TCF Financial (TCF) Q2 2018 Earnings Conference Call Transcript

TCF Financial (TCB)
Q2 2018 Earnings Conference Call
Jul. 27, 2018 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, everyone, and welcome to TCF's 2018 second-quarter earnings call. My name is Jamie, and I will be your conference operator today. [Operator instructions] Please also note, today's conference call is being recorded. At this time, I'd like to introduce Mr.

Jason Korstange from Investor Relations to begin the conference call.

Jason Korstange -- Investor Relations

Good morning, and thanks for joining us for the TCF second-quarter 2018 earnings call. I'm happy to be here today for the -- my last of 78 continuous earning calls. As many of you know, I will be retiring, and I've certainly enjoyed working with all of you and many of your predecessors. But I'm looking forward to spending more time traveling and on the golf course.

Joining me today will be Craig Dahl, chairman and chief executive officer; Tom Jasper, chief operating officer; Brian Maass, chief financial officer; Mike Jones, EVP of Consumer Banking; and Jim Costa, chief risk officer and chief credit officer. In just a few moments, Craig, Brian and Jim will provide an overview of our second-quarter results. They will be referencing a slide presentation that is available on our Investor Relations section of TCF's website, ir.tcfbank.com. Following their remarks, we will open it up for questions.

During today's presentation, we may make projections and other forward-looking statements regarding future events or the future financial performance of the company. We caution that such statements are predictions and that actual events or results may differ materially. Please see the forward-looking statement disclosure in our 2018 second-quarter earnings release for more information about risks and uncertainties, which may affect us. The information we will provide today is accurate as of June 30, 2018, and we undertake no duty to update the information.

And now, for my last time, I will turn the conference call over to TCF chairman and CEO, Craig Dahl.

Craig Dahl -- Chairman and Chief Executive Officer

Thank you, Jason. Good morning, and thank you all again for joining us today. Before we begin, I want to take a moment to recognize Jason for his 30-plus years of service at TCF. He has led the Investor Relations Department for nearly as long as I've been here.

Many of you have gotten to know Jason over the years and understand his dedication and commitment to establishing strong relationships with the investment community. He's certainly been a great resource for me, and I'm truly grateful for all Jason has done for TCF. For the rest of the year, Jason will continue to lead the TCF Foundation, which he is very passionate about. In the meantime, we've added Tim Sedabres, as our new director of Investor Relations.

Some of you have spoken with him already, and I know he looks forward to speaking with more of you over the coming days and weeks. Again, Jason, congratulations on your retirement, and thank you for moving your teatime back. Now before I comment on our second-quarter results, I want to take a minute and talk about the settlement with the BCFP and OCC we announced last week. This settlement resolved the legacy overdraft opt-in litigation and resulted in a pre-tax charge of $32 million in the second quarter, including related expenses.

We are pleased to have a resolution to this matter and believe it is in the best interest of all of our shareholders to put this legacy issue behind us. From a go-forward standpoint, we don't anticipate a material impact to any of our current practices or programs, and in addition, we continue to maintain a good working relationship with both regulators. With this matter behind us, we can focus all of our attention in the positive momentum we have been building over the past several quarters, and our current and future initiatives to drive value for shareholders. We continue to see this positive momentum in the second quarter.

Looking at Slide 2, we recorded net income of $58.7 million and diluted earnings per share of $0.34. Excluding the settlement charge, adjusted earnings were very strong with net income of $84.3 million and diluted earnings per share of $0.49, up 48.5% compared to the second quarter of 2017. We've previously outlined three strategic themes for 2018, which we demonstrated strong execution against in the second quarter. As a result, our second-quarter performance included five key highlights: improved core operating leverage; continued asset sensitivity; strong loan and lease growth, excluding auto finance; a reduced risk profile; and a continued focus on improving return on capital.

First, our adjusted efficiency ratio improved to 66%, 241 basis points better than a year ago and in line with our targeted range for 2018. This was driven by higher net interest income and disciplined expense management as we focus on managing the efficiency ratio lower over time. Second, we continue to see the benefit from our asset-sensitive balance sheet, as net interest margin expanded to 4.67% in the second quarter, even as we faced a headwind from the auto portfolio run-up and remix. Third, we produced strong loan growth year over year of 5.9%, excluding the auto portfolio, and we saw strong origination volumes of $4 billion in the second quarter without any benefit from auto originations.

The combination of these factors supports our optimistic outlook for loan growth in the second half. Fourth, we've continued to reduce the overall risk profile of the balance sheet. Certainly bringing the BCFP litigation matter to a conclusion removes an overhang from the business. In addition, the auto loan portfolio has declined by just under $600 million since the beginning of the year, in line with our expected pace, while our nonperforming asset levels declined to 54 basis points down from 86 basis points a year ago.

We continue to see very strong credit metrics across our portfolios, and second-quarter charge-offs, excluding auto, totaled just 10 basis points on an annualized basis. Fifth, we continue to focus on enhancing our return on capital. At the end of last year, we shared ROATCE target with you to highlight our focus on optimizing our return on capital for shareholders. We were successful in the second quarter with an adjusted ROATCE of 15.39%.

In order to achieve this, we have made substantial progress on both sides of the equation. First, as I mentioned earlier, we have improved the core earnings power of the company with adjusted EPS of up 48.5% from a year ago. Second, we are in the process of optimizing our equity base through various capital actions, including the redemption of $100 million of preferred stock, doubling of the common dividend to $0.15 per share and announcing the share repurchase program. In the second quarter, we've repurchased 2.8 million common shares.

Now that we are 90% complete with our initial buyback, today, we also announced an additional $150 million share repurchase authorization. Before I turn it over to Brian to provide more detail on the second-quarter financials, I want to share some of my thoughts around our businesses and outlook as we stand at the halfway point of the year. Our strong results reflect the momentum we are seeing across the organization. Our dedicated and experienced team members across the company are working hard every day to enhance the experience for our customers and drive returns.

In many of our businesses, we compete and win as expert in the industries we serve. Delivering this expertise to our customers require strong talent and the resources to support their success. Our people are the most valuable driver of our success, and we are committed to investing in our professional growth and our culture to support continued strong results. A few key initiatives we have in process to support these efforts include: enhancing employee engagement, expanding talent development programs, enabling our team members to provide an improved customer experience, leveraging technology to support the needs of our customers and fostering collaboration across the organization.

As I think about each of our businesses, we are seeing substantial momentum that gives me strong optimism of the outlook for our company. In consumer banking, our core deposit funding capabilities are the foundation of the organization and fuel our lending and earning asset growth. As interest rates have risen so has the strength and profile of this retail deposit business. We believe the value of our core deposit franchise is unmatched by peers given our granular retail deposit balances.

In addition, our investments into our digital platform continue to bolster our ability to attract and retain accounts. In fact, we have seen 4 times as many concurrent users on the digital platform since the launch last year, along with the 77% year-over-year increase in digital and ATM deposit transaction and a 36% increase in digital account openings. In addition, we continue to see quarterly net checking account growth. On the asset side, we differentiate ourselves with our very well-diversified loan and lease portfolio originated through a disciplined credit culture.

Our combination of national and in-footprint lending across multiple business lines allows us to optimize the portfolio by citing where and when we want to invest capital in order to generate the best returns for shareholders. The value of our diversification model is delivering strong returns today, and I'm very optimistic about the outlook going forward. Looking at our consumer real estate business, we have recently made key sales hires that will allow us to bring a more complete offering of financial solutions to our customers. In TCF Home Loans, we are in the early innings of building out the team and adding products to ensure we are meeting the financial needs of our customers and capturing our fair share of home loan activity within our footprint.

This business is expected to offer complimentary mortgage products to serve our existing core retail franchise. As this business gains traction, it has the potential to be a growth and revenue generator as we move into 2019. From a commercial banking standpoint, we have both the appetite and capacity to grow. We have strengthened our commercial team over the past few years, and they are generating relationships that fit our risk profile.

Coupled with the dislocation across our markets from recent M&A activity, we believe there to be potential opportunities to add seasoned bankers to our teams in key markets such as Chicago, Denver, Detroit and the Twin Cities. In the leasing and equipment finance business, I am optimistic about our organic growth prospects, especially in the back half of the year as our backlog remains very strong. We are also evaluating growth opportunities through nonorganic channels similar to our strategic leasing platform acquisition and portfolio purchase in 2017. We are very disciplined as we look at these opportunities.

But as interest rates continue to increase, they are becoming available. Inventory finance reported loan growth of 19.8% year over year, despite a seasonal decline of over $450 million in the second quarter. We continue to grow with our existing customer base as they expand through new manufactured products, additional dealers and increased sales. In addition to expanding these existing relationships, we are also having success adding new exclusive programs.

We also continue to see opportunities to leverage combined solutions with our leasing and equipment finance business. It is important to understand that the nature of our exclusive program agreements means that we can grow with the same risk profile without having to renegotiate on price per credit. As you can see, there is strong momentum building across the organization, and we are entering the second half of the year optimistic as we think about our growth opportunities and our ability to drive improved returns on capital. As I look at our loan and lease businesses in total, market conditions remain competitive.

However, our growth rates and strong credit quality across our businesses demonstrate our ability to consistently compete as experts and maintain discipline in the market. With that, I'll turn it over to Brian to provide some additional color on the second-quarter financials.

Brian Maass -- Chief Financial Officer

Thank you, Craig. Starting on Slide 3, you can see that we have continued to make progress in driving core operating leverage as our adjusted efficiency ratio of 65.78% in the second quarter declined 241 basis points year over year. This was driven by 6.8% revenue growth as net interest income increased 10.4%. Meanwhile, noninterest income remained relatively flat, but reflected a more favorable mix with a lower gain on sale concentration.

Reported noninterest expense included the BCFP and OCC settlements and related expenses of $32 million. As we indicated last quarter, adjusted noninterest expense, excluding operating lease depreciation remained well controlled at $222 million and was relatively in line compared to the prior year. On a year-to-date basis, our adjusted efficiency ratio at 67.47%, which is within our full-year guidance range of 66% to 68%. We are pleased with the progress we have made in improving our operating leverage and feel confident in our ability to hit our target range for 2018.

Turning to Slide 4. The net interest margin saw a nice expansion of eight basis points on a linked-quarter basis, driven by a favorable impacts from higher yields on variable rate consumer real estate and commercial portfolios, seasonally higher average balance and increased yields in the inventory finance portfolio and higher leasing and equipment finance yields. These tailwinds outweigh the headwinds, which included higher funding costs and an impact from auto loan runoff being reinvested into the securities portfolio. Keep in mind that we experienced extended seasonality this year as the longer winter resulted in higher seasonal inventory finance balances carrying over into the second quarter, impacting the margin favorably.

At the beginning of the year, we expected marginal declines in net interest margin as we progress through 2018. However, we have experienced several favorable items to date, including additional rate hikes, faster inventory finance growth, higher reinvestment rates on securities purchases and discipline on non-promotional deposit pricing, which was reflected with just a two basis point linked-quarter increase in deposit costs. As a result, our year-to-date margin was higher than expected, implying a full-year margin that will now likely be flat to modestly higher than it was in 2017. However, we do expect lower average inventory finance balances in the third quarter as period-end balances were lower than average balances in the second quarter.

We are also cautious around both promotional and non-promotional deposit costs going forward as the next 100 basis points of rate change will likely be more expensive than the last. Turning to Slide 5. Second-quarter earning asset yields of 5.33% are up 39 basis points year over year despite the runoff of the auto portfolio as loan and lease yields continue to expand. Loan yields increased 52 basis points year over year, driven by increases in nearly all of our loan and lease portfolios.

Our strategy of competing as experts, along with our pricing discipline and increases in short-term rates continue to drive our strong yield performance. In addition, our securities yields are becoming more impactful as we continue to reinvest runoff from the auto portfolio into the securities portfolio. The securities we purchased in the second quarter had an average tax equivalent yield of 3.38%, up 27 basis points from last quarter. Looking at Slide 6.

We have seen year-over-year stability in noninterest income, but with a more favorable mix as the gain on sale and servicing fee income now make up just 13% of noninterest income, down from 18% a year ago. We believe this will drive more stable and predictable revenue. In addition, last quarter, we talked -- we began talking about our net leasing and equipment finance noninterest income, which is the net of leasing noninterest income and operating lease depreciation. This came in at $25 million for the quarter in line with our guidance.

While we have seen stability in this line in recent quarters, we are optimistic that we could see some improvement in the second half of the year. Turning to Slide 7. Average deposit balances in the second quarter increased 6% year over year with checking and saving balances up 9.7%. We would expect these core checking and saving balances to be the deposit growth driver going forward in 2018.

We will continue to base our funding needs around our loan and lease growth outlook. With our auto portfolio continuing to run off, we have less pressure to grow promotional deposits. We saw deposit costs increased just two basis points from the first quarter, which speaks to the value of our retail deposit franchise. As interest rates continue to increase, we expect upward pressure on deposit cost going forward due to competition, as well as our very low non-CD deposit beta today.

Over the past year, we have only seen a nine basis point increase in non-CD deposit costs, which will likely increase in the future periods. Turning to Slide 8. Loan and lease balances increased 5.9% year over year, excluding the auto finance portfolio in line with our mid-single digit growth guidance for the year. Keep in mind that we did see the expected seasonal decline of inventory finance balances of nearly $453 million in the second quarter.

We continued to see strong year-over-year growth from our wholesale portfolios as inventory finance increased 19.8%; leasing and equipment finance, 7.3%; and commercial, 6.2%. The runoff of the auto finance portfolio also continued with balances down $596 million year to date, nearly matching the midpoint of our guidance of $1 billion to $1.5 billion of runoff in 2018. We saw strong originations of $4 billion in the second quarter, up from $3.5 billion of non-auto originations a year ago. As we look toward the second half of the year, we are optimistic about our loan growth opportunities.

With that, I'll turn it over to Jim to cover risk and credit.

Jim Costa -- Chief Risk Officer and Chief Credit Officer

Thank you, Brian. If you turn to Slide 9, you can see that we are continuing to reduce the risk profile of our balance sheet as the auto portfolio runs off. Overall, credit quality trends remain positive. Nonperforming assets are down to just 54 basis points, declining 32 basis points year over year.

This reflects $36.7 million of consumer real estate nonaccrual loans that were transferred to held for sale during the second quarter, which we expect to sell in the third quarter. Sixty-day delinquencies continue to remain stable at just 11 basis points, while delinquencies excluding auto have remained at 10 basis points or lower for the last eight quarters. Consistent with the first quarter, provision remains in the lower teens at $14 million. In addition to our stable credit quality, we are also seeing reduced credit and liquidity risk as the auto portfolio is being reinvested in the cash and securities.

In fact, cash and securities now make up nearly 13% of the total assets compared to just 10% a year ago, while our loan-to-deposit ratio has declined from 105% to 101% during the same period. Our largest securities portfolio allows us to manage our aggregate interest rate risk, increase our on-balance sheet liquidity and improve our capital efficiency. If you turn to Slide 10, we'll take a closer look at net charge-offs. Slide 10 provides more detail on the net charge-off trends.

Here, while we continue to operate in a benign credit environment, the benefits of our reduced risk profile and diversification philosophy are driving our strong net charge-off trends across the portfolio. Total net charge-offs of 27 basis points are down one basis point year over year, while net charge-offs, excluding auto, remained consistently low at just 10 basis points in the second quarter, down seven basis points year over year. We have added a chart at the bottom of the slide showing a breakout of net charge-off dollars, two-thirds of which were made up of auto, with just $4 million coming from other loan and lease portfolios. Auto net charge-offs of $8.5 million are declining along with the runoff of the auto portfolio, following the shift to discontinued originations in the fourth quarter of 2017.

Overall, we are very pleased with credit quality of our portfolios. With that, I'll turn it back to Brian.

Brian Maass -- Chief Financial Officer

Thank you, Jim. Turning to Slide 11, I think our focus on improving return on capital has been evident so far this morning. Our adjusted ROATCE increased to 15.39% in the second quarter and our CET1 ratio increased to 10.6%, all while improving our risk profile. As Craig mentioned earlier, we are now 90% complete with our initial $150 million share repurchase program.

Today, we announced an additional $150 million share repurchase authorization. There are many variables that can impact the pace at which we will repurchase our stock, but we now have the optionality to continue to buy back additional shares moving forward. With that, I'll turn it back over to Craig.

Craig Dahl -- Chairman and Chief Executive Officer

Thanks, Brian. I think our second-quarter results show real progress toward our key 2018 strategic themes on reducing our risk profile, deposit of outlook for our non-auto businesses and improving our return on capital. Earlier in the year, we provided 2018 target range for ROATCE of 11.5% to 13.5%. As the years progressed, while keeping in mind the seasonality of our business, we are more confident that we can be at or above the higher end of this range on an adjusted basis for the full year.

Similarly, we remain on target with our adjusted efficiency ratio range of 66% to 68%. I feel really good about the progress we've made to date and how we're positioned for future success. I believe we are focused on the right strategies to drive shareholder value moving forward. With that, I'll open it up for questions.

Questions and Answers:

Operator

[Operator instructions] And our first question today comes from Jon Arfstrom from RBC Capital Markets. Please go ahead with your question.

Jon Arfstrom -- RBC Capital Markets -- Analyst

Thanks, good morning.

Craig Dahl -- Chairman and Chief Executive Officer

Good morning.

Jon Arfstrom -- RBC Capital Markets -- Analyst

Congratulations, Jason.

Jason Korstange -- Investor Relations

Thank you.

Jon Arfstrom -- RBC Capital Markets -- Analyst

Seventy and sunny. I know where you're headed. Brian, just on the margin, I understand, I think what you're talking about going forward. But give us an idea of -- I think you're seeing modest contraction in Q3 and possibly Q4.

Give us an idea of what you're thinking in terms of magnitude. And then, if we get a couple more rate increases later in the year, how do you think that plays out for the margin?

Brian Maass -- Chief Financial Officer

Yes. No, good question. I mean, there continues to be a couple of headwinds for the margin, right? The auto balances running off, that remix in the securities, we try to quantify some of the components of the margin that kind of help out on that. So that's, call it, three to four basis point impact cumulatively each quarter as that runoff takes place.

In addition, contributing to our margin expansion in the second quarter was really inventory finance. Six basis points of that expansion was really due to the average balances being higher in the second quarter for that business. So as we end the quarter, right, the balances are lower than what the average balance was. So that's a little bit of a headwind as well on the net interest margin.

However, to the extent that we can continue to maintain the discipline on our deposit pricing, that's where the optimism comes in and that -- we continue to see, obviously, a high margin. Yet, it could come off some amounts, whether it's few basis points or something as we progress to 3Q and 4Q in light of the headwinds that are there.

Jon Arfstrom -- RBC Capital Markets -- Analyst

OK, OK, that helps. And then, two of the loan categories, it seems like you guys called out a little bit. I don't know if it's for Bill or Craig. But you talked about potentially operating lease income improving and some of the equipment finance and leasing strengthening.

So talk a little bit about that. And then also curious on the home-owned business. Craig, you called that out a little bit. What's possible there in terms of balances and fee growth? Thanks.

Craig Dahl -- Chairman and Chief Executive Officer

Sure. What was the first -- what was the question?

Brian Maass -- Chief Financial Officer

Leasing revenue.

Jon Arfstrom -- RBC Capital Markets -- Analyst

Leasing, yes.

Craig Dahl -- Chairman and Chief Executive Officer

Yes, leasing revenue, with the acquisition that we made in the platform in the middle of last year, and then there's a little bit we added in the third quarter that were operating leases, we have a little more predictable revenue stream coming off of those acquisitions. So we have a little or sidelines not quite as episodic as it's been maybe looking back. So that's a little bit behind our confidence there. And just basically, the general outlook, as rates start to move, the leasing product with our fixed-rate options becomes a lot better conversation.

And that's bringing us into more conversations on that as well. As far as TCF Home Loans, what I'm trying to guide there, Jon, is the fact that this is going to be a footprint addition. This is not going to be another national business for us, but we want to up our game on offering we have for the mortgage product through our branch system, for our customers and potential new customers. And that's why those investments, as you know, we've been selling all of those through a correspondent relationship.

And now we're going to be originating those and managing those ourselves. So that's what that outlook is.

Jon Arfstrom -- RBC Capital Markets -- Analyst

OK. And that -- you would say that's early to nascent right now?

Craig Dahl -- Chairman and Chief Executive Officer

Yes. We bought TCF Home Loans, which was a mortgage company here in the Twin Cities. We've been adding to it in other markets. But '18 is really going to be a transformational year and '19 is really the year that is expected to start to be additive.

Jon Arfstrom -- RBC Capital Markets -- Analyst

Got it. OK. OK. Thank you.

Operator

Our next question comes from Scott Siefers from Sandler O'Neill and Partners. Please go ahead with your question.

Scott Siefers -- Sandler O'Neill & Partners -- Analyst

Good morning, guys.

Craig Dahl -- Chairman and Chief Executive Officer

Good morning.

Scott Siefers -- Sandler O'Neill & Partners -- Analyst

So I appreciate the commentary on sort of the nuance within the expense base and outlook. I'm just wondering as we look on a -- sort of an all-in basis, you've got this adjusted base of $240 million. What's your best guess as to how that trajects here as we go through the remainder of the year?

Brian Maass -- Chief Financial Officer

Yes, I don't have specific guidance for you. We are committed to improving the operating leverage of the company. And I think you can see that in our results. We expect to stay within that range as we continue to the end of the year.

You could see some increase on a year-over-year basis in expenses as we get into the second half, but you also have to take into consideration even with this quarter, right, we're up $23 million of revenue from last year and we have flat core operating expenses. So we think we're doing a really good job and that we're being disciplined on expenses, but as we've alluded to, we are making some investments in other areas, including technology, as Craig mentioned, on the TCF Home Loans. We're making investments in talent. All of those investments that we're making are going to continue to provide growth in revenue for the longer term for the organization.

Scott Siefers -- Sandler O'Neill & Partners -- Analyst

Yes, OK. Thank you. And then, if I can switch to credit for just a second. So I guess as I look at things that would impact the provisions, so you've got as runoff of auto since we're going about as planned with -- as planned credit performance as well.

You've moved some of these nonaccrual commercial real estate loans over to healthier sales, so presumably those will -- they're just no longer risks on the balance sheet. And then, additionally, you have very, very minimal charge-offs outside of auto. So what are the major puts and takes you see them -- as you see them when you look at provisioning needs going forward?

Craig Dahl -- Chairman and Chief Executive Officer

Yes. I'll have Jim Costa comment on that.

Jim Costa -- Chief Risk Officer and Chief Credit Officer

Yes. You could see the -- Scott, with the credit quality trends, we really are in the benign part of the credit cycle here. We do like to call out the difference between the auto and non-auto portfolio, but really 10 basis points charge-offs and low levels of delinquencies, things really are quite stable, what I call, well-behaved, so we love that. Any difference in provision might just come from select movements on -- maybe on the wholesale side, where you would see a downgrade here or there.

And for that, we watch for sematic trends, none of which we're seeing today. That's probably what would change the provision profile. Or if we did entertain another asset sale, which were not signaling here, but historically that, of course, has made a movement in provision. But I would say things look pretty quiet on the provision side other than what we've already guided here, which is that, as the auto portfolio runs off, we'd expect that the allowance levels in provision would fall accordingly.

Scott Siefers -- Sandler O'Neill & Partners -- Analyst

Yes. OK. All right. Well, that sounds good.

Thank you, guys, very much.

Operator

Our next question comes from Chris McGratty from KBW. Please go ahead with your question.

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

Hey, good morning.

Craig Dahl -- Chairman and Chief Executive Officer

Good morning, Chris.

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

Brian, maybe a question on the balance sheet. I think you alluded to in your comments that the auto runoff was around $800 million in the first half of the year. Could you talk about the pace of securities reinvestments based on your mid-single digit loan growth guidance? So we just -- simply just put the excess into the securities portfolio. If so, I'm just interested in kind of what you're buying in the spreads or the yields there.

Brian Maass -- Chief Financial Officer

Yes, so a ouple of things, Chris. One on the auto runoff for the first half of the year, it's been closer about $600 million, which is right in the midpoint of our guidance of the $1 billion to $1.5 billion. We did see about a $500 million increase from a point-in-time perspective in our investment portfolio in the first half of the year. So a lot of those proceeds are winding up there.

I think as we've been describing it over the last couple of quarters, that's where we're planning to put the proceeds at least initially. If another opportunity comes along that can provide us with a higher return on the capital, we obviously have the liquidity on balance sheet that we could also use for that growth. I did give in my opening remarks kind of what the yields are there. I think it was 3.38% for the second quarter.

We're predominantly or almost exclusively buying U.S. agency and the asset securities, longer-dated, call it 20- to 30-year type of paper.

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

OK, that's helpful. Thanks for that. And then maybe a quick one on the tax rate. You have the $1.8 million you called out in the release.

What should we be thinking about kind of prospectively in the back half the year?

Brian Maass -- Chief Financial Officer

Yes. We have -- as we alluded to in the release, there's a couple of discrete items that made it lower within the quarter. But our guidance that we've been giving since the beginning of year, the 23% to 25%, that's really what you should be thinking about. And we should have less discrete items in the second half of the year.

We tend to have more stock compensation in Q1 and Q2, which is really one of the main drivers that makes our tax rate lower, call it, in Q1 and Q2. But 23% to 25% is what you should expect.

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

Great. Thanks a lot.

Operator

Our next question comes from David Long from Raymond James. Please go ahead with your question.

David Long -- Raymond James -- Analyst

Good morning, guys.

Craig Dahl -- Chairman and Chief Executive Officer

Good morning.

Brian Maass -- Chief Financial Officer

Good morning, David.

David Long -- Raymond James -- Analyst

With regard to the inventory finance portfolio, obviously, there was some seasonality that we saw hit the results here in the first and the second quarter. Could you talk about the back half of the year and how any seasonality that we may see or how we should think about the size of that portfolio on a period-end and an average balance?

Craig Dahl -- Chairman and Chief Executive Officer

Yes, this is Craig. It typically comes down or stays relatively flat in the third quarter and then starts to grow again in the fourth quarter. And as I talk about, we always should look at this business year over year and not on a linked-quarter basis because the seasonality is fairly consistent. So that's really what our outlook is.

In addition, as you know, the yields go up as the inventory ages, and so there is some upward movement in the yields in the third quarter, whereas in the fourth quarter, we have a higher amount of the newly shift inventory, so it tends to have a little bit of a flattening there.

David Long -- Raymond James -- Analyst

Got it. And you talked a bit about the exclusive program, and it sounds like the exclusive program wins and the signings are going well. Can you talk about the momentum there? And then at this point, what is the percentage of that total portfolio that are on these exclusive programs?

Craig Dahl -- Chairman and Chief Executive Officer

Yes. We're over 70% in exclusive programs, 70% of our balances. And it's -- there is a long-selling cycle, and there is a very strong competition. We have two primary competitors, Wells Fargo and Northpoint, which is now owned by the Laurentian Bank in Canada.

And they have their own unique business models, and we've been very successful at new program acquisition here in the end of '17 and 2018.

David Long -- Raymond James -- Analyst

Got it. And last thing that I had. You guys have done well on the expense management side relative to the revenue growth that you've been generating. When you look out to 2019, any early peeks as to what we may see in the efficiency ratio for next year?

Brian Maass -- Chief Financial Officer

This is Brian, no real guidance toward 2019 at this point. But what we are trying to do as an organization is continuing to find ways to make the organization more efficient.

David Long -- Raymond James -- Analyst

Got it. Thanks, guys.

Operator

Our next question comes from Nathan Race from Piper Jaffray. Please go ahead with your question.

Nathan Race -- PIper Jaffray -- Analyst

Hey, guys, good morning.

Craig Dahl -- Chairman and Chief Executive Officer

Good morning.

Nathan Race -- PIper Jaffray -- Analyst

A question on auto credit for Jim. I think previously you've guided to auto net charge-offs, rate increases and portfolio runs off. Obviously, we saw net charge-off rates in auto step down. I was just curious on your outlook for auto credit quality if that portfolio continues to decline?

Jim Costa -- Chief Risk Officer and Chief Credit Officer

It's working up, Nathan, as we've expected. What you're going to see is just changes in the aging of the portfolio as there is no inflow and then seasonality. Those are the two dynamic steps that we'll be watching. They're working out unexpected.

What I'd really encourage you to do is watch the decline in the levels of delinquency, the levels of charge-offs and balances as well. Obviously, with the dynamics of seasonality and aging, those rates will change. And so, really in a runoff portfolio, we'd encourage you to keep an eye on the balances themselves, which are all falling in line as expected.

Nathan Race -- PIper Jaffray -- Analyst

OK, got it. And then kind of changing gears a little bit and thinking about commercial loan growth. You had good growth this quarter, but I was just curious if payoffs on the commercial real estate side of things may have impacted growth this quarter. And if so, how pay-offs are trending so far in the third quarter?

Craig Dahl -- Chairman and Chief Executive Officer

Well, this is Craig. We've got a pretty good sight line. There isn't anything that happened differently than our sort of forecast was. So there wasn't any outsized reduction or increase.

And it's really just been pretty consistent growth across all of our markets.

Nathan Race -- PIper Jaffray -- Analyst

OK. I appreciate the color. Congratulations on your retirement, Jason.

Jason Korstange -- Investor Relations

Thank you.

Operator

Our next question comes from Jared Shaw from Wells Fargo. Please go ahead with your question.

Jared Shaw -- Wells Fargo -- Analyst

Hi, good morning.

Craig Dahl -- Chairman and Chief Executive Officer

Good morning.

Brian Maass -- Chief Financial Officer

Good morning.

Jared Shaw -- Wells Fargo -- Analyst

May be just on the inventory finance, do you feel that as rates start to go higher that you're going to see those dealers be more active in managing their inventory and will most of that growth, when you start looking year over year from this point, really be more dependent upon adding new dealer relationships? Or are you seeing them maintain their level of inventory?

Craig Dahl -- Chairman and Chief Executive Officer

Well, I think the small business lending index and confidence factors are up. That's one thing. They're expecting continued strong operations. Secondly, they are -- they already actively manage that inventory.

Jason, remember for our exclusive programs, the free -- there's a free floor plan period that covers 90 to 120 days of that selling period. And they take good advantage of that. So we're always sensitive to -- and then the third thing I would say is, 11,000 dealers and 70% of those of credit lines are under $300,000. So we have a concentration of fairly small balances that turn over frequently.

So it's always something that we watch. But right now, we're not calling any alarms on that at this time.

Jared Shaw -- Wells Fargo -- Analyst

OK, all right. Great. And then when you spoke about the new hires, the potential for making some new hires in Chicago, Denver, Detroit, Twin Cities. Is that more on the traditional small- and middle-market C&I site? Or what type of person are you looking for in those hires?

Craig Dahl -- Chairman and Chief Executive Officer

Yes, I would -- we're targeting both C&I, and obviously, the opportunity to get a team would be very encouraged around that, and then CRE as well. I don't think everyone always recognizes the diversification we have built in just with our various footprints. So it's not like we've got $3 billion of commercial real estate in Minneapolis. It's really spread across our footprint and then with some portion of it, where sponsors -- local sponsors are doing transactions in other markets.

So we wouldn't look at either side of that equation for talent at this time.

Jared Shaw -- Wells Fargo -- Analyst

OK. Thanks. And then finally just from me on the deposit side, can you highlight a little bit like what you're looking to implement for some of those deposit promotions? Is that growing customers or growing product or markets?

Brian Maass -- Chief Financial Officer

Yes, this is Brian. So I'd say, no. Where we're seeing a lot of our growth come over last year, 9.7% year-over-year growth in our checking and savings accounts. So we're really focused as we've made our investment in technology.

We're really interested in growing the core book. We do offer promotions at promotional rates. We, like the market, have had to adjust, make some adjustments to the promotional rates that we offer. So that's where we definitely expect to see some rate sensitivity.

We have promotions in various of our markets across the footprint in general, but where we've actually again been able to manage from -- on a deposit cost increase perspective, has been in the non-promotional part of our book. We have not had much increase at all. I mean, if you look at -- with the 175 basis point move in fed funds since beginning of this rate hike cycle, our non-CD portion of our book is only up six basis points. So again, some of the cautious words I have was that we could see some increased pressure on that.

But as we stand at today here, we feel really good about the composition that we have for that portion of our customer base. It's less about the rate, it's more about the features and functionality of the account, as well as the convenience, ATMs, digital mobile app, all those types of things, which the investments we've made over the last couple of years we think put us in good position.

Jared Shaw -- Wells Fargo -- Analyst

Good. Thanks. And just wanted to say congratulations also to Jason and Tim on the new role.

Jason Korstange -- Investor Relations

Thanks, Jared.

Operator

Our next question comes from Ebrahim Poonawala from Bank of America Merrill Lynch. Please go ahead with your question.

Ebrahim Poonawala -- BofA-Merrill Lynch -- Analyst

Good morning, guys.

Craig Dahl -- Chairman and Chief Executive Officer

Good morning.

Brian Maass -- Chief Financial Officer

Good morning.

Ebrahim Poonawala -- BofA-Merrill Lynch -- Analyst

Just had one remaining question actually around capital spending. I think as we think about the buyback that you announced today, should we expect the execution on that to occur as fast as we saw with the first one? Or given sort of the move in the stock at this is going to be a little more opportunistic than what we've seen over the last three quarters?

Brian Maass -- Chief Financial Officer

Yes, this is Brian. What I'd say is, we were pretty intentional on kind of outlining a period that we intended to do our first buyback. And as you know, we executed kind of accordingly with that. I'd say with this announcement, we're saying there's many variables that can impact the timing and pace at which we buy back.

So not signaling kind of a period that that can be over, but obviously share price, as well as other growth opportunities that could present themselves could alter the timing or pace of that buyback.

Ebrahim Poonawala -- BofA-Merrill Lynch -- Analyst

Understood. And is there a capital levels that we are adopting, Brian, where we want to get to over time? Or...

Brian Maass -- Chief Financial Officer

There's not a specific target capital ratio that we have announced to the market. I will note that our capital ratios on a year -- not only are we improving our returns on capital on a year-over-year basis, but our capital ratios are actually higher than they were a year ago, as well as we think we've got a reduced risk profile as an organization.

Ebrahim Poonawala -- BofA-Merrill Lynch -- Analyst

Would you at least say that you'd believe you have excess capital right now where you are?

Brian Maass -- Chief Financial Officer

Yes. No, I would agree that we have excess capital as we sit here today based upon the comments that I just made with our capital ratios being up on a year-over-year basis. But we don't have necessarily a specific target that we've announced.

Ebrahim Poonawala -- BofA-Merrill Lynch -- Analyst

Understood. And just one last one on -- tied to that that. In terms of any portfolio or just stand-alone business acquisition opportunities, is conversation ongoing or the opportunities?

Craig Dahl -- Chairman and Chief Executive Officer

Yes, this is Craig. I mean, we continue through the specialty finance, primarily to the specialty finance angle, as credit really can't get better for the independence that it is now, where funding costs tend to move up now. And I think those conversations are occurring. So we would, again, be opportunistic, but we would be disciplined about how we approach it.

Ebrahim Poonawala -- BofA-Merrill Lynch -- Analyst

Understood. Thank you for taking my questions. And Jason, good luck.

Jason Korstange -- Investor Relations

Thanks, Ebrahim.

Operator

Our next question from Lana Chan from BMO Capital Markets. Please go ahead with your question.

Lana Chan -- BMO Capital Markets -- Analyst

Just following up on the last question on acquisitions. Craig, could you update us on your thoughts about bank M&A? And we're seeing a lot of pickup in smaller bank M&A activity recently.

Craig Dahl -- Chairman and Chief Executive Officer

Yes. We're really focused on the positive momentum we're creating and running the business. But we're really focused on these returns on capital, and those are going on around us. So...

Lana Chan -- BMO Capital Markets -- Analyst

And in terms of the return on capital, clearly, you've made significant strides in achieving the full-year ROATCE targets. Could you talk about where you think you could go from there and if we could get any updated targets on that?

Craig Dahl -- Chairman and Chief Executive Officer

Sure, Lana, this is Craig. It's really hard to do that with -- while we're still managing that -- the runoff of the auto portfolio. And so we -- I think I mentioned last quarter that we intend to give some guidance, but it would be a future guidance number. And we really have to make sure that we understand the pace and performance of continuing that auto runoff.

So it's still $2.6 billion at the end of the quarter. It's still a big number, and we still have a lot of work to do there.

Lana Chan -- BMO Capital Markets -- Analyst

OK. Thanks, Craig. Jason, good luck with your retirement.

Jason Korstange -- Investor Relations

Thank you, Lana.

Operator

Our next question comes from Steven Alexopoulos from JPMorgan. Please go ahead with your question.

Steven Alexopoulos -- J.P. Morgan Securities -- Analyst

Hey, good morning, everybody. And I echo that. Congratulations, Jason, on your retirement.

Jason Korstange -- Investor Relations

Thanks, Steve.

Steven Alexopoulos -- J.P. Morgan Securities -- Analyst

I want to first follow up on the inventory of finance side. This was the second quarter where you had year-over-year growth of 20%. I'm trying to understand why growth is running so strong again this quarter? Can you walk through that? I mean, are customers justd holding more inventory for some reason? Thanks.

Craig Dahl -- Chairman and Chief Executive Officer

Sure. When you look back quarter, March to March, for the last two to three years, and I don't have an exact number in my head, but our year over year was in 10% to 12% range, OK? So that is the additional product being shipped, new program additions things like that. This year, what we identified at the end of the first quarter was there was new program acquisition that was another 10%. So to us, this number is consistent because that year-over-year growth is roughly half of that and new program addition would represent the other half.

Now in addition, it's hung on a little longer because of the poor springs in almost all parts of the country. So primarily through that lawn and garden product, which has its big shipment in that February, March, April time frame, that was slower to be sold through and that has added a little bit to it as well.

Steven Alexopoulos -- J.P. Morgan Securities -- Analyst

OK. So if we think about this second half, do you see it going back to the more typical year-over-year range?

Craig Dahl -- Chairman and Chief Executive Officer

No, I think it's going to be higher than that.

Steven Alexopoulos -- J.P. Morgan Securities -- Analyst

Higher than the 10% to 12%?

Craig Dahl -- Chairman and Chief Executive Officer

Because of the addition -- yes, because of the addition of the new programs.

Steven Alexopoulos -- J.P. Morgan Securities -- Analyst

Do you think we could be 20% for the year?

Craig Dahl -- Chairman and Chief Executive Officer

This is a very difficult category to predict, and I wouldn't be predicting that level. So I would say it's in between that and our historical range.

Steven Alexopoulos -- J.P. Morgan Securities -- Analyst

OK. It's interesting we have quite a few banks, particularly heavy on the commercial real estate side turning more toward specialty C&I, which includes things like leasing and equipment finance. What are you guys seeing in the competitive environment? Are spreads compressing at all?

Craig Dahl -- Chairman and Chief Executive Officer

Well, the short answer is, yes. And there is really two reasons there. A part of it is competition, but more of it is due to the flatness of the yield curve because you're pricing on a term basis and you're funding it -- your pricing it basically on more of a midterm type of an index. So -- but that's -- we've been in the business now a long time.

It's -- we have a focused market strategy. And yes, there is more competition, and yes, it's having an impact. But our yields are also augmented starting in the fourth quarter by that acquisition we made as well. So we remain competitive as well.

So...

Steven Alexopoulos -- J.P. Morgan Securities -- Analyst

OK. And then, finally, if I look at the loan portfolio and back up the auto loans, which are in run-off mode, do you think in equipment and finance loans around 30% of total, inventory finance is around 20%. How do you think about these from a concentration risk view? How high could those go?

Craig Dahl -- Chairman and Chief Executive Officer

Well, one of the advantages we have is, we've been growing all of our portfolios outside of the auto portfolio, and so we're within the range. Concentration management is a core competency here when you have a diversified business model. And so we're going to continue to project and track these, but they are moving within our expectations. And again, we're growing all of the debts, too.

Steven Alexopoulos -- J.P. Morgan Securities -- Analyst

OK. OK. Thanks for answering my questions.

Operator

Our next question comes from Brock Vandervliet from UBS. Please go ahead with your question.

Brock Vandervliet -- UBS -- Analyst

Thanks for taking my question. Congrats, again, Jason.

Jason Korstange -- Investor Relations

Thank you, Brock.

Brock Vandervliet -- UBS -- Analyst

Just going back to the deposits. I think your trend this quarter a departure from what we're seeing in a lot of other companies where not only our costs, deposit costs under pressure, but balances are shifting. And your -- for example, your noninterest deposits were up 3.5% on an average basis. And what do you make of these trends? Because the deposit picture seems much more benign here.

Is this simply a reflection of more granular retail strategy? Or is there something more at play here?

Brian Maass -- Chief Financial Officer

No, I think you hit it -- this is Brian. Brock, I think you hit it right on the head. It is our deposit composition I think is different than a lot of others, and we stand out that way. And it was hard for a long period of time when interest rates were flat.

It was hard to kind of message that story, right? But we do have a granular deposit base. Almost 90% of our deposits are consumer. So again, with that more granular account base, lower average balance, it's a little bit less about the rate and more about the features and functionalities of the account. So that's why I think we've had good performance to date.

Again, I still think we will see some -- we will continue to see increasing deposit costs as we go forward. But I think we can continue to outperform our peers in that regard.

Brock Vandervliet -- UBS -- Analyst

Is there something you're seeing already in some of the end-of-period deposit costs that are leading to that concern that you voiced a couple of times? Or is that just basically your caution on cost moving in the same direction as the rest of the sector?

Brian Maass -- Chief Financial Officer

I think there's -- especially in the promotional deposits, what I would say, right, is we do have CDs. As those CDs mature, there is a renewal price that is likely higher than what it's rolling off at. So there is some expected increase in the deposit cost that's real. As well as promotional rates.

I mean, as you hear from other people are going up. So it really just comes down to what's the percentage of your book that is subjected to that repricing. We have a fair -- we have CDs, so some of that costs will go up. But there's still, when you look at the non-CD portion of our book, we feel good about how that's performed to date over the last couple of years, and we think we can continue to outperform on deposit costs.

Brock Vandervliet -- UBS -- Analyst

Excellent. Thank you.

Operator

Our next question comes from Ken Zerbe from Morgan Stanley. Please go ahead with your question.

Ken Zerbe -- Morgan Stanley -- Analyst

Great, thanks. To come back to your NIM outlook, I just want to be really clear about what exactly you're saying. Because I thought I heard it was flat to modestly higher than 2017. But to reach that flat number, that would imply a meaningful reduction from where your NIM is currently for both the third quarter and the fourth quarter.

Can you just clarify that guidance a little bit? Thanks.

Brian Maass -- Chief Financial Officer

Yes. No, I think you pointed it out. I mean, the reason we're upping our guidance there is due to the first-half performance, right? It is higher than what we expected. So obviously, the full year will be higher on a year-over-year basis.

However, there are a couple of tailwinds. Again that will present themselves as we get into the second half of the year, primarily being, again the remix of the auto portfolio and the securities. I forgot what I was going to say. There's a couple of items that will be headwinds on that.

But you're right in that depending -- outlook for deposit costs, right? It's hard to predict exactly how many more rate hikes we're going to get, how the market reaction is going to be to that, what happens to promotional rates...

Craig Dahl -- Chairman and Chief Executive Officer

Inventory finance balances...

Brian Maass -- Chief Financial Officer

Oh, yes. That was...

Craig Dahl -- Chairman and Chief Executive Officer

And our ability to really accurately understand exactly what happens. In addition, that the adjusting yields on that as it moves from more of the dealer rate back to the manufacturer rate with fourth quarter shipments. So...

Brian Maass -- Chief Financial Officer

Exactly. And inventory finance, specifically, right? eight basis points less in the quarter, six basis points was due to inventory finance having higher yields and higher average balances. As we move to third quarter, those balances aren't expected to be as high. But again, we feel really good about our net interest margin, the rate that it's at and the outlook.

So the fact that we're exceeding where 2017 was means that we're overcoming some of these headwinds, that we were cautious about at the beginning of the year. So overall, I think it's a really good story for us from a net interest margin perspective.

Ken Zerbe -- Morgan Stanley -- Analyst

Gotcha. Understood. I guess, it's the word flat that really kind of freaks me out a little bit just given you're so much above currently in the second quarter. You're so much above last year.

And maybe a different way of looking at it, when you say modestly higher, like, I guess, zero is the lower end. What is modestly higher in terms basis points and the high end roughly?

Brian Maass -- Chief Financial Officer

Yes, I wasn't going to quantify it into basis points. But I think flat would be the low point and it will likely be higher.

Ken Zerbe -- Morgan Stanley -- Analyst

Got it. OK, OK, fine. And then Craig, can you just elaborate, you made comment that higher rates are making acquisitions more attractive. Could you just explain that a little bit? Why is that the case?

Craig Dahl -- Chairman and Chief Executive Officer

Yes, the -- what I was referring to is an independent, specially financed company today that has its own borrowing relationship. It's cost of funding is going up as these indexes move. That's what I was referring to. And so, therefore -- and their credit, we've got to believe and especially a lot of the things we looked but credit's been really good in the equipment finance industry and others.

So they can't get a better credit performance and tomorrow their funding cost can be higher today, and they're more interested in maybe making a move than they would have been when we went through that flat interest rate period. And really, there was very little differentiation between their cost of funds and our cost of funds.

Ken Zerbe -- Morgan Stanley -- Analyst

Got it. But these types of companies also presumably have close to 100% variable rate loans, is that also...

Craig Dahl -- Chairman and Chief Executive Officer

No. No, that's -- no they typically are fixed rate originators. So as the funding costs goes up, they're going to see their margin degrade over time. And expectation is there is going to be end of this credit cycle, and therefore, they're trying to sort of I would say time it.

Ken Zerbe -- Morgan Stanley -- Analyst

Understood. OK. Thank you very much.

Craig Dahl -- Chairman and Chief Executive Officer

OK.

Operator

[Operator instructions] Our next question comes from David Chiaverini from Wedbush Securities. Please go ahead with your question.

David Chiaverini -- Wedbush Securities -- Analyst

Hi, thanks. I have a question on origination. So I'm looking at Slide 8 and originations have been trending up very nicely over the past year, up 14% year over year. So two-part question.

The first is should this trend -- this upward trend continue? And then the second part, is this being driven mainly by the new programs and inventory finance? Or is it other areas, too?

Craig Dahl -- Chairman and Chief Executive Officer

This is Craig. It's by all of the segments, but it is influenced by inventory finance. I wouldn't say that the new programs are what's created that angle of increase, but it's contributed to it. But it is heavily influenced by the inventory finance business.

I will remind you that inventory finance paper has quite a more rapid turnover than sort of the term nature of our commercial transactions or our consumer transactions or our leasing and equipment finance transactions.

David Chiaverini -- Wedbush Securities -- Analyst

And the upward trend, should that continue?

Craig Dahl -- Chairman and Chief Executive Officer

That's what we incent our teams to do. So that was the -- our expectation that they're going to continue to perform.

David Chiaverini -- Wedbush Securities -- Analyst

Fair enough. And then shifting gears to the loan-to-deposit ratio came down to 101%, which is good to see. Do you have a target or expectation on the loan-to-deposit ratio in coming quarters?

Brian Maass -- Chief Financial Officer

This is Brian. We don't have a target per se for the loan-to-deposit ratio. If we continue to reinvest the auto run off into the securities portfolio, we continue to see -- we could continue to see improvement there. It's not necessarily a goal of ours.

We feel good with the level of that effect. And if we see other opportunities that can provide us a greater return on capital, we could see some of that reinvestment go toward other place as well, which wouldn't necessarily continue to see improvement in the loan-to-deposit ratio.

Craig Dahl -- Chairman and Chief Executive Officer

And the other thing I -- this is Craig. I talk about all the time is how our funding and our lending are directly linked. So we don't have a branch banking team with a CD goal that's irrespective of what the loan goal is. And so we're funding the bank.

We do not believe the loan-to-deposit ratio is governed on our ability to fund the bank, so...

David Chiaverini -- Wedbush Securities -- Analyst

Got it. Thanks very much.

Operator

Ladies and gentlemen, thank you for your questions today. Should any investors have further questions, Tim Sedabres, director of Investor Relations, will be available for the remainder of the day at the telephone number listed on the earnings release. And now I'd like to turn the conference call back over to Mr. Craig Dahl for any closing remarks.

Craig Dahl -- Chairman and Chief Executive Officer

Well, thank you all for listening this morning. We appreciate your interest and investment in TCF. And good luck, Jason.

Jason Korstange -- Investor Relations

Thank you.

Operator

[Operator signoff]

Duration: 63 minutes

Call Participants:

Jason Korstange -- Investor Relations

Craig Dahl -- Chairman and Chief Executive Officer

Brian Maass -- Chief Financial Officer

Jim Costa -- Chief Risk Officer and Chief Credit Officer

Jon Arfstrom -- RBC Capital Markets -- Analyst

Scott Siefers -- Sandler O'Neill & Partners -- Analyst

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

David Long -- Raymond James -- Analyst

Nathan Race -- PIper Jaffray -- Analyst

Jared Shaw -- Wells Fargo -- Analyst

Ebrahim Poonawala -- BofA-Merrill Lynch -- Analyst

Lana Chan -- BMO Capital Markets -- Analyst

Steven Alexopoulos -- J.P. Morgan Securities -- Analyst

Brock Vandervliet -- UBS -- Analyst

Ken Zerbe -- Morgan Stanley -- Analyst

David Chiaverini -- Wedbush Securities -- Analyst

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