Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from David Burtzlaff - Stephens, Inc.
David Burtzlaff - Stephens, Inc.
I have a few questions on the convert. How much additional interest expense was there in the quarter from the convert offering?
Tom Bessant
Probably about $0.01 a share, round it down to $0.01 a share. As we look out toward Q3 and Q4 it’ll be about $0.02 a share in each quarter. Keep in mind that’s based on the straight debt rate that we apply to that instrument. As Dan mentioned, it’s the 5.25% cash interest but it will accrete book interest at 8.5% roughly.
David Burtzlaff - Stephens, Inc.
You said the loan balances were up late in the quarter. Was that mainly in June that you saw the big pick up?
Tom Bessant
As usual it’s a gradual increase. Just to recap for everybody, as we said in our first quarter call tax refunds were delayed for whatever reason in the first quarter which meant they dropped later in the quarter then they typically will and so as a result that normal return of demand was deferred a little bit into the second quarter. They begin their gradual rise later in the second quarter so we get a little less earnings off of that. It also defers any forfeiture activity that may have occurred in the second quarter from loans that would have been written in March.
As you point out, they did increase later in the quarter. They did increase obviously quite significantly to give us a 9% up year over year loan balance.
Dan Feehan
A fair amount of that did come in June.
David Burtzlaff - Stephens, Inc.
The loss rates online, I know last year in the third and the fourth quarter they kind of spiked a little bit due to some of the changes, or the removal of some of, as you cut back lending in some of the mature markets like Pennsylvania. Now that you’re not lending in Pennsylvania where do you think the loss rate is that going to affect the loss rate in the third and the fourth quarter this year?
Tom Bessant
You’re exactly right it’s a very astute observation because we did talk about two things that impacted loss rates later in the year last year online which was the absence of mature markets which changes your mix. We also indicated that we were tweaking our underwriting model because we were seeing some increases in loss levels. The improvement we’ve seen in the online business both in Q1 and Q2 is related to those underwriting practices and our analytics team that Dan mentioned a little bit earlier.
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