TCF Financial Corporation
Q3 2011 Earnings Call Transcript

Published: 20 Oct 2011

[Operator:]

Good morning and welcome to TCF’s 2011 third quarter earnings call. My name is Christy [ph] and I will be your conference operator today. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer period. If you would like to ask a question, simply press star followed by the number 1 on your telephone keypad and questions will be taken in the order they are received. If you would like to withdraw your question, press the pound key. If you are using a speaker phone, please lift your handset prior to asking your question. At this time I would like to introduce Mr. Jason Korstange, Director of TCF Corporate Communications to begin the conference call.

[Jason Korstange:]

Good morning. Mr. William Cooper, Chairman and CEO will host this conference. Joining Mr. Cooper will be Neil Brown, President and Chief Operating Officer; Mr. Barry Winslow, Vice Chairman and Chief Risk Officer; Mr. Tom Jasper, Chief Financial Officer; Mr. Earl Stratton, Chief Information Officer; and Mr. Craig Dahl, Executive Vice President of TCF Wholesale Banking. During this presentation, we may make projections and other forward-looking statements regarding future events or the future financial performance of the company. We caution you that such statements are predictions and that actual events or results may differ materially. Please see the forward-looking statement disclosure contained in our 2011 Third Quarter Earnings Release for more information about risks and uncertainties which may affect us. The information we will provide today as of September 30, 2011 and we undertake no duty to update the information. Thank you and I will now turn the conference call over to TCF Chairman and CEO, William Cooper.

[William Cooper:]

Thank you, Jason. Today, TCF reported its 66 consecutive quarter of earnings. We earned $0.20 for the quarter versus $0.19 cents in the second quarter, a slight improvement. Net income was $31.7 million versus $29.8 million, again, a slight improvement. $36.8 million last year’s quarter but last year’s quarter had an $8.5 million security scheme that wasn’t matched this year. So earnings, best way to say it, revenues were up to $293 million versus $290 million in the second quarter. Margin, essentially flat. Fee income up a little. Expenses were down $189 million versus $196 million. So the core operations of the bank improved modestly in the quarter. The margin was, dollars were at flat rate down a little bit largely due to higher liquidity and an increasing amount of asset sensitivity in terms of we’re putting on more variable rate assets and our fixed-rate assets are running off somewhat. That’s an issue that we’ll address early in 2012. Provision for loan losses was up from the last quarter but all of the parameters associated with credited improved. Our performing classified assets were down from $390 million to $340 million. Our non-accrual loans from 321 to 307. REO was down $6 million and the number of houses that we owned has decreased as we have accelerated the liquidation of foreclosed real-estate. If you combine it all, the performing classified loans, the 60-day delinquency, the TDRs, the non-accruals, etc., all of that declines quarter-to-quarter and that’s the third consecutive quarter we’ve seen that decrease. The TDRs which is an accounting anomaly, in my judgment, continue to perform well. We’ve had very little mitigation and particularly in our commercial TDRs into a lost category or non-accrual category, it’s simply an accounting structure if you will. Part of the provision increase that we saw in the quarter was the change in the TDR accounting under Generally Accepted Accounting Principles. As I mentioned earlier, fee income was up from June quarter down from last year which is mostly that impacted Reg E but that improvement is encouraging. We implemented our new negative balance account system in the first of October and so far that is performing exactly as planned. We’ve got some other fee income change that we’ve made that won’t take impact until later in the fourth. In the fourth quarter, we’ll have the full impact of the Durbin Amendment which cost us something like $15 million a quarter. We expect to mitigate that Durbin impact in 2012. We do not plan to institute a debit card fee similar to that’s happening in other places. We do have some fee income structural changes, however, you’ll be able to continue to have a free accounted TCF as long as you use the account. The loans were flat. Deposits were up. We went over $12 billion for the first time. Deposit rates were pretty steady between the quarters but down considerably from last year. New checking origination was very strong. We’ve implemented a lot of marketing in that area and we still – we’ve got really strong checking origination. We expect to have some improving loan growth with the signing of the deal in the inventory finance area with BRP which is based in Canada that Ski-Doos and Sea-Doos, etc., we expect to see a growth in 2012 of as much of $650 million from that deal alone. In addition to that, the new auto finance subsidiary that we are acquiring and the process of acquiring, we expect to see asset growth from the subsidiary as well. We got very strong capital. Our Tier 1 common is 12.22 [ph]. Our tangible 8.75 [ph]. We have approximately, I think, $700 million in excess capital over the Basel III requirements today. We have $115 million in cash up at the holding company that we’re holding to pay off the 10.325% trust preferreds that will occur sometime in 2012. It’s really a regulatory timing. That will save us about $12.5 million a year in the margin. That’s about 10 basis points in the margin. Looking forward, I think we’ve made some real progress in the reinvention of TCF into the new banking world both regulatory and competitively. We’re going to have the impact of the – in the fourth quarter of Durbin but we’re going to react in that later in the quarter and into 2012. As I said I think we’ll be able to mitigate that going into 2012. We got new growth in loan with the BRP and the auto leasing. I believe we’ll see improving provision for loan losses in 2012. We’ve got our operating expenses much under control and particularly operating expenses associated with loan workouts over time should continue come down but we’re also looking at various efficiencies all over the bank. We have no exposure whatever to Europe. We don’t have any loan servicing exposure. We’re not subject to any of those lawsuits. TCF never securitized any loans that are subject to any of those issues. So we have none of those problems that are kind of rolling around the banking industry. Furthermore, we’re not booking any gains from our debt going down in value or servicing portfolio gains or a lot of magic that’s in the accounting world. TCF’s earnings are core in terms of our operations. As we announced earlier, we’ve revised our organization structure. We played what I would call a little bit of money ball if you will in terms of where we move players around and we have moved farther into a functional organizational structure which is the way the banking world is heading in connection with regional banks in particular with Craig Dahl who already who is responsible for most lending will pick up responsibility for all lending. Tom Jasper will now be responsible for all funding, if you will. And Neil Brown is going to be our golly and referee in connection with running credit and risk management. And Barry Winslow will step into the corporate development areas with looking forward similar kind of deals like we did with this auto finance, etc. As I mentioned, all of our earnings at core, we haven’t marked up anything, marked down anything or whatever. I remain optimistic. I think the second quarter at TCF was kind of a place setting quarter. I think the third quarter was a kind of a where we – stepping forward and expect to see some real motion going in to 2012. With that, I’ll open it up to questions.

[Operator:]

(Operator instructions) Our first question comes from the line of Jon Arfstrom of RBC.

[Jon Arfstrom:]

Hey, good morning, everyone. Question on the banking fee line, that $58.5 million, Bill, you’ve touched on a new account structure a little bit and saying it’s performing exactly as planned. I’m just wondering how we should look at that line in the fourth quarter? Is this – does performing as planned mean, you think you can replace all of that revenue in Q4? Does it take a couple of quarters for you to figure it out and make your tweaks to get that money back?

[William Cooper:]

We implemented the new negative balance accounting or fee system in first part of October. The other fee changes that we’ve decided which we basically waited awhile to see how the rest of the market would behave won’t happen until sometime in the later part of the quarter. So we will not mitigate the $15 million impact observed in the fourth quarter. However, we expect that that fee change and along with a number of other revenue enhancement and expense reduction things will mitigate that into 2012.

[Jon Arfstrom:]

So in other way, you don’t expect any real decline in the, call it, banking and service charges other than Durbin with the new account structure if we’re just looking at Q4?

[William Cooper:]

That’s true. There will be the impact of the Durbin which we’ve estimated around $15 million in the quarter. But we did implement that new negative balance system in the first part of October. That will have an impact. It remains to be seen what the impact is but we do not expect that to have a negative impact.

[Jon Arfstrom:]

Okay. Okay, that’s helpful. And then, Craig, just a couple of questions on inventory finance. I thought the inventory finance balance has sort of jumped up in the third quarter. So maybe help us understand the flow of that. I know it’s a new business so I think we’re all trying to understand the flow of the balances. And then help us out on BRP in terms of the flows of revenues and expenses that we might see in terms of that comes in over the next few quarters.

[Craig Dahl:]

Okay, Jon, there, part of the decline in the third quarter is seasonality and part of that was the switch from an E&A [ph] program, from a funded program to a servicing-only program. So there was some mix change in there a little bit. But the second quarter going forward what we expected to be our high point within each year subject to new program additions in the second half of the year, just based on the lawn and garden and snow and power sports products we have. As far as BRP, we expect to start advancing under new purchases in February. And so as Bill has commented that will grow to about 650 million by the end of the year.

[William Cooper:]

Jon, this is Bill Cooper. I will mention that there has to be somewhat of an expense rack up as well in that you have to manage that portfolio as well. So you’re not going to get all of that benefit as fast as someone might believe but we will get it.

[Jon Arfstrom:]

Yeah, so some front loading of expenses in Q1.

[William Cooper:]

Yes. That’s fair to say.

[Jon Arfstrom:]

Okay.

[Craig Dahl:]

Correct.

[Jon Arfstrom:]

Yeah, okay. Thank you.

[Operator:]

Your next question comes from the line of Ken Zerbe of Morgan Stanley.

[Ken Zerbe:]

Okay, thanks. Just a question on credit, I was hoping you could address, I guess, the apparent disconnect between the improvement in all the underlying credit trends versus the higher provision expense, the higher charge offs in the core portfolio. Obviously, it looks like this quarter was more on the first lean portfolio and obviously, just excluding the couple million dollars from the policy changes. But it looks like the provisions went up but the credit trends went down. I was hoping to rectify that. Thanks.

[Neil Brown:]

Well, this is Neil Brown. Some of that is attributable to the consumer TDRs. We introduced a new product this quarter which is a five-year term before the loan returns back to its original terms and it gives our customers a longer period of time to solve their problems and go back to their original payment because that loan has a longer term, the accounting has us increase the reserves on those loans. So you can see on the consumer TDR reserve category, it went $5 million and that went from a 12% coverage to a 13% coverage rate.

[Ken Zerbe:]

Okay so it’s just that – so you take $5 million, so I guess you go from 44 to 47 so basically the provision is largely flat all in.

[Neil Brown:]

We went from $44 million to $49 million.

[Ken Zerbe:]

Okay.

[William Cooper:]

The provision is largely an anomaly of changes. Somewhat the incident rate of losses in the consumer portfolio has come down. The loss per incident has come up somewhat because of continuing house pricing falling particularly in Chicago and because of our acceleration of the liquidation of REO. But in general, when you look at all the parameters, as you mentioned, credit is improving.

[Ken Zerbe:]

So more, sort of abstractly, when you look at over the next 3, 6 months, should we continue to expect a stabilization in credit or is there factors that might lead to get better or worse from here?

[William Cooper:]

The trends, as we just said, are all positive.

[Ken Zerbe:]

Yes.

[William Cooper:]

Now on the commercial side, those things tend to go one z’s [ph] and two z’s [ph] and these deals can go bad and you got to charge off a couple million or it gets better and it goes back on accrual. So it tends to be bumpy. It’s relatively low levels, if you follow me, but over the poll, if you look over the poll in 2012, the trends are positive and the provision will follow that into 2012 in my opinion.

[Ken Zerbe:]

All right. Great, thank you.

[Operator:]

Your next question comes from the line of Paul Miller of FBR.

[Paul Miller:]

Just to follow up a little bit on that, we know that Chicago has been one – attaching [ph] trouble on the CRE side over the last couple of quarters where the trends have been going negative overall on a macro sense. Are you seeing improvement in the Chicago market and are you seeing improvement through your footprint on the CRE side?

[William Cooper:]

Commercial real estate?

[Paul Miller:]

Commercial real estate, yeah.

[Tom Jasper:]

Generally, we’re seeing modest improvement in our footprint in the commercial real estate side both in leasing activity or the loans that we have of current customers that they’re performing loans and we’re seeing a little bit more activity in the non-accrual loans and the pieces of REO that we’re trying to sell. We’re seeing more interest and there’s more activity around this loan, so I would say that it’s modestly improving. It’s probably improving the most in Minneapolis which you might expect because the unemployment rate is lower here than other parts of the country but actually it’s pretty stable right now in Michigan which has been very depressed and it’s bumpy. I’m slightly optimistic about it in Chicago.

[William Cooper:]

The Chicago credit issues are more revolved around consumer and those are largely political. I think it takes us, what, 475 days from the time somebody stops paying to foreclose on a piece of real estate and the foreclosure process is really – they keep the sink pretty well clogged up. In which case, it tends to be more depreciation in the homes and so forth. So Chicago is slower and home prices have declined somewhat simply because the political establishment won’t allow them to clean it out, in my opinion at least.

[Tom Jasper:]

I would say that in Chicago for us, Chicago, what we see is consistent with that is still residential lots and that sort of thing or still very depressed and we basically move the majority of our exposure, fortunately for us, off our balance sheet in the 3rd quarter by just selling these things.

[Paul Miller:]

And one quick follow-up on the Durbin Bill and some of your other free check-in account type policies, are you getting any guidance from the regulators of what’s acceptable and what’s not? Or are you just, I don’t want to say going blind but the Consumer Financial Protection Agency is really not up and running yet so are you getting any guidance at all from the regulators on those issues?

[William Cooper:]

Not as it relates to Durbin per se, it’s my understanding that Bank of America, when they did they or had going to do cleared that through that agency. But in terms of the OCC and the FDIC issued guidance associated with NSF issues and so forth...

[Unidentified Participant:]

Draft guidance.

[William Cooper:]

Pardon me?

[Unidentified Participant:]

Draft guidance.

[William Cooper:]

Draft guidance, right. And part of our restructuring of how we do that was reflective of the way we saw that thing going in the future. But relative to service charges on deposit accounts, there’s been really no guidance and I don’t believe that there is a regulatory issue, real regulatory issue on what you charge people for a service as long as you clearly disclose it. And that is the new, that’s the manta of this new regulatory agency. They want to have transparency and clear disclosure which we’ve always done and will continue to do.

[Paul Miller:]

Okay, gentlemen, thank you very much.

[Operator:]

Your next question comes from the line of Erika Penala of Bank of America Merrill Lynch.

[Erika Penala:]

Good morning. Just my first question surrounds some of the BRP and the Gateway purchases. I guess I was wondering, when you do these wholesale purchases, a, do you re-underwrite the loans or leases that are already funded? And b, going forward, is the underwriting done where you’re sitting today or is it done by Gateway folks?

[William Cooper:]

The BRP wasn’t “an acquisition” per se, we’ve got a new arrangement with BRP to take their old lender out of new loans as their originated and we will indeed underwrite those in the ordinary course of business as our inventory finance does. The Gateway transaction, the Gateway head in the past originated and sold their loans and so there isn’t much in the way of existing portfolio for us to acquire that needs re-underwriting. We did deep; deep due diligence on those portfolios to make sure that what they were doing was a good credit quality which we believe it is. All new loans that go on are associated with that acquisition will be underwritten with our regular review of it as we would any loan going on the books. Craig, you got anything to add on it?

[Craig Dahl:]

No.

[Erika Penala:]

And so the press release that Fitch put out citing it as a concern on your debt ratings was just a concern on the expansion national lead, didn’t necessarily have to do with how you’re underwriting the loans that were coming from the Gateway channel?

[William Cooper:]

Yeah, the Fitch thing kind of implies that this is a step in the direction of us expanding, especially finance and indeed it’s true. However, I’ll remind you that 50% of our loans are home mortgages originated in our market place. All of our commercial real estate loans are virtually originated in a market place. We do have a specially financed area which is the way the world is moving in equipment finance, inventory finance, now auto finance but that is a minority of our loans and I don’t share Fitch’s concern on that in the way that they expressed it. But it has nothing to do with the existing portfolio. It’s simply the expansion into more national markets. Now the auto business is done nationally by everybody today. It isn’t done locally in the way it used to be, so if you’re going to be in the business, you’re going to be in national or you’re not going to be in it.

[Erika Penala:]

Got it. And just – my one last question is a follow up to Ken Zerbe’s. Could you give a sense – I know there was some accounting noise this quarter but could you give us a sense in terms of what the underlying trends are with the consumer and how you’re using the TDRs to help keep them in their homes. Are you finding that, more or less of your customers need the TDR product to stay current? And also for the shorter dated restructurings, when they do come up against the higher monthly payment, is the solution usually to re-TDR these customers or can they usually step up to that higher payments?

[William Cooper:]

One of the things about TCF’s portfolio, mortgage and loan portfolio – first of all, these are all first mortgages, is that TCF never made any subprime loans. The average (inaudible) square on our first mortgage portfolio is around 720. It was when we made it and still is. And so, we’re talking about, in general, credit worthy customers, who have had some kind of a life event, like for instance, the wife lost her job, or the guy who used to work 60 hours a week, now he’s working 30 hours. He was a carpenter or whatever. But these are people that are – want to stay in their home and they’ve got a, what we consider to be a temporary financial difficulty. These are people who have always paid their bills and we believe if they can, will in the future. And so, we put them on as a TDR. We make a rate concession. The TDR consumer portfolio was yielding about 3.5%. That’s not bad. The TDR commercial portfolio is yielding 5.5%. As a matter of fact, that’s pretty close to what the portfolio as a whole yields. In our TDR portfolio, because it’s good credits, has held up considerably stronger than what, either the government has done or other banks. We’ve got about 11% or 12% reserve on our TDR portfolio. I think the over 60-day delinquency is around 5%.

[Unidentified Company Representative:]

6.8%.

[William Cooper:]

6.8%, which is about the average for first mortgages in the banking industry and in general, we’ve had good experience with people working their way through these things. As we mentioned, one of the options that we have now is to put them on a longer term, five-year restructured transaction which will keep it in TDRs that will give them even more time to work the situation out. But does result in a – from an accounting perspective, in a bigger reserve in connection with the way we calculate it. Does anybody else might have a comment on it?

[Unidentified Company Representative:]

Yes, Bill. This is (inaudible). Just a follow up on her question in terms of the maturities and so forth. In year 2008 today, we’ve had a 128 million of currency debt come to maturity. And for about mid 20% of those have been declared (inaudible) and most of the rest of them have, in fact, gone into a new modification with increased payments, not back to the original payment but closer to the original payment. So, that’s what we’re seeing in terms of the current maturities. We have 29 million maturing in the 4th Quarter. The (inaudible) credit trends tend to be improving with delinquencies down – they’ve crept up a little bit last quarter but your (inaudible) delinquencies are down and now non-performers are down. And just as a tip, the TDRs in the third quarter, there were fewer TDRs that went to non-accrual than they were in the second quarter.

[William Cooper:]

All right. One of the things that –because we’ve learned a lot, among other things, is that the credit quality of new TDRs in the consumer portfolio appears to be stronger than when we first started that. Basically because we’ve learned more.

[Erika Penala:]

Great. Thank you so much.

[Operator:]

Our next question comes from the line of Tony Davis of (inaudible) Nicholas.

[Tony Davis:]

Good morning. Tom Jasper, a couple of question for you. Have you guys altered the 6% asset since the profile of the balance sheet, number one? And second, could you talk a little bit about, I guess, the funding tactics that you look to employ for Gateway and BRP and Draco (ph) and these other inventory expansions as we go forward.

[Tom Jasper:]

Tony, this is Tom Jasper. When you look at the balance sheet kind of on the asset sensitivity on the one year gap, at the end of the quarter, it’s going to be roughly 9%. And as you look ahead, that number should come down in the 4th Quarter. And that’s really being driven by the mix issue that we’ve talking about over the last several quarters, in terms of the types of loans that are coming on the books versus the loans that running off, that switch between variable and fixed rates. As you look at, going forward in the funding strategy, we’re going to have a couple of things. The BRP in our inventory finance business, as you look at that growth, we expected from that was deposits. That’s been the goal in all of our specialty finance businesses as we look at growing those businesses. Gateway One, we’re going to have a similar approach for those loans that we’re going to maintain on the balance sheets. We’re going to have some additional start-up cost and we’re going to, kind of, come out of the, originate to cell model that they’re currently employing and go to more of an, originate the whole. But that’s going to happen a little bit over time as we ramp up that business. So, I don’t have a funding issue for the portion that we’re going to continue to sell after we own it. But the rest of it will be funded by deposit growth.

[Tony Davis:]

Got you. Bill, one for you. I think your attitude about the scale issue certainly has change here over the last several months because of this regulatory issue and the compliance cost. I just wondered if – do you have a sense on what it’s going to cost you to comply with all the new regulatory requirements that you’re facing today. Have you put a pencil to that?

[William Cooper:]

The answer is no. But it’s a lot. It’s very, very expensive. It’s just like every other environment. And what will tend to happen with that, in my humble opinion is that it eventually works its way into pricing. And borrowers and depositors eventually pay for those cost, just like the Durbin Amendment. We said in – we said what was going to happen in this Durbin thing was, that if they take this revenue – 85% of the savings of Durbin went 1.5% of the retailers. The Wal-Mart’s of the world get $1 billion and the customer of Bank of America pays $5 for his debit card. Sooner or later these regulatory cost work their way through to a higher pricing for consumers, unfortunately.

[Tony Davis:]

Okay. Thank you very much.

[Operator:]

Your next question comes from the line of Emlen Harmon of Jefferies.

[Emlen Harmon:]

All right. First point – but just – you know, restructuring release the other day seem to indicate a more bullish tone on acquisitions. Obviously, we see you do a fair amount on the asset side. Are you thinking about additions that you want to make to just kind of improve funding mix and help the growth in some those specialty finance categories? And then maybe just more broadly, could you address just how you’re thinking about the structure of the bank on longer terms in terms of how the balance sheet is going to be allocated to specialty finance versus consumer, versus maybe more traditional or commercial banking?

[William Cooper:]

Well, one of the things that’s happening in the banking world is that if you look at some of the businesses that we’re in, for instance, equipment finance, 20 years ago, equipment launch used to be made by the local banks. Now, they’re made to equipment finance company similar to ours, and many big banks have those same kinds of structures. The inventory finance business that we do today, those were in the past, local banks financing retailers. And because of the growth of the dominant big banks in terms of the way they do their lending on a national basis, unless you can compete in that fashion, in my opinion, it simply isn’t enough asset growth within your market. Now, that doesn’t say that we expect to continue to do our commercial real estate in a lot of our residential lending and so forth within our market places. But the world has changed in that connection. In terms of the structure of the balance sheet, it is indeed possible that we’ll do a deposit institution acquisition at some point. And a lot of that has to do with the maturity of our borrowings. Our borrowings tend to be longer term. When indeed those borrowings could get closure, we may want to substitute deposits either through deposited growth through our 450 branches when we have that capacity or through a deposit acquisition going forward. In continuing that, we have done a large number of asset acquisitions over the years, particularly in equipment finance, and now in the auto-finance business. And we will continue to look at those. And we look at a lot of them. And I’m not dropping a shoe on that, but we’ll continue to look at things in that fashion.

[Emlen Harmon:]

Okay. Thanks for addressing that. And then a follow-up on the (inaudible) the second question there, which is in terms of the difficult revenue environment out there, I didn’t you guys got a little bit together on expenses in the quarter. And you’re kind of making some changes in terms of how you’re thinking about managing the franchise. Could you give us a sense if there’s additional room just to improve efficiency broadly across the portfolio and help the operating leverage out a little bit that way?

[William Cooper:]

There’s always a capacity in that. In particular, one of the big numbers in our expense category that can have improvement is the cost of foreclosed property, the workout stuff, and so forth. In both the commercial and the residential, there are a lot of expenses in those special lines that can improve. But we’re constantly refining how we’re doing our ATM business, who’s processing our things on data processing things, the branch closures, hours, the way new branches, what the structure is of them, et cetera. So, we’re in a constant 100% review of expenses in terms of rolling those back to the degree that’s possible. And there’s more to come.

[Emlen Harmon:]

Great. Thanks for taking my questions.

[Operator:]

Your next question comes from the line Chris McGratty of KBW.

[Chris McGratty:]

Good morning, guys. Just a quick question on the balance sheet, you’re one of the few banks in this quarter to show up security yields. Not a lot change in the dollars but up yields, some of it is encouraging. Can you tell me what you guys are doing in the investment portfolio?

[Tom Jasper:]

We’re doing what we’ve always done in terms of we’re only buying mortgage back securities. We’re looking to continue that strategy. I haven’t taken a look at what other banks are doing in terms of what other products we’re getting in to. But we’re buying the Triple A products depending on the mortgage (inaudible), and there’s nothing unique that we did in the quarter that would be different from other quarters.

[Chris McGratty:]

What were the yields on the security you bought? I’m trying to think ahead on what’s going to come off. And is there is a reinvestment risk going for?

[Tom Jasper:]

Just give me one second on that. It’s around what items in the quarter that were bought. In total, current park, $600 million at about 3.4%.

[Chris McGratty:]

Okay. And then for over the next year, what are the yields of security that we’re wanting off?

[Tom Jasper:]

I don’t have that. I don’t have that number right in front of me. I have just the purchases and the runoff. We can get you back on that. But that’s not a big concern in terms of where. We have taken some games in the past, and those are represented in the overall yields that we’re getting in the book. And so, those are required. When we take those games, we’re buying in the current market. So, we haven’t gain in the overall portfolio today. But we can get back you on that.

[Chris McGratty:]

That’d be great. And in the asset CD around 80 basis points, is there another, like, down that you guys could see given the rates currently?

[Tom Jasper:]

What’s your question?

[William Cooper:]

I think the question was in relation to where CDs are priced and whether or not there’s any room to decrease CD pricing going forward? Neil, you want to take that?

[Neil Brown:]

Yes. This is Neil. Our CD portfolio is such a small portion of the overall portfolio and it’s less than 10% of the total deposits, and there are probably about at the floor.

[Chris McGratty:]

Okay. Great. Thanks a lot.

[Unidentified Participant:]

Let me add on the investment portfolio, because of our significant asset sensitivity, we can afford to go longer in the investment portfolio in some degree. That is one of the options associated with reducing your asset sensitivity, which tends to improve your margins.

[Operator:]

(Operator instructions) Your next question comes from the line of Chris Gamaitoni of Compass Point.

[Chris Gamaitoni:]

Hey, guys. Thanks for taking my call.

[William Cooper:]

Sure.

[Chris Gamaitoni:]

On the gateway, have you given what the general like FICO score is and what their percentage breakdown between new and used origination is? I’m just trying to figure out how you can compete on national product without just purely being a rate product.

[Unidentified Participant:]

In general, it’s pretty high credit quality portfolio. Until this deal is close where we have a degree of confidentiality, but the portfolio historically, let’s say the last 12 months, has charged up at about 40 basis points. And it’s primarily used.

[Chris Gamaitoni:]

Okay. And then, when you spoke about loan sales, would that be through proprietary TCF securitizations or just some wholesale market?

[Unidentified Participant:]

Gateway in the past has sold their loans, the whole loans to other financial institutions.

[Chris Gamaitoni:]

Okay. Thank you.

[Operator:]

Your next question is a follow-up from the line of Erika Penala of Bank of America Merrill Lynch.

[Erika Penala:]

Hi again. I guess I was just wondering given Bill’s comments. That 600 million that you bought, what was the average duration at 3.4%?

[William Cooper:]

I think that’s 15 years ago...

[Tom Jasper:]

No. It’s a 30-year product and it’s relatively new issue. So, we’ll look at the typical duration of that going on in that 8 years.

[Erika Penala:]

Got it. And could you give us a sense of what your refreshed duration was on the security at the end of the quarter?

[Tom Jasper:]

I don’t have the number in front of me.

[Erika Penala:]

Okay. Thank you.

[Operator:]

There are no further questions at this time. I will now turn the call back over to Mr. William Cooper for any closing remark.

[William Cooper:]

Well, thank you very much. We'll keep at it.

[Operator:]

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