Edward Wehmer - CEO David Dykstra - SEVP & COO Dave Stoehr - CFO Kate Boege - General Counsel

Jon Arfstrom - RBC David Long - Raymond James Michael Young - SunTrust Chris McGratty - KBW Brad Milsaps - Sandler O'Neill Nathan Rice - Piper Jaffray Terry McEvoy - Stephens Kevin Reevey - D.A. Davidson

Welcome to Wintrust Financial Corporation 2017 First Quarter Earnings Conference Call. Following a review of the results by Edward Wehmer, Chief Executive Officer and President; and David Dykstra, Senior Executive Vice President and Chief Operating Officer, there will be a formal question-and-answer session. During the course of today’s call, Wintrust’s management may make statements that constitute projections, expectations, beliefs or similar forward-looking statements. Actual results could differ materially from the results anticipated or projected in such forward-looking statements. The Company’s forward-looking assumptions that could cause the actual results to differ materially from the information discussed during the call are detailed in the first quarter’s earnings press release and the Company’s most recent Form 10-K and subsequent filings on file with the SEC. As a reminder, this conference is being recorded. I would like to turn the call over to Mr. Edward Wehmer. Sir, you may begin.

Thanks very much. Welcome everybody and good afternoon. Welcome to our first quarter earnings call. With me as always is David Dykstra, our Chief Operating Officer; Mr. Stoehr, our Chief Financial Officer; and Kate Boege, our General Counsel today. We will conduct the call, they'll start usual format and I'll some general comments on the quarter. Dave will give some detail on other income and other expense and back to me for some summary comments and thoughts about the future, and as always we’ll have time for questions. First quarter results got us up to an excellent start for 2017, net income of 58.4 million, was 19% over the prior year, 7% over the fourth quarter of last year. The $1 per share for the quarter was 11% over the prior year and 6% over the fourth quarter. Earnings were basically driven by couple of factors. One is the margin increase that our fully taxable given margin of 60 basis points for the fourth quarter to 3.39%. It’s a function of 13 basis points increase in our earnings asset portfolio from really the Fed rate increases and the like, 6 basis points from mix into higher earnings assets of our liquidity and higher loan to deposit ratios, 6 basis points for that and 3 basis points rate of contribution by less accretion income. On the credit side of thing, last quarter, I provide you all -- sorry about that, I said credit couldn’t get any better and loan held a bit. Net charge-offs of 1.6 million and 3 basis points from 2.8 million or 6 basis points. And our fourth quarter provision was -- I am sorry, and 3.5 million or 8 basis points a year ago. Our first quarter was 5.3 million compared to 7.4 million in the fourth quarter. NPAs fell both dollar and in percentage obviously. There are 119 million total NPAs, down from 128 million or 0.46% compared to 0.50% respectively. Reserve was constant at 0.64%. The coverage ratio rose to 159% from 140%. The other income side, Dave will obviously go into some good specific detail on this, but some general comments as expected the mortgage revenue was soft in the first quarter. Seasonality plus rate increases result in a very slow January and February, pretty much nonexistent. However, we know that pickup in March and our application volumes have increased, boding well for the second quarter and beyond. This is nothing that we -- was not expected by us. The reduction in mortgage volume had some interesting effects on our balance sheet, which I'll talk about in a couple of minutes when I get to the balance sheet analysis. Wealth management revenues were up $650,000 that’s to $20.15 million, up 10% from year ago, and 12% from the fourth quarter. Fees from covered cost were down 50% to $760,000 and that to be expected that’s one of our internal hedges that we use in the falling rate environment. The rising rate environment, we keep our balance sheet very positively gapped so that you would not expect us to be recording any sort of large numbers in that area as long as the rates are going up. Security gains were not existed this quarter. They were $1.6 million for the fourth quarter, so they had no help there. And other income, other expense was in line and Dave will discuss that. And then on the expense side, again Dave will take you through these, but I think you'll find that they were in good order. Having the mortgage business softness and the balance sheet activities that I will discuss in a second, raised our net overhead ratio to 160, obviously the 150 goal that we have internally. With the prospects for improved mortgage, volumes throughout the year and continued growth, we expect this ratio should be better than the goal going forward and obviously better for the entire year. You all notice there's other of our patriots have experienced, we got a $3.4 million tax benefit, we expected related to the adaption of the new accounting rules for share-based compensation. These benefits will continue to occur to us. They should continue that they will fluctuate just based upon quarters and when compensate -- when this type of compensation vest going forward. It drove our effective tax rate of 33.67 from close to the 39.6. And the balance sheet, you can see was really kind of an interesting quarter for us when we have experienced at a long time. Total assets were up by the all around a $112 million, the 25 around at least $25.78 billion, but on average assets were down $404 million compared to the fourth quarter. Deposits were up 72 million to the $21.730 billion, but on average were down $216 million of which broker deposits were down $170 million. Again, we only rely on brokered CDs to fund mortgages and to fill our gap situations. Core loss, not including mortgage related loans. Mortgage-related loans are mortgages held for sale and mortgage warehouse lending to third parties plus covered loans that there are not many covered loans where the CDs are left. We’re up $270 million quarter-versus-quarter, but up $500 million on an average basis first quarter versus fourth quarter. Federal Home Loan Bank advances were up $73 million at the end of the quarter, but down on the average basis $207 million and mortgage-related loans were down a $180 million period end balances, down $327 million on a quarterly basis. What we do to fund mortgage related assets again, mortgage is held for sale and mortgage warehouse loans to third parties, as we fund that with the short-term brokered CVs and with third party early with Federal Home Loan Bank overnight advances. This allows us to accordion the balance sheet, not sit on a lot of extra liquidity these days. So, when -- it’s obvious that when mortgages fell off for the first two quarters that we had those declines in both Federal Home Loan Bank advances of $207 million on average and a $171 million of brokered, that pretty much offset that. But we grew back at the end of the year showing strong volumes and mortgages for the pickup of mortgages and our own internal growth. Our loans grew for the most part towards -- we're back-end loaded. Again, January and February were very interesting months, not a lot going on but we were not -- I think that some of it was hangover from the large fourth quarter we had where we booked a heck of a lot of loans in the fourth quarter, but I think the -- we had good loan growth towards the end and we see that continuing into the first quarter already. Our pipelines are very strong right now as we indicated in the press release. They're consistently strong. So, as relates to second quarter prospects, period end loans, the 331 million to 228 million higher than the first quarter average. So that gives us a head start for the second quarter. That was a good loan pipeline, which again is $1.5 billion and this is -- these are core loans. This does include our niche loans. This is our core commercial real estate, commercial loans and the like, and again 1.5 billion gross, $934 million on a probability-based -- probability-closed based calculation. So and other pipelines are strong too in our premium finance business, our leasing business and our major niche businesses are all very strong, also. So, this all bodes well going into the second quarter especially considering that we see mortgage ebbs up in that business coming back in line. With that, I'll turn it over to Dave to discuss other income and other expense.

Thanks Ed. As normal, I'll briefly walk through the major components of the non-interest income and non-interest expense sections. Turning first to the non-interest income section, our wealth management revenue totaled $20.1 million for the first quarter of 2017, which was up from the $19.5 million reported in the prior quarter and was also up nicely from the $18.3 million recorded in the year ago quarter. The trust and asset management component of this revenue category increased to 13.9 million in the first quarter from 13.1 million in the prior quarter whereas the brokered revenue component declined slightly to $6.2 million compared to $6.4 million in the fourth quarter of 2016. Overall, the first quarter of 2017 represented another record high quarter for our wealth management fee revenue. Mortgage banking revenue decreased approximately 38% or $13.6 million to $21.9 million in the first quarter of 2017 from $35.5 million recorded in the prior quarter, but was slightly higher than the $21.7 million recorded in the first quarter of last year. The decrease in this category's revenue from the fourth quarter of last year was due to lower origination volumes as a result of the typical seasonality in the first quarter and the higher rate environment. The first quarter was also partially impacted by a $400,000 negative fair value adjustment related to our mortgage servicing rights compared to $1.2 million positive fair value adjustment in the prior quarter. We originated and sold approximately $722 million of mortgage loans in the first quarter compared to $1.2 million of originations in the prior quarter and 737 million of mortgage loans originated in the first quarter of last year. As it relates to the mix of business, our loan volume related to purchase home activity was approximately 56%, compared to the 52% in the prior quarter. As I mentioned given our existing pipelines and the interest rate environment and the pickup and spring home buying activity, we expect originations to increase in the second quarter of 2017, and we continue to look for opportunities to further enhance our mortgage banking business both organically and through acquisitions. Piece from the covered call options were $759,000 in the first quarter compared to $1.5 million in the previous quarter and $1.7 million in the first quarter of last year. Our revenue from selling covered call options tend to decline in periods of rising rates where we expect improvement and net interest income to offset such decline as Ed indicated in his comments. The revenue in the first quarter of 2017 for operating leases totaled $5.8 million, compared to $5.2 million in the prior quarter increasing approximately 12% during the quarter. The increase in this revenue item compared to the prior quarter is primarily related to growth and the operating lease portfolio during the first quarter to a $155.2 million from $129.4 million at year-end 2016. Again, these amounts income relate to operating leases only as capital leases are carried in loan section of the balance sheet. In regards to gains and losses on investment securities and trading gains and losses, the first quarter had a slight combined loss of approximately $375,000 whereas the prior quarter had combined net gains of $2.6 million. So, the combined change from the prior quarters and net reduction in our revenue associated with those two line items of approximately $3 million. Other non-interest income total $12.2 million in the first quarter of 2017 from $13 million in the fourth quarter of last year and a primary reason for the decrease in this category of revenue was related to $1.4 million less the swap fees, offset by the fact that the prior quarter had a $717,000 loss and extinguishment of some of our Federal Home Loan Bank advances. Turning to non-interest expenses, total non-interest expenses were $168.1 million from the first quarter, decreasing approximately $12.3 million or 7% compared to $180.4 million recorded in the prior quarters. And I'll walk through the more significant fluctuation relative to the fourth quarter for the individual categories. Salaries and employees benefits expense decreased approximately $5.4 million in the first quarter compared to the fourth quarter of 2016. The base salary component was up approximately $1.9 million or 3.6% in the first quarter compared to prior quarter. The first quarter included the impact of annual base salary increases of general which took effect on February 1, and those base salary increases were generally in the 3% range. So, we had two of the three bonds of the quarter at those higher base salary levels. Additionally, salary deferral related to loan origination cost which reduced salary expense were approximately $1.5 million less in the first quarter of 2017 in the prior quarter due to slightly lower loan origination volumes this quarter and the fourth quarter of last year. Employee benefits expense was up approximately $1.8 million in the current quarter, compared to the prior quarter. Significantly impact in this quarter was payroll tax expense, which is approximately $1.4 million higher, payroll tax substantially higher in the first quarter of each year and I should also note that in the fourth quarter of 2016, the employee benefits category had a $492,000 pension cost adjustments that did not similarly impact the current quarter. Our commissions and incentive compensation expense decreased approximately $9.1 million to $26.6 million from $35.7 million in the prior quarter. The Company experienced the decline in commission expense related to the lower mortgage revenue along with decline in accrued incentive compensation from the higher fourth quarter of 2016 levels. As I discussed in regard to the operating leases in the non-interest income section, the Company experienced a corresponding increase in depreciation expense related to those operating leases of approximately $417,000 due to the growth in that portfolio. Again, we'd expect this category of expenses to grow at a rate similar to the revenue side as the portfolio of operating leases continues to expand. Occupancy expenses decreased by $1.2 million during the quarter, compared to the fourth quarter of last year, this was due primarily to slightly lower rent expense on lease properties as well as lower maintenance and repaired costs including less no renewal charges during the quarter since Chicago had really no snow in January and February. Marketing expenses declined by approximately $1.5 million from the fourth quarter of 2016 to $5.15 million. As we discussed on previous calls, the fourth quarter of the year tends to be our lowest quarter of marketing expanding. We'd expect this category of expenses to increase in the next couple of quarters to levels similar to was slightly higher than in mid-year 2016 amount. So, our corporate sponsorships tend to be higher in the second and the third quarter for the fiscal year. Professional fees decreased to $4.7 million in the first quarter, compared to $5.4 million in the prior quarter. Professional fees can fluctuate on a quarterly basis based on the level of legal services related acquisition, litigation, probably loan workout activity as well as use of any consulting services. With that being said, total professional fees within the range experienced over the past five quarters and a level that we think is reasonably expected. The miscellaneous line item on the overall non-interest expense category declined by approximately $2.2 million in the first quarter to $14.8 million, the primary reasons for the lower expense levels due to a lesser amount of travel and entertainment expenses and a decline in loan-related expenses due to the lower level of mortgage loan originations and other loan originations. We would anticipate this expense category with increase in the second quarter with anticipated increases in loans and seasonally higher travel and entertainment expenses. If you combine all the other expense categories other than the one that I just discussed, they were down on an aggregate basis points approximately $1.6 million in the first quarter compared to the fourth quarter of last year with really no significant items that are particularly noteworthy on an individual basis. So in summary, the first quarter generally represented a solid quarter and expense control. As Ed mentioned, our net overhead ratio did end being above our goal of 1.5% or that was mostly due to a slightly lower level of total average assets for the quarter and the significant decline in the mortgage banking revenue and related expenses. Lower mortgage origination business is detrimental to the net overhead ratio that tends to help the efficiency ratio of it. So, we’ll continue to work hard and effectively lever our expense base and update you on our quarterly calls. So, with that, I will turn it back over to Ed.

Thank you, Dave. So, in summary all-in-all, it's a pretty strong start to the year for us. We’re all positioned for not just the second quarter but really for the rest of the year. The two rate increases, the one in December and the one in March that have occurred are working their way through our income statement, which will continue to show positive results, additional positive results. And the additional raises will also -- interest rate raises will also -- should also materially affect our margin. Loan pipelines are strong. We start the quarter of $228 million ahead of the again given the fact I talked brought earlier that ending loans were that much higher than average loans for the quarter. We also like the fact that we -- it's kind of the material number, but one more day in the quarter is very helpful to us. The rate -- it increases our net interest income just to start $208 million. That's nothing to seize at. Mortgage business appears to be returning to good level and March results of an early indication, the application volumes are continuing upward and we expect to have a good mortgage quarter in the second quarter and third quarter. Our organic growth that has been emphasized although all of our sector pipelines for acquisitions are full and very active, but we see good organic growth both on the deposit side and the loan side going forward. Credit is good. We see no, nothing would make us think otherwise right now. We continue to call the portfolio for any cracks. So, I've mentioned in our previous calls, it's easy to push a piece of business out right now. There will five other banks with the term sheets there within a day. So, we’re able to really dig deep and make sure that we can maintain that pristine nature of our loan portfolio, the one that you would become custom through seeing as it relates to Wintrust. So, we continue on our whole approach and that’s again we regard shareholders equity very carefully. Dilution is a four letter word around here. Our goal is to put up double-digit earnings increases to continue to grow smartly grow without diluting our shareholders. It takes a lot to make a use of those earnings and I don’t want to give it up about the door to do the deal. We would -- we have a number of initiatives organically that we’ll be starting -- there are plan to be started later in the year that the cost of those will run through the balance sheet -- I'm sorry, through the income statement, but it is better than buying in a line of business of the 2.5 times book and taken it up to back door. So, it's more the same for us, we haven’t really changed what our goals, our directions are, but we’re off to a very good start for 2017 and we expect that will continue, and you can be shared our best efforts in that regard. So onto questions, if you could please.

Thank you. [Operator Instructions] And our first question comes from Jon Arfstrom from RBC. Your line is open.

A couple of questions I wanted to ask on mortgage. You mentioned January and February were slow and March was much better. How different was it? Give us an idea of maybe some of the production numbers in the first two months versus March.

Maybe I can talk quarterly. The full first quarter as you know was about $722 million in production. My guess it will be awfully close to that in the first two months of the second quarter. So, my guess is that we should tap a $1 billion of production in the second quarter. I think we obviously got to get the pull-through of based on applications that would be my guess.

Jon, this is Edward. We can't of course -- you know, it's coming back, we can't accordingly expenses. So, the volume that comes in the lot of it just -- that incremental volume is over the 700 of that Dave talked about. That will hopefully just fall the bottom line.

Okay, that's what I was getting at in terms of what you're thinking for the second quarter, so that helps. And then on the loan yields, they were up about four basis points sequentially and I know there's other things happening there, but you provide that table about loans that re-price in one year or less, and I'm just curious if you had to guess how much of that December rate increase do you think has flowed through into loan yields? And is there more to come just from December alone?

Yes, I think the LIBOR rates, the life insurance portfolio is 1/12, those -- that $3.5 billion plus or minus replaces 1/12 to every, so that's got to move through the system. The premium infinity -- commercial premier finance business that’s every 9 to 10 months have re-priced. That’s going to flow through the system. So, we expect continued improvement of the margin. Remember too, we have three basis points headwinds on the accretion falling on. We’re not one of those banks and cases that have to think another shelter to go to keep our accretion up. It's really run off and it is what it is. We have an opportunity that fix on the road where it'd be what it will be, but we’re not chasing that.

Yes. Okay. And just overall margin, it feels like you can maybe shoot to the higher end of the range of expectations. The beach ball is rising, I guess to use a very old analogy. But how do you feel about just overall margin potential for the Company, just from the two hikes we've had?

Well, I think this put on perspective our model sits to the every quarter point. The first one started around $23 million pre-tax on an annual basis that drops about $1 million and $1.5 million in the second one. And then it drops like that as you go forward, because of the way we how long it takes to get it fully observed plus lagging the deposit cost going forward. So, any step of 23, 23.5 drop a million and a half, drop million and a half we got to see a lot of that come through yet. Also, I will tell you that we haven't seen a lot of first run on the rigs to come up on the deposit side. I think that that’s changing a little bit and those numbers I just gave you include those rigs. So, we’ve actually have a little bit more benefit than you would anticipate in -- on the first two rises, because we haven’t really won to our model numbers, our model rate numbers yet, but we’re seeing a little bit more pressure there. And but just with comfortable basis points here and there. So again, I think we’re ahead of the game right now and that $23.5 million and then $23 million should come through, the first two rates yield increases because we have not raised deposits as fast as we have in our plan. However, that won’t be the case going forward. I believe that there will be pressure and there is some pressure on raising deposits five or six basis points. So, we’ll be back on plan, but I think we’re a little bit ahead of plan right now.

And our next question comes from David Long from Raymond James. Your line is open.

It’s the follow-up on Jon’s question regarding the net interest margin. I think you said in the quarter that the December rate hike added about 8 basis points. And you look it from a basis point perspective, looking after the second quarter. Will the March hike have the similar impact in the first quarter afterwards? Or will it be more so or less so what do you think?

Well, I think you can assume on a set -- on our balance sheet that would have a descent effect of the -- the first one was $23.5 million, a little bit ahead of plan on that. Second one should be relatively the same. So -- but we also expect that first one to continue to pursue the income statement through. You see what I mean, that's going to take a year to fully probably absorb this. I think a year to fully absorb. So, there might be a fair assessment what you laid out there, not quite sure, I don’t have it in front of me. But I think we expect the margin continued to grow based on these rate increases and how we positioned the balance sheet.

Okay. And then the second question I had regarding the American Homestead acquisition that closed in the first quarter. Would you -- you said the volume was about 722 million in total. How much do they contribute in the first quarter?

I don’t have that number. But their reduction last year in total was $55 million. So, it was not a significant piece for the mortgage banking business and it would be a small contribution. But one that we like because it helps us diversify geographically and product mix wise and helps us to supplement our existing business out in the Rocky Mountain region. So, we like it, but it's not a significant contributor on the overall margin banking business.

Got it. And then last thing regarding the tax rate, obviously the change with the benefits from the stock compensation and you make the comments that would be somewhat volatile on a quarter-to-quarter basis. But you’ve been running at about 38.7% to 38.8% on a fully tax equivalent basis. Do you have any sense of what the tax rate should look like over the course of the year?

Well, that was those share based benefits, you're right, it's probably somewhere in the 37.5% and after 38% of effective rate. Now, the first quarter as we said in the press release is higher because a lot of our share-based vest in first quarter.

That was a pretty long-term incentive.

Yes, our long-term incentive plan and there was a fair number of options that we exercise because with the quick and high increases in stock prices. There was more options that were exercised, so it’s really a function of when people exercise their options, when share-based plan vest and what the stock price is. And so, we would expect the first quarter to be outside relative to other quarters. And I can’t tell when the employees are going to exercise their options and what's the stock price is. So, it's hard for me to put an exact on there, it will be a little bit volatile, but it should be much less of an impact in the second quarter and third quarter and fourth quarters.

And our next question comes from Michael Young from SunTrust. Your line is open.

I just wanted to dig a little deeper, you have said that the M&A pipelines were looking pretty strong across the board on fee income and whole bank side. Could you just maybe elaborate a little more on what you're seeing and maybe the magnitude of what you're looking at there?

Well, if you look at all of our line of business, I mean we historically we’ve been interested in the mortgage and expanding our mortgage banking presence. We think that people are doing these mortgages and people are seeing kind of the end of the rainbow there and kind and are being more interested in selling we like the increase to expand that our national footprint there. So, we’re active in that regard, we’re active on the wealth management side, continuing growth for opportunities there both on the trust and asset management and the brokerage side. So, we’re seeing we always see opportunities there. And on the banking side, I think that pipeline is very strong. We’re still interested in the smaller banks, we’re not really go back to my statement on tangible book value and pricing has not moved away on some of the smaller banks yet. Our price increase certainly has helped us in that regard. Also so, we’re seeing activity across the board from all areas of our business and our specialty business. The specialty asset business is seemed to go at very high multiples compared to book value, and we see more lists out opportunities there. Again if you all turn this to buy something to two and a half to three times a book to get into an asset class or to bring in a team in that might cost you, you might lose a $1 million or $1.5 million of first year. But make money or insight the middle or the second year going forward, that’s a lot better deal for us to that for our shareholders have build up organically is appose to again create a lot of dilution on the back door. So, we are active in all areas of our business right now, and I think -- I would probably but had a parameter doing let say activities were up probably around 25% across the board in terms of opportunities in all assets and areas of our businesses in the last year. That’s just kind of thumb in the ling sort of thing.

That’s great color. Thanks, Ed. And then maybe thinking about the back half of the year or maybe getting into early 2018 with the kind of organic growth that you're seeing positive signs and then potential for some M&A. how are you feeling up all capital and where do you think you might have to be active on that space?

Well, it's an interesting question. The first quarter was have a little bit lower growth rates and good earnings actually it was kind of nice we all actually created capital quarter, not our usual growth there. So, it is always we will maintain our capital ratios. We will, if we have deal or we have to have something we have to do we see an opportunity that will require capital we will go get it, if our organic growth takes off we'll go get it, but right now just based on what we think and what we know, where we don't know about deals we don't put them in, we're pretty self sufficient right now. You can see our capital ratios propped up with our cash balances which we always look at very closely, propped up also the holding company. So we actually, we're in better shape than we were in the fourth quarter relates to have the graph and get any but I think we're pretty self sufficient understanding abnormal extraordinary organic growth or deals.

And our next question comes from Chris McGratty from KBW. Your line is open.

Dave or Ed, the balance sheet, the 600 million decline in the liquidity portfolio. How should be thinking about the size going forward? You know said it another way, is loan growth going to match or in asset growth? Or is there any more kind of remixing that you plan to have with the balance there?

Again, we try to run at 85% to 90% loan to deposits. We ran higher than that this quarter because of just the dynamics of the quarter itself, which was helpful, but we were going to stand at 85% to 90%. We and the rest of that is in our liquidity portfolio which was normally barred up. At the end of last year, our bar go wasn't weighted properly and probably was short, was more short than long -- pardon me, and as we say that we will continue to let her out as rates go up, to even that out, even out the balance between short term and long term, maybe even push it a little bit more long term to bring our high rates still. So and you have to look at in that perspective or it was kind of a goofy quarter on the balance sheet side, so going forward I think that you will see us continue to slowly extend the portfolio back to again, last quarter I talked about the duration of the portfolio and we raised a little bit in the fourth quarter, we raised it a little bit in the first quarter we’ll continue to do that so possibly depending on what we see going on in the world, I am hearing more and more talks about hyperinflation coming in or something, that would be fun, but you know and maybe as wholesome as goofy radio stations but we will probably start, we will continue that plan to latter out as year goes on.

Okay, so latter in and out and probably a little bit of growth in the dollars of the portfolio too.

Yes, if we grow, right the 20% of whatever 15% whatever we put in, we'll grow.

That's helpful. Just a couple of housekeeping. Did you -- I think Dave you mentioned in MSR adjustment, could you repeat the number in the quarter?

It was a four. The valuation adjustment was a $400,000 negative adjustment and the MSR asset grew more than that because we retained more servicing right and capital lines those servicing rights. But from what through the income statement from evaluation perspective, it was relatively small adjustment 400,000 negative.

What we're doing now Chris is input the loans we're actually retaining services, we kind of hand it off to our competitors. So, in doing that when we look those loans, we’re adding to that asset class, but the actual overall asset class evaluation adjustment went down to have the differentiate between the two.

And then the conversation announcement, you guys announced earlier in the week. Can you just remind us?

Can you just become allusive of it?

Welcome to my world Chris.

I don’t know how to follow that up.

Don’t try.

In terms of the P&L adjustments, the preferred dividend line and the share count. Can you just remind us impact of any?

Yes. So, the last dividend was paid as of Monday. And so, the 5% dividend on those preferred dollars will see and then the share will convert to common which is already in our common stock equivalent calculation. And so, the payout at the common dividend right now versus the 5% preferred dividend rate.

Okay.

The shares will convert from common share equivalence to actual common shares outstanding.

But the 56 were diluted, is that still a good number?

That’s still a good number, yes.

And our next question comes from Brad Milsaps from Sandler O'Neill. Your line is open.

You guys have addressed most everything, but just wanted to follow up on some comments you made at the end of your prepared remarks about, thinking about maybe some bigger initiatives or some initiatives in the back half of the year. Just kind of curious maybe an order of magnitude kind of where you're thinking about there you guys have a done a great job driving in that overhead ratio lower in terms of management expenses as well over the last five or six quarters. Just maybe, I think you about correctly maybe you take one step back in terms of the expense management in order to take maybe two steps for the next year with some new revenue initiatives or about reading too much into that?

Well, I think you got it partially right. Yes. Again we would rather do that, and take our dilution to the income statement and take us through given up a lot of back door. So, but that being said I didn’t calculate and we will be -- we should be ahead of our 150 net overhead ratio goals for the year. So, lot of these initiatives were taking will cost some money, but they are not going to be, I don’t believe material on up to make us below through and put up big numbers. So too early that we’re making, if we did a deal that was 100% cost outfield like we did in the couple of last year, it was last year?

Last year, 2015.

2015, two years, like we did two years ago, that took below a step a little bit, but in terms of organically no I don’t think that any of them will be material, I made that comment more to just say we continue to look other opportunities to save the diversified, but counted by the fact we expect that over ratio that people or peer are targeted goal for the goal going forward into the year.

And our next question comes from Nathan Rice from Piper Jaffray. Your line is open.

Just still make your comments about deposit pricing and environment that we sit in, in to Chicago land area. Obviously core deposit growth was a little slower this quarter and it doesn’t look like you guys changed your pricing much. Just curious what the outlook for deposit growth of some the area and kind of update on the completive environment that you guys are seeing?

Well, we obviously, again we’re ahead of our own model in terms of where are pricing is, where pricing should be. We had a past move just based on the asset, just the fluctuations that took place in the first quarter we have had to do much. Going forward however, we are seeing some pressure and I think we’ll have to go up to bring rates up a bit. But they are bringing up to the levels that we’re in our plan and our plan resulted in that $23 million plus or minus increased for, annual increased for quarter point rise at the Fed. So you’re talking 5 to 6 basis points overtime that will come in right now on a blended basis. So yes, I think pricing, it is getting a little bit more competitive out here and everything will depend on our asset growth, which is usually pretty good. We are, we’ve always been very good organic growth and we’re rekindling a lot of those ideas again, and going out, in anticipation of some really good loan growth, but we still see. But I think you’re talking within 5 or 6 basis points, which of course an offer double I guess.

Got it. And then just kind of thinking about the growth within the life insurance peer finance portfolio, obviously it’s been a nice growth driver over the last several years. And I appreciate the ad disclosers in terms of the breakup between variable in fixed within that book. Just curious kind of what the growth outlook for that portfolio looks like going forward particularly as we see the Fed continue to tighten. In other words, how elastic is that book to additional rate hikes?

Well, the majority of the book is based on one year LIBOR and we’re obviously not -- have not seen a flag yet out of that business on the left side. We provide a very specific value-add to the providers who follow that business to us. And you’re not seen the price worth yet there. It is a very competitive business, but we’re able to hold our own. We haven’t seen a lot of repayments yet as LIBOR, one year LIBOR is basically in the head of the Fed raises. So these rates have been moving for the last six months, we haven’t seen an exodus or a lot of pressure there as of yet. So, that business continues to build in the growth and we’ve seen always into that it would change. Dave?

Yes, I mean, rates are still relatively low. These small increases are now to dramatically change any years of those borrowers. So maybe comeback and ask that business, if they start to see 300 and 400 basis points increases, but I don’t say 25 basis points increases are going to stop people to take it advantage of that type of product.

And our next question comes from Terry McEvoy from Stephens. Your line is open.

First question is on the $580 million franchise portfolio you bought last June. How has that performed relative to expectations? And I’m thinking runoff, delinquencies, and then maybe as a follow-up how has GE exceeding that market impacted margins in the market itself?

It's actually been better than we anticipated. The overall portfolio in the fourth quarter last year grew by $90 million. In the first quarter, we picked up some new relationships but we also are continued peering down. We had a lot of these relationships that we picked up or over our internal hold limits. So, we have already anticipated selling pieces of them off. So, it's actually delinquencies are not existent and the volume has been very good. GE existing the business has appears that it saw that the three of us again what California and Tennessee and us. So, with three of us are competing now to get the business and everybody knows all the players in this. So, it’s a we’ve seen to be winning our share of business and it's working better than anticipated and always used on credit have developed that we've seen.

And then just one other one. The market value of Wintrust is up about 30% since the elections. Salaries expectations, are they up 20%, 30% or above 40%? I'm trying to see how the salaries have reacted to your public currency which is done well much like others?

Well, so our expectations are probably up about sitting on the size of the bank. On the bigger banks they got comps out announced because some big deals have been done at some pretty high numbers. So, there are some comps out there for banks over $1 billion and those are obviously up from in the 190 area to the 2.5 times book area as what those guys are looking forward. On the smaller banks and still case-by-case basis, but we used together 140 now looking at 155 or 160 is more than average. So, while I'm talking about multiples of book, but their earnings have picked up also with the rising rates that will put the portfolio to move so their earnings have move. So, can’t see much of the move on PE sort of approach.

[Operator Instructions] And our next question comes from Kevin Reevey from D.A. Davidson. Your line is now open.

So, I think Dave earlier your comments, if I got the number correct where you said that your loan pipeline was about a $1.5 billion and that includes your own C&I and CRE and then your probability was $934 million. Did I get that correct?

Yes. And that’s on Page 12 of our press release too.

And how does that compare to where it was same time last year?

Well, I can tell I think you're going to ask me that. Last year so we’re $1.498 million now is a 1.519 million gross, this time last year, March of last year. I don’t have the probability number from last year.

So, pretty much flat.

Yes, seasonally flat but still pretty good. We are -- as we gather more data, we have more time and more data that we’re able to plot this out. There is and you kind of see a rhythm to this volume to these volumes right now. So, probability was just about the same as it was. So, in March of last year, so it's pretty much even.

Great. And then as far in the -- with the pipeline is that kind of pretty even, evenly spread out as far as your footprint goes?

Most of and from our footprint perspective figured out in geography generally a little over 90% of our loans are done in Illinois, Southern Wisconsin area for our banking business is that and the remainder of it. If it’s out of state, it generally has an access to our customers here in Chicago, but roughly 90% is in the Illinois, Southern Wisconsin area.

And at this time I'm showing no further questions, I’d like to turn the call back to Ed Wehmer for any closing remarks.

Thanks very much, if anybody has any further questions or something comes to mind, you can always call Dave or I. We look forward to hearing from you. We look forward to talking to you this time next quarter and everybody have a great spring. Thanks very much.

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