May 3, 2012
Operator
Good afternoon. And welcome to the BofI Holding’s Incorporated Earnings Conference Call for the Third Quarter ended March 31, 2012.
With us today are BofI’s President and CEO, Gregory Garrabrants; and Executive Vice President and CFO, Andrew Micheletti.
Operator
Today’s call will have the following format. Mr.
Garrabrants will provide an overview of the highlights for the quarter. He will then turn the call over to Mr.
Micheletti, who will provide a more detailed discussion of BofI’s financial results. Finally, Mr.
Garrabrants will make some closing remarks and open up the call to any questions you may have.
Operator
Before I turn the call over to them, please remember that in this call management’s remarks contain forward-looking statements which are subject to risks and uncertainties, and that management may make additional forward-looking statements in response to your questions. Therefore, the company claims the protection of the Safe Harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995.
Operator
These statements are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today, including risks and uncertainties related to, among other things, the economic environment, particularly in the market areas in which the BofI operates, competitive products and pricing, fiscal and monetary policies of the U.S. government, changes in laws and government, regulations affecting financial institutions, including regulatory fees and capital requirements, and the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act changes in prevailing interest rates, risks associated with the conduct of the company’s business over the internet, credit risk management, asset liability management, the financial and securities markets, and the availability of and costs associated with sources of liquidity.
Operator
Examples of forward-looking statements include statements related to BofI’s anticipated or projected asset size, net interest income, net interest margin, projections of future delinquencies and impairment charges, loan originations, deposits and performance ratios, such as efficiency ratio, regulatory capital ratios and return on equity.
Operator
We would like to encourage all our listeners to review a more detailed discussion on the risks and uncertainties related to these forward-looking statements that is contained in the company’s filings with the U.S. Securities and Exchange Commission.
Operator
Any forward-looking statement as to the company’s future financial performance represents management’s estimates as of May 3, 2012. BofI assumes no obligation to update these forward-looking statements in the future due to changing market conditions or otherwise.
Operator
With those cautionary statements, it is my pleasure to turn the call over to BofI’s President and CEO, Gregory Garrabrants. Please go ahead, sir.
Gregory Garrabrants
Thank you. I’d like to welcome everyone to BofI Holding’s third quarter conference call for the quarter ended March 31, 2012.
I thank you for your interest in BofI Holding and BofI Federal Bank.
Gregory Garrabrants
BofI announced record net income for its third quarter ended March 31, 2012 of $7,718,000, up 46.3% when compared to the $5,275,000 earned for the third quarter of fiscal 2011 and up 15.9% when compared to the $6,660,000 earned in the last quarter ended December 31, 2011.
Gregory Garrabrants
Earnings attributable to BofI common stockholders were at $7,331,000 or $0.58 per diluted share for the quarter ended March 31, 2012, compared to $0.48 per diluted share for the quarter ended March 31, 2011 and $0.54 per diluted share for the quarter ended December 31, 2011.
Gregory Garrabrants
Excluding the after-tax impact of net gains related to investment securities, core earnings for the third quarter ended March 31, 2012 increased $3,803,000 or 85.4% when compared to the quarter ended March 31, 2011.
Gregory Garrabrants
For the 9 months ended March 31, 2012 net income was $20,911,000, up 39.1% over the $15,036,000 earned for the 9 months ended March 31, 2011.
Gregory Garrabrants
Other highlights of the third quarter include return on equity reaching 16.8% for the third quarter ended March 31, 2012. Our net interest margin of -- about 3.72% for the quarter ended March 31, 2012, a 12 basis point improvement over the prior quarter.
Gregory Garrabrants
Our loan origination unit had another great quarter with $324.7 million in loans originated in the third quarter, the $324.7 million of production consisted of the following. $128.4 million of single family agency eligible gain on sale production, $14.9 million of single family non-agency eligible gain on sale production, $103.3 million of single family jumbo portfolio production, $36.1 million of multifamily non-agency gain on sale production, $21.2 million of multifamily eligible portfolio production and $20.7 million of C&I and specialty asset production.
Total loan originations for the 9 months ended March 31, 2012 reached $1.028 billion, an increase of 96.1% over the 9 months ended March 31, 2011 origination volume of $524 million for the same period last year.
Gregory Garrabrants
Total assets reached $2.278 billion at March 31, 2012, up $338 million, compared to June 30, 2011 and up $542 million from March 31, 2011 quarter, an annualized percentage increase of 31.2%. This growth rate was lower than it could have been because we decided to sell portfolio of eligible single family and multifamily loans of $182 million compared to the 9 months ended March 31, 2011.
Without the sale of portfolio eligible loans the annualized growth rate of assets would have been 41.7% rather than 31.2%.
Gregory Garrabrants
Our asset growth this quarter was $54.2 million, down by $72.6 million from the growth in the second quarter of the fiscal year. The change in asset growth of $72.6 million was the result of a slowdown in loan origination volume of $40.3 million and an increase in loan repayments of $27.2 million in the current quarter compared to the prior quarter.
Gregory Garrabrants
The slowdown in originations was primarily attributable to multifamily loans and capital market originations, which decreased 52.3% and 28.6%, respectively. This reduction in multifamily lending and capital market originations was not only expected, given that the holidays typically impacted the number of commercial property transactions, as well as the focus on the type of complex transactions we pursue in the capital markets group.
Gregory Garrabrants
However, we are seeing our pipeline recover very nicely in the current quarter. The average multifamily lending group pipeline in the third fiscal quarter was $69.2 million.
As of today, the multifamily loan pipeline is $125 million, an all-time record for the bank, which nearly the doubles the average from the third fiscal quarter. Although volatile, the capital markets pipeline also has seen significant increases this quarter -- this current quarter.
Gregory Garrabrants
We believe this surge in multifamily and capital markets pipeline will allow us to continue to generate the robust level of fee income from the sale of loans and grow our interest earning assets at a strong pace. Additionally, our warehouse lending group’s launch has been well received and we have approximately $55 million in credit lines approved and an application pipeline of roughly $90 million.
Gregory Garrabrants
One-off lines take about 60 days to package and approve given the extensive due diligence required and the time it takes for lenders to shift production to our credit lines adds another 30 days before balances will begin to appear. This group will begin to contribute to asset growth in the fourth quarter of this fiscal year and contribute more significantly in the new fiscal year.
Gregory Garrabrants
The bank is in a strong capital position with pro forma Tier 1 core capital ratios of approximately 9% as of March 31, 2012 when we include the $14 million of the $17 million currently held at the holding company and available to contribute to the bank.
Gregory Garrabrants
Given the bank’s organic earnings growth and the demand for our loan originations at high premiums, the bank is in a capital position that will allow us to grow our balance sheet without the need to cap the capital markets. By way of example, assuming flatter earnings over the next 3 quarters and a pro forma capital ratio of 8%, the bank would be able to grow our earnings assets over the next 3 quarters by approximately $639 million without the need to raise additional capital.
Gregory Garrabrants
Because we are finding greater demand for our loans at high premiums and our willingness to sell them, we believe that we will have the flexibility to control when and if we tap the capital markets for additional equity and determine of what time period we will use our existing balance sheet capacity.
Gregory Garrabrants
If the bank grew its assets by $639 million with our current margin, the bank’s net interest income would rise by 31%. Although, we have the ability -- although we have to continue to execute our business plan in order to achieve that result, the ability to grow assets without raising capital provides a clear path for the bank to grow its earnings per share.
Gregory Garrabrants
We continue to remain highly focused on the credit quality of the bank. For the quarter, the originations have the following credit characteristics.
The average FICO for the single family agency eligible production was 783 with an average of LTV of 58%. The average FICO for the single family jumbo production was 735 with an average LTV of 57%.
The average LTV at the originated multifamily loans is 58% and the debt service coverage ratio was 1.59%. At March 31, 2012, the weighted average loan to value of our entire portfolio of real estate loans to 64%.
Gregory Garrabrants
Now, I’ll turn the call over to Andy who will provide additional detail on our financial performance.
Andrew Micheletti
Thanks, Greg. First I want to note that in addition to our press release, our 10-Q was filed with the SEC today and is available online through EDGAR or through our website www.bofiholding.com.
Second, I will discuss our quarterly results on a year-over-year basis meaning fiscal 2012 versus fiscal 2011, as well as this quarter ended March 31, 2012 versus the second quarter ended December 31, 2012 -- 2011.
Andrew Micheletti
For the quarter ended March 31, 2012, net income totaled $7,718,000, up 46.3% from the third quarter of fiscal 2011. Diluted earnings per share were $0.58 this quarter, up $0.10 or 20.8% compared to third quarter of fiscal 2011.
Net income increased 15.9%, compared to the second quarter ended December 31, 2011.
Andrew Micheletti
Excluding the after-tax impact of gains and losses associated with our securities portfolio, core earnings would have been $8,256,000 for the quarter ended March 31, 2012, up 85.4% year-over-year from the $4,453,000 in core earnings for the third quarter of fiscal 2011 and up from $6,828,000 in core earnings for the last quarter ended December 31, 2011.
Andrew Micheletti
Net income was $20,911,000 for the 9 months ended March 31, 2012, up 39.1% over the $15,036,000 earned for the 9 months ended March 31, 2011. Earnings attributable to BofI’s common stockholders were $20,018,000 or $1.68 per diluted share for the 9 months ended March 31, 2012, up 37% from the $14,804,000 or $1.37 per diluted for the 9 months ended March 31, 2011.
Andrew Micheletti
The reasons for the increased earnings for the 9 months ended March 31, 2011 and 2012 are similar to those identified this quarter. Specifically, increased net interest income from loan growth and increased non-interest income from growth in the volume of loans sold through the mortgage banking business.
Andrew Micheletti
Net interest income increased $5 million during the third quarter ended March 31, 2012 compared to the third quarter of fiscal 2011 and increased $1.2 million compared to the second quarter ended December 31, 2011. This was a result of increases in the average interest earning assets and average interest bearing liabilities, as well as a decrease in the cost of funds.
The net interest margin was 3.72% this quarter, compared to 3.60% last quarter and 3.71% in the third quarter of fiscal 2011.
Andrew Micheletti
The cost of funds decreased 180 basis points -- to 180 basis points, down 45 basis points over the third quarter of fiscal 2011 and down 16 basis points compared to the quarter ended December 2011. Provisions for loan loss were $2 million this quarter and $1,150,000 for the third quarter and $1.6 million for the second quarter ended December 31, 2011.
Increases are primarily the result of single family and multifamily loan charge-offs during each of the fiscal quarters.
Andrew Micheletti
Non-interest income for the third quarter of fiscal 2012 was $3,856,000, compared to $1,924,000 in the third quarter of fiscal 2011, and compared to $2,986,000 for the second quarter of fiscal 2012. Increased sales volume resulting in higher mortgage banking gains are the primary reason for the variances between the quarters.
Andrew Micheletti
Non-interest expense or operating costs for the third quarter ended March 31, 2012 was $9,190,000, compared to $7,429,000 in operating costs for the quarter ended March 2011 and compared to $9,204,000 in operating costs for the second quarter of fiscal 2012.
Andrew Micheletti
The increase was mainly result of increase in compensation expense of $1,437,000 related to additional staffing added during the year and increase in data processing expense of $450,000 and other increases associated with operating expense categories, due to those costs associated with increased account volumes and additional employees.
Andrew Micheletti
Our efficiency ratio was 37.99% for the third quarter of 2012, compared to 43.12% recorded in the third quarter of 2011 and compared to 41.7% for the second quarter of fiscal 2012. The efficiency ratio is calculated by dividing our operating expenses by the sum of our net interest income and our non-interest income.
Andrew Micheletti
Shifting to the balance sheet, total assets increased to $2,278 million, up 17.4% from total assets of $1.940 billion at June 30, 2011. The increase in total assets was the result of origination of loans.
The asset growth since June 30, 2011 has been primarily funded by a net increase of deposits of $235.1 million and an increase of borrowings of $41.5 million.
Andrew Micheletti
For March 2012, stockholders equity increased $55.4 million to $203.2 million, up 37.5% from the $147.8 million at June 30, 2012. The growth was primarily due to the issuance of preferred stock of $19.5 million, the issuance of common stock of $13.3 million and net income of $20.9 million.
At March 31, 2012, our Tier 1 core capital for the bank was 8.42% with $78 million of capital in excess of the regulatory definition of well-capitalized.
Andrew Micheletti
With that, I’ll turn the call back over to Greg.
Gregory Garrabrants
Thank you all for joining us this afternoon. That concludes our prepared remarks.
And we will now move to the question-and-answer session. Operator, if you could open up the line for questions?
Operator
[Operator Instructions] And we’ll take our first question from Andrew Liesch from Sandler O’Neill & Partners.
Andrew Liesch
So just looking at loan yield, I mean, it looks likes it was up 2 basis points to 514. I’m just kind of curious like what yields do you have on your -- this single family jumbos that would make, first of all, the yield is high and also just what you are putting on now?
Gregory Garrabrants
The single family jumbo yield on new originations hovers in the low 5% range on average. There are certainly lower loan yields available, but by the time it averages out that’s around where it comes out.
The multifamily side is a little bit lower than that. But it’s not that far off from that and then we blend in from other specialty assets, which can have significantly higher yield.
So, we may see a little compression of that but I wouldn’t expect much.
Andrew Liesch
Got you. And then, and also just putting through the Q here and I know you guys are obviously purchased loans throughout your history and it looks you didn’t do that last quarter.
But I’m curious if you purchased those at a discount would they come with higher yields as well?
Gregory Garrabrants
Well, historically to the extent we did purchase loans that we purchased at a discount. We really haven’t done that for quite a number of years now in any significant bulk.
They did generally come with higher yields and the discounted -- the accretion of that discount obviously impacts the yield and helps those yields become, when they were just higher as a result of that. But that’s not really driving any of our business now in any significant way.
Our discount on loans outside our specialty finance area is only a few million dollars really and it’s the last and it’s quite low as far as the accretive element on the loan side, so what’s really driving it is we had a $1 billion of loan production, obviously some of that was sold over the last 9 months, but that is overwhelmingly what sets the yields in our portfolio.
Andrew Liesch
Got it. Thank you.
And then just one other question from me and that was I think that you’ve said that your first regulatory exam with OCC is going to be towards the end of March, I’m just curious if you can us an update on if that’s still going on if they’ve left or where does that stand right now?
Gregory Garrabrants
They left, as you know you’re not allowed to disclose specific ratings and those sorts of things, but we feel very good about the outcome of that. I think it’s fair to say that they were impressed with the teams that we have in place here and with what we’ve done and with the organizational structure that we’ve created to ensure that we run an institution in a safe and sound manner.
So, I don’t expect any changes to our business model at all or any of the growth that we’ve been able to achieve as a result of the regulatory exam, and I don’t expect any additional costs of any significant nature whatsoever that will arise out of any requests that they had. They always have helpful suggestions and in some measures in different areas and those are suggestions are things that we’ll implement in a appropriate and speedy manner and move forward.
So I thought it was an outcome that people felt good about. And also, we also had our first step Federal Reserve examination at the holding company as well, and I would say that the remarks that I had for the OCC would also apply to the Federal Reserve examination as well.
Operator
And we’ll now go onto our next question from Joe Gladue from B. Riley.
Joe Gladue
Yes. Actually I’d like to follow-up on that last question a little bit.
Just wondering if you had any change in method of treating reserves and net charge-offs due to this, whatever to the OCC?
Andrew Micheletti
No is the simple answer. They spent a large amount of time going through our methodology and a substantial amount of which is detailed in the 10-Q in terms of how we separate analyze and report our general loan loss allowance and our experience.
So there were no recommended changes to the methodology on how we’re doing our allowance.
Gregory Garrabrants
And as they in regulatory speak, it is found to be satisfactory, which is the word for everything even if it’s great.
Joe Gladue
Okay. All right.
So, I’d like to I guess just a little follow-up on your progress with some of the -- I guess newer business initiatives both affinity group white label stuff and the business banking platform.
Gregory Garrabrants
Sure. So, on the warehouse lending side that is going well.
We have our existing single family sales teams, selling that product and the first loans should be boarding that platform in the next month or so. There is a long lead time to get those lines set up, because they are business lines, the credit they require, site visits, due diligence and there is a relatively complex agreement that has to get in place and sometimes folks want to negotiate it, but we’ve been making good progress there.
The team is doing well and the demand for the product is definitely there. So that will add to asset growth in the next fiscal year, in a substantive way and so I’m very pleased about that and I think that’s going well.
On the business banking side, we have, we’ve made obviously some progress there. It’s still relatively small, it’s about $10 million of deposits there.
The demand is very large and at this stage it’s a pilot program for us. We are making sure that we have our economics right.
We have all the systems in place and the team in place. And so, we’ve been doing a little bit of hiring there to make sure that we can scale that to the next level.
But the demand that we’re seeing is quite large and we have not yet even started to do any of these things that we would do to scale that business, so we are probably going to have it run in a pilot capacity for another 3 months to ensure that we’ve got everything, done appropriately before we would push it out to an affinity or even to our own customers to allow it to scale. So, I think that that will be successful and we will gain significant amount of deposits for our future growth from the business banking side.
The affinity side is also going very well. We have a number of large affinity groups that we have received Board approval from the Boards of the affinities that we should be signing and bring on board and so that obviously is a, there is also a lead time associated with that.
It typically is about 3 months to bring up the sites and the white label banking center for that and then, after that you start marketing, but the product is in great demand and we have a lot of groups that are very excited and they're large groups, and they are a great distribution source for us. So, I feel that that’s progressing well.
And also and then the BIN [ph] sponsorship side is going well. We are in implementation phases with a number of programs, and one large program that we’re very excited about, and obviously we want to make sure that we -- the demand for that is so great that we have to tell a lot of folks that we really can’t service them now and we have to put them on the wait list for that particular offering, because we just want to make sure again that we do things appropriately.
And our reputation obviously would be impacted if we are not servicing the clients that we’ve chosen very well. So I would say that, I’m very pleased with the success of those businesses, they have long tails.
Yes, if you’ve looked at it, let’s say a BIN [ph] sponsorship arrangement, you typically would have several months of negotiation of a contract, several months for getting the systems ready for implementation. And then generally because of the nature of the issuance of the plastic and the costs associated with switching that, you’re not going to have institutions that are going to rundown and change the process that they currently have out on a Jhook [ph] or however, they are distributing it.
So what’s going to happen, as they’re going to run that current inventory off and replace it with your inventory. So it is a long lead time, but it’s a good business and there is fees associated with that business that begin accruing to the bank as soon as the first financial transaction occurs.
So even if the deposits and the uptake on the individual programs take some time, there are fees that you can receive immediately upon the launch of the program.
Joe Gladue
Okay. And question with the article, I guess in American Banker about Costco, about expanding out to auto and student loans, I just wondered if you had any comment on that?
Gregory Garrabrants
We have a great partnership with Costco. We are very much in contact with them about their future plans, and obviously that distribution platform is incredibly powerful.
So if they’re interested in doing up certain products, that obviously is an important thing for us to consider and think about, and certainly we’re watching that closely because they are an absolutely incredible partner and we’re very pleased to be able to work with them.
Operator
We’ll now go onto our next question. That comes from Edward Hemmelgarn from Shaker Investments.
Edward Hemmelgarn
Yes. Gregg, Andy, couple of questions.
One, could you, as a little bit of a follow up on that, could you talk a little bit more about where you might expect some of these programs to be in 6 months. I mean it’s, I know they take a while to ramp, -- in terms of the deposit period, what do you think those programs might be sourcing for you, say by the end of the September?
Andrew Micheletti
I don’t think if that’s kind of micro level projection for new business is really appropriate to give, and it would be inherently wrong and subject to a lot of variables. So, I think the thing to do is whenever you, obviously from a regulatory perspective and from a Board perspective, making sure that you are engaging appropriately and making sure that you have got the resources to get the business in the place you need it to be is important.
So it’s very difficult to say right obviously, let’s just take a simple example. So we have a certain amount of warehouse lines that go out, they have minimum usage fees.
We make a lot of money from minimum usage fees and mortgage banking operations may be willing to spend those, because they want to make sure they have the flexibility in the business. It’s very difficult for me to say what that line utilization would be given that it’s highly dependent upon what happens in the mortgage market.
So it’s just, I think that until we get some history there, I think its best that we don’t provide specific projections on individual new businesses.
Edward Hemmelgarn
Okay. I mean, could you, I guess you talked about as you’ve mentioned the warehouse line or the warehouse lending function, could you talk about a little bit about how just might see that ramping in terms of number of relationship overtime?
I mean what, give us a little bit of a feel for and you’ve been talking about this for a while and I’m just curious, where you think it may be heading?
Gregory Garrabrants
Yes. The answer to that is that, is it really depends on how want to price it.
So we have a, what we call note grade financing. So, in other words what that does, is it doesn’t leave carry for the mortgage bank in the timeframe in which they hold the loan.
So depending upon, it’s again, it’s a very rate driven business. We are very sensitive to our return on equity.
So the ability to grow that business to $500 million outstanding with our existing deposit base in 6 months is readily available and we could do it almost instantly. The question is as what yield we would get.
And so what we are doing is, we are approaching the business like we approach all our businesses. We approach them very economically and thoughtfully.
And so that means if they inherently grow at, I mean obviously it’s difficult to say that we grow with a measured pace when we increased our assets 40% in a year, but the point is that, we have one of the largest networks of bankers and brokers in the country and it’s getting larger every day. They have tens of billions dollars -- tens of billions of dollars of outstanding warehouse capacity, depending on how we price that and what we’re trying to achieve the ability to grow the assets as available, but we don’t -- that’s not the approach.
So what I think that you’ll see, I gave some numbers about $55 million in approved line of credit and another $90 million of applications. You can look at that and say that typically banks have about 50% utilization on those lines.
And obviously, we intend to continue to build that pipeline. So but -- it’s -- it is a business that has obviously the mortgage banker highly focused on what the rate is in the loan now, where it doesn’t -- where that rate competitiveness is not directly.
We know that directly impacts the agency business, but this line also is utilized for our own individual jumbo production, which helps drive peoples’ desire to have it and then because they have that line, they end up using it for the agency side to avoid the non-usage fee. So that’s really the way the economics work on that.
And so as we go and we’re seeing that we’re able to hold our pricing. We don’t have to become more aggressive on price because we’re getting enough volume for what we want to do.
Well there’s really...
Edward Hemmelgarn
I have, just the other question I had was, there was a pickup in non-performing loans on the secured by real estate. Can you talk about that a little bit?
Andrew Micheletti
Yes. Let me go ahead and give you some color, there was primarily one loan, which is actually footnoted in your 10-Q.
That was $2.2 million. It’s actually a multifamily loan, which was a TDR and came off of the TDR non-accrual about 18 months ago.
Based on a technicality of the file review, we did not have current financials at the time we took it off of non-accrual. So we are working to get current financials into that file, as a result for the period ended March 31, we showed that as non-performing, even though frankly, it had been -- it had been performing under its modified terms for 18 months.
So we’re doing that until the financials are and we expect the financials to be in and we expect this item to be cleared next quarter. That’s the most significant item in the growth other than that the growth would have been relatively small in dollar terms and in percent.
Operator
And now we will take a question from Greg Cole from Sidoti & Company.
Greg Cole
My first question is just looking at your deposits, the rate on the time deposits under $100,000, it jumped up a little bit this quarter. Is that mainly due to just trying to match your cash flows or is that I guess due to competition and just growing your own balances?
Andrew Micheletti
Yes. I mean in general it relates to the mix of CDs that we have in the time now.
We actually have been when you look at our CDs, they have actually been coming down in terms of that. So depending on which maturities are paying off, so for example there is some shorter, which have lower rates that have come off, the higher rates were still on, which as they mature going to change the mix.
So what you’ve really seen is the mix, a small mix change.
Gregory Garrabrants
Yes. I think the short answer is you are right.
This is the result of us extending in different areas to match the cash flow timing with the increased loan production.
Greg Cole
Okay. All right.
Thank you. And then with -- I’m just looking at the LTVs of the segments, and it looks like that 80% LTVs on the single family popped up this quarter, is that -- I mean it’s still at pretty low level, but is that -- I mean are you seeing opportunities in that area just a higher LTV loans?
Gregory Garrabrants
No, I would not say that, that’s necessarily an area of focus at all. We haven’t changed our guidelines at all.
What’s, what is you looking at Andrew.
Andrew Micheletti
Just looking at the breakdown in the loan loss allowance,
Gregory Garrabrants
How much of the cost did that incur?
Andrew Micheletti
In dollar terms, I think it’s relatively small.
Gregory Garrabrants
Yes.
Greg Cole
Okay. But it still -- I mean you’re still just staying with the, the very low -- or the very high quality credits?
Gregory Garrabrants
Exactly. Yes.
We haven’t changed our single family underwriting standards to increase LTVs at all.
Operator
[Operator Instructions] And next we’ll go to Mitchell Sacks from Grand Slam.
Mitchell Sacks
Can you just remind me a little bit of the rollout schedule on the repos and some of the higher priced CDs over the next few quarters?
Andrew Micheletti
Sure. Let me just flip to that.
So, when you look at our mix, we will have in April $51.2 million will come off, at a 2.55 rate, that’s CDs. Then 54 in May, and then 59 in June.
So these are pretty good-sized hunks. All are at one set a 1.9 rate, the other is at a 2 rate.
And also when you look at the next 12 months going forward, we have $571 million coming off at 1.73, so, on a weighted average basis. So, clearly almost no matter what duration we pick to replace that we will be re-pricing down in those -- in those products.
As far as the repos are concerned, we’ve got $10 million of $120 million coming off at 3.65% during the next 12 months and that’s a big piece.
Mitchell Sacks
Okay. And then in terms of -- I was trying to follow a little bit early when you are talking about some of the different deposit relationships.
How do I think about the new deposit relationships? Do think about them as replacing some of the deposits running at lower cost or do I think of them as just helping you grow the balance sheet?
Andrew Micheletti
I think that over time, they will be helpful on lowering deposit costs as we were able to focus on checking and savings accounts and other more relationship-based accounts. Initially, though in general, they really are a replacement for the marketing expense and the cost associated with going out and reaching customers.
So pretty expensive, obviously. We work with different types of affinity groups.
Most of them -- some of them for example American Senior Association, like AARP market is a benefits organization. And so, I think very few people say that well gee, I want to help the AARP make more money.
I don’t think that’s really the value proposition. Now if it’s the Audubon Society or something like that you might have folks who say that the affinity nature of that will allow you to price that relationship definitely.
But it’s very dependent upon the relationship and the nature of the marketing technique. So this is really a way just like MBNA did right to reach out and to get customers who are willing to look at an offer based on the fact that brand means something to them.
So I think that’s the right way to look at that side. And then obviously, on the BIN sponsorship side that’s different.
That is a relationship where because of the other services you are providing the cost of funds is really not something that those programs are very focused on. And so that is just a much lower cost of funds.
That is associated with those programs.
Operator
And our next question will come from Gregg Hillman from First Wilshire Securities Management.
R. Gregg Hillman
So first of all, could you talk about, some of your new initiatives are losing money in the third quarter. What was the amount of money that they lost or basically what kind of overhead you had for people for the businesses they haven’t gotten break even yet?
Andrew Micheletti
The businesses that haven’t gotten break even yet. I guess the -- it’s -- sorry -- because for example on the -- if we take, if we go through and you say the retail factoring side is not losing money.
So that wouldn’t be -- that is, there is nothing there. They are on the BIN sponsorship side.
There is -- we have 4 people working in that group. And we have term sheets that well exceed their costs just on a fee-based perspective right now.
So I think obviously we have got expenses associated with doing all of these things and they are -- we estimated maybe it’s up to 3% to 5% of our efficiency ratio associated with that. These things are doing -- they are doing very well.
And so it’s very difficult to really break them out and try to say that certain ones are losing money. In some respects, it’s not really a very fruitful discussion to have.
R. Gregg Hillman
Okay. We are moving now to another area.
So the non-interest income, could you sort of give me -- break that down more the components of it versus a year ago?
Gregory Garrabrants
Yes. The biggest element of change was about $1.9 million in non-agency sales gains.
So this year, we have started to originate and sell portfolio jumbo single family and multifamily loans. That $1.9 million was not around last year where we were not selling non-agency loans.
So that’s the single biggest increase in that component year-over-year.
Operator
And that does conclude our question-and-answer session at this time. I would like to turn the call back over to Mr.
Garrabrants for any additional or closing remarks.
Gregory Garrabrants
Thank you all for the questions and the time, and we will see you next quarter.
Operator
That does conclude our conference for today. Thank you for your participation.
You may now disconnect.