Edward Wehmer - President and CEO Dave Stoehr - EVP and CFO Dave Dykstra - Senior EVP and COO

John Arfstrom - RBC Capital Markets Dennis Klaeser - Raymond James John Rowan - Sidoti & Company Peyton Green - Sterne Agee & Leach Bryce Rowe - Robert W. Baird Stephen Geyen - Stifel Nicolaus Rick Graeme [ph] - World Wide Associates [ph] Hemant Hirani - Endeavour Capital

Welcome to Wintrust Financial Corporation's 2009 third quarter earnings conference call. Following a review of the results by Edward Wehmer, Chief Executive Officer and President and Dave 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 first quarter's earnings press release and the Company’s Form 10-K on file with SEC. I’ll now turn the conference over to Mr. Edward Wehmer.

Thank you, good afternoon. With me as stated there is always Dave Dykstra and Dave Stoehr, Chief Financial Officer. As is customary, I'm going to talk about the quarter in general including credit quality. Dave Dykstra will get into some specific numbers and then I will provide a summary statement and then we'll have time for questions. As this was a very active quarter for Wintrust, let's get on with it. First to the balance sheet, deposit growth was very strong this quarter, up $656 million pretty much all core deposits. That means for the year-to-date we're up about $1.47 billion in core deposits; good growth, good core franchise growth for the organization. I will point out that in looking forward to where you might see us at the end of the year, last December, we put on our books about $300 million worth of what we'll call aggregator deposits, we were, at that point in time, as the rest of the world, we were looking into a dark tunnel, we said liquidity is very important. So we had the capital, so we put those deposits on at that point in time to just as an insurance policy for liquidity. Those will be running off, they bear interest at about 1.25%. Those will be running off $200 million in December, and another $100 million in January, plus or minus. And right now those are kind of a negative spread to us and so there'll be a little bit of pick up there. So, if you look to year-end, we expect the fourth quarter to show reasonable growth. So I would imagine on a deposit side, it would be relatively flat when you look at it in the fourth quarter, but who knows the way the markets are moving right now. Our deposit growth ended up with $1.2 billion in overnight liquidity at the end of the quarter. We kept a lot of liquidity on hand during the third quarter while we transacted the AIG transaction. And then the securitization which brought liquidity back significant opportunities for the deployment of that liquidity obviously are available to us, that’s only earning about 25 basis points for us right now. It's a concerted effort on our part to put those deposits to work and there should be reasonable upside for that. On the lending side, it gets a little confusing because if you add back the $600 million we sold in the securitization, gross loans ended up at $8.875 billion, up from $8.116 billion, a $759 million increase. The majority of that relates to the AIG Life Insurance portfolio purchase. Core loans were up just a little bit, relatively flat. Third quarter is usually slow for us, our pipelines remain pretty good and we see significant opportunities with the upheaval in the market and with the competitive situation, we believe that there are good earning assets out there for us to bring in, very good customer relationships for us to bring in, but as always we'll be discerning on what we do, how we do it and pricing that we'll accommodate those relationships at. From the earnings standpoint, we made $32 million this quarter, that's actually a record for us. I believe and on a quarterly basis a $1.11 a share. I'll save you all the percentages, but remember last quarter this year, we had a small loss and so earnings were up substantially this quarter. Core earnings were also up substantially. If you look at what is now considered the bank EBITDA, which is pretax earnings less credit costs as being a provision and the OREO losses and then deduct out the bargain purchase gain that we recorded related to the AIG transaction, we have taken core earnings from $68 million annualized in the fourth quarter of last year to $100 million in the first quarter to about $136 million in the second quarter to $172 million. So it's up $104 million since the fourth quarter last year in terms of just that core pre-tax, pre-provision, pre-bargain purchase gain. So as we stated in the last conference call and really throughout the course of the year, our objective this year was to concentrate on increasing our core earnings and to rid the balance sheet of problem assets. The margin on the core earnings side went from 2.91 in June up to 3.25. Good solid increases there, a 34 basis point increase. Cost of funds was 23 basis points of that, with remaining being on the asset side of the equation. We believe that there are significant opportunities here in deposit repricing. You noticed in the press release, we actually gave you our maturities of time deposits over the next period of time and the rates on that. I will point out that we're putting, I think the last month, Dave, correct me if I'm wrong, but new deposits or time deposits are coming on the 1.40 to 1.50 range somewhere in there. So there are significant opportunities as those re-price and we are focused on that There are also significant opportunities going forward on both assets, continued asset repricing in our existing portfolio, plus as I mentioned earlier, putting the liquidity we have to work. Income was enhanced by the sale of premium finance loans in the securitization and the bargain purchase gain. Dave will go over all of those with you in better detail than I probably could. Wealth management, mortgage banking and trading income are all continue to be very strong. Mortgage banking, the applications with rates having dropped the applications have picked up. We expect a fairly strong fourth quarter in that area, if poultry rates remain consistent with what we've seen in the past. Other expenses were consistent with plan, really other than credit expenses, Dave will go through those in detail. In the credit expenses were $10.2 million of OREO revaluations and costs related to clearing some of the OREO and again Dave will go into other expenses in detail. On the credit side, non-performing assets were down $7 million. $24 million, if you count, there was a $17 million relationship, where we were negotiating renewals and those were renewed in the first part of the month. So really way I look at it is we were down $24 million quarter-over-quarter. In terms of non-performing assets, OREO was down, non-performing loans and OREO was down about a $1 million. As we've indicated our intention to appreciatively liquidate bad assets, as part of that, we recorded a provision for loan losses this quarter of $90 million to accommodate $80 million of charge-offs we took during the quarter. As stated in the press release $12 million of the charge-offs related to the new items coming into the non-performing area, about $29 million related to loans where we had specific reserves set up, and the remainder came from really a general revaluation we see occurring in the market. I think this is where we have to spend a little bit of time. As we move to liquidate, we also are looking at, we continue to get on a loan-by-loan basis especially on the problem assets, and we get updates as to collateral values and the like. What we saw during this quarter was a real devaluation of some of these assets. I'll give you some examples. It was somewhat shocking. We were carrying our farmland, if you will, our undeveloped farmland. We had appraisals on hand that were four months to six months old that were in the $23,000 to $24,000 an acre range. We, noted when we went to liquidate these things are more in the $15,000 range to $16,000 range. We noticed that there were a number of deals that went off at those levels. Appraisers always look backwards, and they are looking at historical type of trades. During the last four months, I think what's happened is you're seeing more and more liquidations taking place in the market, which are driving these prices down, which in turn are changing the valuations which assets are coming up at. We had another loan, just as an example, where we had an appraisal that was four months old, and a $6.8 million piece of property that came in, in first week in October, about $2 million lower than that. What we did was we took those evaluations and we said, we feel very comfortable with evaluations that we had going forward. As I said in the past, we go loan-by-loan. If it’s a problem asset we look at that problem asset. We value collateral, we value collateral by getting appraisals, discounting those appraisals, verifying them with in some cases, in many cases, depending on the property with other third-party evaluations be them either liquidation costs supplied by local realtors or actually using real estate firms to give us third-party evaluations. We can present documentation and have going forward as to how these, every one of these has been priced. But as we got into the liquidation order, we've seen this phenomena taking place just as I laid out earlier. We applied those statistics, the entire portfolio of non-performing assets and in doing so resulted in that valuation adjustment that we took. The end result of that is that we've got a reserve that is upright now with only $14 million of it plus or minus that’s actually specifically allocated. The rest is generally allocated to the portfolio going forward and we basically have a non-performing portfolio that is priced to sell and we are working very hard to push those assets out of here as has been our stated goal. To-date, we have pushed out this month so far $8.6 million with another $6 million scheduled to close before the end of the month. So it's about $14 million in the first month, do a transfer of another $6 million to non-performing to OREO in anticipation of those selling. Once we can get control of the property, we can push those out. So, we're making good progress in liquidating our troubled assets and we'll continue to push to do so. The reserve is on $95 million or 1.19% of loans outstanding. If you add the discount related to purchase portfolios, our total coverage on the loan portfolio is about 1.68%. Going back to the revaluation, I think that you can see kind of the results of this and some of the results of other banks, not just in our area, but around the country. As banks move to liquidation mode, they're seeing that there may be more and more bottom feeder, their buyers out there which has raised the bottom feeder price to some extent, but there's still more transactions taking place which is resulting in this revaluation that we're talking about here. But again, at the end of the day, we’ve got a portfolio, reserve that's really looking forward for the most part and we have a portfolio that is priced to sell as it relates to non-performing assets. Obviously, as new non-performing assets come out of the books, we certainly know that there will be more coming. Our goal is to stay ahead of the game on all of this and to continue to make good progress and knocking those numbers down. But it can be anticipated that the charges related to those if they do go bad will probably percentage wise higher than they would have been based on as a percentage of the loan outstanding and accordingly, we did raise our factors and our reserve calculations to accommodate all of that. Dave, let's turn over to you to talk about specific numbers.

Thank you, Ed. I will quickly go over non-interest income and non-interest expense variations. Ed talked about the margin and the provision levels. On the non-interest income side, wealth management revenue increased by $618,000 from the prior quarter that follows $957,000 increase from the second quarter over the first quarter. This quarter as well as the second quarter of '09 showed growth in both the brokerage revenue and the revenue generated from our trust and asset management business. So across the board, we’ve obviously seen equity values have risen during the course of the year and that is assisted with the revenue from our managed money and the trading volumes have gone up also. So, a couple consecutive quarters of nice growth in our wealth management revenue. On the mortgage banking side, mortgage banking revenue totaled $13.2 million in the third quarter following revenue amounts of $22.6 million and $16.2 million in the second and the first quarters respectively. The revenue generated in this business is obviously tied to the interest rate and the activity in the housing market. Although, the third quarter revenues were lower than the first two quarters of the year. As Ed mentioned, we do have a good flow of applications in the pipeline right now and we would anticipate that the revenue in the fourth quarter would be higher than what we had in the third quarter. Looking at the trading income amount for the quarter, we totaled $6.2 million in the third quarter compared to $8.3 million in the second quarter of this year. This gain is again primarily related to the market value of certain collateralized mortgage applications that we purchased in the first quarter of 2009 when the prices on those securities were very cheap and seem to be very dislocated from the true value. The gain on the sales of commercial premium finance loans totaled $3.6 million in the third quarter primarily as a result of the sale of $600 million of these loans into a securitization transaction that we completed on September 11, 2009. As this is revolving securitization facility, the Company will continue to sell loans under the facility as existing loans pay down and should recognize an additional gain related to those sales during the fourth quarter. Now other than that, the gain on the bargain purchase, on that I'll talk about in a moment, there were no other really meaningful changes that I'm going to address related to non-interest income. Now onto to the bargain purchase gain. We recognized a $113 million. This was related to purchase of the life insurance premium finance loans in the third quarter, which was required to be accounted for as a business combination under Statement of Financial Accounting Standards No. 141, which is now part of the Accounting Standard Codification No. 805 for those accounts that they would like to know what's applied to this transaction. Under these accounting principles, the gain is recorded equal to the amount by which the fair value of the net assets acquired exceeds the consideration paid with such gain being recognized as a bargain purchase gain in our income statement. Additionally, these new accounting standards eliminated recognition at the acquisition date of an allowance for loan losses and we applied a credit discount to those loans as part of this transaction. So those two concepts in mind, the bargain purchase and the credit discount, I'm going to address the recognition of the appropriate discounts. In summary, the Company purchased, and if anyone has a press release and wants to follow along, we’ve added a nice table. I think that summarizes this transaction on page 23 of the earnings release that we provided. In summary, we purchased $949 million of loans for net purchase price of $685 million and accordingly, we had a total discount of $264 million related to the loans that we have acquired. That discount can be disaggregated into three basic components. One is the bargain purchase gain, two is accretable discounts, which are yield related discounts and the third is non-accretable credit discounts, as I said before, we have to apply credit discounts versus establishing allowance for loan loss. Of the $264 million total discount $150.6 million is classified as a bargain purchase gain, $74.8 million is classified as accretable yield related discounts and $38.5 million is classified as non-accretable credit discounts. And again, we have this all scheduled out in the press release. Of the $150.6 million of bargain purchase discount, approximately $99.9 million was recognized effective as of the purchase date in the third quarter. Another $11.3 million was recognized as loans have been in an escrow account waiting for requisite conditions to be met to release those loans from escrow. And since those loan conditions were met, we were able to recognize an additional portion of the gain related to those loans. So $11.3 million in essence is related to loans being released from escrow because all the requisite conditions have been met. That leaves approximately $39.4 million of remaining bargain purchase gains that's available to be recognized as conditions are met to release the remaining loans from escrow and we are diligently working on getting those loans removed and recognizing that additional income. Now onto the accretable yield discounts, we had $74.8 million of accretable yield discounts that will be recognized over the estimated lives of the loans on a level yield method. As you recall we previously disclosed that we expect the lives of these loans to be five years to seven years. This discount is accreted in the interest income. In addition to the extent that a loan pays off early, the remaining discount would be taken into interest income during the quarter in which it pays off. So, if we had loan payoffs this quarter and we have discounts associated with the loans, entire amount of that discount would come into interest income and we'll do that going forward. During the third quarter, the Company recognized $3.5 million of discount accretion related to the level yield recognition and we recognized $3.9 million of discount accretion due to pay-offs of loans. Again, these amounts are included on our interest income. Moving onto the credit discount, we had $38.5 million of credit discount and we can view this from a few different scenarios that I'll walk through as to how we will utilize or recognize that discount. There are really four different scenarios that could apply. One, if we have a credit loss for which the discount was set up, we have the discount available to absorb that loss. If the loss were to be less than the full amount of the discount, then any remaining discount related to that loan after the loss would be recognized into interest income. The second scenario would be if conditions towards the credit discount were established, we have to change for the better. So the underlying credit conditions got better. The company could determine to reclassify a portion of that credit discount to accretable yield discount and accretes the remaining amount in the income on a level yield basis over the remaining life of the loan, while keeping the remaining portion of the credit discount available to absorb losses. So for example, if we had a loan that happened to be unsecured and we had applied a portion of the discount to that unsecured position and the borrower subsequently brought in additional collateral to eliminate that unsecured position, we may determine that we don't need as much credit discount and we could move that into the accretable yield bucket and amortize it over the remaining life of the loan. The third scenario would be if the loan pays off in full and if the loan pays off in full the remaining credit discount would be fully recognized into interest income upon the pay-off. And in the third quarter, we had $2.3 million of such discounts recognized, and again these numbers are in the press release. And the fourth condition would be to the extent that the underlying credit conditions stay the same, the discount would remain unchanged. So those are really the four conditions that could or four scenarios that could happen that would impact the $38.5 million credit discount. In addition, as we disclosed in the earning release, so what I just talked about was the initial purchase that we closed on in July. In October, we purchased an additional $83.4 million of Life Insurance Premium Finance loans for $60.5 million. We purchased $83.4 million for $60.5 million or discounted $22.9 million. Of that discount, $14.5 million represents a bargain purchase gain and will be recognized in the fourth quarter of 2009. $5.7 million represents the accretable yield discount, which will be taken into account, into income over the life of the loan and $2.7 million is attributable to credit discount. Looking forward, in summary, if we put both of the transactions together, the initial purchase in July and the subsequent purchase that we did in October, we have $53.8 million of bargain purchase gains that's available to be recognized in future quarters. Of which, $14.5 million related to the additional purchase and we know it will be recognized in the fourth quarter. And we continue to work on releasing long-term escrow and are having some success in the fourth quarter. So, we will certainly have more than the $14.5 million, but we could have up to $53.8 million. We also have $73.1 million of accretable yield discount that will be recognized on the future on a level yield basis and as loans pay-off and we have $38.9 million of credit discounts related to these two combined portfolios that can be utilized to absorb losses or to accrete into income as previously discussed. Moving onto non-interest expenses, salaries and employee benefits increased by $2.1 million over the second quarter of 2009. The increase in the second quarter can be generally associated with the costs associated to personnel related expenses for staff hired in connection with the Life Insurance Premium Finance portfolio including approximately $450,000 of signing bonuses. The hiring of additional lending staff as we've seen dislocated lenders out in this marketplace. We've picked up some quality lending staff and have been adding those over the last few months and the reestablishment of certain bonus accruals in the third quarter as profits increased accordingly. FDIC insurance declined by $4.8 million in the quarter, due to the fact that the second quarter included the special industry wide assessment whereas the third quarter amounts returned to normal assessment levels. And as Ed mentioned, OREO's expenses were up, they increased by $9.2 million due to additional write-downs of real estate valuations as the market conditions deteriorated during the quarter And as we aggressively attempt to liquidate the portfolio of properties as well as the costs associated with holding those properties. Other than those fluctuations, there are really no meaningful variances from quarter-to-quarter that we had not anticipated. And I'm sorry, I missed that, Ed. I might have crossed over the gain on the sale of the premium finance loans, but we recognize the $3.6 million gain on that in the second quarter. I think I did talk about that.

Okay, to summarize. As I said at the beginning this was a very active quarter for us. We are consistent in our objectives. We said it all year and we really reemphasized it last quarter and that is increased core earnings and clean up the balance sheet. Those are the objectives we've set for ourselves. I said last quarter that it was kind of a tipping point for non-performing assets for us where we had to really expedite our clearing of these items. I think that we've made good progress on those fronts. Net income of $31 million is really a record for us. We did reduce non-performing assets and will continue to do so, hopefully stay a step ahead of whatever going to wash up on shore. Also importantly, we’ve increased core earnings, as I said earlier, to $172 million from $68 million in annualized fourth quarter last year. As I mentioned earlier also, we have additional opportunities to continue to increase those core earnings. Deposit repricing, even if you brought that you can run the numbers yourselves, but if you took 80 basis points, that's $3.6 billion, you can see what opportunities exist there. Liquidity redeployment, we redeploy half of our liquidity over a $1 billion dollars, going from 20 basis points to 5%. You can calculate those numbers also. We still have good core balance sheet growth also, which is adding to the overall franchise value of the organization, but should also add to the profitability of the organization. Important thing, as we said earlier and as part of this plan there is always been to increase our core earnings to give us the ability to support anything that the credit market may throw at us. No one's hanging a mission accomplished banner over this aircraft carrier here. There is still a lot of legs on this current cycle here. But we believe that our strategy to-date has been appropriate. We believe that we are well and we have executed it to-date as well as we could, and we believe that we can continue to execute that in order to be in a position to take advantage of the opportunities that present themselves in these markets, that being dislocated people, dislocated assets and dislocated banks. We have not gotten into the FDIC assisted arena just yet, but with the thought being we want to concentrate on our earnings and clearing our non-performings out, get them in a good shape to do so. I think it is underestimated in the market, but the amount of effort it takes to clear these bad assets, to add more of somebody else's bad assets would dilute our efforts to take care of getting rid of our own. We believe we have that pretty well under control, we've marked our non-performings to a clearing value right now and are making good progress there. We're starting to peak under the covers a little bit on some transactions. So, it might be a quarter ahead of where we actually thought we'd be at this point in time, but we are going to start to do that. We continue to look for dislocated assets just as the AIG portfolio or the mortgage-backed securities we did earlier in the year. Well I think there will continue to be asset dislocations out there we can use to absorb some of our liquidity and we also believe with the market turmoil here in Chicago that’s going on, there's still a number of great competitors out there, but the competitor ranks are thinning, that allows us to take advantage and it could build our core franchise. So, all-in-all, we are executing our plan where we thought. We think we're in terrific position going forward. We're very proud of the fact that we've been able to increase our core earnings to $172 million on an annualized basis, with the opportunity to grow those, and we think we're very well positioned to go forward. So with that, I think we can turn it over and I'm sure there'll be some questions.

(Operator instructions). We'll go first this afternoon to John Arfstrom with RBC Capital Markets. John Arfstrom - RBC Capital Markets: Thanks. Good afternoon, guys.

Hello, John. John Arfstrom - RBC Capital Markets: Dave, may be a question for you on the process of clearing escrow on remaining bargain purchase gain. What is the maximum timing in terms of how long you think this could take? I know you maybe intimated that a lot of this could come in the fourth quarter, but is this something that maybe last through the first quarter at the longest and I guess the question is how much would be Q4 versus Q1 or Q2 of next year?

Contractually, the time can run until October of next year. We don't think that, that many will go that long. From July 28th, when we close through the end of September, we had about 22% of the items cleared and it took some time to get the communication out and to get established and documentation. So, we're seeing some good progress here in the third quarter of getting things teed up to move out. I think we'll clearly have more than half of it done by the fourth quarter if trends and backlogs turn out to be accurate. We really still have two more months left this quarter. And the issue is generally, it was collateral. The loans were generally placed into escrow because certain collateral documents didn't have assignment language in them. So, we had letters of credit as our collaterals or letters of credit may not have had assignment language. If we had marketable securities account with a brokerage company where the prior owner had an assignment, some of those contracts that they had for having it as collateral didn't have assignability language in it. So what we're really trying to do is work with the third parties that hold that collateral and just get the documents changed. So now the collateral is assignable to us versus the prior owners. So that process isn't that owners is just getting the third parties to pay attention to it and work it through. We're hopeful that we'll have a substantial majority of it done in the third quarter. My guess is that some of them will flip over into 2010. So we're hopeful that it's not a lot. The sellers and us would prefer to be done with it and accelerate it. So, we're both working expeditiously to get it done. With that being said, I can't just guarantee the actions of third parties that there'll be quick but we're making good progress. We're not hitting any bumps in the road. It's just a matter of teeing the people up, getting it through their system, getting new documentation out. I don't have a specific number, John, because I can't count on what the third parties will do, but we think a substantial portion of it will be gone by the end of the year.

It's a priority, John. John Arfstrom – RBC Capital Markets: That is helpful. Ed, with respect to what you've done here with writing down the non-performers and getting them to sales prices, I'm just wondering if you could talk a little bit about the pace of inflows. I think if there was one surprise in the quarter, it was surprise of the quarterly provision and I guess the question is obviously, you’re going to have a big gain coming again in the fourth quarter and if you could give us an idea of the pace of inflows maybe that helps us understand what we think the provision might go in Q4.

: So, we're looking at it all the time, John, and it's just hard to say. This quarter so far, I would tell you it's negligible. We're actually way ahead in terms of what we're getting off in terms of what we're putting on. But these things surprise you. They'll just pop up on you and we don't wait to try to massage it or hide it or look for the pony in the pile of manure. We just deal with the issue right away. So, some of them just kind of pop up on you, it's just the nature of the time that we're in right now, that part of the cycle that we had a guy walk in the other day business 35 years and family owned business and this happened during this last quarter, they just said we're shutting down. We'll work with you to collect the money, we'll put our houses up, but we never would have expected it. They just said, we look forward and it's just, we're going to close down. So, it gets a little hard to predict. I can only tell you that it's been negligible so far this quarter, but that doesn't mean they're not going to pop up as the quarter moves on. John Arfstrom – RBC Capital Markets: Okay. All right, thanks guys.

Next now to Dennis Klaeser with Raymond James. Dennis Klaeser - Raymond James: Good afternoon. Just a couple of questions drilling down on the accounting for the debt purchase discount. There's the $38 million of credit discounts. I'm surprised at how high that is based on your charge-off expectation for that portfolio?

It is a higher number than you may think about is sort of annual terms, but you do have to establish the discount over the life of this portfolio and some of these assets go off for a while. So, you've got a number of years that you got to establish the discount and then bring it back. We also applied discounts. Their portfolio although it has performed well, lots of portfolios in the past have performed well and if you look at banks today, their losses are substantially more. So, we might be taking the conservative route, but they had certain of their loans that had unsecured positions to wealthy borrowers and well deserved to probably provide unsecured positions then. The loans are still performing, but we probably applied a little bit high of a credit amount to unsecured positions and they also took marketable equity securities out there and that given these times we saw fluctuations while back where the market dropped 40% and even though they take care of cuts it’s a little bit more of a credit risk than a straight letter of credit from the larger well-capitalized banks that are out there. So to a certain extent their portfolio has a little more risk to it, times have changed quite a bit. We went through and took our best estimate as to sort of the most likely credit discount scenario that we want to apply based upon insurance carrier ratings, based upon the life of the portfolio, based upon the unsecured nature. We also went out and hired an independent firm to do evaluation to support our valuation and they kind of came at it from a different perspective, using credit default rates for insurance carriers and different payment rates and that were independent of what we had. And they came up with a number that was amazingly close to what we had. So, part of it is the sign of the times and that loss rates are up across the board for consumers, even wealthy consumers and so we applied a little bit higher factors than historically had been done and you have to remember we had to apply it for the life of the portfolio. Dennis Klaeser - Raymond James: Right Okay. And then for us trying to model out the accretion of the discount, the accretable discount. You had the $3.5 million of accretion in the third quarter and I think that would cover about two months worth of accretion?

Correct. Dennis Klaeser - Raymond James: Is that a run rate, a reasonable run rate to begin with as we look forward? Or is there something else going on in the third quarter that might make it not a reasonable run rate?

No, it would be a reasonable run rate. You have to remember, as loans prepay, it's a level of yield. So if the portfolio pays down, you'll have more at the front end because you have more outstanding as the loans pay down, that will come down a little bit. So what we'll do is every quarter, give you information to show you what the paydowns are, so you can see how much of the discount was related to the paydowns, but the number should be higher earlier and work its way down because if you take the five years to seven years, so maybe you have 20%, plus or minus paydowns every year, that balance is going to come down 20% a year and so, you'll need less discount to accrete to keep the yield at a leveled pace. So it'll start higher and it'll work its way down over the life of the loan as the loans paydown.

Dennis, one thing you have to remember too is you got to have the $80 million that we bought in October. Dennis Klaeser- Raymond James: Right, exactly. I understand, adding that to the trend in …

You're an old CFO you know how to do that. Do you like it on that side of the phone as opposed to this side? Dennis Klaeser- Raymond James: Yes, a lot more fun on this side, I tell you.

Go ahead, Dennis. Dennis Klaeser- Raymond James: Sure. On your securitization since those, those underlying assets are relatively short-term, could you give us an idea sort of the volume of assets that will roll into that securitization per quarter? Is it roughly 1/4 of the…

We actually disclosed that in one of the pages in there. We think there'll be about $300 million that will run off and be replenished into the facility during the fourth quarter. Dennis Klaeser- Raymond James: Fourth quarter. Is that the pace they're going forward?

Yes, pretty much. Dennis Klaeser- Raymond James: I believe you have another billion or so of the PNC Premium Finance loans on your balance sheet. Given the very low funding rates that are available through the TARP program, are you considering securitizing more of those loans?

Not at this point in time. We're sitting on a $2 billion worth of liquidity right now. We are lowering rates that slowing our growth number. We continue to pick up market share across the board. So there are costs associated with TARP field that do raise that up a little bit. We think our core cost of funds actually be cheaper, but that is an opportunity for us going forward. If we were to find another portfolio of something out there where we needed some extra liquidity, that is an opportunity for us, now we've been through it once, doing an add-on should not be that complicated.

We set up a master trust for this too. So to the extent we wanted to do that down the road, Dennis. It would be a fairly simple process for us and we've been through the rating agencies they know us now and the like. So we think that would move fairly quickly. The one thing that, that could happen and we've talked about this on past calls is that if the insurance market in general begins to harden and premiums increase, then our average ticket price right now for a new loan is in the low $20,000 range. We've been as high as around $40,000. So we're fairly low historically and if that market hardens and let's say premiums rise by 20% or 30%, you could easily pick up $300 million or 400 million depending on how high the premiums go without any additional work or overhead. If that happens, we would probably then look to say, let's see if we can do another one of these. But it's that right now, we've got a lot of liquidity on the balance sheet, earning us very little and to add more of that liquidity, even though it is relatively cheap funding, the costs of that facility was 145 basis points over one month LIBOR. So it is cheap funding, but we think actually our core funding is cheaper than that right now. Dennis Klaeser- Raymond James: Got you.

By the way, the PNC Premium Finance business is going extremely well. I think our units processes are up 20% over last year. So we continue to gain market share. Last year, we were up about 10% in terms of units process. We're obviously hurt by the soft market here, but we are gaining more and more market share in the PNC business and we are continuing to do new loans on the life side of the business. We continue to use our positioning as the £900 Gorilla in that business to garner more business. We're also where it is possible and make sense. As the purchase portfolio comes to decision points, we're making sure that the collateral and the pricing of that are appropriate, when in fact, we can do so. So both those core businesses, we're kind of stuck in the ancillary here between the securitization and bargain purchase, but the businesses themselves are going very well for us. Dennis Klaeser- Raymond James: Quickly on your diluted share counts, your average diluted shares increased to $26.5 million from $24.3 million in the prior quarter. Is that all related to the stock price depreciation?

No. A good chunk of that is our convertible preferred stock and in prior quarters it was below the conversion rate and now it is above the conversion rate. If you sort of do the with and without EPS calculation you would assume that those were converted. So, we added the converted shares into that denominator. Dennis Klaeser- Raymond James: Okay. So, the $50 million of convertible preferred now it's being treated as if converted to common.

Yes. So you include those shares in the calculation and you backup the million dollar dividend in your numerator. Dennis Klaeser- Raymond James: Got it. One final question and I always dislike this question sitting in your chair, but I'll ask it anyway.

We don't have anymore time, Dennis. I'm kidding. Dennis Klaeser- Raymond James: :

Sure. I think if I was sitting in your chair, since we are just switching chair, if you go back, I forget what chart it is in the press release, where we did go through and show you the amortization of our time deposits and the rates paid on those. I think you should be able to work the cost of funds number off of that and 145, 150 is what we're renewing CDs at. So I think you can take our growth and apply that to it also. So, I think from the cost to funds side, we've given you all the data. Dave, what chart is that?

On page 18.

On page 18. So you should be able to determine that from that side of it. On the asset side, a lot of that will depend on, if you now know how to do the accretion, kind of know what the base rates are, we're going to continue to reprice our existing portfolio where we can, it's really going to depend on how quickly we can put that 2 billion of liquidity to work and that will be a big component on the asset side, plus just a normal growth on top of that too. So, you've shown good progress quarter-to-quarter-to-quarter, since 12/31 of last year. We will expect to continue to show that type of progress in the margin going forward through the first part of next year. Dennis Klaeser- Raymond James: Okay, thanks guys, appreciate it.

Next now to John Rowan with Sidoti & Company. John Rowan - Sidoti & Company: Good evening. A couple of follow-ups to actually Dennis's question. On page 23 you showed $3.5 million of discount accretion, just using the effective yield method, but that two month of accretion, it seems like you're accreting that back at a fairly fast pace relative to the $75 million total to get you to a five year to seven year timeframe, now is that just based on prepayments?

We look at the estimated cash flows, but you also have to remember, it's based upon, your assumption that you got the full balance outstanding now and four years from now, you're only going to have 20% of the balance outstanding. So you've got to apply the level of yield concept to it. So you take enough discounts over the life of that portfolio, you end up with basically the same yield throughout. So, you're going to have more in the early years than in the later years because you got a much higher balance outstanding. John Rowan - Sidoti & Company: Okay, fair enough. And then also, just another question on the margin, because you say you expect the margin to trend up, but yet, there's $3.9 million and $2.3 million here again on page 23 that are accreted back in through the margin in this quarter. Your expectation that the margin is going to trend higher, does that assume that there are prepayments where you get some additional accretion into the margin through prepayments or is that just CD repricing and we could see those numbers come back out if you don't have the prepayment fees?

We’re going to have a third month in there plus you're going to have the additional purchase that we made plus there will be prepayments during the course of this. It's hard to predict what prepayments will be, but you're going to have a third month, plus you're going to have an additional $80 million or $60 million on the books that's accreting also. So I think that it kind of all offsets if you get right down to it. Make sense to you? John Rowan - Sidoti & Company: Yes.

Next now to Peyton Green of Sterne Agee. Peyton Green - Sterne Agee: Hello. I was wondering if you could talk about what the capital ramifications are on the premium finance paper that was securitized and how that affects capital next year.

Well, you do get some capital relief on selling the loan the way we structured the facility. And roughly the relief, I don't have the exact number, but it was roughly in about the $30 million capital relief range. So, by doing the transaction, we relieved about $30 million of needed capital. So it was beneficial for us from a liquidity perspective and from a capital perspective. As many of you may know, on January 1, 2010, the accounting rules require that (inaudible) assets that were securitized come back on to the balance sheets of the companies as if they were financing transactions. So, your funding would come back onto the balance sheet and the assets would come back onto the balance sheets. So theoretically if I get $30 million of capital relief now, when those go back on I'll need $30 million of additional capital to support those assets. Now, we didn't do this transaction really for the capital relief perspective, we did it more from liquidity perspective. That was out there knowing that the capital rules were going to change in 2010. There is a proposal by the Federal regulators that is up for comment to say, that if these accounting rules go into place 1/1/10 as they are proposed to do and as they are set to do, unless the FASB changes the rules where the regulators are looking at doing the transitional year of capital relief, where they would basically, you'd have 100% capital relief at the beginning of the year, 75% at the end of the first quarter, 50% capital relief at the end of second, 75% at the end of the third. And by the time you got to end of 2010, you would need full capital for those assets. So, I've not seen that they have issued a final rule on that, but that is up for comment. And obviously, this is not a huge deal for us. It's a bigger deal for some of the banks that have billions of dollars of assets securitized out there and the capital ramification. So, I assume that's why the Feds are looking at it, now they provide some regulatory capital relief as this new accounting standard comes into play. You might remember that this was set to go in effect on 1/1/09 and as the world was in its financial crisis stage that has the deferred implementation for one year and there if it was there then they must assume that the financial crisis is done and so they let it go into effect for 1/1/10 and the regulators are now looking for capital release. So, it's not a significant amount of capital for us something affect our earnings this quarter basically cover that. Peyton Green – Sterne: And then I guess part of your earlier comments, I mean would you ever unwind that and bring them onto your balance sheet, lower cost of funds in a wider spread? Or do you have to keep the structure in place for a period of time?

It is a three-year term. This structure revolve in term for three years. It's LIBOR plus 145, it's decent. We think it's pretty decent funding on cost for us and liquidity and if we can take that liquidity and put it to work in other commercial loans or other premium finance loans, we think that will work out. Peyton Green – Sterne: Do you have to put anymore paper in there beyond just replacing what pays off or?

No, just replacing what pays off. Peyton Green – Sterne: Okay, all right, great. Thank you very much.

Next now to Bryce Rowe with Robert W. Baird. Bryce Rowe - Robert W. Baird: Dave, I just wanted to follow-up on Dennis question, I think I got it answered, but just wanted to be sure that if the securitization balance will stay around at $600 million for most of the three-year term, is that how we're to think about that?

Yes. Bryce Rowe - Robert W. Baird: :

I don't have that number directly in front of me, but my recollection is we didn't do much in the first couple quarters because we didn't have much earnings. I think it was roughly in the $2 million range. Bryce Rowe - Robert W. Baird: And then a final question, do you have a headcount, an employee headcount at the end of the quarter?

I don't have it in front of me. It's probably somewhere in the…

2750?

Yes. I was going to say…

So 2700 to 2750 would be a good number to use. Remaining of a majority of those – not a majority, but we've got lot mortgage producers out there I think the mortgage companies are biggest employer right now with 283 producers out there. And they're all variable based. So, it gets a little foggy when you look at that side of the business. I think that's a legitimate number you can use. Bryce Rowe - Robert W. Baird: Okay, thank you.

Next now to Stephen Geyen of Stifel Nicolaus. Stephen Geyen - Stifel Nicolaus: Good afternoon. The loan yields were up about 40 basis points from 2Q, can you give us an idea about how much of that was come into the life loans and how much from the legacy loans portfolio, biggest loans specifically commercial loans?

Stephen, I don't have that detail in front of me, we haven't disclosed it. I think maybe what we can do to answer that question is when we file our Q here shortly we'll try to get that guidance to you. Stephen Geyen - Stifel Nicolaus: And last quarter you guys talked about the commercial premium finance business and it had I guess some sort of a negative effect on loan yields. Has trend reversed in the quarter?

In the commercial, in the property and casualty Premium Finance business, the yields are down from where they were a year ago but that was just a portfolio because they're nine month full payout. The portfolio running off and new loans coming on, that phenomena is pretty much completed itself in this quarter and competitively yields have been relatively stable. Stephen Geyen - Stifel Nicolaus: Okay. And the last question I think you might have touched on this, but I was away from the phone for a bit, but the securitization and what you're putting in future quarters, are there boundaries around the terms and pricing or is that set by the market each quarter?

Well, there are certain filtering criteria as it relates to the underlying assets as to what you can put in, for instance, only so many of them can be with insurance that have collateral, that's held by insurance carriers rated, A or less and BBB or less, et cetera. So there are some criteria that we need to filter for in order to maintain the AAA rating with that facility. And we have some states where you would need to get license to get the special entity that sold the loans into the securitization license. Some of those states take 90 days, 120 days or 150 days to work through the bureaucracy of the licensing division. So there are some loans that we don't sell in just because of where we originate them, what states we originate them in, but generally there aren't a lot of restrictions as far as yields and the like, it's more collateral, quality of the collateral base. Stephen Geyen - Stifel Nicolaus: Okay, thank you.

Next now to Rick Graeme [ph] with World Wide Associates [ph]. Rick Graeme - World Wide Associates: Hi, thanks for taking my call. First, can you just kind of discuss your thoughts on the capital ratios going forward? Specifically, the TC ratio still seems somewhat low and is the plan to try to offset going forward with additional gains on bargain purchases, if you will?

Our opinion of the TC ratio is that it’s a ratio made up by investment bankers to sell stock. As compared to a year ago we raised $300 million worth of capital, be it $50 million of our own preferred and $250 million worth of TARP, which is $300 million. The logical way out of those both, one is the convertible common $50 million, that will convert to common at some point in time. And then TARP will eventually have paid of a year vis-à-vis earnings or common stock. We've made it. Our objective here is to use that as a bridge loan to build core earnings, to do all the things that we're doing, so that we do not have to raise capital at levels that aren’t beneficial to our shareholders. So we are comfortable with our TC ratio. We know we have the earnings to prove that and we have the earnings to support whatever credit throws at us going forward we think and we are going to continue to improve those earnings to a point in time where either earnings or if an opportunity develops or it's in our shareholders best interest, we'll raise capital to either support future growth or pay off the TARP funds. In the meantime, the TARP funds are a wonderful bridge loan, a cheap capital for us and allow us to execute the other part of our plan, and to build the earnings up so that we not put our shareholders at a deficit by raising capital at levels that don't seem appropriate as to the value of the company. So, we are comfortable with where we stand on those right now and we'll continue to work on our objectives as I've laid out to you. Rick Graeme - World Wide Associates: And then secondly the theory on (inaudible) in particular it looks like then I guess ask for the (inaudible) some time on about $2 million and charged off roughly $74 million. Were there any significantly larger loan on the inflows or just across the board or?

It's just across the board. I don’t believe there are any particularly larger loss to the relationships that came into it. We don't take a lot of big bites of apples if there are $2 million, $3 million, $4 million deals or what come on and we apply these evaluations, statistics that we got as we run liquidation mode to those assets in terms of bringing them down to what we think our liquidation realizable values. As I said earlier our goal here is to try to stay a step ahead of the inflows and reduce the inflows and increase the outflows so that we can stay a step ahead here and whether we can do that or not time will tell us. The liquidation process is very complicated and cumbersome and you probably will have rather three closing schedule when you got a bad asset moving out. You will get two of them down and the other guy will walk away from the table and try to squeeze you for more. So, this is a very dynamic market and it's a tough market. I think people underestimate the amount of work it takes to get out of these things at reasonable prices. So, we want to really stay ahead of the game on those things and that has been our objective and we'll continue to do so. As I said, I think that the non-performing portfolio which stands now is at a price to sell level. So, we hope to make significant progress throughout the rest of this year and whatever it takes to take on the rest of it and then new inflows will come in. Rick Graeme - World Wide Associates: :

Well, if you certainly look back over the history of time with that portfolio, you’ve been probably down to as low as just a little under 10 basis points to the highest 79 basis points. We would expect then sort of a normal whatever normal is an average normal timeframe to be the 30 to 35 basis point range. When we were at 79, we were doing a little bit different type of business and all those numbers were higher we also were collecting a lot more on late fees because we were doing some higher yield, smaller ticket items that helped the system a little bit, a lot for a little bit more charge-offs, but we sort of made it up with the yield and the late fee. So, historically we’ve never been above the 79 basis points of charge-offs for any given year.

The range is about 25 to 50 basis points for this general type of business, somewhere at 25 to 55 basis points. It has been thing about the charge-offs in that business is charge-offs go up, late fees go up by factor that’s higher than charge-offs that’s been our case. So we actually take more money when charge-offs go up in that business, but we don’t change our credit standards or try to make more money by doing worse deals, because we always refer to that as playing Frisbee in a mine filed, eventually you are going to get blown up. The higher charge-offs usually being higher late fees which more than offset that.

We're comfortable where we stand right now. It's operating fairly well, the numbers are up a little bit, but the profitability it's there and these are higher up yielding assets that know where the charge-offs are now as this still is an acceptable range for us. Rick Graeme - World Wide Associates: Is it safe to say than at 74 basis points were probably seeing new charge-offs comes out down in that portfolio?

I'd say we're at the high end of the range right now. Rick Graeme - World Wide Associates: Is there anything to make you believe that range maybe get reset higher?

Nothing really right now that I would say is on a radar of our screen. Obviously, the economy is difficult and there're more companies are delinquent, but if you structure the loan correctly with the appropriate amount down and the appropriate term of the loan, your underwriting should prevent you from really having a large increase and losses. Rick Graeme - World Wide Associates: Okay, great, thank you very much.

We’ll take the last question today from Hemant Hirani with Endeavour Capital. Hemant Hirani - Endeavour Capital: I just wanted to check on your pretax pre-provision, recently, one of your presentation you talked about your pretax pre-provision, could kind of reach a run rate of about $225 million and the assumption used one of course about $50 million of accretion of the life insurance portfolio purchase and given that a big portion of the purchase discount was already put in. How should we think about the pretax pre-provision run rate going forward and then I have another just small question.

Yes. When we did that presentation, we were doing just didn't add anything by taking the discount. We actually said, we were working on what those numbers would be and would probably be more front-end loaded in that I think when we went through that particular presentation. I think if you go to the chart on page 23, that will give you a better idea as how that amortization will come in. But still we look at our pretax provision, just call a banking EBITDA write down. And going up to about $172 million this quarter, the numbers we talked about to you. It now relates to the redeployment of liquidity and the deposit side still gets you to the same and the numbers that we talked about just on an additive basis. So, yes, the 50 million that we just took the discount and divided it by five, is not the case as more as the front-end loaded. Hemant Hirani - Endeavour Capital: Second is can you just give us an idea about the gross inflow of non-performing loans this quarter versus last quarter? Because after taking $80 million charge, you would have expected NPAs would have declined pretty meaningfully. But it remains relatively flat not much of it decline. I just trying to get an idea of gross inflow.

We take up an administrative task to the one that we just rolled over the end of the quarter was on $80 million and new stuff that rolled on the books. We resolved during the quarter a little over $30 million notwithstanding that this is just on the loan side. So, the inflow was up a little bit. Hemant Hirani - Endeavour Capital: Up a little bit?

83 million bucks were the new NPAs. Hemant Hirani - Endeavour Capital: Were the new NPAs. Okay, thanks.

Gentlemen we have no further questions. Mr. Wehmer, I hand it back to you for any closing comments.

I appreciate everybody listening in and please feel free to call us with any questions. Again it was a somewhat of a noisy quarter, but you feel roughly good about where it turned out with the balance sheet ready that's cleaner than it was and ready to be cleaned even more with core earnings that have moved up nicely and with lots of opportunities stare us in the face we are going to continue on our goal of core earnings and cleaning the balance sheet, looking for opportunities under displacements or dislocations that are out there and we're sure our best efforts in doing so. So, call us if any of you have any other questions. We'd be happy to take them and thanks for listening.

Thank you. This concludes today's conference call. Thank you very much again for joining us. Wish you all a good afternoon. Bye.