SLM - Earnings call transcript Q1 2018

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Operator

Good morning. My name is Angela and I will be your conference operator. At this time, I would like to welcome everyone to the 2018 Q1 Sallie Mae earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Instructions]. [Operator like call now to turn to would over the Mr. I Relations. Vice President Cronin, of Brian Investor Please ahead, go sir.

Brian Cronin

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

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

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

Raymond Quinlan

as market faster That higher It likely as looks market. performance. have think grew expectations. thank extend team great morning. attention for all I good was want was a than to cylinders. By lights, competitive And It quarter. up all the to volume And your for on Brian. my a Thanks, though we our than you you thank very a most special this our we delivering quarter originations good

than performance talk. Come back We in outstanding credit. Our yield had those to levels. and as NIM at we model better are

The have on in results high-quality that ROE show we've at XX.X% line. these fact the level. ratio, New quarters. good is these over And very which customers last testimony a bottom the continued many a to progress we all discussed do efficiency are up

in we it have results mailing The mailing We've personal and X we we very piece a introduced be. to XXX,XXX customers that, with high. are initial relationship In addition the Sallie is The several tested had loan Mae followed strategic volume with very quality up good extending applying it and March. gratifying brand and to test January to in million the is a also areas. we've good in to results where of brand And that financing non-student in very products. want

embedded quarters. this starting good Our which is fully now cloud three methodology, we show migration well now the to for going doing been We've is and Agile are in results.

on progress product track evaluation that and card on continues Our credit stays for launch. initial XXXX

field. Our grad products are in the

We X% expect volume They well. we've them experienced to far. the of not are so part that increase very do

hopes have for And high that additionally. so, we

has selectively evaluating several the second it which In It's addition reductions. to consolidation that, been we're include which about for initial APR response we results. talked and product one quarter, extension, we will one up put as calls, in term place and on our by go through also

good would we rate experienced In addition running our results. of at a think our gratifying areas, X% very low management. what our to non-operational feedback employee turnover that, has as team from for survey and It's

at satisfaction as continue option senators attended very And to an workforce we the an collections successful had here have Most a operations both underwriting. by we It's well our chat it far for us. our all the the continue community. XX% for congresswoman. governor, introduce recent both in results we've expanded us level and to including the is innovation a for as well recently service. With best extension which our and a Delaware to our top relationships have, as for additional elected our is chat officials customers and receive customers levels to And regard and second others, following was Our of to as good of in enhanced are that ongoing that alternative customers. so community, for any with way the of result experiment to at satisfaction opening as speak with our very our Delaware, lead site

as to of we turn so, volume quarter the originations $X billion. And results, were first

You'll entire recall for $X billion the that we goal have a year.

I the up course, of of of X% busy We're So, in season, And XX% believe The originations market us. slower. XXXX. to the in be year as front is said, looms we from growing in.

report up, numbers, we've obvious Of of through those couple on continues the always that When door. high volume will the them. experienced these about is certainly out With same years. that implication quality That worry share at we you our we level last receive course, the is up. credit

Our level. as last the you the printed FICO, year. material, is saw XXX at in this XXX year; same

Same Our year. And have the borrower. last rate cosigner plus XX XX FICO our by level. versus primary XX% over XXX of loans

of out up to beneficiary and stand and is Steve last is revenue year. X.XX on to and, efficiency that we last the both OpEx, quarter the of yield be the The at of year. X.XX in a industry, team able the from of that our to good assets down continues NIM that results his The were of the total first The the on focus on level from in to mix. a balance And the as management ratio, envy producing the NIM. very to XX.X% portfolio, efficiency of the course, deliver the level, of the quarter sheet addition for XX.X improve. the know is In funding absolute continues the you regard proportion

XX%. up is revenue Our

XX%. operating up are expenses Our

the our in right I pointed point. as in is particular the growth, service continued. that for to as that mode prudently said, direction. at days concerned, we well the investments So, both question far. the as control this so they're indicators first thus business business Credit, the performance. Great far than The appropriate is existing as time. Early both growth all so how over Better make model are year but

Our bottom sense these one XX.X% balance to EPS of investment the of from continued XX%. meetings. – The indicators performance mentioning. individual extremely XX% the $X.XX, the growth increase. strong. business gratifying and year, ROE proud assets from in we've in is is sheet continued in about – risk-weighted EPS, at that well at and ROE reflects I'm talks line at overall remains that. the other as quite XX% our good talked $X.XX calls up sense balance sheet capital We're last all certainly as that on many to the

we're all have their The The conversation. gratified partner. aware have to good been constant and of field all UDFI Our the we CFPB, them FDIC, regulatory of results very to relations audit be were the great. plan continue a and our are as in

progress talk areas saw is the EPS. this in The in around at in in detail, as optimistic making the relationship focus the course, We're about quarter. guidance, And we're on customer, yet billion. progress we've efficiency the year of you But So, more first the frame, market of after to which the originations, especially tightened competition the and this to I ratio. in on as up the Steve, continued $X the volume come and we XX% will the staying said, we outlook, our our are NIM. evolution. all

major Balanced over now good I'll turn to good to this very start Good Steve. every And that, performance on the quarter. meeting So, indicator. with year.

Steven McGarry

provide little number. Ray. a more or the on much, going And very you Good please morning, everybody. if I'm a bit stat detail to two, me. I Thank quarter's repeat forgive

quarter, the quarter. loans strong So, first in of the personal increased increase a post jumping by portfolio. up the year-over-year, ago from a by in NIM quarter year-ago student mentioned, loans and The in very our as into X.XX% XX NIM and Ray points NIM, of driven percent in basis just we X% did the the X.XX%

the spread We environment from from also we sub-LIBOR retail – and pricing brokered markets. environment, asset-backed very and departments as market low our continue CDs benefit to good benefit money deposits on spread

Assuming remain above full our stable, that think for the year. X% to those is NIM remain markets going we

seasons, to As then disbursement. peak build NIM know, we tends us for to cash as those our balances and follow subsequent rise that decline disbursement the

the out shock bank. funding +XX at basis interest a million quarter, equity, all-time raised of given the started some as points. did That a is swap basis at interest that but is a down for for it's transaction, in $XXX term our and risk positioned a we XXXX-A, our full our rates well XXX full LIBOR environment, come we ABS remain issuing points bank In since we of points, we basis So, standalone impact and XX around value with of very basis earnings XX should right Talking rate year. in interest market rate rising think rates, very last up NIM economic three-year the at the to since another about rising the low complete X.X% ABS call, points. where minor we

We diversify our it's to also fund to market ABS a funding way and assets. use us liabilities' and will fixed-rate extend duration continue the our as for great

an as example, million rate. life. in of were XX% weighted details originations important, That's because of included the see with bond rate in fixed of in you most our up That's reissued as average the So, the the our from fixed $XXX recent a XX% six-year quarter. bonds release, first year-ago will quarter,

smart rising in environment, is their borrowings. our rates this customers to that in rate on and lock the So, choosing are thing,

incurred related related million are of And payments in to $X that, up in Just that in the included we January. in OpEx. a to million maybe number million the up It officers stock sharp costs little addition the which was bit passing accelerated more executive the of expense a of quarter. compared detail XX%. $X year-ago of in to we one compensation. fees importantly, around more for $XXX But of FDIC million our were to quarter, $XXX vesting

reasonable call, the the $XX quarter. that growth our this point we actually will we was also been last the think of one been out only diversification off a that to mentioned expense our mention slow XX.X% an in here $XXX,XXX numbers, would've acceleration – got ratio this would to start. have that's We into and period. thing that, OpEx back of of in you the a million because I of expenses spent of If we XX%. our operating efficiency first investment And

compared rate our XX% want can the plus XX% more rate I'll from for X.X% purposes. tax benefit that tax act. XX evenly right QX performance. year-ago the rate the And few XX.X% over quarters on from in delinquent I us that passed three the from expect to the were quarter. a the tax year-ago days in modeling credit X.X%, balance up give next Effective quarter year. you spend being think recently and if to obviously, up in you of the of you Loans X.X% was around you think about quarter. stats big a modeling purposes, should in for

on quarter. $X.XX the quarter lower than from X.XX% is prior up from in the result of in full sheet. of Charge-offs our directly P&I. ago on higher total these loans. is typically And the wave FICO we to and within of the the young. simply monitor P&I. at November the from $XX of And December was year-over-year million A $XXX performing QX the to it with provision the quarter. total increase in repay are and That due and big fourth incomes delinquency under the million quarter that expectations. expected loans to P&I XX% loans, The carefully year came for million increase view delinquencies total slow loans We our simply to charge-offs losses, delinquency average measured rapid million in the with hits for well quarter based losses loans is in X.XX% compared borrowers delinquencies fact increase that than portfolio of with were QX Personal had year-ago slightly This flow They in XX% we provision be in recent dollar in on in balance $XX provision was score portfolio. $XX is as quarter. were of quarter. we loans, quarter that as average volume of an and a loans quarter feel We lot few from buckets for of is to fact QX. up. portfolio of an First charge-offs that of a the of quarter are personal very of credit in $XXX,XXX. ended buckets. loan high in have our a of a is it quarter. due We for loans percentage into were XXX. personal more X.XX% of stacking the down quality these fourth QX comments X.XX% are the It the the loan and the we're repayment. the billion the year personal in X.XX% just allowance We X.XX% Net down somewhat way this ended total our loans of full ago repayment loan positioned had loans and the and the loans of also a

Our And will performing solid, I portfolio allowance repeat our two our coverage better very slightly is times expectations. probably is charge-offs. almost than that

very solid are [ph]. things So, both on fronts

Turning to capital, equity total with bank remains Tier risk-based XX% XX.X%. of common ratio X well-capitalized the of capital and

of in. III the holding both the continues requirements these well-capitalized, for capital the need and on around from our have that levels should covering growth, move a available to unlikely of the wrap CCEL of years. before balance phased sheet comments ratios CCEL is event now now a these excess continue fully be demonstrating we is is at change Basel prior Couple I expect to source at up course, of forward. significantly is that right ratios excess after considered our of Work on be bank to We These here. we sort in company as And, which are year-end, to strength in earnings it.

requires years. As one a just a to new loss the period effects and the allowance day phase banks Fed, a regulatory loan over in the weeks CCEL the the capital giving proposal portfolio. option FDIC from three at a for interestingly, us But, reminder, is under to joint of CCEL a OCC life-of-loan two ago, build

not a it adopted. capital wraps welcome much Now, calls, pretty last we've that looks levels. CCEL would my be and in stated well-capitalized pretty then, phase-in will falling development implementing capital our prior clearly below commentary. that certain result up it the in is That But

up line So, this calls be for in we would open to very at point time. the happy

Operator

[Operator Instructions].

You DeVries Barclays. with Mark first question comes of from the line

Mark DeVries

thanks. Yeah,

But this. if it Sorry you really helpful and out, update consolidation Ray, consolidation if us your I of little signs detail guidance, on for expectations missed activity. the mentioned you more kind on ability hopes product to could be rolling also, kind of the just early mitigate your of activity. that And for give you would a that

Raymond Quinlan

Sure. Consolidation, you the running about quarter. was at know, should XXX in

there out million. $XXX for We have guidance

that leaps the of increase And it's there positive though. and in could we there's in experienced as the run might one given to the danger over of come having that what I of consolidators rate. In also that are both that we are we want week window slope turn some course, think be And we've mitigate. consolidation think loans. the a efforts forecast they're We, that opportunity the doing that, volumes that right of to Of about forecasted exactly think loans be it in mail early probably with from has to regard to don't course, consolidation overall lower with days. we arbitrage the we're the on rate One zone that the If these bounds. And said gradual. increases seems that it's that We'll two their think well some out we don't Having where will are loans up, either standpoint. response, years. are continuing to a volume the to higher-margin bases. or of that last embedded couple into margin closing of see, last information consistent want and as the or

of lowering on are which as with after we customers What customer to about know, look are you their effect we extension. rate as June servicing let's back efficacy particularly net, us the focused which, is well in the as they They're XX, of improved have term Mark, well reducing for will this, we on quality the by are is customer, the a by the so quarter, second as flow, APR term as customers loans the these as a hunters. others focus moving extension you, have credit both the of the much told cash And remainder graduation [indiscernible]. far focus. learn very so, And requirements primary wide not to report as of those to as

in our on we consolidation And environment So, consolidation. the run overall early the oxygen are think for product the the of regard this. the days out interest some who rate to of take rate specializing that people of to continues

Mark DeVries

roughly year rest the we are expectations originations about is $XXX indicative so second of the And in beyond? of question, XXXX it. your quarterly what personal growth that into should or got and of for the for loan million this think originations kind and Okay, how quarter

Raymond Quinlan

Okay.

As the at and loans personal it, organic there's fees. we looked there's then purchased the

year. And so, we're a for about for the this thinking billion dollars purchase,

The effectively. So, still in test making the won't These We that will clockwork, per to organic, some And XXX,XXX pieces, be in like done that. month. appears I I IT did regard – into million shakeout. did X we would outstanding. in million roughly said, mailing product We're translate the about to first, of $XXX $XX test Obviously, hit mailing. in up January a that be we've We're working that to all in as but range. it are million improvements March.

efficiency. again, we're once looking So, to as for learning opposed

So, explore to that million We're $XXX little leave in it's we about a receivable as exploit year. in more management be than for lingo. looking the

$XXX billion million the dollars about build. a about in purchase in for organic looking we're piece, So,

Mark DeVries

to you as Okay. and go you'd that expect accelerate? beyond, And forward into XXXX

Raymond Quinlan

testing. We're

[indiscernible], go a to that fees, currently level will The as we from I early think would can that meet we model But our days, you what we're to yes, fees, at be purchase experiencing. we will accelerate. do expect of ahead things organic that the of know. starting targets, but, ROE So, the we're see

Mark DeVries

Okay, it. you. Thank got

Operator

Your question is with next line the from Sakhrani Sanjay of KBW.

Sanjay Sakhrani

just disbursement and The was that you've had attributed was perhaps to morning. Good growth the about Thanks. strong. some Could you share? shifting what environment around because players pretty talk competitive

Raymond Quinlan

Pretty modify model We're total was outstanding. market Why actually, in that Sanjay. the growth is. think. we don't we far strong, of the wallet what market – Sure, tried the so as X% I that a have

think where full we is obviously, overall. position market have or a market greater the X% in in X growth don't documentation that the to share first X% X, continue what X%, We level that puts quarter. up. than is a in of us know did We to think you X the being that

think would quality which for of business the efficient don't more to watching lag. as we be know very a for the there comes why have loan. would the ourselves, You as consistent faster on really yielded extension our to is process business why are think we in point, good answer you see their go fewer market we make Wells regard to improvements, is to without But sort faster applications stagnant, the in anything to process up that follow-up, it's of up to question core at so continuing to We're volume. where that continuing this us. than business, games going mapping to how Fargo, Discover who information And changing through, commenting we believe and our see competitive at new frame order has who other we are they results I two, people do than fairly your that all, market, that entrants what part say results per think of improving applications margin, far were we're have, Citizens, than how lines, competitors effective. – they consistently we the any – We way particular be this one, that have; play in the at the some

turnaround We on have it. faster

through We We've go have options our for more people the website. improved as they process.

efficiency the have market the And extension where of a so, already of we in to XX%. think incremental we it's a options customer game and mild

there improvement the incremental and game improvement us. so, for And is name the consistent of

Sanjay Sakhrani

right. Thank Steve on question CECL. for All My follow-up you.

as management you expectations much that You Does previous you have your might as phase have then mentioned thought a don't change three-year the you capital under because to capital in. scenario? expend

Steven McGarry

management think this at us to So, in it's point change I our time, little a premature approach. capital for

conversations probably have significant would levels consume we after they just also group now. capital and decline little XXXX to our come then generation and a grow developing capital. to we out bottomed and in Our capital think will our CECL's are that of really peer with that in course, XXXX the will our relative have implementation. also efforts They some slightly we And, bit diversification relative are about regulators, And appropriate.

early So, point I this think our no in no at change to buyback it's a shareholder little dividend, time. position

Raymond Quinlan

as said that on Two three-year Sanjay. quickly is, Steve essentially to this weeks two I'd comment, One the came things in ago. like about in phase over transom,

so, one. it But, for Directionally the uncertain the framework how two, And is CECL. regulatory that's us implementation reminds good. of

think I cautious to phase-in three-year adamant behooves X, coming. be so, us implementation it XXXX. People we because January And instant on it in the that see was really that didn't to had regard been

And had very so, concerned. us that

Now, all exactly to a years. We're sure like it looks where not going land. it's three sudden, of

be we very the with and And of we provided be return the that cautious out always hard And want that. because the if capital thing it's looking combination it capital by goes appropriate back. get for shareholders the on is the our so, here the we're will to that second door, to

capital the have. make so, the sit gives the we use we ROE XX.X% And we efficient as of us here, can confidence that

it's an part, decent we a hold as bounded our ongoing any in return frame, by regulatory we but stance. on it's that owe capital also believe So, the – shareholders we

Sanjay Sakhrani

question another Ray, on fair. that's this is loan portfolio. personal Okay,

you are these loans to and As across platform, to? personal we think make it about roll you your out targeting who testing as

Raymond Quinlan

we wider thought. It’s than a range originally actually

we there in into the they who activity maybe for them us, government. out have school, They pre-existing of especially their to say, those a debt to are a XXs. people with purchases, have I'm think allows housing. They their so, of that is Americans about as get many student and federal with discussed to life And are to box gotten set have And going later times, put debt automobiles, on on consolidation other the track. looking

those And early the the that, is that that people stages area. I untouched you key testing as lives. several parts of can But with to overplay we see of so, believe is trying our households there where Having personal form in our graduate to but we not Americans' all not effectively, we target. where trying leave this to And are we as pockets our product and our play purchases use their lives following loans, customers are, early they go of can and of through areas we accelerate as knowledge, remain committed they portfolio. but stage the said knowledge can others' we're for will we as profitably think said,

answer. roundabout Early days. So,

casting target a certainly forward. implications both report the and the back that we are on going wide We audiences of will well the as for results as

Sanjay Sakhrani

you. Thank right. All

Operator

Orenbuch the question next Credit Moshe your is of line from Suisse. And with

Moshe Orenbuch

Great, thanks.

down new having your might XX% to come based So, for year. Ray, seeing from of you talked things anything from product environment within that you Are your and about – the of the about might be in any anything the whether there coming Washington? that competitive fundings, talk student done terms maybe for preparing products you're expanding upon target your set

Raymond Quinlan

processing. And this frame by been we of was ability But Right. And to objective it have implemented million progress – we might the make thought That capability was in our Good year increasing should It regard that basic ago, successful disappointed. in know, we it. and I as actually to was you That regard $X as execute our our financing. Project a increase to frame how Nike area. Moshe. it in its product hitting of to spent some question, XXX% know, year, realizing student last you was – Washington it.

trying market. second is from ready way to One of that back a we're to A are mood step there developing federal Washington. dominance they as think we the continue is student is the cut the be So, ready. we on things lending understand in to being of

the So, we focus said well think right parent and is tilting education on plus. that those looking Having changing act are we who the funding as as people higher of current we're think grad the that, at way.

opposed grad will were And for we curtail the so, we plus. students to told, of what currently as particular, XX% parent as but federal the the limits if and will where the might think take know, And to of both increase the being United grad, undergraduate piece borrower. undergraduate, you students the are of piece. In grad and the States XX% comprise graduate we're

all They of So, a household. ticket average is less of They're regardless older. a larger. to economics bit of the little the have their – Americans right education higher

is So, us we be believe efforts margin that to the the changes concentrate grad ready best our for place to at for in the program.

from graduate because very homogenous students way long a professionals, a quarters, MBAs are from we've new and sciences, products health doctorate, graduate it's the So, appropriate think those other as not for targeted as a and in we introduced result of to that, and even and heard to prior way arts six as funding legal. you segments long

one the major of forward aid in sales had of as more say, because But for moving let's explanation our financial introduction grad – We force, that the in the that competitive of We've the each for offices. aid of doctor are districts handholding requires Each the individual involved a this believe graduate centers conversations constant higher. is financial financing our [ph] the are much with today. of We largest offices a much and we the smaller I environment in the graduates tailored than we've advantage each, tailoring this have in think said, so, school average product tickets, professions. the typical one university. the the undergraduate And in industry. with

of in sort stable, see is, which one is question, in that the so, is to Two as competition response gratifying. price around And are there current relatively your market we changes especially Washington.

way, get that We our to by expect the quite the the they're graduate federal most concerned we by is is more conversation anticipating from Three, of the to And that would a also with possible their and four major extent favorable. And so the grad. we'd to them be that the open threatening, introducing debated, even products. government. are they be this be being find funding changes us are about alternatives. about that to schools because expect And schools

Moshe Orenbuch

That sounds good.

to buying, like or Just the the drag loan. personal up it's not organically. that $XXX you probably Is stand to that in you're a purchased, big the given it XXXX big less And I kind there on the comment? the reserve today, well fair million doing as product going in we this also seems I to mean, wanted up capital that that build follow that notice a quickly over of quarter. for you did you more loans be ramp was stuff here start you're and commitment capital as

XXXX So, likely is in I reserving setting – table and guess, to would a lot of you're the what in for be setting here capital the come XXXX.

Steven McGarry

when over on two the starts Look, as to see personal is A years, loan of grow next product really quick I terms right, P&L. out rolling XXXX volume. the But it think that's we Moshe. in word the

slightly the should starts the statement terms for the in be in traction XXXX earnings it But XXXX. terms in of for on timeline personal but the really the way to see size the balance XXXX, rolling to out the loan contribution sets portfolio of some based We It'll in of sheet. the product, earnings seeing positive are start loans XXXX way income in on we building the in that provision contribute really up.

Raymond Quinlan

organic The piece.

Steven McGarry

The piece. organic

Moshe Orenbuch

Thanks very much.

Operator

Citi. from And the question Arren Cyganovich of your next line with is

Arren Cyganovich

Thanks.

Can – – the how we about quarter. private education portfolio yield was at quarter mostly at you that rates Looking the forward? XX loan private talk basis benchmark about – points or think if the about what from education to was increased I yield think going it do loan

Steven McGarry

Yeah.

of to it So, look, up quarter pretty It's than on eighth the on more this every was Arren, nearest probably month. student pegged in sets details increase it the on XXth to we you loan month based much give here, – the in really resets one could yield want and rounds but LIBOR you and LIBOR. the changes

will portfolio correlated think hasn't increasing XX have the end that's mention and increase But XX loan step really where almost we a we the directly in fixed-rate the funds to basis yet. increase points of the So, did is loans but impacted that up on brand-new the cost another or phenomenon. was It the that LIBOR temper an of the LIBOR. which somewhat, it portfolio of based in yield I at really just the percentages month. today, of will

Arren Cyganovich

on for bit less But loans, to loan you those opportunity sensitive. time just competitors thanks. guess, that take Okay, kind then, understand of of rates a I at want being my together. in conflicting on view, comment have, the And work a that rate driving little your a the consolidation same side, about two little to but higher customers not how away the those I

Raymond Quinlan

Sure.

customer lower rate is, And they're our so, when a in we lower projection, being implication order in that talk is when to requirement about rate cash the But service not overtly sensitive, loan. customer for right? a the of flow do not, they the sensitive, experience, rate

a number to But I And flow associated APR. with looking the debt for as for get do my find so, customers insofar how particular servicing demands they be are cash lower. the we don't looking

that's on of side the customer things. Now,

month. how pay I So, they're focused much have do on to each

margin, about, we've talking things On two know, is, have APRs versus you quality. years spreads which driven helping credit provider at last by the of fact the is the is as is ability the the question given on extremely the so, pre-existing in lower a has on been my the spread? And of things, loan their the deltas favorable, the for I've what provider especially other of fund the been flow, accomplished on cash which, spread hand, side to customer side the

And not so, the major I don't APR need that to is the is just factor. decision unimportant. It say

having So, was the but pay more consolidation wound flow to the cash if the in customer zero. would month, be low, per APR up mark

delta to needs have they're what customer And their obviously, the the the cash so, cost. between, for but they provider looking flow, and bill

last And go several both up. delta as over so, decreasing said I as and quarters, Steve is that the have rates

Arren Cyganovich

Got it.

Okay, you. thank

Operator

[Operator Instructions].

Your from Wells Michael next question with Kaye Fargo. is

Michael Kaye

setback but be developing? get for but control upcoming student just negative Congress, thoughts very Hi, a on to wanted know is challenging it potential of of basically would risk how midterm this impact a I perpetuates morning. positive I potential much Washington meaning your good the elections, the predict, to quo of the Republicans development a there lost if private the on of loan something or status expansion is

Raymond Quinlan

less election what House. maybe the lose It Republicans widely lose of lose seems likely will that the they the and it's course, the will From and, we seats Senate. can see XXXX heralded in

of have And way, still by government. two the with have so, they fairly that And will be close. deal arms is we either to things Democrats, a other House dominated if the

in not the And To the said, so, faster fragmented, we there'd extent expect we from has structure had much XX mud would felt doesn't last [ph] progress last as the we further that slow year-and-a-half. can would But progress, progress what that see. occurred. power a DC we more be we forward. the if that is I slower over over in mud threat expect going months, represent That

Michael Kaye

Okay. That's very fair.

to back gain much meaning that giving $XXX and in away do could new you think that consolidate from included how the Just you that prevent starting your that do go loans going your that portfolio? consolidation consolidation is how much about think product to estimate million you optionality that's offensive, how product, portfolio? on to from defensive Like, outside

Raymond Quinlan

Right.

in have to, activity. to so, that no question, consolidation we answer is regard that consolidation for there the Steve's first guided number estimate to $XXX our And factor off, the million, in

of that think And our course, bucket of more their are the we to attractive in put that's early when days refinancing So, something customers, can think I they're debt your answer an zero. they, to given to. interested was of open that's they the clearly they talk And loans all you into together. bucket finding the we're are only question mode. versus preexisting appropriate what in or test others, in In

are that sheet their of the today and early of for this progress how particular consolidations. this is do we opportunity our consolidating million it the are so, what away balance the would to articulate, on position loans us other from moment one, that second, not or, $XXX to given a And estimate in at really to be to able

think what overplay want quarter another on that to So, need and don't we I we're I doing.

back crisply. just off responding of So, I anymore think to I'd that

Sorry, Michael.

Michael Kaye

you. thank Okay,

Operator

is the Morgan. question Rick from next line Shane Your J.P. with of

Richard Shane Jr.

the Hey, guys. to that's going taking drives the for go the liability And really it like probably and if through the rates and benchmark reset hedge go Could next the variance on NIM looks also that periodicity numbers, balance? each my you year, us the over through factor really us be Thanks for question to was with that this stock. we asset the what Walk morning. mix? When side. persists the the through are of the

Steven McGarry

Sure.

pretty fixed have directly to straightforward we tied variable rate. a one-month XX% it's So, rate and about Today, portfolio. LIBOR XX%

the funding to closely of pretty Our the matches mix assets.

billion market We have money $X of deposits.

have We of billion the we tied And LIBOR. swapped – to majority CDs have brokered $X ABS into one-month are another is of LIBOR. that another vast our

of So, mix matched. fixed the to is pretty well variable

fixed swaps some on received rate our flow portfolio. put have fixed, to pay hedge also We

thing. a although look it pretty a will So, say at rates, well beta. bit Rick, conservative It's our think if on disclosures, interest our rate I probably I sensitivity little you interest to the one sensitivity captures take

in probably the modeled market money deposits to there have it's closer of running when we these beta basis for a XX think I points XX days.

in to the put stabilize. prepared that – an opportunity some I going out two Moving decline our me and forward, over this then gives remarks, quarters so and next to on actually both NIM neglected my information to is

[indiscernible] in will EPS first [indiscernible] our EPS into QX. decline In year a ramp then in from the finish quarter. are to the up Our QX second we the strong direct-to-consumer and marketing spend decline quarter, very

share our earnings So, there's seasonality in both our metrics. per funding and

Brian Cronin

Steve. Hey,

lawyer rattling please? hard to a was were It repeat little guidance. that that providing when phone the the bit you think I you again Could hear. started

Steven McGarry

That he the SG&A been reprimanded. guidance actually was has and

the ramp only quarter and marketing in the And slightly but a miss by persistent up to pretty our large end season So, QX decline time. cost hit we that the is of the direct-to-consumer then, costs, EPS for QX. QX. second process in originate time but marketing increases And a will it pattern, continued volume in very as we been not It analysts loans has from that do strongly. QX. was strong it we to peak

Richard Shane Jr.

Got it.

that's very you. helpful. Okay, Thank

Steven McGarry

welcome. You're

Operator

with Your Henry question comes from next Wedbush. the Coffey

Henry Coffee Jr. Jr.

I got Good XX up are year-over-year at of in look your kind net cohort taking morning, the you for we quality my basis that talking when above And When stability thanks everyone. you're we loan trend about? full analyze call. second how into within charge-offs, data, And see the in be that charge their then, seasoning we Is are loans Is that offs in-full you've point. process or about should and of the that year in for the year? of where the a sort payment? repayment more rest thinking third

Steven McGarry

the stats are total in charge-offs the filed delinquency over loans SEC we So, that both repayment. and our disclosures, numbers the in

a more changed, much repayment, significantly not loans on charge-offs principal significant interest are strictly to both and call an certainly month for And have they in payment, they a full as than delinquencies full but more when and that so nominal loans for just loans the making charge-offs also in in the dollars also or the interest it's principal I in which what fact are P&I is So, that that school. gave $XX interest-only stats and repayment, school, are we which delinquencies related the it's and to and interest go full has fixed payment. The mix charge-off. year-over-year increase we is in tend the P&I. is loans delinquent in that

There of they years three the Granted, loans in year-ago your period point, bulk the of charge-off were loans full billion the go QX. measured in X.XX% in after covers – charge-offs QX loans in down they are first probably full really emergence from into X.XX more QX were the the full our X.XX in quarter, in to or in $X XXXX. up than billon quarter. P&I first were So, XXXX for And $X P&I happen P&I. from loss

the see So, that is year-over-year you increases. why

roll X. fourth X end hovering be of quarter. defaults up the For the or by QX are could be for do there closer that default delinquency the through increase and loans to The the significant an charge-off either a and they entering full should to buckets rest We tend be then the recently principal and as see repayment should delinquencies and year, in expect the in interest increase to to in the of third year not stats. stable just

Henry Coffey

But Thank the see front, origination you. then, forward. And on that the to obviously, thing same you jump won't there in about makes you're hesitant number, that anything you was unique the think X% September?

Raymond Quinlan

follow-on year. different through, of many from high. good our we said, at serialization look as had right? the across was things, rates take pull prior it, progress remain I pieces it for application Well, As We

And of wasn't be would factor, we we because anything gee, and to expected I this say particular that new different to numbers say, there would so, upgraded the market.

is think becoming we're us. more customer to dealing I efficient at that we're seeing regard interest before I've what in said with

applications with And I us. take advantage better better faster so, people that we in We around, of turn were who have experience think the for customer. the

at a efficiency market the And seeing player. think I share XX% so, what for you're is margin

that of we introduce our as XX% third not and have be be products quarter we busy different are volume, the graduate story. and but a different As will so loans calls, much grad in evidence second And in about first over investor the so our that the will season, quarter.

Henry Coffey

you. Great, And excellent thank quarter.

Raymond Quinlan

Thank you. Can I record that?

Operator

line the is of John with question next from Hecht Jefferies. your And

John Hecht

answered. loan taking Thanks, seasoning little talked lending just I most I you assume this a guess for [ph] student that will levels. one my of trending to is questions. about with then start we're and also personal ALL and Qs respect year. the them better have a in question I Steve, asked layering in Actually, private portfolio portfolio guys, the

two ALL think this about we as through taking together. those step How we You're year? levels should things

Steven McGarry

the preparing joking about this for actually were last were as we We call. night

it of gotten I there the year can of as our the portfolio. down think allowance But that you have that suggested X.XX%. yet trend We towards allowance it's statements. hovering X.X% twice hasn't end do expect around X.X% will toward and for at will either I losses on least the the see, at loan trend

than private personal require portfolio clearly, for as loans will losses grows allowance loan student a that the Now, larger does. portfolio loan

trend be higher. should the So,

John Hecht

of course you'd So, X.X% target reported advocate that year? still or is that this throughout reasonable the

Steven McGarry

Yes. year. to it That's expect the where end we

John Hecht

very Thank Okay. you, guys, much.

Operator

And Compass question from your is Michael with Point. Tarkan next

Michael Tarkan

players, A of wondering pick recently taking has just focus CPRs with the the I'm programs over but the the higher those incidence seeing are for my any We've employer-sponsored with refinance been seen benefit Thanks up on years. activity you associated loans? questions. lot couple for consolidation of student past of

Steven McGarry

haven't, we Look, No. Mike.

see widely And that, very, lines. those that the have consolidation advertised we companies very programs of some like to along little programs

Michael Tarkan

Does making payments are required? your see data than whether is are principal that to students more you Are show that? there you able

Steven McGarry

full We We pay-downs. Look, see see curtailments. we see consolidations. Yeah.

We have all the details.

we have rise a in significant not can result those We prepay that seen identify speeds a as of programs.

Michael Tarkan

thanks. then – Okay, And

Steven McGarry

[indiscernible].

Michael Tarkan

sensitivity? sort assets maybe fixed out the of loans, day where how it's of more back about business taking there sort or got now portfolio big XX% do rate your and was you impact about in think that. And does then, picture creeping remember out think funding just students taking was Just with some Yeah, that you. the fixed I of we your of how up.

that. think you So, I'm how about just wondering of kind

Steven McGarry

also done the have And some CDs. to X, brokered X-year money of book. on swap changing market market derivatives We're and received that there X, we of a we the index out brokered any flow where including X, we We're type portfolio, rate fund a and issuing think Look, so we way about the the LIBOR it's deposits absolutely for paid time the less offset given production. retail we in fixed ABS. deposit how to at have we charges our

a definitely CPRs of any rate But don't assets complex funding fixed mortgage isn't Convexity we real than steady. it more rate So, are book. nature. see things it see products volatility that of an you little a really is variable or on is pretty issue. the that

Raymond Quinlan

XX% at still And we're variable.

Steven McGarry

its of some very we're Yeah. funding job as X% variable. portfolio, our that a doing disclosures still think the show, current given index. we good There's sensitivity And

Michael Tarkan

only a year. rate with a looking you more We fixed saw deals bit component? Are securitizations that at little last couple of

Raymond Quinlan

mentioned that I has ABS since points a of basis out from. XX out cost the remarks think bottoming. We of declined funding spreads in we probably coming And we're the started are prepared that by high seems all here So, as more well my down volatility at like as yield are the ABS markets spreads it's bank. bleeding indications, unsecured the while stock up here. market the the debt markets shown that's into in full

tranches fixed We transactions. And will as include end we year in those deals up to this rate will opposed two. probably issuing more three

Michael Tarkan

very Thank much. you

Raymond Quinlan

You're welcome.

Operator

we no And have questions. further

Raymond Quinlan

I we're participation. thank and associated XX%, all share, at funds, a business, the at And look customers market and volume performance, the the for recounted, ROE we quality you and tools. major you and your had Okay. satisfied, both with variables quarter. Steve earnings as new have efficiency, as operating the believe introducing we terrific level, are up Well, yield of increasingly cost credit XX-plus And

I chat migration. the activity. areas think the which And of turnover, on strategic want And said, As significant experiencing I for Agile a progress improvement to low cloud The is and is company. latest. we employees continued are we are making reemphasize new very of helpful the on

in for course, the the to franchise, we at talked have high The we think how all And solid, people see, the six Of performance that the We'll didn't also we nipping is to we say, X%. And the hopes the very case the consolidation get very And plus combating personal portfolio. more the look have that think as reiterate the at it we areas across that it, who expect see about. of are products, field gratifying. just months. I we the grad does. we'll loans, on product, next we

that you all is, that's the with of was in is two, significant forecast know, gratifying because competitors. as so, ahead our not market, it. And growing and, not And filled we one, spectacularly are and especially

in that paying and the credit shareholders. done changes mark investments and of we've off particular all think are service, paying quality off of we more tuned our finely that is So, a in for

replicate we your the it future, a the first and today into quarter would could much happy and attention. of If portfolio just very we very performance the be So, we take Steve that thanks people. for have and in I this had copy that

all your attention. So, for thank you

Brian Cronin

questions time today. this Thank the and call Investors for you your available at your and page SallieMae.com. the A be presentation Great. of replay will on

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

Operator

Thank you conference. for in participating today's

disconnect. now may You

SLM (SLM) 24 Apr 182018 Q1 Earnings call transcript