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

Jon Arfstrom - RBC Capital Markets Brad Milsaps - Sandler O'Neill Emlen Harmon - Bank of America Mac Hodgson - SunTrust Bank Dan Johnson - Citadel Stephen Guyan - Stifel Nicolaus Daniel Cardenas - Howe Barnes

Welcome to Wintrust Financial Corporation's 2010 second 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 in the company's Form 10-K on file with the SEC. I will now turn the conference call over to Mr. Edward Wehmer. Please go ahead.

Good afternoon and welcome to our second quarter conference call. I love it when we get on, I always have to say my name and I get Waymer, Wimer, and I go just remember, I weigh more. So it always comes across is Wehmer. With me today are Dave Dykstra, our Chief Operating Officer and Dave Stoehr, our CFO. For our normal operating procedures I will provide some general comments. Dave Dykstra will get into some details on the actual numbers, and as we said, we'll have time for questions. Outside of our normal procedure, I'll let you know we are conducting this call from our new offices down on 190 South LaSalle Street, where our commercial initiative has taken off to a great start, and it's kind of fun to be down here with the big bankers, with the big guys having this call. I'll start with earnings. Continued profitability in these challenging times for the second quarter and year-to-date, net income of $13 million or $0.25 per diluted share. Good progress in core earnings. As we have defined them and in the press release itself, our core earnings for the quarter were $47.5 million, up from $25 million a year ago. So, our objective to increase core earnings and to continue to increase core earnings, we are doing it and we think going forward that we'll be able to continue to take advantage of opportunities, both in the market and our own balance sheet. And I'll talk about those a little later. For the quarter, the margin did increase 5 basis points to 3.43%. Cost of funds was the biggest contributor to that as we continue to bring down our cost of funds. The yield on earning assets however was down a bit. As you recall, last quarter we had about $1.2 billion of overnight liquidity because of our growth this quarter, which I'll talk about in a second. That number stayed relatively the same. So, there are opportunities to redeploy that liquidity, but because of how that is affecting us right now, that is holding our margin down a bit. But then again, the margin was up for the quarter. Core growth for the quarter, we feel very good about this. If you strip away the two FDIC deals, total assets grew by $363 million with deposits up close to $400 million and loans up around $255 million. The deposits were up even as we continue to drop rates. These are core deposit relationships, both commercial and households. The market is in such disarray here with banks closing and alike. We are picking up market share and we think this is a good thing. I think in the short-term it will hurt you a little, but long-term, adding core business and core households to our franchise at costs that are relatively low is a good thing for building overall franchise growth. And over the long term, I think it will serve us extremely well. The FDIC acquisition about Lincoln Park and Wheatland added assets of $506 million, deposits of $502 million and covered loans of $276 million. So in total, the Company grew assets for the quarter by $869 million and deposits by $900 million. Again, good solid core growth. I will mention that, I'll do that in a second, never mind. We're particularly pleased with loan growth. Quarter's growth represents solid relationship banking and our pipelines remain very strong. I was just talking to the fellows down here, and what's very interesting is the amount of looks that we're getting just out of Chicago. I will say the growth occurred throughout the system but Chicago is off to a terrific start. We booked a number of loans, but what's most interesting is the number of loans that we haven't booked. It's not like we're taking everything that comes in. We've turned down, we've looked at numbers, so qualified leads and we've turned down or decided not to bid on close to $250 million already, the six months that we've been operating here. Which is a good thing because, opening up downtown we have a very strict credit culture around here and we brought fellows in who had the exact same credit culture as we had. I told one of the gentlemen, John McKinnon, I said, he's a little bit older, then I said, John I think the way we think I think we were separated at birth. It was a very long labor, but I think we were separated at birth. But the issue is that their culture, their credit culture fits right in to our credit culture and they are having solid success in building, the commercial side of our equation in very short order. The FDIC deals, just a word on that. We really have had no surprises to date. The integration is going extremely well. We look forward to completing the conversions which are to schedule now for the next three months. They will take place within the next three months and continue the assimilation in starting the market in these new geographic areas. We're excited about Naperville and the households. We believe Naperville is a wide open market for us and as we move into the North side of the city, as I mentioned before, I think we're within a mile and a half with the branches of that acquisition of 50,000 households. So, we look forward to in the future once we get them totally assimilated in marketing into those areas. The quarterly results include $26.5 million of bargain purchase gains related to those deals, so we're happy with that also. On the other income and expense side, Dave will give you more specific details, but I will comment on a few salient points. Other income, mortgage banking is very strong right now as you would imagine. Pipelines are very strong, but we fought two things this quarter: one is an MSR, Mortgage Servicing Rate reduction of $1.4 million and another $4.5 million really of excess put reserves, put back reserves. I think you've all read about that. The markets as everybody is trying to load up their dump truck and knock them back on us. We have settled probably 50% to 65% already, some with global settlements. The numbers as of 6.30, we're working on the remainder of those and would hope to get this behind us. We didn't play very hard in the 2007 and eight range where we didn't play and we only did it for a little while in the awful areas, I guess we could call it. So, we think that we should be able to put this behind us and hopefully in relatively short order, but the core business is growing extremely well. Wealth Management also continues to grow. Referrals between the banks and the Wealth Management operation plus Wealth Management's own initiatives have brought those fees up nicely. On the other expense side; included there and credit losses, OREO losses of $5.8 million, 1.9 of operating and 3.9 of valuation. We continue to see continued stress on that. These are OREO portfolio or OREO properties in the portfolio where we've gone out and after maybe 6 or 8 months gotten another appraisal. We continue to see downward pressure on that. But we are moving as the charts shown. I'll talk about it in a second. We are still having very good success in pushing stuff out of here; and we are still dedicated to that philosophy of getting stuff out of here as fast as we can. That's as good a segway into credit. On the credit side, aggregate non-performing loans and as I mentioned before, OREO balances were down just a little bit percentage wise because of our growth in the FDIC deals, they were down a lot. I think we compare well to Peer Group and our competitors. We continue to strive to liquidate these troubled assets on an expedited basis and fortunately to make room for the next batch. The hits just keep on coming; but this cycle isn't over yet. Our goal is to continue to decrease these numbers and push them down and get ahead of the game and I use the analogy as we're trying to land an airplane here and it's going to be a little bit of a bumpy run in; but we are pushing this stuff out the door and eventually they will stop. Unfortunately, what you're seeing now is, at the beginning of the cycle you saw a lot of the overleveraged fellows go down early. What we're seeing now is just good people. Good people who have tried to do everything right, who have kept these things current, who worked with us as much as they can and their gas tanks are just getting empty, and it's kind of sad when you look at it and we work with them as much as we can to try to do it but when it's over, it's over. And we will continue to identify these things as rapidly as we can and work on their resolution as rapidly as we can. Charge-offs for the quarter were $37.9 million. If you look at what we consider core of $22.3 million, and then we had the excess charge for the fraud related to the First Insurance Funding. The First Insurance was subjected to a fraud perpetuated by an East Coast insurance agency. It seems like every 10 years or so, we get hit by one of these things. It's in the property in casualty side of the business. Two of the other larger, major premium finance companies in this space were also hit by this particular fraud. We have charged off the entire amount and are working diligently on recovery. 10 years ago when we had this occurrence, we were able to recover pretty much all of the money. I don't think that's going to happen this time. We're going to try to do that but I think that there will be some meaningful recoveries down the road on this. We performed a detailed review of the entire portfolio and are comfortable that there aren't any similar issues inherent right now in the portfolio. We instituted new controls to prevent future occurrences. I'll tell you the crooks are getting good and we got to be very careful and stay on these things. Given the ongoing nature of the investigation, the criminal investigation plus in respect of the other violated premium finance companies, the authorities; we're limited really on what we can say on this other than the fact that we have charged the whole thing off. We don't believe that we have anything else like that out there and we're continuing to go forward. Keep in mind it's suffice it to say that First Insurance Funding is a very, very profitable arm of our organization. If you look back some from fourth quarter of 2008 until now, their total charge-offs including this have been around $20 million in a period of time where they made about $115 million after tax, $115 million. So, you're putting it all into perspective, this is not a killer. It's unfortunate. We feel badly about it, but year-to-date, this business is still profitable and should be profitable, very profitable for us for the rest of the year. I'm sure there will be questions on this, and we'll answer what we can when the time is right. Now I'll turn it over to Dave Dykstra for some details.

Thank you, Ed. I'm just going to swing through the non-interest income and non-interest expense items briefly. And Ed talked about the margin and the credit side, so we'll dip below the line. Wealth Management revenue for the quarter increased $9.2 million, compared to $6.9 million in the same quarter of 2009 and $8.7 million in the first quarter of this year. This represents the fifth consecutive quarter of increases in this revenue source. Obviously, the underlying market conditions and the resulting asset valuation influences this source revenue, but we continue to focus on expanding our customer base through the cross-selling of customers and our existing bank locations, and hopefully, future locations as we open them up and acquire them in the coming months and quarters and years, and through the acquisition of new talent. We continue to add to our employee base and bring new talent on that brings in new assets to that business. So, we're pleased with the continued growth in that revenue source and we look forward to future growth. Mortgage banking revenue declined in the second quarter from the prior quarter and the second quarter of '09. Mortgages that we originated and sold in the second quarter of 2010 totaled $732 million, compared to $687 million in the first quarter. So, it was up a little bit, but it was down from $1.5 billion in the second quarter of '09 when the refinance boom was really in full stride. Negative factors influencing this quarter, Ed touched on them, were the $1.8 million of charges related to mortgage servicing right valuation adjustment, and the excess charges for recourse obligations related to the loan put backs. And we detail out those sources of revenue and the charges in the press release. So, if you want more detail on trends, they are in the Press Release. As Ed also mentioned, we recorded $26.5 million bargain purchase gains related to the two FDIC assisted acquisitions that we did in April of this year. Approximately, $4.2 million related to the Lincoln Park Savings Bank transaction and $22.3 million related to the Wheatland Bank in Naperville transaction. We spent a considerable amount of time valuing these transactions since we closed on them, and believe these amounts are solid results. But with all FDIC deals out there, the information is a little preliminary up front, and the results could vary during that true up period over the next few quarters, but we do believe those numbers are pretty solid. We spend a lot of time doing those. We also engaged outside consultants and have invested in a fairly robust system to track these loans going forward, to account for the loans and helped us value the loans. And so, we believe we really have a good infrastructure in place not only on the system side, but obviously on the people side and the back office support side. We believe we're really set up and now that we've been through our first two, we feel very confident that we can continue to play in that market as long as pricing remains reasonable and we don't see silly bids coming in from some of our competitors. On the other expense side of the equation, salaries and employee benefits increased by $1.6 million in the second quarter versus the first quarter this year, and the increase can be attributed primarily to the growth in our commercial lending staff and higher commission levels on the mortgage banking side with a slight increase in loans sold during the quarter and commissions related to our wealth management brokerage revenue also. OREO expenses, Ed touched on were $5.8 million in the second quarter, up $4.5 million from the first quarter of 2010. Approximately three quarters of that increase related to the downward valuation adjustments on properties we continue to own with remaining quarter related to costs associated with holding those properties. Again we provided a table in the press release on Page 33, showing the activity and the composition of our OREO portfolio, and in that table you can see that the inflows of properties during the quarter approximated the outflows. So, we are moving them through and as we get them into OREO, obviously that's a good thing because we have control and we can move them out. So, we're actively moving that portfolio and we expect to continue to do so in the third quarter. Other than that, if you go through the other expense items, our equipment, our occupancy, our data processing, marketing, professional fees and alike, really no significant variations in that regard. I did skip over on the other income side, I apologize, but the trading revenue was changed from last quarter. We had a slight loss of $1.5 million for the second quarter of 2010 after having strong trading gains in the prior five quarters. These trading gains and the loss of this quarter related primarily to the portfolio CMO pools that we purchased in the first quarter of 2009. As you may recall from our prior calls, these trading gains relate to support trenches of CMO pools that we purchased back in early 2009 and we acquired those support trenches for less than $1 million, and since that time in the first quarter of '09, when we acquired them, we recognized an excess of $30 million of gains on those portfolios. So, although it was down a little bit this quarter, if you take it in it's totality and look at the total gains on that portfolio investing less than $1 million and receiving more than $30 million over a six quarter timeframe, I think the portfolio has been a home run for us. That's an example of the dislocated assets that we've constantly talked about, trying to find during troubled times. And so far that transaction has done well for us. Obviously, market spreads, prepayment rates and default rates all change from quarter-to-quarter and even though it was a small loss, the portfolio has done well for us, just changing a little bit of market conditions there, but overall it's been a great trade for us. So other than that, on the non-interest income, non-interest expense side, nothing of other significance that I think we need to address on the call. We do have more detail on the press release.

Thanks, Dave. Instant summary now. When you look at this and you just signs the issues at First Insurance, it actually was a pretty good quarter. I feel very good about that. First Insurance, as Forrest Gump says, it happens. We'd like it not to happen, but we will be better off, we'll be better for it, and it's still a very profitable company for us. But when you take that away, we were able to control non-performing assets, bring those numbers down, which we observe and we expect very good progress going forward in terms of continuing to manage that. We are able to grow our core organization, the franchise value of our organization. We are able to grow loans. We are able to accomplish two FDIC acquisitions that are very profitable to us, and moving us into new markets and get that assimilation going and done. Remember we set out our goals for this year and we consistently said to you, is to get core earnings up, so they can absorb whatever credit throws at us, and we've been able to accomplish that. We think we should continue to be able to accomplish that. There is still opportunities in deposit repricing. We have over $3 billion of deposits, we're pricing over the next 12 months that should yield 30 to 45 basis points depending on where the rates are at that point in time. We have a $1.2 billion liquidity that we can put to work. We still have continued growth. We haven't started marketing in our new market areas. So, I think we're accomplishing everything we set out to accomplish this year. We're taking what credit throws at us, this cycle isn't over. We continue to increase core earnings. The other goals for the year were to continue to locate dislocations. It's harder to find asset dislocations, but we continue to look for them and find them in smaller parts out there. It'd be nice if another AIG deal came along, but I don't think that's in the cards. As it relates to people, we continue to find good people in the market and put them into all of our organizations and they are accretive to all of them. It's a great place to work. We think we have a great place to work. We think we've got good momentum and we're hiring very, very good people. Really the dislocation now is on the bank side of things and I think you'll see more FDIC deals. You're also seeing inbound calls from any number of banks that are at various stages of dealing with this cycle, and we're looking at that on an opportunistic basis and we will continue to do so. So all in all, we're doing everything possible. We'll continue to do everything possible to grow earnings. Our pipelines are strong, leveraging these people we brought in, put this excess liquidity to work, because eventually, the credit's going to fall away, all of these issues that we break out, being the mortgage put backs, the OREO charges it's going to fall away. We went into this cycle and put our head down two years earlier than the competition. We've been able to keep our credit portfolio at a fraction of our peer group. I think that bodes well for us getting out of this faster if we can, and the core earnings will then start falling to the bottom line. So we're going to continue to work on that, work on finding dislocated assets, people and banks and remember that we take a long-term view on this and we're building a franchise for the long term. We'll take advantage of opportunities to do that. We continue to be one of the only banks out there, that has increased, I don't know how else you can measure things in this market, but increase the book value per share of our organization and have done so throughout the cycle and we will continue to do so and bring more value to our shareholders. So, again we feel very good about the quarter. We feel good about the momentum we have here. Feel bad about the First Insurance issue but we'll work hard to get those recoveries. And it's always better to look good on a recovery. And we're going to continue to plow through this and take advantage of what could be very good opportunistic times for us. So with that, I will turn it over for questions.

(Operator Instructions). Our first question comes from Jon Arfstrom of RBC Capital Markets. Please go ahead. Jon Arfstrom - RBC Capital Markets: Couple of questions; first of all on loan growth is there any particular theme that you can talk about on loan growth? Is this primarily the downtown office? Are you starting to see kind of broad base of charters if you will start to dig in and put up some loan growth?

It's really across-the-board, Jon, in all of our businesses. The life insurance business at First Insurance is growing. The P&C business is actually continues to grow. We're praying for a hard market that would be a Godsend for us in that regard but it appears that insurance prices have stabilized. Now we continue to grow that business. The banks are also growing, I mean we're growing really across the board Jon and you are getting pay downs in the real estate area and other places too. So, some of the new business that's coming in is a little bit mitigated by that. The downtown office is off to a terrific start. Pipelines are strong. Numbers are getting close to $85 million and very strong pipeline. With that, the crossover sales on that into the wealth management and treasury has been really good also, but it really is across the Board that we are seeing good growth. It's harder to find the good assets. You hear about the government all the time. We got to have more credit. You got to have more credit and put more credit out there and it is hard to find creditworthy guys. So we have to look a lot harder to find those, but we are increasing market share on the consumer side also and those are bringing home equity loans and other business to us across the board. So I can't pinpoint one thing. It's really good across the board. The rebound real estate, we are not afraid of real estate and we think it's actually not a bad time to the strong borrowers to be lending 60% of cost and lending 50% to 60% of cost to very strong borrowers through very good rates. So we see good stuff across the board. Jon Arfstrom - RBC Capital Markets: Okay. Maybe Ed or Dave, but on the recourse obligation expense, what did that look like the last quarter and is this something that you feel is going to be an ongoing issue for your for the next few quarters?

Well, it's hard to tell. We do build the reserve based upon the volume of put backs that are coming in. So we have built a pretty strong reserve right now. Again, we were not extremely active in the 2007 and 2008 period. We did it for a little while and we just stopped doing those types of loans. The Alt-A's and the bad boys. So most of the vintage of what's coming back is from that period and they are slowing down a bit. We have reached global settlements with a number of the providers from back then. We are working with probably two or three more right now related to outstanding claims to get rid of the rest of them. It's hard to say what else is going to show up in terms of the claims and more importantly the validity of those claims. These are dump trucks backing up and our guys are very good and very methodical in going through and hey if we screw up, we'll take the blame for it but in terms of negotiating these things in a fair and honorable way. I would imagine that it could continue through the next quarter, hopefully not to the same extent at this quarter but our goal like it is on the credit side get these things resolved, move on to the extent you can get it global and put all of this behind us, and like I said, we have been able to reach global settlements with a number of them. There's two or three left and we are negotiating with them and hopefully we can achieve that same result and put it all behind us.

And John, as far as the numbers go and we have got a couple tables in the press release that show the numbers, but the excess amount that we put to mortgage put back reserves was $4.7 million in this quarter. It was $3.5 million in the first quarter and it was roughly $900,000 in the fourth quarter of last year.

That's the excess.

All right, we do set a little bit aside every time we make a loan, but this would be the excess for an unusually high levels of what we think are put back reserves. But as Ed said, we aren't seeing a lot more pull in. We've got a few that we're dealing with. We got a few that we settled and really this is our best estimate right now and things could change, but we think we've got our hands around it right now. Jon Arfstrom - RBC Capital Markets: Just a question on the front, I know that maybe you're somewhat limited to what you can say but what can you do to mitigate it so something like this doesn't happen? I know you said you've tightened down some controls and I know it's difficult to detect the fraud but just talk a little bit about what you've done to attempt to mitigate something like this happening again?

Well it's kind of technical and gets into some things that probably shouldn't talk and can't talk about here, but the fact is that you are always going to have one of the biggest risks in the P&C side of the premium finance business is fraud and we probably have two or three a year. We usually catch them at 50 grand or 100 grand and you'd never even see them, but we understand that that's part of the business. This one was sophisticated. It was a little bit different and you have to adapt. You are kind of like the immune system. We've got to adapt and take it about five steps farther to make sure the permutations of this can't occur. Again, we feel, we're having gone through the entire portfolio, we feel very comfortable that there aren't other situations out there like this and we believe that the controls that we put in, I'll tell you one of them. One of them that we did was we've had a credit department there that's done a great job. We haven't had one of these in 10 years and not that that's a badge of honor. I'd be happy to wait 10 more years because I'll be 66 and probably gone by then, but for the next one, but we have put in a full time independent what we call a [fraudator] somebody who works with the internal audit staff, who will be a full time person doing absolutely nothing but doing normal procedures and then we are paying them to think like a crook and try to figure out other ways that we could be hit. So, we have added some staff and added some very strong controls, we believe, but it will be a risk of this business and we have to maintain and we have to mitigate that risk. But it always will be there. Again, good track record. This one was a good one, that's all I can say. Jon Arfstrom - RBC Capital Markets: Yes, and the only other thing I would say, I sort of hate to tell people what your controls are because you don't want people to know how they are circumvent them, but…

You didn't have that mind, did you, John? Jon Arfstrom - RBC Capital Markets: I get your frauditor recommendations though…

So we're very keen on it. We had good controls for certain types of fraud. Some are more sophisticated. You learn as you go along. We had belts and suspenders and we probably have two belts and two suspenders on now. So I think we've done a lot of good things here. A lot of learning from it and we'll be better for it and hopefully we'll get some recovery on this, but you got belts and suspenders and we'll go forward with that and we feel pretty confident that we've instituted new stuff that should prevent it and as Ed said we have scrubbed our portfolio and there's nothing else out there like it. Jon Arfstrom - RBC Capital Markets: Anything that would slow the volumes in the business?

No.

Our next question comes from Brad Milsaps of Sandler O'Neill. Please go ahead. Brad Milsaps - Sandler O'Neill: Ed, you guys did a nice job bringing your construction, land, commercial construction balances down this quarter. Just wanted to see if you could offer a little bit of additional color there, kind of just additional color on what you guys have been doing to bring those numbers down?

Charging them off. No. A lot of them they reach completion. They aren't all bad. Some of them move out, some of them move on; there were renewal issues where other people pick them up. We're just not making a lot of them right now, if any. They got to be pretty strong for us to be doing that sort of thing. So, a lot of them are just reaching normal conclusion and actually are going off like they should go off. Brad Milsaps - Sandler O'Neill: Any guess on kind of what percentage kind of moved into permanent, CRE category versus paying off or charging off in the worst case?

I don't have that right now. I'm sure we can get that to you though, Brad. Brad Milsaps - Sandler O'Neill: Second question, maybe just on the margin. You guys talked, obviously about the excess liquidity. Just wanted to get your continued thoughts or additional color on how you're managing the balance sheet. You're back down to kind of the mid 80s loan and deposit ratio. With the two deals closing maybe I thought you might have been able to [eek] out a little bit better margin with all of the deposits you've got repricing. So just maybe some additional color on what you're thinking on the margin going forward?

Well, we keep dropping basis point at a time on core rates. We still think there's some room on core rates to bring those down to find this equilibrium, if you will, of indifference by our customers. We don't want to kill the goose here, because we are picking up full relationships here and again we do take the long term. But we are lowering our core rates. On the CD side there's I think $3 billion that comes due in the next 12 months, and the 180-190 range that can come down into 140-150 range or maybe even a little lower, 135, and that will be a continued pickup on the cost of funds side. On the asset side of things, it just keeps continuing to do what we do, plan profitable growth. We do look for dislocated assets out there. We do look you know we've invested in a number of new lenders. We are having good results with that. We continue to look for other niche businesses and to continue to try to gain market share in our niche businesses. So, we're not pushing anything in particular on the asset side of the equation other than what we do normally, and the end result on the balance sheet side is try to keep a diversified balance sheet, and one of the reasons we've been able to get through this with knock on wood so far as we have is that we've had a very diversified balance sheet between a third of the portfolio coming from our niche businesses and then the rest split between retail, commercial, commercial real estate and alike. We learn all in one bucket and I think if we learned anything, we didn't learn it before we got to learn it through this cycle that concentrations kill. So, we will continue to look for, continue to try to grow and not in any concentrated way and they continue to look for other earning asset types to build more legs on the stool of our niche portfolio, but so far so good. I'm very pleased with $0.25 billion worth of core growth in the quarter and I think that those numbers can continue to go up like that. I think that's good growth for us. So, I don't know how else to answer it. We keep dropping rates to try to find an equilibrium where we continue to pick up market share. Maybe not equilibrium, but an optimization point where we continue to gain market share and get our rates as low as we possibly can. That's the objective on the liability side. On the assets. We might be subjected to this for another two or three quarters of a lot of liquidity; not making a lot of money; but eventually that will turn also; and I think in the long-term basis, you have to look at it that way. We've always prided ourselves on the right hand side of the balance sheet being core funded with relationship funding. Another lesson that we didn't learn from this cycle is that you got to have good solid liquidity; and we consider that franchise value. So, we're going to be measured good growth. We're hanging, where we're laying low so far on trying to push into those new markets. We're going to make sure everything is right and when the time is right we'll do that also. But like I said a couple quarters ago, what we know how to do is to build and to grow banks and grow market share and grow franchise value and we're easing back into that. We need assets to catch up. Brad Milsaps - Sandler O'Neill: Just two quick questions. One, Dave, do you have the accretion from the AIG loans this quarter? I couldn't find it in the release and then second, can you refresh my memory? Is the $50 million preferred is that [mandatorily] convertible in the third quarter?

Under certain circumstances it could be like change of controls on the like, but generally, we don't have the absolute right to do it for five years from when we issued it. Under certain circumstances, it could be… Brad Milsaps - Sandler O'Neill: It's not mandatory.

Well, it could be converted by us with a change of control on the like, but I would look at that, as a five year from when we issued it, as to when we could do it. Brad Milsaps - Sandler O'Neill: Okay.

They could convert it at their will, but not us for the five years. Brad Milsaps - Sandler O'Neill: Okay.

On the discounts on the AIG Life portfolio purchase, we didn't put them in there, but I can give you what the numbers are. We've had a few requests. It's fairly consistent although a little choppy with the prepays. And I'll go through the three components. We have the accretion of just taking the yield discount, the accretable yield discount in the income over on a level yield method and in the first quarter of this year, we had $5.4 million of that, in the second quarter, we had $4.8 million. So, as you would expect as the portfolio runs down, that number is going to come down a little bit also. As far as prepays, we had $1.4 million worth of interest income recorded from the accretable discount portion of that entire discount, and I'll get to the credit side, but we had $1.4 million of the accretable discounts come in from prepays in the first quarter, and in the second quarter we had $3.4 million come in. And that would be the income effect for the accretable side. So the first quarter of $5.4 million from yield and $1.4 million from prepays, and the second quarter $4.8 million from normal yield accretion, and $3.4 million from prepays. On the credit side, we also recorded interest income related to prepays, and in the first quarter that number was $2.3 million and in the second quarter it was $3.4 million.

That just moves to accretable, right?

So, that would be the income statement effect.

Our next question comes from Emlen Harmon of Bank of America. Please go ahead. Emlen Harmon - Bank of America: I guess it was good to see in the quarter kind of a decline in the NPAs and I guess would you consider your legacy portfolio. Could you maybe give us a little bit of an idea of what your view is on kind of inflows to NPA and whether you think that number will continue to decline?

That's the plan. You really don't know what's going to flush up. But I think that I meet with the MAD Group, the managed assets group, pretty much every week, probably every other week and go through all of these things. And it appears that there's good resolution volume coming forward over the next couple of quarters. But in terms of what washes up onshore, like I said, we're starting to see good people trying like hell and they just finally come in and go, I can't do it anymore. And you really don't know until such time as they kind of show up and they put the flag up. So, we expect inflows to continue to pop-up. The idea is to stay ahead of them and continue to bring that number down like I use the analogy of landing a plane. I mean it's going to be a little jumpy cum bouncy coming down, but let's continue to bring that aggregate number down. I've set goals and objectives for our guys in the MAD Group to where it would be really be nice to be, and we'll see whether they'll be able to do it. And I can guarantee you they are aggressive goals. So let's push this stuff out of here. Let's not be stupid, but let's get this stuff out of here and then whatever shows up, shows up. I would hope that it would be similar and declining from what we've seen, but there's no assurance to that. This thing isn't over yet. Emlen Harmon - Bank of America: And kind of a follow-on to that, I guess despite the decline in NPAs, you guys did build the reserve a little bit. Could you talk to us just about your outlook for growth in the reserve and why do you think you continue to add to that a little bit?

Well, this is Dave. Our reserve methodology is fairly robust. So, a lot of it depends on trending of your risk rating in your loan portfolio. Obviously as we sort of run down the commercial real estate side some of our heavier reserving is with those categories, but if you see the problem loans migrate up, it's going to end up with a higher number, but hopefully that's going to slow again, as Ed said no assurances. The other thing is that, as you get more and more history, you start to use a little bit higher factor for some of these because of the recent charge-off rates and until you see those mitigate, we'll continue to be conservative, but how we build our reserve is loan by loan by loan by loan and it's dependent upon what collateral is behind it and what risk rating is with it. If it's a higher risk rating which means it's a worse credit so to speak. We apply a higher factor. So if we can start to see the migration slowdown of loans moving into those categories and as we move the commercial real estate off the books and focus more on some of the other categories because there's just not as much as CRE lending going out, you could see it slow a little bit. But I would guess that unless you start to move a lot of the CRE out quickly that it may build just a little bit going forward. But again, it's very formulaic. We don't put our finger up in the air and sort of see which way the wind's blowing that quarter. We calculate the number and we book the number based upon our specific portfolio and any impairment issues that may be out there also. It's a round about answer, Emlen; we don't target and say we want our reserve to be here. We look at our portfolio from a qualitative standpoint and quantitatively calculate that number.

Our next question comes from Mac Hodgson of SunTrust Bank. Please go ahead. Mac Hodgson - SunTrust Bank: I just wanted to follow-up on Brad's question earlier on the AI credit discount table. I can probably back into this, but were there any discounts used for loans written-off out of the accretable section and the non-accretable section?

Nothing out of the accretable and on the non-accretable it was 369,000, so virtually nothing. Mac Hodgson - SunTrust Bank: Okay.

And that was a good thing for us.

Because of that level of charge-off wouldn't be less than what we bought. We bought it at a much bigger discount than that. So the answer is virtually nothing Mac. Mac Hodgson - SunTrust Bank: Okay. So my math could be wrong here, but what I looking at the non-accretable discount at the end of the first quarter at $33.99 million, and then what you report is $28.2, I think in your second quarter release?

Right. Mac Hodgson - SunTrust Bank: That gap seems wider than the 3.4 related to prepays that you gave to Brad?

Well, there is about $2 million that transferred out of the credit discount side into the accretable side. So hasn't been recognized yet, but as credit conditions get better and the reasons that you had the discount there go away. So if let's say you had some policies with a company that was B rated company and they got upgraded to A, you would say you don't need as much of that credit discount anymore and we remove it out of credit and we would move it into accretable. So in the table last quarter we had for this second quarter we had about $2 million, because of the improvement in the underlying credit metrics, we moved it out of the credit discount and put it into the accretable discount. So going forward part of that $2 million will come into income, but wasn't affecting the income for the quarter. Mac Hodgson - SunTrust Bank: Okay, perfect.

So Mac, I can just run you through it. I've given you all the numbers now. On the credit side you are at the $33, 990 and $3.4 million was recognized in income because of prepayments, $2 million was transferred into the accretable discount out of the non-accretable because of the credit metrics of those underlying deals got better. And then you had $369,000 that was used to offset a low credit issue. Mac Hodgson - SunTrust Bank: Just one question or a couple questions on TDRs, I know there is a slight increase in non-accrual TDRs and a decline in accruing TDRs. I could be just reading into this; but I was curious if there was any negative migration from accruing TDRs to non-accruing TDRs in the quarter?

Nothing material. Mac Hodgson - SunTrust Bank: So there wasn't a loan that you had on TDR that was accruing that negatively migrated to non-accrual?

Probably was, but nothing material. Mac Hodgson - SunTrust Bank: Okay. And just to refresh my memory, when does the non-accruing TDR become accruing and when does an accruing TDR go back into the normal loan bucket? I've heard different explanations and I know there's a time frame it has to perform maybe just…?

We'll turn that over to Mr. Dave Stoehr. Our CFO, he's the King of TDR regulations.

That's quite the title. What we do is we're follow standard industry practice on those that are compliant with their new turns, specifically those that have a change in interest rate or a lowered interest rate or modification of that nature where after six months of being compliant we move them out of a TDR status; so you'll see some of that decrease in on the accruing side was due to movement back on to or out of the TDR status. Mac Hodgson - SunTrust Bank: And then when does the non-accruing TDR become accruing? Is it similar six months?

If it's non-accrual, it's non-accrual. Non-accrual is kind of the Trump card in the game. Mac Hodgson - SunTrust Bank: Okay.

If it's non-accrual, its part of our non-performing number and it can't get out. Mac Hodgson - SunTrust Bank: It's just there for ever?

We address that. We actually make a statement like that in the press release under the TDR table, but they don't come out.

They don't come out after non-accrual. Mac Hodgson - SunTrust Bank: Okay, great. Just one last one, Ed you were talking about concentrations earlier and I know that the premium finance business drove the large majority of the loan growth in quarter, so the concentration there ticked up a touch and combined 29% of total loans. I know the hope is for the other loan categories to show more growth to lessen that concentration, but do you ever or what point would you push the brakes a little bit to try to slow that concentration risk somewhat?

Well, we believe that that will, we say a third of our portfolio from our niche businesses, so those are our two main niche businesses right now. The others are we got out of indirect auto back a couple years ago. The Tricom receivables are really as more of a fee base, but there are some minor receivables there that don't add into it. We would like to find some other legs for our niche based stool and are working very hard to do that. But I would imagine that those portfolios will grow barring a hardening market will make those portfolios grow, just without doing anymore business. I think that they will continue to grow at the same level our balance sheet grows and if we could keep it around 25% to 30%, that's a good number for us because inside that portfolio it's pretty diverse, those portfolios it's pretty diversified also and we look very closely at company exposure, agency exposure and so I think right around here is a good number. It could pop-up a little bit but, 33% of the portfolio in niche lending with these two making up the majority. You would probably expect to see that.

The other thing I would add there, Mac, is Ed talked about the diversity within those portfolios but we really look at those as two very distinct portfolios. We don't look at it as sort of 29% premium finance, obviously it is. But the life business and the P&C business are distinctly different businesses and distinctly different risks and distinctly different average terms and these different collateral and different types of borrowers. And so, although they may be cousins, they are not twins. So there's diversification within that premium finance total portfolio by those two segments.

Our next question comes from Dan Johnson of Citadel. Please go ahead. Dan Johnson - Citadel : On the non-performing roll forward table, I don't see any asset sales or no sales listed. Does that mean we did not have any? I know we transferred some stuff to OREO and some stuff was sold out of there, but.

Well, I think if we sold any of those they would actually be probably in the principal pay down line. So the principal got paid down through the sale of the loan. Dan Johnson - Citadel : Okay. So that's not just purely interest collected?

If we had transferred it to OREO, we charged it off, returned to performing status, or we received a principal pay down in one form or another. Dan Johnson - Citadel : The additions for the quarter were $41 million. Do you recall off the top of your head what they were in the first quarter?

No. I don't have that handy with me right now. We could get back to you, but I can tell you that about $30 million of that was still commercial real estate and so the bulk of it is still commercial real estate. Dan Johnson - Citadel : I'll follow-up for the Q1 number. In terms of just going to the loan side for a moment, can you talk a little bit about what we're seeing in terms of new loan spreads and yields in sort of the competitive environment than the market?

For our business new loans, spreads and yields were pretty good. You are still able to get floors on the deals, and you're able to get in the 300 range plus and commercial deals. That's the deals we're doing. So our new spreads are coming in very nicely and our profitability reports on new businesses, is as strong as it's been. So, we are holding to our standards here. We are seeing some things going on in the competitive market. I had one competitor, a fellow working for a competitor was talking to somebody and said, if you just lower your rate a little bit and change your terms you can get a lot of business right now. It's like, oh my God. Do we learn anything? It's institutional amnesia I think, in downtown I'll tell you, there were probably 15 deals for $100 million that we bid on, that we were very interested in getting in and I would say 60% of those were lost because we lost to lower rates and easier terms. So we are seeing that creep a little bit back into the market because I think everybody is suffering with a lot of liquidity on their books. But you just got to be so careful. You can't sacrifice that. So we are holding to our pricing standards. We are getting, we're not seeing LIBOR plus 100 days. We never played in that game and we're not seeing that in the market right now, but floors in the high fours and fives, where we're playing the game right now and targeting LIBOR on the 300 plus range. You may go a little bit lower if you get the strong deposits, strong relationships but we're trying to hold steady there. And so far so good and we'll see where that ends up. But we are seeing some things done in the market now that had just surprised us given what's transpired over last three years. Dan Johnson - Citadel : With those floors, sort of new loans coming in are sort of printing, I don't know, mid four is up maybe even five on a yield on a straight up yield basis?

Yes it is fair. Dan Johnson - Citadel : Would you have seen some interesting offers from a bunch of different banks that I honestly don't know where the floors are but the spreads are much tighter than 300. Are you seeing toughest competition from say the local Chicago crowd or the national or almost national crowd?

The national crowd is very competitive. It's sporadic but you do see it in certain local competitors too. But the national crowd is driving things down a little. I will give you an example and take you out of commercial loans and put you into the premium finance space. Premium finance average ticket size is usually in the 20,000 right now in the 20 to $22,000 range but there always was a market out there for bigger deals, a $1 million to $5 million deals. We see those going out at 190 right now. We are not playing in that game. Right now we're seeing anywhere from 190 to 220 with some risk on those deals. So you are starting to see some stretching out there and many of those, some of the firms have taking them are owned by large banks. So you're starting to see a little bit of that. We're sticking to our guns though and hopefully we're not going to have to drop our drawers.

(Operator Instructions). Our next question comes from Stephen Guyan of Stifel Nicolaus. Please go ahead. Stephen Guyan - Stifel Nicolaus : There's one question. There was a slow loss in the securities [ph] those acquired early last year versus gains in the prior quarter. Just wondering if you change your plan for these securities if there's any way you can reduce volatility going forward? Edward Wehmer : Well, we don't really project what we're going to do in future quarters. We've looked in the past we looked at a number in different ways to see if we could hedge those effectively and you could find a way to sort of hedge the credit side a little bit; and you could find a way to hedge just the straight interest rate side. And it was always hard to find a way to hedge the spread and to find one instrument that covered them all was nearly impossible. So we felt pretty confident that we bought this at really a bargain purchase price just because of when we bought it and we did a lot of research on it; and felt that there was continued upside as to why we left it in the trading portfolio, at some point you might want to monetize that and take away the risk. But we don't project it outgoing forward. We haven't found a real effective way in the past to hedge it; but as I said in my comments, overall if you take the totality of the last six quarters even though there was a slight loss this quarter, it's been a fantastic investment for us.

And our final question comes from Daniel Cardenas of Howe Barnes. Please go ahead. Daniel Cardenas - Howe Barnes: Just a quick question on the FDIC transaction. Can you comment as to how stuck it the deposit base has been?

I don't have specific numbers. The Lincoln Park location was the more mature bank and has been around for decades and very loyal customers; and so we're seeing good retention there. Wheatland was more of a De novo bank and had funded some of their growth through higher rate CDs and so we are seeing some run-off at Wheatland and we anticipated that when we did the bid. But as Ed mentioned in his remarks earlier, Naperville is a huge market and once we get this conversion done in the next couple months, we'll really hit the marketing while once they are up and on our systems and I think any run-off that we're seeing will hopefully replace with new growth from our typical marketing that we do when we enter a new market and has historically been successful and quite frankly deposits are as Ed said they are coming in fairly good for us now and we're trying to find that point where you get the lowest cost and still build the value. So Wheatland, we expected to run-off. They didn't have a great core portfolio of deposits there, but we're expecting what we've run-off there to replace but nothing really different than what we anticipated when we acquired them.

I am showing no further questions at this time.

Okay, thanks, everybody and look forward to talking to you during the quarter and next quarter at this time. Thank you very much.

Ladies and Gentlemen, that does conclude today's conference. You may all disconnect and have a wonderful day.