BOSTON, MA -- (Marketwire) -- 02/02/09 -- The First Marblehead Corporation (NYSE: FMD) today announced its financial and operating results for the second quarter of fiscal 2009 and for the six-month period ended on December 31, 2008.
Total revenues for the six-month period ended December 31, 2008 were $(171.0) million, a decrease from $257.2 million for the same period last year. Revenues declined principally as a result of not completing a securitization transaction during the first six months of fiscal 2009 while two securitization transactions with revenues totaling $319.3 million were completed in the first six months of fiscal 2008. The net loss for the six-month period was $186.3 million or $1.88 per share, down from net income of $51.1 million or $0.54 per diluted share for the same period last year.
Total revenues for the second quarter of fiscal 2009 were $(86.1) million, as compared to $(122.8) million for the same period last year. Both quarters were adversely affected by non-cash, pre-tax adjustments to the estimated fair value of the company's service receivables; $98.6 million for the second quarter of fiscal 2009 and $170.5 million for the second quarter of fiscal 2008.
The net loss for the second quarter of fiscal 2009 was $93.4 million, or $0.94 per share compared to a net loss of $117.7 million, or $1.26 per share, for the same period last year. Non-interest expenses, excluding the $29.3 million unrealized loss on education loans held for sale, decreased $43.9 million or 60% from the same period last year as a result of the company's expense reduction initiatives.
The company ended the quarter with $198.6 million in cash, cash equivalents and investments on the balance sheet. Net operating cash usage for the quarter ended December 31, 2008 was approximately $14.3 million.
About The First Marblehead Corporation -- First Marblehead helps meet the growing demand for private education loans by offering national and regional financial institutions and educational institutions an integrated suite of design, implementation and capital markets services for student loan programs. First Marblehead supports responsible lending and is a strong proponent of the smart borrowing principle, which encourages students to access scholarships, grants and federally-guaranteed loans before considering private education loans, please see www.SmartBorrowing.org. For more information, go to www.firstmarblehead.com.
Statements in this press release, including the tables, regarding First Marblehead's future financial and operating results, products and services, efforts, liquidity and the demand for private student loans, as well as any other statements that are not purely historical, constitute forward-looking statements for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based upon our historical performance, the historical performance of the securitization trusts that we have facilitated and on our plans, estimates and expectations as of February 2, 2009. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future results, plans, estimates or expectations contemplated by us will be achieved. You are cautioned that 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 financial or operational results, including the performance of securitization trusts and resulting cash flows, facilitated loan volumes or financing-related revenues, or the timing of events, to be materially different than those expressed or implied by forward-looking statements. Important factors that could cause or contribute to such differences include: our ability to structure securitizations or alternative financings; the size, structure and timing of any securitizations or alternative financings; developments in the bankruptcy proceedings of The Education Resources Institute, Inc.
(TERI), including challenges to the enforceability of security interests of securitization trusts; the demand for, and market acceptance of, loan programs that are not TERI-guaranteed, including our success in providing such alternatives to former, current and prospective clients; the inability of TERI to meet its guaranty obligations, or rejection of its guaranty agreements with regard to loans held by the securitization trusts; degradation of credit quality or performance of the loan portfolios of the securitization trusts; the estimates we make and the assumptions on which we rely in preparing our financial statements, including with respect to the valuation or our loans held for sale; continued variance between the actual performance of securitization trusts and the key assumptions we have used to estimate the present value of additional structural advisory fees and residual revenues; and the other factors set forth under the caption "Part II - Item 1A. Risk Factors" in First Marblehead's quarterly report on Form 10-Q filed with the Securities and Exchange Commission on November 10, 2008. Important factors that could cause or contribute to differences between the actual performance of the securitization trusts and our key assumptions include economic, regulatory, competitive and other factors affecting prepayment, default and recovery rates on the underlying securitized loan portfolio; capital market receptivity to private student loan asset-backed securities; trust expenses; and interest rate trends, including with regard to auction rate notes. We disclaim any obligation to update any forward-looking statements as a result of developments occurring after the date of this press release.
-financial tables to follow-
The First Marblehead Corporation and Subsidiaries
Condensed Consolidated Statements of Operations
For the three and six months ended December 31, 2008 and 2007
(Unaudited)
(in thousands, except per share amounts) Three months ended Six months ended
December 31, December 31,
2008 2007 2008 2007
---------- ---------- ---------- ----------
Service revenues:
Up-front structural
advisory fees $ - $ 524 $ - $ 178,066
Additional structural
advisory fees:
From new
securitizations - - - 24,304
Trust updates (29,513) (10,775) (47,403) (7,916)
---------- ---------- ---------- ----------
Total additional
structural advisory
fees (29,513) (10,775) (47,403) 16,388 Residuals
From new
securitizations - - - 116,972
Trust updates (69,082) (159,746) (149,238) (173,854)
---------- ---------- ---------- ----------
Total residuals (69,082) (159,746) (149,238) (56,882) Processing fees from TERI 244 37,280 2,630 83,529 Administrative and other
fees 4,782 3,129 8,400 24,890
---------- ---------- ---------- ---------- Total service revenues (93,569) (129,588) (185,611) 245,991 Net interest income 7,474 6,778 14,612 11,161
---------- ---------- ---------- ---------- Total revenues (86,095) (122,810) (170,999) 257,152
---------- ---------- ---------- ----------Non-interest expenses:
Compensation and benefits 10,295 19,734 25,552 51,737
General and
administrative expenses 19,540 53,959 43,987 119,457
Unrealized loss on loans
held for sale 29,303 - 50,530 -
---------- ---------- ---------- ----------
Total non-interest
expenses 59,138 73,693 120,069 171,194Income(loss) before income
tax expense(benefit) (145,233) (196,503) (291,068) 85,958Income tax expense(benefit) (51,846) (78,828) (104,785) 34,813
---------- ---------- ---------- ----------Net income(loss) $ (93,387) $ (117,675) $ (186,283) $ 51,145
========== ========== ========== ========== Net income(loss) per
share, basic $ (0.94) $ (1.26) $ (1.88) $ 0.55
Net income(loss) per
share, diluted (0.94) (1.26) (1.88) 0.54
Cash dividends declared
per share - 0.12 - 0.395
Weighted average shares
outstanding, basic 99,116 93,500 99,040 93,469
Weighted average shares
outstanding, diluted 99,116 93,500 99,040 94,108 The First Marblehead Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
As of December 31, 2008 and June 30, 2008
(Unaudited)
(amounts in thousands) December 31, June 30,
2008 2008
------------ ------------
Assets
Cash, cash equivalents and investments $ 198,570 $ 140,909
Federal funds sold 23,420 80,215
Loans held for sale 460,987 497,324
Service receivables:
Structural advisory fees 64,935 113,842
Residuals 144,017 293,255
Processing fees from TERI 67 4,086
------------ ------------
Total service receivables 209,019 411,183
------------ ------------ Property and equipment, net 27,223 37,681 Goodwill - 1,701
Intangible assets, net 1,569 1,956
Other prepaid expenses 9,153 15,377
Mortgage loans held to maturity 9,831 10,754
Prepaid income taxes 6,772 -
Net deferred income tax asset 91,789 -
Other assets 5,409 3,798
------------ ------------
Total assets $ 1,043,742 $ 1,200,898
============ ============Liabilities and Stockholders' Equity
Liabilities:
Deposits $ 137,967 $ 244,113
Education loan warehouse facility 245,663 242,899
Other short-term borrowings 50,000 -
Accounts payable and accrued expenses 20,085 20,543
Income taxes payable - 31,275
Net deferred income tax liability - 10,385
Other liabilities 11,027 14,071
------------ ------------
Total liabilities 464,742 563,286
------------ ------------ Commitments and contingencies Stockholders' equity 579,000 637,612
------------ ------------
Total liabilities and stockholders' equity $ 1,043,742 $ 1,200,898
============ ============
The First Marblehead Corporation and Subsidiaries
Balance Sheet Metrics
Roll-forward of Structural Advisory Fees and Residuals Receivables
(Dollars in Thousands)
Three Months Six Months
Ended Ended
December 31, December 31,
2008 2008
------------- -------------
Structural Advisory Fees Receivable
Beginning of period balance $ 94,475 $ 113,842Cash received from trust distributions (27) (1,504)Trust updates:
Passage of time (fair value accretion) 2,641 5,430
Decrease in average prepayment rate 2,358 2,358
Increase in discount rate assumptions (6,123) (20,189)
Increase in timing and average default rate (3,031) (6,164)
Increase in auction rate notes spread (13,087) (13,087)
Decrease in forward libor curve (15,396) (19,531)
Other factors 3,125 3,780
------------- -------------
Net accretion (29,513) (47,403)
------------- -------------End of period balance $ 64,935 $ 64,935
============= =============Residuals ReceivableBeginning of period balance $ 213,099 $ 293,255
Trust updates:
Passage of time (fair value accretion) 8,821 19,752
Decrease in average prepayment rate 11,336 11,336
Increase in discount rate assumptions (39,991) (83,634)
Increase in timing and average default rate (9,380) (50,108)
Increase in auction rate notes spread (31,779) (31,779)
Decrease in forward libor curve (16,129) (22,113)
Other factors 8,040 7,308
------------- -------------
Net accretion (69,082) (149,238)
------------- -------------End of period balance $ 144,017 $ 144,017
============= =============
Note: Factors affecting the valuation of structural advisory fees and residuals receivables include changes, if any, to the assumptions we use in estimating the fair value of these receivables. In light of conditions in the asset-backed securities market and our ongoing evaluation of actual trust performance, we changed certain assumptions used to determine the fair value of our residual and structural advisory fee receivables at December 31, 2008. We continue to monitor the performance of trust assets against our expectations, as well as other inputs necessary to estimate the present value of our structural advisory fee and residuals receivables. We will make such additional adjustments to our estimates as we believe are necessary to value properly our receivables balances at each balance sheet date.
Contact:
Lee Jacobson
Investor Relations
617.638.2065
