Question-and-Answer Session
Operator
[Operator Instructions]. Your first question comes from the line of Gary Townsend.
Ralph W. Babb, Jr. - Chairman and Chief Executive Officer
Hi, Gary.
Gary Townsend - Friedman, Billings, Ramsey & Co
Good morning. Ralph, Beth, Darlene, and Dale too there. Maybe the first question for Dale. If you could discuss the residential construction work again and particularly the Michigan developer with projects in Florida, is the problem with that credit the Florida exposure or? what else can you add?
Dale E. Greene - Executive Vice President and Chief Credit Officer
Okay. I will do my best. The Michigan line of business? commercial real estate portfolio is roughly $900 million. So, it’s a relatively small piece of the overall commercial real estate line of business portfolio. Within that portfolio, we will have developers, who will do projects not only in Michigan, but elsewhere. And this particular case that I referenced, this is a long time customer of long time developer who we know very well, which is an important ingredient, particularly in a workout situation, who did our project? a couple of projects actually in Florida that has generally performed well, but has recently come into some tough time. So, we are working through that project with them as we would with anyone else who would get into trouble. The good news is that it’s in a location where continues to be good growth and we are hopeful that we can re-structure this and successfully exit it over time, but that is not an unusual situation for a number of our Michigan residential developers.
Gary Townsend - Friedman, Billings, Ramsey & Co
So, you would be providing him finance that he would be using for construction in Florida.
Dale E. Greene - Executive Vice President and Chief Credit Officer
Correct.
Gary Townsend - Friedman, Billings, Ramsey & Co
Okay. And Beth, very impressive slide 20, the new banking center deposits. But if you could discuss? you have got great growth year and if you project this into future, it’s certainly going to be helpful. But it seems to be masked currently at least by other things and the overall deposit growth has not been that impressive. So, could you also just speak to how you see this developing from here?
Elizabeth S. Acton - Executive Vice President and Chief Financial Officer
Yes, well, I guess what I say generally speaking is a couple of things. One is, if you look at excluding our financial services business, our deposit growth was good in the quarter. And part of that was obviously bolstered by the new banking center additions, particularly you saw higher growth in Texas and Western and that still growth in Michigan too. What’s counter veiling a lot of that good growth, out of new banking centers obviously is the financial services division. Our deposits are down, $1.8 billion year-over-year in total in FSD. And so, in that 12 months period that is big decline that is hard to totally offset, but as we said other than FSD, we are getting growth in our core deposits and we feel positive about that as the new banking centers are contributing to that obviously.
Gary Townsend - Friedman, Billings, Ramsey & Co
I see that loans were down the FSD in the quarter, and so, the margin impact, low yielding loans out of these somewhat reduced, do I have that right or not?
Elizabeth S. Acton - Executive Vice President and Chief Financial Officer
Yes, you have exactly right. The deposits declined about $700 million, the loans were down about $400 million. So, the impact of the margin was negligible. But we did say our expectation is in the forth quarter that as this business has been shrinking that the competitive dynamics are getting more intense, and therefore, we may not be able to maintain that offsetting totally in the fourth quarter.
Gary Townsend - Friedman, Billings, Ramsey & Co
Any thought to? any strategic choice with respect to the FSD operation?
Elizabeth S. Acton - Executive Vice President and Chief Financial Officer
I think we continue to realign it in terms of resources. We are down about 16%, 17% from a couple of years ago. And we are? we will be working to make sure that business is aligned from resource standpoint with a lower deposit as we go forward.
Gary Townsend - Friedman, Billings, Ramsey & Co
Thanks for comments.
Ralph W. Babb, Jr. - Chairman and Chief Executive Officer
Thanks Gary.
Operator
Your next question comes from the line of Terry Mcevoy.
Ralph W. Babb, Jr. - Chairman and Chief Executive Officer
Good morning, Terry.
Terry Mcevoy - Oppenheimer & Co
Hi good morning. The 20% loan growth in Texas pretty impressive number, given I think Dale had mentioned some softness in the market. I think it was 6% last quarter. And then the deposit growth I think was 9% this quarter in Texas. Anything special going on in terms of aggressive marketing? maybe being aggressive on the pricing of products, given the relocation, or is it just the strategy is working?
Dale E. Greene - Executive Vice President and Chief Credit Officer
I think the last point is the right one. I think the strategy is working. I think we’ve got? we’ve seen new opportunities. I think part of that’s because we’re now here and that does mean something in the market. Certainly, part of it? the growth of the energy sector itself which we’re an active participant. I think what I would say overall is all the businesses particularly in the middle market segment are experiencing good quality growth. We’re not seeing any stretch in terms of the metrics, if you will, or the structures of the pricing, it’s pretty much down the middle.
Elizabeth S. Acton - Executive Vice President and Chief Financial Officer
And I think to reinforce what Dale said, we actually, if you look at all of our lines of business saw improvement in the quarter. So, it’s not just isolated in one sector like energy, it’s across all of our business lines.
Ralph W. Babb, Jr. - Chairman and Chief Executive Officer
I would emphasize one thing you said Terry and that as our management group has gotten here, we have all been very active in the community and making calls and opening doors that support Chuck Gummer and his Texas team, who’s been here about 20 years. So, we’re seeing that accelerate opportunities.
Terry Mcevoy - Oppenheimer & Co.
Just one last question on the relocation expenses. I know the City of Dallas in the state of Texas offered some incentives and will that come through the tax line or will that just be? those incentives be netted against the expenses that we saw last quarter as well as in the most recent quarter?
Elizabeth S. Acton - Executive Vice President and Chief Financial Officer
Yes, those are being netted against the expense so that the net result in the third quarter was $2 million net increase in expense related to the relocation.
Terry Mcevoy - Oppenheimer & Co.
Thank you very much.
Ralph W. Babb, Jr. - Chairman and Chief Executive Officer
Thank you.
Operator
Your next question comes from the line of Mike Mayo.
Ralph W. Babb, Jr. - Chairman and Chief Executive Officer
Good morning, Mike.
Michael Mayo - Deutsche Bank
Good morning. Can you give a little more color on the margin outlook? I guess you said it could be down fourth quarter. So, spread revenues also down. And I guess related question, so that include the benefit of the maturity swaps and what’s your overall interest rate position? I know you’re modestly hurt by lower rates when the quarter started.
Elizabeth S. Acton - Executive Vice President and Chief Financial Officer
Looking at the fourth quarter outlook we gave versus the third, we will have a positive impact from maturing swaps. We have $800 million maturing in the quarter. So, that will provide several basis points of positive lift. But there are couple of? there really is a continuation we see expect in the fourth quarter that the deposit environment will remain still very competitive that deposit rates just are not coming down. And even if there is a Fed decline, we think the opportunity for much of a decline in deposits is less. So, that will impact the fourth quarter. The wholesale funding cost to the extent, again, we are projecting lower deposits from FSD will be increasing our need for wholesale borrowings and obviously the cost of that for all participants is higher. And so, that’s reflected in our outlook. And the addition of securities I mentioned that we increased our securities portfolio in the third quarter we anticipate assuming that attractiveness remain doing more of that in the fourth and there will be a higher impact? negative impact on the margin in the fourth quarter versus the third in terms of what we added in the third and we anticipate adding in the fourth.
And finally, I mentioned just a minute ago that we have an expectation that there will be more some margin pressure from the FSD business. So, it’s really all of those factors, deposits, wholesale funding, FSD, and securities purchases that have an impact on the margin in the fourth quarter.
Ralph W. Babb, Jr. - Chairman and Chief Executive Officer
I would add to that, Mike that we have not really seen an upward pressure on pricing on the assets side at this point. It has still been a very competitive market. I would expect to see that in time, but at this point, can’t project it.
Michael Mayo - Deutsche Bank
Which markets in particular because traditionally you have capital markets disruption more firms want to go to banks, and you would think you would have a little more pricing powers. So, what’s causing this ongoing heightened level of competition?
Ralph W. Babb, Jr. - Chairman and Chief Executive Officer
I think you see based on what you just said, just to carry on with that a little bit, at the higher end, you’ve seen some. At the lower end, you’ve seen a little bit, but at the middle market, we have seen that yet, because they are used to working with banks day-to-day as it is.
Michael Mayo - Deutsche Bank
And are you? when you are talking at this competition, can you kind of rank your markets as it worse than Michigan, Texas, California.
Ralph W. Babb, Jr. - Chairman and Chief Executive Officer
I would say it’s strong in all the markets.
Dale E. Greene - Executive Vice President and Chief Credit Officer
Yes, it is. Mike, I mean? and even in Michigan.
Ralph W. Babb, Jr. - Chairman and Chief Executive Officer
In Michigan, it’s very.
Dale E. Greene - Executive Vice President and Chief Credit Officer
I think actually? and we keep saying and is surprisingly very competitive. So, we really haven’t really seen the opportunity there to do much on the margin side.
Ralph W. Babb, Jr. - Chairman and Chief Executive Officer
Michigan would probably be at the top on the deposit side. And then California and Texas would be follow that, probably Texas is next and then California. On the loan side, I would say that we see that competition really it kind of crossed the board.
Michael Mayo - Deutsche Bank
And then unrelated, you are saying charge-offs should be kind of flat, which would, I guess it would be good for the fourth quarter. What’s your expectation for next year? And why do you expect losses to stay so low, given the environment that we are in?
Dale E. Greene - Executive Vice President and Chief Credit Officer
Well, I think that there’s a lot of? it’s sort of a complex answer. The fundamental thing is that we believe that we have added additional resources on our workout area that can help us, particularly real estate experienced workout resources. We are working with developers who we have known for years. We think we have taken all of the appropriate steps to structure these appropriately, reserve for them appropriately, and take charge-offs as necessary. We are from time-to-time accessing the secondary market, which does exist for real estate transactions. And so, that’s a helpful strategy. And what we learn on the auto side, i.e. quick actions staying in front, gearing up resources and workout, accessing the secondary market et cetera. There are a lot of things that are transferable to the real estate side, which I think is helping us. But it’s a little longer process? a little longer workout process on a real estate side. So, we are hopeful that the market stabilizes a bit, but even if it doesn’t I think we have identified and drawn some fences around our issues.
Michael Mayo - Deutsche Bank
And last question, just your feel for the environment, I mean, it’s obviously getting worse. Or is it getting worse at increasing rate or things just the same as they have been? How do you characterize that?
Dale E. Greene - Executive Vice President and Chief Credit Officer
Well, I think it depends on the market. To a certain extent, I think in Michigan that market has softened for sometime. It probably will get softer, but I think we haven’t really added anything in Michigan for sometime. So, we are working through. It’s already out there and we are already, I think well in front of that problem, and hopefully, we have done the right things there and I think we have. California is probably still the market that’s still showing some deterioration. Depending on those, the particular sub-markets you want to talk about. But even there, there’s still positive job growth or still growth in the economy, which you don’t really see in Michigan and that will help us workout of the issues we have got there. I think more quickly and more successfully, then at a certain extent then you will see Michigan. And Texas continues knock on wood to do pretty well. We don’t see any issues there at all.
Michael Mayo - Deutsche Bank
All right. Thank you.
Ralph W. Babb, Jr. - Chairman and Chief Executive Officer
Thank you, Mike.
Operator
Your next question comes from the line of Steven Alexopoulos
Ralph W. Babb, Jr. - Chairman and Chief Executive Officer
Good Morning Steven.
Steven Alexopoulos - J.P. Morgan
Hi. Good morning everyone. Just to follow-up on the margin commentary, you just gave, now do you see a longer term benefit from the Fed cut steeping of the curve or is that 350 marginally you would expect on beyond the fourth quarter.
Elizabeth S. Acton - Executive Vice President and Chief Financial Officer
We haven’t finished actually our budget for next year. We would give an outlook in January for the full year of ’08. But for us the key item right now is really what? how the market reacting on the positive side that as the Fed is going to cut rates and it’s are further cuts to come. We are seeing banks being pretty sticky in lowering rate, because the alternative is to go out and raise other funding which potentially could be more expensive. And so, I think that dynamic that we, not just we, but of many banks, all banks will be dealing with. And so, in some sense regardless what the Fed cut in the next? in this quarter that will be a dynamic that we all have to be dealing with.
Steven Alexopoulos - J.P. Morgan
That’s helpful. Dale, you help me reconcile the increase in non-performers? They are up I guess it was $32 million sequentially. In the release, you are saying you moved $94 million loan into non-accrual. Did you sell non- performers in the quarter?
Dale E. Greene - Executive Vice President and Chief Credit Officer
Well, we have sold some obviously took charge-offs against some others. So, when you take a look at that what we added over $2 million. And basically, it was payments charge-offs and so forth that did all tied out. So, it’s all reconciles. And it does relate directly to the amount of write-downs and charge-offs we have taken.
Steven Alexopoulos - J.P. Morgan
Do you have the amount of non-performers that were sold in the quarter?
Elizabeth S. Acton - Executive Vice President and Chief Financial Officer
It is $11 million. It was all real estate.
Dale E. Greene - Executive Vice President and Chief Credit Officer
Yes, all real estate.
Steven Alexopoulos - J.P. Morgan
Okay. And just a final question. Beth, are you able to provide the annualized loan growth metrics in the four major markets without the impact to the shared national credit? Do you have that available?
Elizabeth S. Acton - Executive Vice President and Chief Financial Officer
Well, I don’t have that on the top of my head, but I can say that the shared national credit growth really can vary from quarter-to-quarter. This quarter was about 57% of our growth was related to shared national credit. In prior quarters, we have had a much lower, in other quarters, we have had higher. So, it really is something that isn’t a managed number, it’s just a functional what opportunities are in the market. So, that was? as I said about 57% of our loan growth was SNC this quarter.
Steven Alexopoulos - J.P. Morgan
Is it safe to say if we look at the Texas growth, which you talked that at 20% annualized? It looks likes a lot of that is the increased in the shared national credits and energy lending. So, that would be significantly lower x that item.
Elizabeth S. Acton - Executive Vice President and Chief Financial Officer
Well? and I guess on a little? well, how I do address that is I don’t think of it that way, because the SNC strategy is not a fixed strategy . it’s not we go out and say this is the? how much we want this business to be and to the exact loan growth isn’t being achieving non-SNC related things that we do something to manage to SNC target. So, that’s not how we think of it. The reality is for a lot of the businesses we are in weather it’s Texas or elsewhere commercial real estate transactions turned to be often in SNC. Energy transactions offered and syndicated credit, middle market tends to be less. But so, it’s really? it’s the full complement of accessing that key those various customer rates that were going after.
Ralph W. Babb, Jr. - Chairman and Chief Executive Officer
And it’s really based on relationships an either existing relationships or building relationships or we are not interested. It is not just putting assets on the balance sheet. And that’s a very important difference, because it allows us to a properly balance our credit and our risk in any given transaction as we were talking about earlier. It’s across all our businesses. And we look very carefully and many times we invite other institutions in, in order to balance that risk. Do you have any thoughts on that, Ralph?
Steven Alexopoulos - J.P. Morgan
We ended the quarter at $10 billion in our portfolio. To follow-up on that, could you give what the deposits might be for those followers?
Ralph W. Babb, Jr. - Chairman and Chief Executive Officer
I don’t have that of the top of my head.
Steven Alexopoulos - J.P. Morgan
Okay. Thanks.
Ralph W. Babb, Jr. - Chairman and Chief Executive Officer
It’s in the mix. And that’s one of the things we look at. We not only look at the deposits, cash management, but we look at other areas where we can provide services and we have the product since services to do that. So, we look at the overall returns on those particular clients. And if it is one, we are trying to develop over time, and I think we have said this in the past, we will look one to two years if we can develop it, then we will move on to other customers. Many of our biggest customers, we have considerable other business with them, because a bank our size can provide what I would call kind of extra business because we are quick and we can move quickly, but we have the products and services as well to compete with the largest customers.
Dale E. Greene - Executive Vice President and Chief Credit Officer
Steve, I would also add as you referenced the Taxes and SNC and the energy business in particular, but I would say that the number one that we do participate in larger high quality energy credits where we don’t certainly won our exposure. And virtually everyone of those we have a full relationship including deposits and treasury management. So it’s a heavily emphasized piece of our strategy.
Steven Alexopoulos - J.P. Morgan
Thanks. Those are my questions.
Ralph W. Babb, Jr. - Chairman and Chief Executive Officer
Thank you.
Operator
Your next question comes from the line of Manuel Ramirez.
Ralph W. Babb, Jr. - Chairman and Chief Executive Officer
Good morning, Manny
Manuel Ramirez - Keefe, Bruyette & Woods
Hi, good morning. How are you?
Ralph W. Babb, Jr. - Chairman and Chief Executive Officer
Good.
Manuel Ramirez - Keefe, Bruyette & Woods
I want to start from the margin, just to follow-up on one of the earlier questions Beth, that maybe you crystallized the margin issue a little bit more. If you could talk about the margin in this low 350s in the forth quarter versus I guess 377 in the second quarter. If you had to guess at the moving parts on that, how much of that is the Fed? How much of that is deposits, how much of that is FSD? And all the factors that you sighted as well as hedges. I don’t know if you can get into that level of detail, but just try to square my own head.
Elizabeth S. Acton - Executive Vice President and Chief Financial Officer
Yes, well, actually in terms of thinking about it from the third? second or third, so down 10 bases points in the quarter. If you look at it, we mentioned that, first of all, the dynamics in that quarter a little? were impacted by our decisions to do additional securities. And so, that had a 3 basis point impact on the third quarter. So, as we think about what happened in the third and then our outlook for the fourth, we are saying we see a continuation of pressure on the margin related to the deposit clement that I described earlier that wholesale? given the decline in FSD deposits, we are now projecting in the fourth quarter that we will be doing more wholesale funding, which is more expensive, because of the credit turmoil in the third quarter. So, those are factors that really continue from the backend of the third quarter. So, deposit pricing, the wholesale funding, securities purchases will be in incremental negative impact, incremental to the third quarter in the fourth quarter at least that’s our expectation. And lastly, there is? we have been? we are able in the third quarter to successfully navigate lower FSD deposits and lower? low rate loans. As this business has been shrinking, it is becoming even more competitive, and therefore, we think there will be an incremental? there will be a net? negative impact on the margin in the fourth quarter from that. So, it is really? it is all those pieces that I just described, securities, deposits, wholesale funding, and FSD.
Manuel Ramirez - Keefe, Bruyette & Woods
Okay. If I focus on the two pieces that are easiest to probably dissect from 3Q to 4Q focusing on that, the additional securities, and then, I think the Fed actions, leases relates to the asset side of your balance sheet. Can you give me a ballpark estimate of the impact from the 366 to the? let’s say it’s 351 and 352.
Elizabeth S. Acton - Executive Vice President and Chief Financial Officer
Well. the Fed action itself is an interesting one to think about but it’s more?I put it into the bucket thinking about deposit pricing and into the buckets of in turn what I need to raise on the wholesale funding side. So, it’s really those together that are not an insignificant part of the decline quarter-to-quarter.
Manuel Ramirez - Keefe, Bruyette & Woods
Okay. Great. And then two other questions. One is, obviously on the venture capital gains, they were elevated this quarter. What should we think about it as a normal four quarter average run rate on that beside from just taking the four quarter average?
Elizabeth S. Acton - Executive Vice President and Chief Financial Officer
That’s a tricky number, year-to-date, our income was $13 million. If you look at the last three full years prior to that we range between $10 million and $20 million. So, the 13 year-to-date is kind of in the space where it’s been frankly over the last several years. So, I think? but it’s very difficult to project.
Manuel Ramirez - Keefe, Bruyette & Woods
Okay. So, a few million in a quarter and what’s built into your full year guidance and what would be the implicit assumption be for the fourth quarter?
Elizabeth S. Acton - Executive Vice President and Chief Financial Officer
I think, your thought of the kind of the several million is good assumption.
Manuel Ramirez - Keefe, Bruyette & Woods
Okay. Great. And then thing and this is for Dale. If you look? at your comments on the increase non-accrual coming from the Midwest of the most part. But then I look at your provisions in your Western business line increasing pretty dramatically, should I refer from that or we should start to see some NPA’s coming through probably on a construction side, perhaps in California over the next couple of quarters. Just we know NPA’s are going up for the industry, but it seems like they might actually be some baked into the cake for you going forward?
Dale E. Greene - Executive Vice President and Chief Credit Officer
I think that’s a reasonable assumption I mean clearly there is still as you said before there is still stress out there. We are seeing regular migration and we have seen it for the last few quarters. So, I think in the for sale housing side, the construction lending side, you are likely to see some inflow there without question.
Manuel Ramirez - Keefe, Bruyette & Woods
Okay. And I am sorry to hog the time, one last question. If we looked at you historically, if we looked at reserves to NPA’s. Dale, you can argue whether or not that’s a meaningful metric most of your NPA's in the past were seen C&I loans right. But if I look at where your NPA’s are today, a lot of real statement and it seems like might increasingly be real estate. So, I think about reserve adequacy relative collateral you might have versus on a credit, any real firm that we should consider just how do you think about it on the credit side?
Dale E. Greene - Executive Vice President and Chief Credit Officer
I don’t think about it in terms of rule of firm. We obviously? we talked about like every quarter, go through a very elaborate process with all credit to access. Charge-offs, reserves, action plans, and so forth and we look at the value of the underlying assets of secure loans. We look at the value of guarantees of individuals who guarantee loans, and we look at a number of other factors. We have a very active back office of construction monitoring. We monitor budgets carefully. So, it’s quite the process to make sure we are adequately addressing the issues. And so, we are comfortable obviously with where we are in that regard, but every quarter it’s? you go back to it again and see what’s changed and to the extent values would client further obviously that would have an impact on what we do.
Manuel Ramirez - Keefe, Bruyette & Woods
And do you think you fully take into account for decline in home prices, it’s likely happening in the last couple of months?
Dale E. Greene - Executive Vice President and Chief Credit Officer
Definitely. I think we have? I think we have appropriately reserved and charged off. And I think we are taking the appropriate actions. We do look at sale prices all the time, no matter what the market is, every market is different, absorption rates are different and so forth.
Ralph W. Babb, Jr. - Chairman and Chief Executive Officer
Currently Dale, the percentage write-down, it’s in the non-performing. It’s about 70%?
Dale E. Greene - Executive Vice President and Chief Credit Officer
Yes, I think the value of what’s there is about 65% or 67%.
Manuel Ramirez - Keefe, Bruyette & Woods
So, 35? 30% to 35% write-down you mean?
Elizabeth S. Acton - Executive Vice President and Chief Financial Officer
Yes, with 70% in the third quarter.
Manuel Ramirez - Keefe, Bruyette & Woods
Okay. Got you.
Elizabeth S. Acton - Executive Vice President and Chief Financial Officer
30% write-down.
Manuel Ramirez - Keefe, Bruyette & Woods
Thank you very much.
Ralph W. Babb, Jr. - Chairman and Chief Executive Officer
Thank you.
Operator
Your next question comes from the line of Chris Mutascio
Christopher Mutascio - Stifel Nicolaus & Company
Good morning all.
Ralph W. Babb, Jr. - Chairman and Chief Executive Officer
Good morning, Chris.
Christopher Mutascio - Stifel Nicolaus & Company
Quick question, more from a macro prospective. You mentioned I think that the average departed balances for the consumer fell during the quarter. In your view, is that seasonal or could that be more ominous of things to come for the consumer, maybe the drawn down cash reserves? I am actually kind of curious to get your thought on that.
Elizabeth S. Acton - Executive Vice President and Chief Financial Officer
Yes, the comment I made actually was specifically related to Michigan. We are saying because of the economic climate there, we are going on now to the fourth year of our recession in Michigan, that we have consumers being drawing down liquidity reserves, if you will, and dealing with economic situation there. You see that manifested in our home equity draw downs, they are down 5% year-over-year. So, we are not seeing activity there. So, consumers are being cautious about doing any more borrowing. And in addition, we are seeing them drawing down balances, but again, it’s Michigan related.
Christopher Mutascio - Stifel Nicolaus & Company
Thanks. Okay. I appreciate the color.
Operator
Your next question comes from the line of Heather Wolf.
Heather Wolf - Merrill Lynch
Hi, good morning.
Ralph W. Babb, Jr. - Chairman and Chief Executive Officer
Good morning.
Heather Wolf - Merrill Lynch
Dale, a quick question for you. You have talked about building reserves in the different categories. I’m just wondering why that didn’t come through if we’re just looking at those REIT consolidated reserves to loan ratio?
Dale E. Greene - Executive Vice President and Chief Credit Officer
Yes. As I indicated the reserves that we have built have been primarily real estate related. If you look at the reserves we have for the automotive exposure or automotive supplier exposure where we’ve had great results over the last few quarters, no inflows and charge-offs, and where we reduce the absolute level down to a $1.9 billion. The level of reserves acquired there is reduced rather substantially. We also looked at some of the other segments where we had reserves, bigger reserves and done in-depth analysis of certain industry segments on national gasoline delivery. And because of that analysis determined that the level of reserves we had there wasn’t necessary where we had it. So, on a net basis, it’s come down because of the way we look at our reserves. Real estate clearly has gone up, a fair amount for obvious reasons. And that’s how you sort of reconcile the numbers.
Heather Wolf - Merrill Lynch
Okay. So, it was almost a full offset. Okay. And then also on? forgive me if you’ve mentioned this already but on the increase in the delinquencies, that was primarily real estate driven as well?
Dale E. Greene - Executive Vice President and Chief Credit Officer
Well, the delinquency?
Heather Wolf - Merrill Lynch
Go ahead.
Dale E. Greene - Executive Vice President and Chief Credit Officer
Well, delinquency would be? there’s been some home equity delinquencies increases that hasn’t been material but nonetheless there have been delinquency increases there which have caused us to increase some reserves on the home equity portfolio.
Elizabeth S. Acton - Executive Vice President and Chief Financial Officer
Are you talking about the path 2 Heather?
Heather Wolf - Merrill Lynch
Yes, on the? I think it was--?
Dale E. Greene - Executive Vice President and Chief Credit Officer
Excuse me, that’s a? there is a component of that, that is real estate, there’s a component of it that is in middle market. Almost all of it’s related to timing issues, in most cases putting forbearance agreements together and/or getting payouts, in some cases that’s already occurred after the end of the month. So all of those are generally well secured in the process of a workout or being refinanced in some way. So I don’t see any – there’s no real issue there and as I said it’s a mix between real estate and sort of middle market type credits.
Heather Wolf - Merrill Lynch
Okay. And then that’s just one last question for you on margin on credit EBITDA force here but, you talk a lot about the deposit environment and I’m just curious, have you hedged out a lot of the floating rate aspect of your loan portfolio or should we expect some of that re-pricing to start flowing through in the fourth quarter in FY’08?
Elizabeth S. Acton - Executive Vice President and Chief Financial Officer
We? part of the opportunity in the marketplace provided itself for looking at the attractiveness of increasing our securities portfolio and obviously an element of that is in helping us better manage looking forward the interest rate environment. And so, those are similar to just as if we are putting on interest rates swaps where we received a fixed interest rate and pay-off loading. So, all part of what we have been doing on the last couple of quarters is increasing that portfolio and have intentions to increase it further in the fourth quarter to protect ourselves against further downside in interest rates.
Heather Wolf - Merrill Lynch
Do you able to know anything including your swaps better or what percentage of your earning assets are floating rates? Want to include all the off balance sheet?
Elizabeth S. Acton - Executive Vice President and Chief Financial Officer
Yes, about 85%, well 85% of our loans are floating rate.
Heather Wolf - Merrill Lynch
And that includes any off balance sheet hedges?
Elizabeth S. Acton - Executive Vice President and Chief Financial Officer
No. That just be the explicit loan dynamics and the rest of our earnings assets really are either cash or investments securities, the investment securities are largely fixed rates, are fixed rate portfolio.
Heather Wolf - Merrill Lynch
Okay. So it sounds like what we see is kind of what we get as we are looking at the on balance sheet earning assets and the off balance sheet may not alter that number all that much?
Elizabeth S. Acton - Executive Vice President and Chief Financial Officer
Yes, the off balance sheet is we have $3.2 billion of swaps that mature next year and another $800 million this quarter and you see that in the net interest income reconciliation the impact of that.
Heather Wolf - Merrill Lynch
Okay. All right. Thanks very much.
Elizabeth S. Acton - Executive Vice President and Chief Financial Officer
Okay.
Ralph W. Babb, Jr. - Chairman and Chief Executive Officer
Thank you.
Operator
There are no further questions in queue. Do you have any closing remarks?
Ralph W. Babb, Jr. - Chairman and Chief Executive Officer
Okay. I would like to thank all of you for joining us today and for your continued interest in Comerica. Thanks very much.
Operator
This concludes today’s Comerica Inc third quarter 2007 earnings call. You may now disconnect.
Copyright policy: All transcripts on this site are copyright Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.
THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.
- To read the full transcript on Seeking Alpha, click here »
