls it’s a double whammy, you lose the volume plus you do lose margin. So but fortunately we look pretty strong for the second quarter and we see an opportunities out there also. We think that that market is going to consolidate when this thing, it slows down a week. We’re seeing opportunities there. We unfound any that we’re hot to try down right now but that mortgage market will continue to consolidate in an other area, where we can roll up for basic, for not a lot of money and bring business in without the commensurate increase of expenses. So mortgage is going to be a long-term play for us, something we’re committed to and something I think we’re well positioned to take advantage of when the market consolidates. Brad Milsaps – Sandler O’Neill & Partners, L.P: Great. I appreciate the color. And Dave I missed the first time through what was the refi versus purchase money percentages during the first quarter?

34% was the first quarter total. Market actually was a little bit better than that. But on average the 34% in the first quarter. Brad Milsaps – Sandler O’Neill & Partners, L.P: Okay. Great, thank you guys.

Was purchased. Brad Milsaps – Sandler O’Neill & Partners, L.P: Thank you.

Thank you. Our next question is from Chris McGratty of KBW. Your line is open. Christopher McGratty – Keefe, Bruyette & Woods, Inc.: Good morning guys. Dave again I feel that 10 and 20 basis point compression that you talked about what is the, this was the absolute level that is half of this is like 2% gain on sales, at 175 or?

You know we haven’t disclosed that Chris. I don’t have the specific numbers in front of me. But we’ll try to put that in a queue, but we haven’t put that out in any document here. Christopher McGratty – Keefe, Bruyette & Woods, Inc.: Okay. Ed, one for you on the efficiency, where do you see this playing out over the next year and half. You’ve talked about the revenue growth got a lot of expense growth. Where kind of efficiency ratio go?

Well, you know what, I didn’t talk about the efficiency ratio because your margin, when your margin is under pressure, make sure you (inaudible) it, we look at the net overhead ratio, we manage half of that. We figure at about 147 right now and as I said, I think 150 was always remarkable well run bank, but now we have lower margins and you have to do better than that. We get to have to get that number into the 130 some place. So when you think of the efficiency ratio it’s where your margins going to go, where your expenses are going to go, where your expenses are going to go when you are in acquisitive mode things aren’t as easy to straight line. You’ll pickup an acquisition that’s going to take you three or four months to bring the expenses out of it. So – but that’s, our goal is to get down under the 130s in that overhead ratio and try to hold the margin as good as we can. Christopher McGratty – Keefe, Bruyette & Woods, Inc.: Okay. One last one Dave, on the acquisition, it looks like in the release you’re acquiring $370 million of assets. What’s the breakdown of those assets between loan and securities?

You broke up there a little bit, the breakdown of what? Christopher McGratty – Keefe, Bruyette & Woods, Inc.: The $370 million of loans that are going to come in with the deal of the First Lansing deal?

We got, we probably have to go back and look, they’re probably about 60% loaned up. So we’ll have some liquidity there that we will have to deal with and we probably can get rid of some of that, we don’t need all of the investments. But I don’t have the specific breakdown in front of me between those. Therefore OREO, they do have residential and I do have commercial, I do have commercial real estate, I say it’s a nice plan, but I don’t have the specifics in front of me right now, Chris. But I could follow-up with the public informations I’m going to tell you. Christopher McGratty – Keefe, Bruyette & Woods, Inc.: All right, thanks.

That was about over $450 million bank till they – when they hit the prices, they shrunk themselves down to the level they are at right now. It’s a great market for us and really shores up the south side, we’re excited about getting in there, that gives us entrees into Northwest Indiana without a lot of overhead, there’s a lot of business in Northwest Indiana, it’s a please beautiful Illinois. But it’s always been a nice business space there that we can service out of that those locations. So we are actually excited about the strategic aspects of that acquisition and the people we’re picking up good folks and no one to us for a long time, so we think that’s going to be a good deal for us.

Thank you. Our next question is from Emlen Harmon of Jefferies. Your line is open. Emlen Harmon – Jefferies & Co.: Hey, good morning guys.

Hi, Emlen.

Good morning. Emlen Harmon – Jefferies & Co.: Maybe start-off just on the loan growth side of things. It’s typically sees the strength in the P&C premium financing business in the first half of the year, didn’t start to see that come through in the first quarter. Is there anything kind of unusual going on there? Or do we expect that to pick up as we end the second quarter here?

No, I don’t think there is anything unusual going on, but that that business is actually pretty good for us. The market has been hardening and continues to harden on the premium finance side. And so the yields have stayed pretty stable there for the last year. So we’re not seeing the same sort of compression in that business as we do in some other areas and we’re fine with that result. So we think it’s good. There is nothing there that concerns us. Emlen Harmon – Jefferies & Co.: Okay, so no shifts in market share or anything going on there that I guess would hamper the growth?

No. Emlen Harmon – Jefferies & Co.: Okay. And then going to just stepping back and talking about the deal environment. Just in terms of the scrutiny that that deals are going to in the regulatory side. Are you anticipating that to be or have you found that to be kind of a larger impediment to doing deals? Obviously, it sounds like a first lancing deal is coming through pretty quickly, so it’s a not a problem there, but just from a big picture prospective.

I think the bigger, the larger the deal you do, the more you’re going to get scrutinized. We’re doing smaller deals where we have great relationships with our regulators. It doesn’t mean they’re not beat the tar out of us as everybody else. But our structure allows us to do these things very efficiently and we have not seen any issues as it relates to timing or excess regulatory burden related to any of the deals we’ve done today. Emlen Harmon – Jefferies & Co.: Okay, thanks. Thanks for taking the questions.

Thank you. Our next question is from Stephen Scinicariello of UBS. Your line is open. Stephen Scinicariello – UBS Securities: Good morning everyone.

Stephen? Stephen Scinicariello – UBS Securities: Just a quick one for you, just on the expense side of things, great to see the positive operating leverage starting to kick in. Just kind of curious when, I kind of weigh all the puts and takes in that expense line. Is that $120 million kind of a good core level and then kind of builds from or were there maybe some other things just to be aware of as we look forward?

No, I think it’s actually a pretty good number, Steve. And the OREO is the line item, that’s included in the $120 million there and obviously we had a net gain on that line item, which is not normal for us. But we also see valuation stabilizing there and we had lower write-downs on existing properties on the portfolios coming down. So you sort of have to look at the OREO income expense line there and make your own decisions. But we believe that could be a fairly long number going forward, but I’m not so certainly there will be a gain every quarter, so. Stephen Scinicariello – UBS Securities: That makes sense.

Other than that our long collection expenses in our covered loan expenses have gradually come down and some of these categories increased a little bit, but we also have the Hyde Park acquisition come on and that added to some of the categories. So, the only other caveat would be mortgage banking revenues, so we think that would be relatively stable than the salary line and commissions will be relatively stable, but if that jumps up or falls down a little bit as you know commissions and other benefits are about 50% of the revenue line. So there could be some movement with that. But other than that it should be a fairly clean quarter. Stephen Scinicariello – UBS Securities: Got it, makes sense. And then just in terms of kind of the OREO, when I look at the trends and the gains the valuation adjustments, it certainly looks like much more positive trend there should I read anything into it or is that just going to be lumpy as we go focus, just continued improvement there and definitely good to see lot of the things move in the right direction, but this kind of looking to get some more color on that?

Continued improvement on a lumpy basis, how is that? Stephen Scinicariello – UBS Securities: That sums it up perfectly.

Yeah, it’s like the weather today, those airplanes coming down, we’re going to land this plane, but it’s going to – if the numbers get lower too, you’re going to have $1.2 million; $2 million swing one way or the other, which will materially affect a lower base number you’re working on. But we think that the market is stabilize, we are seeing the real estate stabilized. I think we’ve identified most of our issues that doesn’t mean it won’t pop up, we don’t look at migration there much because with the way we look at it you can have loan less product that we are going to put on non-accrual and work out. So we think that credit should continually get better that is our goal. Stephen Scinicariello – UBS Securities: Perfect. Thank you so much guys.

Thank you. Our next question is from David Long of Raymond James. Your line is open. David J. Long – Raymond James & Associates Inc.: Thanks, good morning guys.

Good morning

Good morning David J. Long – Raymond James & Associates Inc.: Looking at the M&A environment you guys have talked in the past about the number of incoming calls from perspective sellers increasing over the last several months. Can you give us an update on that? Are you still receiving calls from perspective sellers, and how does your expectations changed?

As time goes by and it’s taken longer for these guys to kind of work out of their issues, because their core earnings not growing like that – like because they can’t lend the money. They have too much real estate already or too much something and it has taken them longer to earn out of their situation. But we’re starting to get rebound calls. Guys, we talked to more rebounds calls than new inbounds. Guys we talked to a year ago or 18 months ago, who when we went in and melted them down, they really had some work to do before they worked anything. But they’re starting to make progress and get out of it, not although we’ve made it, some are actually looking pretty good and we just have to see how it goes. But I think the expectations aren’t any different than they were year ago. I think a lot of them would like to get, they’d like to get close to book value if they could as what we do is we go in and we melt them down. We come with their revised equity number and based on the value of the franchise you pay a multiple of that revised equity number. That may or may not be above book value as stated. But book value is kind of what they’re looking at if they can get away with that. They would like to get out of this goofy business and move on, because they all tell you, it’s just really tired. And they don’t see a lot of; they just don’t see the upside in the future for banks, especially the ones under $1 billion. They just don’t see the upside for them on the earning asset side, the excess capital side, the excess regulatory side and they have just been through this, it’s been like they have been in (inaudible) debt charge for the last three years there. They’re all shell shocked and I think they’d like to put their money in other places. And that’s our benefit because with our size, we can take advantage of the situation and this roll up at very, very effective prices and everybody wants. David J. Long – Raymond James & Associates Inc.: Great. And then as a follow-up as far as from the buyer side, I think you guys have gotten some pretty good prices, and some of the deals you’ve done, because there hasn’t been a lot of competition. Are you seeing as other banks improved their health more competition for some of these potential deals?

We expect to see that. We would expect to see that. But I think what gives us the lag up and what really gave us a lag up before the crisis when we are doing some deals was that our culture. If you think the banks under $1 billion are really community banks. And they are culture fits to much better than say about commoditize and who is going to come in and just wipe about and just make them teller stations with one lender in there. We want to move in and we do it strategically. We may do that in the situation of its just an add-on to an existing bank. But I think it move us into a new geography. We want to build that geography out and so our culture really makes us up better fit for them. And lot of these owners are might be one or two or very handful of owners in these banks and they would like to take advantage. They wanted to take care of their people as best as they can. And we have the ability to even when we have an upturn over here that we’re going to absorb people and that after the recording of costs, but rather to attrition being able to take care of their people also. So culturally I think we stand out, I think it will get more competitive. But what is, what it is and we’re not going to do anything still, but won’t to be anything we haven’t seen before.

The only thing that I would add on there Dave, we have more that we’re talking to that don’t have investment bankers associated with them. As just direct cost, probably, so we don’t know who else are talking to the other end, but a fair number of them this direct bankers-to-bankers talking and not coming through investment bankers. So that would sort of lead us to believe that people are trying to pick who they want to partner up with. David J. Long – Raymond James & Associates Inc.: Great, good point. Got it, thanks for the color guys, I appreciate it.

Thank you. Our next question is from Herman Ching of Wells Fargo Securities. Your line is open. Herman Ching – Wells Fargo Securities: Thanks. Ed, you mentioned in your prepared remarks that mortgage warehouse was more competitive as well. Talk about your outlook there as we get into a seasonally stronger Q2?

What we hope, we picked up some additional clients, so we would hope to rebuild some of the loss. But we haven’t lost clients, what we did many of these warehouse, these mortgage operators have more than one line and when their business drops off, where is it first drops off, because we’re more expensive than this competition that’s come in. And we’re not going to drop our pricing, we keep our 100% risk ratings on these things and we have collateral, we have returns, we have to make. So we think we can pick up some additional markets here just by new business. We’re very selective in who we do and who we do business with. But we’re not going to cut our pricing to pick up new business in that area. We think it’s priced just fine for a lot of work that we have to do and we’ll just see where that goes. But we would hope we could build off the number that we, the ballpoint that we have in the first quarter. Herman Ching – Wells Fargo Securities: Got it. And can you talk about the decline in noninterest bearing deposits in the quarter with commercial deposit growth in recent quarters. Are you seeing some more seasonality in those balances in Q1, and further the TAG expiration effect deposit balances at all?

Yeah, it’s good. I don’t believe, I’ve noted already about TAG expiration effecting deposit balances in the quarter that’s not been an issue. I think just in a year-end there were just a lot of window addressing going on in our corporate clients we actually continue to pick up new business, and new deposit accounts, our overall deposit numbers are up it just at the levels of the DD&A were down, I think you’ve seen that in some of our other competitors too, whether DD&A drop-down a bit, it wasn’t because deposits or customers left actually. We’ve picked up a number of very good customers in the first quarter. We think of seasonality, we’re looking at it a little bit deeper and we’ll know better, we’ll see what happens in the second quarter. Herman Ching – Wells Fargo Securities: Got it. Thanks for taking my questions.

Thank you. Our next question is from Joe Stieven of Stieven Capital. Your line is open. Joe Stieven – Stieven Capital Advisors: Good morning Ed.

Hi, Joe. Joe Stieven – Stieven Capital Advisors: Almost all of my specific questions were answered, but the only thing you really didn’t talk about little bit more generally just sort of the help, the Chicago real estate markets, your markets sort of later into the cycles, sort of it seems a little later coming out of the cycle. So just can you give some of your general overall thoughts? Thanks Ed, good quarter.

Thank you, Joe. The Chicago market is stabilizing and based on property type and based upon actual location, Chicago is a huge market, rental properties in the city going through the roof right now, you are looking at values if we are, you are going back to 2006 values and 2006 cap rates, and you’ve seen some kind of goofy pricing of people going in and trying to finance those businesses. So and then you can go out, if you go back to the internal triangle as I call it, the land between Plainfield and Hinsdale, there is still a lot of land out there that you can’t give away. So it all depends on where you are and what you’ve got, and housing in the City of Chicago, you put something on the market, you’ve got to price reasonably , you have two bids in a day. It’s very, very regionalized right now if you go on to what I care some of the higher network areas; things are moving a lot faster; in the slower areas, they’re moving a lot slower. So it’s recovering, spotty sort of way depended upon type of property, depended on geography, but it stabilize debt as recovery. Joe Stieven – Stieven Capital Advisors: Okay. Thank you, Ed.

Peyton Green – Sterne Agee: Good morning. A question for you, Ed and Dave on the C&I decline. How much of that do you think was attributable to customers moving their non-interest rate balances to pay down C&I balances on a linked-quarter basis?

As I said, we’re looking into that, Peyton. Peyton Green – Sterne Agee: Okay.

We think it was seasonal. We think people did, but it is bulk up at the end of the year, and I think tax payments and all sorts of things. Our clients did very well last year. Tax payments and all sorts of things brought those numbers down, but it didn’t pop-up a little bit. But we’re looking into it and we’ll let you know when we figure out what’s going on. But we think it was just a seasonal issue. They said our clients are doing very well and we continue to add more and more business there. We’ll let you know. Peyton Green – Sterne Agee: Okay. And then in terms of thinking about the loan yield pressure going forward, I mean, it’s been fairly consistent over the last three quarters. What kind of rate are you getting kind of on the blended bucket of new loan yields? And what kind of renewal spread pressure you are seeing, compared to loans that rolled a year ago that are going to roll now?

Mr. Stoehr, you did that report.

Yeah. The new stuff, Dave, actually the new stuff really, generally, I think it’s coming on average in the low 4s if you blended altogether, where you’re seeing some of the pressures, some of the older stuff was in the upper 5s and close to 6% that’s coming up for renewal and rolling in, and so when you go, the older fixed rate come and do and you have that kind of reset, it’s causing some pressure. So it’s really a math. If you got some variable rate loans that are out there, there is really not much pressure on that. And if you get some short one-year deals maybe they’re going from the high 4s, four and three quarters down to four in a quarter on average, but the real pressure is coming from the older fixed rate deals that are up for renewal. Peyton Green – Sterne Agee: Okay. And any sense of how much volume margin have that rolls over the next nine months kind of blended yield it is?

I guess only thing I would tell you there is look at our K where we showed the maturity schedules. Peyton Green – Sterne Agee: Okay. All right. Great. Thank you very much.

Thank you. Our final question is from John Marren of Macquarie Capital. Your line is open. John Marren – Macquarie Capital: Thanks for taking the question. I guess firstly 2006 cap rates and values on certain assets in Chicago, maybe time to shift back to the rope a dope on net asset class anyway?

Well, that’s automatic. I mean that will not fit our underwriting parameters, nor our profitability. We got 10 year deals going out in the high 3s, not swapped, no thank you, I’ll pass on that. John Marren – Macquarie Capital: Gotcha. On a more serious note, I did want to just revisit the insurance premium finance business, and I think it was touched on earlier in the Q&A. But could you remind us with the harder insurance market and do you see evidence of that happening and is it sustainable, and what could that mean for those balances sort of organic growth aside, just if things kind of firm up where can that go?

Well, you know, It has hit its low from the perspective, normal is $27,000 is the average ticket size. In a hard market, it can get up to $44,000 that was the last hard market that was the average ticket size. In this soft market, it was down to $19,500. It is working its way back up to around $22,000, $23,000 and we expect that to continue at least up to $27,000. So, if that’s just additional loan volume with really no excess expenses related to that. There are no excess processing and other loan just at higher ticket value. So, we expect it by the end of the year that that will move back to $27,000 plus or minus, which obviously from $20,000 we will add whatever percentage that is to our outstanding. And we have seen prices stabilized to move up a bit and move up a little bit. Hopefully that will continue to be the trend, so that could be a nice driver for us if it continues to occur and over the last two years, we’ve been able to continue to pick up market share. We’ve done a double-digit overall ticket processing, the volume of loans, if we do by number of transactions, our number of transactions have gone up by double-digits over the last three or four years and we would hopefully that would continue again this year. So, it actually have both volume and ticket size increases in that business. John Marren – Macquarie Capital: Gotcha.

Over the last 15 months or so, if you look at what the premiums were in the year-ago month versus for the current month, we’ve seen consistent, not dramatic but small increases on premium. So the market has gradually been hardening for the last 15 months. I have to remember that these loans don’t reprice every month. So they come up for renewal every year. So a deal that was out there last March is going to reprice this year in March when it comes again. So they’re fixed for the life of the loan and then when they come up for renewal, we will do them again. So you’ll start to see some of that impact, when the renewals come up, the market that’s been hardening over the last 15 or so months. John Marren – Macquarie Capital: Gotcha, that is helpful. And then just I guess for Dave, I jumped on a little late, so I apologize if I missed the commentary around this. But when we think about the NIM, kind of puts and takes opportunities on the funding side for you guys, particularly the CD book, if you can just refresh on what those maybe over the next couple of quarters?

So probably on average over the next year in the 70s some place and you’re generally renewing the CDs less than 50 basis points now on average. Some people could go long and certainly there maybe some that are renewed at higher than that. But generally you are less than 50 basis points. So you’re going to get some there, but it’s not as dramatic as it was a year ago. John Marren – Macquarie Capital: Gotcha, so net-net called 40 basis points or so on whatever it’s kind of rolling?

Yeah. Overall that CD portfolio is 92 basis points. So over time I think you can, assuming rates don’t do anything else there is probably 40 basis points there. John Marren – Macquarie Capital: Okay. Thanks very much for taking the question guys.

Thank you. Great, thank you everybody for participating, and we look forward to talking to you next quarter. If you have any other questions please feel free to call me or Dave. And everybody have a great day. Thank you.

Ladies and gentlemen, thank you for participating in today’s conference. This concludes today’s program. You may all disconnect. Everyone have a great day.