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Executives

Suzanne Murray - MD, General Counsel and Secretary

Daniel Meyers - Chairman and CEO

Kenneth Klipper - CFO

Analysts

Michael Tarkan - Compass Point

Christopher Donat - Sandler O'Neill

Ann Heffron - Zacks Investment Research

The First Marblehead Corporation (FMD) F2Q2014 Earnings Call February 10, 2014 8:00 AM ET

Operator

Good day and welcome to The First Marblehead Corporation Second Quarter Fiscal 2014 Earnings Conference Call and Webcast. [Operator Instructions]. Please note, this event is being recorded.

I would now like to turn the conference over to Suzanne Murray, Managing Director and General Counsel. Please go ahead.

Suzanne Murray

Thank you and good morning. Welcome to First Marblehead's earnings call for the second quarter of fiscal 2014. On today's call, we have Dan Meyers, our Chairman and CEO; and Ken Klipper, our CFO.

Before we begin, please note that various remarks that we may make about the company's future financial and operating performance, expectations, plans and prospects, including with regards to Tuition Management Systems, Cology LLC, Union Federal Savings Bank and Monogram-based loan program, and the sale of our Union Federal Portfolio private education loans, proceedings related to our federal and state income tax returns, including any challenge to the tax refunds previously received as a result of the audit being conducted by the Internal Revenue Service, and the prospects of the private education finance industry, constitute forward-looking statements for the purposes of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not a representation by us that the future results, plans, estimates, or expectations expressed or implied by us will be achieved. Matters subject to forward-looking statements involve known and unknown risks and uncertainties, including economic, legislative, regulatory, competitive and other factors which may cause our actual results or the timing of events to be materially different than those expressed or implied by our forward-looking statements.

Important factors that could cause or contribute to those differences include; demand for our Monogram platform; the successful marketing and sales of our client's Monogram-based loan offerings and the products and services offered by TMS and Cology; the volume, timing and performance of disbursed loans; our success in designing, implementing, and commercializing private education loan programs through Union Federal; and our compliance of regulatory approvals and conditions; the resolution of any proceedings related to state and federal income tax matters, including the audit being conducted by the IRS; our net purchasing ability to meet required closing conditions and consummate the sale of Union Federal, of the portfolio of private education loans; the general interest rate and consumer credit environment and the other factors set forth under the caption Risk Factors in our quarterly report on Form 10-Q filed with the Securities and Exchange Commission on November 8, 2013.

Any forward-looking statements represent our views only as of February 10, 2014. Although we may elect to update our forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our views change. Therefore, you should not rely upon these forward-looking statements as representing our views as of any date subsequent to February 10.

During this call, we'll refer to net operating cash usage, which is a non-GAAP financial measure. A reconciliation to loss from operations, to the most directly comparable GAAP measure, is included in the earnings press release posted on our website under the heading, For Investors.

I'll now turn the call over to Dan.

Daniel Meyers

Thank you, Suzanne, and good morning everyone. Our second quarter is historically a quiet one, given the academic calendar, but we have been busy. For the quarter, our facilitated loan volume was $94 million, including $14 million of facilitated Monogram volume, a 40% increase from the same period of last year. For the first six months of the year, we facilitated $527 million in total loan volume, which includes $90.4 million of facilitate Monogram loan volume.

As of December 31, 2013, on a consolidated basis, we were processing private student loans for approximately 275 lenders and credit unions, and our products are listed on over 1,130 school lender lists around the country. Over the first half of the year, facilitated Monogram volumes were down 11%, primarily, as a result of a 29% decline in Monogram loans made at our bank, Union Federal. We have been purposefully slowing the growth of Monogram loans made at Union Federal, as we have been cautious in managing the bank's balance sheet capital requirements and other regulatory parameters of Union Federal.

As part of our efforts to manage the Union Federal balance sheet, we recently announced that Union Federal and First Marblehead have instituted into a loan purchase and sale agreement with RBS Citizens. Pursuant to the sale agreement, Union Federal agreed to sell to RBS Citizens a portfolio of Monogram-based loans, with an aggregate outstanding principal balance of approximately $53.9 million as of December 31, 2013. Subject to regulatory approval, we expect to sell these loans to RBS Citizens before the end of the fiscal year.

This is an important transaction for us for several reasons; first, we believe it is another validation of the value of ultra high credit quality Monogram loans. It certainly shows that consumer friendly flexibility of loan terms and repayment options do not commit the sacrifice of credit quality. I believe that our origination on our payment data shows that borrowers and co-borrowers, utilize choice actively to manage their obligations.

Second, we believe it demonstrates the flexibility in the potential of another funding alternative, originating [sale], which adds to our partnered lending and originating the hold options that we have executed to-date.

Since we started originating loans up the Monogram platform for Union Federal, we have looked at many instructions to permanently fund them, including holding them on the bank's loan balance sheet, as well as several securitization scenarios. I have said on previous earnings calls, that we will not securitize these loans just to be stylish. We look forward to the continued healing of the financial markets, whereby issuers can achieve rational economics.

We expect to sell these loans for 103.5% of par value, plus secured interest through the closing date. So, on average, including interest earned from disbursement, we expect each loan to yield approximately 109% of original principal value. This is, we believe, the first above-par whole loan sale of the private student loans since the credit crisis, and after this transaction closes, RBS Citizens would become the second super-regional bank to hold Monogram loans on their balance sheet.

Turning to our Tuition Management Business, TMS, processed $2.54 billion in tuition payments over the first six months of the year, a 3% increase over the same period of last year. TMS revenues were up 5% for the first six months, and we expect revenue growth for TMS to exceed that rate for the entire fiscal year. TMS has also signed to-date, over 30 colleges and universities to our more consumer-friendly refund management product.

Also during the quarter, we signed a contract with Vermont Student Assistance Authority and two other private hedge-fund type A entities to perform credit and data analytic services and consulting services for their loan portfolio. This new fee-for-service portfolio management style business fits our capabilities well, and we believe that there are opportunities to grow this business line actively over time. We have always maintained that our highly quantitative analysis approach pay substantial dividends throughout the entire life cycle of a loan.

For the second quarter of the fiscal 2014, across the entire company, revenues were up 9%, our loss from operation was $7.4 million and importantly, our net operating cash usage, a non-GAAP financial measure, dropped 40%. Going forward, we intend to continue to work diligently to balance our objectives of growing our TMS, Cology and Monogram business lines, while we minimize cash burn.

With that, I will turn the call over to Ken.

Kenneth Klipper

Thanks Dan and good morning. The company's financial results for the second quarter of 2014 fiscal year, reflected steady consistent improvement. In addition to the importance of the RBS Citizens transaction that Dan mentioned in his opening remarks, I would like to cover some of the highlights of the second quarter results, including some specifics surrounding the RBS Citizens transaction.

Facilitated loan volumes were approximately $94 million for the quarter, up 40% from last year, primarily on a 60% increase in facilitated loan volumes at Cology. Facilitated loan volumes included approximately $14 million of Monogram-based loans. Disbursed loans totaled approximately $105 million, of which approximately $18 million were Monogram based loans.

The net loss, down $4.7 million or 38% to $7.6 million from $12.3 million for the same quarter a year ago; the net loss was $0.68 per share for this quarter, compared to a net loss of $1.17 per share a year ago, a 42% improvement. Please note that all the per share amount discussed today and contained in our earnings release and regulatory filings, reflect the impact of the company's one-for-10 reverse stock split that was effective December 2, 2013.

Our net operating cash usage, a non-GAAP financial measure, improved approximately 40% or $5.5 million from the same quarter a year ago, to $8.2 million for the same reasons mentioned last quarter. Lower loan acquisition costs, better asset diversification of our balance sheet, and the growth in our fee-based revenue streams from Monogram products and services, TMS offerings and Cology offerings.

Now I would like to expand a little on Dan's comments, regarding RBS Citizens' transaction. At the end of the quarter, as a result of the execution of the loan purchase and sale agreement with RBS Citizens, we reclassified approximately $54 million of education loans held for maturity, to education loans held for sale. We expect the loans to be sold, subject to OCC approval and the maintenance of eligibility criteria set forth in the purchase and sale agreement, in two separate transactions over the next two quarters, at a price of 103.5% of par value, plus accrued interest through the applicable closing date.

We expect some of the first pool of loans, which represent approximately $47.4 million of loans at December 31, 2013 in our third fiscal quarter ending March 31. We expect to sell the second pool of loans by fiscal year end. This second pool, primarily consists of partially disbursed loans, which as of December 31, 2013 totals $6.5 million, and could grow to approximately $11 million once fully disbursed. We believe that the total amount of loans to be sold to be up to approximately $58 million plus accrued interest.

Assuming that each pool of loans were sold at the end of the next two quarters, respectively, there would be a reduction in net interest income from current run rate of approximately $700,000, which would be more than offset by an increase in fee income during the second half of the year of approximately $2 million. Using the weighted average shares outstanding for the second quarter, we believe that the net accretion for the remainder of the fiscal year would be about $0.11 per share, if each transactions close as described above. Realize however, these loans projections and related financial implications are subject to continued compliance with loan eligibility criteria, and accordingly the final amount sold to RBS Citizens could be different than what I have just articulated.

I would now like to turn to some of the specifics for the second quarter of fiscal 2014. Revenues totaled $12.2 million, a $1 million or 9% increase from the same quarter a year ago. The increase was primarily driven by a $477,000 expansion of net interest income, as we continue to see the impact of the growth in the private student loan portfolio on Union Federal's balance sheet. In addition, TMS revenues increased $264,000 or 3.6%. we continue to forecast TMS revenues to be in the $26 million to $28 million for the 2014 fiscal year, an annual growth rate of approximately 7%.

Finally, the administrative fees, which primarily include Monogram-based fee revenues and Cology processing fees, increased $207,000 from last year. However, last year's results included the last remnants of special servicing revenues, that totaled $452,000. When normalizing for the removal of this revenue stream, the administrative fees increased $659,000 or 34%, as Monogram related revenues rose $550,000.

Non-interest expenses declined $3.5 million or 15% to $19.9 million. Compensation and benefits fell $1.9 million or 19%, primarily as a result of a 12% reduction in headcount. General and administrative expenses declined $1.6 million or 12%, as special servicing expenses dropped $375,000, marketing costs declined by $571,000, as our loan acquisition strategies became more efficient, and consulting expenses fell $292,000.

At this point, I would like to turn to year-to-date results. The net loss for the six month period ended December 31, 2013 was $19.2 million, a $7 million improvement from fiscal 2013. The net loss per share was $1.71, compared to a net loss per share $2.53 for the same period a year ago. We saw a significant improvement in our net operating cash usage, as is a non-GAAP financial measure, decline $9.9 million or 40% to $14.6 million, compared to the six month period ended December 31, 2012, primarily as a result of $6.8 million improvement in the loss from operations.

We continue to believe that our net operating cash usage will be in the range of $26 million to $30 million for fiscal 2014, a 34% improvement from fiscal 2013. Facilitated loan volumes totaled $527 million, including Monogram based loans of $90.4 million. Monogram volumes were down approximately 11%, primarily on a 29% decline in Union Federal volume, as we manage the Union Federal balance sheet. We believe that the RBS Citizens transaction will better position Union Federal for this year's upcoming peak season. This first volumes were approximately $342 million, including $60 million of Monogram-based loans.

Revenues for the six month period ended December 31, 2013 was $26.1 million, up $2.2 million or 9%. The significant contributors to the revenue improvement include a $571,000 increase in net interest income, a $788,000 or 5% rise in TMS revenues, and a $1.2 million increase in administrative and other fee income. The administrative fee increase was a result of a $2 million improvement in Cology revenues, as income from last year did not start until the October 19, 2012 acquisition date, and a $1.2 million increase in Monogram-based fee income. These increases in administrative fees were partially offset by lower special servicing revenues of $2 million.

Non-interest expenses were $45 million for the six month period ended December 31, 2013, a $4.6 million improvement, as general and administrative expenses fell $4.3 million. The improvement is attributable to $2.6 million lower marketing costs, and a reduction in special servicing costs of $1.6 million.

Moving to liquidity; at December 31, 2013, our unrestricted cash, which we define as cash, cash equivalents and short term investments, held outside of Union Federal, total $82 million; down $11 million from September 30, 2013. The decrease was primarily caused by the previously mentioned net operating cash usage of $8.2 million, as well as $1.8 million in deposit made to participation interest accounts.

In other matters, we continue to progress on the IRS tax item. On a previous call, I have described the three phases of the process to include the exam phase, the appeals phase, and the litigation phase. At this point, we remain in the exam phase. We remain diligent and our position on the outcome has not changed since last quarter. As a result, our financial payments for the second quarter of fiscal 2014, do not reflect any accrual for this matter. But professional fees for the quarter related to this were down significantly from the first quarter to $547,000, consistent with the upper end of the range provided on our last call.

With regards to the Massachusetts Department of Revenue case, the briefs for the appeals court, which was the next step in the process, were filed in December. Shortly thereafter, the Supreme Judicial Court of Massachusetts transferred the case from the Appeals Court to the SJC. Oral arguments have not yet been scheduled. This development has not altered our views on this matter, and we continue to maintain an accrual, including interest, but not penalties, on our balance sheet.

In conclusion, we continue to show significant improvement over the financial results from last year. Revenues are up, expenses are declining, and non-operating cash usage is significantly improving. We are excited about the RBS Citizens transaction, including the liquidity demonstration in the marketplace for private education loans, the validation of our strategy to a premium price point, and the balance sheet capacity it provides us with, for the upcoming peak lending season.

I will now turn the call back to Dan.

Daniel Meyers

Thanks Ken. Before we turn the call back to the operator for questions, I note that we are busy as its prime selling season for our Tuition Management and private student loan products, and of course, we are already beginning preparation for the big summer [fee-processing] season. Thank you.

With that concluded, operator, do we have questions?

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session. (Operator Instructions). And our first question comes from Michael Tarkan of Compass Point. Please go ahead.

Michael Tarkan - Compass Point

Good morning. I guess, just a quick IRS question out of the way first. You mentioned you are still in the exam phase. Were there any developments this past quarter that you can share with us, and what are the next steps there that we should be looking forward to? Thank you.

Kenneth Klipper

So Mike, I think where we are at is not an item that creates additional developments to be disclosed. I mean, we are working through the various -- the groups within the IRS exam phase, and there is nothing really to -- there are no developments to talk about there. What I would say though, is you are going to get kind of a front-ending of your professional fees before you get results, so that's the -- where you see results or developments in the [matter] (ph). So that's why they are -- you continue to see some of the professional fees, but not things that we can quite talk about yet.

Michael Tarkan - Compass Point

Any color as to when we could expect some of those professional fees to start coming down a little bit?

Kenneth Klipper

I think it depends on how things move, Michael. I mean, if we continue to progress into the next phases, we are going to continue to have professional fees related to those phases and the work that needs to be done to manage the matter properly.

Michael Tarkan - Compass Point

Okay. I guess, shifting over to sort of that lending franchise, can you just talk a little bit about overall demand transitioning out there? I know, we have seen a little bit of a slowdown at some of your bigger competitors this quarter. Just kind of wondering, what you are hearing from students and kind of where you think, overall private student loan demand trend is right now?

Daniel Meyers

Well, this is really a function of both supply and demand. I mean, from the demand overall perspective, despite notions of cost control, the total dollars expended on higher education continues to go up at a greater than inflation rate. So we think that there is still growing demand in the marketplace, and if anything, that the private market, which is frequently cheaper than any of your federal [options] (ph), represents a good deal for credit capable people.

The major competitor in the marketplace is the federal government, and they have changed their products, and the way they package credit quite frequently, especially during the election year, that ended a year ago. First, adding to, and then restricting, and then adding to their capacity to counter volume. I think that has had an effect on the marketplace, and we don't think that that is sustainable in anyway, from a budgetary perspective. But our job is not to make federal policy and proposed legislation, our job is to fund high quality demand, with low cost alternatives in the marketplace, and given the growth in the sector and the demand for the overall products, I think the future looks very good.

Michael Tarkan - Compass Point

Okay. And with these loan sales from Union Federal, I mean, is it safe to say, or how quickly -- I guess my question, how quickly can we see loan volume there start picking up again more significantly? The level that we saw in fiscal 2012, is it possible that we can get back to that in fiscal 2015?

Daniel Meyers

On the forward-looking statement side, we have to be careful, because we don't have a crystal ball here. But, it is true that we restricted some of the volume development and certainly quite a bit of marketing spending activity, as we wanted to make sure that we had a terrific exit for that portfolio. We are very pleased with the RBS sale. We think that it was an intelligent option for them, it was an intelligent option for us, compared to any securitization scenario, it made a lot more sense for us and our circumstances to take in 103.5 plus accrued interest.

We think that they are benefiting from just a terrific high quality portfolio, and so this is something that we absolutely wanted to do, and should not be interpreted in any way as kind of secondary choice or along those lines. This is exactly the kind of option that I have been alluding to in earnings calls for many quarters now, because, as I said, and I said again this morning. We are not going to do something like the securitization that will yield worst financial results just to be stylish since they are first of all a headwind into the securitization. From our perspective, either short term, medium term, or long term, is a better idea for us to do something in this circumstance, than it would be, to do a securitization, at a substantial discount to par on the portfolio. And then, face all kinds of timing [intact] (ph) circumstances on the securitization, and it is kind of going on.

Michael Tarkan - Compass Point

Understood. And then I guess, just as a follow-up on that. When you were looking to sell these loans, did you find that there was a fair amount of appetite amongst potential buyers out there? I know that when Sallie Mae completes their spin-off, they are going to be looking to sell a chunk of private student loans as well, from their bank. And I am just wondering, kind of how that secondary market has developed?

Daniel Meyers

I would say, it was rational. I am not going to sit here and say that we got a premium price, I think it was at a rational price. We like to concentrate very much (inaudible) here, and we concentrate on that. And if you really looked at the value of the portfolio, we were able to -- as of the (inaudible), turn to the board and say, we are going to be able to tell your shareholders, that we had a mathematically, quantitatively rational price for the bidders. And that we had an opportunity to make sure that we could clearly check the box and say, we know how to count, and this makes sense. And so, [forgetting] other options, like partnered lending, securitization and things like that, the range of values that we saw in the marketplace, made sense for the portfolio. And that's what we like, and if we -- if someone who, I think that I participated in -- somewhere between 30 and 40 securitizations of private student loans. Over time, what you saw, was different competing funding options, whether it was private deals or public deals or asset-backed commercial paper transactions, in every evolution of the marketplace, people had kind of a quantitative rationale as to why the next evolution was an enhancement to the last activity in the marketplace.

I think that, if we see some more quantitatively rational transactions, that puts the onus back on the bond funding people, because if they want to participate in funding loans that -- you know, with the 750, 760 average FIFO score, that's an intelligent long term thing to do and a very sustainable business, but they are just not going to get it done, where they are right now, and so, as the world progresses, we know that the world is a very competitive place out there, and if something comes to us, and they have a good idea, then we are happy to hear it.

Michael Tarkan - Compass Point

Understood. Thanks for all that color.

Operator

Our next question is from Chris Donat of Sandler O'Neill. Please go ahead.

Christopher Donat - Sandler O'Neill

Good morning, Dan. Just wanted to ask -- and I know, it's a forward-looking question, but I will try it anyway. How should we think about your ability to replicate the RBS transaction? I know you don't -- you take a buyer and a seller for something like this, but what are the factors that you can control, and what's -- just how can we think about you, may be being able to do this again in the future? Would it be six months, a year? Any way, any color there?

Daniel Meyers

I think -- let me take the kind of constructive, and then kind of caveat side, Suzanne is here, she is kind of full in the -- she turns red when everybody talks about a forward-looking statements. But just getting back to my last answer, what we are interested in, is receiving good value for our activities for our shareholders and for the company. And quite frankly, I don't think that we would continue activities. We demonstrated as a management team, that we did not make loans, but we thought that the loans we made, couldn't be resulted in -- have results, that was financially proper for the company. So when we replaced all the product lines of the company and all the funding structures and all the origination methodology and all the underwriting methodology with the Monogram platform, there was a rational purpose to that, and now we have got these loans on two large, -- we will have these loans on the balance sheet, of two large banking entities in this country.

And so of course, we would like to try and replicate that on a going forward basis, and receive proper value for our activities, as we go forward. And quite frankly, the answer to the question is, is that because we think that we have been so rational about this and not stylish, we would not be continuing to make loans and ramp up for the fee, if we did not think that we could get a good outcome for it.

Now, we are clearly not going to say, exactly what we are willing to do with the next batch of loans, because that's absolutely determined for our shareholders, first of all, because it hurts our negotiating position, with people who call us upon the phone, and say hey, why don't you think about XYZ? And second of all, is that, you know, as I also said earlier, our crystal ball is not perfect. So there have been events in the bond market and things like that, that affect things on an going forward basis. You never really can tell, what's going to happen until they are closed. But the fact that we are enthusiastic at this moment, and we consider that this kind of volume and regulatory constraint situation, Union Federal to be substantially eased, if not dealt with at this point in time, means that we are happy to go out, and originate high quality, ultra high quality loans again for disposition. But that wouldn't make sense, and I think that this kind of quantitatively rational few of the world really helps us on a long term basis.

Christopher Donat - Sandler O'Neill

Okay. Thanks. Then for Ken, I am not sure I caught this right. I thought you said, with the loan sale, reduction in net interest income of about $700,000 and then fee income of $2 million. Is that the [down tail] or is that some recurring fee? Can you just explain what that is, the $2 million.

Kenneth Klipper

Yeah. So the $2 million is a gain on sale, so it is a 3.5% premium on the loans, and the $700,000 would be, quite frankly, if you assume the $47.4 million has a weighted average coupon of about 6%, and you sold that portfolio on March 31st, its basically a quarter's worth of interest.

Christopher Donat - Sandler O'Neill

Got it. Okay. Then on the comp and benefits, just the level was a little lower than I was looking for and that was based in part on the commentary last quarter about $3 million of savings from severance. Should I think about the $8.5 million of comp on a quarterly basis is a good run rate, or was there anything unusual in the quarter?

Kenneth Klipper

There are a couple of things to think about. One is, and this is more of an accounting adjustment than it is anything else, but we had a $400,000 credit for some vacation accruals, as we clean up the accrual, because we have some amounts that can roll over and so forth. So we clean that up, as we try to do every December. So there is a little bit of a credit there. The other thing I would say is, typically, the third quarter is slightly higher than the other quarters, because the payroll taxes kick in again for the quarter ended March. You should see a blip of a couple of $100,000 or maybe slightly more, as it relates to that process. But I think from a headcount perspective, I would think we are going to be in the range that we are in, subject to the other business decisions.

Christopher Donat - Sandler O'Neill

Okay. Got it. Thanks very much.

Kenneth Klipper

Yup.

Daniel Meyers

We have very-very-very actively managed our expenses here. (Inaudible) total expenses, since I walked back through the doors then. Certainly, 80% and maybe even closer to 90%. I mean, this has been a very active OpEx management, I should say.

Operator

And our next question comes from Ann Heffron of Zacks. Please go ahead.

Ann Heffron - Zacks Investment Research

Hello gentlemen, how are you this morning?

Kenneth Klipper

We are good, how are you Ann?

Ann Heffron - Zacks Investment Research

Oh fine. Thank you. About marketing, the marketing expense, do you expect that episode of revert to a more normal level, you can't -- I mean, you've referred to earlier that, you were really controlling that, in the second quarter, and I am wondering if that's going to sort of go up a little bit more.

Daniel Meyers

It will go up a little bit more, because in any regard, because -- for seasonal factors, quite frankly, as we head into peak. It depends on channels. I mean, right now, actually, the large activity is in the last couple of months, and now through the year, on the school channel side. People are out talking to people about products, and demonstrating the results of how well this works with people selecting repayment options and originations and doing all those things. So that expense is probably running at [wholesale] right now, and then kind of the more student and family centric approaches of talking to people about these products is extraordinarily cyclical. But yes, I think that the quick answer is, is if there is anything different with the pending closing of the obvious transaction, I think that affects the amount of appetite we have for volume under the Union Federal brand, and that affects the budget, but we don't do these things for the price of increasing the OpEx budget, we do these things for the purpose of efficiently growing that portfolio and then yielding revenue and net income off it. So whatever we do, I think, we will continue on with our pattern there.

Ann Heffron - Zacks Investment Research

Then the second question I had, relates to Union Federal. I have heard, you are selling off these loans. You didn't have a lot of excess capital there. Are you just going to keep it there, or are you going to try and take a dividend, or --?

Kenneth Klipper

I think Ann, we will keep it there. The major reason why is we are going to originate loans back in -- back into August, that capital is going to have to be in the bank anyway. So its more of a temporary thing, than it is a permanent way of looking at the bank's balance sheet.

Ann Heffron - Zacks Investment Research

Okay. Well thank you.

Daniel Meyers

Thank you.

Kenneth Klipper

Thank you.

Operator

This concludes our question-and-answer session. I'd like to turn the conference back over to Dan Meyer, for any closing remarks.

Daniel Meyers

Thank you very much for tuning in to the quarterly call. We will probably revert back to the evening calls, as this was a function of the schedule, and trying to get to investors as fast as we possibly could, to increase transparency. But we appreciate everybody getting up early, and going through the numbers. Everybody have a good day, and we will be on our way back to doing certain amount of work.

Kenneth Klipper

Thank you.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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