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Wintrust Financial Corp (NASDAQ:WTFC)
Q1 2020 Earnings Call
Apr 22, 2020, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to Wintrust Financial Corporation's First Quarter 2020 Earnings Conference Call. Following a review of the results by Edward Wehmer, Founder and Chief Executive Officer, and David Dykstra, Vice Chairman 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 the call are detailed in our earnings press release and in the company's most recent Form 10-K and any subsequent filings on file with the SEC.

Also, our remarks may reference certain non-GAAP financial measures. Our earnings press release and slide presentation include a reconciliation of each non-GAAP financial measure to the nearest comparable GAAP financial measure.

[Operator Instructions]

I would now like to turn the conference call over to Mr. Edward Wehmer.

Edward Joseph Wehmer -- President and Chief Executive Officer

Thank you. Welcome, everybody, to our first quarter earnings call. Hope you are all isolated and well. With me, obviously, Dave Dykstra; Tim Crane, our new Wintrust President; Rich Murphy, Vice Chair and Senior Lending Officer; Kate Boege, our General Counsel, and David Stoehr, our Chief Financial Officer.

Kate Boege is very worried because we're all in different places and her shock collar doesn't come that far on me. So, Kate, I will behave, I promise.

As you can see, we do have some additional Wintrust execs on the call. I think it's important to get to know them better and I think there'll be a lot of questions arising just because of the times and what's going on. So, I thought it better to have more reinforcements around.

The format will be, for the most part, as usual. However, we're going to try not to parrot what's already in the release to leave more time for the questions. As I said, I'm sure you'll have a number of them.

I'm going to give some general comments regarding our results. Dave Dykstra will provide a more detailed analysis of other income, other expenses and taxes. Back to me for summary and comments and thoughts about the future, and we'll have time for questions.

Before I get into the details, I'd like to do a heartfelt shoutout to what I believe is the absolute best crew in the banking business. Case in point -- a couple of cases in point. Our crew has moved seamlessly to remote locations. Also being able to grow the bank and take care of our clients. It's worked extremely well. Our technology crew has done a wonderful job.

Also, in seven days, we stood up for a front-end portal for PPP from scratch. We opened the portal -- one of the only ones open on the evening of April 3, first day available, and it actually worked flawlessly.

The two weeks thereafter, with our working from remote locations and processed 8,900 applications for $3.3 billion. That put us in the top 15 of banks in the country in terms of total volume.

Median size of these loans was $85,000. We estimate fees to Wintrust before round two of approximately $85 million. Our decks are cleared for round two. We already have close to 2,000 applications and another $9 million in fees in there. The applications, again, are in the lower area -- in the lower-end area. So, we know we're taking care of all of our customers across the board. I couldn't be prouder of the team that's been able to do this.

One point in time we had a need for more quality control people. We had 300 people volunteer. People worked tirelessly all night. One guy they call the wolf after -- he was our Pulp Fiction. He would get involved and he could scrub other banks' messes [Phonetic] so quickly, it was unbelievable.

And now, on to our first quarter earnings. As you can see, we made close to $63 million, down 27% from the fourth quarter, but for obvious reasons. Our earnings per share, $1.04.

You take our pre-tax, pre-provision, pre-MSR valuation income, it's over $150 million, which is almost a record for us. It's pretty darn good in terms of core earnings, and that's before really any recognition of the probably close to $100 million we'll have in PPP income, which will act as a reserve for us, a cushion for us, we believe, for any eventuality that may come along.

Net interest margin held up pretty well as we were able to drop our deposit costs rapidly. We still have room to grow there as indicated on page 18 of the press release. The 5 basis point margin decrease was due to really a 4 basis point drop in the free funds ratios you would expect as the overall rate environment goes down. And 1 basis point difference between the 12 basis point drop in earning asset yield, 11 basis point drop in liabilities.

Net interest income was essentially flat. Really, one less day was offset by $925 million in average earning asset growth. We expect the core NIM -- that being net interest margin without PPP effect to drop to the levels previously disclosed in the past for future quarters.

However, the amortization of PPP, the terms of which are in question, but no longer than two years, and expect to be much shorter, will have a material positive effect both on margin and the net interest income even in the worst case scenarios.

On to provision and credit quality, adopted CECL. So, really, I think as I picked the wrong quarter to quit Stiff and Glue [Phonetic], FASB certainly picked the wrong quarter to put CECL in effect. We adapted CECL, the day one adjustment of $47 million. The first quarter provision of $53 million, which exceeded the 4th quarter provision by $45.2 million. Earning reserve was up $95 million from year-end now to $253 million. I'll leave it from here as I am sure you have a number of questions.

And on the CECL calculations, I'll leave that to our CECL experts who are here to answer your questions. But net charge-offs were 8 basis points or $5.3 million in Q1.

Credit quality remained relatively in good shape for the same period over period, on an apples-to-apples basis. NPLs increased due the three factors. First, the pool accounting for acquired loans went away with the adoption of CECL, adding about $35.5 million to the total.

Second, approximately $21 million of new non-accruals were added in the normal course of business, largest of these being an SBA loan where we should get good recoveries [Indecipherable] put it in non-accrual. These assets have been marked appropriately and will be resolved relatively quickly.

Finally, commercial premium finance loans over 90 days delinquent and still accruing around $5 million due to state-imposed restrictions on canceling policies during the current crisis. As you know, our commercial premium finance portfolio is regulated individually by all 50 states. In the case of crisis like we have now, many of them preclude you from canceling policies. However, in the past, we've only seen minor tick-ups because they will go back and honor the actual cancellation date and most states are requiring to go back and honor that. So, really, the insurance companies take the hit on that. But we do expect a minor tick-up in charge-offs, but not as much as you would imagine. That's at least been the case in the past when we had hurricanes, fires, 9/11, etc.

We are yet to see material effects of the current crisis on our credit quality. Our PPP loans coupled with interest and principal deferrals have been granted to our borrowers and other customers. Regulators are really cooperating on this and we believe that this should be able to weather the storm, at least buy time for our borrowers. Coupled with our highly diversified portfolio and history of loan losses in troubled times vis-a-vis the peer group, we're cautiously optimistic. However, at this point, it's a tossup as to -- if and when the stress will appear in the portfolio, with our expected [Indecipherable] augmented by PPP earnings, adequate reserves and capital, we feel adequately situated to take on whatever comes our way. Look forward to your questions in this area.

Dave is going to cover other income, other expense in detail, but I'd like to -- suffice it to say that it's been a great mortgage quarter, notwithstanding our $10.4 million mortgage servicing valuation expense. I might be jinxing this, but I think they can't go down much more. We have to be close to bottom on mortgage servicing rates.

Net overhead ratio was 1.33%, down 20 basis points from fourth quarter '19, more than made up for the drop in the net interest margin.

On the balance sheet front, we grew total assets to $2.2 billion. Average earning assets were up $925 million. Our loans were up $1 billion. Rich Murphy will take you through the quarter. But half of that was probably related to the line draws which happened very quickly. We've seen abate -- at least the initial fear of everybody is going to draw their lines has kind of abated a little with the work of the government and other opportunities. The rest is across the board and we're happy to break that out for you a little bit later.

We start the quarter with $870 million of loans where the period-end exceeded the average. So, we're going to start with a head start the second quarter. That does include the PPP loans, which, as you know, are -- now with round two coming on will be close to -- we've funded about $3.3 billion and we'll have about $3.7 billion, up to $4 billion depending on how quick the window closes in round 2.

Deposits grew $1.3 billion in the quarter. We feel very good about our liquidity position right now. We will be able to take advantage of -- we had good liquidity to begin with. We had bulked up in anticipation of what was going on with our MaxSafe loans where we offer 15 times FDIC coverage because of our 15 charters and other wealth management opportunities, including CDEC, which we expect to slow down a little bit, but still a $1 billion to CDEC, which is our deferred exchange money at the end of the quarter. So, we feel very good about where we are.

Our loan-to-deposit ratio is 90% and will obviously go up with PPP loans. But between our liquidity and our ability to take advantage of the Fed's lines related to PPP, we feel very good about our liquidity, where we stand right now.

So, all in all, we feel comfortable with our balance sheet. Our loan pipelines, believe it or not, remain very strong. A bit of a halo effect coming on because of other banks dropping the ball on PPP. We were able to pick up a number of prospects and customers -- and just the word of mouth and spreading the -- Wintrust came through and our relationship -- it's not how banking really works. So, our pipelines are good. We have to remember that good loans are made in bad times. So, we feel very good about where we are right now.

On the balance sheet side, we think we're well prepared.

I'm going to turn it over to Dave, who is going to provide some detail on other income, other expenses and taxes. Dave?

David Alan Dykstra -- Senior Executive Vice President and Chief Operating Officer

All right. Thanks, Ed. As normal, I'll just briefly touch on the non-interest income and non-interest expense sections. In the non-interest income section, our wealth management revenue increased $942,000 to a record $25.9 million in the first quarter compared to $25.0 million in the fourth quarter of last year and it's up 8% from the $24 million recorded in the year-ago quarter.

Overall, we believe the first quarter was another solid quarter for wealth management unit. Asset valuations declining toward the end of the quarter may create some headwinds in the second quarter, but trading volume is also fairly solid right now. So, we'll see how that comes out in the second quarter, but the first quarter was a solid quarter for us.

Mortgage banking revenue increased by 1% or $466,000 to $48.3 million in the first quarter from the $47.9 million recorded in the prior quarter and was up a strong 166% from the $18.2 million recorded in the first quarter of last year.

The company originated approximately $1.2 billion of mortgage loans for sale in the first quarter of 2020. This compares to a similar $1.2 billion of originations in the prior quarter and $678 million in the first quarter of last year.

The increase in the revenue from the prior quarter results primarily from $17.4 million of derivative income associated with the mandatory commitments to fund mortgage originations compared to a $1 million derivative loss on similar activity in the prior quarter. That was offset by a negative MSR adjustment, net of the hedging contract during the first quarter of approximately $10.4 million, and that compares to $1.8 million positive MSR adjustment in the fourth quarter of 2019.

And we also had $5.1 million less of capitalized mortgage servicing revenue compared to the prior quarter. I think we had one less sale of our loans during the quarter. So, there might be a little bit of a timing difference there.

The derivative income that I talked about really is associated with the surge of the refinancing activity where we had mandatory commitments to fund approximately $1.4 billion of mortgage loans at March 31 of 2020, and that's roughly $1 billion more in mandatory commitments to fund than we have averaged over the past four quarters. So, it hasn't really been a big adjustment in the prior quarters because of the amount of loans that we had mandatory commitments to fund. We're always fairly stable around few hundred million dollars and it just jumped up by about $1 billion. So, positive momentum in the mortgage business. And obviously, that pipeline bodes well for closings in the future quarters.

The mix of loan volume originated for sale was -- that was related to the refinance activity, was approximately 63% in the first quarter compared to 60% in the prior quarter. So, the refinance volume increased slightly during the quarter and the pipeline is still predominantly filled with refinance applications.

We currently expect second quarter originations to be stronger than the first quarter, and that's a result of the continuation of the refinance activity and the strong pipeline. Table 15 of our earnings release provides a detailed compilation of the components of the origination volumes and the production revenue and MSR capitalizations, pay-downs and valuation activity.

The Company recorded losses on investment securities of approximately $4.4 million during the first quarter, primarily related to unrealized losses associated with equity funds that the holding company has investments in, which were initially used to seed money for proprietary mutual funds.

And as you all know, equities had big drops at the end of the first quarter. So, those valuations declined.

Other non-interest income totaled $18.2 million in the first quarter, up approximately $4.2 million from the $14 million recorded in the prior quarter.

Primary reasons for the higher revenue in this category include $3.9 million of higher swap fee revenue and $2.1 million of net gains related to sales of certain loans and leases. And this was offset by $2.7 million of lower BOLI income as BOLI investments that's supported deferred compensation plans were negatively impacted by equity market returns.

But I should note that the decrease in the BOLI income in the first quarter resulted in a similar decrease in compensation expense during the quarter. So, the net effect of that is washed out in total.

Turning to the non-interest expense categories. Non-interest expense totaled $234.6 million in the first quarter, down approximately $15 million or 6% from the prior quarter.

A number of factors contributed to the decrease. Salaries and employee benefits expense were down $9.2 million from the prior quarter. Lower levels of advertising and marketing expenses of $1.7 million compared to the prior quarter. We had $1.4 million less of OREO expenses. And we had $3.1 million of charges in the fourth quarter of last year that didn't recur related to legal settlement charges, contingent purchase price payments and costs, and terminating two small pension plans.

And then, those aforementioned changes I just discussed were offset by $2.8 million of higher FDIC insurance assessments due to the rebates from the FDIC substantially subsiding in the current quarter compared to the prior quarter.

I'll talk in more detail about the major categories now. Salaries and employee benefit expense category, as I said, declined by $9.2 million from the prior quarter. The majority of the decline in this expense category related to reduced incentive compensation accruals, which were approximately $8.7 million lower than the prior quarter, with that change being driven largely by long-term incentive compensation programs, which are forecast to be negatively affected by the impacts of the current economic conditions brought on by the pandemic situation.

Additionally, salaries expense were down by $1.6 million from the fourth quarter. The primary cause of the decline was a $2.2 million reduction in deferred compensation costs that were related to the BOLI investments that I previously discussed.

And then, offsetting those decreases were employee benefit expenses were up approximately $1.1 million during the quarter due to higher amounts of payroll taxes, which tend to be elevated in the first quarter of the year.

Data processing expense increased by $804,000 in the first quarter compared to the fourth quarter of 2019. This was due primarily to approximately $1.4 million of the deconversion charges related to the countryside acquisition versus only $558,000 of conversion charges related to the STC Capital Bank system conversion that happened in the prior quarter. The additional operating cost of data processing related to the franchise also contributed to the increase.

For your information, we also expect to incur slightly more than $3 million of additional conversion related charges in the second quarter related to the just-completed conversion of the Countryside Bank transaction.

And by the way, our teams did a terrific job of completing that this past weekend, given they were working in a remote work environment and social distancing requirements, et cetera. So, our first virtual conversion went off well.

FDIC insurance expense, as I mentioned, was up $2.8 million in the first quarter as a result of the assessment credits substantially going away. We had roughly $200,000 of assessment credits yet in the first quarter of 2020, but we are essentially done with those. I think we have a little less than $100,000 that could still be credited.

Professional fees decreased to $6.7 million in the first quarter compared to $7.6 million in the prior quarter. Professional fees, as you know, can fluctuate on a quarterly basis based on the level of legal services for acquisitions, litigation, problem loan workouts as well as any consulting services. This category of expenses came down from the prior quarter due to a decline in legal fees associated with litigation, collections and acquisitions. The category also experienced a slightly lower level of consulting engagement costs. And if you look at the professional fees over the past five quarters, it's averaged $6.8 million. So, the $6.7 million we incurred this quarter is relatively in line with our typical amount.

Advertising and marketing expenses in the first quarter decreased by $1.7 million when compared to the prior quarter. The decline was primarily related to lower mass media advertising costs, which tend to be lower in the first quarter of the year. And we also had some media spending that was associated with various sporting events that did not occur due to the cancellation of those events later in the quarter.

OREO expenses were actually negative by approximately $876,000 in the first quarter as the company recorded a gain of $1.3 million on the sale of a piece of OREO property and that gain was in an amount that exceeded the aggregate cost of OREO expenses and negative valuation charges on other pieces of the OREO.

And the miscellaneous expense category totaled $21.3 million in the first quarter compared to $26.7 million in the fourth quarter of 2019, a decrease of approximately $5.3 million. The decrease was impacted by approximately $2.7 million of charges in the prior quarter for legal settlement charges, additional expense accrued with contingent purchase price payments that did not occur in the current quarter. And the current quarter also had a lower level of travel and entertainment expenses, as you can imagine, and a variety of other smaller fluctuations.

So, other than those categories I just discussed, all other categories of non-interest expense were down on an aggregate basis by $19,000 from the fourth quarter of 2019. And so, they were essentially flat.

The net overhead ratio, as Ed mentioned, stood at 1.33%, which is down 20 basis points from the 1.53% recorded in the prior quarter. The ratio benefited from strong balance sheet growth, strong mortgage banking results, and lower non-interest expenses, and we would expect that net overhead ratio to stay well below the 1.4 in the near term due to continuing strong mortgage market, the strong balance sheet growth, including the lending related to the PPP and our focus on expense control.

So, with that, I will turn it back over to Ed.

Edward Joseph Wehmer -- President and Chief Executive Officer

Thank you, Dave. Remind me of the guy at the end of a mortgage commercial that talks really fast.

Anyhow, back to me for some summary thoughts and thinking about the future. These are really crazy times. I kind of feel like Bill Murray in Groundhog Day. In fact, my alarm clock, which is Alexa, will play [Indecipherable] plays Sonny and Cher's I Got You, Babe every morning when I get up by purpose.

The quarter was really -- it was really a pretty good quarter, given the current environment. As I said, the FASB picked hell of a quarter to adapt CECL.

I think that we've adapted well to the current environment as well as can be. I think our crew is working extremely well. Our ability to service our clients' needs as it relate to the PPP loans, credit modifications, new credit will hopefully abate credit issues going forward, at least the financial effects of those will.

We're not naive enough to think that there will not be some credit ramifications, the situation. Past history, however, would say these should affect us less than our peers due to our portfolio diversification, our conservative underwriting culture. So, these losses will be a function of how fast we get back to work, our earnings from PPP loans will provide a wonderful cushion against these unknowns. Time will tell, but we feel pretty darn good about where we're at.

We said before the crisis that we need to grow through this low rate environment, which is exactly what we're doing, some of which we didn't anticipate. But our core growth, we anticipate to be very good. We think our expenses will be in check.

I was talking about travel, entertainment and no baseball season. And save a lot of money there. But, again, I can't say enough about the Wintrust crew and our ability to ride this out and do it with our shareholder -- with all our pillars in mind, our shareholders, our customers, our employees and the communities that we serve. And you can be assured of our best efforts in getting through this crisis and continuing to build Wintrust in the solid way you've known we've always done it.

With that, I'll turn it over for questions.

Questions and Answers:

Operator

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

Jonathan Arfstrom -- RBC Capital Markets -- Analyst

Hi, thanks. Good morning, everyone.

Edward Joseph Wehmer -- President and Chief Executive Officer

You're still Stiff and Glue, Jon [Phonetic].

Jonathan Arfstrom -- RBC Capital Markets -- Analyst

I hope you have your mask on, Ed, when you're doing that.

Edward Joseph Wehmer -- President and Chief Executive Officer

N95s, baby.

Jonathan Arfstrom -- RBC Capital Markets -- Analyst

I want to talk about credit. But I guess, first, Dave, you just talked about the revenue line, pre-tax, pre-provision. And on mortgage, I just wanted to make sure I understand what you're saying. You had the $17 million commitment -- I guess gain because of the good pipeline. And I think you're saying that may or may not recur in Q2, but likely it may not have the MSR headwind as well in Q2. So, it's possible to sustain those kind of revenue momentum in mortgage. Is that fair?

David Alan Dykstra -- Senior Executive Vice President and Chief Operating Officer

Yeah. Well, I think the pipeline is still pretty strong. So, I think we're still going to -- it looks like we still are building the pipeline. Purchase activity is going to fall off a little bit. But we're going to probably close more loans in the second quarter. So, we'll have production gain there, but that will be offset by probably that derivative going down a little bit. So, I think we're sort of looking at ex MSRs as sort of being a relatively stable revenue quarter, first quarter to second quarter.

Edward Joseph Wehmer -- President and Chief Executive Officer

So, we're going to watch itself out and then we'll have the regular gains from this quarter, especially with the hangover from the quarter from book to -- from locked to closed.

David Alan Dykstra -- Senior Executive Vice President and Chief Operating Officer

We expect -- usually, you don't have that much visibility going out, but the lock terms have lengthened out because there's so much volume. And so, we think we'll still have a fairly decent pipeline on those loans that they have mandatory commitments. At the end of the quarter, we'll have to see. So, I expect that will be down a little bit, but then the actual gain on sale of higher level of production that we sold will be up a little bit. So, probably offsetting to a great degree.

Jonathan Arfstrom -- RBC Capital Markets -- Analyst

Okay, OK. And then, bigger picture credit. Ed, one of your comments, I don't know if this is for you or Rich, but if and when stress shows up in the portfolio with the comment that you made, can you give us the Ed Wehmer view of kind of the near-term, medium-term portfolio stress that you expect to see?

Edward Joseph Wehmer -- President and Chief Executive Officer

I'll give you the 20,000 foot level and Murphy can kind of jump in, I'm sure, on some of the areas that you want to cover. It's kind of like time is stopping for two or three months. We're giving two or three -- we're giving three-month deferrals of principal and interest to a lot of clients. Regulators are OK with that, tacking it on to the end. They don't TDRs really until after two of those really, six months.

The PPP loans, almost $3.8 billion of those out there to our clients and not clients alike, but the majority to our clients. Buys them two months of -- a little over two months of breathing room. The stimulus comes in and provides people a couple of months. So, if you figure it -- I don't think you're going to see the stress until -- if we can get out of this in two months, the stress will be mitigated. If we don't get out of in two months, you're going to have delayed stress that will come into the portfolio. We're fortunate we don't have a lot of credit cards or consumer debt on the books where things could get a little dicey. But if you think about it, a guy -- if you have a mortgage and you give a three-month deferral, that guy is OK. Especially, they've got a PPP loan. He's got paid. It's put on the end. No problem. If you think about commercial multifamily guy. I need rent abatement. Okay. I need principal abatement.

So, the whole world is stopping for two or three months. And I think that any stress that comes through is going to be a hangover at the end. In the event that we can't get out, it's going to take six months to get out of where we're at, then I think you have issues unless the government comes in and provides more money into the system, which I think they'll do since they really have caused it in a lot of respects by the shutdown. I think that they're committed to keeping this going.

Then you've got to worry about rates increase. But we'll worry about higher rates down the road and where QE is going to take the whole economy.

Murph, you want to get into some of the specifics on the hairier parts of the -- what I consider the more vulnerable parts of the portfolio by the community.

Richard B. Murphy -- Executive Vice President and Chief Credit Officer

Yeah. I would echo Ed's comments to begin with. I think that if we can bounce out of this pretty quickly, we have programs in place here that have helped our customers and I think they'll respond accordingly. But, obviously, the longer it takes to get out of this and for customer behavior and the consumer behavior to really go back to normal, I think that's the big question that everybody's asking.

One of the examples I use is for -- we have a longtime movie theater operator in Chicago that we have a reasonably sized, not a big loan to, but for him, you just have to question how long will it be before people want to go back into a movie theater. And that's a good example of where the uncertainty is pretty big.

But as it relates to our high impact industries, we brought -- we gave you a lot of detail there. And obviously, the one that jumps out at you is the franchise portfolio. Generally speaking, we think the franchise portfolio is in pretty good shape for a couple of reasons. One is that we have mostly quick service restaurants that are 85% of that portfolio. Most of those are still open. Most of those are to really strong operators with good franchise doors. So, we feel pretty good. We also have seen a lot of those customers take advantage of some of the deferments and PPP opportunities. So, generally speaking, those are holding in pretty well. But, clearly, that is a large segment in the portfolio at just about $1 billion and it's obviously a very impacted industry as well.

As it relates to hospitality and oil and gas and some of the other areas that are areas for concern, those are relatively small for us. We have not typically played in those spaces all that much. The oil and gas is really a function of some of the leasing work we've done over the last couple of years.

But I would just really go back to Ed's comments that, right now, the diversity in the portfolio gives us a lot of comfort. And we generally pick very strong operators that we want to finance, but the ripple effects and the length of those ripples we just don't know right now. So, time will tell.

Jonathan Arfstrom -- RBC Capital Markets -- Analyst

And then, just one small one. The premium finance non-performance just kind of keeps creeping up. Is that administrative or is there anything new there?

Edward Joseph Wehmer -- President and Chief Executive Officer

Yeah. That's what I was saying earlier. What you have when you have these crises -- and again, you're governed by each state, the regulation. So, in Florida, whenever there is a hurricane, you cannot cancel policies. So, what you've got is policies that are -- people haven't made their payments, they would normally be canceled. You're not allowed to cancel. Most of them allow you to go back and cancel them as of that date -- the date that it would have been canceled retroactively. You can't lose if you've got businesses insurance. So, you're going to see those creep up, as I said earlier. You see a minor tick up in losses really from maybe 20 basis points to 23 basis points or something. You can go back and look whenever we've had those types of issues. Now, this is -- not every state has done it. I think maybe 20 states have done it so far in terms of not allowing cancellations during this period of time, but they always will let you go back -- so you get your principal back, maybe not all your interest or late fees, but you get a lot of that back anyhow. So, you're going to see those keep popping up a little bit until the crisis is over. But, again, it's not usually a loss situation for us.

Jonathan Arfstrom -- RBC Capital Markets -- Analyst

Okay, good. Thanks. Appreciate it.

Edward Joseph Wehmer -- President and Chief Executive Officer

You bet.

Operator

Thank you. Our next question comes from David Long with Raymond James. Your line is now open.

David Long -- Raymond James & Associates, Inc. -- Analyst

Good morning, everyone. Ed, as a fellow fan of AirPlay, I do have to commend you on your choice of remarks to Lloyd Bridges [Indecipherable] for calling it out.

Edward Joseph Wehmer -- President and Chief Executive Officer

I kind of like the wolf one better, though. You ever see pulp fiction, the wolf is awesome.

David Long -- Raymond James & Associates, Inc. -- Analyst

Yes, indeed. So, anyway, I wanted to follow-up on that -- on the premium finance business. I know we just talked a little bit about the -- seeing a bit of an uptick there. But the reserve levels in general are always very low for that business line. So, I think you had a basis point, maybe 20 basis points of reserves on the commercial side. Maybe just remind us why you can carry such a low reserve in that business and maybe give us an example of a situation absent COVID-19 that you may or could lose money in that business.

Edward Joseph Wehmer -- President and Chief Executive Officer

Well, the life insurance business, knock on wood, we've never lost a dime. So, on the commercial business, I'll let Dave and Murph take you through that.

David Alan Dykstra -- Senior Executive Vice President and Chief Operating Officer

Yeah. So, Dave, on the commercial business, generally, you were financing commercial insurance policies for workers' comp, building coverage, liability coverage, whatever it is, and they are generally annual policies. So, we finance those policies by generally taking a percent down. So, 15%, 20% down is sort of a standard down payment. And you finance those over generally 9 months to 10 months. I think our average is slightly over 9 months.

So, your collateral is the unearned premium held by the insurance carriers, which are generally high-rated insurance carriers that we do business with. So, if that premium, which is your collateral, amortizes 1/365th or 1/366 in a leap year, per day, it amortizes away and earns out, that collateral is deteriorating on a daily basis. But since you took 10%, 15%, 20% down on that policy, that's your initial cushion. And since we have that loan pay off monthly over 9 months to 10 months, our loan pays off faster than the collateral deteriorates. So, that's generally why you don't have losses in that industry.

Sometimes, you could have losses if you take a lesser down payment and you don't have as much collateral cushion. And then, if they don't make their payments, the states require you to generally give them a notice of time to tell them that they've been delay -- or defaulted on their loan and then you can cancel the policies. So, that may be 20 or 30 days depending on the state. And so, then your collateral continues to deteriorate during that notice period. So, if you touch your collateral position too short, then because you took less down payment, it may eat into your collateral enough when they default on their payment that you'd have some small losses.

And then, there are losses sometimes from auditable policies, workers' comp, fleet auto, some of those policies are auditable, and to the extent that the estimated premium on the front end was off a little bit from what the actual premium was when they audit the payrolls or the fleet size, then you could have some losses. Those are the general reasons for it.

Edward Joseph Wehmer -- President and Chief Executive Officer

Since you'd have a potential fraud or insurance company going bankrupt -- in case of a bankruptcy, we monitor the AM Best reports and credit limits for each insurance company. With nine-month full pay out, usually takes more than nine months for an insurance company to go down. So, we can stop doing business with them, and that mitigates it.

You can have agent fraud, but we've developed a number of systems. In the past, we've had some large ones, relatively large, for our time, maybe $6 million, $7 million, $8 million. We have not had one in a long time, and we're doing a much better job electronically of screening for those. But knock on wood, we haven't had one of those. So, that's where you could lose money.

Now, what I was saying is -- Dave was talking about cancellations. They don't allow cancellations, you feel your collateral is going to run off, but the cancellations are allowing you to back date. Once we get through it, they always allow you to back to when it would have been. The insurance company is the one who really kind of loses on that situation, but not so much because claims usually aren't that high. Especially in something like this and in terms of a hurricane and the like, maybe a little bit different where they have higher claims. But that's how it usually happens and we've averaged around 20 -- anywhere between 15 basis points, 25 basis points normally on that, and that's how we come up with that number.

And again, life, knock on wood, $7 billion. We haven't lost a dime. So, I think we're OK.

David Long -- Raymond James & Associates, Inc. -- Analyst

Excellent. I really appreciate the color there. That's helpful. And then, as it relates to the franchise finance side of things, you indicated that about 85% are quick service. Are there any other of the remaining exposures that you consider much riskier? Anything that you can point there at the remaining part of that portfolio?

David Alan Dykstra -- Senior Executive Vice President and Chief Operating Officer

Yeah. The dine-in restaurants is really where I think you're going to be most impacted. For us, that's about $150 million, all well-known names, but it just -- obviously, they are the most profoundly impacted by this.

Edward Joseph Wehmer -- President and Chief Executive Officer

Many of them have taken the PPP loans from us or from other banks because many of these are syndicated deals. And they've also gone for deferrals. So, again, it's a situation where, for a couple of months, they'll look fine and hopefully they get out of this and people start going out eating again, they'll be fine. But when it gets pushed off, and very logical way to look at it, however, it keeps -- you don't get back to business until September, October, they're going to have some issues.

David Long -- Raymond James & Associates, Inc. -- Analyst

Got it. And then, just the last one, I know you kind of hinted on this, but if no one attends Wrigley Field this summer or the [Indecipherable], those are marketing expenses that I'm assuming you guys would not be spending?

Edward Joseph Wehmer -- President and Chief Executive Officer

That is correct. Cubs, White Sox, you name it, we would not be spending that money. But I'd rather spend and go to ballgames myself. But we actually [Indecipherable] Brewers and some minor league teams around in Chicago would not be -- we would not be paying. That can be a significant amount of money.

David Long -- Raymond James & Associates, Inc. -- Analyst

Got it. Thanks, guys. Appreciate it.

Operator

Thank you. Our next question comes from Terry McEvoy with Stephens. Your line is now open.

Terry McEvoy -- Stephens, Inc. -- Analyst

Hi, good morning. Can't believe it took this long to ask a net interest margin question. So, I'm going to ask one. Just taking a step back, as you think about the second quarter, you have the full impact of the March rate cuts. But then you've got multiple -- more quarters of just lowering deposit rates. So, under that big picture view, Dave, does the net interest margin bottom out here in the second quarter and then likely potentially move higher in the second half of the year as deposit prices come down?

David Alan Dykstra -- Senior Executive Vice President and Chief Operating Officer

Well, if you're talking about the core net interest margin, yes, it would go down. But, remember, we're going to have almost $100 million of PPP fees we'll be bringing in over two years at the longest. With the shortest, it'll be -- people, when they go for release of the funds as these are all -- every one of these can be -- is for two months. It can be in two-and-a-half months. They can apply to the SBA and have them forgive it. If they are forgiven, we take the money upfront. So, in a worst-case scenario, for two years, if we -- if the whole thing ran out for two years, the margin would be OK, right around where it is. If it comes in and people, at the end of this quarter and beginning of the third quarter, get their funds -- their loans forgiven, we have $100 million coming in during that period of time. So, that's going to positively affect the margins.

The margin -- the core margin is going to end up, like I said, in the 2.70% to 2.80% range, somewhere around that based on where we are right now. But the PPP loans are going to protect us for two years or one year or some derivative [Phonetic] between two months and two years. You tell me. But they will help the margin and, obviously, help net interest income to grow nicely.

So, between that and our growth, I would expect 2.80% and start bouncing back from there on the core side. But the PPP loans are going to be very helpful, from the income side, to help cushion any long-term credit issues we have, but also from the margin standpoint. Do you follow what I'm saying there? I kind of drifted a little bit.

Terry McEvoy -- Stephens, Inc. -- Analyst

Yeah, understand your thought process on PPP and how that plays into the margin. I'm just thinking about the revenue related to PPP and what that can be to building capital. I know you have the $85 million that you mentioned in the release. I just wanted to make sure that $9 million is just kind of what's in the pipeline. My guess is, you assume that grows and increases on PPP round two. And then, what are the expenses that we should think about related to PPP just so we can calculate a bottom line impact that, obviously, will help your capital ratios.

Edward Joseph Wehmer -- President and Chief Executive Officer

I think the marginal expenses are absolutely zero. I think. We set up this system out our own and these are people -- we had people from all over -- at home, but would jump in and help them. We didn't add much -- any outside vendor. I don't think there's any issues related to that. Do you think of any, Dave, or -- Dave Stoehr?

David L. Stoehr -- Executive Vice President and Chief Financial Officer

No, I think it's generally just the people issue, our staff that we already have onboard that clear up the back-end. You obviously have some minor data processing charges because you have more accounts on the FIS system, but shouldn't be that much of additional expenses.

Edward Joseph Wehmer -- President and Chief Executive Officer

If any, really, it would be negligible.

Terry McEvoy -- Stephens, Inc. -- Analyst

And then, just on the round 2 of PPP, you said $9 million. That's going to be higher as we move forward.

Edward Joseph Wehmer -- President and Chief Executive Officer

Right now, what we have in the pipeline, we have $350 million, $360 million. So, we'll be waiting for E-Tran tonight. Once you get your E-Tran, you're committed. I believe that that's about $9 million of fees. That's rough numbers because something we know as you go through the process which we will have done today on the current -- we should have done today on those stuff that came in. We opened the portal last night. There were some duplicates and the like. So, roughly around $9 million more and $350 million more. So, plus or minus 10% maybe. We'll know better at the end of the day. And then, we may open the portal again once we get through that.

We kind of think that this next round is -- because many of the banks will drop the ball on this. They have a number of customers that are waiting. Chase had $26 billion come in. They only funded $14 billion or $12 billion, which means they have $14 billion they're going to hit the new allotment with. We had 98% of ours all the way through the process in round one. We'll be fully funded today. The other guys didn't. So, this is going to last maybe 48 hours at the most. So, this next allotment, we've got to be very careful we don't overextend it and leave your customers hanging. But we think we can get these through and plus or minus 10%. Whether we get any more on top of it will be a function of where we sit at the end of the day in terms of our production and where we are in our manufacturing process, if you will.

Terry McEvoy -- Stephens, Inc. -- Analyst

That's great color. Thank you.

Operator

Thank you. Our next question comes from Michael Young with SunTrust Robinson Humphrey. Your line is now open.

Michael Young -- SunTrust Robinson Humphrey -- Analyst

Hey, thanks. Good morning.

Edward Joseph Wehmer -- President and Chief Executive Officer

Good morning.

Michael Young -- SunTrust Robinson Humphrey -- Analyst

Hey. Wanted to start this with the CECL reserve. It's a little lower than peers and I understand there is some mix benefits from the premium finance book. But can you just maybe talk about kind of the economic assumptions that are currently underlying the adjustment you made this quarter and any kind of outlook going forward from here into 2Q on your need to continue to build this reserve?

David Alan Dykstra -- Senior Executive Vice President and Chief Operating Officer

Well, we put in the slide deck what our macroeconomic scenario factors are, the ones that are the key drivers for our models. So, it's some of the credit spreads, commercial real estate price indices, the GDP growth, etc. So, those are the ones that impact our portfolios the most, that have the best correlation and work best as you look back through the cycles. So, those are the factors that most impact it.

But I've got to tell you, I was reading some of the sell-side analyst reports last night, and I thought I was reading like Goldilocks and the Three Bears. Some people thought I had too much. Some people that we had too little. And some people thought we were just right. So, I'm not sure that -- as I look out there, you may have a different view, but it seems like, to me, we're more toward the top of the bell curve and there are some outliers on either side.

But as you said, our mix with premium finance loans, I think, helps that out quite a bit and I think our diversity helps that out quite a bit. So, we think we're comfortable with where the CECL reserves are at. It's substantially more than what our run rate was, if you look at the total reserve build. And right now, we're comfortable with where it's at. We've gone through all the business lines. We've done all that heavy lifting. There is more stimulus that's coming that hopefully should help, etc.

So, I don't know if you can look into your crystal ball any better than -- or anybody on this call or us and know how long this pandemic is going to last and what the lasting effects are. So, I'm not even going to take a shot at Q2 reserves. They could be higher, they could be lower, but we'll have to see how quickly the economy reopens and how quickly things start getting back to normal.

But our view is, probably, it's not a V-shape. It's not a complete U shape. It's probably some place in between there. I've heard like every letter of the alphabet. It's probably like a G shape, some goofy shape out there. But nobody has talked about that.

We're monitoring the portfolio well. We're managing it well. We had a credit team that put up there with anybody and we'll see where it goes. But I'm not sure we're going to try to make a prediction on 2Q. It could be better. It could be worse. As Ed said, it's just what a time for CECL to come in. It is not transparent, I think, looking company to company. But if you look at some of the metrics that I've been looking at, it seems like we're sort of in the middle of the pack. And we certainly didn't try to do that. Just seems to be where we're landing. And I understand people can take a dark view of where this is going and some people can take a more favorable view. But we took what we thought was the best reasonable view that we could using our modeling and our subject matter experts on the credit side. And we think we're OK for now.

Michael Young -- SunTrust Robinson Humphrey -- Analyst

Thanks for all that info. And maybe just following up, I appreciate the breakout on COVID-impacted industries, specifically. But also just wanted to get some high-level thoughts on commercial real estate and construction, particularly retail, and just kind of any mitigating factors that you guys are looking at or any portfolio analysis that you've done thus far?

Edward Joseph Wehmer -- President and Chief Executive Officer

I think Rich.

Richard B. Murphy -- Executive Vice President and Chief Credit Officer

Yeah. CRE is a bit of a wild card. We've spent some time kind of thinking through what it might mean. We're pretty well diversified in the CRE book, multifamily being the largest segment. In multifamily, generally speaking, it's Chicago metro. It performed very well. Very good long time operators. I think that that -- I'm feeling pretty comfortable about that. Industrial is a decent-sized portfolio for us. I feel really good about that. Obviously, the overall business impact will determine ultimately how that performs.

The areas that give me the most concern is retail and office. I think office because I think that this work from home model that we've all adapted is something that we really won't know what it's going to look like a year from now, two years from now, five years from now, but it's going to be different. And how that impacts our portfolio, it remains to be seen. That being said, again, we tend to be very granular in those deals and we tend to really pick very strong operators. So, again, I'm feeling OK there.

Retail is the segment that probably concerns me the most in general. As we've said in the past, our approach toward retail has been to really try to reduce that portfolio over the last five years, which we've been pretty successful at, but where we do have exposure, it's none of the big box. I shouldn't say none, but very little of the big box regional type retail exposure. Where a great majority of our retail exposure exists is in the towns and communities that we have banks, and so these are the downtown suburban type operators.

And I think that they are still going to be viable operations going forward. But I don't know when, but generally speaking, I feel that that's going to rebound better than most. But it is one of those that I -- people are shopping on Amazon and the numbers are obvious, but dramatically higher levels. And I don't think that you're going to see a reversion back to what we had seen in the past. I think those people's shopping habits are going to change in a pretty meaningful way going forward.

Edward Joseph Wehmer -- President and Chief Executive Officer

Yeah. Murph and I talk about that a lot. I say, you're going to keep my wife out of shopping, you're crazy. And you're going to keep me here or at the office? I'll go to the office. She'll kick me out. So, there's a lot of schools of thought. We have to wait and see. But I think, as Murph says, we're diversified enough, know our borrowers enough. I think we will know -- everybody bought two, three months with PPP loans, with deferrals and the like, even in offices and what have you. We'll know in two or three months how this is going to shake out, where it's going to go and how it's going to work. So, I think that we're kind of in limbo. We've got to get out of this. And then, we'll see if all this happens. But we'll be very cognizant of it. Already, any underwriting we're doing, we're -- on some of the new stuff that's coming, we're very cognizant, but we'll be very careful for sure because good loans are made in bad times, but you've got to -- you have to have a better crystal ball of the type of assets that you will take as collateral.

Michael Young -- SunTrust Robinson Humphrey -- Analyst

Okay, thanks.

Operator

Thank you. Our next question comes from Chris McGratty with KBW. Your line is now open.

Christopher McGratty -- Keefe, Bruyette & Woods -- Analyst

Hey, good morning.

Edward Joseph Wehmer -- President and Chief Executive Officer

Good morning, Chris.

Christopher McGratty -- Keefe, Bruyette & Woods -- Analyst

Hey, Ed. How are you doing? Kind of a high-level question. In the past, you've talked about the rope-a-dope and not the need to go there. What would it take for you to pivot? Is it this two to three months and we don't get the outcome we're looking for? I'm just interested in your thoughts and what may pivot the bank strategy more significantly. Thanks.

Edward Joseph Wehmer -- President and Chief Executive Officer

Well, the rope-a-dope before was really brought on by two things. One is, we couldn't get paid for the risk we were taking. So, it didn't meet our profitability models on pretty much any deal out there. And secondly, we were seeing way too many critical exceptions to loan policy, and we just said we're not going to do that.

The spreads are actually moving up on the lending side, which is a good thing. So, we are meeting our profitability models there. And we are very closely monitoring exceptions. That's something that could slow us down a little bit if it's -- in terms of making new loans and the like, if guys are coming up with too many exceptions.

But I think we're seeing people pull back enough that this may have -- it sounds goofy. This may been a timely crisis because we had started seeing people's scrounging for yield as rates went down to zero again and taking more risk. But now, this has brought everybody back and now they're thinking, I think, more rationally about pricing and collateral, what have you. We'll see what we've got and if they revert back to the goofy stuff, but who knows. Murph?

Richard B. Murphy -- Executive Vice President and Chief Credit Officer

Yeah, I would absolutely agree with that. I think while it wasn't rope-a-dope in the back half of '19 and the first part of '20, we were having trouble really growing C&I opportunities because there were just a lot of people in that same space fighting structures and pricing that just made no sense for us. And the CMBS market was very active in the CRE space. So, I would agree with what Ed said. The market had gotten goofy and way too aggressive. And this crisis, certainly, has snapped back those trends pretty dramatically.

Edward Joseph Wehmer -- President and Chief Executive Officer

What's pretty interesting for us is the kind of the halo effect that we got from the PPP work where our competitors are unable to service their clients and they'd call us and maybe we knew the owner, whatever, he had a personal account or what have you, had some relationship with them, we were able to get them on and service them. A larger bank in town hardly did any of -- the oldest, largest bank that we are a competitor didn't do any hardly, and that's opened up an opportunity for us to pick up really solid opportunities going forward and at reasonable pricing. So, it could be a little bit of a godsend.

So, rope-a-dope right now. Who knows? Well, we see opportunities for growth right now at our pricing parameters for good solid long-term companies that aren't in the higher impact risk areas that -- I don't think we do a lot of hotel loans right about now, do a lot more restaurant loans, but a lot of really solid other businesses that we're going to have shots that we never would have had before.

So, kind of mixed right now, but we are always very vigilant in terms of what's going on because, as Dave pointed out earlier about CECL, who the hell knows where we're going to end up.

Christopher McGratty -- Keefe, Bruyette & Woods -- Analyst

Thanks for that. That's good color. Just one more question on the PPP. Obviously, we're trying to make our assumptions on where the economy is going, but it seems like the banks are going to generate a tremendous -- I think you said almost $100 million of fees. I guess the question becomes -- I know you're bound by the models. But wouldn't it seem conceptually the right thing to do, to put this back into the reserve and make people feel a little bit better about adequacy for the industry?

Edward Joseph Wehmer -- President and Chief Executive Officer

Well, you've got to go with the black box and see where it goes. But I would just say that we -- who knows when that money -- that money could come in over two years, over one year, over six months. I don't know when it's coming in. I look at them independently. The reserve will be what it is and the PPP fees will be what they are. [Indecipherable]. I don't think we have the luxury of playing that game anymore. We've got to really look at the data and be consistent. And we have committees that meet that, everything from -- everything. And so, you really don't have a lot of art left in it anymore. It's all going to be out of the box and we'll see where it goes.

But I would imagine, if things turn bad, and you're feeling it turns bad, you can do some qualitative things that would go over the top and match it up nicely. Who knows? You've got to look at them independently is my point.

Christopher McGratty -- Keefe, Bruyette & Woods -- Analyst

I got it. Yeah. I got it.

David L. Stoehr -- Executive Vice President and Chief Financial Officer

GAAP is GAAP, Chris. So...

Christopher McGratty -- Keefe, Bruyette & Woods -- Analyst

GAAP is GAAP. Yeah, I was looking for the qualitative comment that Ed referred to. So, that's helpful. Dave, while I have you, the tax rate going forward, how should we think about it relative to Q1?

David L. Stoehr -- Executive Vice President and Chief Financial Officer

Yeah. I still think you think about it sort of as 26.5% to 27%. The first quarter -- because the stock price was down so much, the benefit we usually get in the first quarter from stock-based compensation was actually negative a little bit and the BOLI adjustment was actually negative a little bit. So, I think -- I still look at sort of a normalized tax rate to be 26.5% to 27%.

Christopher McGratty -- Keefe, Bruyette & Woods -- Analyst

That's an effective [Indecipherable].

David L. Stoehr -- Executive Vice President and Chief Financial Officer

Yeah, yeah.

Edward Joseph Wehmer -- President and Chief Executive Officer

Chris, I have a question for you. Can I ask you one?

Christopher McGratty -- Keefe, Bruyette & Woods -- Analyst

Absolutely.

Edward Joseph Wehmer -- President and Chief Executive Officer

Why does our stock get so beat up all the time? We don't understand why we trade so much lower than everybody else and such a discount the peers.

Christopher McGratty -- Keefe, Bruyette & Woods -- Analyst

Yeah, I think the market is -- a lot of the volatility in these stocks lately has been, I think, somewhat less fundamental and somewhat technical, but I agree. That's why we're constructive.

Edward Joseph Wehmer -- President and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from Brock Vandervliet with UBS. Your line is now open.

Brock Vandervliet -- UBS -- Analyst

Thank you. Can you hear me?

Edward Joseph Wehmer -- President and Chief Executive Officer

Yeah, Brock. We're good. How are you?

Brock Vandervliet -- UBS -- Analyst

I'm doing well. I wondered if I'd managed to pop in the queue. So, this is great. I was wondering, given your comments about the outlook, and a number of banks have talked about how their outlook squared with Moody's, as Moody's is working with so much of the industry, and whether that used the base case or the adverse outlook. Could you touch on that and what you consulted outside for kind of a reality check on the outlook?

Edward Joseph Wehmer -- President and Chief Executive Officer

Rich.

Richard B. Murphy -- Executive Vice President and Chief Credit Officer

So, we look at a lot of different things. You look at the base case, you look at the severity, you look at the long end of the pandemic one, we run the models on all of it, we talk to our businesspeople. So, we look at blue chip economist models, and we look at consensus Moody's models. At the end of the quarter, you have to pick a scenario and run with it, but then you're informed by those other models that you run and the consensus blue chips and -- and the consensus and the blue chip models that we compare and contrast against and then we get the qualitative input from our business leaders. So, you have to pick one to base your model off, but then there are qualitative factors that you had to layer on because, at some point, you had to pick a scenario and run with it. Moody's was changing scenarios weekly almost for this thing.

So, then you took some -- you ran some other models to find out where the guardrails were on the ups and the down sides and then you squared that with the business leaders that have their fingers into the pulse of those scenarios and you run out the process. So, I'd say we were informed by a number of different Moody's models and other models out there.

Brock Vandervliet -- UBS -- Analyst

Okay. And in terms of forbearance, I saw the reference in the press release, I believe, in terms of it tailing off here in April. Have you released a percentage on commercial and CRE deferrals that you did grant?

David L. Stoehr -- Executive Vice President and Chief Financial Officer

No, I said I don't know if we have those. I think we noted in the release that we had about $300 million of outstanding balances for commercial and commercial real estate loans that we had some sort of modifications to, and that's what we have right now.

David Alan Dykstra -- Senior Executive Vice President and Chief Operating Officer

So, those are ones that are actually booked, those ones that are going through the process that we're still evaluating and we have not booked yet. That will show up over the course of the next couple of months, but I don't have the detail on that. Okay. And on our retail residential real estate mortgages, we sell most of that. So, we do do the servicing portfolio and then we have some in our portfolio. We are tracking -- so far, we're tracking better than the MBA averages that they're putting out there on that.

Edward Joseph Wehmer -- President and Chief Executive Officer

[Indecipherable].

David Alan Dykstra -- Senior Executive Vice President and Chief Operating Officer

Our numbers are a little more current than the MBA numbers. So, I haven't seen the most recent MBA ones. But we are better than the MBA average on that.

Brock Vandervliet -- UBS -- Analyst

Okay. Thanks for the color.

Operator

Thank you. Our next question comes from Nathan Race with Piper Sandler. Your line is now open.

Nathan Race -- Piper Sandler -- Analyst

Thanks. Hi, guys. Good morning. Wanted to ask a question on just updated thoughts on capital planning and priorities, obviously, with total risk-based capital coming down 30 basis points or so sequentially. And I, obviously, understand it's uncertain, you can't project what credit costs are going to look like, but just curious to kind of get some updated thoughts on capital deployment priorities and how you guys kind of see capital levels projecting to the extent you can kind of predict just given all the uncertainty that exists today.

David Alan Dykstra -- Senior Executive Vice President and Chief Operating Officer

Well, we look at our capital levels all the time and we go through stress analyses on them. The PPP loans are going to be capital free from a risk-based perspective, so that's not going to impact and it's going to be short term in nature anyway. We still are generating positive earnings this quarter and expect to do so going forward. And we've suspended the share repurchase, but that was prudent to do. Still believe the dividend is appropriate. But we'll let the Board of Directors decide that as they move forward. But we continue to think capital is adequate. If we continue to grow or there -- we have these opportunities Ed talks about and we have growth opportunities out there and the equity markets open up, we could look at some preferred or some sub debt. But it's not critical that we do that right now, but we're always watching those markets because we do expect to continue to grow.

Edward Joseph Wehmer -- President and Chief Executive Officer

Yeah. We won't be spending a lot of cash on acquisitions with where our stock price is. You can't have any of them make much sense. So, I think that, Dave, laid it out nicely. Our growth has really been at zero-based risk ratings and we keep a close eye on the whole thing and we do -- we run more stress test, I think, than most people do and we feel very comfortable where we are right now. But depends on our growth prospects other than the zero-based risk rating stuff. So, we feel very good about where we are and we'll -- that's where we are.

Nathan Race -- Piper Sandler -- Analyst

Understood. That's helpful. And speaking of stress tests, I think when you guys last submitted DFAST in 2017, you guys indicated that you could have 2.8% cumulative losses and a severe adverse scenario. So, I guess I'm just curious, as you guys have kind of stress tested the book more recently, any kind of thoughts or guidance in terms of kind of what you guys could see in that kind of adverse scenario under the current circumstances that exist today?

David Alan Dykstra -- Senior Executive Vice President and Chief Operating Officer

No, we haven't disclosed that, Nathan. So, people can look at that stress test, but that was -- I'm not sure you can compare that -- any environment to this. It may be a good environment as your best one to look at, but we haven't disclosed the stress test a couple of years either. And to give you something on this call like that, we'd have to give that more thought because we haven't done a DFAST stress test per se that we've made public so far. So, we do them internally, but I don't have the numbers other than to tell you right now that we believe with a tremendous amount of stress, as we see it, that we're fine.

Edward Joseph Wehmer -- President and Chief Executive Officer

Yes. I think a general statement, though, that we do stress the portfolio and that we feel that right now we're in pretty good shape.

Nathan Race -- Piper Sandler -- Analyst

Understood. And if I could just ask one more on PPP. I appreciate all the disclosures and the deck notes that you guys have funded relief through the PPP for, call it, 15% of those select high impact industries. So, I'm just curious, based on the pipeline of PPP loans you have, where do you expect that number moving forward in terms of providing that added cushion for those selectively high impact industries?

Edward Joseph Wehmer -- President and Chief Executive Officer

Well, most of them were done in the first round for our clients. Most of them were done in round one. So, going forward, we've actually been reaching out into the neighborhoods to -- to low to moderate neighborhoods, to people who say they can't get the loans and really reaching out to our customers and say, 'Hey, come on, we'll get you in,' because we really have the system nailed and feel we're in pretty good shape. So, we basically had the portal open from now, four-and-a-half hours maybe in total. In total. We've taken in over 10,000 applications. And we tried to close it for a little while to do some direct work to make sure that we covered people who maybe not have been as unfortunate to be there, but to have their data and understand what it is. We've really reached out to do that because -- but, really, when you think of it, most of the guys who were in our troubled and the severely impacted industries were the first guys in. They're not done. They're very smart people.

I will say that -- you might ask what motivates our people to do this. I think we've had a number of great notes from people. If you think about it, we're going to keep 10,000 businesses from probably bankruptcy in a lot of cases. You think that they each have maybe average 30, 40 employees. That's 400,000 people. They all have -- on average, would have four dependents. That's 1.6 million people that we're affecting and let sleep easier every night because for two months they're going to have their salaries or benefits and that's what kept our people working until midnight 1, 2, 3 in the morning, is doing the good we're doing. And how often do you have a chance to touch that many people in your life, much less in two weeks.

So, we feel very good about what we're doing here. We think we're doing our contribution. And as it relates to the impacted industries, they went right out of the box. Now, we've got to make sure those who really don't get it are getting it. So, that's what our focus has been in the last round.

David Alan Dykstra -- Senior Executive Vice President and Chief Operating Officer

I would add that, from the release date through 4/20 which does not include this phase two, we are up about another 15% to highly affected industries.

Nathan Race -- Piper Sandler -- Analyst

Understood. That's great to hear. I appreciate all the color. Thanks, guys.

Operator

Thank you. [Operator Instructions]. Our next question comes from David Chiaverini with Wedbush. Your line is now open.

David Chiaverini -- Wedbush Securities -- Analyst

Hi, thanks. I wanted to ask you about -- how is it going? So, I wanted to ask you about expenses. So, in the past, you've mentioned about keeping the net overhead ratio below 1.5%. I think I heard you mention that it should be well below 1.4%. So, I was wondering, is that the new bogey now, less than 1.4%? Did I hear you right?

Edward Joseph Wehmer -- President and Chief Executive Officer

We don't usually get it, but 1.5% has always been the sign of a well-run bank. And I think that with our growth and what's going on with our asset growth and our expense control based just what's going on here in terms of our inability to open branches and do things like we normally do right now through rest of the business, plus the mortgage markets and how well we're doing there, I'd say, yeah, you should be well below 1.40%. I think we could even make it below 1.30% if things go right. But the bogey will always be 1.50%, 1.50% or better. We're not changing it yet, but I think you can expect it for the next few quarters to be below 1.40% and between the 1.30%, 1.40% range. And, hopefully, lower than 1.30% if we're good.

David Alan Dykstra -- Senior Executive Vice President and Chief Operating Officer

Yeah, I think what I said in my comments were with growth of the balance sheet related to PPP and the strong mortgage market and the lack of some of the expenses that are going to flow through just due to the situation we're in, travel, entertainment, some of the sponsorships of some of the summer events, etc., we should be below 1.40% for the time being. But I agree with Ed that the general target in a normal environment is still sort of below the 1.50%. But, yes, I did say below 1.40% because I think in the near-term quarters that's still going to be the case.

David Chiaverini -- Wedbush Securities -- Analyst

Great, thanks for that. And has your de novo outlook changed at all? Previously, you're planning about a dozen branches over the next 12 to 18 months. Has the backdrop kind of shifted your thinking on that?

Edward Joseph Wehmer -- President and Chief Executive Officer

Not really. Slowed it down a little. Again, we're taking basically a couple of months off, but we're all in this hibernating, if you will. But these are areas we're committed to. We have space, we're growing and there are opportunities for us to continue to build and grow. And we've always invested in our business. We are a growth company. The acquisitions aren't going as planned or they are not -- the market is not giving us good price to acquisitions, we will turn to de novo growth. These are basically all-in install, but the timing will be probably more spread out than it would have been before.

David Chiaverini -- Wedbush Securities -- Analyst

Okay. And then, the last one from me on loan growth. And you touched on that a little bit earlier. But to be clear, you're still expecting mid to high single-digit growth in the context of line utilization rates and the drawdowns did kind of surge at the end of the first quarter. Could that be a headwind to loan growth if things start to normalize and these companies start to pay down those drawdowns?

Edward Joseph Wehmer -- President and Chief Executive Officer

Rich?

Richard B. Murphy -- Executive Vice President and Chief Credit Officer

Yeah. I think overall economic activity is certainly going to be muted in the remainder of the year. So, that's going to have an effect. I do think a couple things that are going to be interesting to watch will be -- I do think that this halo effect is real, that I think that we'll have some real opportunities with customers that -- in the past, we just haven't had a lot of success with that we would really like to bank. So, I think that'll be a good opportunity. I think the first insurance groups also will continue to do reasonably well.

Edward Joseph Wehmer -- President and Chief Executive Officer

Ticket [Phonetic] sizes should move up there nicely.

Richard B. Murphy -- Executive Vice President and Chief Credit Officer

Yeah. So, I think that there is going to be some good opportunity there. But, clearly, the economic growth going forward is going to be a bit of a headwind.

Edward Joseph Wehmer -- President and Chief Executive Officer

I think those are line draws. It was only, what, $400 million, $500 million we figured out, Murph. Is that right?

Richard B. Murphy -- Executive Vice President and Chief Credit Officer

Yes. But we also have warehouse lines. And as the mortgage industry -- we're seeing really good usage on those right now. And the second half of the year, that probably will be under some pressure. So, we'll keep an eye on that too. So, we'll see.

Edward Joseph Wehmer -- President and Chief Executive Officer

So, your question about high-single digit, it could be affected by those fluctuations. Agree with that?

Richard B. Murphy -- Executive Vice President and Chief Credit Officer

Yes.

David Chiaverini -- Wedbush Securities -- Analyst

That makes sense. Thanks very much.

Edward Joseph Wehmer -- President and Chief Executive Officer

Thank you.

Operator

Thank you. I'm not showing any further questions at this time. I would now like to turn the call back over to Edward Wehmer for any closing remarks.

Edward Joseph Wehmer -- President and Chief Executive Officer

Thanks everybody. Stay healthy. And if you have any other questions, please feel free to call me or Dave. Tim Crane got off easy. He didn't have to answer anything today, but might want to call him and pepper him. But thanks, everybody. Stay healthy. And until next time, bye-bye. [Operator Closing Remarks]

Duration: 80 minutes

Call participants:

Edward Joseph Wehmer -- President and Chief Executive Officer

David Alan Dykstra -- Senior Executive Vice President and Chief Operating Officer

Richard B. Murphy -- Executive Vice President and Chief Credit Officer

David L. Stoehr -- Executive Vice President and Chief Financial Officer

Jonathan Arfstrom -- RBC Capital Markets -- Analyst

David Long -- Raymond James & Associates, Inc. -- Analyst

Terry McEvoy -- Stephens, Inc. -- Analyst

Michael Young -- SunTrust Robinson Humphrey -- Analyst

Christopher McGratty -- Keefe, Bruyette & Woods -- Analyst

Brock Vandervliet -- UBS -- Analyst

Nathan Race -- Piper Sandler -- Analyst

David Chiaverini -- Wedbush Securities -- Analyst

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