EX-99.1 2 a09-4140_1ex99d1.htm EX-99.1

Exhibit 99.1

 

 

 

Contact:

 

 

 

Lee Jacobson

 

Investor Relations

 

617.638.2065

 

 

 

News for Immediate Release

 

First Marblehead Announces Second Quarter Fiscal 2009 Results

 

BOSTON, MA, February 2, 2009 – 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.

 

– continued –

 


 

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

 

171,194

 

 

 

 

 

 

 

 

 

 

 

Income(loss) before income tax expense(benefit)

 

(145,233

)

(196,503

)

(291,068

)

85,958

 

 

 

 

 

 

 

 

 

 

 

Income 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

 

 

-more-

 


 

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,
2008

 

June 30,
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

 

 

-more-

 


 

The First Marblehead Corporation and Subsidiaries

Balance Sheet Metrics

Roll-forward of Structural Advisory Fees and Residuals Receivables

(Dollars in Thousands)

 

 

 

Three Months
Ended

 

Six Months
Ended

 

 

 

December 31,
2008

 

December 31,
2008

 

Structural Advisory Fees Receivable

 

 

 

 

 

Beginning of period balance

 

$

94,475

 

$

113,842

 

 

 

 

 

 

 

Cash 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 Receivable

 

 

 

 

 

 

 

 

 

 

 

Beginning 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.

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