SLM - Earnings call transcript Q4 2021

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Operator

Good day, and welcome to the 2021 Fourth Quarter Sallie Mae Conference Call. At this time all participants are in a listen-only mode. [Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the call over to Brian Cronin, Vice President, Investor Relations.

You may begin.

Brian Cronin

Michelle. you, Thank welcome XXXX and Mae’s Quarter Fourth Good Call. to Year-End Earnings and morning, Sallie It to CFO. my CEO; is pleasure and Witter, with Steve our Jon McGarry, our be here today up After remarks, the for we open prepared questions. the will call

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

Sallie COVID-XX include, pandemic For operations, among of business, our potential results of impact cash factors these on and/or financial others, Mae, conditions the flows.

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

Jon Witter

Good to Thank I’m quarter from announced the messages and morning, night’s and you’ll for announced for an joining report you on stemming us key away hope to pleased exciting Mae, of College. three XXXX, today. beginning for Thank Brian, full year plans you, our in to last take acquire year discuss I chapter Sallie agreement Nitro new discuss XXXX, Michelle. fourth Mae’s results. Sallie everyone. and XXXX a successful

we delivered strong First, in results XXXX.

strategic results opportunities XXXX. evolve our to we look of And in drive that the creative company core continue will acquisition and Nitro expect strategically imperatives, we for by and evidenced as execution College. our three, will against enhance business to our Second, strong

me discussion begin results. of a XXXX Let with the

program that capital year, and expectations, exceeded business, rigorously maintained executed our our managed return focus a core on we expenses. original the During a

and an earnings the Our improved throughout outlook economy. improving on this focus year based

our further shareholders. improved, of diluted in fourth share increased $X.XX goals As capital to quarter. the EPS our quarter year in the repurchase $X.XX to ago dividend, compared we GAAP our XXXX performance and was returning

results in on Our $X are earnings than executed billion were by associated prior we unique These the premium release. QX strong the driven year. last in sale the we and two of quarter that quarter, earned occurred loan the events given reserve the lower

provision to the our pandemic with call, release with You loan of billion, of up which with call XXXX fourth Consistent last XXXX the we at $XXX.X quality last which XX% million full fourth consistent XXXX. quarter is Loan Education may the past early quarter XXXX. impact Credit over guidance $XXX originations January, for year from our is due quarter of X% ended combined our our related years. origination originations to our from XXXX up were was million, our at $X.X remember the by earnings Private improving actually reserve fourth reduced sale. coupled conditions, over

repurchasing an $XX.XX. continued of XXXX. price cosigner versus XXX fourth XXXX at average our for in fourth return rate quarter the we to million FICO fourth XXX average XXXX capital flat of of the for our of the XX was fourth quarter XXXX. Our quarter quarter quarter shares the XXXX, XX%, of fourth of was score strategy, And In

XXXX We share of since have reduced price X, January at the XX% shares $XX.XX. average an outstanding per by

the quarter. XXXX Steve? at X, highlights by January since outstanding XX% Steve financial through average the of shares the price an now take reduced $XX.XX. will have We you of

Steve McGarry

everyone. morning, Thank you, Good Jon.

which unfunded of loan accrued billion of commitments a under our discussion CECL, billion, and Education Private Loan loan may The $X.XX receivable we do loss Let’s usually allowance X.X% reserve includes the exposure, $X.X plus the was provision. on-balance portfolio loan with sheet start you $X.X of or of interest where our total recall, and student billion.

but from significantly ago in year Our reserve quarter. the X.X% slightly is X.X% rate up in the prior down from quarter,

look going calculate SX our during are and used of input We XXXX. over Base the major to can from CECL In outlook. to now quarter, X.X% Model uncertainty XX%, this our XX%, forecast the ago current and weightings fourth expected variables weighted economy. of A improvement XX% as two of SX major drivers inputs to the reserve. last periods at in weighted used be use respectively. forecasts quarter forward, quarter year graduate Let’s the except model. important improved to major Economic in in and mix Moody’s prepayment a and we our speeds sharp are The next the unemployment year as X.X% such the the well. the factor economic extraordinary college average was declined reserve years forecasts, in

million provision loan a of resulted This quarter. negative the million allowance. for projected new to the in losses income commitments. is our booked in speeds contributor which a increased, important. our reduction loss prepay $XX $XX volume just over statement sold major discussed of of our is $XX which on year-over-year of loan in in Provision this new We The we quarter loan the XXXX, is of lending decline the We terms and million new unfunded the As economic and sales in reserve loans from reserve. have a associated natural another the discounted course, totaled origination fourth are, need the of release over environment, accretion lowest commitments for have in loan quarter. result $X with of improved our reserve. course Loan billion and offsetting the commitments reserve sale quarter, the

Page Loans X.X% year in and with up of discuss metrics, ago Private can found repayment. and Education in XXXX investor Private X the down X.X% quarter. in in Loans loans which is the days X.X% QX were our and in X.X%, credit quarter. year from of now QX ago X.X% be from on This forbearance Let’s XX-plus Education X.X% of our presentation. delinquent

closer Recall we quarter, Let’s at stringent The take announced are not policies. were are that delinquencies this. we up more last fact forbearances that when that forbearance look a transitioning to down is a coincidence.

As increase accounts seeing positive. expected, lieu forbearance. are in is a of of significant resolutions obviously delinquent in This we cash

that received a of is However, the entering the forbearance population there policy as would past of in loans status result have a that change. are delinquency

to These December course throughout and of roles In area. addition, XX-plus and demonstrating pandemic November percentage expect included to are XXXX P&I three in during higher delinquency, XXXX in loans – low the I’m our the and that left entered loans the going wave school repay repayment. forward just full we delinquencies day hover were sorry,

[ph] to at charge-offs in Let’s QX X.XX% in charge-offs compared look line Private Loan the made were quarter fourth and charge-offs. projections the take Education QX in in X.XX% at to Full XXXX a the XXXX. X.X% X.XX% quarter last with in year X.X% year quarter. compared in were in ago we

expect the Going for to for We of of full other Education outlook. one increase remainder decrease XXXX, few believe XXXX in A reserved then charge-offs totaling this forward, we Private X.XX% comments. X% very over are Loan and to about appropriately quarter the we year.

of know, XXXX. all program been through loan holiday has the you federal As May on the extended payment

our beneficial we to of discussed been we As both have hold this prior on private as has they borrowers loans. many calls, and believe federal

servicing borrowers engaged loans their that our in Our and positive payment habits, credit are good effectively. demonstrates performance

be margin the ultimately that However, we when federal do on expect impact financial customers will resume. payments negatively

are will I while However, outlooks for we can that we change, reiterate current reserved credit the believe well very economic outlook.

up net X. net which year X.XX% can quarter. X.XX%. year The to interest margin both Page from quarter find on ago you turn This the prior at NIM let’s interest-earning was from is assets and Full was QX. year the margin, interest unchanged on our Now, the prior in

NIM the believe full we our over of will forward, year just for that remain Looking XXXX. X%

quarter We $X Let’s $X talk selling on in about billion the loans of XXXX. sell now billion the of the loan in year. first quarter sales. $X billion in plan and third We’ll

So, perspective. into let’s put this

Our have fixed We our XX the the increased since samples just over conduct is rate. the our rate component sell conducted present on on about points approximately we impact loan floating a portfolios. cash when value of XX% flows basis sales. sale. fixed XX% and just loan The portfolio rates Interest last representative point was the of portfolio we under of

side to roughly leads accept all value things the the portfolio you the that that the in premiums earn, X.X decline of rate the is of point unchanged variable If a hikes, due being rate would we equal. to

premiums sales. A While will the execute our little be the the confidence we have we this. by double-digit we more low in included guidance have color ultimately loan ultimate on our price when in auction, determined

the the business, subject XXXX. projected is This XX% that markets portfolios post The the just and we revenue expect will over XX% to of on from on revenue our our come to on core revenue of gain of sale We interest volatility from our CECL our provision the net the comprise XX% form the sale. is of release XX% sell. balance means in in income of gain reserves just from pretax, but to

from $XXX student compared quarter. loan being $XXX are to to year-over-year despite Let’s year X%. service operating volume noninterest $XXX and X% in sorry, expenses business in third seasonally our ago million the expenses down our dispersed in – core turn OpEx. million quarter Expenses Fourth were million year declined full loan I’m high quarter, and up

up ticked an in declined impressive unit turned marginally be X% competitive out while Our our a what service year. to acquire cost to cost to

and our We gain on efficiencies will focus acquisition to servicing costs and absolutely operation. lower continue driving, continue to from

as a our of was post-CECL total to reserves, and like risk-weighted We ratio risk-based quarter, XX.X% liquidity was in Finally, common the Tier a ended XX.X%, our capital let’s assets. world, very strong. which X total look at which is with equity capital plus loan the equity strong against GAAP liquidity loss positions, assets. we’d measured are XX.X%. of call out our quarter the capital the fourth At XX.X% was and end

continue sheet you, Our grow capital to are we to to to business and Back forward. positioned very going return the and remains balance Jon. shareholders solid, well

Jon Witter

Steve. Thanks,

a environment outlook and offering the grants, view a remains increasing forgiveness community wrap description service brief college the up increasing Congress Nitro Biden constructive Pell funding with the HBCUs. on of free political for loan focused and the process, me Let administration the public of with political for environment, Overall, simplifying XXXX. acquisition and discussion an

assistance target and of most As they business. to types complementary as those discussed efforts previously, support are it need who to we our these

a all acquire Nitro last an core is business announced that to new As opportunities. hopefully, both future our enhances you’ve that agreement acquisition opportunity potential This we we night, seen, signed creates College. definitive and

XXXX, in Nitro years. this, significantly million, to you some give in million. originated on XXXX in We experienced know the $XX $XX for Nitro College growth To perspective the grew nearly And and has million. few five very partnership team XXXX in well. XXXX, we versus partnered years, – with The have disbursed have $XX grown or gotten to that last the

increasing originations low-cost through strong expect marketing added to increases and our other substantially through are next sources a years, tools our of drawn Nitro to for this acquire. We robust content, quality reach. the to customer grow the channel navigating valuable customer and families a path their growth own, cost lowering and generates partnerships. resources organic meaningfully over Nitro and quantity These these engine college. to to This that the for of and our results, leveraging channels base customers engine acquisition customers several acquisition

have today. direct one, For to lastly, we projected enrolled of with of seniors And than of two to have high that students. the direct We estimate dramatically. students the we are number with have actively school a parents will engaged with today. of of day will times that we we relationships the a that is example, estimate relationship number times increase X.X Similarly, estimate we will number compared seven college we that times we have number college-age with college-bound customers on relationship the

team our platform, senior We to numbers XXXX, Along XX% the to, welcome the and connection Combining combined the immediately planning entrepreneurial through customer increases tools content, and college-bound grow. this continue industry excited professionals high expect and of with and of a reach company and This high And a independently will real destination expanding we to will are our depth with journey make Sallie for college. we talented true expect company population. these possesses, school knowledge their with and loyalty. after a everyone drive. the school of to Mae, to customer relationship – have each by seniors navigating

priority position is leverage core drive first to to reduce growth and Our in this business. CTA enhanced our

would relevant partners. well compete expect product card be being areas obviously businesses potentially students to efficiently parents. current also to to credit and attractive that We will as allow and their other this as platform product deposit us This and our more valuable in other effectively to

by the look and the this to transaction and of the course, close first will of customary all subject We approvals conditions. end to that’s quarter, closing

me guidance conclude Let discussing our XXXX. for by

the share. per that diluted share non-GAAP be a and core expect will $X year between We full earnings $X.XX

Private XX%. to expecting Education are Loan We growth X% origination of

expect the be loan $XXX year be million. We our year first million portfolio noninterest our net $XXX between million expenses to charge-offs expect between and $XXX million. $XXX total full – for will And we and XXXX

billion In new the years. we common addition, a stock share to to today, buy over of next are $X.XX announcing authority repurchase two up

half factors, remainder to repurchase and in While other expect of authority dependent the on XXXX. share roughly that XXXX price in we and

will favorable return. return clear capital days years and believe open conditions to on when for support will premiums the Steve, to We our back favorable. reinforce persist and We the loans Thank to programmatically that, capital plans and to up more stock for continue shareholder for our our questions. market two market buy you. next longer-term our are buy let’s look opportunities the and With continue conditions commitment over call

Operator

[Operator with Sanjay from Instructions] KBW. Our question comes Sakhrani first

Your open. is line

Sanjay Sakhrani

quarter. and good Thanks, good morning

doesn’t factors – So might impact an the premium. But of an into valuations, you’re provided. premium you to little just reason. that factors current Does a sure give assuming? just bit you on play around And the increases, where those that I make other have it and whatever color where Or makes can sense rate impact other might that what what’s want it appreciate perception on the that have that for seem I today. on Steve, then at premiums the on premiums? sales. changes loan maybe threshold understand Thanks. It’s rate more I to and what premium

Steve McGarry

Sanjay. All great questions. Thank Sure. you,

top is the swap on loan of couple base What spreads to basically So the rates. market want our look, drivers basically, of underlying here. and the to credit premium a of on points rates biggest level sale the interest I – the make

interest So important. rates are very

However, and you want of lot it mute. acceptance a I’m the much. interference Sanjay, go extremely how is asset you on Thank to to of important. also knowledge getting very might model of here.

investors. interest I look, loan our So of this coverage last the the amount class. is eight asset is of in assets esoteric were There sell. point drew basically student no lot will longer asset class we an that asset that awful from times attempting of an And to out auction

also very rates, speeds, have as And think, pointed grew price I So very are and strong portfolios. out portfolio’s demand this I model our more drove their for Sallie rates January how Mae sale, to and of portfolios. accept interest premium interest losses substantially that your knowledge the that and acceptance interest rates increased like the October note. for as and our out our class substantially performance investors as is increased yet that I investment prepay that point our significantly, you it history we and think and sale important, are will or what factors while asset between important which things on other are in helps

So, we Did anything constant portfolios, a continues the buyers end demand we out, are asset with of for that know leave and class. to touch in Jon? be these I significant there

Jon Witter

of I of part we’ve to really way thing advantage between are loan multiple valuation. add, before, and as second to great think only this [indiscernible] this think sort arbitrage The your I looking strategy Sanjay, premiums Yes. it, the we this at a would the of we about question, and obviously, take said

at that. So, we looked have

zone basically kind of and we valuation. as a have relates premium yellow, it green, red loan believe is out to what plotted We

publicly We have calls don’t But think do zone. disclosed that of it’s to on think very appropriate close for nor said the clearly we’ve us I to. not that is couple we yellow are believe I what entering we last

valuation here that, sense. terms to or arbitrage And in make so dramatically from pretty to didn’t something would of for us premium change that have believe

Sanjay Sakhrani

product guys. Nitro you you. follow-up for for maybe It Jon, like you Thank And one good on a College complementary Great. seems question, acquisition. the

their forward. that Sallie referrals, a of impacted Just on marketplace might be Mae come behind Obviously, them one if their from lender And going right? revenues revenues. is lot

So, Thanks. the think acquisition from should if dry how we about those this up? accretion

Jon Witter

Yes. question, Look, it’s Sanjay. a great

respect all, think the say of really value Nitro First to I we model. business and it’s important current

very Our them that months with work time. more the like strong keep or We that, to the and guess approach doing obviously remain know really better think over Nitro franchise. Nitro a sort we to model, period business go really we really them understanding at opportunity. the no getting of in enhance But look sure and is done may And as work ahead intent – peak risk, very intact. is our to evolve trajectory we’ve and to that of season. first, this my the at We’ll strategy first of protect directly day, of that and and done committed brand. through bunch like by a making and the understanding of I start end bunch the harm forward work we’ve we are of Look,

they side, risk the sense think work forward. companies partner potential going is to a our lending with On don’t decides combined the want if I

lenders feel pass I for are think leads to those us. degradation, or opportunities way, us including like with no we other by there to little off the

some there’s So growth there. potential for a

couple know to And that opportunity of there’s cost one very for different are is And per dollar think there that that some We’re that value We think if those good that mind, takes, a revenue. we not also looking in significant there synergies. ahead. we decision a made, a But synergy of happen. direct that my partners were forms. retain to

sort the I doubt on that bucket. and think, they for that and us they’re is know paid loans marketing the versa, efforts, that of referral on quality. into we think a of really plan I And that previously We high to and growth We opportunities And investment, and grow expect Nitro to we also that achieved on very to That’s quite originations avoided required could of avoid building that that enhance to to category to channel those pull-through platforms, than dramatically had know probably already sure will think is lead high-quality we example, share look, to Nitro and the better they capabilities us. is they rate pay technologies going think no to the strong. more no forward. opportunities the and own. send have saves integration fee a are would able giving our to vice rate put us becomes channel. on For even longer we We the make there’s and I to otherwise there’s have achieve what higher cost channel the their that through better is I and be that have what a our there

So diligence. case, a a rare very one I our as course, think business business we’ve, looked think We it’s part today. sole, of its in a has very of of strong that. all is those core the rooted and all that strategic strategic hard-nosed really We’ve that of acquisitions acquisition, of but modeled at that in this

the that’s strategic along to our the score think but cash got really also way. register on this double something old So, like proverbial one, accelerate journey, going we word feel the ring we I

Sanjay Sakhrani

Great, very much. thank you

Operator

Our with Securities. Kaye next Wells comes question from Fargo Michael

open. line is Your

Michael Kaye

morning. good your charge-off into could further was net guidance. hoping Hi, dig I you

how federal year-over-year much general normalization. the policy coming close, is much was How For coming credit from the example, uplift the loan that change? is much how student payment more and from of end forbearance

wave it the in in the that safe mentioned repayment could meaningfully to come any down And also You also, barring XXXX, seem that NCOs say does impact. changes economy?

Steve McGarry

to discuss all Michael. Happy of that, Sure.

charge-offs credit et payment in the course consumers’ to good balances, the So termination cash balance over of user pandemic, think down look, cetera. mortgage and are of Americans shape. card there We sensibly loan very isn’t balances, of pay expected behaved very sheets an awful federal holiday. lot balances, the auto from excess the

very we that new, college So packages. in significant we increases their shape. And both are pay good also think and note recent also graduates, consumers in would are seeing

or young adults So, loan good we payments handle with forward very in are holiday. their think student without the going loan to federal shape

we going and other trend delinquencies the absolutely of cut increase. the factors. – try What year down they’ve X.X% year is I and the points in and half where charge-offs was probably this a from pandemic that will to practices year in quarter, an that the throughout additional doing don’t get around quarter is first the of with third little roughly well, increase around which from back that into of to the were basically they to from Turning to happen is we factors. in in actually I the the saw rest is repay – probably quarter But delinquency the roughly the hovering, increase course basis in think the higher the mean, dropouts of forbearance additional the fourth and the peak want the changes wave been to X.X%. than and XXXX, from

we outlook will gave factors the that the And net are for for think much So, think XXXX out temporary have charge-offs XXXX that we XXXX. started quickly. point And there based is I will in guidance that of very that we in we where a the run outlook. we right pretty reserved system off through we the well the delinquency buckets pretty impacting now are couple

what But So catch-up the little is XXXX. seeing. and very, we into the of from at we’re that overall, performance the pandemic look our filtering good bit there of when portfolio, we about is absolutely a effects of feel XXXX lingering

Michael Kaye

helpful. Okay. That’s very

to supposedly May. ending loan holidays some student the we on thoughts Second refi wanted as market, mentioning I in were question was get payment

moving potentially refi got We approved loan getting could higher. the make for a charter, rates which them are more but also competitor bank student major dangerous,

much maybe estimate the sort your to have could XXXX. in any portfolio market your and if So, you share on refi of see be I how refi-ed wonder of perspective loan see could you student if

Jon Witter

Jon. it’s Michael, Yes.

Let if me he at take sort a chime let of likes. that, and in crack I’ll Steve

the all, of call one in and been product in has to accelerated changed One, of, anybody. it those make we the minds, government years business, to First predicted that efforts ledger. of for on a our go self-consolidate relatively was of a own having sort manage payment looking place a way mind real obviously, I is students the where good the of these good of high And a yes, And of many disruption to constant. our to find We, have back. really and of really their back before of that the would value of that a sword our try such think of I as activities sort course, to be a the it it any good cannibalization extensively is, side of calls But number couple cost really dramatically shareholders. in to forward. it’s view of would doubt opportunities I sort And I business the about think for that need don’t our to activity people is think of to the would holiday precise customers with to like loans. math to question hasn’t and if double-edged have point from others self-cannibalization of any I anything been And about ever we’ve persistent, But modest where ROE of and is sort on business. the hold sort there me, the To sort need start having sort federal proactively viewed the refi customers activity of historically. sort both you of I think our it pretty a in has sort it’s And and we’ve a flip thing. experience necessary gotten the talked business. losing you

payment the during and discussion that limited they forgiveness. ongoing learned holiday think with pandemic some potential federal federal I of loan the

there’s So, to having I actually think respects, federal those many come not and loans have the cost real that of in hold people government understand consolidating. a

you that are both rising, a marketing, has interest it, rates effect. Secondly, underlying also economic an I think but mentioned has it customer

a situations interest environment. and that lot the even the harder. is And we sort in much product By model increases of loans, and don’t are so squeezed refinancing too that the the get to of pretty will of acquisition to something proposition continue the rate true I If of on – assume originated marginal And margin this sort the or way, environment. during debts. fixed loans by hold a most not margins refinancing as terms therefore squeezed – way, their that For people rate were of it by expenses think higher justifying customer, makes have marketing thinking viewed the these the where historically, as about to lower rate this we strong. see think, and I the for was that get to squeezed also in product you get the it’s point where value

together, I don’t and anticipating we I change. but we’re that of of cost our the sitting don’t think consolidations that we’re the will going be here believing seen put that I to So, less all think historically business, are dynamics think we’ve

regulatory capital competitors. of capital at that you to are against benefits funding costs. cost specific has and the you to think to also As and most has implications relates importantly, more costs. shrinking someone talk It capital in It terms the kind of look costs if a very asked, a important advantages And of well funding of about requirements, I low change. in start becoming be want minimum a margin it certain than terms we the don’t disadvantages could really Certainly, competitive bank question loan category. that

fact really forward. capital lends of Historically, been viewing that it’s that heavily going I And I in have most them that risk the as it’s think the of nonbanks, think engaged a don’t refi us worth that around. noting calculation which credibility for space. make we’re So, the hard to go think I major to just players we see

So perspectives. of a in this a as that at I think gives obviously, we’re sort something of few hopefully, outlook, steady-as-she-goes much that changing type But barring a viewing you very environment.

Michael Kaye

Does to any your – he’s Okay. of of in how refi-ed Steve have XXXX? for be what expecting much portfolio estimates sort

Steve McGarry

don’t to XXXX. refi been than it’s see very numbers the think a have steady. rate more we whole and XXXX to expect we in been very in I steady. The seasonality lot seen Michael, It’s

Michael Kaye

for you. your color. Thanks Okay, thank

Operator

DeVries with next comes Barclays. Our Mark from question

Your line is open.

Mark DeVries

X% bit XX% resolved? the year you faced you. this you assumptions Thank expecting year? headwinds Can Are guidance around get you your of a origination talk this to will about some little the

Jon Witter

Yes. It’s have that. for that I Mark. think we to Jon, tried known all incorporate the into Thanks things. of Look,

our gotten have or things. unknown We in not speculated over SKUs

So, after of at the looked is what important fall. with see happen end students. long and But large colleges course, a and growth pandemic. I coming barometer. aid last going amount happened for the programs. ending universities think pretty We at an this to And about some spring. of has the assistance originations to That we’ve the really were come statute, is here call. the course, think, That’s talked in extensively you’ll to remember, by really of of we what this hard there market on to the back HEERF financial of into we glad looked last given very direct to for program, a We’ve,

of we’ve and enrollment not in to so applied come of our assumed snapback if that there of natural is, that part sort expect it And from is What we’ve market would an sort say we that the large outlook processes. development absolutely end forth just that. of any included as of rates the growth unexpectedly we’ve the then explicitly pandemic. to So

that want to depending end flat digits pandemic, slightly know we on of look the from upward mid-single before pretty in that. to you trajectory numbers what So to at, enrollments a were beginning the the down versus schools

from kind we’ve not that yet that it’s kind We of numbers. growth a it have of assumed in where been, enrollment assumed just the not because but we’ve snapback, continues seen

different. are you very, patterns than, to different expect enrollment out if pandemic something than trends obviously, of very might coming the see So historical

Mark DeVries

then that, buybacks. of and about are little I next about The get I And more XXXX why you it. of authorization considering question aggressive the half even to after you expect not bit is, phase-in? thinking the capitalized Got than CECL how you use half think year. a kind just to turning in mean Okay. well indicated,

Jon Witter

Yes. we return. a hope and And question. Look, one the great is and capital and notion allocation are there’s you think Steve our that if I it’s I have thing. to committed to capital demonstrated really of I Board

XX quickly year, the I by how us fact in bought is back I that we think pretty the we Mark, can last that’s governor put that But clearly think evidenced tender that, during really work. XX% learned really we’ve the the months. capital of offer with for last what to company the is

to the limit of sheet there’s place a be don’t quickly have year and return. About we by we those we tender. aggressive led you to ago, want many it in we we terms return recognize done upper to being was balance can remind as year to efficiently. but love capital And share an can keep as It subscribed. just So what and a on repurchase, a put all. great while billion really we in our how $X that loans, of It capital forget, XX% on way,

right. more return. aggressive see little margin, but bit little a think assured And get bit It’s for think be a opportunities if on I to us of we’re rest to so the It’s on I can capital of science. trying you that art, balance we

think an always in eyes try of do of towards well we’ve eye we’re will with capitalized and I demonstrated our investors making the that, regulators. to always we sure course,

Mark DeVries

Okay, make Thank you. sense.

Operator

from Orenbuch with question Suisse. next Credit Moshe comes Our

open. is line Your

Moshe Orenbuch

maybe comments us of in got, how think capital the how as of to just years? terms the of you a a levels I hoping over that I in the you your about Great. guess, originations and percentage about basis it, a – talk you that’s about think coming couple could about it do it generating. to you the on billion, of down? of sales. views kind are next Can think is framework multiyear you do that as I $X was that you’ve think give mean how about particularly Thanks. as a time loan over do Like

Jon Witter

tape remind happy Moshe, rewind And we’ve me Yes. look, and been. everyone the again, sort of to. let where

mind, that loan Our real strategy. sort are remember, sales midterm my of and midterm just a in strategy here – the

But of have phase-in things really manage return arbitrage to to our long-term that, the the disconnect We equal. loan sell become two are between and CECL we to are not that ability obviously, then second company. and would capital both capital, effect being is, trying trying different premiums. advantage of a on the other one all And originate valuation I and implications think and take is factors. Number the

we’ve persist. things So for couple be will long play of three the the market two, years, one conditions at at first for, of both next play. got And however, those

we shareholders, think can long-term are to can And very aggressive I high-quality have of pretty to them recognizing we is a is clearly that we want that loans. hold return as these sheet capital to in capital really generating while think we to most be what as meaningful investors strategy we measure. our in retain said and balance organically returning on

balance think what historically next to a flat-ish have I is slightly over it should increasing be is people of sheet. will flattish couple the sheet. So, said expect My guess we years, balance

and probably suggests that pretty to market evaluate few for level to broader based But ability in loan on is we’ll as what over conditions, will our capital plan. our of on efficiently course, year. next based years that consistent effectively, return guided think that evaluate next of sales we year, So the we we’ve each longer-term a

arbitrage we’re the guess think sort those doing opportunity think precedent I of And the of we’ve and/or I phase-in, you more my it. and a two about should how until expect, thinking for set it on CECL clear factors average, one So, is of changes, pretty same.

Moshe Orenbuch

Got it. Thanks.

in Just the the need consolidation that hold to the both capital follow-up, months. time those of on as probably say to for fair competitors market, a competitive dynamic, bank think a they put loan into loans balance over sheet that you discussion do the actually the it’s of see them six major on I if markets even

So had been during need Plus, – of to the it that? kind your is, I loans think they dynamic private does really I the of student guess much moratorium. competitors targeting it’s question as do the that one change

kind you those points. So, I of guess could on both reflect maybe of

Steve McGarry

Sure.

up in the end add or is the loans portfolio our sheet. really billion of there, a them. of XX% exact and But through swaps the basically balance gain on last day, out volume comment gotten we’ve months, billion of don’t would based same they a market in portfolios. seen right. the whole has – direct player medium-term are $X.X just of is volume. basis where players since The refi way. a at asset-backed the the Moshe, in the fact have the what NIM know that is increase a probably on other look, we’re the eight originating The One of going them market confronting $X private you’re impact to bunch retaining over happen yes, I So the sale different or doesn’t matter measured where about doesn’t these impact had of points And student XXX the fund in increased players about offsetting the the six those has on are cost on and in

done gain one reasonable that margin capital on the markets So of up. doesn’t I driver really, these can the a sale. what mean are players yes, add or at But ultimately get

Moshe Orenbuch

Steve. Thanks, Okay.

Operator

Jefferies. question from comes next Our Hewitt Matthew with

line open. Your is

Matthew Hewitt

John for on Hecht. I’m

are how how hikes interest expected First your putting model? fewer with rise in And is, would hikes expectations? or to more impact year, many rate question you your this rates

Steve McGarry

the simple. put model It’s a our question. is the is into And basically very forward great we to What answer that curve.

we going the what put happen is, market So what says to is into our models.

in sensitivity, XX-Qs. rate interest our from recall, may our presentations you As

well very position hasn’t queue, the quarter into but went it because one publish didn’t We our are balanced. this dramatically. changed We

I think at there point basis was third if modestly. our earnings market XXX shock quarter on very rates, in increase a the based queue, risk

number I the think X%. was

So, a the interest market we are rates. rise current very well in of expectations for positioned

this rate market like the headlines the read You is seems hikes. morning, expecting it five

market. that’s that priced already the pretty think bond probably swap government into and much I the

up I X.X% to from think increase positioned in don’t yield it market know, are terms order we would hike here something in happen spot year have So the well I think, interest down quarters of for X.XX% I we to, rates. dramatic, what comes But helps. hope X%. the from very for [ph] five

Matthew Hewitt

does. It

accounting is as you gaining where are is? expectation share that some gains an for year, to market this X% for And As a for follow-up, what if so, XX% the your originations pickup you expectation are well? share? in growth Or

Jon Witter

Yes.

look are it retain assumption and – for it. can we we think going I so we our is is share that where then to grow opportunities base modestly

do demonstrated that yet consistent gains obviously, throughput XX% about the amount. to lot but important. time there’s year, based certification very last opportunities the And We work. for player, we’ve not six to don’t As announced lending application a the share announced share spend during quarter that last yield, share a of of think to over is The process quarters thinking think But market the quarter student fourth unique us last and that frankly, old-fashioned increase market we Steve we I I we plus for to share schools think pretty a large and huge steady I what look, hard on, is private have with it. up really, good quite business. time.

lot and loans with So, lot students, spend for are don’t cards. can their end students and travel and more of use a to partners related of dispersed. working of time student do our loans caught on school being student up in certified sure getting those are know them not putting that and we fees, with can We that systems expensive they that and many supplies they loans work on up what they for. Surprisingly, their loans educating those use make credit their a sort

maintain actually learned Matthew, customer-friendly sources financing. on it expensive, slightly last experience can doing well, I the less in all I’d you would for you and of your and us expand back the in out more And you angles. that there’s grow look other over margin that. to and quarters that the again, I for no just six funding there’s What So of think, pie do modestly share opportunities say, any by the our you I you is work do one bullet of can silver think crowding we’ve on And to And that. those if margin. need

Matthew Hewitt

taking Great, questions. thanks for my

Jon Witter

Yep.

Operator

call to CEO, questions. any further remarks. turn closing no Witter, Jon I’d are There over the back for like to

Jon Witter

any your Mae. thank Well, today. Great. questions. answer over before. and to team to are if think whole you, Obviously, Brian quarter, turn I And again to I’ll With we everyone, forward it at dialing talking help for in. Sallie We appreciate you some back your you business. thank last-minute continuing in that, Michelle, look and not next disposal for Brian, and the interest here your for dialogue IR the

Brian Cronin

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

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

Operator

This concludes program. the

day. great a have Everyone, disconnect. now may You

SLM (SLM) 27 Jan 222021 Q4 Earnings call transcript