Welcome to Wintrust Financial Corporation's fourth quarter and full year 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 presentations, 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 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.
Good morning, everybody, and welcome to our fourth quarter 2021 earnings call. With me always are Dave Dykstra, Dave Stoehr, Kate Boege, Tim Crane, and Rich Murphy. We have the same format as we adapted earlier in the year. Seems to go pretty well. I'll give some general comments regarding our results. Turn it over to Tim for more detail on the balance sheet. Turn over to Dave Dykstra, who's going to talk about other income and expense. Murph will then follow up with the discussion on credit. Back to me for some summary comments about the future and then time for questions. As many of you already know, 12/27/2021 marked the 30th anniversary of us opening our first bank.
A little more than $6 million in capital raised from friends, neighbors, and family, 11 hardy souls embarked on the journey. They had absolutely no delusions of grandeur. Our goal was simple, to create a new type of community bank, one that combined high-touch banking with technology, i.e., high tech, high touch, to serve people and businesses in the communities we serve. All along, the center of our homegrown culture have been four pillars, our shareholders, employees, customers, and communities we serve. We've not wavered from that commitment in the 30 years we've been in existence. Of course, this anniversary, I've been asked many times what I'm most proud of about Wintrust. Is it the 5,400 employees that make up Wintrust? Yeah, I'm pretty proud of that.
Is it the $50 billion in banking assets and $35 billion of wealth management assets we have amassed over the years? Yeah, I'm pretty proud of that too. Is it the record earnings we have delivered over the years? Yes. In fact, is it the fact that our stock price broke the century mark? I feel pretty good about that too. Many of the attributes I am very proud of. However, what I'm most proud of is the fact our culture has endured over that period. Culture dedicated to doing the right thing for our constituents all the time. Take the blame, share the fame, avoid the shame, and enjoy the gain. Our culture in a nutshell have endured even though we have grown beyond our wildest dreams. Enough of the walk down memory lane.
Let's talk about the quarter and year-to-date results. All in all, another very successful quarter. Previous calls I referred to around there's one billion-dollar quarters. This one's different. It's a two billion-dollar quarter. Assets grew $2.3 billion to $50.14 billion. 7.2% growth or $5.1 billion versus 12/31/2020. Core loans and PPP and loans held for sale went to $34.2 billion. $2 billion for the quarter. 16.6% growth for about $4.9 billion. Deposits to $42 billion or $2.1 billion growth through the quarter. 13.5% or $5.2 billion up since 12/31/2020.
Loan growth was enhanced by the purchase of a portfolio of agency loans from Allstate, approximately $550 million. Tim will talk about this a little bit more. On the balance sheet front, our strategy, which we adopted at the start of the pandemic in April 2020, of growing through the period and enhancing our interest rate sensitivity position has paid off in spades. Mortgage and PPP loans took us through the depth of the pandemic. Our growth in core loans has more than replaced the earnings power of these assets. We're extremely well-positioned for higher rates that appear to be here finally. Like Paul Harvey, page two. At the earnings front, we recorded a record year, $466 million or $7.58 per diluted common share. Fourth quarter recorded income of $99 million or $1.58 per diluted common share.
Dollar over percent from the third quarter mainly because of the positive provision $9.3 million as opposed to a negative provision of almost $8 million. Positive provision was brought about by the acquisition with the double accounting we have to do there and the fact that our loans have grown so nicely. Net interest income was up $8.5 million compared to Q3. Core net interest income was up $15.5 million as the PPP contribution was down $7 million. Earning asset well basically loan levels at 5 basis point decline. Deposit costs of major commodities change. Loan pipelines remain consistently strong. We start 2022 with a nice head start as ending loan balances exceed December average loans by $1.36 billion.
Line utilization was up a smidge. That's kind of a smidge is a technical term we use around here, but not close to historical averages. We'll discuss it. Murph will talk about this in detail. Manages over $1 billion in loan growth if and when utilization return to normal. NIM was down slightly 4 basis points due to ex-additional liquidity. This is how you can expect us to begin investing our excess liquidity. Current rates on our liquidity portfolio is a little over three years, opposed to a normal six plus years. We'll be prudent in our investment timing, though. Credit quality got even better, believe it or not. Murph will also cover this in his review of credit. I'll note that we did conduct an asset sale noted in the release.
We continue to cull the portfolio to get rid of bad assets, potentially bad assets, as soon as possible. PTPP, pre-tax pre-provision income, was up approximately $5 million to $146.3 million. We expect this to continue to grow nicely in 2022, especially if rates rise as anticipated. More on this in my closing remarks. One last point I wanna make is our wealth management business. Assets under administration were up almost $1 billion in the quarter, up approximately $5.5 billion year-over-year to $35.5 billion for 18% growth rate. Obviously, the market helped these numbers, but core growth and our account totals is impressive.
Fee run rates went from annualized $107 million in the fourth quarter of 2020, $130 million in the fourth quarter of 2021. Yeah, you got it. I feel like Joe Biden here. Still not gonna talk for two hours. Very proud of the progress made this year. Look forward to continued growth in this area. Had a lot of momentum there. Now I'll turn it over to Tim, who will take us through the balance sheet.
Great. Thanks, Ed. I'd like to highlight a couple of balance sheet items as well as comment on a couple items likely to be of interest. The $2 billion in loan growth that Ed referenced was spread nicely across all categories. Rich will add some color to that, but it includes the $578 million of loans from the previously announced November purchase of the Allstate agency loans. This portfolio is a very nice add to our existing agency lending business. Importantly, unlike some loan portfolio purchases that run off over time, this is a business that we believe we can continue to sustain and grow. It's also important to note that the overall loan growth does not yet include much benefit from increased line utilization, where we only saw a modest improvement in the quarter.
On an annualized basis, the loan growth for the quarter, excluding the portfolio purchase and PPP, was 18%, the third straight quarter at or above 15% and Ed mentioned that the period-end loan balances were well above the quarter average balances. Obviously, PPP loans continue to run off, down a little over a half billion dollars in the quarter, and now total $558 million, a number we expect to decline relatively quickly with continued forgiveness activity. Into 2022, we expect continued strong loan growth. While our guidance remains our historical mid to high single digit loan growth on a percentage basis net of PPP, our short-term performance should continue to be at or above the high end of that range and likely better than peers.
The $2 billion of deposit growth, just under half of that was non-interest-bearing deposits and the rest at very low cost. As a result, interest-bearing deposit costs declined to 24 basis points. While we believe there is some continued room for decline, the changes will be smaller going forward as the majority of deposits have repriced during the low rate cycle. On the investment front, we remained very liquid with approximately $6.1 billion in liquidity at year-end and securities balances essentially flat. While I expect we will begin to deploy some of the liquidity in the first part of 2022 at somewhat higher rates than we saw in the fourth quarter, we remain cautious about locking in low long-term yields and remain very well-positioned for rates at higher levels.
On that topic, anticipating a question or two about rising rates, we've reported for several quarters that we have focused on remaining interest rate sensitive, expecting the possibility of higher rates. That continues to be the case, and we will benefit from upward changes that the market is starting to price into the consensus forward curves. Just a couple of highlights reinforcing Ed's earlier comments. Approximately 80% of our loans reprice within a year. You can see this on page 12 of the supplemental presentation. Our spreads, simply our loan yields versus our deposit cost, improved for the third straight quarter. Securities yields for many instruments are 20-50 basis points higher than they were even a month ago.
While it's slightly more complicated than this, given loan floors, loan indices, deposit betas, and competitor actions, we believe each 25 basis point change in rates is worth about $40 million-$50 million in pre-tax net interest income on an annualized basis. You'll see this in a paragraph on the second page of our press release. The only thing that I would add is that early in the cycle, deposit costs tend not to rise as rapidly as they may following subsequent later increases. You can obviously do the math, but our net interest margin for the quarter was down 4 basis points, attributed solely to the continued impact of more liquidity. Absent that excess liquidity, our margin would have actually expanded by 2 basis points. Without large continued inflows, we expect the margin has bottomed and will certainly improve as rates begin to trend up.
Going forward, each 25 basis point increase in rates equates to approximately a 10 basis point improvement in margin. If, and that's a big if, the current consensus rate forecast plays out, it's conceivable margin will be around 3% at year-end. On the capital front, the bank's capital levels are down slightly as a result of the strong growth in the quarter, but remain well within our targeted levels and appropriate on a risk-adjusted basis. Lastly, we continue to be very pleased by our market momentum. Last quarter, we highlighted the favorable Greenwich ratings and the satisfaction of our commercial clients. I would add that Wintrust ended 2021 as the top SBA lender in Illinois. In terms of customer behavior, we continue to see digital usage increase nicely.
In 2022, we will continue to improve on our digital offerings with a near total revamp of our consumer and small business digital services. In addition to our high-tech improvements, we will also enhance our high-touch activities with the addition of locations in Oak Park, Illinois, and Rockford, Illinois, both attractive markets where Wintrust historically has had a limited presence. As you can tell, we feel very good about where we begin 2022. With that, I'll hand it over to Dave.
Great. Thanks, Tim. I'll cover the noteworthy income statement categories, starting with the net interest income. Some redundancy with Ed and Tim's comments here, but we'll just go through it quickly. For the fourth quarter of 2021, net interest income totaled $296 million, an increase of $8.5 million as compared to the third quarter of 2021, and an increase of $36.6 million as compared to the fourth quarter of 2020. The $8.5 million increase in net interest income in the fourth quarter compared to the prior quarter was primarily due to average earning asset growth, which was up 17.4% on an annualized basis over the prior quarter. Net interest margin declined 4 basis points to 255.
A beneficial decline of 6 basis points for the rates paid on liabilities was offset by 7 basis point decline on the yield on earning assets and a 3 basis point decline in the net refunds contribution, resulting in the decline in the reported net interest margin. The yield on earning asset decline in the fourth quarter compared to the third quarter was, as Tim said, almost entirely due to the short-term liquidity build that we had during the quarter. The decline in the interest-bearing liability rate was primarily associated with a 5 basis point decline in our interest-bearing deposits, mostly due to the repricing of time deposits.
It's important to note that the net interest income expanded despite the $7 million less of interest income associated with the PPP portfolio in the fourth quarter, and the net interest margin would have stayed relatively stable, excluding the impact of the PPP portfolio, and would be down only one basis point. As Tim Crane mentioned, the margin was affected by this excess liquidity on our balance sheet, and that the rates are higher than they were a month ago. As we begin to deploy some of that liquidity into the market, we expect the net interest income and net interest margin to benefit from that, although we'll continue to be cautious on deploying the liquidity. Now turning to the provision for credit losses.
Wintrust recorded a provision for credit losses of $9.3 million, compared to a negative provision of $7.9 million in the prior quarter, and a $1.2 million provision expense recorded in the year-ago quarter. The provision expense in the fourth quarter was driven largely by loan growth, excluding PPP loans of approximately $2.0 billion, including loans related to the acquisition of the insurance agency lending portfolio, and also increased slightly due to a small rise in net charge-offs. Offsets to those increases for the provision were improvements in the macroeconomic environment and in the loan portfolio characteristics during the quarter, including improving loan risk rating migration. Rich will cover credit quality in additional detail in just a couple minutes. Turning to the other non-interest income and non-interest expense sections.
In the non-interest income portion of the income statement, our wealth management revenue increased $1 million to another record level of $32.5 million in the fourth quarter, compared to $31.5 million in the third quarter, and up 21% from the $26.8 million recorded in the year-ago quarter. Mortgage banking revenue saw a reasonably solid loan origination volume during the fourth quarter, with lock-adjusted origination volumes down approximately 22%, which was consistent with the guidance we provided in our prior quarter's earnings release. Mortgage banking revenue decreased $2.7 million to $53.1 million in the fourth quarter. Revenue was lower in the current quarter, primarily due to the lower lock-adjusted origination volume and combined with slight compression in the related production margin.
The lower production revenue was partially offset by a favorable fair value adjustment of mortgage servicing rights. The company recorded a positive $6.7 million valuation adjustment in the fourth quarter of 2021 related to mortgage servicing rights, compared to a decrease of $888,000 in the prior quarter. Looking forward, based on current market conditions, we anticipate mortgage revenue, excluding any MSR valuation adjustments, to be fairly similar in the first quarter of 2022 as we experienced in the fourth quarter of 2021. Obviously, the mortgage servicing rights valuation is tied closely to interest rates, and we're not gonna speculate on what those may be at the end of the first quarter of 2022. Based on current market rate conditions, it would point to a higher valuation.
You know, obviously, lots of time to go yet in the quarter. Other non-interest income totaled $18.9 million in the fourth quarter of 2021, down approximately $4.5 million from the $23.4 million recorded in the prior quarter. The two primary reasons for the lower revenue in this category include $1.3 million of lower swap fee revenue and $3.7 million of lower income from investments and partnerships, which are primarily related to investments that we have to support our CRA purposes. In the non-interest expense categories, non-interest expense stayed relatively stable with the past five quarters and totaled $283.4 million in the fourth quarter, up approximately $1.3 million from the $282.1 million recorded in the prior quarter.
Now, there are a handful of categories that account for the majority of the change from the prior quarter that I'll focus on, but I think it's important to put the expense growth in the context of the company growing its balance sheet by $2.3 billion during the quarter. Salaries and employee benefits expense decreased by $3.8 million in the fourth quarter of 2021 compared to the third quarter of the year. The decline is primarily related to $7.1 million of lower compensation expense associated with the mortgage banking commissions and incentive compensation program expense in the fourth quarter relative to the third quarter, with those savings partially offset by increased staffing costs as the company continues to grow. Software and equipment expense totaled $23.7 million in the fourth quarter.
That was an increase of $1.7 million as compared to the prior quarter. The increase is primarily due to accelerated depreciation related to the reduction in the useful life of certain software that is planned to be replaced as we continue to upgrade our digital customer experience, as well as increased expenses associated with upgrading our data centers and other software enhancements to support our growth, ongoing digital enhancements, and cybersecurity efforts. OREO expenses were actually negative by approximately $641,000 in the fourth quarter, as the company recorded gains of approximately $843,000 on sales of OREO properties. These gains were in amounts that exceeded the aggregate cost of the OREO expenses and valuation charges on other OREO properties.
Although this expense category was negative, it was approximately $890,000 less negative than the third quarter, which also had gains on the sale of OREO properties. I think it's important to note that we've been aggressive in liquidating OREO assets, and the amount of OREO on our balance sheet at the end of the year was a mere $4.3 million, compared to $13.8 million at the end of the prior quarter and $16.6 million at the end of 2020. Other than the expense categories I just discussed, no other expense category had a change of more than $900,000, and all those other expense categories in the aggregate were up less than $2.5 million compared to the third quarter of 2021.
The net overhead ratio, a measure of operational efficiency, remained relatively stable in the fourth quarter relative to the third quarter. The net overhead ratio stood at 1.21%, which is down one basis point from the 1.22% recorded in the third quarter and the ratio continues to benefit from strong balance sheet growth and good mortgage banking results. Now the efficiency ratio also stayed relatively stable at approximately 66% in both the third and the fourth quarters of the year. I n summary, the core fundamentals were strong with growth in pre-tax, pre-provision net income, robust loan and deposit growth, increased net interest income despite sizable PPP loan reductions. Another record wealth management revenue quarter, seasonally adjusted, strong mortgage banking revenues, relatively stable net overhead and efficiency ratio, strong pipelines, and fantastic credit metrics.
With that, I'll turn it over to Rich.
Thanks, Dave. As noted earlier, credit performance for the fourth quarter was very solid from a number of perspectives. As detailed on slide five of the deck, loan growth for the quarter, net of PPP, was just over $2 billion. As Tim noted, that number included the Allstate portfolio acquisition of $578 million, resulting in net loan growth of over $1.4 billion. Equally as important and similar to the third quarter, was the nature of this growth, which was spread across our loan portfolio. Specifically, Wintrust Life Finance loans, which were up $387 million, core C&I loans, which were up $392 million, FIRST Insurance Funding, which was up $239 million. In addition, the asset-based lending group, leasing, and franchise teams all showed solid growth.
This quarter's growth closed out a very productive year for Wintrust, where we saw net loan growth, excluding PPP, of $4.9 billion, $4.3 billion if you net out the Allstate acquisition, an increase of 14.6% for the year. As noted in prior earnings calls, we continue to see very solid momentum in our core C&I portfolio. Pipelines have been strong throughout the year, and we saw that materialize into increased outstandings during the past two quarters. We continue to believe that ongoing market disruption and our success during PPP are the primary driving factors. We are optimistic about loan growth in 2022 for a number of reasons.
Core pipelines continue to be very strong. Line utilization, as detailed on slide 18, continues to trend up from 36%-40% during this past year when netting out mortgage warehouse lines, and we anticipate this trend will continue. We have seen the average loan size in our FIRST Insurance portfolio grow by over 10% this past year to $39,000 and over $40,000 in the fourth quarter. We believe these levels will continue into 2022. Wintrust Life Finance had a very strong year, growing their portfolio by 20%. This momentum was maintained through the fourth quarter and should continue into 2022. As a result, as Tim mentioned, we are reaffirming our loan growth guidance of mid- to high single-digit growth through 2022.
We think our short-term performance should continue to be at the higher end of that range, and we should continue to outperform our peer group. From a credit quality perspective, as detailed on slide 17, we continue to see solid credit performance across the portfolio. This can be seen in a number of metrics. Nonperforming loans decreased from $90 million or 27 basis points to $74 million or 21 basis points. A meaningful part of this reduction came from the sale of a $10 million portfolio of loans. The majority of these were nonperforming. NPLs continue to be at record low levels and roughly half of where they were this time last year. Charge-offs for the quarter were $6.2 million, approximately $2 million of which was a result of the loan sale that we just discussed.
We, as Dave pointed out, we continue to see credit risk ratings show positive migration as our customers continue to recover from the pandemic. That concludes my comments on credit, and I'll turn it back to Ed to wrap up.
Thanks, Murph. Good job. As I mentioned at the beginning of the call, our strategy has been to grow the balance sheet during the period of low rates, use our structural hedges mortgages, i.e. mortgages, to buffer the loss of net interest income until such time as balance sheet growth can offset the income loss due to lower rates. PPP loans were unexpected benefit add-on to this strategy. All of the above was to be accomplished while enhancing our interest rate sensitivity position in anticipation of higher rates to appear on the near term, which appear to be on the near-term horizon. We have more than covered the PPP loan runoff, which was our goal with core loans. It's fair to say that to date, the strategy has been accomplished in spades. The excellent growth we have put up over this period and the Allstate portfolio purchase has been organic.
Other than the Allstate portfolio purchase, [growth] has been organic. The acquisition market appears to be getting more active, but seller expectations remain fairly high. We continue to evaluate opportunities in all areas of our business as they arise. As you know, we take what the market gives us, and right now it's given us great organic growth. We'll continue our historical approach to potential deals, but add where it makes sense. As you all know, I'm deathly allergic to earnings and book value dilution. I'm sure you're well-positioned for wherever the market brings us. Credit metrics are at their lowest levels in years. Loan pipelines remain consistently strong across the board. We expect this to continue due to our reputation in the market, the market disruption that is and will continue to take place. Our servicing asset base continues to serve us well.
Our line, our line utilization should rise if inflation stays strong, should be worth over $1 billion additional loan growth if utilization returns to historical levels. We expect wealth management revenue and assets to continue their current glide path. Mortgages should continue to be meaningful, but with lower contributions than in 2021. As we mentioned in previous comments, our asset sensitivity position places us in position to take advantage of the rising rates. As Tim said, every quarter point should add $4 million-$50 million to our net interest income on an annualized basis. I'm very much looking forward to seeing my beach ball again. It's been underwater for a long time. We have the ability to put more of our liquidity to use if and when as rates rise. We've already been legging into this strategy.
We're always and have always been a growth company, and this has not changed. I'd direct your attention to the charts on pages 4 through 8 in the release. The CAGRs indicated on those charts on all of our vital statistics could stand out from our last 10 years of work. Numbers would be similar, if not better, if you went back the entire 30 years of our existence. I put this body of work against any other bank in the country. I'm very proud of our entire Wintrust team, worked so hard to make this happen. Cannot wait to see what the next 30 years brings. With that, I'll turn it over to the operator for questions.
Our first question comes from the line of Jon Arfstrom of RBC Capital Markets. Your line is open.
Thanks. Good morning, guys.
Hey, Jon.
Good morning, Jon.
Good, good. Congrats on the 30 years, Ed, and $50 billion. It's notable.
Hard to believe, isn't it?
Hard to believe. Maybe, Tim or Murph, can you talk a little bit about the kind of late growth in the quarter and what you think drove that? It's a pretty good jumping off point for Q1 but anything notable that you'd call out on that?
No, I don't think so. I think if you look back at prior year ends, you see a similar phenomenon. There is always a rush to get deals closed before year-end. C&I was up, but you know, again, you know, as I pointed out, it goes really across categories. There was just a big rush also in the life finance area, deals closing before the end of the year. You know, I don't think it's really atypical for a year end, but it was very pronounced this year. We were earlier in the quarter, you know, we were commenting that, you know, the feedback we were getting was very solid performance for the quarter, but it wasn't materializing.
Just really in December, it really started to ramp up quite a bit. I really just think it's a function of just that deadline of twelve thirty-one and the holidays and everybody just pushing things across the line. The other thing is I think everybody was dealing with you know a fair amount of capacity issues from attorneys and appraisers and everybody else. You know there was definitely a push at the end here to get things through the pipeline. Other than that, I don't know. Tim, would you add anything?
No. I think that may be a handful of people that thinking that they were gonna complete some sort of transaction, trying to get it in before some tax-related activity might have come up, but that turned out not to be the case.
Right.
We'll see.
turned out there's a lot of first quarter too.
really no change in the pipeline though. You're not seeing any-
A lot of still things that didn't close are gonna close in the first quarter, so.
Sorry, Jon, we missed you there.
Yeah, but you're still saying no real change in the pipeline despite that strength at year-end?
Yeah.
No, pipeline looks pretty strong.
Okay. Tim, your comment on deposit costs not rising early in a rate hike cycle. At what point do you start to think about that? Or, you know, maybe said another way, how much runway do you think you have in terms of your deposit betas?
Yeah, John, it's hard. I think it's gonna be hard to tell because a lot of the market has a lot of liquidity right now. Unlike, you know, prior cycles where people might have been a little bit higher on the loan to deposit scale, we'll just kind of have to see. We've seen very little deposit competition so far. Given the very low levels we start at, you know, the betas will obviously work themselves up over the cycle.
Jon, this is Dave. I think if you look at the prior cycle, we didn't see any rates in the first two rate raises by the Fed, and you really only started to see pressure on the third rate hike of 25. We'll have to see the size and the timing of them and what competition does. As Tim said, with all the liquidity in the market, we wouldn't expect it to happen any faster than that. We think it could potentially, you know, the betas could lag a little bit more than that given all the deposits in the system.
Yeah. Yeah, it seems that way. Just a quick one for you, Dave, on mortgage, on your mortgage guidance. You're saying start with the $28 million production revenue number, add servicing, and then take our best shot at the MSR valuation. Is that the right way to look at it?
Yeah. The other way is just take the $53 million of total mortgage banking revenue and back off the $6.7 million of MSRs and say that's your base. But yeah.
Okay, good. Thanks, guys.
Just a point on that. We think actual closed originations will probably be down just a little bit in the first quarter, but we think the pipeline will build at the end of the quarter. If that happens, the lock adjusted origination should be fairly similar, and the revenue should be fairly similar.
Okay. Thanks, Dave.
Thank you. Our next question comes from David Long of Raymond James. Please go ahead.
Good morning, everyone.
How you doing, David?
Good, good. You guys talked a little bit about the strong loan growth in the quarter, but just curious if I can get a little bit more color on whether these are new relationships? Is utilization upticking? You know, where are these new loans coming from?
Yeah. I think utilization, as we talked about, is up a little bit. You know, businesses are doing better, and utilization is very real. We have probably a ways to go there. I think you would see numbers closer to 50%. We're at 40%, so I think there's still lots of headroom there. I think in general, you know, thinking about the different loan products, most of this is really coming as a result of market disruption in the C&I space because we, as we've talked about in prior calls, you know, I think we have really kind of become the bank in Chicago to go to. You look at what's going on with CIBC and some of the changes there.
You look at what's happened with MB Financial and Fifth Third and a lot of the changes there, the First Midwest acquisition. There's just a lot of things that have gone on where decisions aren't getting made locally anymore. We've always positioned ourselves, as Ed in opening remarks talked about, you know, we've always been the local alternative to the big banks. We continue to be that, and people do like that. They like being able to walk in and meet with the people who are making the credit decisions, you know, the people who are running the company. It is a key differentiator, and most of that is resulting in these new relationships coming over.
If you look at, like, the life portfolio, that's all new relationships. I mean, that is just people that really like the product, see how it fits into their estate planning. It has become a much more popular product in the industry, and we are just capturing market share of that and getting more opportunities. It definitely is new relationships.
Got it. Then on the deposit side, sort of the same direction here, but, you know, you had $2 billion in growth in the quarter. Are these sticky deposits? Do you expect these to stay on? I know you talked about the deposit beta, but, will these deposits stay on the balance sheet? You know, do you expect a runoff at any point once rates start moving higher?
Well, I think I have a NIM issue when rates are moving higher a bit, but a lot just sits in demand right now. I believe you know, we don't know, basically. Will people pull a lot of money out? They all had a lot of cash. They pull it out. Will it come back to us? Probably. That's why we're being a little bit slow. We take this into consideration as we look at investing our excess liquidity. Tim, you want to comment?
Yeah, I think that's all right. There's probably a little bit of tax-related activity that'll occur in April. There's obviously people have sold some businesses that have parked money for their tax obligations. But we watch it very carefully, David, and you know, we'll react appropriately. It was a lot of growth.
Got it. Okay.
A lot of growth.
Yep.
So.
Yep, definitely.
Seemed to be hanging in there so far this quarter.
What was that?
Seemed to be hanging in there so far.
Right.
Good. Yeah, I may have missed this with Dave's discussion, but were there any merger charges associated with the Allstate portfolio that was purchased that were baked in the operating expense number in the quarter?
Yeah, it was a very small. I mean, we had legal fees associated with it, David. I mean, you know, a very small amount, less than half a million dollars, so nothing significant.
Great. Thanks, guys. Appreciate it.
Thank you. Our next question comes from Terry McEvoy of Stephens. Your question, please.
Hi. Good morning. How are you?
Pretty good, Terry. How you been?
Good, thanks. I went back. It took you a decade to grow your deposits $2 billion. You crossed that mark in 2001, whereas you did that just in the last quarter. Congrats on the fourth quarter. I guess a couple questions. How are you thinking about expense growth in 2022? A lot of talk of wage inflation but then on the flip side, maybe a softer mortgage market, you know, will impact some of your salaries and benefits.
Dave?
Yeah, well, I think that context is probably correct, Terry. I think the way we look at it and it will sound like a broken record compared to prior quarters, is we try to focus on that net overhead ratio because the mortgage business, if it goes up and down, you know, the expenses go up and down. We look at the operating leverage from that perspective. It was in the low 120 the last two quarters. You know, we expect to sort of hold that line a little bit. If mortgages go down, then it's possible that that trends up into the 130 range. I think our target for net overhead ratio is still sort of in the 130 basis point range.
We expect to get leverage. There clearly is some, you know, some pressure on wages out there. As you said, if mortgage volumes are down, then those commissions will be down and related expenses. You know, we also, you know, we also have those expenses supporting, you know, spread business, right? Loans and deposits. If as the spread business goes up, there's a lot of built-in growth already for next quarter with over $1 billion worth of ending earning assets over average. Those spread income will start to come through and the growth in the balance sheet will offset it. We do think there'll be some pressure there, but we're also investing in, you know, robotic process automation in some areas.
Not that necessarily would cut a bunch of positions, but it would eliminate the need to add positions as we grow. We're going to be able to leverage technology and the like. Some of the digital enhancements we're doing are just going to reduce time to complete some functions in the organization, which should also help let us leverage those technological advancements for growth. Yeah, there is pressure there. But we also think there's leverage in the system. Certainly we don't think that our net overhead ratio targets are going up. We, you know, think we can grow into any of those sort of increases.
If there's a rate increase, then that way more than offsets any pressure that you would have on those line items.
Thanks for that, Dave. Just as a follow-up, your commentary on bank M&A. A few years ago, you were looking and talking about larger deals. I guess, is the message here you're going to take what the market gives you if something pops up, or is there a bias towards a larger transaction? As you think about markets, would you be willing to expand into a newer market?
I really don't think we've changed. We're very opportunistic as it comes to acquisitions. You know, those couple quarters ago, I threw out that big bank kind of concept. That was just chumming the water, seeing if I could get a shark up or a whale or a blowfish. I don't know.
I can't imagine us doing a bigger deal right now. It drives me crazy. You talk to people of all, you know, from $1 billion on up, all worried about themselves and not about their shareholders. Drives me nuts. Said that before, I'll say it again. We're gonna be opportunistic on it, in terms of, I can't imagine us doing a very large deal, but I can imagine us doing a deal that, either in market or expanding the market, to contiguous states. I think Northwest Indiana is still on our bucket list. We gotta get there. We have to expand in Wisconsin, and in the rest of Illinois. You know, we only have 8% or 9% market share here in Chicago. Plenty of room for us to grow here.
As Tim mentioned, we're opening up a couple of new branches, new areas we're not in. There's a number of areas we're still not in, we're gonna have to get to. We'll take what the market gives us. I can't imagine we'll do a big deal, but we're always looking, and we'll be very opportunistic. As I said, I'm allergic to dilution and unless Dave's got a big EpiPen, I don't think we'd do a big deal that would dilute the crap out of us.
I appreciate that. Thank you.
It's intriguing that I could use an EpiPen on that, but we'll wait for another day, so.
Thanks.
Thank you. Our next question comes from Ben Gerlinger of Hovde Group. Your line is open.
Morning, guys.
Ben.
Good morning.
I was curious. You said in the opening remarks that every rate hike equates to about 10 basis points on the margin. I was curious if, since you guys are so asset sensitive, is there any part of that 10 that's in a delayed effect? I mean, for example, if the market's pricing in a hike in March, would you expect to see that 10 in the second quarter? Or is it potentially like seven immediately and three following on?
Well, you know, I guess what we'd point to is just what we said in there. It's $40 million-$50 million over the next, you know, 12 months. You know, I think it's gonna depend on competition on other things, how fast that builds in, if it's front-end loaded or not. I think as Tim indicated with it and based upon an earlier question, that there's probably a lag in the deposit cost rise because of all the liquidity in the market, which would maybe front-end loaded a little bit more, that you could get an increase on your earning assets a little quicker than your deposits are gonna reprice.
You know, there's so many moving parts to the equation and what could happen with the slope of the yield curve, et cetera. I think that general guidance is good right now, and we'll try to fine-tune it as rates go up. You know, I think we'll just stick with what we gave you there.
Gotcha. Okay, that's fair. Then when you think about hiring and the potential for talent, obviously expenses have increased industry-wide in terms of the salary line and the guidances for even more. I was curious how you guys approach talent and the cost associated with that. Do you need to see revenue associated with the talent, or is there supporting back offices that could potentially also increase the salary line items?
Well, I can take part of that, and Dave can add. I mean, we continue to believe we're an attractive endpoint for bankers and revenue producers, and Rich talked about the disruption in the market that will drive that. Is there a little bit of pressure from a wage standpoint? Yes. I don't think that's anything atypical from our standpoint at this point. We're, you know, generally hiring commercial bankers, so we think the people are really important. They'll help us continue to grow the company. The back office side of things, we're doing a lot to limit the number of people we would need and the ability to scale up. So there'll be some impact, but I don't think it'll be outsized at this point.
Yeah. I think we're always generally in the market for revenue producers, you know.
Right.
Maybe that adds a little bit until they bring their book over with them. But if we can hire good people that produce loans, I mean, we're always investing in the business, right? We would do that if there's good people, and we always have for the last 30 years. No change in that approach.
Gotcha. Okay, I appreciate it. Thanks, guys.
Thank you. Our next question comes from Brody Preston of UBS. Your line is open.
Well, good morning. Thanks for the question. I guess going back to, I think it was David Long's question on deposit trends. You know, have you kind of in line with other banks in terms of having, you know, vacuumed up 25, or increased your deposit base 25-30% since COVID started. Have you know, have your bankers started engaging with large pools of deposits to try and get a sense of, you know, their stickiness? Or is that, you know, is that coming? How are you trying to, you know, be the player coach in this, you know, move into a higher rate environment?
Well-
Tim is in charge of stickiness other than me.
Yeah, I'm sticky, right. It's a good question. Brody, we actually have our structure is kind of well-positioned to do that because each of our banks can reach out to their largest clients and, you know, sort of determine what their intentions are. As we did that in the fourth quarter, you know, we didn't see people reporting the, you know, large outflows or large volatility. Remember, some of the deposit growth is actually consumer-based and related to new account activity and the stimulus payments and the like. You know, we're currently pleased that we're up to about 34%-35% DDA. It's obviously helpful to us going forward, and a lot of it's related to the addition of new clients.
To Ed's point earlier, we will watch for some volatility but we still think absent all of the noise, we have and would have had very, very strong deposit growth.
Got it. Okay. Separately, I've been noticing this for a couple quarters just in terms of wealth management. It seems like many community, even regional banks or even larger banks struggle with wealth management. You know, it's a product, it's a line item, but it just doesn't move. Clearly not the case here. Just if you were to kind of briefly summarize your go-to-market strategy there and why you think it's, you know, distinctive versus, you know, more maybe more traditional bank wealth offerings?
Well, it took a long time to get here. That wealth management business is a tough business. Every time we thought we'd be there, it need another piece. Finally about last year, they said all the pieces are here. Feels like Dave Wannstedt said when he was talking about the bears that time. Scared the hell out of me, but they've been able to go and build and grow. I would say their approach to market is kind of the same as ours. It's high touch, high tech. Seems to be resonating well with the clients. Our name is out there a little bit more. Our size helps. Our reputation is out there and, you know, doing a better job of cross-selling.
I don't know if we do anything different other than the fact that our products are good, our service is good, our name is good, and that's how we're doing it. One brick at a time.
Okay. Sounds good.
Thank you. Our next question comes from Christopher McGratty of KBW. Please go ahead.
Hey, good morning. Ed, you or Dave mentioned the 3% NIM by the end of the year. If the futures is right, I'm interested in what assumptions you may be making on just the mix of your balance sheet, given the elevated cash in that assumption.
Chris, it's Tim. The you know the assumption is that we deploy a little bit of liquidity and that we continue to get the growth that we've talked about. You know, part of it is obviously pure interest rate help as the various indices move. They're pretty simplistic assumptions. You know, the thing I think we just have to be careful of is that you know there are a bunch of deposit indices, and there's competitors in the mix and a number of other factors. We just wanna be a little bit cautious in terms of forecasting you know what that might look like. It's. We're clearly positioned to benefit from rates up and expect that we'll get a nice lift.
Okay. That doesn't assume liquidity levels go to pre-pandemic levels. That's just a slow gradual remix, right?
Yeah.
Yeah. It's not assuming, like all. If you're wondering if it assumes all $6 billion of excess liquidity.
Right
Goes to work, it's not doing that.
Yeah
It's a slow, steady in investment.
Yeah, that's what I was getting at. Thank you. Maybe another question, more for Ed. You guys have had a good history of having a pulse on big changes in the market. You know, I remember the financial crisis, you guys pulled back. Everything's going really well right now. What's the wall of worry, if there is one?
I don't know. We worry about everything. You know, we're basic old-time bankers. That's why at the end of my initial comments about you have to look at how we responded to everything from the Great Recession to the pandemic to also, you know, 9/11. During that period of time, we've been able to maneuver and move very, very quickly to react to that. I think that's the same situation here. We don't know what the market's gonna give us, but we're gonna take what it gives us, not get greedy. We're diversified enough to know that if something isn't working, we don't have to do that. We can do something else will be working. I guess what I worry about most is, will the deposits stay?
I'm always worry about that. Loan quality can't be this good forever, I keep saying that, but we're gonna continue to cull the portfolio and might even do another sale or so just to keep the numbers even lower. So, I don't know. What do you guys think?
Well, I think it, and I think this, the worry when it's rates low for long, I think the bigger concern was-
there a race to the bottom on loan pricing because it's better than Fed Funds concept? I think with the perception now that rates are going up, I think people aren't going to want to lock in those low loan rates. If for some reason we went back to a low-for-long rate environment, you worry that people just continue to price down the loan products. Our pipelines and our ability to get loans on our pricing, you know, matrix that we have as far as profitability, we've been able to do it. You're worried about it, but I think that worry is sort of goes away a little bit with rising rates because people don't want to lock in the lower spread. Let's just hope they increase the rates.
You know, competition is something we would deal with all the time. As we saw in 2006, 2007, people raced to the bottom on spreads. I was concerned that might happen, but I think that concern is going away now.
Yeah. Chris, I maybe would add to what Dave said. I think that, you know, the old adage about the worst loans are made in the best of times. You know, it's something that we, you know, the credit team here is constantly thinking about, which is when there's so much liquidity in the marketplace, you see banks doing irrational things, and we just have to be constantly mindful that there's no loan out there that we absolutely have to do. We have good loan growth. You know, if you just can't get there because somebody else is doing something stupid, you just got to step away. You know, we think we've made good, prudent credit decisions, but it is a very competitive market out there.
you know, just as Ed said, you know, credit can't stay this good forever. you know, time will tell.
That's a great call. Thank you very much.
Thank you. Our next question comes from Nathan Race of Piper Sandler. Your line is open.
Nathan?
Please make sure your line isn't muted. And if you're not speakerphone, lift your handset.
Yeah, apologies there. I appreciate you guys taking the questions. Just going back to the excess liquidity deployment discussion. Just given the greater slope that we've seen in the yield curve of late, is it maybe more of a willingness or sense of urgency to maybe put some liquidity to work in higher yielding securities in the first half of this year, as opposed to maybe a more of a laddered approach, particularly just given the potential for the long end of the curve to flatten out as the Fed raises short-term rates and starts to unwind its balance sheet?
That's a great question. We've begun laying into it a little bit. We got plenty of liquidity to do it with. We're gonna take our time, make sure that somebody said earlier, make sure those deposits are going to stay. The growth is there. I worry about that a little bit. We have so many good sources of deposits, not just our retail side, but CDEC, our Deferred Exchange Company produces a lot of deposits. Wealth management produces a lot of deposits. We have a very good diversified deposit source. Anybody else?
No, I don't think there's a rush. I think we're patient and, you know, we've been rewarded a little bit as rates have moved, you know, quite a bit in the last month or so. You know, as we said, we're going to deploy some, but I don't think we're in a hurry.
Yeah.
I'd love to use it via loan growth, I mean, and deploy it that way and see where deposits take us. But that's our first choice.
Yeah. We'd still like to, you know, deposits are your inventory. We want to get more and more deposits. I mean, I have no problem with bringing on deposits and any type of liquidity, just another lever we can pull when the time is right. So, we are very active in terms of getting more deposits from our customers and playing that out just because you have more inventory than.
Yeah. I think, Nathan, I don't think anybody can predict what that yield curve is going to do. If we invested it all right now, I guarantee you the conventional Ginnie Maes would go up 50 basis points you know, the next quarter. You know, we're going to ladder it and see what the market gives. I mean, the market expectation for rate increases are completely different now than they were three quarters ago or two quarters ago. I don't think anybody knows what it does. You know, we'll take it over time and we'll be prudent. But as Tim says, loans are the first choice and then we'll ladder into this liquidity and see where it takes us.
I personally believe in light of this inflation, as we said all along, is not transitory. It's never was. I think you're closer to a spiral than anybody wants to tell you you are. I think a quarter or a half point ain't going to cut it, personally, or even a full point isn't going to stop anything. Way too much liquidity. The government's way too involved. So I actually believe that you're going to see even higher rates than are coming down the pike. We will. They're forecasted, but that's my personal opinion. We got to just be very prudent in how we lay the money out. You don't want to lay it all out and make a bet that way.
We're so well-positioned right now to take advantage of whatever the market brings us. We're in pretty good shape. I'm going to leg into it, and the timing will be somewhat staccato, but we'll see.
It's a great lever to have to pull.
Yep.
Yep, definitely. I appreciate that color. On a separate topic, just thinking about mortgage related expenses and just kind of the outlook along those lines this year, perhaps for Dave, if mortgage volumes are maybe half the levels that we saw in the first quarter of 2021, is it as simple as kind of looking at the incentive comp line and assume that is also reduced by half? Or have there been other kind of implementations within the mortgage cost structure that could lead that expense bucket to be maybe a little more variable than what we've seen in the past from you guys as the volumes come down?
Well, I don't think it's exactly linear. I mean, the spreads in the first quarter of last year were a lot higher, so as there was spread compression, that revenue goes away. But your commissions are based upon units, not based on revenue. I don't think it's linear because if you got into the higher production quarters, margins were much, much wider. It's not quite linear, but if you sort of normalize the production margins, then I think you get closer to your concept. I think you have to take into account that under Dodd-Frank, you can't pay commissions based on the revenue you generate. You have to pay commissions based on the units. I think you have to normalize your revenues, margins.
Which is why we always push to the net overhead ratio. It's hard to know where they're gonna be. In that overhead ratio, at current levels, we're expecting 130 around.
We're $1.21 this quarter, but our target is really sort of the $1.30-$1.35 range.
Yeah. If mortgages pick up, we, that number will go down.
The other thing you can think of, Nate, is you know, MSR is gonna play into this too. If rates go up and our volume's down, you know, MSRs valuation is going to go up, and our servicing portfolio continues to grow and so we'll have additional revenues off of that too. Lots of moving parts there.
I know you guys don't like to count the MSRs, nor do we, but fact is, it does add to earnings and capital, and it does add, you know, does help on the way up, and it hurts on the way down, so.
I guess I'm just kind of going back to a more normalized mortgage environment, you know, maybe in the first quarter of 2020, incentive comp was $32 million or so. If you guys do a similar level of volumes in the first quarter of this year, is that kind of a good level to go off, or have there been any kind of nuances within your mortgage structure that could cause those expenses to be more variable than what we've seen in the past?
No, I don't think we've really changed our comp structure there. You have to remember, the incentive line in the press release includes bonuses and long-term incentive comp, yeah, and commissions for wealth and mortgage and everything else. It's not just the mortgage line, so.
Got it. I really appreciate all the color. Thanks, everyone.
Thank you.
Our next question comes from the line of Michael Young of Truist Securities. Your line is open.
Hey, thanks for taking the question. Happy 30 years. Ed, I want to call back a couple of your references and frame that into a question. You know, Sisyphus starting off the year this year, maybe pushing more of a beach ball up the hill. What areas do you want to sort of reinvest in as some of the higher rates, you know, kind of pull through and really benefit the earnings stream?
Well, we've never stopped investing in the business. I mean, we're a growth company. You have to invest in the business. We've always kept, you know, earnings growth, tangible book value growth in mind. So we continue to invest in the digital channels. We started that about three years ago. We have not done a very good job of explaining to you how much we spent but it's been a lot of money we spent to get out there. It's working because all the Greenwich awards we won, as you can see in the earnings release. Come June, we're gonna roll out a major component of Deep Blue, which is full remake of the individual or the retail digital stuff.
We're in a great shape to do that, but stuff is expensive. We monitor. We think we'll be fine. We care, we prioritize nicely. Robotics is something we're looking into a lot of. In a lot of different businesses, it's you take some of these rote procedures we go through and make them no people, which should keep the people cost down and add to productivity. We always look for other businesses that we can get into. We added a couple this year, smaller ones. We continue to do that. Diversification is still very important on both the deposit and the asset side. We'll look for other deposit sources and loan products to get out there.
Our people, we gotta keep our people happy.
Miss anything, Dave?
No, I think that's good.
EpiPens. You gonna invest some EpiPens for me?
EpiPen, many EpiPens. I like poking ads.
Perfect. You know, my second question is just to follow up on kind of the liquidity management asset. You know, if we look back to, like, 2018, you know, as rates were rising and reaching, you know, higher levels, it was more of a mid-teens kind of percentage of earning assets versus 23% today. You know, was yielding somewhere around 2.7% versus 1.09% today. Is there anything structurally changed either within the company or within the market that would, you know, prevent it from getting back to sort of those levels if we were, you know, back into that sort of rate environment in a year or two years from now?
It really all depends on loan growth. We always ran 85%-90% loans and deposits. When we got overnight, we were 92% or 93%. It may be uncomfortable, but other people are happy. You get to 85% or 90% loans and deposits, that would bring us back down to a little bit lower levels in terms of the overall liquidity portfolio. As there is about three years duration on all of our liquidity, including the overnight money we have, usually higher than six and a half years. That's kind of going to be the basis of deployment; we'd love to get the loans back to 85%-90%, which is our target range, and then invest after that. Does that make sense?
Yeah. No, I think it does. Just real quick on the duration, you were saying it's six and a half years now. Is that.
Yeah. Historically, that's where we've been at. We're at 3.1 now, so plenty of room to,
Okay.
-grow.
Okay. Perfect. Thanks. Appreciate it.
Thank you. Our next question comes from Russell Gunther of D.A. Davidson. Your line is open.
Hey, good afternoon, guys. I just have one follow-up on the overhead ratio discussion. The commentary of 120% moving towards 130%-135%, that longer-term target as mortgage normalizes. You know, we overlay the asset sensitivity discussion and that glide path to a 3% margin. I mean, in that scenario, do you think you can sustain around current levels or even improve upon? Or are the franchise investment and growth mode still likely to take us to that 130%-ish range?
Yeah. Well, 1.30 doesn't really get impacted by margin because the net overhead ratio is non-interest income minus non-interest expense, and take that result divided by average assets. That's how we sort of break down as we look at managing the company. You manage your margin, you manage your provision costs, and then you manage your net, you know, overhead ratio, which is non-margin related. The increase in rates other than potentially reducing mortgage production doesn't really have an impact on the net overhead ratio. We've been 1.20, and we're 1.20 this quarter with a relatively seasonally softer mortgage volume. But that included an MSR adjustment.
If you take that MSR adjustment out, you're up closer to 1.30. The 1.30 sort of is today's sort of environment, without an MSR benefit. We think as we continue to grow, we should be able to hold that or improve upon it as we get operating leverage. A rise in rates doesn't necessarily directly impact the net overhead ratio.
If you think back, we always
Okay. Yeah.
1.5% was our net overhead goal. We've been able to get more leverage into the system as we've been able to grow, and down to 1.30%-1.35% is not bad. That's kind of the leverage we picked up by being able to handle more assets with under that expense base. I think as we continue to grow, like next year, we came in at, you know, hypothetically, I don't know what happened, but like $60 billion, not going to happen, but I would expect that will go down even more as you get more and more leverage out of it. We shall see.
Yeah. I think the short answer is.
Got it.
The only thing the rates impact on the net net overhead ratio, generally speaking, is if the mortgage rates go up, then the mortgage servicing rate is going to gain in value, and you're probably going to put pressure on your originations. You just have to take that into account.
No, I appreciate it, guys. That's a great explanation, and thank you for that. If so then, you know, maybe asked a different way. On the in that 3%, you know, margin range, do you expect to be able to demonstrate overall positive operating leverage in 2022 from an efficiency perspective?
Yeah.
Yeah. Oh, yeah.
All right, guys. Thank you again. That's it for me.
Thank you.
Thank you.
Thank you. We have a follow-up question from Brody Preston of UBS. Your question please.
Oh, thanks for taking the follow-up. Just on mortgage, I was looking through the press release here, and half the volume was refi. I'm assuming that, you know, should be falling pretty fast here given the move in rates. Are you know, trimming expenses in that, you know, in that segment preparing for, you know, heavy sledding, or haven't you moved in that direction yet?
Oh, yeah. We've been able to reduce staff in the mortgage area. Well, they're not sure because we utilize them in a different area. Our premium finance life business is growing so fast, we needed to get some help. But we get really good people. We like to keep involved. But we are monitoring mortgage costs. We wanna keep that fixed variable concept going. In other words, lower the fixed expense, get more variable expenses. We're accomplishing that, I believe, and we'll go from there. But yes, look at all the time.
Yeah. I think, Brody, in the first quarter, we're probably thinking, you know, 60%-65% purchase and refi is ticking down. Even though some of the potential borrowers aren't in a position to do a refi just because of lower rates, we are seeing some cash-out refis. It is a big part of the refi volume now. People kinda using the 30-year product as their home equity product of old.
That's keeping that refi volume up a little bit because there's a fair amount of cash-out refis going on, and people are willing to maybe even do it at a little bit higher rate because it's a, you know, a 30-year AM on the loan versus a home equity line, which would be a lower AM and they keep their payments down. We're seeing a lot of cash-out refis.
Yeah, you're finally with the inflation, you're gonna see obviously home values continue to go up. People will go back to that pattern. They always in the old days, you know, you look at the pattern, they get a mortgage, get a home equity line. Run up the whole equity line, pay off the home equity line with a new mortgage and go from there. I'd imagine we're kinda getting into that period of time. That's kind of the inflationary way to do it, I guess.
Okay. I noticed the MSR markets about 112 basis points where you're carrying that MSR asset. Just for context, back in 2018 or so, before rates started coming down, where was that roughly? Just trying to gauge what kinda ceiling we could have on that mark.
Well, you know, Brody, I don't have that in front of me. Although I you know, there was a time where those numbers were in the 1.30 range. I don't know if that was 2018 or not, but they certainly could go up higher than this.
Yeah, 130-140 makes sense.
Yeah.
We've got a hell of a lot more than we had back then, so.
Yep. Okay, great. I appreciate all the color, guys.
Thank you.
Thank you. At this time, I'd like to turn the call back over to Edward Wehmer for closing remarks. Sir?
Thank you, everybody, for listening in. You know, we'll give you our best efforts going forward. We continue to take what the market gives us, not get greedy. Don't be stupid. Do the right thing like we've always done. Again, hats off to our staff who have been through hell and back to make this happen. They do a wonderful job at keeping the customers happy. Talk to you in a quarter. If you have any questions, please don't hesitate to call any of us on the call. Thank you very much. See you in April.
This concludes today's conference call. Thank you for participating. You may now disconnect.