UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(mark one)

þ		Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the Quarterly Period Ended September 30, 2006

o		Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the transition period from                      to                     .

MoneyGram International, Inc.

(Exact name of registrant as specified in its charter)

Delaware		16-1690064
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
1550 Utica Avenue South, Minneapolis, Minnesota		55416
(Address of principal executive offices)		(Zip Code)

(952) 591-3000
(Registrant’s telephone number, including area code)

Not applicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ     No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ     Accelerated filer o     Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o     No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of November 6, 2006, 84,050,387 shares of Common Stock, $0.01 par value, were outstanding.

 

 

TABLE OF CONTENTS

		PART I. FINANCIAL INFORMATION
Item 1.		Financial Statements
		Consolidated Balance Sheets
		Consolidated Statements of Income
		Consolidated Statements of Comprehensive Income
		Consolidated Statements of Cash Flows
		Consolidated Statements of Stockholders’ Equity
		Notes to Consolidated Financial Statements
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.		Quantitative and Qualitative Disclosures About Market Risk
Item 4.		Controls and Procedures
		PART II. OTHER INFORMATION
Item 1.		Legal Proceedings
Item 1A.		Risk Factors
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds
Item 6.		Exhibits
Signatures
Exhibit Index
Certification
Certification
Certification
Certification

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

MONEYGRAM INTERNATIONAL, INC.

		September 30,				December 31,
		2006				2005
		(Dollars in thousands, except
		share and per share data)
ASSETS
Cash and cash equivalents		$	—			$	—
Cash and cash equivalents (substantially restricted)			886,395				866,391
Receivables (substantially restricted)			1,602,153				1,325,622
Investments (substantially restricted)			5,761,583				6,233,333
Property and equipment			136,775				105,545
Deferred tax assets			44,055				37,477
Derivative financial instruments			27,376				28,743
Intangible assets			18,363				13,248
Goodwill			419,657				404,270
Other assets			59,106				60,535
Total assets		$	8,955,463			$	9,075,164
LIABILITIES
Payment service obligations		$	7,878,315			$	8,059,309
Debt			150,000				150,000
Derivative financial instruments			3,733				5,055
Pension and other postretirement benefits			93,291				105,485
Accounts payable and other liabilities			157,114				131,186
Total liabilities			8,282,453				8,451,035
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY
Preferred shares — undesignated, $0.01 par value, 5,000,000 authorized, none issued			—				—
Preferred shares — junior participating, $0.01 par value, 2,000,000 authorized, none issued			—				—
Common shares, $.01 par value: 250,000,000 shares authorized, 88,556,077 shares issued			886				886
Additional paid-in capital			70,388				80,038
Retained income			700,934				613,497
Unearned employee benefits and other			(16,532	)			(25,401	)
Accumulated other comprehensive income			1,563				11,825
Treasury stock: 3,701,889 and 2,701,163 shares at September 30, 2006 and December 31, 2005			(84,229	)			(56,716	)
Total stockholders’ equity			673,010				624,129
Total liabilities and stockholders’ equity		$	8,955,463			$	9,075,164

See Notes to Consolidated Financial Statements

MONEYGRAM INTERNATIONAL, INC.

		Three Months Ended September 30								Nine Months Ended September 30
		2006				2005				2006				2005
		(Dollars and share in thousands,								(Dollars and share in thousands,
		except per share data)								except per share data)
REVENUE:
Fee and other revenue		$	200,894			$	156,375			$	556,862			$	444,173
Investment revenue			96,406				91,634				297,882				272,188
Net securities losses			(869	)			(1,624	)			(1,728	)			(2,060	)
Total revenue			296,431				246,385				853,016				714,301
Fee commissions expense			83,144				58,940				226,246				167,344
Investment commissions expense			63,520				60,889				185,346				177,656
Total commissions expense			146,664				119,829				411,592				345,000
Net revenue			149,767				126,556				441,424				369,301
EXPENSES:
Compensation and benefits			44,753				35,180				128,473				97,745
Transaction and operations support			41,318				34,547				112,615				106,733
Depreciation and amortization			10,419				8,102				28,197				23,187
Occupancy, equipment and supplies			9,314				8,156				26,748				25,106
Interest expense			2,003				1,697				5,925				5,694
Total expenses			107,807				87,682				301,958				258,465
Income from continuing operations before income taxes			41,960				38,874				139,466				110,836
Income tax expense			11,922				10,076				41,787				28,185
Income from continuing operations			30,038				28,798				97,679				82,651
Income and gain from discontinued operation, net of tax			—				740				—				740
NET INCOME		$	30,038			$	29,538			$	97,679			$	83,391
Basic earnings per share
Income from continuing operations		$	0.36			$	0.34			$	1.16			$	0.97
Income from discontinued operations, net of tax		$	—			$	0.01			$	—			$	0.01
Earnings per common share		$	0.36			$	0.35			$	1.16			$	0.98
Diluted earnings per share
Income from continuing operations		$	0.35			$	0.33			$	1.13			$	0.96
Income from discontinued operations, net of tax		$	—			$	0.01			$	—			$	0.01
Earnings per common share		$	0.35			$	0.34			$	1.13			$	0.97
Average outstanding common shares			84,298				84,883				84,468				84,748
Additional dilutive shares related to stock-based compensation			1,501				1,136				1,684				1,176
Average outstanding and potentially dilutive common shares			85,799				86,019				86,152				85,924

See Notes to Consolidated Financial Statements

MONEYGRAM INTERNATIONAL, INC.

		Three Months Ended September 30								Nine Months Ended September 30
		2006				2005				2006				2005
		(Dollars in thousands)								(Dollars in thousands)
Net income		$	30,038			$	29,538			$	97,679			$	83,391
Other comprehensive income:
Net unrealized gains (losses) on available-for-sale securities:
Net holding gains (losses) arising during the period, net of tax expense (benefit) of $22,689 and ($19,646) for the three months ended September 30, 2006 and 2005, respectively, and ($8,306) and ($30,253) for the nine months ended September 30, 2006 and 2005, respectively			37,019				(32,743	)			(13,551	)			(50,422	)
Reclassification adjustment for net realized gains included in net income, net of tax expense of $330 and $609 for the three months ended September 30, 2006 and 2005, respectively, and $657 and $772 for the nine months ended September 30, 2006 and 2005, respectively			539				1,015				1,071				1,288
			37,558				(31,728	)			(12,480	)			(49,134	)
Net unrealized (losses) gains on derivative financial instruments:
Net holding (losses) gains arising during the period, net of tax (benefit) expense of ($10,844) and $13,686 for the three months ended September 30, 2006 and 2005, respectively, and ($4,373) and $41,683 for the nine months ended September 30, 2006 and 2005, respectively			(17,692	)			22,811				(7,136	)			69,472
Reclassifications from other comprehensive income to net income, net of tax expense (benefit) of $2,248 and ($3,074) for the three months ended September 30, 2006 and 2005, respectively, and $4,158 and ($14,530) for the nine months ended September 30, 2006 and 2005, respectively			3,667				(5,124	)			6,785				(24,216	)
			(14,025	)			17,687				(351	)			45,256
Unrealized foreign currency translation gains (losses), net of tax expense (benefit) of $30 and ($126) for the three months ended September 30, 2006 and 2005, respectively, and $1,574 and ($2,054) for the nine months ended September 30, 2006 and 2005, respectively			48				(210	)			2,569				(3,423	)
Other comprehensive income (loss)			23,581				(14,251	)			(10,262	)			(7,301	)
Comprehensive income		$	53,619			$	15,287			$	87,417			$	76,090

See Notes to Consolidated Financial Statements.

MONEYGRAM INTERNATIONAL, INC.

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2006				2005				2006				2005
		(Dollars in thousands)								(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	30,038			$	29,538			$	97,679			$	83,391
Adjustments to reconcile net income to net cash used in operating activities:
Net earnings in discontinued operations			—				(740	)			—				(740	)
Depreciation and amortization			10,419				8,102				28,197				23,187
Investment impairment charges			1,091				1,312				3,529				4,740
Net (gain) loss on sale of investments			(222	)			312				(1,801	)			(2,680	)
Net amortization of investment premium			(2,773	)			2,090				(5,721	)			6,740
Provision for uncollectible receivables			1,518				1,948				2,763				6,788
Non-cash compensation expense			1,707				1,139				5,233				3,653
Other non-cash items, net			(1,630	)			(5,849	)			(6,803	)			2,261
Changes in foreign currency translation adjustments			48				(210	)			2,569				(3,423	)
Changes in assets and liabilities:
Other assets			(1,986	)			2,095				723				590
Accounts payable and other liabilities			6,053				16,964				2,784				1,109
Total adjustments			14,225				27,163				31,473				42,225
Change in cash and cash equivalents (substantially restricted)			(154,183	)			332,403				(10,473	)			(72,011	)
Change in receivables, net (substantially restricted)			(39,948	)			(88,236	)			(278,935	)			(636,491	)
Change in payment service obligations			(264,147	)			(200,730	)			(192,985	)			579,923
Net cash used in operating activities			(414,015	)			100,138				(353,241	)			(2,963	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investments			379,007				4,744				492,493				773,501
Proceeds from maturities of investments			239,261				271,149				625,567				739,770
Purchases of investments			(176,118	)			(357,902	)			(668,859	)			(1,438,718	)
Purchases of property and equipment			(17,102	)			(6,877	)			(57,299	)			(32,228	)
Cash received (paid) for acquisitions			5,741				—				(7,311	)			(8,535	)
Net cash provided by investing activities			430,789				(88,886	)			384,591				33,790
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options			2,964				3,322				20,192				5,956
Tax benefits from share-based compensation			1,171				370				4,936				715
Purchase of treasury stock			(17,504	)			(14,089	)			(46,236	)			(34,902	)
Cash dividends paid			(3,405	)			(855	)			(10,242	)			(2,596	)
Net cash used in financing activities			(16,774	)			(11,252	)			(31,350	)			(30,827	)
CHANGE IN CASH AND CASH EQUIVALENTS			—				—				—				—
CASH AND CASH EQUIVALENTS — Beginning of period			—				—				—				—
CASH AND CASH EQUIVALENTS — End of period		$	—			$	—			$	—			$	—

See Notes to Consolidated Financial Statements

MONEYGRAM INTERNATIONAL, INC.

																		Accumulated
														Unearned				Other
														Employee				Comprehensive				Common
		Common				Additional				Retained				Benefits				(Loss)				Stock in
		Stock				Capital				Income				and Other				Income				Treasury				Total
		(Dollars in thousands, except per share data)
As of December 31, 2005		$	886			$	80,038			$	613,497			$	(25,401	)		$	11,825			$	(56,716	)		$	624,129
Net income											97,679																97,679
Dividends ($0.04 per share)											(10,242	)															(10,242	)
Employee benefit plans							(9,650	)							8,869								18,723				17,942
Treasury shares acquired																							(46,236	)			(46,236	)
Unrealized foreign currency translation adjustment																			2,569								2,569
Unrealized loss on available-for-sale securities																			(12,480	)							(12,480	)
Unrealized loss on derivative financial instruments																			(351	)							(351	)
As of September 30, 2006		$	886			$	70,388			$	700,934			$	(16,532	)		$	1,563			$	(84,229	)		$	673,010

See Notes to Consolidated Financial Statements

MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES

1. Basis of Presentation

The accompanying unaudited consolidated financial statements of MoneyGram International, Inc. (“MoneyGram” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal recurring nature. Operating results for the three and nine month periods ended September 30, 2006 are not necessarily indicative of the results that may be expected for future periods. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005.

2. Consolidation of Special Purpose Entities

Special purpose entities (“SPEs”) are trusts, partnerships or corporations established for a particular limited purpose. The Company participates in various trust arrangements (special purpose entities) related to official check processing agreements with financial institutions and structured investments within the investment portfolio. The Company has determined that these special purpose entities meet the definition of a variable interest entity under Financial Interpretation (“FIN”) 46R, Consolidation of Variable Interest Entities, and must be included in our consolidated financial statements.

Working in cooperation with certain financial institutions, the Company has established separate consolidated entities (special-purpose entities) and processes that provide these financial institutions with additional assurance of our ability to clear their official checks. These processes include maintenance of specified ratios of segregated investments to outstanding payment instruments, typically 1 to 1. In some cases, alternative credit support has been purchased that provides backstop funding as additional security for payment of instruments. However, the Company remains liable to satisfy the obligations, both contractually and by operation of the Uniform Commercial Code, as issuer and drawer of the official checks. Accordingly, the obligations have been recorded in the Consolidated Balance Sheets under “Payment service obligations.” Under certain limited circumstances, clients have the right to either demand liquidation of the segregated assets or to replace us as the administrator of the special-purpose entity. Such limited circumstances consist of material (and in most cases continued) failure of MoneyGram to uphold its warranties and obligations pursuant to its underlying agreements with the financial institution clients. While an orderly liquidation of assets would be required, any of these actions by a client could nonetheless diminish the value of the total investment portfolio, decrease earnings, and result in loss of the client or other customers or prospects. The Company offers the special purpose entity to certain financial institution clients as a benefit unique in the payment services industry.

Certain structured investments the Company owns represent beneficial interests in grantor trusts or other similar entities. These trusts typically contain an investment grade security, generally a U.S. Treasury strip, and an investment in the residual interest in a collateralized debt obligation, or in some cases, a limited partnership interest. For certain of these trusts, the Company owns a percentage of the beneficial interests which results in the Company absorbing a majority of the expected losses. Therefore, the Company consolidates these trusts by recording and accounting for the assets of the trust separately in the consolidated financial statements.

The Company follows the accounting guidance in Statement of Financial Accounting Standards (“SFAS”) No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities, to determine whether or not SPEs are qualifying SPEs (a “QSPE”). A QSPE is an entity with significantly limited permissible activities which are entirely specified in the legal documents establishing the SPE and may only be significantly changed with the approval of the holders of at least a majority of the beneficial interests held by parties other than the sponsoring company. If the Company has a variable interest in a QSPE, or is a sponsor of an SPE that does not meet the criteria required to be a QSPE, the Company follows the accounting guidance in FIN 46R to determine if the Company is required to consolidate the SPE.

3. Acquisitions

On May 31, 2006, MoneyGram completed the acquisition of Money Express, the Company’s former super agent in Italy. In connection with the acquisition, the Company formed MoneyGram Payment Systems Italy, a wholly-owned subsidiary, to operate the former Money Express network. The acquisition provides the Company with the opportunity for further network expansion and more control of marketing and promotional activities in the region.

MoneyGram acquired Money Express for $15.0 million, subject to purchase price adjustments. The acquisition cost includes $1.3 million of transaction costs and the forgiveness of $0.7 million of liabilities. During the third quarter of 2006, the Company received a purchase price adjustment of $6.0 million. The Company is in the process of finalizing the valuation of intangible assets and deferred taxes from this acquisition, among other items, which may result in adjustment to the purchase price allocation. Purchased intangible assets of $7.3 million, consisting primarily of agent contracts and a non-compete agreement, will be amortized over useful lives ranging from 3 to 5 years. Preliminary goodwill of $15.3 million was recorded and assigned to our Global Funds Transfer segment.

The operating results of Money Express subsequent to May 31, 2006 are included in the Company’s Consolidated Statement of Income. The financial impact of the acquisition is not material to the Consolidated Balance Sheet or Consolidated Statement of Income.

4. Unrestricted Assets

The Company is regulated by various state agencies which generally require us to maintain liquid assets and investments with an investment rating of A or higher in an amount generally equal to the payment service obligation for those regulated payment instruments, namely teller checks, agent checks, money orders, and money transfers. Consequently, a significant amount of cash and cash equivalents, receivables and investments are restricted to satisfy the liability to pay the face amount of regulated payment service obligations upon presentment. The Company is not regulated by state agencies for payment service obligations resulting from outstanding cashier’s checks; however, the Company restricts a portion of the funds related to these payment instruments due to contractual arrangements and/or Company policy. Assets restricted for regulatory or contractual reasons are not available to satisfy working capital or other financing requirements. The regulatory and contractual requirements do not require the Company to specify individual assets held to meet our payment service obligations; nor is the Company required to deposit specific assets into a trust, escrow or other special account. Rather, the Company must maintain a pool of liquid assets. No third party places limitations, legal or otherwise, on the Company regarding the use of its individual liquid assets. The Company is able to withdraw, deposit and/or sell its individual liquid assets at will, with no prior notice or penalty, provided the Company maintains a total pool of liquid assets sufficient to meet the regulatory and contractual requirements.

The Company has unrestricted cash and cash equivalents, receivables and investments to the extent those assets exceed all payment service obligations. These amounts are generally available; however, management considers a portion of these amounts as providing additional assurance that regulatory requirements are maintained during the normal fluctuations in the value of investments. The following table shows the total amount of unrestricted assets at September 30, 2006, and December 31, 2005:

		September 30				December 31
(Dollars in thousands)		2006				2005
Cash and cash equivalents (substantially restricted)		$	886,395			$	866,391
Receivables (substantially restricted)			1,602,153				1,325,622
Investments (substantially restricted)			5,761,583				6,233,333
			8,250,131				8,425,346
Amounts restricted to cover payment service obligations			(7,878,315	)			(8,059,309	)
Unrestricted assets		$	371,816			$	366,037

5. Investments (Substantially Restricted)

The amortized cost and fair value of investments were as follows at September 30, 2006:

						Gross				Gross
		Amortized				Unrealized				Unrealized				Market
(Dollars in thousands)		Cost				Gains				Losses				Value
Obligations of states and political subdivisions		$	782,843			$	28,286			$	(342	)		$	810,787
Commercial mortgage-backed securities			609,087				6,907				(2,348	)			613,646
Residential mortgage-backed securities			1,685,611				4,613				(23,344	)			1,666,880
Other asset-backed securities			1,919,318				34,120				(8,258	)			1,945,180
Obligations of U.S. government agencies			347,530				3,351				(6,360	)			344,521
Corporate debt securities			345,392				8,471				(829	)			353,034
Preferred and common stock			30,175				76				(2,716	)			27,535
Total		$	5,719,956			$	85,824			$	(44,197	)		$	5,761,583

The amortized cost and fair value of investments were as follows at December 31, 2005:

						Gross				Gross
		Amortized				Unrealized				Unrealized				Market
(Dollars in thousands)		Cost				Gains				Losses				Value
Obligations of states and political subdivisions		$	836,419			$	35,610			$	(529	)		$	871,500
Commercial mortgage-backed securities			691,604				10,297				(2,235	)			699,666
Residential mortgage-backed securities			1,894,227				5,024				(20,800	)			1,878,451
Other asset-backed securities			1,963,047				38,340				(10,885	)			1,990,502
U.S. government agencies			360,236				5,641				(5,274	)			360,603
Corporate debt securities			395,869				11,830				(2,266	)			405,433
Preferred and common stock			30,175				217				(3,214	)			27,178
Total		$	6,171,577			$	106,959			$	(45,203	)		$	6,233,333

All securities were classified as available-for-sale at September 30, 2006 and December 31, 2005. The amortized cost and fair value of securities at September 30, 2006 by contractual maturity are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations, sometimes without call or prepayment penalties. Maturities of mortgage-backed and other asset-backed securities depend on the repayment characteristics and experience of the underlying obligations.

		Amortized				Market
(Dollars in thousands)		Cost				Value
In one year or less		$	23,683			$	23,810
After one year through five years			575,019				585,107
After five years through ten years			533,249				547,666
After ten years			343,814				351,759
Mortgage-backed and other asset-backed securities			4,214,016				4,225,706
Preferred and common stock			30,175				27,535
Total		$	5,719,956			$	5,761,583

At September 30, 2006 and December 31, 2005, net unrealized gains of $41.6 million ($25.8 million net of tax) and $61.8 million ($38.3 million net of tax), respectively, are included in the Consolidated Balance Sheets in “Accumulated other comprehensive (loss) income.” During the three and nine months ended September 30, 2006, $0.5 million and $1.1 million, respectively, was reclassified from “Accumulated other comprehensive income” to earnings in connection with the sale of the underlying securities, as compared to $1.0 million and $1.3 million for the three and nine months ended September 30, 2005, respectively. Gross realized gains and losses on sales of securities and other-than-temporary impairments were as follows:

		Three Months Ended								Nine Months Ended
		September 30								September 30
(Dollars in thousands)		2006				2005				2006				2005
Gross realized gains		$	1,552			$	60			$	4,399			$	7,544
Gross realized losses			(1,330	)			(372	)			(2,598	)			(4,864	)
Other-than-temporary impairments			(1,091	)			(1,312	)			(3,529	)			(4,740	)
Net securities gains and losses		$	(869	)		$	(1,624	)		$	(1,728	)		$	(2,060	)

At September 30, 2006, the investment portfolio had the following aged unrealized losses:

		Less than 12 months								12 months or More								Total
		Market				Unrealized				Market				Unrealized				Market				Unrealized
(Dollars in thousands)		Value				Losses				Value				Losses				Value				Losses
Obligations of states and political subdivisions		$	5,174			$	(23	)		$	42,690			$	(319	)		$	47,864			$	(342	)
Commercial mortgage-backed securities			116,502				(1,162	)			115,284				(1,186	)			231,786				(2,348	)
Residential mortgage-backed securities			1,426,424				(22,860	)			14,756				(484	)			1,441,180				(23,344	)
Other asset-backed securities			302,833				(3,682	)			244,300				(4,576	)			547,133				(8,258	)
U.S. government agencies			49,569				(529	)			271,783				(5,831	)			321,352				(6,360	)
Corporate debt securities			95,885				(208	)			39,965				(621	)			135,850				(829	)
Preferred and common stock			5,613				(95	)			11,844				(2,621	)			17,457				(2,716	)
		$	2,002,000			$	(28,559	)		$	740,622			$	(15,638	)		$	2,742,622			$	(44,197	)

At December 31, 2005, the investment portfolio had the following aged unrealized losses:

		Less than 12 months								12 months or More								Total
		Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
(Dollars in thousands)		Value				Losses				Value				Losses				Value				Losses
Obligations of states and political subdivisions		$	62,783			$	(529	)		$	—			$	—			$	62,783			$	(529	)
Commercial mortgage-backed securities			209,056				(1,572	)			33,770				(663	)			242,826				(2,235	)
Residential mortgage-backed securities			1,081,400				(13,105	)			375,400				(7,695	)			1,456,800				(20,800	)
Other asset-backed securities			656,313				(10,086	)			75,813				(799	)			732,126				(10,885	)
U.S. government agencies			241,994				(3,327	)			80,452				(1,947	)			322,446				(5,274	)
Corporate debt securities			104,438				(1,847	)			30,719				(419	)			135,157				(2,266	)
Preferred and common stock			9,960				(40	)			11,290				(3,174	)			21,250				(3,214	)
		$	2,365,944			$	(30,506	)		$	607,444			$	(14,697	)		$	2,973,388			$	(45,203	)

The Company has determined that the unrealized losses reflected above represent temporary impairments. Eighty and sixty-one securities had unrealized losses for more than twelve months as of September 30, 2006 and December 31, 2005, respectively. The Company believes that the unrealized losses generally are caused by liquidity discounts and risk premiums required by market participants in response to temporary market conditions, rather than a fundamental weakness in the credit quality of the issuer or underlying assets or changes in the expected cash flows from the investments. Temporary market conditions at September 30, 2006 are primarily due to changes in interest rates. The Company has both the intent and ability to hold these investments to maturity.

Of the $44.2 million of unrealized losses at September 30, 2006, $0.1 million relates to one preferred stock and one asset-backed security,which each have an unrealized loss greater than 20 percent of amortized cost. These securities were evaluated considering factors such as the financial condition and near and long-term prospects of the issuer and deemed to be temporarily impaired. The remaining $44.1 million of unrealized losses at September 30, 2006 relates to securities with an unrealized loss position of less than 20 percent of amortized cost, the degree of which suggests that these securities do not pose a high risk of being or becoming other than temporarily impaired. Of these securities, $35.6 million relates to unrealized losses on investment grade fixed income securities. Investment grade is defined as a security having a Moody’s equivalent rating of Aaa, Aa, A or Baa or a Standard & Poor’s equivalent rating of AAA, AA, A or BBB. The remaining $8.5 million is comprised of $7.4 million of U.S. government agency and corporate fixed income securities and $1.1 million of asset-backed securities and residential mortgage-backed securities.

In July 2006, the Company sold securities with a fair value of $259.7 million to one party (“the acquiring party”) for a gain of less than $1.0 million. No restrictions or constraints as to the future use of the securities were placed upon the acquiring party by the Company, nor was the Company obligated under any scenario to repurchase securities from the acquiring party. In August 2006, the acquiring party sold securities totaling $646.8 million to a QSPE, including substantially all of the securities originally purchased from the Company. The Company acquired the preferred shares of the QSPE and accounts for this investment at fair value as an available-for-sale investment in accordance with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities. At September 30, 2006, the fair value of the preferred shares was $7.8 million. In addition, a subsidiary of the Company will serve as the collateral advisor to the QSPE, receiving certain fees and rights standard to a collateral advisor role. Activities performed by the collateral advisor are significantly limited and are entirely defined by the legal documents establishing the QSPE. For performing these activities, the collateral advisor receives a quarterly fee equal to ten basis points on the fair value of the collateral. The collateral advisor also received and recognized a one-time fee of $0.4 million in August 2006 for the placement of the preferred shares of the QSPE.

The Company evaluated the sale of the securities under the accounting guidance of SFAS 140 to determine if the transfer of securities to the acquiring party constituted a sale for accounting purposes, as well as to determine if the subsequent placement of the sold securities into the QSPE by the acquiring party would be deemed a transfer of securities by the Company to the QSPE. Based upon the terms of the sale to the acquiring party and legal documents relating to the QSPE, the Company determined that sale accounting was achieved upon transfer of the securities to the acquiring party and that the Company was not a transferor of securities to the QSPE. The Company then evaluated the accounting guidance of FIN 46R to determine whether the Company was required to consolidate the QSPE. As the Company does not have the unilateral ability to liquidate the QSPE or to change the entity so that it no longer meets the requirements of a QSPE through either its ownership of the preferred shares or its subsidiary’s role as collateral advisor, the Company is not required to consolidate the QSPE.

6. Derivative Financial Instruments

The notional amount of the Company’s swap agreements totaled $2.6 billion and $2.7 billion at September 30, 2006, and December 31, 2005, with an average variable receive rate of 5.2 percent and 4.1 percent, respectively, and an average fixed pay rate of 4.3 percent and 4.2 percent, respectively. The variable rate portion of the swaps is generally based on Treasury bill, Federal Funds or 6 month LIBOR. As the swap payments are settled, the net difference between the fixed amount the Company pays and the variable amount the Company receives is reflected in the Consolidated Statements of Income through “Interest expense” for the debt swaps and through “Investment commissions expense” for all other swaps. As of September 30, 2006, the Company estimates that $9.3 million (net of tax) of the unrealized gain included in “Accumulated other comprehensive income” in the Consolidated Balance Sheets will be recognized in the Consolidated Statements of Income within the next twelve months as the swap payments are settled.

7. Sale of Receivables

The balance of sold receivables as of September 30, 2006 and December 31, 2005 was $367.9 million and $299.9 million, respectively. The average receivables sold totaled $390.0 million and $385.9 million during the three and nine months ended September 30, 2006, respectively, and $387.9 million and $397.3 million in the three and nine months ended September 30, 2005, respectively. The expense of selling the agent receivables is included in the Consolidated Statements of Income in “Investment commissions expense” and totaled $6.2 million and $17.7 million for the three and nine months ended September 30, 2006, respectively, and $4.5 million and $12.1 million for the three and nine months ended September 30, 2005, respectively.

8. Income Taxes

The effective tax rate was 28.4 percent and 30.0 percent for the three and nine months ended September 30, 2006, respectively, compared to 25.9 percent and 25.4 percent for the three and nine months ended September 30, 2005, respectively. The increase in the effective rate is due to tax exempt investment income declining as a percentage of total pre-tax income. For the three and nine months ended September 30, 2006, $1.7 million and $2.6 million, respectively, of tax reserves were reversed due to closed tax audits or the expiration of statutes of limitations. The effective tax rate for the three and nine months ended September 30, 2005, benefited from the reversal of $0.7 million and $2.8 million, respectively, of tax reserves that were deemed to be no longer needed due to the expiration of statutes of limitations.

9. Stockholders’ Equity

As of September 30, 2006, the Company has 84,073,297 shares of common stock outstanding. During the three and nine months ended September 30, 2006, the Company repurchased 580,000 shares and 1,534,050 shares, respectively, of its common stock at an average cost of $30.18 per share and $30.14 per share, respectively. As of September 30, 2006, the Company has remaining authorization to purchase up to 2,420,000 shares of its common stock. Following is a summary of common stock issued and outstanding:

		September 30,				December 31,
(Amounts in thousands)		2006				2005
Common shares issued			88,556				88,556
Treasury stock			(3,702	)			(2,701	)
Restricted stock			(325	)			(693	)
Shares held in employee equity trust, at cost			(456	)			(918	)
Common shares outstanding			84,073				84,244

Following is a summary of treasury stock share activity during the nine months ended September 30, 2006:

		Treasury Stock
(Amounts in thousands)		Shares
Balance at December 31, 2005			2,701
Stock repurchases			1,534
Submission of shares for withholding taxes upon exercise of stock options and release of restricted stock, net of issuances			(533	)
Balance at September 30, 2006			3,702

The Company has an employee equity trust (the “Trust”) used to fund the issuance of shares under employee compensation and benefit plans. The fair value of the shares held by the Trust is recorded in the “Unearned employee benefits and other” component in the Consolidated Balance Sheets and is reduced as shares are released to fund employee benefits. During the nine months ended September 30, 2006, the Company released 461,639 shares upon the exercise of stock options and the vesting of restricted stock. As of September 30, 2006, 456,393 shares of MoneyGram common stock remained in the Trust.

The components of accumulated other comprehensive income include:

		September 30				December 31
(Dollars in thousands)		2006				2005
Unrealized gain on securities classified as available-for-sale		$	25,808			$	38,288
Unrealized gain on derivative financial instruments			13,300				13,651
Cumulative foreign currency translation adjustments			4,786				2,217
Minimum pension liability adjustment			(42,331	)			(42,331	)
Accumulated other comprehensive income		$	1,563			$	11,825

10. Pensions and Other Benefits

Net periodic pension cost for the defined benefit pension plan and the combined supplemental executive retirement plans (“SERPs”) includes the following components:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(Dollars in thousands)		2006				2005				2006				2005
Service cost		$	480			$	473			$	1,441			$	1,419
Interest cost			2,896				2,830				8,689				8,490
Expected return on plan assets			(2,231	)			(2,151	)			(6,694	)			(6,453	)
Amortization of prior service cost			176				179				527				536
Recognized net actuarial loss			1,080				1,023				3,241				3,070
Net periodic pension cost		$	2,401			$	2,354			$	7,204			$	7,062

Benefits paid through the defined benefit pension plan and the combined SERPs were $4.1 million and $4.2 million for the three months ended September 30, 2006 and 2005, respectively, and $12.1 million and $12.5 million for the nine months ended September 30, 2006 and 2005, respectively. The Company made contributions to the defined benefit pension plan and the combined SERPs totaling $14.0 million and $5.1 million during the three months ended September 30, 2006 and 2005, respectively, and $20.9 million and $13.7 million for the nine months ended September 30, 2006 and 2005, respectively.

Net periodic postretirement benefit cost for the defined benefit postretirement plans includes the following components:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(Dollars in thousands)		2006				2005				2006				2005
Service cost		$	159			$	155			$	478			$	464
Interest cost			179				161				536				483
Amortization of prior service cost			(74	)			(74	)			(221	)			(221	)
Recognized net actuarial loss			6				4				18				12
Net periodic pension cost		$	270			$	246			$	811			$	738

Benefits paid through, and contributions made to, the defined benefit postretirement plan were less than $0.1 million for the three months ended September 30, 2006 and 2005, respectively, and $0.1 million and $0.2 million for the nine months ended September 30, 2006 and 2005, respectively.

The Company incurred expenses for and made contributions to the 401(k) defined contribution plan totaling $0.8 million and $0.6 million during the three months ended September 30, 2006 and 2005, respectively, and $2.1 million and $1.7 million for the nine months ended September 30, 2006 and 2005, respectively. In addition, the Company made a discretionary profit sharing contribution to the 401(k) defined contribution plan totaling $2.1 million and $1.9 million during the nine months ended September 30, 2006 and 2005, respectively.

11. Debt

On September 30, 2006, the interest rate under the Company’s bank credit facility was 5.9 percent, exclusive of the effect of commitment fees and other costs, and the facility fee was 0.125 percent. At September 30, 2006 and December 31, 2005, the interest rate debt swaps used to hedge the cash flows of our variable rate debt had an average variable receive rate of 4.6 percent and 3.9 percent, respectively, and an average fixed pay rate of 4.3 percent for both periods. See Note 6 for further information regarding the Company’s portfolio of derivative financial instruments.

12. Stock-Based Compensation

Option awards are granted with an exercise price equal to the market price of the Company’s common stock on the date of grant. Stock options granted in 2006 become exercisable over a three-year period in an equal number of shares each year and have a term of ten years. For purposes of determining the fair value of stock option awards, the Company uses the Black-Scholes single option pricing model and the assumptions set forth in the following table. Expected volatility is based on the historical volatility of the price of the Company’s common stock since the spin-off on June 30, 2004. The Company uses historical information to estimate option exercise and employee termination within the valuation model. The expected term of options granted is derived from the output of the option valuation model and represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. Compensation cost is recognized using a straight-line method over the vesting or service period and is net of estimated forfeitures. The weighted-average grant date fair value of options granted during 2006 and 2005 was $10.38 and $5.95, respectively.

		2006				2005
Expected dividend yield			0.6	%			0.2	%
Expected volatility			26.5	%			24.1	%
Risk-free interest rate			4.7	%			3.8	%
Expected life		6.5 years				5 years

Following is a summary of stock option activity:

										Weighted-
										Average
						Weighted				Remaining				Aggregate
						Average				Contractual				Intrinsic
						Exercise				Term				Value
		Shares				Price				(in years)				($000)
Options outstanding at December 31, 2005			4,883,262			$	18.42
Granted			405,040				27.37
Exercised			(1,031,223	)			31.38
Forfeited			(62,878	)			19.60
Options outstanding at September 30, 2006			4,194,201			$	19.50				5.24			$	40,107
Options exercisable at September 30, 2006			3,222,080			$	18.49				4.60			$	34,061

The Company has granted both restricted stock and performance-based restricted stock. The vesting of restricted stock is typically three years from the date of grant. The vesting of performance-based restricted stock is contingent upon the Company obtaining certain financial thresholds established on the grant date. Provided the incentive performance targets established in the year of grant are achieved, the performance-based restricted stock awards granted subsequent to 2002 will vest in a three-year period from the date of grant in an equal number of shares each year. Vesting could accelerate if performance targets are met at certain achievement levels. Future vesting in all cases is subject generally to continued employment with MoneyGram or MoneyGram’s former parent company, Viad Corp. Holders of restricted stock and performance-based restricted stock have the right to receive dividends and vote the shares, but may not sell, assign, transfer, pledge or otherwise encumber the stock. Restricted stock awards are valued at the quoted market price of the Company’s common stock on the date of grant and expensed using the straight-line method over the vesting or service period of the award, net of estimated forfeitures. Following is a summary of restricted stock activity:

						Weighted
						Average
						Grant Date
		Shares				Fair Value
Restricted stock outstanding at December 31, 2005			692,939			$	18.28
Granted			114,570				27.71
Vested and issued			(472,183	)			17.60
Forfeited			(10,769	)			19.34
Restricted stock outstanding at September 30, 2006			324,557			$	23.33

Following is a summary of pertinent information related to the Company’s stock-based awards:

		Three Months Ended								Nine Months Ended
		September 30								September 30
(Dollars in thousands)		2006				2005				2006				2005
Fair value of options vesting during period		$	19			$	4			$	5,646			$	9,953
Fair value of restricted stock vesting during period			31				—				13,369				9,916
Expense recognized related to options			641				617				1,821				1,768
Expense recognized related to restricted stock			433				538				1,561				1,924
Intrinsic value of options exercised			3,318				1,121				14,323				2,179
Cash received from option exercises			2,964				3,322				20,192				5,956
Tax benefit realized for tax deductions from option exercises			1,171				370				4,936				715

As of September 30, 2006, the Company’s unvested stock-based awards had the following unrecognized compensation expense and remaining vesting periods:

						Restricted
(Dollars in thousands)		Options				Stock
Unrecognized compensation expense		$	5,331			$	3,268
Remaining weighted average vesting period		2.18 years				1.86 years

As of September 30, 2006, the Company has remaining authorization to issue awards of up to 6,931,390 shares of common stock under its 2005 Omnibus Incentive Plan.

For the three and nine months ended September 30, 2006, options to purchase 392,563 and 326,930 shares of common stock, respectively, were not included in the computation of diluted earnings per share because the effect would be antidilutive. For the three and nine months ended September 30, 2005, options to purchase 1,098,280 and 1,444,989 shares of common stock, respectively, were excluded in the diluted earnings per share calculation. Options are generally antidilutive if the exercise price of the option is greater than the average market price of the Company’s common stock for the period presented.

13. Commitments and Contingencies

At September 30, 2006, we had available reverse repurchase agreements, letters of credit and overdraft facilities totaling $2.3 billion, including a $1.0 billion reverse repurchase agreement with one clearing bank. At September 30, 2006, $11.1 million was outstanding under letters of credit.

As of September 30, 2006, the total amount of unfunded commitments related to investments in limited partnerships was $5.2 million.

14. New Accounting Pronouncements

In May 2005, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 154, Accounting Changes and Error Corrections, which replaces Accounting Principles Board (“APB”) No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. This statement requires that an entity apply the retrospective method in reporting a change in an accounting principle or the reporting entity. The standard only allows for a change in accounting principle if it is required by a newly issued accounting pronouncement or the entity can justify the use of an allowable alternative accounting principle on the basis that it is preferable. This statement also requires that corrections for errors discovered in prior period financial statements be reported as a prior period adjustment by restating the prior period financial statements. Additional disclosures are required when a change in accounting principle or reporting entity occurs, as well as when a correction for an error is reported. The statement is effective for the Company for fiscal 2006. The adoption of this SFAS did not have a material impact to the Company’s consolidated financial statements.

In January 2006, the FASB issued FASB Staff Position (“FSP”) No. 45-3, Application of FASB Interpretation No. (“FIN”) 45 to Minimum Revenue Guarantees Granted to a Business or Its Owners. This FSP amends FIN 45 to include guarantees granted to a business that its revenue for a specified period of time will be at least a specified amount. FIN 45 requires that a company record an obligation at the inception of a guarantee equal to the fair value of the guarantee, as well as disclose certain information relating to the guarantee. The FSP is applicable for minimum revenue guarantees issued or modified by the Company on or after January 1, 2006, with no revision or restatement to the accounting treatment of such guarantees issued prior to the adoption date allowed. The disclosure requirements of FIN 45 are applicable to all outstanding minimum revenue guarantees. The Company has adopted this FSP effective January 1, 2006 with no material impact to the Company’s consolidated financial statements.

In February 2006, the FASB issued FSP No. 123R-4, Classification of Options and Similar Instruments Issued as Employee Compensation That Allow for Cash Settlement upon the Occurrence of a Contingent Event. This FSP amends SFAS No. 123R, Share Based Payment, to require that stock options issued to employees as compensation be accounted for as equity instruments until a contingent event allowing for cash settlement is probable of occurring. The Company has adopted this FSP effective January 1, 2006 with no material impact to the Company’s consolidated financial statements.

In July 2006, the FASB issued FIN No. 48, Accounting for Uncertainty in Income Taxes. FIN 48 is an interpretation of SFAS No. 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in an entity’s tax return. This interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition of tax positions. This FIN is effective January 1, 2007 for MoneyGram. The Company is currently evaluating the impact, if any, of this pronouncement on its consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. This statement does not require any new fair value measurements, but it provides guidance on how to measure fair value under other accounting pronouncements. SFAS 157 also establishes a fair value hierarchy to classify the source of information used in fair value measurements. The hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad categories. This standard is effective for the Company on January 1, 2008. The Company is currently evaluating the impact of this pronouncement on its consolidated financial statements.

In September 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132. This standard requires the recognition of the funded status of a pension or postretirement plan in the balance sheet as an asset or liability. Unrecognized prior service costs and gains and losses are recorded to accumulated other comprehensive income. SFAS 158 does not change previous guidance for income statement recognition. The standard requires the plan assets and benefit obligations to be measured as of the annual balance sheet date of the Company. Prospective application of this standard is required. The recognition and disclosure provisions of SFAS 158 are effective for the Company’s 2006 year-end, while the change in measurement date is effective for the Company’s 2008 year-end. The Company does not believe the adoption of this standard will have a material impact to the Company’s consolidated financial statements.

In September 2006, the SEC issued Staff Accounting Bulletin (“SAB”) 108, which expresses the SEC Staff’s views regarding the process of quantifying financial statement misstatements. The SAB provides for a one-time cumulative effect transition adjustment to correct for misstatements that are now considered material as a result of implementing SAB 108. This SAB is effective for the Company’s 2006 year-end. The Company is currently evaluating the impact, if any, of SAB 108 on its consolidated financial statements.

15. Minimum Commission Guarantees

In limited circumstances as an incentive to new or renewing agents, the Company may grant minimum commission guarantees to an agent for a specified period of time at a contractually specified amount. Under the guarantees, the Company will pay to the agent the difference between the contractually specified minimum commission and the actual commissions earned by the agent.

As of September 30, 2006, the minimum commission guarantees had a maximum payment of $23.6 million over a weighted average remaining term of 3.5 years. The maximum payment is calculated as the contractually guaranteed minimum commission times the remaining term of the contract and, therefore, assumes that the agent generates no money transfer transactions during the remainder of its contract. However, under the terms of certain agent contracts, the Company may terminate the contract if the projected or actual volume of transactions falls beneath a contractually specified amount. In fiscal 2005, the Company paid $2.5 million under these guarantees, or approximately 50 percent of the estimated maximum payment for the year.

16. Segment Information

Our business is conducted through two reportable segments, Global Funds Transfer and Payment Systems, which are determined based upon factors such as the type of customers, the nature of products and services provided and the distribution channels used to provide those services. The following table reconciles segment operating income to the income from continuing operations before income taxes as reported in the financial statements:

		Three Months Ended								Nine Months Ended
		September 30								September 30
(Dollars in thousands)		2006				2005				2006				2005
Total revenue
Global Funds Transfer
Money transfer, including bill payment		$	176,220			$	132,802			$	483,125			$	368,644
Retail money orders			37,231				34,695				115,333				105,741
Total Global Funds Transfer			213,451				167,497				598,458				474,385
Payment Systems
Official check and payment processing			74,883				72,404				230,870				220,104
Other			7,585				6,484				23,159				19,812
Total Payment Systems			82,468				78,888				254,029				239,916
Other			512				—				529				—
Total revenue		$	296,431			$	246,385			$	853,016			$	714,301
Operating Income
Global Funds Transfer		$	38,566			$	35,230			$	119,275			$	91,340
Payment Systems			7,539				7,717				34,068				32,385
Total operating income			46,105				42,947				153,343				123,725
Interest expense			2,003				1,697				5,925				5,694
Other unallocated expenses			2,142				2,376				7,952				7,195
Income before income taxes		$	41,960			$	38,874			$	139,466			$	110,836
		-

The following table presents depreciation and amortization expense and capital expenditures by segment:

		Three Months Ended								Nine Months Ended
		September 30								September 30
(Dollars in thousands)		2006				2005				2006				2005
Depreciation and amortization
Global Funds Transfer		$	9,464			$	7,101			$	25,008			$	20,075
Payment Systems			955				1,001				3,189				3,112
Total depreciation and amortization		$	10,419			$	8,102			$	28,197			$	23,187
Capital expenditures
Global Funds Transfer		$	15,599			$	6,446			$	48,345			$	30,635
Payment Systems			1,503				431				8,954				1,593
Total capital expenditures		$	17,102			$	6,877			$	57,299			$	32,228

The following table presents revenue by major geographic area:

		Three Months Ended								Nine Months Ended
		September 30								September 30
(Dollars in thousands)		2006				2005				2006				2005
United States		$	233,406			$	196,597			$	681,836			$	571,398
Foreign			63,025				49,788				171,180				142,903
Total revenue		$	296,431			$	246,385			$	853,016			$	714,301

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with MoneyGram International, Inc.’s (“MoneyGram,” the “Company,” “we,” “us” and “our”) consolidated financial statements and related notes. This discussion contains forward-looking statements that involve risks and uncertainties. MoneyGram’s actual results could differ materially from those anticipated due to various factors discussed under “Forward-Looking Statements” and elsewhere in this Quarterly Report.

Highlights

Third quarter 2006 results reflect:

	•		Global Funds Transfer segment revenue growth of 27 percent compared to the third quarter 2005, driven by 40 percent growth of money transfer transaction volume and 33 percent growth of money transfer revenue.
	•		Fee and other revenue of $200.9 million, up 28 percent from the third quarter of 2005, driven by the growth in money transfer transaction volume.
	•		Net investment margin of 2.07 percent as compared to 1.82 percent in the third quarter of 2005, as shown in Table 4.

Table 1 — Results of Operations

		Three Months Ended												Nine Months Ended
		September 30												September 30
		2006				2005				Change				2006				2005				Change
		(Dollars in thousands)								(%)				(Dollars in thousands)								(%)
Revenue:
Fee and other revenue		$	200,894			$	156,375				28			$	556,862			$	444,173				25
Investment revenue			96,406				91,634				5				297,882				272,188				9
Net securities (losses) gains			(869	)			(1,624	)		NM					(1,728	)			(2,060	)		NM
Total revenue			296,431				246,385				20				853,016				714,301				19
Fee commissions expense			83,144				58,940				41				226,246				167,344				35
Investment commissions expense			63,520				60,889				4				185,346				177,656				4
Total commissions expense			146,664				119,829				22				411,592				345,000				19
Net revenue			149,767				126,556				18				441,424				369,301				20
Expenses:
Compensation and benefits			44,753				35,180				27				128,473				97,745				31
Transaction and operations support			41,318				34,547				20				112,615				106,733				6
Depreciation and amortization			10,419				8,102				29				28,197				23,187				22
Occupancy, equipment and supplies			9,314				8,156				14				26,748				25,106				7
Interest expense			2,003				1,697				18				5,925				5,694				4
Total expenses			107,807				87,682				23				301,958				258,465				17
Income before income taxes			41,960				38,874				8				139,466				110,836				26
Income tax expense			11,922				10,076			NM					41,787				28,185			NM
Income from continuing operations			30,038				28,798				4				97,679				82,651				18
Income and gain from discontinued operations, net of tax			—				740			NM					—				740			NM
Net income		$	30,038			$	29,538				2			$	97,679			$	83,391				17