Wintrust Financial Corp (WTFC) 2007 Q1 法說會逐字稿

Good afternoon. At this time, I would like to welcome everyone to the Wintrust Financial first-quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (OPERATOR INSTRUCTIONS).

Thank you. Mr. Wehmer, you may begin your conference.

Good morning, everybody. Welcome to our first-quarter conference call. It's springtime here in Chicago. Just 10 days ago, we had 6 inches of snow on the ground. So as usual, we went right from winter to summer here in Chicago.

Hopefully, the way our stock price moved today, you don't want to hear about much of us talking. You'd rather ask us questions. So we'll keep our comments at the beginning to a minimum.

As always, we'll start with -- it's been our practice to start with credit quality. Credit quality remains very good for us, as nonperformers actually decreased in total for the quarter; charge-offs also remained relatively consistent. We continue to have what I consider important is good velocity. We have been identifying any issues that we have and moving them through the system as quickly as possible, recognizing any losses that we have and moving forward and not being in denial.

So we keep pushing through on the credit quality side of things, and our stringent underwriting standards have served us well so far on the credit quality side. As we talked to you last quarter, and as we saw our annual report and what we talked about, we continue to execute the plan that we previously laid out to you. This plan is -- these tactics are designed to deal with the market conditions that remain prevalent at this point in time -- lack of credit spreads, inverted yield curve, and we still see some things going on in just the credit market in general that are not conducive to the way we like to do business. The tactics that we have employed of keeping very good credit quality but still trying to maintain good growth on the asset side of the equation, controlling our cost of funds.

Again, we continue to look at almost every CD that's repriced -- not almost every CD, every CD that's repriced. We continue to market to try to shift funds from the CD side into the money markets and savings and other more core accounts. If you recall, we commented how in the very low rate environment we had experienced a shift, I think, as all people were searching for -- our customers were searching for yield, trying to move people back into the more core accounts and get in line there. Both of those first two have been -- although it's just the first quarter of doing this, I think you can see some of the results that have popped through there.

The third is we really control our expenses. I think if you add up all our expenses, take salary and payroll out, especially payroll taxes are always a hit in the first quarter, I think our expenses might have been [quarter over quarter up] over maybe $30,000 or $40,000. We continue to look for ways to rationalize expenses and to keep our cost of funds under control.

At the same time, our model is based upon being asset-driven. Just to go back a little, you know that two years ago, we saw the credit markets kind of moving away from what we considered to be prudent and in line with the way we like to do business. Our loans and deposit ratio fell off from -- really, if you took what we sold over the 90% range down into the high 70's, we built that back up to 85% loan to deposit. We're going to continue to build that up with good quality loan growth, both through our traditional sources and through our commercial initiatives, which are going on in each of our banks right now, calling programs and the like. We're seeing some success there, with the understanding that gestation periods on this sort of thing are a little longer than you would imagine [on] building relationships.

But we think the market is very good and our timing is very good for getting in there. We have seen some reasonable results from that across the board. But we have to get back into this asset-driven mode. We have more assets than we actually need. When that occurs, you'll start seeing our balance sheets get back to more normal growth levels.

All that being said, although the quarter -- on an average basis, our balance sheet on the quarter-to-quarter basis was pretty much flat with the fourth quarter of last year, period end numbers shifted around a little. We had a run-up at the end of last year, and then it came off. So from quarter end to quarter end, it looks like we shrunk a bit. But on an average basis, we're pretty close right now.

So the phenomena has been a lot of higher-cost funds, the hot money, we have let run off. Non-relationship money has run off through our disciplined approach, and we have been, in our newer locations, picking up more relationship type business, and that -- in account total, that has been growing.

So again, going forward, we still don't see the market as giving us very strong, strong, profitable growth right now. So we are going to continue on this course of growing the smaller banks that need to continue to grow into their overhead, holding steady on some of the bigger banks, taking growth when it is available. But if they shrink a bit, we really don't care.

Just going forward along that line, until the market -- some changes in the market that allow us to get back into our more normal growth mode that you are accustomed to. But I think you can see that so far, so good, in terms of this plan. We have been able to execute our stock buyback. Dave can talk about some of the numbers related to that. We intend to continue doing that.

With that, I will turn it over to Dave. By the way, the numbers, I think, were fairly noiseless, if you will. We saw good growth where we wanted to see growth and not growth where we didn't want to see it. So we will leave that open to questions, for the most part, unless, Dave, you have some comments on that and maybe the stock buyback to begin with.

Yes, I'll just cover some of those areas quickly. As far as the stock buyback goes, at end of March, we have repurchased roughly 1.7 million shares at an average price of $45.78 per share. In the first quarter, the total was 1.3 million shares at an average price of $45.34. So, of our 2 million share authorization, we have accounted for 1.7 million through the end of March.

As far as the other income and other expense goes, Ed said it was a rather noiseless quarter; I think that's right. We saw growth in our wealth management income for the quarter in both segments, the managed money and the brokerage side. We continue to be encouraged about that business. Mortgage banking was $5.5 million for the quarter, which is sort of right in the middle of the range where we have been in the last five quarters. So that continues to plug along, and in an interest rate environment that has been relatively stable in that business for a while here. So that business is still performing as we have expected it to do the last few quarters. But then all the other non-interest income types were relatively stable with the prior quarter.

If you go to the other expense side, salaries were up $321,000 over the prior quarter, so a fairly de minimus increase there. The increase is generally related to year-end salary increases that went into effect in the first quarter, but we also had $1.2 million of additional payroll taxes in the first quarter relative to the fourth quarter. As you know, the payroll taxes reset at the beginning of the year, and it tends to be the highest quarter of the year. So without that, we actually had very good control on the salaries and employee benefit area.

If you add up all the other expense categories beside salaries and employee benefits, they totaled $23.8 million for the quarter. They were actually down $42,000 from the prior quarter, so basically flat. So we had good control on that aspect and really no increase in other expenses whatsoever.

Provision was flat with the prior quarter. Ed talked about the asset quality, and the margin was up 3 basis points over the fourth quarter. So the control on the deposit side and the mix changed a little bit to be more heavily weighted towards loans is starting to show some results.

But as Ed said, we don't have anything really unusual in the numbers this time around. So we will open it up to questions.

Well, just a couple of follow-up comments to Dave, if I could. We still have a lot of work to do here, right? So we met numbers, estimates. We are very happy with that, and we're happy with the progress we've made to date. We are happy that everyone has embraced the goals and we laid out and we explained to you in the previous conference call and conferences since then regarding where we want to go with our cost of funds, where we want to go with our other income, where we want to go with our earning assets and our balance sheet mix. Those are still goals that have not changed, and we still intend to -- we're still executing them. Everybody in this organization is on the same page in terms of executing those tactics.

But we still have a lot of work to do. Our core results, if you look at single-digit return on equity and 63 basis points return on assets is extremely anemic, and it's embarrassing to us as managers. We are doing everything we can to move that along. It's tough when you're a growth company and the market doesn't give you profitable growth.

We have a lot of seeds in the ground that we need to continue to build to fruition, and that's kind of hard to do. So we're kind of caught in that, but we're going to work our way through this and be just known for the fact that we understand that our numbers, our core metrics, are not where we want them to be, and that everybody is on the same page, working forward to push those up where they need to be, and then even farther than that.

So with that -- any other comments from Dave Stoehr, you have anything, or Dave Dykstra? We could open it up to questions.

(OPERATOR INSTRUCTIONS). Jon Arfstrom, RBC Capital Markets.

A question for you about your first comment, Ed, on the velocity in and out of nonperformer. You had one larger creditor, about $4.5 million, that you talked about on the last quarter call that came off. Can you talk a little bit about -- a little more detail on the velocity? How fast are things going in and how fast are they coming out? Or is that $4.5 million the biggest piece of the decline that we saw from the previous quarter?

We have that phenomena every quarter. I think $4.5 million came in and went out. I think this quarter, we had $1 million go in and go out that's out already. That occurs all the time, but there is actually very good progress this quarter, in terms of cleaning up older deals and putting newer ones in. We pride ourselves on being probably more conservative than most, in terms of identifying problems and pushing them through the system.

I think, if you look at -- a ratio I've always looked at in looking at banks is charge-offs compared to recoveries. We've always had a good recovery number versus charge-offs, which to me says that we are being conservative, we're pushing charge-offs through and then trying to look good on recovery thereafter. But the velocity is kind of hard to come up with any sort of metric to give you, because some take a little longer than others to work through the system.

But I think that you have to look backwards at that ratio of charge-offs to recoveries and look at our aggregate numbers, and you can get an idea of what we're talking about there. So I guess it's (inaudible) you have to take my word it that we haven't been surprised lately. We don't really get a lot of deals that kind of pop up and we go, whoa, where did that come from? It's usually something that has been on our smell list for a long time that we've been working to get out to somebody else anyhow.

So I think we have a pretty good handle on it. I think that we've identified these things early on and we pushed them through the system pretty quickly.

On expenses, you had good expense control for the quarter. Is there still more going on there? Can you get more expense savings and then, related to that, does this change your de novo plans for the rest of 2007?

Well, a lot of the expense savings that we identified just in the first quarter are those that will take place and be realized throughout the rest of the year. We've already identified a lot of different things that we could do. Again, I've used the analogy early on, we've been running fast -- like you live in a house for 15 years and you're raising 20 kids. When you take a break, there's a lot of stuff in the attic that you can sit down and figure out and save some money on, and we have been doing that.

We still believe that there are other areas that we have identified where we are now executing new strategies to actually save additional money. But these types of cost savings we're doing are more program-oriented, and you should see them survive through the rest of the quarter. So that process has worked very well for us, and should continue to -- when we lower our materiality limit per company down to $1,000, you find a lot of little things that maybe you overlooked in the past. We are still finding those, so it's still kind of fun.

As it relates to de novo openings, we do not have a new bank plan. We actually opened two de novos last year, which we -- the Old Plank Trail and then through the acquisition of Hinsbrook going out into St. Charles. So those are like two brand-new banks for us. We have all the costs associated with them and building them out. The Old Plank is opened in three locations and actually will be moving to permanent facilities over the next three or four months into those permanent locations. So there will be some expenses associated with those moves, but also some growth associated with getting drive-ins and getting a real presence in those towns.

On the branching inside, we open up in Bloomingdale in the next couple of weeks; that's a brand-new branch for us. [South Auckland Estates] will be opening up, and these are all expansion plans that we had well underway last year.

We still want our guys to open up a branch every two years. So we will continue with that, and there still will be some expenses associated with it going forward.

There won't be any new de novo banks this year; there will probably be five -- we only opened up one in the branch in the first quarter. That's in North Chicago. It's a branch at Lake Forest, and that's more of a low-overhead operation for us. Not our usual the building; it's a smaller convenience type facility, but it's doing very well for us. We're happy to be there. But there will probably be four or five more branches that open up through the rest of this year, and next year probably just about the same.

On the acquisition front, we have pulled back a little. We're not as interested in -- I always thought the Mount Prospect Bank that sold to First Midwest Bank Holdings was a fine organization and one that we might be interested in, but we took a pass on that. We continue to see acquisition opportunities, but with our stock price where it is, with some of the things we're trying to accomplish, it would have to be really strategic for us this year to jump on it going forward.

But growth will come back. This market will turn; it's just a matter of when. If it's a year or two years, we are still very [hard]. When we open these new branches and these new banks, the reception is great. People still want what we have to offer. These banks, the newer ones, do as well or better as the older ones that we open.

So everything in this model still works, except the asset side is just hard right now. If you can't be asset-driven, it's very hard to get that profitable growth. So we've got to be very selective on what we do and be very careful on what we do.

How does the premium finance backlog look?

Premium finance is actually -- they are doing fine. They have been able to move their rates up nicely. It's still very competitive out there.

We picked up a number of -- as I mentioned last quarter, a couple of national programs that are just kicking in right now. The soft market is not helping them much. We'd much rather have a harder market. But they have made up in terms of -- the average ticket size might be down a couple thousand dollars, but they have been able to make that up in volume. So they are working harder to get the same volumes on the books, but the business is still very good.

You have -- you can see there was a pickup in delinquencies kind of underneath the nonperformers that helps us get our late fees back. Our late fees have dropped from where we used to be at 2% to 2.25%, it dropped down to 1.5%. We're seeing those move a little bit more, so we kind of like a little bit more delinquency there. That helps the yield. I think we were -- what were we, 1.68% this quarter, Dave, something like that? I think we were around 1.68% in terms of late fees.

So that has moved up a little. So that's helping us, but the soft market still plays havoc with us. But the business is going great, in terms of the relationships and the number of transactions actually processed. So we are very happy with that business.

Ben Crabtree, Stifel Nicolaus.

Just a couple -- maybe a quick follow-on to the premium finance business. Given the short nature of the short life of those loans, are we kind of at the peak here in terms of what the portfolio will be on your balance sheet?

Oh, I don't think so. I think that there's still an opportunity for us to grow that business. We are a little bit subject to the insurance market or a lot subject to the insurance market itself in average ticket sizes, but year over year, we continue to process in our sweet spot more and more contracts. If you were to get a hard market and you went from the $27,000 average ticket size now back to the $35,000 that we experienced in the peak of the hard market, we would actually be higher than that.

But the business itself, the core contracts process, has continued to grow. We always anticipate it can grow 8% to 12%. We look at about 10% is what we like to see in that growth -- again, tempered by the actual insurance market itself and the average ticket sizes, which is a variable we can't control.

But we're still bullish on the business. The Chevy division continues to build and to grow. It's probably not growing as fast as we'd like, but it's still -- we are learning as we go. Again, the Chevy division, as we call it -- InFund is the actual name of it -- is the smaller ticket size -- less service, smaller ticket sized accounts. Their growth percentages have been great, but they are starting with a base of zero. So it's not material to us now, but hopefully over the next couple of years, we can build a couple hundred million dollar portfolio there, which will augment it.

We're also looking at -- there's the life insurance markets, something we have never been in before. But I know it's a huge business for AIG; the AIG's book has billions of dollars of life insurance financing for people doing estate planning and the like. That's something that we are exploring very hard right now, something we are considering. We will wait before we dive in, but it's another line of business we're considering to get into, in the premium finance business.

So we think that that is still a very vibrant business with a lot of growth potential for us. So I don't think you've seen the top of the portfolio for us.

Do I detect kind of a change in strategy here? You seem to be more comfortable just keeping these loans, rather than securitizing or just selling them.

Well, we sold them before when we -- we always thought, still do, that liquidity is very important. If you look back at the times that we sold it, we like to run at 85% to 90% loan to deposit. Every period up until the last couple of years, and then we stopped it, we were always at 87.5% loan to deposit or right around there. We would always sell to be right in the middle of where we felt we wanted to have our balance sheet.

Two years ago, when we kind of -- we actually didn't pull back from the credit markets. We just didn't change the way we underwrite things. The market kind of went away from us, and our loan to deposit went down to 79%. There was no reason to sell those loans anymore. We did it for a couple of quarters, thinking that maybe it was just kind of a temporary thing. But then we said there's really no reason to sell it.

If we ever get back to 90% loan to deposit, we probably would look to that asset because of the short-term nature of the asset, because of the ease in terms of selling it, we would probably go back to selling those loans if we could get a reasonable spread out of it. The spreads on this inverted yield curve -- you really got -- were getting skinny on us, too, at the time we stopped selling.

But we really do it just for liquidity purposes. Until such time as we have a liquidity issue, we probably won't be selling those loans. That was always the reason we did it, and going forward, that will be the reason we do it again.

Does having those loans in the portfolio have a measurable effect on the margin?

It certainly helps. We had 2 or $300 million of loan sales outstanding, really balances outstanding at any point in time where you can pickup probably 1.5 points pretax; you can run the numbers. So a couple basis points here or there, it certainly does help.

Then one last question on earning assets. Investment portfolio down sequentially -- how should we think about that going forward?

Well, as we continue, our goal is to deploy the assets and the loans and get back up to the 90% range. As that occurs, the investment portfolio will be running off to fund that. Hopefully, we will have some growth that occurs to fund it also.

Right now, when we have kind of a flat quarter and we did increase our loan production, you will have your investment portfolio run off on you. So the investment portfolio is our first line of liquidity. As we continue to redeploy, we would hope that it actually would go down a little bit more.

Is there kind of a minimum size we should think about, in terms of how big the investment portfolio needs to be as a percent of assets?

I think if you went to 90% loan to deposits, and you modeled yourself out at 90% loan to deposits, and we hit that number we will start getting more aggressive on deposit growth again. But you would then just back into what the investment portfolio would be. We've always run at 85% to 90%. I think if you ran it up to 90% loan to deposits, realize then that we probably would start -- you'd see deposit growth start accelerating a little bit more. Because it would mean we were getting back into the asset-driven position that we would like to be in, and then you can just the solve backwards to the investment portfolio. Does that make sense?

Yes. Okay, thank you.

(OPERATOR INSTRUCTIONS). Troy Ward, A.G. Edwards.

First of all, on the expense, specifically on advertising and marketing, can you give us a little bit of color on kind of the Wintrust branding effort? I really expected that the advertising and marketing line to be a little bit higher here in 2007. Is this lower number a pretty good run rate?

Well, the Wintrust branding will start taking place -- we expected to have it in place by the fourth quarter, we were going to kick it off. It's probably middle of May it will kick off, right now.

Will that have a measurable difference to that line item?

I think we budgeted about $250,000 for advertising as it relates to this, so it will add a little bit to it. But it will be taken away in some other places, too.

So I think the print advertising -- we're not doing radio, but the print advertising, the direct Web mail we're doing, we're working with a $250,000 to $300,000 budget on that. So we actually -- we expect -- the results have been pretty good so far. As we told people our story, have kind of come out of the closet in terms of who we are and how big we are and what we can actually do. We're now, with the La Salle announcement, even though it might not mean anything for a period of time, we think that we're very well-positioned. Our timing is very good on this right now. The [offset] hopefully will be additional free deposits and more loans.

Then on the salary and then benefit lines, it was -- considering the increase in Q1 related to the seasonal tax issues, that line was a bit lower than I anticipated. Going forward, do you think you'll get back down to that 33%, 34% range you saw in Q2 and Q3 of last year?

No, I don't see us going down that much. Some of it -- you'll get down a little bit more as payroll taxes go off. But some of the function [of that] was done a little bit in the first quarter was the mortgage banking revenue. Although it was sort of average, it was a little bit less than the fourth quarter, so some of commissions are down there. So some of it is variable rate, but I don't think you're going to see yourself go down into the low 33's again.

Then on the buyback, you are pretty well through your 2 million shares. Can you remind us when the shareholder meeting is, and if you anticipate the Board will look to reload that?

Well, the shareholder meeting's -- I think it's May 24th; it's the fourth Thursday in May, although a share buyback is just really authorized by the Board. So the Board will, I think, look at it and look at the program and look at some of our projections and consider it going forward.

But it's really a function of where our growth is and where the capital levels are at. We do, I think, have some capacity to buy some additional shares back, but we'll have to discuss that with the Board, and they meet next week.

We still think book and a half is a pretty reasonable place to be buying our stock. We're very comfortable with the approach that we have taken here, though we are taking the pain here on the results. But we are very comfortable with the conservative approach we have taken towards dealing with the market environment now, and we think it's very logical to be buying our stock back at these levels. So, to the extent that we can maintain good capital ratios now and on a projected basis, I think it's the right investment for us to make.

You briefly mentioned La Salle. Can you talk a little bit about both sides of the acquisition market? I know you always keep your toe in the water and are looking at possibilities. What do you see out there, and do you still anticipate looking for an asset-generating bolt-on business?

Well, you know, we kind of looked at buying La Salle, but that was a little bit bigger than -- of course, if you had seen me, you would say what's bigger than Ed's appetite? But there is a lot going on, on the acquisition side of things, I think. You know, there was an article in the American Banker last week, I think, that talked about Chicago and the acquisition market in Chicago. I think everybody -- my read on it is that -- right or wrong, and we could still be wrong. We could miss the biggest economic boom of all times. I don't know.

But right around two years ago, we kind of saw this happening, and we didn't change from what our normal operating procedures are. Other people kind of went along with the flow, in terms of how they were dealing with credit. I think they are starting to see the competition is tough, margins are tough. I think we're all looking in the same crystal ball, and some people are saying, boy, I don't know how I'm going to grow my bank or, is it the right time now to get out while prices seem relatively high.

So there is a lot going on, on the acquisition side of things. Again, as I stated earlier today, if something really strategic came along, we'd have to look very, very hard at it. But just bolt-ons right now -- it's harder to make sense out of a lot more of them than it was a couple years ago. So we are being very, hopefully, disciplined on what we're doing. I'm not going to say that we wouldn't consider doing one or wouldn't do one, but it really would have to fit a geographic hole that we need to be in, and the ability to grow that bank.

Remember, our philosophy is you pay full price for what you get, and you really make money on what you do after you get it. We bought banks and we've been able to grow them substantially in the short period of time since we've owned them. If I can't do that, if we can't do that somewhere, we're really not interested in just buying a bolt-on add-on for a couple of pennies a share; that doesn't make sense. So we think that there will be a lot of activity on the acquisition side, whether we are in it or not, will be whether it fits what we need to do strategically for the long term.

It sounded like most of those comments were specifically regarding to other banks. What about just an asset generator business like a la Tricom or the premium finance business? Are you still actively looking there?

Well, we are always looking there. I think we were offered pretty much every subprime mortgage operation in this continent.

Well, they are cheaper now, so you could --

Yes, I think I'll stay away. Did you ever notice those never work? They just -- they never seem to work. But we see that. There's a lot of leases, a lot of leasing companies that pop up that we're really not interested in. But we still keep our ear to the ground, looking for that right one that makes some sense for us. In the meantime, we will continue to try the to grow the ones that we have, get into related lines out of the ones that we have, like I talked about earlier, on the premium finance side. We will continue to look -- and same on the wealth management side. If we can find an asset manager that made some sense for us and brought us something we needed strategically -- and again, we could make money on it -- we do a lot of looking, but we haven't recently done a lot of buying.

Congratulations on a very nice quarter.

Stuart Quint, NWD Investments.

Could you elaborate a little bit on your thoughts on the competitive landscape once the La Salle deal closes? I'm thinking about things like the opportunity to hire bankers or dissatisfied bankers as well as loan and deposit pricing dynamics?

I think Chicago is competitive in will remain competitive. Bank of America didn't get to be Bank of America by being dopes. They are pretty smart guys. They are going to come in, and they are going to get a great franchise in La Salle. They will merge it into the operations that they have here, and it will be a very strong franchise and a good competitor.

That being said, any change will always open up opportunities for us, whether it's a name change or it's an acquisition or a merger, there will be some fallout from there. I think we are -- La Salle, even though it was owned by the Dutch, was probably a bank that was considered a Chicago bank. You look now, and you are going to have Bank of America, you've got Citizens, you've got Harris. None of them -- Harris is owned by the Canadians; Bank of America is out of North Carolina. You look, there's really no -- the Northern Trust is a wonderful institution and a great Chicago mainstay, but there's an opportunity for somebody to move into a position and be Chicago's bank and kind of take that up.

I'm very excited about where we stand right now, being -- notwithstanding Corus, but really in terms of a bank with local deposits, we are right on the heels of Northern, being the second-biggest bank headquartered in Chicago, if you add us up.

We continue to move into other neighborhoods and grow. I think that there's a heck of an opportunity for us as we embark on our joint marketing, our more regionalized marketing on the commercial side and eventually rolling that into more corporate identity regional-wide. We can move in and take a heck of a position here. I said this in our last couple of presentations.

It might seem to all of you that it's a fairly grandiose plan, but 15 years ago when we were sitting at a card table, we had no idea we would be where we are right now. I think that we are very well-positioned to go and take that positioning as Chicago's bank and move forward. It's really got us, all the guys at the banks and our whole management team, very invigorated about what began do over the next 10 years.

So the competition is going to be rough. The competition has been rough for forever here. But there are opportunities, and we think we're very well-positioned right now to take advantage of any fallout that will come from this or any other transaction, larger transaction, that might take place in this market.

[Kevin O'Keefe], Stieven Capital.

It's actually Joe Stieven. Ed, I was actually going to ask you a little bit about the La Salle --

The Cardinal/Cubs series this weekend? I don't want to talk about it.

I was going to ask you a little bit about this La Salle transaction, as far as have you guys already developed a sort of a game plan as far as what you're going to do? Because there should be a lot of opportunities, because La Salle obviously still is a great company, but whenever you have changes like this presents some opportunities.

I said in the last one, it does; the change does present an opportunity. La Salle is a great, a wonderful -- if you get what Norm and that crew did down there, it's a wonderful organization. You look at Bank of America -- as I said, they are no slouches. They know what they are buying, and they know they want to come into Chicago. They are not going to just lay down and let little guys like us run over them; they are smarter than that.

So it's going to be hard, but there is an opportunity here. In any change, there's opportunity. If people buy -- like I used to tell you, Joe, when we first started this organization, you kind of felt like Tom Sawyer and Huck Finn saying, "Hey, come on over and help paint our fence. We're really going to do something here."

We have that same opportunity right now, in terms of where we see us going over the next 10 years, what we think we can build in the city of Chicago and in our target market area. We think that there's an opportunity for us to take some positioning and to actually deliver on that. It's a grandiose plan, but what the heck? It couldn't be better, I mean, if you had a script that this would be a good script.

But that doesn't mean that it's going to be easy. It's going to be really hard, because the competition right now is fierce and it will continue to be fierce. But I think the ability to get good people -- not just from La Salle but from other people, because this momentum will build on itself. We get out in the market and we say this is where we are going, and more people will come and help paint our fence.

Momentum it is such a big thing in this. I think we have the opportunity to beat this competition, because we're going to have very good momenting walking into it as, really, one of the few alternatives to a foreign, an out-of-state organization. Chicago is a world-class city, and it deserves -- maybe we are being bold by saying it, but it deserves its own bank, either us or somebody else. We are going to try to make it us, so we'll see how it goes.

Ron Peterson, Sterne, Agee.

Kind of a different angle on the Bank of America-La Salle questions. You've had some relationships with La Salle in the past, I believe. I wonder if you could just elaborate on if the transaction might affect some of your relationships, especially in regard to the premium finance loans?

La Salle has been a great bank for -- when we first got this, La Salle backed us. We didn't have any money, and La Salle was our bank, back then. They backed us all the way through, and we've been very loyal to them. They are our primary correspondent. We have had multiple relationships with them on the funding side, from placing trust preferreds to placing sub debt to our senior line.

Then over that period of three or four years when were selling premium finance loans, we sold it through them and what you'd call a poor man's securitization. They would take it and and then resell it to their correspondents. So it was a very low-cost, flexible way for us to be able to offload those assets.

I don't envision, going forward, will we be doing the same things with Bank of America? I don't know. We're a customer like everybody else is a customer. If they continue to treat us well, then competition is going to be good. Maybe we can take advantage of both sides of that equation and cut our rates some more and get better fees.

But we will obviously have to make sure that we have alternate sources for all of our needs at the holding company. We have been doing a little bit of that even prior to this with all the noise at La Salle. We have been talking to other folks just regarding what is available out there.

But we're pretty loyal guys. I'll always be loyal to Norm Bobins and [Jeff Bowden] and the guys at La Salle, because they were there when we needed them. So we'll see how that all shakes out, but I think there will be -- there's other guys that would pick us up, if need be, I'm sure.

On the sale of the premium finance loans, there's a lot of people that knock on our door all the time to see whether they can get into that. So it's not just one source there that is available to us to sell through. La Salle made it easy, and it worked economically for us, but there are lots of other players out there that are calling all the time about that business.

I'd like to be back in the position of being able to sell those again. That would mean things would be going pretty good.

At this time, there are no further questions. Mr. Wehmer, are there any closing remarks?

No. Thank you all for your continued confidence in us, and I think our game plan plan is pretty straightforward. If you have other questions, please call Mr. Stoehr, Mr. Dykstra or myself, and we would be happy to respond to you. But thank you very much for attending today.

This concludes today's conference call. You may now disconnect.