Edward Wehmer - CEO, President David Dykstra - COO, Senior Executive Vice President Dave Stoehr - CFO, Executive Vice President.

Jon Arfstrom - RBC Capital Markets Christopher McGratty - KBW Brad Milsaps - Sandler O'Neill David Long - Raymond James Emlen Harmon - Jefferies.

Welcome to Wintrust Financial Corporation's 2015 Second Quarter and Year to Date Earnings Conference Call. At this time all participants are in a listen-only mode.

[Operator Instructions] 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 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 any such forward-looking statements.

The Company's forward-looking assumptions that could cause actual results to differ materially from the information discussed during this call are detailed in the second quarter and year to date earnings press release and in the Company's most recent Form 10-K and any subsequent filings on file with the SEC.

As a reminder this conference call is being recorded. I’ll now like to turn the conference over to Edward Wehmer. You may begin..

Good afternoon everybody. Welcome to our second quarter earnings call. Dave Dykstra and Dave Stoehr are with me here. We will have the same format as we always do.

I'll give you some general discussion about the quarter and Dave Dykstra will jump in to give you detail of other income and other expense and then I'll come back with the summary and talk about the future and then time for some questions. Stated in our release the second quarter was really solid in all aspect of our business.

Net income of $43.8 million was up 14% over the same quarter last year $0.85 per share, was up 11% over the same quarter last year. On a year to date basis we're up 12% and overall earnings of 11% and earnings per share, if you look at asset growth over the last year up $1.9 billion or 10%, deposits up 10% and loans are up 13% to $15.5 billion.

If you look at first quarter versus the second quarter, assets were up 400 million, deposits 144 million, and loans up 15%, $561 million, so good loan growth. That loan growth as we said in this statement itself was really balanced across all categories, our pipelines remain consistently strong.

We have very good momentum on the earnings and the loan generation front as our brand awareness continues to permeate the market that we want to deal in and we're doing the deals on our terms. We have not -- as always we do not really go up of our -- our loan policy and our pricing parameters they don't change to fit the times.

You will notice that our loan-to-deposit ratio was higher than our 85% to 90% stated goal and we did that to accommodate to the acquisitions that are taking place in the second quarter. So we will hit the ground running with those acquisitions fully optimized on the balance sheet.

On the deposits front demand now makes up 23% of our total deposits, every quarter we seemed to raise 1% or 2% in that as our commercial initiative continues to move forward and that bodes well for the future as our deposit base -- those demand deposits do look a lot of money if -- besides if any when they ever decide to move their -- to move rates.

Mortgage results were strong and projections show this continuing into the near future. We know when rates go up there will be a little bit of drop off.

We -- during the quarter 36% of our volume was refis in normal times that's about 15%, but we do believe that rates -- that there is a lot of pent up demand for housing and that should offset some of this, but we do stand ready to cut costs and according very quickly when rates go up, we expect to, expect volumes to stay high for the immediate future and when rates move up a little, fall off a bit and then come back to a consistent sort of level, we’re prepared for that and when that does occur obviously we are very well positioned for rising rates and any offset in mortgages should be -- any mortgage drop off should be offset by increases in that net interest income.

We continue to look at expansion opportunities in the mortgage area. We think that when rates do go up there will be opportunities to pick up, both producers and maybe additional platforms at very reasonable prices. So it includes a good opportunity for us and we'll continue to look in that. Wealth management also had a good steady quarter.

Assets under administrations are now at $20.9 billion at quarter end and we consistently grow and build that and it's really an important part of our strategic emphasis.

I'll let Dave take you through the details of other income and other expense in a minute, but I will point out that the net overhead ratio, the measure that we really to look at, to look at how efficient we are fell to 1.52% for the quarter. So as stated in the past, we want to be 1.5% or better as we believe that's the mark of a well loaned bank.

We are constantly working on this through expense control, through growing into the infrastructure where we know we do have capacity due to our flurry of acquisitions and opportunities that took place during the cycle in the life.

We know that those are not fully optimized and the acquisitions that we're bringing on this quarter are really strong cost out acquisitions and I'll talk about that a little bit letter. Credit quality continuous to get better.

The reserve coverage is very good and that charge off are at pre-crisis levels and NPAs continued to drop in total dollars due to pre-crisis levels or below. Our goal is to continue to work on that to identify deals that might be going a little bit sour and pushing them out the door as quickly as we can.

We've always done that, we will continue to do that. Capital ratios remain strong. They were bolstered by the $125 million offering we did earlier this quarter and those funds will be used to support the acquisitions that we announced and future growth going forward, so we feel very good in really all aspects of our operations right now.

Our balance sheet is solid. We will continue to be core funded. We're 96% I believe core funded in the operation and we continue to build and grow that franchise. So with that, I am going to turn it over to Dave to take you through other income and other expense..

Thanks, Ed.

As normal I’ll just tough on the non-interest income and non-interest expense sections and I will start with non-interest income, our wealth management revenue totaled $18.5 million for the second quarter which was up slightly from the 18.1 million that we recorded in the prior quarter and the 18.2 million that we had in the year ago quarter.

The trust and asset management component of this revenue category continued its consistently strong growth, increasing to 11.7 million from 11.2 million in the prior quarter. Brokerage revenue remained relatively flat at approximately 6.8 million compared to the 6.9 million that we had in the first quarter of the year.

Overall this quarter marked another solid quarter for our company in terms of wealth management revenue and we look forward to continued growth there.

And as Ed mentioned on the mortgage banking side, it was a strong quarter, mortgage banking revenue increased $8.2 million to 36.0 million in the second quarter of 2015, from 27.8 million recorded in the prior quarter and was substantially higher than the 23.8 million recorded in the second quarter of last year.

The company originated and sold approximately $1.2 billion of mortgage loans in the second quarter compared to $942 million of loans originated in the first quarter of this year and 912 million of loans originated in the year ago quarter.

Also during the second quarter as would be expected in strong spring buying season we experienced a higher level of purchased home activity relative to the refinance activity and that mix of loan volume increased to the low 60% range from the mid-40s in the prior quarter.

Fees from covered call options increased to 4.6 million in the second quarter compared to 4.4 million in the previous quarter and 1.2 million recorded in the year ago quarter.

As you know the company is consistently utilized its fees from covered call options to supplement the total return by hedging what could be an interest rate risk on the related agencies and treasury security that we hold in that portfolio.

Revenue from bank owned life insurance assets in the second quarter was $1.4 million higher than the amount recorded in the first quarter this year and that was due primarily to the recognition of $1.5 million debt benefit.

Turning to the non-interest expense categories, non-interest expense is totaled of $154.3 million in the second quarter of 2015 this is increasing approximately $7 million compared to the prior quarter.

Now clearly the biggest drivers of the increase were elevated commission and incentive compensation combine with an increase in advertising and marketing cost which were offset by a reduction in employee benefit expenses.

I'll discuss each of these categories next, but I would like to note that if you exclude these three categories of expenses the remaining total non-interest expenses is actually declining from the second quarter by approximately $42,000.

Focusing now on the individual categories that have notable fluctuations, salaries and employee benefits expense increased $4.3 million in the second quarter compared to the first quarter of 2015.

The increase in this category was due to an increase in commissions and incentive compensation expense of $7.9 million offset by reduction employee benefit expense of 3.4 million.

The increase in the commissions and incentive compensation expense was driven largely by the additional commission related to the substantial increase in mortgage loan origination during the quarter as well as increases in short term and long term incentive compensation approvals due to the company's growth and elevated earnings level.

The reduction in employee benefit expense was primarily the result of reduced payroll [tax][ph] expense from the seasonally high level in the first quarter of the year. Additionally, I’d like to note that the base salary expense was actually down slightly during the quarter to 46.6 million from 46.8 million in the prior quarter.

Turning back to occupancy expense, occupancy expenses declined by approximately $1 million in the second quarter to 11.4 million from 12.4 million in the prior quarter.

The current quarter saw decreases in utility and maintenance expense and repair charges which tend to be seasonally higher in the first quarter of the year due to cold weather and the slow removable cost.

The data processing category increased by 633,000 to $6.1 million from $5.4 million in the prior quarter and from $4.5 million in the second quarter of last year.

The current quarter included approximately $653,000 of conversion related cost associated with the recent acquisition activity compared to 783,000 of acquisition related charges in the first quarter of the year.

Professional fees remained relatively constant but increased by 410,000 to $5.1 million the current quarter included approximately $417,000 of legal cost associated with the recent acquisition activity.

As you know professional fees can fluctuate on a quarterly basis based upon the level of acquisition activity, problem loan work outs as well as any consulting services that we may employee.

Advertising and marketing costs totaled $6.4 million from the second quarter compared to 3.9 million in the prior quarter and 3.6 million in the year ago quarter.

The increase in this category related primarily to enhanced and successful efforts to increase the Company's brand awareness thorough increased mass media marketing, community advertising and sponsorships.

The remain categories of non-interest expense that haven’t address were essentially flat and they were up about $96,000 in the aggregate from the prior quarter or less than one-tenth of 1%.

Finally, as noted on the press release on page 26 included in the non-interest expense section, more acquisition related charges totaling approximately $1.1 million that will not be recurring for the specific transaction to which they relate. In the second quarter these charges related primarily to legal expenses and data conversion charges.

As we noted last quarter we'll continue to provide this detail on the acquisitions because as Ed noted we have closed one transaction this quarter and we expect to close two other shortly, each of which will have conversion, severance and legal associated with them.

And as Ed also noted earlier that the net result of the aggregate levels of this non-interest income and non-interest expense is that our net overhead ratio improve from 1.69% in the first quarter to 1.53% in the second quarter which is approaching our goal to be at a net overhead ratio of 1.5% or better.

And with that I will throw it back over to Ed..

Thanks Dave, good [Segway][ph] a little summary discussion here but this month if all goes according to plan we will close on three acquisitions which will add close to $1 billion in assets to our balance sheet. One of these deals the North Bank transactions, smallest of the three is already closed.

As mentioned we have already absorbed liquidity that these banks will bring over by running our loan-to-deposit ratio higher than our normal 85% to 90%. Targeted June 30, so the banks will be fully optimized from that -- from balance sheet perspective at the onset. We expect some 60% to 70% cost saves from these transactions.

And that’s going to take the rest of the year for us to achieve these numbers but we believe that they are hard numbers, they’re identified and we feel very good about that.

We still -- and this will help us as we continue to fill out our infrastructure obviously that we have the infrastructure to absorb this event -- to absorb this activity and so we can cut those costs. We are still seeing acquisition opportunities in all areas of our business. Core book prospects remain very good. Loan pipelines are consistently strong.

Mortgage prospects in the near term remain good and we are prepared for the slow down if and when rates ever rise. We are very well positioned for raising interest rates if that actually does happen. Credit quality continues to improve. Capital ratios are very strong. And for those of you who looked at it our stress test results were pretty damn good.

If you study the numbers you can actually see we took a very conservative approach if you compare us to the latest completed crisis and we still are well capitalized in very good position based on stress test numbers. In short, I really like where we are positioned right now.

Our consistent and steady approach to improve our operating metrics and our goal of increasing earnings on a double-digit basis continues to move along and move along well.

So we are going to continue to as we always do to hope for the best and yet plan for the worst on the back side and we really like where we stand as we continue to work towards our goal of being Chicago’s bank and Southern Wisconsin’s bank. So with that I would open it up for questions..

Thank you. [Operator Instructions]. Our first question comes from the line of Jon Arfstrom with RBC Capital Markets. Your line is open..

Yes, I had a different lead off question until you said 60% to 70% cost saves on the three acquisitions. And I --..

Seems a sensitive question Jon, we’ll move on..

Hadn’t heard you say that before.

What is the timing, how long it’s going to take to get that type of savings in the run rate on those three deals?.

Probably by the end of the year, I mean conversions are scheduled. We’ve got the North Bank conversion scheduled by the next month and then every month, month and a half afterwards we will be converting the others.

The conversions, there are a number of branches that we’re picking up, that we’re going to be closing because of the proximity to our existing branches. And that’s all been laid out. The staffing has been laid out.

But it really will all occur kind of when those conversions are closed, are when you are going to see most of it come through and the divestiture of those branches. So I think you will see, it will gradually come in throughout this quarter. But by year end, we should have them totally absorbed and play the rock and roll for 2016. .

Okay, that’s bigger than I thought it was going to be. Okay. And then I guess on mortgage you touched on it a little bit but may be talk about the near term pipeline and then a little more color. You talked about the potential for rising rates and the impact.

Is this something where you think you can -- the variable expenses will come out fast enough, so it will be in that neutral or do you feel like you have to cut aggressively if rates go up or how do you think through that, help us understand that?.

Our data is pretty good and we monitor -- we do projections based upon everything. There is a lot of good data we’re getting through. We understand our pull through rates. There is many phenomena that could take place that we build into this.

But we have many sort of plan -- all sorts of plans laid out for various contingencies in terms of the drop off in volume that I think we should be able to have enough lead time to really not have hurt our overall profit margin on this business when it does go down.

There is a lot of pent up demand for acquisition -- for property purchases as opposed to the refis. Refis in a normal environment are about 15%, 16% of our overall volume. As I said they were about 36%. So you might lose 15% of volume if the refis fall off.

Obviously some seasonality to the purchase market but we think we are in a very good position to maintain our margins. And when rates do go up I think if you look at our debt interest income sensitivity you’ll see that that is the, as I always say the beach ball under water.

So really the only hedge left you can ever do on of whole balance sheet hedge is your mortgage business versus rising rates. So I think that any decrement we would experience in overall net income from the mortgage business would be more than made up by the increase in the margin that would come through.

So I think we’re well prepared for it and I think we’re much better -- we were well prepared for this in the past. Remember the first quarter last year we did see a downturn in mortgage volumes, but in that situation we kind of knew it was going to come back up.

So we just bit the bullet, we didn’t do the massive -- any sort of massive cuts, we just carried the overhead rather than having the step-down, step-up that just didn’t make a lot of sense.

So like I said, we have a number of scenarios that we can play out based upon what we see and what we’re able to project when rates go up, when that eventuality actually happens. So I think we’re much better prepared, we have a number of scenarios that we run and we’re ready to execute depending on the variables that accompany any rise in rates..

And the pipeline kind of the near-term pipeline?.

Near-term pipeline is relatively consistent with what we experienced in the second quarter..

And then Dave Dykstra maybe one for you on expenses, other than the acquisitions coming on, any other expense pressure? Anything out there we should be aware of?.

No, I don’t think so, the variable comp changed a lot this quarter, but a lot of that was based upon the mortgage market, but I don’t see any substantial changes other than the acquisition related cost and the variable comp depending upon commission based businesses..

And if you look at, Dave did a nice job when you back out those categories there is reasonable explanations for all of them, we’ve been relatively constant on expenses. So the sign off of left field it really wasn’t cheap, but I will tell you it's paying off in spades.

You can never put a value on something like that, but in terms of brand recognition it's just -- with everything else that we’ve been doing over the past few years and what we continue to do our brand recognition is picking up.

We’ve picked up a number of new households as a result and there will be a time when the acquisition market moves away from us and core growth is going to be very important for us and there is no reason not to jump start that now with the loan volumes that we’re experiencing..

And your next question comes from the line of Christopher McGratty with KBW. Your line is open..

Ed on your comments on the overhead ratios you’re a shade over 1.50 today, I think you talked in the past getting it to 1.50 or possibly below, where do you think is possible in this environment and maybe longer term as you kind of optimize from your acquisitions?.

If you look at our -- in terms of our mature banks some of them are operating below 1%. Now when you add everything up because of the mortgage business it's hard to get to those numbers. But I think that we are a growth company, we continue to invest in growth.

So if we ever just said, stop and optimize, you probably get that number down to by 1.30, 1.35, but I don’t see as doing that, I see the opportune route, we’re growth company and that’s what we said and we’re not afraid to invest in the future and sometimes those investments have longer term payouts.

I think if we can hit consistently around 1.50 and go 5 basis points to 10 basis points off of that either way depending on transactions we’re doing or investments that we’re making, I think that would be very good in this environment.

Again our goal is to continue to build and grow the franchise and continue to increase our operating metrics and to put up double-digit earnings growth, if you're familiar with our past history maybe before 2006 when went under [indiscernible] that’s the game we played before and we did it very well and I think that we -- we’re kind of returning to that sort of approach.

I guess there will be a time when we think we’ve fulfilled our goal of being Chicago’s bank which is probably a long way off where we would maybe step down on the investment and in the future business and if I am around I doubt we’ll do that, we’ll probably think of something else will do.

But we will continue to push that number, I think 1.50 is the goal for the way we operated and if we can below that to 1.40, all the better..

On the preferred offer rate I think you opened in your remarks, you said part of it was backward looking for deals and kind of forward-looking as well.

Then maybe some commentary about deal activity in the market, you’ve done three, they’re going to close, what are you expecting to kind of over the next on several quarters, from [11 year][ph] perspective? Thank you..

The acquisition pipelines in all areas of our business are relatively full. As I stated in previous ones, gestation period on the deals are taking a lot longer for whatever reason, so and some of them don’t come to fruition, I mean we are very, very disciplined in how we do these transactions.

So it will be okay with me, if we took little time to absorb what we’re picking in right now for the next month or so or two and then we will continue to be very opportunistic in this. We’ve done before for the year in terms of banks by pretty much mid-year, that’s a lot.

But our structure allows us to accommodate that type of volume, so and as you know we on the banking side of things we do concentrate on the banks of $1 billion and less.

I think that that is a market where cultures fit with us, these are mostly community banks that give us good new geography to work into or good cost out opportunities because our geographies gets bigger and bigger, allows us to get more cost out because we've overlapping branches.

So we -- I think that this market is going to stay hot until rates move up a couple of points and I think in some of these banks starts -- these target banks start making spreads in their investment portfolios, their earnings move up and their prices are going to go higher than maybe we would be willing to go after if you look at that vis-à-vis organic growth.

So we’re going to take advantage of this while it’s here, we’re not going to do anything stupid, but -- we hope we won’t do anything stupid, but on the banking side I think that in the second half of the year you could expect us to be relatively active. On the mortgage side same sort of thing.

I think as the prospective rates are moving up we’re seeing bit more chatter from some of the people we've talking to, bit of accelerated chatter as you know on those deals those are basically our earn out deals. So it's not a -- too much risk to take in those transactions.

So we can’t help but win if we do an earn out deal for the most part this year. And we do asset purchases so we don't get any cancer transplants from any historical debt that somebody made that may crop up. So we’re very careful on our due diligence.

On the Wealth management side, we do see -- although that market is a bit floppy right now in terms of price, we do see opportunities to pick up producers and pick up -- lift out sort of asset management type of situations where it may not involve a company acquisition, but we will continue to grow and expand.

And in the niche businesses we’re seeing opportunities there but mostly on the lift-out side where there is a little bit of turmoil in the market right now and in different areas with some things that other people have announced and we’re seeing opportunities like we did with our leasing operation and we opened up down in Texas, seeing opportunities to lift-outs and that’s very helpful for us because they will bring a different type of asset class or different type of asset to us and that helps us with our strategic goal of remaining diversified.

.

Our next question comes from the line of Brad Milsaps with Sandler O'Neill your line is open. .

Dave just wanted to follow-up on the expense question specifically as it relates to mortgage banking. It looks like your incentive comp was up almost equal to what the mortgage banking revenue was up.

I know you have got other parts of the bank that are earning incentive as well, but is there a better way to think about it in terms of overhead ratio with or an efficiency ratio with the mortgage piece? Just trying to get it in a better way to model that going forward and how it might draw up to the bottom-line. .

I guess my rule of thumb would be -- and it’s not an exact science, but probably about half of what the revenue is you can take that and apply it to the compensation section.

So I mean there was some -- our earnings were up and our growth was up and as you know some of our LTIP, our long-term incentive plans are based upon earnings and growth and as those go up we’ve got three different cycles going and that elevates some of the accruals in that.

So part of that was also short term bonuses and the impact on our long-term incentive plan from the elevated earnings and growth. But I think about it if mortgages go up or down you can increase or decrease compensation by about 50% of the revenue. .

And just maybe a couple of questions on loan growth, particularly as it relates to some of the insurance premium finance, life businesses. The life growth looks like its accelerated maybe quite a bit in the last couple of quarters and now it’s actually overtaken the commercial side in overall size.

What are you seeing there? Are the larger loans or have you picked up additional people and just your outlook maybe for that specific line would be great. .

Actually no, maybe one or two clerks, but we have not had to pick up any additional people. That market is very interesting market. I mean it's one where we do the AIG acquisition really acquired the guys who invented this market and this business. So and I think that the competition will pull us in and pull us out of this market.

So you will see, especially the foreign banks, we’ll pop in and try to steal business and then something happens and then to get out of the business. And they really don't have the expertise that we have.

We actually have a value add approach because some of these deals pretty complicated as they relate to a state planning or corporate succession issues and the like and there is lot of -- many tripwires in there. Fortunately we have the expertise to say that we got value add there.

And I think that what we -- why it's growing so much is, is that reputation is out there, we have been able to -- it's not like the commercial side where our business comes in through 3,000-3,500 agents around the country, independent agents around the country.

This comes in through probably a 150 people where a lot of that's really the sourcing of a lot of this business. Now they are -- the pickup sizes are obviously much-much bigger than the commercial side, commercial sides are $23,000 to $24,000 full payout loans. These are $1 million to $2 million loans that we're putting on the books.

So I think it's a function of the reputation. I think it's a function of our service but we have -- there is, really there has been nothing that's happened that would change the market rather that much other than better marketing and reputation..

And Brad that the other thing remember there is, we do significantly more volume on the property and casualty side but it's nine-month full payout, so it's turning pretty fast.

On the life sides those are generally four or five year loans, so if you're picking up your production on the backend you're not as much as paying off on or in the front and you're not as much as paying off on the backend.

So when you put one of those loans out there, they're generally out there for four or five years and so it's add up a little faster on smaller volume too..

And what we've seen on the commercial side Brad is it, we've often talked about what is personal or what is normal these days, but normally our average ticket size is about $27,000.

In a hard market it could be up into the $40,000 to $44,000 range, it got as low as $19,000 in the soft market and it worked its way back up to $24,000 which was kind of a steady growth little by little up to $24,000. We've seen that fall back down to around $23,000.

So the competition I guess and there is a lot of capacity out in the commercial insurance world and we're seeing premiums actually drop a bit again.

And we would love a hard market because that's -- we can almost double our average ticket size with no increase in expenses, but I think that that's been a little bit negated by -- our growth here on the commercial side has been negated by the drop in premiums and the drop in average ticket sizes.

We still continue to pick up market share in terms of number of ticket processed, so both businesses are going very well..

[Operator Instructions] Your next question comes from the line of David Long with Raymond James. Your line is open..

I wanted to talk about the premium finance business some of the questions were just answered but thinking about the asset sensitivity of those loans and I think you've said the commercial has about a nine-month term-to-debt re-priced monthly and then as far as the life side how quickly are those loans re-priced on your books?.

On the commercial side they do not, they are fixed rates for nine months so they're 4.5 month full durations. So when you think about it one-ninth of the portfolio re-prices every months. So it's pretty quick to re-price.

On the commercial side or on the life side, those adjust annually so one-twelfth of the portfolio adjust, pretty much they all floating rates and they’re all adjusting on an annual basis..

Fixed rates..

They are all fixed -- they're fixed rate for one year and they -- with floating rates with a one year re-price. Fixed for a year and they re-price every year..

Okay got it..

Thank you. Your next question comes from the line of Emlen Harmon with Jefferies. Your line is open..

Going back to mortgage and know there has been a lot of focus on it already, but how do you guys think other than the organic growth rate in that business and obviously there is a lot of kind of cyclical effects with rates in the purchases but it is a business you've been investing in, having interest in kind of consolidating going forward, so like how do you think about what the actual organic rate of that business has been historically and I'd been kind of curious as to how that compares to the future outlook or your future outlook?.

Well, as I always try to profess these things, I got a D plus in economics at Georgetown, so if you’ll take that into consideration that probably makes me a genius in this world, but I could work for the government. But we think that the growth potential in this market is actually very good. We think a couple of things are going to happen.

In October 4th this new TRID regulation comes into play which is really going to be -- the focus of TRID is to make sure that you need to expedite the entire process and I think TRID coupled with the -- it's probably the biggest change to the whole mortgage process in a long time other than [QRM][ph] and that stuff from banks.

But just in getting them in -- in getting a mortgage.

And I think that lot of these small, if rates go up and volumes drop off that having to comply with TRID, having to comply with all these new regulations is going to reduce the independents that are out there, many of them are going to fold up shop because they are just riding this last wave right now.

So I think that the pie is going to get smaller in terms of actual mortgage producers out there.

I also think that millennial have been very slow to jump in to household formation and if you look at graphs of number of births and when household formation use to come about now it's happening a little bit later, you are going to see more household formation coming out, if you look at that you're 6 million to 7 million housing unit short in the United States just to catch up with that.

So I think home buying is going to come back in the role and even if rates go up a couple of points it’s still going to be relatively low compare to where they’ve been for the last 15-20 years before that. So I think that there is a lot of pent up demand.

I think that the supply is going to go away and I think we’ll get an opportunity to cherry pick good producers and good opportunities and continue to work on strategic alliances on the purchase side of the equation on the construction side of equation to provide mortgages and we're big enough that we can actually pull that stuff off.

So we think that everybody is going to need a mortgage and people are going to buy houses mortgage, this is going to be here forever and this is a market that because of its complexity is going to push out the small volume people. And we think that it’s a good natural fit for us. It's one that we can control our expense and our operations.

We can absorb the costs of regulation better than most. And it's a great hedge to our balance sheet, now that we can’t do any macro-hedges any more, but it's a great hedge to our balance sheet in our falling rate environment.

So we think it fits in very nicely, it’s strategic for us, we think that there is good future for it and we're excited about taken advantage of opportunities there..

Got it, thanks and on the -- just a quick one for Dave on [fee line][ph] items that some of the miscellaneous fees were a couple of million bucks higher than they have traditional been historically.

Is anything kind of unique in there you would call out?.

No there is just a lot of stuff in there. We've got any FX changes that happen as a result of some of our Canadian funding, we've got our investment set we do in limited partnerships with some of the bank funds that are in there. The FDIC amortization of that indemnification asset run through there and a number of other smaller things.

So it's really just an accumulation of a number of different items. .

Got it all right perfect. Thank you. .

I'm showing no further questions at this time. I would like to turn the call back to Edward Wehmer for closing remarks..

Thanks everybody for listening in and we look forward to talking again next quarter. Enjoy the summer. Thanks..

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