Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Sameer Gokhale – Keefe, Bruyette & Woods.
Sameer Gokhale – Keefe, Bruyette & Woods
You talked about potentially looking at opportunities, it seemed like acquisition opportunities. I was just wondering to what extent that might include potentially buying a bank. It seems if anything this cycle has taught us the importance of deposit funding when the wholesale funding markets are in turmoil. Is that something that you’ve considered or are considering, why or why not?
Paul R. Sinsheimer
Sameer, I think that’s a great question and if I were to answer it in the negative, that no we are not, I probably would be the only one in the country not looking to do that. Let me say this, we are exploring all of the opportunities and that is one. We’re under no time clocks or severe time clocks or to do so but as the world continues to turn and things continue to change and evolve, we are considering all of these options and it’s on the table along with several other things.
Sameer Gokhale – Keefe, Bruyette & Woods
Can I ask you if you’ve already had a discussion with the bank regulators as far as this is concerned?
Paul R. Sinsheimer
I’m not going to go into that type of detail except to say that we are certainly intellectually and physically approaching this and as things become more definitive we will share them with the public at an appropriate time.
Sameer Gokhale – Keefe, Bruyette & Woods
Okay, fair enough, and then the other question I had was, you talked about in the past as well, the operating expenses, and how they relate to higher MPAs, but it seems like if one were to look at the run rate of OpEx, that your operating expenses are kind of $500,000 or so higher as compared to say the same period last year and I was wondering if you could just shed some light on what exactly, how that relates to the increased MPA, are those the costs for just locating and repossessing the actual assets? Can you shed some light on that?
Paul R. Sinsheimer
This is a phenomena we experienced 5 or 6 years ago or 4 years ago in 2003 when we experienced a downward swing in our business. We expense all of our repossession and litigation expenses as incurred. They’re not capitalized. They are written and they are charged to earnings as paid. As you can see, we went from net losses at microscopic levels to something that I still consider outstanding but meaningfully larger and those costs are litigation and repossession costs and that is a very, very large portion of that increase and as the portfolio, if it continues to weaken, you can expect those costs to remain with us. Once again, when it turns, and if our performance in the future is similar to what it was in ’04 and ’05, you actually saw our operating expenses come back down as we’re able to collect those monies that were previously expensed. It is a moving target but in general as the portfolio declines, those costs go up, and when it turns, we usually get a large portion of that money back.
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