SLM - Earnings call transcript Q3 2017

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Operator

Good morning. My name is Angel and I will be your conference operator today. At this time, I would like to welcome everyone to the Sallie Mae Third Quarter 2017 Earnings Call. [Operator Instructions] Thank you. I would now like to turn the call over to our host, Mr. of President Vice Cronin, Investor Relations. Brian may you begin your conference. Sir,

Brian Cronin

Quinlan, Good Great. With to Ray we Steve will morning for prepared Sallie the After you. our me CEO CFO. McGarry, Mae’s is open call. welcome remarks, earnings and Thank the and XXXX third today call up our questions. quarter

could future discussion predictions, other be refer discussed statements. Actual forward-looking SEC. we keep mind in and variety those a begin, to to XX-Q the factors than our in due expectations the maybe the of Before here. should and different company’s Form with This discussions of will contain Listeners on materially results filings factors. those the

page A the I call, over this along a for we release on GAAP and XX-Q is reconciliation This earnings, to Form posted will Investors salliemae.com. quarter XXXX. measures conference to the core full earnings we the GAAP found the call During press in XX, earnings. be of now turn results description September can at our non-GAAP Thank core to measures refer with call Ray. ended the will you. our

Ray Quinlan

then Brian you, this It’s to you pleasure all then and for morning. I talk able open quarter your report we to walk interest will be and results the with will third I through going Steve are thank a we our comments and Thank where Okay. will here. prose turn about and from over a measures series quantitative for some of call questions. to

That have student $X.XXX $X.X growth where from billion we the growth private quarter, loans, new rate also billion loans. originated up we rate the year. in year-to-date originated that last new $X.X The have is billion of So we was X%. student

the Measure for market the up XXXX, that the about growing by have, provided to was trends As X.XX% actually us we and interested point. data latest we at to are market which One, first within that half the the this, that in had very indicated been we look of

rate that, the overall believe market For that the market, growth size continued originations. of of applying approximately and in increase we that be has that an would $XX million the to

As we exceed of look will volume course that. our full increase the to year,

not will will we match also growth, So the increasing we over market’s share the couple as done we only of have but market be last years.

in will approximately We naturally very XXX interested talk consistent. we a and the equal along. last credit quarter, that It XXX% score XX% had been We in last that, quality versus about third that more year’s had to to year. gratifies We go the as door. say XXX XX% through has FICO average are cosigners we

our the take customers, We After take loan do we continue rate. they to out have monitor in us. with approved fact

been take has consistent are that We approximately that it. hair have just we to – rate a report at over XX%, happy

So, XX then in we X.XX%, asset? increase. NIM. was look point a is year, basis to up NIM Our the X.XX% necessarily last How from the efficient quarter

million improvement, in the gratifyingly interest cycle. would of increase we XX%. as And that lower originally have we million the of versus prior $XXX had last very all the beta increase we NIM we in and thought an are, were consistent it expenses a a experiencing our But seeing are in we are through than said mild year, Operating to the extent quarters, originally you course, We know, good. deposits on consumer rate some quarter as be era anticipated. $XXX is

most for that’s number, course not a or it servicing. money of how the in whether reasonable at we look increase track is against of the spend receivable, we As which we our

quarter the $XX.XXX billion from prior year. at So, end student of $XX.XXX up loans were the private billion,

terms, absolute of very is billion but is So, $X.X in good that XX%. increase it

customer index, with done us On which that operating is excellent XX%, a period is our ratio is while we customers up service continue that the deliver area in interact like this ease expense time, will numbers, they improve. over to of that XX% we a only us the and we do customer are our is improving. efficiency continue be not up in in increase and choose, receivable to but continuing now confident all allows So, experiencing will being methodology the This to number. they

a with complicated index they self is XX% for human to problem. XX%, in of speak to us us, the time the and customer So are means that they service only satisfy customer interact all which that to of required ease a order the times time, more would X% a

are the ratio up continues enhancement in on efficiency In we to in it continues and continues the to provide the us, to for to credit X.XX%, from volume way grow, anticipated. losses models. These trending investment were year. So, losses the attractive regard the basis our is prior performance, quarter points be the XX

losses up X.XX%. life well cutoffs loan objectives setting we when quarter know, from our Delinquency X.XX%, you of as ran risk. ROE setting the As forecast in as for our

carefully. We have very this looked at

to conscious increased in phenomenon. the losses that card delinquencies focus and increased We the that general, fact are have have credit has particular been on quite of in industry arena in a the regard

question model versus we this should particular X.X% something be quarter. The we or trend us that look X.XX% that X.XX%, model. gee, But X.X% should to we a would that about return is for which be indicate is, about this As this our aberration is at concerned? an the is the first,

be that various of Florida during some with about would that points associated that we in especially basis baseline and the Texas So quarter. average in conditions the were – do believe along customers troubling was weather from which our We XX the of sort compare there things.

summer, think seasonality for were And we we we slow for of X.X% staffing, So, tried some to the early buckets. delinquency little the bit we X.X% or address as got maturation, X.X% then and that over a flooding. on

that. corrected since have We

points delta here As mid-October, in has basis sit receded. we of XX this entirely

that I call to it to X.XX%, increases transient. as and X.X% And a going it am looks though jumps is jump, so the to

lending, in spaces related to results I this ours, about have As of others are said, consumer especially we experienced. because concerned unsecured, that the

We confident on associated grew as has quite that weather seasonality speak. depleted mostly with that model. are been are and entirely our a bulge we The bit, little and numbers we

Our Balance sheet up at balance last of billion year. is sheet. $XX.XX billion. increase billion, an That’s from $XX.X $X.XXX

in the is quarter NIM, rate-on-rate. was a means $X.XX, better being sheet of billion, in Our more from the up private which the general, couple minutes provided course, a balance that EPS XXX% noted XX.X%, is obviously and to $X.XX $X.XXX by our in of allows productive sheet. more as better student loans, returns are ago, up which growth have of of assets, this than ROE a Results prior increase. a up year, increase efficient XX.X%, the XX% from at balance all XX% us

we the FDIC Turning the for the working regulatory relations our Financial that Department to have activities and through have the have FDIC, with field ourselves review. CFPB second a minute, Institutions of excellent. Utah the been in The been and environment the all DFAS

first Our was one very successful.

us That and The over of our good market think share satisfaction frame, seems stay we appears close them three we horizon, to continue our ‘XX, be continues us quarters the reflects see this for to have in periodicity evolution. their will to evaluate back as chosen us CFPB, to seen increase. about And to this the notice with not did steady all review second but scarce look moment customers Our know, their very fourth evolution servicing our the just review on our to trying we have last that of with see and will In fine partners. first X-year resources of in of customer for where they and first be the year use a of that customers. they our confidence ‘XX. time competition, be to them the we not them our their at market, in at expectations contact quarter we particular in the going and growth are Competition their operations of and been you year. review have one our we

of we talked is consolidation great the of you about with folks have One a all items that loan deal activity.

have it the whom am is as gratified customers loan couple well have consolidation with to by our I at very we third say that both activity it been essentially competitor and by we as a tracking interacting. quarter so are of carefully quarter dollars, at looked flat, million second And the of quarter.

monitor we there we expected. didn’t at a will something some closely, that So, to very continue it but grow is people are plateau as we and believe

from as $X.XX Our in I share, earnings for was share, XXXX, $X.XX year from By have prior happy a up $X.XX will are just year, coincidence, XX% increase. a outlook, said, affirming we per XXXX, $X.XX up share we the that XXXX. a in

your EPS in EPS. XX% a back-to-back in to XXXX in had increases XX% are originations, increase billion, X% at an we favor. us It noted our So we works as The forecast of increase gives EPS. $X.X earlier. our Compounding I outlook XXXX for our regard

has market, $X.X thought. markets, look hit The than we our slower preferred fluctuates. billion. to does the though course, It grown Of as market all as we with

this. said We more not as as are complacent go graduate postgraduate, as in on both concentrate that, we share. follow market the we we improve And heavily continue school our students also about our we would Having forward to well funding. as

include introducing X business graduate funding legal, new medical, professionals XXXX, a dental, They for be And and schools, loan. so general products. will we health targeted graduate will

they and competitive this, expansion many, product about And before about this, it very option, good since our we our in spoken three, are market set so we represents spin. stance, – look as one, the we the the our welcoming additional many largest feel to in schools have at two,

put that this as ready to clearly ATLOS as before that season. it the busy be at our ease ago, product would we that XXXX will a fact is that fiscal years this evidence in system of long introduction, time X told of the investors the we we where allow validation Additionally, us

So that’s EPS and originations.

third efficiency the The outlook piece ratio. of is

in between are down after will which the the course, XXXX’s We XX% the the down spin ratio. quarter run-rate fourth end of of the from from is at that be is is efficiency XXXX’s down XX%. which from This, affirming we XX%, XX%, of XX%,

So continuous course, interested are improvement we of is, in. what

pace business So continues. the

We returns. results, and impressive growth continue deliver with solid to

services. We continue products, our improve to our expand our to improve product to set,

only at is not is are and relationships one see be continue are have high, as they we profile good. unclear, that but We returns possible have two a very continue regulatory The but we been improving. to unclear, Washington that to those, developments financial look opportunities.

You free And about benefit taxes. if expansion the a payer. there from of course We of private business, course corporate is in would know we any full are all that.

our the So of stages we story. are at early still

consistency. providing gone now through we the have launch, looking establishments, continuous the We and the balance, efficiency, are improvement, the for effectiveness,

focus to main be regard in mid-XXs to the on is approaching about attractive where look is earnings, growth with as three continue vectors are on investors. We in where teens. down, of equity two operating individually, have and we XX% excellent many you in efficiency, or provide we to One targeting parallel to talked the our in returns mid-teens; consistently we

Thanks to Steve. us So, all for involvement And thank better help a be turn you player. attention. for to with your over I will us continued your this

Steve McGarry

Ray. you, Thank

better the think the continue strong the the in – for I run-rate and was that landscape income commented being it for there quarter Other and NIM this low results. million. million XX%. effective I artificially that thoroughly other I details months changes around low be low XX.X% year positions, quarter X right quarter would in XX very to sharp tax to tax on for types rate covered and compared through the operating line the start due the our offset items A where of the came the tax move prior few was provision far to in it point with of was quarter. ago pretty we continue morning. roughly year a primarily the think we than basis good have the the in contribute you was in year. It think third million company the $X compared a points just X.XX, will will the in that to not at by add excluding to the EPS uncertain in around NIM on the impact. comment XX.X% the The NIM be year year that, did the in totaled will rate, thought million the an we quarter-to-quarter, but year $XX prior one-timers. of offset here at rate a so the the quarter’s the more decrease first would tax and quarter rate had from The that running full million probably just of have for so in ago you a Ray as Tax as these will – of offset an out $X is number income seen, $XX for $X.X quarter.

is which income to the on $XX ago good X.XX% was go-forward investors came quarter So, on million are prior provide rates like run-rate a with in pretty other in a do for from X.XX% X.XX% at We company down the P&I. the just in quarter. in full year for in QX, That basis. loans that default and

to to primarily in compared at expectations. repayment $XX provision ratio defaulted As sales. loans number and that included in Talk the million about ended X.Xx on bit $X was of loans within an the of in Allowance negative allowance this the billion have loan to to the we million ago came trends result but within increase we receive well that our morning. was expected solid a X.XX% our that year balance with charge-offs. million in was of included expect the and here downward additional Ray quarter expectations. an in adjustment for that on a assumptions. adjustment mentioned, well added quarter losses Provision a $XX XX-Q. They sheet, quarter. The loan in deterioration We of credit an this forward-looking total offset to a is of positive coverage mentioned we is the a losses our $X.X offsetting there our Basically performing life-of-loan of both and prices TDRs our changes

that, think pretty I the landscape. that much covers

for call So let’s open Q&A. the up

Operator

of go your Sanjay Please Instructions] ahead. question with KBW. the first from line [Operator And comes Sakhrani

Sanjay Sakhrani

But just One I do is some industry have matter, related your what that you have is the wondering think another you And own questions. sign. rate appreciate I on were talk all case? other be the that you would later was rise a different purposes? then have good And you was got as declining then if a a consolidation potentially if and that do are of expect as increase that color, of on for could pace their if any competitive or I this retrenched rate we couple the the of to growth, benefiting, but that? competitors you driving secondly, to about year, expecting consolidation response on were

Steve McGarry

will you first Do I the consolidated the want to one. one? cover cover

Ray Quinlan

I growth, this a One, of by X industry the X.XX%. Yes, was after the driven as first Measure factors. said, series by as year reported months It’s of

it’s decade, are demographics over relatively Americans been to The the course, relative college? as attend attend graduates. and primary far How the increased graduating college their been lately. are but high as to propensity number from has close many And propensity Of one. what the to has that is school flat flat

that cosigned driven availability XX% loans financing of cost education. family undergraduates are that time for by our the alternative remembering of is might have, and the typically the over also of first Second the

And in been so to demographic sheets have quite addition has a general reported, bit. the Americans trends, as balance the improved of widely

savings. And balances There more are were X years so housing. ago. is than or in more for today their financing is equity attractive There higher they X alternatives

out we are alternative those savings general, some whether in an so with And alternative of in of funding, it’s competition borrower. or

growth, but normal – of education education there inflation has – with of successful. they providing So combine fluctuation. XXX% to loans been or they have is that that’s tried keep have course, we down, And so college not which the

ourselves. They variety there do share we items. it of at aspirations when it in including market We some all noise that have be and will core for that do believe X% between them. And think it’s this, in X% a the add will gain growth We look our continued somewhere undergraduate as so up, to market. we be

And grad regard should consolidation for the affects In grown, as line. handle that provide an as competitors. customer the you so faster increase so and will our because rate entry our the course, we into this, the trend space to will that. look well to Steve, let The I incremental dynamic both has loans, is that us with of at opportunity the

Steve McGarry

Sure. Yes.

X put business loans very secondary the To as obviously, federal year the points. ago, goal. XXX the to in rates consolidators rate at we was it at that basis Sanjay, interest by points of here and was and at that market So A to have marketplace. level for as points. funding all sort sit consolidation are basis base in perspective, is impacted who basis loan those ago, private basically looking of a price, X-year then was XXX low it’s into loans the XXX the primarily raise the a the securitization Consolidators swap month which today, offer

rates, So, in there returns obviously portfolios. rise which consolidation has diminishes been a the on

have raise seen the We as rates, going they going maintain are something to to rates not that yet, to to need do that of but is and raise size this be consolidate. it trend, on they consolidators to diminishes addressable the obviously, market profitability

it be impact think So, consolidations have I that leveling rising already And had in the today. our why off an you watching. book worth might and see rates is

rate see your guess, think we consolidations, already. up saturated additional running is I my will pretty consolidation question market I hikes? money, more interest think I was, For to the

advertising. turn a one event can’t sporting on seeing without or another You consolidator

that seeing by trend have about rates. So, fact our to payment be muted the talked somewhat in see. will the driven we fluctuating we interesting Clearly, also are is it it but book,

happens what see that. and this with one have another will We coming later in quarter we

as seeing world do, the it, so Regarding is as consolidation consolidation low ROE a know we what product fairly we’re business. far, products, so clearly, the

are to other interested on And not product payment. protecting keen consolidating extends are we very term the federal we to And looking but reduce we borrower’s day, what We develop a cash loans, our are quarter in portfolio. at the something that the really of would along the those of for or drives quarter we that’s lines end the XXXX. think second product. in first out hope to So the demand roll

on you we’ll So front. keep posted that

Sanjay Sakhrani

Alright. much. very Thank you

Ray Quinlan

welcome. You’re

Operator

line question ahead. Shane Please And of Rick your JPMorgan. from next the of comes go

Rick Shane

in loans evolution XX%. for at trend were guys Look, the here last higher is question as repayment. but you an percentage From guys the builds, the of balance on going there underlying morning. taking in Thanks my shift this that’s year, sheet that are is

the Now are would like explore term, I run-rate levels loans ratio, repayment will get what take just what XX%. How it you the like loans will when will you longer for of efficiency at to a reserve this, and the long you of sort as you efficiency there? to you get over there? what alluded then and and think to percentage the a XX% And be. about ratio look

Steve McGarry

Sure.

of I So I but out consistent. mapped trend the the be pretty think have we me in year, that’s will front next just believe

loans what quarter third P&I. So, the where real in. That’s in on service focus cost the ended at we of XX%. kicks full We is really

get we full end equal. things the mid-XXs of up quarter the When to fourth to mid-XXs, think end trend all creep should we lower am We going guess of will plan, XXXX. and into financial the going ratio by map that XXXX out that’s the to efficiency and the our around year to being continue XX% I maybe

Rick Shane

about what reserve And levels?

Steve McGarry

am sorry, I Oh, reserve levels.

we are X.XX% today. at look, So

last us level. creeping about and by I being year X.XX% the of vicinity the on to in then the talked call, I think up end X.XX%

going more creep and give to the not we in We’re the to be more P&I. as guidance full is loans reserve but going trend higher to today, for you have

of up we about delinquency be portfolio emergence X.X% the in immediately. fact rate a our curve. run talked loss don’t now a to rate that have should charge-off Ray is that Loans loans So P&I. substantial There

So go to loans we need that continue P&I. reserve to full the into

take going the say then guidance, I’m I bait. give So not and I to

in in XXs totally So low now? going from possible. to be the are X.X we That’s year

Rick Shane

you. Thank great. Okay,

Operator

next your ahead. from with of comes And go Arren Cyganovich line question Please the Citi.

Arren Cyganovich

area I loan are how would a consolidation, comments Thinking be about that and of just grad that discussing – the focusing. that school the the was a about want targeting loan you. to think those lot consolidators the Ray to of seems that from work risk loans, Thank because

perspective work lose higher it competitively the So, terms you from then rate? being to in what that originate would rather a to with and of at loan able have do that than

Ray Quinlan

a into is frame view customer’s don’t with Sure. frame And I a for, think rate the is the grad attractive program, materially or as the competition of from course, similar. think choice fixed we term We origination the We we market. that’s PLUS/Grad say, graduate. full that and versus through we undergraduate of – think is, in normal either know competitive. The fee. for to intend can balances fully have think space what’s X.X% far view. point either the variable. customer has consolidated that of from PLUS, as point federal you P&I, We which different permeating Steve business. very of We grad where customer’s said medical match to offer a competitive off schools as will let’s expect or the the so And view be the from an

rates decrease loans. said, because on they and Steve are as the will a increase, as are narrow NIM, NIM so consolidating that fixed And consolidators largely

trying of to in viewing competitive, take the and And they offering that the I balances. extent who the the of grad we, those time can have and offer to increases the in are think attractive customers risk for don’t way the consolidation so in us from And be course, will in space. customers make we choice the any that, first

Arren Cyganovich

acquiring Navient address risk competitor of can Navient staying just then loans from to the that to the kind of under And stronger Sallie Mae you seemingly consolidation similar topic, of guess thanks. framework? Okay, Earnest, I kind that

Ray Quinlan

around. been competitor has pieces been running has there. is One a Sure. and and Earnest been Two Earnest for as up as long

in in so different, kind. won’t think be they idea I the maybe it that it but be And degree, will

Navient, non-compete, thought a before period at spin. the hasn’t Navient, has private education attempt and what time have that in competitor all, the were since a a the our on not versus vehicle XX/XX to not By specifically of change competitor to with for ‘XX we to competitor which through once see. would we for, a loans, of the us. not It non-compete at choosing between with past and of own them be be them it calls loans changed all That and they student always for we loans. Secondarily, consolidate changed think two now in of expiration doesn’t will of about we their doing combination a going the Earnest particularly as competitors and a

Arren Cyganovich

your Thanks. consolidation you any And for bidding ever just Earnest those creating lastly, or consider or of program? did own

Steve McGarry

So, couldn’t about on and consolidation our a the former the bit in I comment have interest talked we think quite program. we certainly

them in We on do books. ROE and rate-driven, are an our maintain loan our looking interested balances protect but not we interest business, precious to are low ways – we for

compete that monthly talked the looking requirements we very earlier, we be are term the well effective that think So reduce might edges to about way and extend I payment to with where consolidators. around to an that,

Arren Cyganovich

comments. Thanks interesting all It’s topic around Thanks an investors. Thanks. simply that. for the for your for just questions

Steve McGarry

Sure.

Operator

Please next comes line from question Moss ahead. FBR. of go your And with Steve the

Steve Moss

how more say hundred million out, that originations. that. heard several Is couple wondering little regard of numbers put could it Good hundred I are program million, morning. you or bit rolling should kind I we was around to a to of was you With if incremental think that? about the a graduate you

Ray Quinlan

think are as conversations And as turns from should about regard remarks, quadrant introductory have forecast in gross into standpoint, mentioned a Two that it I had we attempting to one the now. to dozens Well, with schools we a in and opportunity. a opportunity is it net of we is this.

we start as so and I products, are most over new think ball relatively will off with it build parking time. slowly And And it.

both We the households relationship are educational institutions. the largely with business with in as as well a

change looking or are general the And we certainly point guidance our to at so but we portfolio. on are not of this standards our quality this, credit giving approach not our change to

up And so level. big we think at market. start it a reasonable it’s will And a

profile will think so start guidance, I but hopes, with not going are government big it have has competitor not in we As I quantitative to high a weaknesses the and said, but it some bang. give we

Steve Moss

Okay, seems higher. it’s terms it delinquencies are of like that’s where helpful. you kind of And in given wondering – trending

wondering do months we you how was or where think XX peaks the it about next or should think over it So so? I

Steve McGarry

Sure.

regarding not delinquencies, we where So Ray we that prepared our which load was have next speak in for that’s And hold X.X% just want the should are issue June I you over number to beating do interest the repay May several us And for repayment we in that and principal loans judge by to was as impacted also we now right run-rate down wave, into operational performance is sizable. the the an and our the path amount of now south. We that back quarters. reiterate that situation we alluded full the to hurricane that quite down the and the desk X.X% vicinity. think wise think by to on that, that the were pretty

Steve Moss

Okay, very thank you much.

Steve McGarry

welcome. are You

Operator

Barclays. the next question go Mark [Operator comes Instructions] Please Your from DeVries line ahead. of with

Mark DeVries

expect Yes, a thanks. temporary be ratio? heard to rollout that efficiency I new some as down cause may spike grad-focused mid-XXs. migrate your going in comments you the efficiency ratio to the there the there investments are loans, you up gradually that these But to

Steve McGarry

calls on were we we the have So PLUS. you I for of is the Mark, thing preparing here elimination prior potential think what, talked interesting that Grad know

that unfortunately, without in we did any see that additional of we So major a that we have already go out. but to roll not is made order product the to this investments elimination, positive byproduct necessary are prepared expenditures. And

Mark DeVries

kind the that on you higher of provision certainly of run-rate? expect a one-time that the recurring or Is pricing flowed Is helpful. defaults. couple your of in through changes And that quarter TDR more we loans I this deterioration a a adjustments should the, to that’s of and a a on more adjustment that item? Steve, Okay, things defaulted in alluded the think expectations and

Steve McGarry

So Mark, it actually positive. was

provisioning. So are to it will our be reduce if necessary impacts, forward there

We that models more based I another have signature life-of-loan pricing TDR fact Option as that our of and we data of the into to in thought The one impacts products. introduce Smart our does provision. tendency less tweaking loan the our the little factor. are talked Option past, loss It’s also outlooks always on of our lofty. TDR impactful product a that It than think was Loan and about estimate expectations the we Smart quarter it primarily probably we performs And is defaulted was the this reduce Student loss simple the have better. loss because models, was fact loans a loan

would the So this net-net, line excited small if too to and much get be models anything, point future at in your there quarters, into build bottom I wouldn’t positive but in a time.

Mark DeVries

Okay, thanks.

Steve McGarry

You welcome. are

Operator

line from question next Orenbuch go comes your And Credit with Moshe of Suisse. ahead. the Please

Moshe Orenbuch

of extend the had Navient, Great, have until just does kind my mentioned already to thanks. non-compete you with refine questions actually the and some of most Earnest asked that of to Ray, Actually now been answers. answered. Maybe XXXX?

Ray Quinlan

apply will XXX% owned is that non-compete wholly that to Earnest Navient, To level, the subsidiary the extent of at yes. the a

Moshe Orenbuch

impact competitive having? any delay will it have been might that effectively, So they

Ray Quinlan

agreement think can the that extent that to by are restrained yes, I yes. signed, – we they they the

Moshe Orenbuch

over Could is – the if relief be just I going relief XX regulatory of grad next about mean that that just Okay, the these to you could launching potential might you even that’s isn’t the months? talk there – is for process there interesting. administrative that Yes. bit there And comments products, you you how made a little you maybe do market fact when on think are about X that? about course the – happen the to talk

Ray Quinlan

new on Well, or regulations we from laws. relief planning not are certainly either

graduate And have so PLUS, we increasing; as because of the we in in worry it’s is three profile dependent grad that for two upon look schools are they about at the funding. one fluctuations it possible is small market, it; Grad is very participation

about they which So to in alternatives disadvantageous under are hearing them. very scenarios, interested maybe

upon as dependent formas, rule to there rules any are getting thinking probably the some as our talk say change law reception for at of opportunity us. the product we that they of be changes, schools. would the to you are ROE calculations people about represent allude, most But volume a would we So, this not or moment. extent sort changes in will our as welcome either this, And pro all our

the so it. this, regard this we Steve thinking that, have but we counting to We on in And capacity to done certainly not handle year. said, about as do have extra investment the are for

Moshe Orenbuch

XXXX? Right, an and update loan your on And maybe just of going of the into thing, some maybe last okay. products kind kind thoughts just non-student of

Ray Quinlan

Sure.

the our said, before And that grad in the so should I increase increase products of the product the the be is have grad one different just in since say introduction for offering had the spin. will as largest that targeted profiles space. I we six

you loan. the as we because personal interested know, installment tailored is Secondarily, in loan are highly loan a essentially student space, a

as that a in go appropriate in expect as on modeling the idea quarter for acquire pilot We evaluate that will the doing of the a market. mechanics fourth to out to first quarter to both a introduce have that far that the opportunities, has so risk as said we have personal as well a then would of of and for this with And systems testing, distribution during setup basically we year from and marketing underwriting offerings the standpoint pilot very of formulating targeting limited the form prior loan. will then cost be Steve

we very loan do and we personal slowly comes ‘XX. all it yes, to, it down So, introduce a will will through

Moshe Orenbuch

Thanks much. very

Operator

ahead. question [indiscernible]. go the from And Please of your next comes line

Unidentified Analyst

good Hi, morning.

you me? at terms metric the and I am you trajectory it the of a company, your you B no all a to dividend then certainly XXx, any coverage because delivered. And at looking you, makes look rating sense the positive look – have sense make overall preferred that in performance As of of does at single to

Ray Quinlan

Steve a thinking little of time has bit this. spent about

Steve McGarry

based We is we on conservative of capital approach the Good should hold, of much take, the higher quality the that highly funding we rating think inappropriate assets, that morning, Anne. the that but... the on level the be company and

Ray Quinlan

the course, of record. And track

Steve McGarry

the is they course, is is held due two record, all that agencies by above. fact the of One factors out to all hostage the of the the of put And the we matter of rating and retail two and monoline track time. paradigm. there encompasses which an are company, nature The an unproven that’s the that unproven markets like like is at the in Amazon.com believe that that, say untested an deposit point internet they I is to this that fact saying jokingly business model time.

now was of assets, have it are deposits – and decay been to CECLs a on deposit knitting, deposits of and improve actually to have rate months. X we of are we impressive very yesterday, going actually, of our I rate stay. deposit lot course that last just do X the retail that gathering now all have we reviewing the we to proves throughout here in solid that an years continue stick cycle We retail through growing we And the the have quality interest that’s those and

we sooner if and going are capitulate later, agree better. an have they are that not So grade, or to to investment

friends couple we to my recognize quality of a them them Moody’s closely continue S&P, at So but hopefully of synergies with with help and will will the we company. work to the see

Unidentified Analyst

Okay, response. so Very much. great. thoughtful Thanks

Steve McGarry

welcome. You’re

Operator

next ahead. your with Coffey comes the from question Please go Henry Wedbush. of line And

Henry Coffey

taking for had you Could and morning I of from again? a loan Good that. that You of Can of the some my couple you over call. sort then revisit walk comments we around go the And made? we X.XX%. quality to went through questions through X.XX% thank

Ray Quinlan

Sure.

turn I’ll me Let then Steve. and it to over start

to with of X.X% P&I we’re we numbers maturation let’s obviously, said that. of the we to here X.X%. in, talking weighting And so would small and start basis pieces, And just the you the if go points X.XX%, that from we changed

the because would of difficult substantial in a We about by were us Texas caused of of our increase customers also think bring think South, that basis has we weather transient conditions points. X.X%. XX numbers the who that Florida, That that, to the affected but and especially

over was the so us past caught maturation the curve with this associated X.X%. actual summer The seasonality And a little wrong-footed.

lighter our as earlier, have in And coverage so ideal would we been Steve desk or the collector said workloads over summer. loads, had than

we And corrected period, expected enter days as XQ as so or I a about and into posting we the have XX have. think fact, have see they from which But post we both We in points. Steve to said, XX standpoint, basis that’s we those recede. are delinquencies and that

we’re for so and on And for little weather model. We were adjustment. seasonality a off model bit

Steve McGarry

No.

I add going So more to was operational details. just

in time So them and keeps don’t we time impact them. we around, this also, they’re XX-day did and so for that hurricane not if the it. delinquency swells this people where one forbearance. of we why saw that’s might these last our in want student loan noticed said you the customers put companies into you the met our did with be affected were put we that, don’t would other us we in in And quarter buckets, advance that areas, impacted call are there. – The people that areas to we them, have these ire the forb respectfully And we into of

We capable these making payments. of are perfectly

that to status, now situation... made no So left what them we and did was change their buckets, the delinquency we in

Ray Quinlan

they we But chose provided opportunity, with to. the if them

Steve McGarry

contacting on are being and Now back normalizing, them. we made, getting that are track. are the situation is we Payments

Henry Coffey

back sort to And do get we ratio X.XX%? quickly target of your how of

Steve McGarry

we’re overall is, the will other well having expect there expectations. that not the be operational forb metrics, short credit. to within in not very in Defaults be our very what confident a shape. are a But and change is We of conversation. we order. is we’re at if in fine And different QX, mean, there I end this

P&I. was loans versus in in it While of X.XX%, in the muted metric full X.XX% is the the seasonality the X.XX% full evident

the is performing. So we portfolio about way good are feeling this

Henry Coffey

have for into you that mode? the Or are of that couple years that The the what you? there operational loans kind jumping their rose is summer that’s payment of caught that books been issue a about full is from dynamic activity, – on the

Steve McGarry

had loans this we rates In to good and loads P&I department. instance, I million on call, bucket this $XXX are the been go a into XX-day cure doing So in job. the our collection in May have outstanding. kudos particular Their desk rose. They collections very And very of have full June. given

has That the just So on busy new as We speak, feet a in other collectors, curing enough and they words, are ground. corrected. not in we their delinquencies. of been have with customers class did graduated working they XX

Henry Coffey

slowly, likely products? equation, be on ramps of And of program growth for side is in first then to looking year when graduate the the the kind that of school the big set loan

Ray Quinlan

different this. that would a hope after the let’s it’s Well, undergraduate. it’s that the dynamic sort And from remember, time number that graduate we be, though, let’s say, is that we year of – or

and graduate research schools frequently are targeted so And by way, highly major a decentralized the in smaller, universities. are run especially

in alternative in be and that will cultivating we them so and and ‘XX, picking United with regard a be by them to And States. this be ‘XX, through relationships students we’re permanent we hoping for up graduate will full-fledged

Henry Coffey

a And from comments point dividends. is with better then of company single issue, finally, rating than look made. I at I going back agree much of it the credit view guess a to the the B I This rating.

loan What’s We I the soon? pretty turn think right would dividends cycle. I now? you or and balance No, build also How When to a a from ROEs, sheet. in aggressive thought think, given you balance that I loan still phenomenal know have it. on appreciate But does your growth are your how I slowdown? capital just view about

Steve McGarry

that we capital. CECL currently would on the So look, included allowance capital build question forthrightly along to which loss capital. next not all trajectory we equal, things XXXX. answer turn, that unclear the comply with is wild enables to out what are make CECL, generating on, we that consuming the there, be comes is to happens in inflection, not loan which card enormous do It to The me from being the in

generation move the couple does is years. that we that So next bridge to the it capital consumption say, within cross. from are going to next the suffice company to to But of have capital

Ray Quinlan

hand. the respectable and other multiple But equity to is alternatives just continue it that on business of remain forecasts our one the above available our our appending in our as can the intention with the to hand that, years shareholders long all are provide in we that over the very future, and it’s and returns this ROEs as case high, into invest on on case

to dividends ROE our So to continue to not drive starts until consider such invest as time us will that to diminish. and

Henry Coffey

you. Thank

Operator

ahead. Please go with the And from your of line next comes John question Hecht Jefferies.

John Hecht

guys. and Yes, am rate the Steve, credit. for questions far. the long-term just are good have talked Thanks, what’s final where loans cyclical so a Yes, like about repayment most asked. question of perspective I stable on have guys’ average coverage on loss when going you position? you guess guys you rates I morning. one your wondering been

Steve McGarry

So, years, interest I more on seasoned there of in balance mean, the reality and loans the the couple over is sheet when and repayment. going into loans principal full much coming we is so slots out new look next

and X And what get cumulative won’t is the to losses vicinity, loss am interest occur portfolio in cumulative curve the big round first down the in and those this of the look years You of does numbers, to like? conversation rate I loss the on going X% and repayment. in loss what rate emergence XX% full principal say of

I question, really I the to here down X simple but X.X% to cumulative of change loss and loss like. there the like over am X comes no what’s the portfolio important there dodging the the rate appropriate much curve this so the sounds the emergence So factors is what think It that it because be years. portfolio, to is in answer is going loss on rate next looks

John Hecht

what loss normal cumulative that loss to be said, then? would expect factor so cumulative a you you But that’s

Steve McGarry

had be portfolio currently already in the under experienced cohorts is cumulative to the here, loss in as It’s I bunch defaults. on thinking mean, the some of a on of slide probably – I have vicinity it sits the portfolio we’ve that today, going X%. rate the am left –

probably we would no one-off of now, So be which plans we rate. have that X.X% appropriate to obviously wanted an loss doing if

John Hecht

have very Okay, year going then on to just are Where final they your Where opinion? any next helpful. been? question, And in thoughts deposit they that’s a betas?

Steve McGarry

have It beta. of around going obviously give So disclosures. very a in to which that we we has such beta in experience to rate hikes Year-to-date, somewhere it’s believe been more would you detailed if going to seen if the front, our gut, data we low we’re that there and seems I a X.X. interest And and hard rate that obviously of would when disclosures, be we model on use pleasing. change X.XX, say, a to – are my beta sensitivity additional X.XX. closer have

John Hecht

Thank guys Perfect. very you much.

Steve McGarry

You are welcome.

Operator

And your Tarkan Michael question Point. of line the from comes with Compass Please final ahead. go

Michael Tarkan

Thank you.

we up this on think following you question, done of side do the funding that think I had year, about the Last how Just equation at securitizations. three point?

thus this far year one We have my done by count.

So and just thinking retail deposits piece of you are broker sort kind keep of see curious that as we how going about up?

Steve McGarry

looking in and it So, they along because a this extend the come is I mean, to ABS, Michael, the from us are that. the look deep XX/XX, benign are There we probably they and continue and we am very do ABS. environment. hopefully am I the horizon plan, down of We of get change will market, will. going benefits access standpoint. with week works. sure next to and that’s do split but very to deposit advantage our take we liability enables pricing overall that. on have X-year my good I and markets bank it book to at a question. the nothing will duration that during efficient the marketed When like deposits, We that securitization up XX% very I XX% get We start

the majority balance that our funding be or from. So we where of the will draw

Michael Tarkan

trajectory about consistent in raises to if keep up going it environment how the of this is kind – like a that? this December Fed pace? just then Okay. line, should in that or rate brokered at – how And the I is we deposits in the number going mean, think

Steve McGarry

but this has the XX%, XX%. on retail between and XX% to push retail that’s we brokered/retail a the is right with year, raised We So, comfortable and What good, basically is big sound. ratio or perfectly other. a that around deposit to remaining goes and are all too, the XX-XX bunch. XX-XX deposits been had it ratio we target brokered more If mix retail we where brokered very

Michael Tarkan

what new where know I X.X%. the Okay. at are lastly, you And coming in book basis? am average have just in. full came new yields on yields wondering the an was do I then origination

Steve McGarry

yield given the prepared originations And basically prior were I think have I been around right And consistent year’s is funded where on that. LIBOR fixed basically going to for or it we came say and variable. originations in. yield its the have year’s in right last – rate right to flattening the the well product is curve, do it I as with where curve on steepening at, set came am

pick which a So, helped – basis good that has helped few points thing. them, a our up is us in

Michael Tarkan

you. thank Okay,

Operator

there And no are further questions.

Ray Quinlan

you as your research Okay. as this which all the that well Well, for thank much on attention was questions. done prefaced call your very

results forward quarter the results of for fourth another our third customers. solid delivering with quarter. good XXXX. our happy looking very investors to as as It’s are for the well the I much am We very quarter and

And so with that, thanks again.

Brian Cronin

thank time available be questions this and and A page Ray your at Thanks, salliemae.com. call on your the replay Investor Great. you the will of and for today. presentation

directly. you This concludes If to have contact further me today’s feel call. questions, free

Operator

does conference Ladies and conclude you thank This call. your participation. today’s for gentlemen,

You disconnect. may now

SLM (SLM) 20 Oct 172017 Q3 Earnings call transcript