E*TRADE Financial Management Discusses Q2 2011 Results - Earnings Call Transcript

Jul.21.11 | About: E*TRADE Financial (ETFC)

E*TRADE Financial (NASDAQ:ETFC)

Q2 2011 Earnings Call

July 20, 2011 5:00 pm ET

Executives

Michael Curcio - Executive Vice President and President of E*TRADE Securities

Susan Hickey - Media Relations

Steven Freiberg - Interim Chairman, Chief Executive officer and Member of Finance & Risk Oversight Committee

Matthew Audette - Chief Financial Officer, Executive Vice President and Controller

Michael Pizzi -

Analysts

Brian Bedell - ISI Group Inc.

Michael Tarkan - FBR Capital Markets & Co.

Eric Bertrand - Barclays Capital

Patrick O'Shaughnessy - Raymond James & Associates, Inc.

Michael Carrier - Deutsche Bank AG

Matt Fischer - Credit Agricole Securities (NYSE:USA) Inc.

David Chiaverini - BMO Capital Markets U.S.

Howard Chen - Crédit Suisse AG

Richard Repetto - Sandler O'Neill + Partners, L.P.

Joel Jeffrey - Keefe, Bruyette, & Woods, Inc.

Daniel Harris - Goldman Sachs Group Inc.

Operator

Welcome to the E*TRADE Financial Second Quarter 2011 Earnings Conference Call. [Operator Instructions] It is now my pleasure to turn the floor over to Susan Hickey from E*TRADE Financial. Please go ahead.

Susan Hickey

Good afternoon, and thank you for joining us for E*TRADE Financial's Second Quarter 2011 Conference Call. Joining me today are Steven Freiberg, E*TRADE’s Chief Executive Officer; Matt Audette, our Chief Financial Officer; and other members of E*TRADE’s management team.

Before turning the call over to Steve, I’d like to remind everyone that during this conference call, the company will be sharing with you certain projections or other forward-looking statements regarding future events or its future performance. E*TRADE Financial cautions you that certain factors, including risks and uncertainties referred to in the 10-Ks, 10-Qs, and other documents E*TRADE files with the Securities and Exchange Commission, could cause the company’s actual results to differ materially from those indicated by its projections or forward-looking statements. This call will present information as of July 20, 2011. Please note that E*TRADE Financial disclaims any duty to update any forward-looking statements made in the presentation.

During this call, E*TRADE Financial may also discuss some non-GAAP financial measures in talking about its performance. These measures will be reconciled to GAAP either during the course of this call or in the company’s press release, which can be found on its website at investor.etrade.com. This call is being recorded and a replay of the call will be available via phone and webcast beginning this evening at approximately 7 p.m. The call is being webcast live at investor.etrade.com. No other recordings or copies of this call are authorized or may be relied upon.

And with that, I will now turn the call over to Steve Freiberg.

Steven Freiberg

Good afternoon, everyone. Before getting into our discussion about the quarter, let me take just a moment and comment on what I'm sure is top of mind for many of you. The filing made this morning by one of our shareholders, Citadel. We were surprised and disappointed by the letter we received this morning. Maximizing value for shareholders has been and will always be our primary focus. We believe this priority has been clearly demonstrated by our tangible actions over the past few years as we significantly bolstered our capital position and moved the company back toward consistent earnings even in a challenging macroeconomic environment. We value the opinions of all shareholders and have always been committed to acting in their best interests. We will be carefully considering the letter received this morning and at this time, have no further comment.

Turning now to the quarter. I will begin by covering the highlights from the second quarter and then Matt will take you through the results. I will follow with a few additional comments, after which we will be happy to take your questions.

We are pleased with our second quarter performance as our business demonstrated strength even as trading slowed across the industry. We reported net income of $47 million or $0.16 per share on revenue of $518 million.

We continue to execute against our strategic plan. Our loan loss provision declined on positive credit trends, expenses declined sequentially and we'd successfully refinanced the company's 2013 notes.

During the quarter, we executed a number of franchise enhancing initiatives to expand our offering and position us well for the future. We continue to grow our sales organization and grew our team of financial consultants by 30% in the first half of the year, focusing on sales of products and services to investors seeking both wealth management and retirement solutions. We also added professionals dedicated to growing our relationships with corporate clients.

On the product front, we introduced weekly options, increased fixed income news and research in the bond resource center and expanded the availability of personalization tools. E*TRADE Securities customers had access to the AIG public offering and our new issues desk continues to build the pipeline as we advocate for a level playing field for retail investors to have access to IPOs and other offerings.

Our Corporate Services group, a leader in stock plan administration signed more than 30 new client contracts during the quarter. We continue to execute on our strategy of servicing both private and public companies, which provide a terrific foundation to grow relationships with corporate clients while strengthening an important channel for future retail brokerage account growth.

Recent IPOs, LinkedIn and Tesla Motors are examples of leading companies that we worked with for many years prior to their entering the public markets. And as Matt will detail later in the call, we remain focused on derisking the company's balance sheet through strategic initiatives designed to minimize credit losses and earnings volatility.

One such initiative gaining momentum is the movement of loans to higher-quality servicers. As of quarter end, $1.1 billion of mortgage loans were with these high-quality servicers, and we transferred an additional $1.4 billion this month.

It was a productive quarter on many fronts. We are executing against the strategic plan we put in place nearly one year ago and are positioned well for the balance of the year.

I will now turn the call over to Matt to take you through the numbers.

Matthew Audette

Thank you, Steve. During the quarter, we recorded net income of $47 million or $0.16 per share compared with net income of $45 million or $0.16 per share in the prior quarter, a net income of $35 million or $0.12 per share in the second quarter of 2010. We generated $518 million of net revenue in the second quarter. This compares to net revenue of $537 million in the first quarter and $534 million in the same quarter of 2010, with higher trading activity driving slightly higher revenue during the previous periods.

Our second quarter revenue included net interest income of $315 million, up $6 million from last quarter. This reflected a net interest spread of 2.89% on average interest earning assets of $42.9 billion, up from the first quarter spread of 2.84% on $42.7 billion in assets.

While our net interest spread continues to face headwinds due to low rate environment, we benefited from a few items in the quarter, which led to the sequential increase. First, we saw an increase in the yield on loans due primarily to a reduction in nonperforming loans. Second, our stock loan business performed exceptionally well, as hard-to-borrow securities spiked in the quarter related to dislocations of foreign markets and a handful of high-profile IPOs. These items improved our spread by roughly 8 basis points this quarter.

While we're pleased with these results, if the current low interest rate environment persists, which is widely expected to be the case, we will continue to see moderate pressure on our net interest spread.

Commissions, fees, and service charges, principal transactions and other revenue in the second quarter were $174 million, a decrease of 13% from $201 million in the first quarter. This decline was driven by a 17% decline in DARTs during the period.

Average commission per trade during the second quarter declined from the previous quarter driven by customer mix from $11.32 to $11.14, an increase from $11.05 compared to the same quarter of 2010.

Revenue in this quarter also included $28 million in net gains in loans and securities, including net impairment of $3 million as we manage our investment portfolio to limit our risk and realized gains due to favorable market opportunities.

Our total operating expenses for the quarter declined 2% or $7 million from the prior quarter. Our second quarter expenses reflected the seasonal decline in advertising spend. And as expected, we recognized a $3 million increase in FDIC insurance premiums as a result of the new FDIC rules that took effect during the quarter. We continue to expect full year 2011 expenses to be roughly flat overall with quarterly variability driven mainly by advertising spend.

Turning now to the metrics. DARTs for the second quarter were $148,000, down 17% over last quarter and down 13% from a year ago. During the second quarter, net new brokerage accounts were 25,000 following a very strong first quarter when we had 51,000 net new accounts and up from 18,000 in the second quarter of 2010. Year-to-date, net new accounts are 75,000 comparing quite favorably to 54,000 for the full year of 2010. Net new brokerage assets for the quarter were $1.5 billion. Year-to-date, brokerage assets in closed totaled $5.4 billion compared with $4.3 billion acquired in the first half of 2010.

We ended the quarter with $26.3 billion of brokerage related cash, an increase of $400 million during the quarter and up $5.6 billion or 27% compared with the brokerage cash balance on June 30, 2010. Customers were net buyers of $200 million of securities during the quarter.

Margin loans made a positive contribution to our quarterly results with average margin receivables growing 6% sequentially from $5.4 billion to $5.7 billion and up from $4.5 billion or 27% compared with the same quarter in 2010. We continue to be pleased with the performance of our legacy loan portfolio and with the success of our loss mitigation activities. The portfolio contracted by approximately $700 million during the quarter, we reported a meaningful decline in net charge-offs and delinquency trends continue to be favorable.

With respect to our TDR program, we continue to be active in our modification efforts, driving a meaningful reduction in losses while allowing homeowners to remain in their homes. Through modifications, we expect our loss forecast to improve by approximately 25% to 30% relative to our loss forecast in the loans prior to the modification. Additionally, we have seen an improvement in the performance of the loans we are modifying with average re-delinquency rates at 12 months of 31% for 1-4 Family and 43% for Home Equity loans. This compares favorably to rates of 36% and 44% experienced last quarter and speaks to continued improvements in the selection and modification process.

Building our risk mitigation strategy, we continue to transfer loans to higher-quality servicers, who employ a higher touch model to improve loan performance. As of the end of the second quarter, $1.1 billion of our mortgage loans were at these higher-quality servicers. Given the improvements of performance of loans that we have transferred, we completed on July 1 the transfer of an additional $1.4 billion in loans. With this transfer, we now have $2.5 billion or just under 20% of our mortgage portfolio at high-quality servicers.

While our expectation is for reduction in delinquencies, we typically experience a temporary increase at the time of transfer as a result of changes to the payment process. We noted such an increase in our main metrics and saw the newly delinquent loans return to current status within a very short period. We anticipate a corresponding temporary increase in delinquencies related to our recent transfer and expect an improvement to overall loan performance over time.

Our loan loss provision was $103 million, down 11% from $116 million in the first quarter and down 38% from $166 million in the second quarter of 2010. We expect these favorable long-term trends to continue although they are subject to variability in any given quarter.

Loan charge-offs declined by approximately $15 million in the second quarter to $178 million, and we were down from the $225 million we reported in the second quarter of 2010. The allowance for loan losses at quarter end was approximately $900 million.

We were pleased that the Bank generated $135 million of regulatory risk-based capital and $138 million of Tier 1 capital in the second quarter. As of June 30, E*TRADE Bank's Tier 1 capital ratio was 7.9% and its risk-based capital ratio was 16.2%. We continue to track our consolidated ratios as we prepare for fed regulations with the parent company under Dodd-Frank.

This quarter we have included our consolidated ratios in our press release on Page 13 for the first time. And as of June 30, all of our acquired ratios are above the well-capitalized minimums. In addition, our consolidated Tier 1 common ratio was 8.4%.

We also continue to track our consolidated ratios under Basel III requirements. We believe that Basel III in its current form will reduce this ratio by 70 basis points from 8.4% to 7.7%. Meaning, we estimate we are above the 2019 fully phased-in requirements today. The main reason for the decrease in Tier 1 common ratio under Basel III is the difference in the capital treatment of unrealized gains and losses on available for sale securities and deferred tax assets.

During the quarter, we accessed the capital markets to refinance our nearest maturity debt at an attractive rate. We issued $435 million of 6 3/4% notes due in 2016, effectively refinancing the entirety of our $415 million, 7 3/8% notes due in 2013. This transaction makes our next maturity December 2015, and affords us the flexibility to focus on other outstanding indebtedness.

The extinguishment of the 2013 notes resulted in a $3.1 million gain on the quarter.

Finally, we ended the quarter with $424 million in corporate cash compared with $461 million at the end of the first quarter.

To summarize, we are pleased with our quarterly and first half results. We continue to execute well on our retail and corporate businesses, prudently manage expenses and minimize risk in the portfolio.

With that, I will turn the call back to Steve for closing remarks.

Steven Freiberg

Thank you, Matt. Before taking questions, I would like to share a few additional comments. Again, we are pleased with our quarterly results as well as the progress we have made to date, executing against our strategy to grow the brokerage franchise, expand our corporate client base, mitigate risk and optimize the value of customer deposits.

As market uncertainty persists, it is difficult to predict investor engagement, but we continue to be confident about our strategy. As it relates to retail investor engagement, month-to-date in July, DARTs are up 8% when compared to June, and we expect seasonality during the summer months.

With that said, we remain focused on growing accounts and assets and satisfy and retaining our valued customers while managing expenses and continuing to derisk franchise. At the same time, we continue to focus on initiatives that support our mission to deliver the best investing experience. Period.

A few highlights include: We are in the late stage beta phase of E*TRADE 360, a new personalized investing experience. Through E*TRADE 360, customers can access everything they need on a single page, choose their favorite features to support investing decisions and enjoy an enhanced visual experience while viewing all accounts. We believe it will be unique in providing personalization tools to all customers, including those new to online investing, as well as the most sophisticated traders. We will introduce enhancements for options traders including enhanced cleaner, analyzer and optimizer tools as well as other offerings for traders, including features in FX and portfolio margining.

We will continue to grow our sales resources in both our retail and corporate sales teams and ensure we are better positioned to serve our current customers while attracting new customers and assets, focusing on both wallet and market share.

Building on our 30% growth in financial consultants in the first half of the year and managing towards a similar increase in the second half, we are well on our way to doubling our relational sales force by the end of 2012. Again, we are pleased with our second quarter performance and look forward to building on our progress for the balance of the year. With that, operator, we are ready to take questions.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from Daniel Harris of Goldman Sachs.

Daniel Harris - Goldman Sachs Group Inc.

Steve, I appreciate that you don't want to speak specifically about the conversations you guys have had today and the documents that came out, but I was wondering if you think forward in terms of how you define success strategically -- or quantitatively. I mean how should we be thinking about that in terms of whether that's a margin at some point or a return at some point?

If we try to put some quantitative measures around where you're looking to go to over the next 4 and 8 quarters, how should we think about that?

Steven Freiberg

I think there's several metrics that are important. One is the continued progress towards normalized earnings. And the way I think about that -- I know we've had discussions before. There's still 2 areas that weigh heavily on the P&L of the company that are really legacy. One would be in the provisioning, with an expectation that over time the provision will become much less of a burden on the company. So if you look back over the course of the 2-year period, really, in 2010 we provisioned in excess of $700 million, and if you just take the first half of the year, this year right now, we provisioned roughly speaking about $220 million. And if you double that, not to say that's a projection because it's not, it's just a simple extrapolation, we'd be close to, let's say, a $400 million. And that's still a tax that we carry that most of our competitors in the industry do not. We would expect with the passage of time and with good management that it will become much less of a burden, and I think the trend is very clear. The other, which I think Matt alluded to, which is the other part of the corporate tax. We carry really sizable interest service costs because of the recaps that were done over the last several years, and we do have very high price debt that's outstanding. And I think it's a good example in the quarter, we were able to refinance at what we would say are quite good rates of large bulk of the piece of the debt to clean up the highest cost debt, and not to forget what we would do out over the horizon. But as we have more degrees of freedom, as we have more capital and we basically have more access to markets and more flexibility, we would hope to lessen that burden on the company as well. And so that's on one side, which is how do we manage down the legacy burden. On the other side, continuing to grow our core franchise, both our core franchise in brokerage, our core franchise in banking and our core institutional franchises at a rate that at least at, if not in advance or higher than the industry, and so we want to introduce not only more normalized earnings but we want to introduce a faster level of growth. And we've seen if you take the first half of the year into account, we think we've seen good progress on that point. And at that point, we're starting to basically think about our business in more traditional metrics to [ph] turn on equity and other types of valuation that become important. But until we get closer to normalize, we are basically working on what I just addressed. But if you're thinking 4 to 8 quarters out, the trends you're seeing should continue under accelerate. And the earnings basically, really, should manifest themselves through the P&L in a way that is stronger than we're seeing either in the current period or the recent past. But this is nothing new, but it's staying with the strategy we put into force roughly a year ago and continuing to execute. The variable we can't control but it's systemic. It's the macroeconomic environment, which truly has influence not only on provisioning but has influence on spreads and has currently influence on consumer confidence and therefore, level of DART activity. But assuming we believe the industry is a strong viable industry with good prospects over the horizon, our real focus is on the strategy and execution of the strategy, and we believe within relatively short order that those elements will play out.

Daniel Harris - Goldman Sachs Group Inc.

Okay, fair enough. We'll focus on normalized earnings for now. But let me actually turn to the one other area that I think a lot of -- that we're certainly focused on and that's in the capital and thanks for the parent company capital on the Basel basis. So if you guys are sort of ahead of where you need to be in 2019, can you walk us through how you think about returning capital via debt retirements or any other way to think about it in terms of increasing EPS, increasing earnings?

Matthew Audette

Sure, Dan. This is Matt. So I think building on what Steve said, I think the most obvious area of focus would be on delevering the parent company. I think the key there is while we're quite comfortable with where we are in the Basel III ratios, I think the key to doing anything is having capital dividends out of the bank. So if you looked at those ratios for the quarter, we had some nice improvement there as well, just under 8% on the Tier 1 and just over 16% on the risk-based. So our view is each quarter, those ratios get better. We feel more comfortable about dividend and capital of the bank. But the key and mainly obvious point is the regulator would have to approve that. And given that we're transitioning regulators essentially tomorrow from the OTS to the OCC, that would be something that the OCC would have to approve. So from our perspective, we think continuing to improve the ratios, continuing to generate earnings and do all the things that Steve described. In our view, it would only improve our ability to dividend capital but we couldn't speculate on whether the OCC would agree with that. So we're focused on the business in improving those ratios, and we think it will take care of itself over time.

Steven Freiberg

And I'll just reemphasize because that position did exactly the way it should to be. All we need to do is continue basically to be profitable, grow our profitability, continue to build our capital and finally, continue to derisk the enterprise. And expectation is if we do that well, we do it consistently, and we think we have been doing that, good things will occur and more degrees of freedom will basically arise but we can't predict that with a certain point or a certain date.

Operator

Your next question comes from Rich Repetto of Sandler O'Neill.

Richard Repetto - Sandler O'Neill + Partners, L.P.

I'm at least going to try with a question, and I'll respect your answer either way. But in today's letter from Citadel, they talked about specifically allotting value in a sale -- in a transaction. So I guess the question is has the board -- first, has the board met to contemplate Citadel's letter? And then he specifically pointed towards 2 directors, Mr. Parks and Ms. Weaver. And I guess do these board members play -- if you go over their roles and any relationships with sort of the merger or process would be helpful.

Steven Freiberg

Yes, let me take a few things. One is I still respect you as gentleman. But let me just read that -- the last sentence of at least the prepared remarks that "Our Board of Directors will be carefully considering the letter received this morning and at this time, we will have no further comment," and we're going to stick to it. And I'll just add, which is independent because it's consistent with what I said earlier, what I've said consistently over time, our clear mandate objective is to maximize shareholder value over any reasonable period of time. And that's what our objective is, we don't waver from it. And we'll continue to focus on that as basically a critical element or priority. I apologize but I really won't elaborate further at this point on this particular topic.

Richard Repetto - Sandler O'Neill + Partners, L.P.

Got it. I respect that answer Steve as well. Moving on, the movement of loans to higher quality servicers, I'm just wondering that -- Where are we going to see the impacts, is it just pure lower delinquencies? Is there going to be -- is there any added expense in doing this other than -- and I know you talked about the temporary blip up in delinquencies, but any other balance sheet -- income statement impacts as you do this?

Matthew Audette

So Rich, the most meaningful impact we expect is improvement in credit losses over the long term. Higher-quality servicers, certainly know they're higher quality, so they can charge more. So your servicing expenses would be slightly higher, but I wouldn't view it as anything meaningful. It's really getting our loans to servicers that we believe are more high quality and long-term provisions coming down.

Steven Freiberg

And let me just add to it. Rich, since we have the experience with a large number of servicers, we have good internal information as to who executes well on different segments or categories of paper. And so over time, the base of knowledge that we've acquired has been important and powerful. And what's really been challenging, because often times as you know we don't own the servicing rights to our paper, so even if we could optimize mathematically in a model the real challenge is around execution. So we've actually felt quite good that in this past period, which is really the month of July, that we effectively moved $1.4 billion of paper that we believe has not been effectively serviced to a combination of either specialty servicers, where warranted both for first and second for Home Equity. And then in addition to that, to servicers, who do just the better job even on, I would say, the current paper. And if we can do more of that -- and remember, we've only got $1.1 billion like in the last year and we've done $1.4 billion in essentially the last period, but this is a very good outcome for us on a whole host of fronts. But it's not an easy thing to accomplish and it is very lumpy.

Richard Repetto - Sandler O'Neill + Partners, L.P.

Got it. And last quick question, Matt, another quarter with $30-plus million in security gains. I guess what's the outlook for the back half of the year? Do you believe that outlook would be able to maintain this space from this quarter?

Matthew Audette

Yes, Rich. I would say that our view is almost exactly the same or exactly the same as we discussed the last quarter. So I think if you look back to 2009 and '10, those gains hovered in the $150 million to $160 million range. Given the volatility in the environment back then compared to where we are today, we would expect those levels to come down but I wouldn't go as precisely, give a specific estimate for the second half of the year.

Operator

Your next question comes from Patrick O'Shaughnessy of Raymond James.

Patrick O'Shaughnessy - Raymond James & Associates, Inc.

So my first question is around your net new asset trends. You certainly saw some great momentum around those in the first quarter of this year. And then it looks like in the last few months, it started to trail off a little bit. How much of that do you think is a function of overall macro versus how much is company specific? And even if the macro-environment continues to be pretty difficult, how do you start to reaccelerate those net new assets?

Steven Freiberg

Yes. Let me kind of give you some insight or some color around that. Clearly, we were lighter in the quarter than we would have preferred to be about $1.5 billion or so of net new asset closed. If you sort of chunk it down into its 2 primary pieces, we really get net new assets close from 2 areas. One being our Corporate Services group and the other being our broad-based retail brokerage business. Our broad-based retail brokerage business has been relatively consistent if you look back over the last several quarters except for the first quarter, where it outperformed in quite an extraordinary way. In addition in the first quarter, we did see a fair amount of execution come through from our Corporate Services group clients, their employees. If you remember the dynamic of that business, when we get a $1 of floke [ph] From that business, remember these are employees of companies that either executed options and/or basically had deferred equity vested to their accounts, a large percentage of that, upwards of about 70% over the course of the first year, flows away from us to firms where they have typically their main account, so we understand that will occur. We just happened to have had an atypical quarter in the first quarter. And we did see outflows, where normally we might get $1 billion of net out of that business, we got substantially less in the second quarter but it was predictable. So we don't think there's anything that material that clearly the environment has had some impact because we looked across our industry and everyone's net flows were down on a sequential basis. Ours were down as well because of the environment but in addition to that, the Corporate Services group, which had a terrific first quarter, you paid back some of that in the subsequent quarters and we did. So this is not surprising.

Patrick O'Shaughnessy - Raymond James & Associates, Inc.

Got you. And then my follow-up question, recently your competitor announced that it was going to start offering international trades-- international trades with the local currency. I think that's something that you guys have offered for a while. What sort of opportunity is that or even beyond international trades, what sort of other asset classes do you think can really be big drivers for E*TRADE, are we looking at ForEx, futures, certainly options, if they have some growth potential, kind of where do you look at -- its kind of the evolution of trade in the E*TRADE?

Steven Freiberg

Yes, I'm going to ask Mike Curcio, who runs the brokerage, the full brokerage side of the company, is here and I think he's best able to give you perspective on that.

Michael Curcio

Yes. So we've had global trading for a few years now in 6 markets where our customers could trade in the current markets. So we're still committed to that but where we see the most growth is through ADRs still. They are just easier to trade, and most customers understand them better. We really invested in options and it was a record first half. Our futures business is doing well. We really think it will see significant lift once it's integrated into E*Trade Pro, which is due later this year or early next year. And we're working on FX offering as well.

Operator

Your next question comes from Howard Chen of Credit Suisse.

Howard Chen - Crédit Suisse AG

Steve, if we focus on achieving that normalized earnings power that you allude to, I would still love some more color on the balance sheet. What ultimately you think it looks like? How big is it? And what are some of the macro factors underpinning that 3% spread that you've alluded to in the past?

Steven Freiberg

Yes, let me -- I want to go back to size of balance sheet, and I think that Matt had highlighted in his section that the interest earning component of the balance sheet continues to expand. And it's predominantly, if not exclusively, driven by the cash or the deposits that our brokerage customers hold with us, either be the sweep and/or the CSA of the savings account. And we did see -- if you recall, back when I first arrived, it was an expectation that, that balance sheet or at least that element of the balance sheet was going to contract for quite a while. And we didn't see any contraction, and in fact, we saw -- we've seen the expansion in it. But we're not consciously expanding the balance sheet for balance sheet's sake. It really is more of a representation of having more brokerage customers and more basically brokerage assets and a concentration of those assets being held in deposits, so that is driving it. From the standpoint of the spread on the portfolio, we've gone on record to say that we think over any cycle, so any period where we could actually define a cycle, that based on the duration of those deposits and essentially, what we invest in today on the margin, which is typically credit risk rate, which mostly are agency backed securities of similar duration. We typically think that we can attain over a long period or a cycle about 300 basis points of spread. Obviously, in any given cycle that may be higher, or if given part of the cycle, that may be higher or lower. So right now, clearly Matt made the point, there's some pressure on the system. So we were at 284 basis points last quarter, 289 this quarter. And we still think there'll be some pressure potentially on spreads. But if in fact we get back to any type of normalized macro-environment, we'd expect that 300 is a very reasonable number. We've had basically outside folks look at this, and we've run a lot of data. And the sense is that 300 is a reasonable target, a reasonable number. It could vary plus or minus on that, 25, 30, 40 points on both sides. And right now, we're probably again on a bit more of the challenged side, but we don't expect the 300 to be unattainable number, but I just can't tell you at any particular period. As you're trying to basically do what we do, which is predict tomorrow, next week and next month, that tends to be harder than predicting it in a longer-term model. What we're doing though is, on everything possible, which is putting all the cash or as much of the cash to work, so that's idle cash, making sure that we invest it smartly, making sure that we price the deposits or the liabilities in a very smart way to keep that spread as stable as possible, although, you have seen basically some movement to the bias when the moment is down.

Howard Chen - Crédit Suisse AG

That's very helpful. And then just thoughts on the long-term composition of the asset side of the balance sheet?

Steven Freiberg

It's a good question. On the margin, which I think everyone is aware, there are 2 fundamental trends, or really 3 that are going on. One is the legacy loans are rolling off, that's the good news, bad news. They clearly have higher coupons but on a net contribution basis when you put the provisioning through, not so good. But we think the optics are clear--they show up in different line items. But the reinvestment rate at the moment, which is basically going back into agency securities largely, is clearly below that. And that's putting pressure on the system. But that is the primary vehicle we are reinvesting in today. In addition to that, we are growing, Matt made the point, we are growing our margin book. it's growing 25% to 30% year-on-year and it grew to $5.7 billion in the particular quarter. But it's not going to grow fast enough to compensate for $700 million or $800 million of runoff of the legacy loan book. That said, we currently are not either contemplating or planning in the very near term, reentering any type of lending relationship with our clients or our customers but we will basically do some testing to our client base off our balance sheet. Meaning, we will not take the risk onto our balance sheet, trying to calibrate scale, meaning demand, in our portfolio of our high-quality customers as well as the economic model that may basically stand behind it. So I would say, if we were talking 3, 4 quarters out, we may have a position around our own client base as it may relate to an expanded relationship, which we know is always good. But at the moment, what we're doing is exactly what we have been doing, which is investing on the margin in agency securities. We don't have credit risk but we do have essentially, sometimes duration risk, but we hedge largely to the group if we [ph] can against keeping the duration of the asset and increase the duration of the liability largely intact.

Howard Chen - Crédit Suisse AG

Okay. So along the same vein, the firm's securities gains continue to pace at the very high end of the banking industry, can you just refresh us on why you're doing that, your outlook for more? And so ultimately, what do you think all this has, impact-wise on your 3% spread guidance and your normalized earnings power?

Steven Freiberg

Yes, several things. One -- absolutely just to give you a context. A year ago, the gains were approaching $50 million. In this quarter, they were approximately $30 million. So we're running at about 60% of kind of last year's numbers. Now the net impact has been helpful because typically net gains against impairments, impairments were much higher last year. And so the net impact fully looks reasonably good, $28 million against a number that was probably closer to the $36 million, but the trends are what they are. We basically expect over the near intermediate- and longer-term to have gains come down from where they are today. But at the same time, we would expect provisioning over that period of time to also come down. And not to say that we're in a foot race between the 2 but we are basically in any given period, trying to be smart about on how we manage our balance sheet. And we're looking at where we have opportunity, when we think securities repurchase were relatively cheap, maybe other option adjusted spreads, and where the spreads have changed. Typically, we'll take gains not from the standpoint of trying to manage the net interest margin on our portfolio, but we think essentially, we made a good swap or a good deal or a good buy or a good sale. So that happens on a continuous basis. And at the same time, we are on a continuous basis, adjusting our assets and liabilities and taking gains but we think the market is favorable. It's not a bad thing as well, as you know, there's been a lot of market volatility over the last 6, 9 months, which allows us to take basically trading profits as well. And just to answer your question completely, it does have some impact on our ongoing net interest margin, obviously, for swapping out higher coupons, in swapping in lower coupons, we do pay for a part of this over time. But it's not one generic mass, there's a whole host of items that play out as we pursue a broad-based treasury strategy. But the broad trend should not mislead anybody. If it was almost $50 million last year and $30 million this year, same quarter, it will basically come down over a period of time.

Operator

Your next question comes from Michael Carrier of Deutsche Bank.

Michael Carrier - Deutsche Bank AG

One follow-up on the -- just on the capital ratios. I know we have flaw forms in the industry and everyone is waiting on regulators, if they get the approval by regulators. But based on what you see in the industry and then what you know about your balance sheet, your capital needs, as an internal target, like where are you comfortable with the capital ratios? Obviously, you got to wait for the regulatory approval, but where do you feel like you, you want those capital ratios to be in an order to even just think about or start to consider deploying capital, whether it's on the debt side or buy that stock?

Matthew Audette

Michael, this is Matt. I think it's almost a circular reference because where we want to be is to able to dividend capital and maximize our return for our shareholders. So given the regulatory environment we're in, where those levels are not especially clear, as I've said a little bit earlier especially because we're transitioning from the OTS to the OCC, the main thing that we know we can do is continue to focus on growing that capital, continuing with the focus to generate earnings and derisk the balance sheet, and that's the thing that we can focus on and control. So that's where our focus is.

Michael Carrier - Deutsche Bank AG

Okay. And then just going back to the balance sheet, just in net interest margin. I think you mentioned during the quarter some of the benefit on the sick sock [ph] lending and then nonperforming loans declining, you guys, you mentioned like a target on the held to maturity portfolio that's been building. I just wanted to go back to that in terms of what should that level be. And then if we're thinking about over the next year or 2 years and assuming the current interest rate environment, if the loans are rolling off and you're pulling the new cash into securities, then assuming this current interest rate environment, should we be thinking that ultimately it goes back down to where the other, your online brokerage margins are? Or is there something unique that you guys can provide or do that can be different?

Matthew Audette

Michael, so on the held to maturity portfolio, so we started building that again last quarter. And so the growth you saw this quarter ending the quarter around $5 billion is the main growth that we've been focused on of late, meaning we're at this point, done. But keep in mind, that is something that we look at each and every quarter. So depending on where our balance sheet is overall. The regulatory environment win, our liquidity position that's something that we could relook at and grow some more. But the $5 billion is where we've targeted to grow so far. Specific to loans paying down, so I think as Steve comments on our spread over the long term being at 300 basis points, there's a lot of positives and negatives that impact that. The biggest positive that we have are our customer deposits in a more normalized environment and a more normalized interest rate environment that there's much more earnings power from a spread perspective there. The second item is over the long term, we still have a fairly large wholesale borrowings book, which is quite expensive. So over time, we would expect that to come down and be a positive, but what you hit on is the primary negative. So as the loan portfolio pays down, we would expect to reinvest at lower rates. So it's certainly a headwind but I think when you put all 3 of those things together, Steve's comments on the 300 basis points over the long-term are -- still hold true. But I would reiterate the point that in the current environment in taking the spread of 289 basis points and kind of carving out those items that are highlighted, you're at 281, and there's really pressure on that 281 if the interest rate environment does not move today.

Operator

Your next question comes from Mike Tarkan of FBR.

Michael Tarkan - FBR Capital Markets & Co.

Just back to the higher-touch services real quick. With the $2.5 billion moved over so far, can you give us any color on how to break down between 1-4 Family and Home Equity? And then along the same lines, I would assume you're moving some more loans over -- this situation where you're going to move over half of your portfolio, the whole thing, I'm just looking for like an end point there.

Matthew Audette

So this is Matt. I think that we don't break down the 1-4 versus Home Equity, I didn't say it's primarily 1-4, so that's $2.5 billion. We don't have a specific target on where we're going with that, but being just under 20%, we think it's a fairly meaningful amount that we moved over. And as far as what we are focused on moving, it would be our highest risk loans. So just under 20% I would say you've got a fairly good amount of what we're focused on. So you could certainly see it grow a little bit in the future.

Michael Tarkan - FBR Capital Markets & Co.

Okay, that's helpful. And then I guess lastly, just real quick, can you tell us where your deferred tax assets are at this point?

Matthew Audette

Sure. It's consolidated at $1.4 billion.

Operator

Your next question comes from David Chiaverini of BMO Capital Markets.

David Chiaverini - BMO Capital Markets U.S.

You mentioned in your prepared comments that the Corporate Services group added more than 30 new client contracts in the quarter. For context, how many client contracts are there in existence in total? And how does the 30 compare to prior quarter wins?

Steven Freiberg

Yes. Overall, we've approximately 1,000, just a little bit above 1,000. As we said earlier, about 70% are public companies, about 30% are nonpublic companies. 30 is -- let me see whether or not I have the prior quarter. I don't have it on -- at the top of my head. And I don't know Mike if you have the prior quarter. What we know is, 30 is actually -- it's a healthy number. I'm almost convinced it's higher than both trend as well as the prior quarter. I just don't want to give you a number that we'll have to go back and qualify. We don't have it. I don't have it now. And you would expect, not all companies are created equal. So we really break the universe by size, and so you can acquire 25 companies that don't provide anywhere near what one significant company would provide. We're not going to break it down on the call, but we're very focused on the universe or the segment that these companies come from. And I would tell you our trend data for the year is looking quite good. When you look at it in terms of assets and look at it in terms basically of employees. And the contracts that we signed today or last quarter, most of those companies were not yet boarded, because remember there's a conversion process that's quite substantial for about 6 to 9 months out. So essentially, think about this as the pipeline of future business that we will realize, but it does take us 6 to 9 months then to move these companies from where they are to basically to our platform.

David Chiaverini - BMO Capital Markets U.S.

Got it. And are there any stats you can share to give us an indication of how much customers are embracing your long-term managed portfolio offerings, such as UMA?

Michael Curcio

Yes. This is Mike Curcio. We have slightly over $0.5 billion in all our managed investment products. And 2 things are driving this. One, just to take a step back, we're delighted with the number we just rolled it out last year. And we have 2 big initiatives going on. One, Steve talked about scaling up the sales force. We added 30% already. So we're well on our way to double that by the end of 2012. And what we're seeing is we're getting a better quality of sales person in that is comfortable in selling these types of products. And the second initiative was performance management, which is true paper performance. And that just rolled out at the beginning of Q2. So we're seeing a lot more. We had a great quarter in all the management investment products. And we're also seeing more mutual funds syndicates and fixed income flows as well. So we're happy and we're on track.

Steven Freiberg

And so that the trend is very good. I'm being off -- as Mike made a point, it's still relatively small base because it's relatively new program. And the way we view it, which I think is just a broader context that our customers have approximately $190 billion of financial assets with us, and we believe through data that's both on us and off us, that those customers have approximately $2 trillion of financial assets overall. And so through a combination of good segmentation models, appropriate product and now an enhanced both in productivity and number of financial consultants, we've -- there's [ph] a lot of testing and learning, and we think we can make inroads into penetrating not only the trading component of what these customers do but the investing component as well. But it's a relatively speaking newer effort will take time to become meaningful at scale but we think we have a sense of the unit model. Now we're just executing on bringing it to a scale that will be meaningful to E*TRADE, that does take some time.

Operator

Your next question comes from Joel Jeffrey of KBW.

Joel Jeffrey - Keefe, Bruyette, & Woods, Inc.

Just going back, I think you mentioned earlier that the commission for trade was down due to mix. I was just wondering if you could give us any more color on what the mix looked like during the quarter?

Steven Freiberg

We can. It's not that exciting. But basically, just to give you -- we have it, I just don't want to go through the detail because if you think about, the way at least we're thinking about commissions, you're talking about $0.10 or $0.15 quarter-to-quarter. You're talking about $0.10 year-over-year. There's just a lot of noise in movement. But effectively, what drives that number up will be more trades from our Corporate Services clients, which are at a much higher trade rate and more options in our futures in the mix. And what drives it down is essentially more or less of the same thing. And so in any given quarter, there's some minimum movement between that distribution, but even if we provided it. One, it's very hard, if not impossible to predict. And I don't think the numbers are really all that meaningful. But to the points made by several people in the room earlier, the more we can do with options, futures and ultimately, FX and the faster we can build our corporates -- or grow our Corporate Services group, they will have a more meaningful impact on the mix. But the mix in any given quarter in my view is mostly noise as that distribution or stratification has a mild movement. And I would say last year's, last quarter's and this quarter's commissions, more or less are same, same. There's just not enough there to spend a lot of time on at least in my view.

Joel Jeffrey - Keefe, Bruyette, & Woods, Inc.

Okay. And then just sort of sticking with customer activity, I mean average -- looks like average margin receivables were up quarter-on-quarter but it looks like the period end were relatively flat. I mean with the markets the way they are, do you think margin activity declines a little bit? Or is it going to sort of stay at this level?

Steven Freiberg

Again it's very hard to predict. For those who've studied it, it clearly is a function when customers have any type of significant net buying, margin tends to expand. The number that I think Matt addressed in the quarter, that net buying in the quarter was relatively speaking neutral. I think it was in net of just a couple of hundred million dollars. And remember the customers have something in the neighborhood of about $186 billion of financial assets with us. So I would say that if consumer confidence and retail trading begins to move forward, and I said I think earlier in the call, we could see sequentially an 8% improvement. So at least it's some degree of incremental improvement. We typically see the margin book expand. But if that would stay relatively subdued for a while, then I would think that the margin book would basically follow that form and that sort of what we see. So the goal is in order to grow the margin book is to get basically an active group of customers and in addition to that, get more customers and we're working clearly on both fronts, one we have more control over than the other.

Operator

Your next question comes from Eric Bertrand of Barclays Capital.

Eric Bertrand - Barclays Capital

Again, I appreciate the disclosure on the consolidated Basel III, Tier 1 comment. If I recall correctly, it was 5.7% at the end of the first quarter and 7.7% at the end of this quarter. The majority of that increase should be the conversion, if I'm not mistaken. Is this a fair assessment about where you think that pro forma ratio is? And are there any other big inputs that you would see moving the ratio on a chunky basis in the near term?

Matthew Audette

Sure. I think everything you said, you got right. I think that it is our best estimate under the current framework of where the Basel III ratio is. I think the biggest factor that would move that ratio going forward, separate and apart from our earnings and utilization of deferred tax asset is under Basel III. The unrealized gain or losses is on available for sale portfolio would be a deduction from capital where as under the current regulations they're not. So the reason that can be volatile is that will move with the interest rate environment. So as that moves, that capital ratio will be impacted by that. So it's the main thing I would say that could move it.

Eric Bertrand - Barclays Capital

Okay. Coming back [ph] on a question that was asked earlier a little differently, if the regulatory threshold is 7% and you have no systemic buffer, where would you expect to run your capital ratio, a 50, a 100 basis point cushion versus that 7%? Is that sufficient for your business model or do you think you need more?

Matthew Audette

Sure. I'd say the same thing I said earlier, I think the primary focus for us is going to be more down at the Bank. So the consolidated ratios, as we highlighted, we feel fairly good about. It's more down at the Bank that the Tier 1 just under 8% and the risk base over 16% at what level would those be at to be able move that capital to the parent and then deploy that capital in a manner that's best for our shareholders. So we wouldn't know what those ratios are today other than we know to continue to improve them, continue to improve profitability and derisk the balance sheet are good things to do. So that's we're going to focus on.

Eric Bertrand - Barclays Capital

Okay. That's fair and my last question will be in around the interest rate hedges attached to your wholesale liabilities, the FHLB and repo. You previously discussed, probably about a year ago at this point, the pace of decline in roll off that you would expect on those liabilities, can you give us an update as to where those things do you think those are these days? And if possible, mark-to-market cash flow if you were to unwind those hedges today.

Matthew Audette

Yes, so Eric because the wholesale book, not unlike the loan book is a run-off portfolio, so things haven't changed, which is to say that the runoff is going to take a long time. You probably noticed that the repo book did come down a bit this quarter but it's probably the most meaningful decline you'll see for some time. The mark-to-market on that, on the hedges on that book will be in our -- it is in our RCI and you'll get more specific disclosure of that in the 10-Q, but suffice it to say it's fairly large.

Eric Bertrand - Barclays Capital

Okay. If I could squeeze in one last one, could you comment on the mix of the global trading in your total volume and also ADRs?

Steven Freiberg

The averages -- the global trading is very modest and ADRs fluctuate. I don't have the exact number on hand because we don't break it out, but we could get back to Brad on that. Yes, I will directly follow up and we'll see what we're able to disclose or not. And to Mike's point, the global platform doesn't generate a substantial amount of volume but it's not surprising. I think most Americans particularly since we're mostly a domestically focused company, tend to be more comfortable trading on the domestic exchanges. So when they want to go outside of the domestic exchanges, ADRs are the preferred vehicle even though we give them access to 6 major exchanges. We even give them access in local currency if they would want it, but it tends not to be something heavily utilized. And then outside of that, you have some physical presence in several geographies, that only generates probably 2% to 3% of our overall trading volume, think London, Hong Kong and Singapore.

Operator

Your next question comes from Matt Fischer of CLSA.

Matt Fischer - Credit Agricole Securities (USA) Inc.

First question, just on your loans, what's the fair market value of your loans? Can you provide that?

Matthew Audette

Yes, man. This is Matt. So that's a disclosure we won't provide, but we provide it in our 10-Q. So we don't have that for you today.

Steven Freiberg

You'll get it in about 2 weeks.

Matt Fischer - Credit Agricole Securities (USA) Inc.

Okay. I mean the gap between the net loans and fair market value was about $1.6 billion in the first quarter, do you think that's kind of consistent?

Matthew Audette

Consistent with the second quarter numbers?

Eric Bertrand - Barclays Capital

Right.

Matthew Audette

Yes. So we'll -- not that I'm dodging the question, but we'll have that number for you in a couple of weeks in the 10-Q.

Matt Fischer - Credit Agricole Securities (USA) Inc.

Okay. And then just regarding the second quarter, were there any of gerbil[ph] transactions? To help you derive the fair value, are you dependent upon your models?

Matthew Audette

So we certainly did not sell any loans during the quarter, but if you reference in the market themselves, that's not that -- the specifics of what we referenced I'd say that the loan markets in general are fairly illiquid, but I wouldn't have any more specific comments for you on how we derive today.

Operator

Your next question comes from Brian Bedell of ISI Group.

Brian Bedell - ISI Group Inc.

If you think about some -- this is a question for Steve, I guess. In terms of thinking long-term strategically, say 2, 3, 4 years out in the business mix that you currently have, can you comment on maybe 4 different types of businesses? If I think of the RIA business obviously that some of your bigger competitors are in, the other being the Corporate Service business that you're currently in, and then the other being the penetration opportunity that you talked about with the $190 billion on the $2 trillion of your own customers client through asset book. And then the fourth would be maybe positioning your company to better leverage to a higher rate environment that obviously the Ameritrade, the Schwab's have. Maybe just say sort of a broad comment about, is there a desire to get in more deeply into the RIA business over time and to lever your business mix over time to higher rates? Or would you rather just focus on the other 2?

Steven Freiberg

Yes, let me put it in perspective the way I think about E*TRADE and this should be consistent for about the last year or so, we put a strategic plan into play. And then I'll try to address the majority of the questions that you've asked, including basically our position vis-à-vis a rising rate environment as well. Think about E*TRADE in basically, let's say, 4 strategic areas: One, being the traditional brokerage business, particularly with a focus on trading; second, being institutional with a dominant piece of that clearly as the Corporate Services group; third, being an area where there'd be the long-term investor on wealth management, where -- I'll give you a sense of our thoughts there as well as our activities; and then finally, the Bank, which we think is a very valuable asset to this enterprise as well. On the brokerage side, over the last year, we spent a fair amount of time on really on strategies that will allow us to increase the level of growth of our customer base, net new account base. And I think as I addressed it in the prepared remarks that so far year-to-date, we put on approximately 74,000 net new accounts. If you look back a year ago for the full year, we put on 54,000. So the first is we kind of learned, in any consumer franchise, if you can't grow your customer base, it's highly problematic over time. And you have to also keep in mind, it's not grow the customer base but grow the customer base with quality at a cost that makes sense. And so we are very focused on all those metrics. In addition to that, and I'll jump over the institutional piece to long-term investor on wealth management, it's evident to us that we have a lot of customers, basically a lot of brokerage accounts almost 3 million. But the brokerage accounts look at us on a narrow way that they look at some of our key competitors. So if you look at E*TRADE, where we have a 10% to 12% or so of the wallet, financial wallet of our customers, if you look over at a company like Schwab, who's being positioned more for long-term investors for a longer period of time, that penetration number is probably 35% to 40%. So it's not Herculean, others have done it. We basically are relatively new, and what we've been working on is a better positioning of our company from the standpoint of marketing. So you've seen the bifurcation between the Baby on our advertising and more hard-hitting product in platform so that we can talk about our capabilities not just our image rate. So we're basically -- we think the Baby is terrific for awareness, but we think we have to also provide more tangibility and specificity, particularly if we want to compel you to think about us or consider us as a good place to invest. In addition to that, what we found is that we segment our portfolio correctly and we put a financial consultant, one of ours, not an RIA, with the right group of customers, the relationship improves remarkably, in particular in the area of a better relationship from the standpoint of helping them manage to the longer term versus just a transactional business, all things being equal. And as Mike made the point, we're working on doubling that sales force over a 2-year period, and we're well down the road as it relates to that. And then finally, but these are not sequential, they're running in parallel, having the right set of products and services and the awareness that we have the right set of products and services, which we believe we have a full set of products and services to serve the needs of that particular client base. So those 2 are highly related but we think about them somewhat distinctive at the moment because we're ahead on one and somewhat behind on the other because we started late, not because we failed at execution. In the middle, is this institutional set of businesses that only focus for the moment on the Corporate Services group, the Corporate Services group, which we said we have 21% market share of corporate America measured by the Fortune 1000. And we do a terrific, we think, a terrific job for those folks in the administration of it's product rate option plans. And the real benefit to us is not only an economic benefit from the program, but 25% to 30% of our new retail customers flow to us from that business at a much reduced cost, if we have to go out into the open market. So we want to accelerate the growth of that business, both for strategic as well as the economic reasons. And then finally, there's the Bank. And the Bank is serving us well. But the Bank is really in 2 businesses today. One, it really does take the deposits we bring in or the cash we bring in and try to optimize the value, which I'd add, I think it's a terrific job at. And the other is it's been a collection agency on collecting the money from the legacy loans that go back mostly from '07, '06, '05 and just prior to that. But that's essentially -- fortunately is not a growth industry, that's an industry basically that's under control and over time, becomes less impactful to our business. So we kind of think about it across that spectrum or executing across all those elements. Then in addition to that, you asked the question about rate exposure and oftentimes, we go on the record, which we have, saying that we're rate neutral, roughly speaking. But we typically have to reinforce extra parallel shock in change in rates. But if rates rise or the curve steepens with the passage of time, we like that a lot, and that will accrue value to us over any reasonable period of time. So we tend to be rate neutral when we run our models again for a shock to the system, whether it's a parallel shock or a nonparallel shock but we tend not to be rate neutral if rates are going to sustain themselves higher and steeper, that's a very good situation for us with the passage of time.

Brian Bedell - ISI Group Inc.

That's a very good in-depth description. Do you ever think about using capital to break some of the hedges on the liability side that would give you more rate exposure?

Steven Freiberg

Put it this way, we talked about it but at this point, we've concluded that when looking at cost benefit, probably not the right thing for us to do, all things being equal. Mike Pizzi is here, who is essentially both the Corporate and Bank Treasurer. I don't know Mike, if you want to add anything in addition to that but I think that's more or less where we come out.

Michael Pizzi

We continually look at it. We continually look at our active hedge position versus the designated position that you are referring to. And at this point in time, I think the best practice is to continue the runoff that we've been.

Steven Freiberg

Yes. So we're going to continue to review it, but we've concluded at this point, it's not economic for us to take action.

Brian Bedell - ISI Group Inc.

And so the debt pay down is still the primary over the favored use of capital when you get to the point where you can deploy, is that correct?

Matthew Audette

Sure. This is Matt. So I think we would make that judgment at that time, but I think it's most certainly one of the most obvious uses sitting here today.

Operator

This concludes the question-and-answer session of today's call. I would now like to turn the floor back over to Mr. Steven Freiberg for closing remarks.

Steven Freiberg

Thank you, operator, and thank you again for joining us tonight. And we look forward to speaking with you again next quarter. Good evening to everyone.

Operator

Thank you for participating in today's conference call. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of 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.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!