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Wintrust Financial Corp (NASDAQ:WTFC)
Q1 2021 Earnings Call
Apr 20, 2021, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to Wintrust Financial Corporation's First Quarter 2021 Earnings Conference Call. A review of the results will be made by Edward Wehmer, Founder and Chief Executive Officer; Tim Crane, President; David Dykstra, Vice Chairman and Chief Operating Officer; and Richard Murphy, Vice Chairman and Chief Lending Officer. As part of their reviews, the presenters may make reference to both the earnings press release and the earnings release presentation. Following their presentation, there'll 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 the actual results to differ materially from the information discussed during this 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 earnings release presentation include a reconciliation of each non-GAAP financial measure to the nearest comparable GAAP financial measure. As a reminder, this conference call is being recorded.

I will now turn the conference call over to Mr. Edward Wehmer. You may begin.

Edward Wehmer -- Founder & Chief Executive Officer

Thank you. Good morning everybody. Welcome to our first quarter earnings call. With me as always are Dave Dykstra; Dave Stoehr, our Chief Financial Officer; Kate Boege, our General Counsel; Tim Crane, President; Rich Murphy, who runs Credit. A new year means newer different format than we had in the past. I will give you some general comments regarding our results, go to Tim Crane, who's going to discuss the balance sheet. He will then turn over to Dave Dykstra for more -- an analysis of our income statement and Rich Murphy is going to give us an overview on credit. Then back to me for some summary comments or thoughts about the future. We'll have time for questions.

For the quarter overview, assisted by a strong mortgage quarter, good quarter loan growth in line with previous guidance, the PPP loan production, lagging into excess liquidity utilization and sizable reserves at least we're able to put up a record quarter, $153.1 million or $2.54 per common diluted share and ROA of 1.38%, ROE of 15.8% -- sorry ROE at 15.8%, exceeded than previous quarter. Our net interest margin was constant at 2.54%. Our net interest income was up $2.5 mi from Q4 despite the fact that we had two fewer days in Q1 from Q4. And by now each day is worth approximately $3 million of earnings. Our wealth investment activity was done late the quarter, so this bodes well for Q2 of this year. Our loan growth was excellent. PPP Round 3 totaled $1.4 billion and helped us paid out and forgiveness on PPP Round 1 and 2, $667 million.

We said previously, the strategy was to grow the incredible rate environment relying on margin to enhance earnings until net interest income protection could catch up. We've been successful on both fronts to asset growth in the quarter to $600 million in Q4 and $7 billion in first quarter 2020. There still remains our strategy compasses to organic growth.

Now, I'm going to turn over to Tim Crane to talk about our balance sheet.

Tim Crane -- President

Thanks, Ed. With respect to the quarter end balance sheet, several items worth highlighting, Ed mentioned the asset growth of just over $600 million. Loans were up $1.1 billion, roughly half related to PPP loan balances. More importantly, the other half or just over $0.5 billion represents core loan growth. Excluding PPP volumes, this represents approximately 7.1% annualized loan growth in line with the consistent loan growth target of mid to high single-digits on a percentage basis.

It's important to note that the loan growth was strongest at the end of the quarter and that the period end loan balances were over $500 million higher than the quarterly average loan balance indicating strong momentum into the second quarter. Some of this detail is on page eight of the earnings release presentation. The growth was spread nicely across all loan categories and pipelines remain strong for all of our major businesses. We continue to benefit from the addition of clients from the halo effect of our PPP efforts and we're starting to see more client activity as the pandemic impacts begin to recede. Deposit growth for the quarter was $780 million, a majority of the increase in non-interest bearing deposits. Deposit costs continue to fall primarily as we repriced term deposits. For the quarter, the rate paid on interest bearing deposits fell six basis points to 45 basis points. This is a trend we expect will continue in the coming quarters. Like many institutions, we've seen very significant deposit growth and are managing the flows carefully. However, we've used stable low cost deposits as a strength of our company and will continue to grow those deposits related to client relationships. Finally, on deposits, we've been opportunistic about securing some low cost longer term funding for the bank.

With respect to the securities portfolio, we remain very liquid. We did deploy some liquidity in the first quarter as investment securities increased by approximately $1 billion. As discussed on prior calls, we have done this on a measured basis mindful of the possibility of rising rates and wary of locking in low long-term yields. Approximately half the securities were purchased toward the end of the quarter at a rate above 2% as yields moved up in March from lower levels earlier in the quarter. To get a sense of the timing and the impact of the securities addition, the period end securities were $743, million higher than the average balance for the quarter and had the securities been on the balance sheet for the entire quarter, the margin would have been approximately three basis points higher. Despite the addition of the $1 billion in securities during the quarter, our duration remains approximately flat from a year ago and we remain well-positioned for rising rates. Lastly, as a result of the strong earnings, both the Tier 1 capital ratios and the CET-1 ratio improved from the prior quarter end and remain appropriate given the conservative risk profile of the bank.

Overall, from the standpoint of the balance sheet, we are watching deposit flows carefully, particularly those related to PPP loans, but the main message is continued good growth, which accelerated into the end of the quarter and will help future periods.

Dave?

David Dykstra -- Vice Chairman & Chief Operating Officer

All right, thanks, Tim. As Ed mentioned, I will cover the notable changes throughout the entire income statement and I'll start with net interest income. For the first quarter of 2021, our net interest income totaled $261.9 million that was an increase of $2.5 million compared to the fourth quarter of last year and a slight increase of $452,000 as compared to the first quarter of 2020. The $2.5 million increase in net interest income compared to the prior quarter was primarily due to the earning asset growth and increased PPP fee accretion, and as Ed mentioned, that's despite two less days in the first quarter, which are worth about $3 million per day, so good NII growth.

As far as margin goes, it was unchanged from the prior quarter as the rate on interest bearing liabilities declined seven basis points in the first quarter as compared to the prior quarter, which was effectively offsetting a six basis points decline in the yield on total earning assets. The six basis point decline on the yield on earning assets was primarily due to an eight basis points decline in loan yields which were partially offset by a three basis point increase on the yield on liquidity management assets. The decrease in the rates paid on interest bearing liabilities on the first quarter as compared to the prior quarter was primarily due to a six basis point decline in the interest bearing deposits due to lower repricing of our time deposits as Tim mentioned, we expect that to continue. PPP loan fee accretion increased as the company recognized $19.2 million of PPP loan fee accretion in the first quarter and that compared to $16.8 million in the fourth quarter of 2020.

Additionally, as Tim Crane mentioned, the late quarter deployment of liquidity into investments securities and the back end loaded loan growth during the quarter resulted in over $1.2 billion of a period end investment and loan balances exceeding the aggregate average balances of those categories, which we expect again to favorably impact net interest income in the second quarter. The margin is impacted still by excess liquidity on the balance sheet and we'll be cautious about deploying that and prudent as far as that deployment goes, but there certainly is some upside there if we can deploy additional overnight liquidity into loans and longer term investments.

Turning to provision for credit losses, similar to many other banks that have reported this quarter, Wintrust recorded a negative provision for credit losses of $45.3 million compared to a positive provision of $1.2 million and $53 million in the prior and year ago quarters respectively. The negative provision was driven by a reduction in the allowance for credit losses, primarily due to improvements in the macroeconomic forecasts, including improvements in the commercial real estate price index and the VWAA corporate credit spreads. Additionally, the company saw improvement in the loan portfolio characteristics during the quarter including decreases in COVID-19 related loan modifications and improving loan risk rating migration.

Slides 13 to 18 on the presentation deck provided on our website provides additional details about the improvement in non-performing loans, the modified loans, and the macroeconomic forecasts that I referred to and Rich Murphy will cover that in greater detail as far as specific credit quality metrics.

Turning to that non-interest income, non-interest expense, and income tax. In the non-interest income section, our wealth management revenue increased $2.5 million to a record $29.3 million compared to $26.8 million in the fourth quarter of 2020 and it was up 13% from the $25.9 million recorded in the year ago quarter. This revenue source has been positively impacted by the higher equity valuations, which impact a portion of the managed asset accounts. So, another great record quarter for our wealth management team. Mortgage banking was seasonally strong due to the continuing low rate environment and actually increased 31% or $26.7 million to a record level of $113.5 million in the first quarter from $86.8 million posted in the prior quarter and was up very strong 135% from the first quarter of last year.

The company originated approximately $2.22 billion of mortgage loans for sale in the first quarter, down slightly from the $2.35 billion in the prior quarter, and up $41 million [Phonetic] from the mortgages that we originated in the first quarter of last year. The increase in the revenue and the mortgage revenue for the quarter was resulted from an increase in the value of the mortgage servicing rights related to fair value assumptions equal to $18 million in the first quarter, as compared to a decrease of $5.2 million in the prior quarter. We also had a slight increase in production revenues, production margin expanded 20 basis points and we had an increase in the value of the capitalization of retained mortgage servicing rights due primarily to higher valuations on newly originated loans.

The company also retained $322 million of mortgage loan production for investment during the first quarter, and earmarked approximately $160 million of the quarter end pipeline for future investments. Accordingly, during the first quarter, the company did not record gain on sale revenue associated with slightly over $480 million worth of loans retained or designated for future retention. Assuming a gain on sale margin of about 3.5% plus or minus, the foregone production revenue for the first quarter would exceed $15 million. But we of course will recognize the benefit of those loans by retaining them on the balance sheet through improved net interest income in future quarters. Obviously, mortgage production remained very stronger in the current quarter due to the high refi activity.

Looking forward, we expect originations in the second quarter to be another very strong quarter, but we do expect refinance activity to decline a bit. Somewhat offsetting that anticipated slowdown in refinance activity will be an expected pickup in the mortgage volume related to home purchasing activity. Net, we believe origination volumes maybe down somewhat from the first quarter, but we really need to see how the purchase market activity materializes. Recently, applications have increased in the purchase markets we'll have to see how that plays out. Table 15 of first quarter earnings press release provides the detail compilations, pardon me, of the components of origination volumes by delivery channel and also the mortgage banking revenue.

Turning to other non-interest income, it totaled $15.7 million in the first quarter, down approximately $4 million from the $19.7 million recorded in the prior quarter. There are two primary reasons for the decline. One was we had $2.4 million of lower swap fee revenue and $1.7 million of lower BOLI income, primarily related to $1 million less of BOLI investment returns supporting deferred compensation benefits and an $800,000 of death benefits that we had in the prior quarter that fortunately did not recur this quarter. I should note that the $1 million decrease in the BOLI earnings related to deferred compensation benefits resulted in a similar offsetting decrease in salaries expense during the quarter

Going to non-interest expense categories, non-interest expenses totaled $286.9 million in the first quarter, up approximately $5 million, or 2% from the $281.9 million recorded in the prior quarter. There are a handful of categories that accounted for the majority of that change from the prior quarter. The first paying salaries and employee benefits which increased $9.7 million as compared to the fourth quarter of 2020 that $9.7 million increases comprised of $9 million in commissions and incentive compensation increases; $3.2 million in employee benefit expense increases, which was partially offset by a $2.5 million decline in salaries expense associated with higher deferred salary costs associated with strong loan originations including PPP, and the aforementioned reduction in deferred compensation related to the BOLI products.

The increase in commissions and incentive compensation is primarily due to higher expenses the stress associated with the company's long-term incentive program and higher commissions related to its wealth and mortgage management businesses. The increase in employee benefits is primarily related to higher payroll taxes, which tend to be elevated in the first quarter. Occupancy expenses totaled $20 million in the fourth quarter, increasing only $0.3 million from the $19.7 record in the prior quarter. Although this increase is nominal, I want to note that the first quarter of 2021 included a $1.4 million impairment charge associated with the planned closure of an additional branch location compared to a similar $1.4 million impairment charge associated with planned closures of branch locations that we discussed last quarter.

Advertising and marketing expenses in the fourth quarter decreased by $1.3 million when compared to the prior quarter, where the decreased relate primarily to a lower level of digital advertising campaigns and printing costs in the first quarter. Miscellaneous expenses in the first quarter declined by $5 million. The first quarter of 2021 included the $937,000 reversal of contingent consider -- purchase price consideration related the previous acquisition the mortgage operations that compared to $6.6 million of additional expense in the fourth quarter. We don't expect that that have any significant impact going forward as a time period for that goes to earn out payments are shortening up and we would expect that to have very little impact going forward. But there was a big swing from last quarter to this quarter. And the company also recognized $3.8 million expense related the impairment of certain capitalized software costs as we evaluate the remaining use for life so certain software systems that we have been replacing.

Other than expense categories just discussed, no other category had any noteworthy changes from the prior amounts recorded in the fourth quarter. If we look at the net overhead ratio for the first quarter, it was down marginally to 0.90% from the 1.12% recorded in the fourth quarter and from the full year 2020 net overhead ratio of 1.05%. The first quarter's net overt ratio benefited from a strong balance sheet growth and strong mortgage banking results. Moving on to income tax expense, the effective tax rate for the quarter was 25.97%, so roughly 26% which is in the range that we normally would expect of 26% to 27%.

So, with that, I will turn it over to Rich Murphy to give some comments on credit.

Rich Murphy -- Vice Chairman & Chief Lending Officer

Thanks, Dave. Tim and Dave noted earlier, the first quarter was very solid from a number of perspectives.

First, from a loan growth perspective, net of PPP, we saw core long growth of $515 million or 7.1% on an annualized basis. This growth was seen across the portfolio, but we saw very solid performances from Wintrust Life Finance which grew by $250 million or 18% annualized and commercial loans which grew by $175 million or 8% annualized, most of which closed as Tim pointed out at the very end of the quarter. A couple of additional notes on loan growth. Pipelines continue to look very strong. Total core pipeline of C&I and CRE loans was $1.4 billion in the highest level we've seen in five months. The core law momentum that we have seen as impossibly affected by our execution of our PPP program, which has been very strong, including this most recent round, which I'll address in a moment.

Secondly, the granularity of the portfolio. One of our hallmarks in the credit portfolio has been the diversification across a number of products. Conceptually, we have always focused on a composition of one-third core commercial and industrial loans, one-third commercial real estate, one-third from our non-bank niche products. The largest niche category we have is our also our oldest, which is premium finance. This includes first insurance funding, which funds commercial insurance premiums, and currently totals $4 billion including our Canadian operations. Wintrust Life Finance, which funds life insurance premiums currently totaled $6 billion. Both of these portfolios have performed very well during the pandemic. Wintrust Life Finance has grown 17% year-over-year, and first insurance funding is up 14% year-over-year. We have also seen solid growth from our leasing, mortgage warehouse, and franchise teams.

Finally, we added a new slide, Page 15 of the presentation, which deals the geographic diversification in our portfolio. We will always have a Chicago, Milwaukee Nexus, however, as this slide illustrates, our various business lines provide us with meaningful amount of credit outside of our primary markets. From a credit quality perspective, improvement was evidenced across the portfolio as the economy continues its post-pandemic growth. This can be seen in a number of ways. First, non-performing loans were reduced from $127 million at year end to $99 million at quarter end. Even more striking is a 50% reduction in MPLs from nearly $200 million at June 30th, 2020. We recorded $13 million of net charge offs during the quarter or 17 basis points, which is up slightly from the fourth quarter, but in line with the previous four quarters. We also saw a 26% reduction in COVID-19 modifying loans from $345 million to $254 million during the quarter as outlined on slide 16 of the presentation. Majority these remaining modified loans are primarily in our select high impact industries, which is detailed on Slide 17. Finally, credit risk ratings continue to show material positive migration, a trend which is accelerated since the third quarter of last year.

Finally, on PPP, as outlined on page 12, we have now funded over 20,000 PPP loans to over 14,000 different borrowers totaling $4.8 billion. This includes over 7,700 PPP loans totaling over $1.3 billion during the first quarter. Our median loan size through the PPP process was around $60,000 and we continue to focus our efforts on our existing customers, low to moderate income areas, non-profits, and identified prospects. During this most recent round of PPP, we heard from a number of customers that they could use additional help in the submission process. As a result, we established nine PPP resource centers in LMI areas to assist customers with the PPP process. This effort has been very successful and the feedback from the community has been has been overwhelmingly positive. Regarding the PPP forgiveness process, we continue to make good progress as we have now processed forgiveness applications on over 60% of our 2020 PPP loans, compared to 46% for the rest of the industry.

That concludes my comments and I'll turn it back to Ed for a wrap-up.

Edward Wehmer -- Founder & Chief Executive Officer

Thanks, Murph. As I mentioned, at the beginning of the call, our strategy has been to grow the balance sheet, non-interest loan rates and these are structural hedges, -- which being our mortgage area above the loss and net interest income so same as balance sheet grow to offset income loss due to the lower rates.

PPP loans were expected to benefit to the strategy. All the above was to be accomplished by enhanced our asset sensitivity position in anticipation of eventual higher rates. The net balance sheet growth asset growth of $7 billion year-over-year and along the $5.3 billion too which was organic and $3.3 million at PPP year-over-year -- experienced -- we're experienced, as Tim laid out, this has been done totally on an organic basis. The acquisition market has been sleeping today, but appears to be opening up a bit, basically lately [Phonetic]. As always we'll take what the market gives us. We hate the [indecipherable] it's stupid. But it appears that other people are getting reality again. Our pipelines, as mentioned, make strong in all categories, our asset sensitive position is enclosed where we'd like it to be. We continue to leg into investment or excess liquidity, taking advantage of market blips we're in no less to be totally invested, locked into a lousy long-term rates is not our plan.

Credit is remarkably good as Rich said. Thanks for consistently conservative credit underwriting standards, reverse that loan portfolio, the book will work with both our lending line and credit folks, NPH and NPL dollars are lower than they were at the start of the pandemic. Wealth management areas delivering strong results with assets administration $0.2 billion in the quarter to $32.1 billion [Phonetic] and $2.5 million in the quarter. Asset administration obviously helped by strong markets, further account total in all distribution channels also able to score. Our treasury was $2 million, I think Tim, which shows that the halo effect in our PPP has worked very well for us. We probably have 40% of the -- for that -- probably 50% of halos and now, we got mostly to start with deposits and loans are becoming, so that aid to our pipeline is doing extremely well with that. So, the data plan is working. We continue to grow plan to fulfillment, organic growth remain strong. I'm sorry, organic growth should remain strong. Take advantage of the open the acquisition market, where it makes sense.

In short, I'm proud of the group. I like where we stand, [indecipherable] what the market is getting us to maintain laser-focus and credit. As always, be ensure our best efforts and we appreciate your support.

Now, we'll answer some questions.

Questions and Answers:

Operator

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

Jon Arfstrom -- RBC Capital Markets -- Analyst

Thanks. Good morning, everyone.

Edward Wehmer -- Founder & Chief Executive Officer

Hi Jon. How are you?

Jon Arfstrom -- RBC Capital Markets -- Analyst

Good. How are you?

Edward Wehmer -- Founder & Chief Executive Officer

It snowed in Minneapolis, snowed in Chicago.

Jon Arfstrom -- RBC Capital Markets -- Analyst

Snowed here yesterday. Question I'm -- I don't know maybe. Rich or, Tim, the loan growth pipeline, can you talk a little bit about why you think you were so strong at period end? And excluding PPP, if you could touch on that core C&I, and core commercial real estate if you're starting to see loan demand broaden out?

Rich Murphy -- Vice Chairman & Chief Lending Officer

Yes, it's interesting, we -- the timing is one that I don't have a real good answer for it, we've had a really strong end of quarter in the fourth quarter as well, as people closed on their financing right before year end. And so I think there was a little bit of a hangover from that in the first part of the year. But clearly, we were -- as we saw good pipelines building and we knew that it was coming, but through January and February, we just kind of -- for whatever reason, it was a little bit of a hangover.

Edward Wehmer -- Founder & Chief Executive Officer

Jon, that's been our modus operandi for probably the last eight quarters. We've always built it up at the end of the quarter and then started again, build it up. I think it's -- we think in --, I'm not sure. But I say quarters, we have that phenomenon.

Jon Arfstrom -- RBC Capital Markets -- Analyst

And just really a curious if this is all pulling through? I guess that's the question, because you guys seem a little bit ahead of your peers in terms of the growth that you put up? So, I guess, that's kind of the genesis of the question.

Rich Murphy -- Vice Chairman & Chief Lending Officer

Yes. And I think that's a broader answer to that. I think that we have seen and you've seen this in -- really over the course of last year. The -- we had always talked kind of this aspirational nature of being Chicago's bank and I think what the last year through the PPP execution and some of the acquisitions that have gone on in the Chicago market, namely [indecipherable] and CNBC have really kind of seen us become the emerging C&I bank, mid-market bank. And we have just seen a lot of new opportunities come over where customers were very frustrated by the inability of their existing bank to execute on their PPP, to get answers during the pandemic. Maybe they were just kind of roughed up a little bit during the downturn and they were trying to find maybe a different bank that might look at their company a little bit differently. There's just a host of reasons that we saw, but the net effect is that we have just really had a much better time being able to get a seat at the table when a company is going out to the market, and then our ability to execute both on the treasury side, and on the credit side, we have been able to pull through quite a lot of these opportunities.

So, finally, your question as it relates to do we see sort of an uptick in overall levels of funding? I do think as the economy starts to open up and expand and people start to deploy all the liquidity and we are seeing people starting to look for greater credit availability and expanding outline. So, I think that as we go through the balance of the year here, you'll start to see some greater usage. So, generally speaking, pretty positive.

Edward Wehmer -- Founder & Chief Executive Officer

We think we're going to roar out of this pandemic issue, economy, there's no references to roar out. We're very well prepared for that. And I think it's somewhat of a reputational issue for us, reputation is wonderful. And people are looking to us to help them grow. So, there you have it.

Jon Arfstrom -- RBC Capital Markets -- Analyst

Okay. And then -- that's helpful. And then kind of the margin calculus, I think the message you're sending to us is that you have a little bit more room on funding costs, and have a bit of a step-up because of the quarter end securities purchases, you've got some long growth, and I guess, the question is with the growth that you're expecting, are you sending the message that the margin, erosion is really over for you, and we should see some margin expansion to the loan growth comes in?

Edward Wehmer -- Founder & Chief Executive Officer

Well, all things considered, yes.

Jon Arfstrom -- RBC Capital Markets -- Analyst

Cost adjusted?

Edward Wehmer -- Founder & Chief Executive Officer

All things considered, yes. But who knows where rates are going to go, what's going to happen. I mean, rates go up, we're ready, we got that beach ball ready to fly. But if rates go down, we still have some vulnerabilities there, but I think I stopped protecting the national debt is going to double GDP over the next five years, just crazy. With all the cash that's out there, rates have got to go up, right. Okay, everybody says, it doesn't work any other way. So, we're very well-positioned in that regard as we continue to build and deploy, I mean, the plan has always been to grow through this, to use mortgages and other means. So driven, as we put out early on and the pandemic really well to get us through this. And as I said, to get that interest income to make up the difference and margins fall off, they'll fall off. I think we're well-positioned to do that. PPP loans were a godsend in terms of additional revenue, but it's just more we have to make up.

So, as we continue to grow through this job, I think the margins basically in this environment is bad about as good upside to it, we're able to execute on closing loans, getting good pricing on the loans, and continue to go through it. So, it won't be perfect. I'm sure we're not going to land on mortgages and the other things fall off and rates go up. They'll be they won't be perfect. It won't be a perfect analysis, but won't line up perfectly, I mean, but I think it'll be I think we're -- I think we'll get there as long as margin can stay high. Do you agree Dave?

David Dykstra -- Vice Chairman & Chief Operating Officer

Yes, I think that's right. I think we said last time, we thought it should have bottomed out and we thought we'd put some liquidity to work and grow and grow through it. And that says, the key is to grow through it and Rich and -- had indicated why they think it's up as far as our loan growth, but I agree with, I also think we have a very diversified long match. So, I think that that helps in some areas work when others aren't. But I would think that the thoughts are that the margin is sort of stable to slightly up in the next quarter, there's a lot of it depends on how much liquidity buys in the door. But we've got that billion to have, period and balance is greater than average bounce out. And you know, that just has to help and we do have some repricing assets on the life's premium finance side that those are tied to one year LIBORs, but we also have the CD book really repricing now, so those kind of offsets. So, I do think we've bottomed out and I think that all things equal that the margin should take up just a bit.

Jon Arfstrom -- RBC Capital Markets -- Analyst

Okay, thanks for the help. I appreciate it.

Edward Wehmer -- Founder & Chief Executive Officer

It's like a ping pong ball underwater. So far, we want to play the beach ball, Jon.

Jon Arfstrom -- RBC Capital Markets -- Analyst

I'm waiting for it.

Edward Wehmer -- Founder & Chief Executive Officer

Been very patient, waiting.

Operator

Thank you. Our next question comes from Terry McEvoy with Stephens, your line is open.

Terry McEvoy -- Stephens -- Analyst

Hi, thanks. Good morning, everyone. Hi, very good. How you doing? Maybe first question as we build out our mortgage projections and loan growth, should we think about call it $200 million, $300 million of mortgages staying on the balance sheet? Is that the right way to think about that? Will that continue? And then what's the earn back on that, is it roughly a year as my memory correct from the last call that you sacrifice the revenue this quarter? And it takes about a year to make that up?

Edward Wehmer -- Founder & Chief Executive Officer

Yes, I mean, on the earn back, Terry, if you look at our margins being right now 3% to 3.5%. The loans are yielding sort of low 3% of the jumbo mortgages that we've kept. So you give up the upfront gain on sale and 3% you earn back over a year basically. So, four or five quarters sort of earn back period of loans. But then they keep, obviously, belong stay out there. They keep paying dividends going forward. So it's a little bit of a sacrifice of the current earnings for future earnings, which we think is, pretty. We started them 10% are so retention on the balance sheet are a little bit more, but so we've done a couple of $100 million on average in the last couple of quarters, probably a little less than that, if volumes go down $100 million or so going forward.

David Dykstra -- Vice Chairman & Chief Operating Officer

8% to 10% numbers going to be -- or actually, where we get up to the close to $700 million to $800 million, we'll probably pull it back a little bit from interest rate sensitivity standpoint. I would imagine $100 million via memories going forward would be a good one. The 10% was originally to get -- to get going and great yields on those. So it should help the margin of the offers long-term. I think you count on maybe $100 million going forward at lease next quarter and we'll judge it after that where the market is, but I think that's the plan.

Dave Stoehr -- Executive Vice President & Chief Financial Officer

And there are some, that $100 million is sort of the jumbo loans that we've kept on our books. I mean, we do have some that we originate for the portfolio that are variable rate, etcetera that are just normal course of business. So it maybe just slightly more than that. But the extra $100 million that's what Ed referring to as far as a jumbo so going forward.

Terry McEvoy -- Stephens -- Analyst

Okay. And then as a follow-up question, at last quarter, at an industry event, you talked about M&A and interest for potentially larger deals and maybe moving out of your, your core markets. I was hoping you could just update us on your thoughts there? And maybe any feedback you heard since making those comments? Thank you.

Edward Wehmer -- Founder & Chief Executive Officer

Well, it was funny. That -- we always say that the market gives us, and I feel that the market was giving people these no premium deals out there. We felt that our stock price going back, it was appropriate to kind throw our hat in the ring. And just basically chum the water, if you will, still I gave it up. It resulted in a couple a -- couple of years in there's conversation nothing really, markets moved away from that. And it really doesn't make any sense, not even considered given the premium is people are going to pay. So how do we want to say why do a market do? We'll talk to him, but it appears that opportunity may have come and gone at least for now. But yeah, we're so willing to do it, it would make sense. But we're going to continue to fill in here in Chicago, both organically and to acquisitions that you have seen it likely to do in the past, if in fact it makes sense.

So, I would discount the -- my chumming exercise didn't really come up with a fish, and but we're still available when I want to talk -- our market share in Chicago play on the building as well. Say from Milwaukee, and then concentrate on there and Piers Morgan tell us how organically we will concentrate on that. And we'll do opportunistic as they come along. Make sense?

Terry McEvoy -- Stephens -- Analyst

It does. I appreciate that. Thanks, Ed, and thanks, everyone.

Edward Wehmer -- Founder & Chief Executive Officer

You're welcome.

Operator

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

David Long -- Raymond James -- Analyst

Good morning, everyone.

Dave Stoehr -- Executive Vice President & Chief Financial Officer

Hey, David.

Edward Wehmer -- Founder & Chief Executive Officer

Hi, David.

David Long -- Raymond James -- Analyst

Looking at the expense side of the equation revenue growth seems to be going pretty well and it is usually an issue with you guys, but looking at the expense side? I'm just curious, what type of growth rate we should expect and your expenses, especially in a revenue environment where you guys still have some headwinds on the net interest margin? And is there -- are there any plans to try to rationalize any expenses given maybe some of the margin pressures, just wanted to get a little bit of color on how you're thinking about operating expense growth here?

Edward Wehmer -- Founder & Chief Executive Officer

We always look at rationalizing expenses. But that's constant. When it's close, more of a growth company. You have to spend money to grow. And Dave, you want to?

Dave Stoehr -- Executive Vice President & Chief Financial Officer

Yeah. We had them -- we -- with our 10 branch closures and three sales of small branches last quarter, and when another branch closure this quarter. So we're constantly looking at that where there might be overlap or underutilization of facilities. You know, it's kind of an interesting question as far as doing the expense growth, because, with a mortgage business as large as ours, as revenues go up and down there, so goes the expenses sometimes. And so, you almost have to look at it, x mortgages, but ex-mortgages is we would expect the expense growth to stay relatively contain, and we are looking at the branch network all the time and places where we can save money. We would -- as we had in prior quarters we have some of these contingent purchase price payments that we had to expense. As I said, on the call -- my comments, those should be some citing and not material going forward. So that should help. We're watching our headcount and those types of things. So, I would think it would stay relatively contained as your noble in the second and third quarter, the expenses tick-up a little bit, because of our sponsorships of Major League Baseball, and some -- somewhat has in the past been general of sort of outdoor festivals and community events that we sponsor as a community bank.

So I expect them to tick-up a little bit in the second quarter. But, payroll taxes will be less than the second and the third and the fourth quarter than they were in the first quarter. And there are some other offsets that go either way. So I would expect, that we can contain the expenses, if we have really good growth, I would expect them to go up, but not nearly as fast as revenue side of the equation. So, maintaining the net overhead ratio levels that we think are appropriate is what we focus on. And so sometime you got to spend money to make money, but we'd expect the revenue growth to be faster than the expense growth.

Edward Wehmer -- Founder & Chief Executive Officer

One of the things on the expense growth was before the pandemic is we have made a -- we called Deep Blue, which is our enhancement of our digital products. And I mentioned this in the last call, we always have related digital products. So going forward, the overall base that we can build off of -- was the single supported, going forward, we took it away from our core processor, and now spent a lot of money. And there's still more buy we spend on that to make sure that base is correct. And we can build and always give serve better products and serve better delivery systems. We even -- we always had great products. And we always do have great products and great delivery systems as indicated by the number of graduates we walked away with last year. Seven I think a number of our national, we're proud of that. But we've got to be -- we got to invest for the future. And to have a platform that's going to keep up with -- I think he's going to continue to be a -- leisure, New York's acceleration of digital availability and products out there with payment systems and things like that. We have to be there at the top of our game.

And I'll know, exactly the timing shock, but we've been there, and we're half, and we'll follow through and that's part of the -- I think you remember your closing overhead ratio for us data, we also don't want to have was pretty good. Probably lower that number to 130 to 135 on a regular basis for the margin. But we'll come back. And in the meantime, isn't that overhead ratio is dropped about as much as the margin which helps. So we're always looking but it's not linear, that's why the issue is for you guys. It's you never know what we're doing without upward, but it's not linear for you. And in many ways, I know, it's hard to say -- you go out in that overhead ratio and compare that to where the margin is -- mortgages are, and I think you probably right number for us.

David Long -- Raymond James -- Analyst

Right, right. No, I do appreciate the color and understand as a growth company, you do have to -- have to spend there. As a follow-up just you know, Dave, you mentioned the mortgage business and needing this kind of separate that out from your core. But, if you're looking at your mortgage and you say, the production revenue comes down by $20 million in a given quarter. How would that immediately impact the expenses in that same quarter?

Dave Stoehr -- Executive Vice President & Chief Financial Officer

Well, we -- I'm not going to give a number per se, because it depends on...

David Long -- Raymond James -- Analyst

Sure.

Dave Stoehr -- Executive Vice President & Chief Financial Officer

How much per -- you've got close, you've got some production in the pipeline, and you've got -- you've got to close that. So, it just -- and also sort of depends on the outlook. If you really think rates are going up and staying there, and it's not just a seasonal thing, then you've got to adjust, but we do have contract labor. We do have some overseas contracts out there that are variable. We do have overtime, and so all those things can go away immediately. And so you will get some benefit immediately. And then it may take another month or two to let that production work its way through the pipeline before you get the full benefits. But we sort of look at in today's environment your efficiency ratio in that business may be in the 60% range, because your work -- going in all cylinders. But if that volume falls, those efficiency and margins come in a little bit, those efficiency ratios are probably more in the 75% to 80% range. So, I think if you think about the mortgage business sort of between 60% and 80%, depending on high volumes and low volumes, that's maybe how to think of the business.

David Long -- Raymond James -- Analyst

Excellent. Thanks, Dave. Appreciate that color.

Dave Stoehr -- Executive Vice President & Chief Financial Officer

Thank you.

Operator

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

Nathan Race -- Piper Sandler -- Analyst

Good morning.

Edward Wehmer -- Founder & Chief Executive Officer

Hi, Nathan.

Nathan Race -- Piper Sandler -- Analyst

Thinking about the overall balance sheet size going forward with PPP forgiveness on going, do you guys expect any downdraft with this excess liquidity that's been building over the last several quarters? Or do you guys kind of planning to or play around these balances pretty much sticking for the foreseeable future?

Edward Wehmer -- Founder & Chief Executive Officer

Well, that's a tendency of people to ask that question and say, what's going to happen to liquidity? Is the money going to run out? Is this all PPP dollar, should they stay in the bank? Tim, do you want to respond to that.

Tim Crane -- President

I think what clients are telling us, Nathan is that those balances are going to sort of stick until they get clarity on forgiveness, which is both the Wintrust and other banks has been slow in coming. But we're getting good core growth from the halo effect with new clients. But clearly some of that PPP money may be moving out of the bank, as clients get more interested in investing it, but if that happens, it should be followed by loan opportunities for us as well as that liquidity gets depleted. So it's a little bit of bad news, good news story if it happens.

Nathan Race -- Piper Sandler -- Analyst

Yes, got it.

Edward Wehmer -- Founder & Chief Executive Officer

I'd just talk we're running off already, Nathan, but doesn't seem to be as is indicated is that, we're making it up with the halo effect. And the Treasury numbers -- Tim, do you have the Treasury numbers here.

Tim Crane -- President

Yes. I mean, one of the things when we've been asked about the halo effect is, how do you know it's real? And where does it manifest itself? And just looking at growth Treasury revenues over the last four months were up 15%, 16%. And we know our people are challenged to keep up with the new installations and new additions. So we're very encouraged that not only are we getting these deposit balances, hopefully, on a permanent basis, but that we're getting Treasury business that will often ultimately credit opportunities that will last. So we feel pretty good about it.

Nathan Race -- Piper Sandler -- Analyst

Got it. Understood. And just changing gears and thinking about provisioning over the next quarter or two. I know it's difficult under CECL framework to predict. But just given the loan growth outlook still in that mid to high single-digit range, as we think about providing for growth if at all over the next quarter or two from a provisioning standpoint.

Dave Stoehr -- Executive Vice President & Chief Financial Officer

I -- for growth, I think if you kind of look back to more of a jumbo non-CECL times where charge-offs were fairly stable, our provision was probably in the $10 million to $12 million, $15 million range. And I would think in normal times if the macroeconomic scenarios and credit quality stayed stable, you'd probably be in that $10 million, $12 million range for the normal times. But I can't predict what the macroeconomic scenarios are going to be. If they continue to improve then, obviously, that the allowance goes down a little bit more. But right now we think it's appropriate based upon what Moody's has, but we'll just have to see what those macroeconomic forecast do. But as far as growth goes mean, you can sort of look at our allowance to loan ratio and apply it to what you think the net growth is, and that should probably get you pretty close.

Edward Wehmer -- Founder & Chief Executive Officer

Yes. The portfolio appears an older than April today, the upgrade parade has continued. Where -- when pandemic started a lot of downgrades, and that had enters into the CECL calculation, and a number of upgrades in the fourth -- in the first quarter. Second quarter, we expect that trend to continue. So if you look at that, and use in a better macroeconomic environment, you think that we may have another negative provision here. I would always hope that we could have grown through it and not have to play the negative provision game, but just for the -- because it's like a yo-yo, sick of up/down where it's going. But I think credit overall is pretty good. It looks like it's going to be -- the environments getting better. So, we think about provisioning going forward, I will tell you're going to you have another release, but you never know anything can happen and really sad about it goes into the exact black box, it comes out.

I think, if you look at our level of non-performers, and to see overall credit quality, and understand the portfolio's actually getting better, I think it has a big data consideration. So hard to predict, we'll see so you're going to end up, and say the old days I couldn't say where I landed up. But I can't do that anymore. I can't.

Nathan Race -- Piper Sandler -- Analyst

Got it, make sense. If I could just ask one more on capital. I apologies if it was in a release, fantastic, but any share repurchases in the quarter, how you guys think about buybacks over the next few quarters this year?

Edward Wehmer -- Founder & Chief Executive Officer

Yes. No, we haven't been doing the buybacks with the stock price increased toward that so. If the stock price stays in this range, we would not anticipate probably doing the buybacks, now we'll use that capital supports the loan growth and the like, so.

Nathan Race -- Piper Sandler -- Analyst

Okay, great. I appreciate you guys taking questions. Thank you.

Edward Wehmer -- Founder & Chief Executive Officer

Okay.

Operator

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

Chris McGratty -- KBW -- Analyst

Hi, good morning. I think I know the answer to the question. But I'm asking anyway. Ed and Dave, the pace of security buying, obviously yields a pop a bit. We've seen some peers to be more aggressive in just deploying some of this in a positive if I missed it. But any sense in terms of magnitude of whether a billion is the right -- purchase rate a quarter or you would perhaps step it up.

Edward Wehmer -- Founder & Chief Executive Officer

It really depends on the rates. I think that we like taking -- we were at -- I don't want to lock in the lousy rates. It's really in an impulsive as rates; I think rates going to continue to move up. And we'll take advantage when they do. I think we locked in probably after-tax 1.5 on the deals we've done to-date [Phonetic] assets as a tax.

Dave Stoehr -- Executive Vice President & Chief Financial Officer

Yes. I mean, when the rates popped up and down the quarter, the jumbo mortgage banks were yielding over 2%. And we thought that was an appropriate time to jump in. We did a little bit earlier in the quarter, they're replaced run off and add a little bit, but rates have kind of fallen back off a little bit. So we're just -- we're for being cautious. And that says, at the lower rates, we probably aren't going to jump in. But if you start to see the jumbos go north of two, again, we may add to this more.

Chris McGratty -- KBW -- Analyst

Okay.

Dave Stoehr -- Executive Vice President & Chief Financial Officer

We don't have a specific number you know, Chris, that we're saying we're going to do X and it really sort of depend on the rate environment.

Edward Wehmer -- Founder & Chief Executive Officer

A little worried to about what we thought about what was previous questions as the liquidity actually stay and kind of have to happen is every algorithm decision make has to be tempered by that, we continue to grow every quarter and which gives us more ammo to deal with, and we'll deal with that as we go along and face that loan, etcetera. But we expect this to be opportunistic going forward, and not to be this programmatic and put it to work at any rate.

Chris McGratty -- KBW -- Analyst

And then longer-term, your cash is roughly 10% of your operating assets, I mean, where do you think that needs to be kind of 12, 24 month out proportionally?

Edward Wehmer -- Founder & Chief Executive Officer

Well, we've always start to set 85% to 90% loan to deposit and the liquidity sort of falls out of the equation there. But I think if you go back to the first quarter of 2020, we were at 4%, and then we went and loaded up on liquidity, and it was like 8%, because we just didn't know what the heck was going to happen with the pandemic. So sort of safety we're in 4% or 5%, 6% range, that's probably more normal, so to speak, if we can effectively lend out of that 80% to 90% loan to deposit ratio.

Chris McGratty -- KBW -- Analyst

Okay, great. Thank you.

Operator

[Operator Instructions] Our next question comes from Brock Vandervliet with UBS. Your line is open.

Brock Vandervliet -- UBS -- Analyst

Just tactically in terms of expenses, obviously, the last year didn't have the big seasonal ramp in ad spend, I'm assuming we should expect a lot of that to return here in the middle quarters Q2, Q3?

Dave Stoehr -- Executive Vice President & Chief Financial Officer

Yeah. I think it may not be to the full extent, depending on how many people are in the ballpark, etcetera and how many outdoor community events happen that we historically have sponsor, but we would expect the second and third quarters to increase this year, unlike last year.

Brock Vandervliet -- UBS -- Analyst

Got it. And just going back to the prior question on how you're thinking on securities deployment, sounds like that's more cautious given where rates are. You have this avenue open to you in terms of being able to just pertain more on the jumbo resi side, would you consider taking that up materially above the several 100 million a quarter, if rates stay here just to use up some of that liquidity or you're happy where you're at?

Edward Wehmer -- Founder & Chief Executive Officer

Anyway considering we're actually going to probably drop off a little now. And surely, we consider rates went up a bit, we will consider deploying more into that avenue, that asset class. But I think we need to kind of wean ourselves a little bit off of that. And just monitor liquidity as long as we can, invest where we can. And we've some dry powder, because I don't know you guys, I just say we're going to come roaring out of this, you look at where the economy is expected to go, total customers and all the pent-up demand they have, supply chains are -- have been so disrupted. And, when you look at the government spending you got to have higher rates, and maybe not where they should be, but I think you can pick up 40, 50 basis points on the tenure pretty quickly, in which case you'd want to do some investing there and your margins will fall off a little bit that'll help. But again, we're trying to land the plane here and have -- get a margin back up at the same time as our other income kind of falls off from mortgages and other issues.

So, it won't be perfect. Might be a little rocky on the way down because of the PPP loans have been wonderful now [indecipherable] PPP because we don't have them. So we have to continue to go through this and be smart about it, invest where we can. And that's been stupid just to try to but a lot of times just to make up short term earnings.

Brock Vandervliet -- UBS -- Analyst

Yeah. And lastly, just in terms of the C&I growth that came in at the end of the quarter, I think that's very important. It was -- is that all organic, so to speak or is some of that from just share shift from competitors?

Edward Wehmer -- Founder & Chief Executive Officer

Which is that?

Dave Stoehr -- Executive Vice President & Chief Financial Officer

It's both. I mean, we continue to win business and take share from our competitors as well as seeing sort of existing customers grow. So the answer would be both.

Brock Vandervliet -- UBS -- Analyst

Okay, all right. Thanks for the color.

Dave Stoehr -- Executive Vice President & Chief Financial Officer

Yeah.

Operator

Thank you. Our next question comes from Michael Young with Truist Securities. Your line is open.

Michael Young -- Truist Securities -- Analyst

A lot of my questions have been asked and answered. But I wanted to just follow-up on kind of coming out of the pandemic here and potentially reopening, is there any more specific focus on hiring of lenders that we should expect the ramp of headed into kind of later this year, or any new business lines that you have a renewed focus on maybe, at this point, versus maybe where we were last year?

Dave Stoehr -- Executive Vice President & Chief Financial Officer

Yeah, I think there are still lenders out there in the marketplace that we have been last year, we brought in a couple of lenders from some of the acquired banks, we are looking at a couple of new niche opportunities that are there. That's really part of our whole story is just trying to find those lenders who really bring a value add and can really try to continue our diversification of the portfolio. So I think both of those are pretty important as we go into the rest of this year.

Michael Young -- Truist Securities -- Analyst

Okay, great. And then maybe just bigger picture, as you kind of -- as you said, tried to turn the water on M&A for the bank side, but that didn't really materialize. Are you seeing any good opportunities maybe on the fee income side that could be a buffer to kind of mortgage revenue falling off maybe in trust or any new business lines?

Edward Wehmer -- Founder & Chief Executive Officer

Well, yeah, we're always looking. We added a couple last year; Murphy do you want to talk about the -- two new niches we added.

Rich Murphy -- Vice Chairman & Chief Lending Officer

Yeah, well, the probably the one that gets to your question is the Money Services Group, which is we -- that was a big business for MB prior to the Fifth Third acquisition, working on the Treasury side with the currency exchanges in Chicago, also in New York, and really gives us nice opportunity to generate some fee income there not a lot of credit risk. I don't know if you'd add to that Tim.

Tim Crane -- President

No. I mean, we're a couple of quarters into that now with both good success and sort of a nice line of people waiting to do business with us as there's a little bit of void in the market, but we'll come with it really nice Treasury related revenues that are significant really by any measure.

Dave Stoehr -- Executive Vice President & Chief Financial Officer

We continue to look at a couple of interesting niches in the leasing area and -- which we think are very opportunistic, and have a really good opportunity for us to kind of expand that book as well. So I think generally speaking, we're pretty positive right now.

Edward Wehmer -- Founder & Chief Executive Officer

On the wealth management business kind of tough because as you know in this market, everybody thinks they're the smartest guy in the world and they want a lot of money. And they don't want a lot. They want to make what they've made every year, and you pay a lot of money for it. There's really a lot of sense to do any of that. Organic growth has been great. We have both institutionally and organically. We picked up anything over I get close to 1,000 accounts, new accounts of management over the quarter from all streams from all aspects of our distribution channel. So, I think our name recognition is helping in that regard to and a lot of it -- half who came through the branch networks, the people open their new wealth management accounts. So institutionally, we're getting much better to the hiring of some very seasoned sales people around the country. So, I would expect that to continue to grow organically. And we'll go from there, but the only good news is niches give us a call. We're all yours.

Michael Young -- Truist Securities -- Analyst

Okay, thanks. Thanks, and congrats on the quarter.

Edward Wehmer -- Founder & Chief Executive Officer

Thank you.

Operator

Thank you. I'm showing no further questions in the queue. I'd like to turn the call back to Ed Wehmer for closing remarks.

Edward Wehmer -- Founder & Chief Executive Officer

Thanks, everybody for dialing in today. Have a great week, a great quarter and we'll talk to you next quarter. If you have any other questions, you please call Dave or me or Tim or Murph, we're happy to fulfill them. And take care and we'll talk to you soon.

Operator

[Operator Closing Remarks]

Duration: 65 minutes

Call participants:

Edward Wehmer -- Founder & Chief Executive Officer

Tim Crane -- President

David Dykstra -- Vice Chairman & Chief Operating Officer

Rich Murphy -- Vice Chairman & Chief Lending Officer

Dave Stoehr -- Executive Vice President & Chief Financial Officer

Jon Arfstrom -- RBC Capital Markets -- Analyst

Terry McEvoy -- Stephens -- Analyst

David Long -- Raymond James -- Analyst

Nathan Race -- Piper Sandler -- Analyst

Chris McGratty -- KBW -- Analyst

Brock Vandervliet -- UBS -- Analyst

Michael Young -- Truist Securities -- Analyst

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