Earnings call transcript Q4 2022

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Operator

Good day, and welcome to the 2022 Fourth Quarter Sallie Mae Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session and instructions will be given at that time.

As a reminder, this call is being recorded.

I would now like to turn the call over to Melissa Bronaugh, Vice President, Investor Relations.

begin. may You

Melissa Bronaugh

Steve Good for quarter Michelle. to welcome Sallie open CEO; to here prepared After Thank we remarks, earnings morning call. fourth will and our Whitter, XXXX with the pleasure our It Mae's CFO. today the call you, up Jon and McGarry, questions. is be my

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

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

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

Jon. And turn call you. the Thank over I’ll to now,

Jonathan Witter

XXXX. you, for us Thank you and full and Michelle. Sallie everyone. Mae's quarter outlook for morning, today Thank and Melissa Good joining fourth discuss results to year our XXXX

two take you'll away messages key today. hope I

First, on most dimensions XXXX. had Sallie strong Mae a

an charge level that of likely experienced the offs believe of but XXXX now level period time. for improve, elevated [Technical we at we will Second, in a remain Difficulty]

XXXX are for a we put that momentum strong operational and third, believe As to we future impact start and tough have such, And we financial taken positioned and to have behind well success. result, us. as medicine entering

of share for a $X.XX As last QX loss year. diluted earnings experienced $X.XX the night, Sallie in share of and a we a released Mae

of the as credit This in increase the investment in our quarterly for as to due was an well provision value non-marketable securities. write-down loss losses, of equity both an

help and XXXX Absent position I for Steve charges in for guidance believe these Mae with both the financial quarter beyond. line Sallie As charges, our expectations. results strong will performance discuss, in were our we and

is the year. the education drove performance loan with in Let's experienced originations guidance on of originations Private call, Consistent XX% our get fourth our million, fourth full into up up the quarter XXXX over quarter month XXXX. approximately were January year and last for This quarter that has XXXX details the XXXX. over into the our ended which which is strongest $X in the company's just $XXX originations have we our at carried history. momentum billion, XX% as of

share according We most of also lending reflective share saw the the core XXXX. XXXX our XXX loan Sallie to of market increased growth report, in a bps notable year-over-year Mae's season industry recent peak market student success.

We in also originations. observed mix of the important our changes

factors, Specifically, bodes lifetime a marketing of school serialization and last This our our future performance Nitro in acquisition underclass we well disbursements by improvement College, benefits effectiveness relationships. including to higher greater originations for peak value Underclass compared us opportunity, to saw XX% year. in due which have seasons. increase to number by was of partnership our investments realized MarTech a driven strength the past from and enabled of

of past quality with Credit was originations years. consistent

of the fourth was in XXX versus was XXX quarter for XXXX. XX% the Our XXXX Average XXXX XX% quarter cosigner of of quarter in the FICO fourth for quarter XXXX. rate score fourth fourth versus

FICO had and originations an For XXX. the full cosigned were XX% average of year, score our

year Year income. our loan generates interest portfolio quality significant in net and out, income, net interest

rate team risk full interest balances. year lower X.XX% higher despite In rising treasury environment, earned than grown X.XX% billion XXXX. we net net effectively income, $X.X For rate loan to and this XXXX managed having our in our the full year interest XXXX margin of in interest from of XXXX of slightly has

period despite the and costs highly as managed volumes this rigorously invest our increase coming in other in and ruthlessly million. this on prioritize This important we initiatives. is an expenses benefits lower such also guidance in and operational expenses. wages, end have in pressure, continue strategic most We inflationary Despite at of $XXX in to our and

our $XX.XX. fourth XXXX, quarter the repurchasing price an of of XX million strategy, In continued average we capital at shares return

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

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

in year this performance, original off our than expectations. about worse charge the excited are were we results While

Specifically, XX discussed offs quarter. private earnings on $XXX range education revised end for the net of at the second our above were release, press page year set charge our as and the million, of we the XX loan

at will remain abate offs to and begin You in remember in that QX expected we charge time to elevated QX.

some we many factors remain factors elevated. we discussed, have performance While transient improving seen previously of in the

across portfolio don't stress portfolio we end of while delinquency began of levels the see in offs toward year. the whole, of we addition, pockets a the evidence our In charge to see of elevated as and

conclude data, off a charge trend elevated. to charge likely As to be we while led factors the lower than combined believe seen this rate lending. assess we XXXX have These remain consumer similar expect XXXX, us those industry will areas in of is we that and in offs to in competitor other

we results saw play fact, expectations. In improved our in out relative this where to January

view and in We allowance estimate off calculations. charge this in our results reflected have

will we charge million. offs between in $XXX XXXX $XXX Specifically, and million expect be

As we a our reserves added result, to million $XXX QX. in

off commitment continuing remaining are to others comes an that that stress. are XXXX while willing see true build of that I Roughly XX% not a actual eventually and described is will economic results. prudent incorporates outlook, and a charge modeled off up normalize, into build of immediate to this allowance credit assumption related moment we expectations to growth, elevated addition In charge are to ago. portfolio and provision XXXX The from we and this XX% where optimistic a we improvement changes modeling over this assume and

loss In have addition made charge, performance. changes this to improve significant programs people, financial also processes our to to we and

continue effectiveness will performance further of our dictate. evaluate operations the to as to changes and results enhancements and make these We

The we our third of in the other main the equity the valuation decision to and non-marketable made portfolio. quarter, QX involve securities. the the card In investment our financials divest factor of business in exit credit

the However, strategic up this we may card partner a XXXX, by when in we as investment $XX In we service million. you made in marked recall, credit investment XXXX. business a entered

remaining in balance sheet to have million. and However, based on is sentiment required the on fourth the prevailing done investment asset our of immaterial. write down by we $XX The were market XXXX, quarter so

provision expectations. write our our driven of the EPS remainder a in to was write are was increase two-thirds and this the impact $X.XX down investment down strategic approximately of we build The than due our a exiting. drivers the the equity primary and lower provision I described of About in the line in by of investment just were coming business

take some the highlights Steve quarter. of will now financial Steve? additional through you

Steve McGarry

Jon. Good morning, everyone. you, Thank

Let's with allowance dive loss continue deeper a into loan and our provision.

million offs represents allowance driven QX in ago for and was of private prior quarter, million credit $XX $XXX losses increase an million the total quarter Our This our the from loan income quarter. provision of net of the build $XXX year million charge an education on by and statement million. $XXX from $XXX provision

interest billion. the quarter detailed sheet of our billion X.X% the level, $X.X exposure, receivable more At reserve to education private which brings accrued of total in loan or increase allowance plus the student the $X fourth loan under CECL commitments portfolio, balance another during and our unfunded includes $X.XX loan of billion a on

mentioned, environment. the allowance, issues, few XXXX and administration our persistence expectations As of operational off there the credit potential increased being practice factors that Jon from to current changes are over influence this the our increase borrowers a largest the for due charge pressure and into on economic XXXX in

slower prepayments. also allowance in than for We the expected quarter built

everyone natural discuss the education up a now reducing metrics. loans in in and reminding worth an and that is uptick of our from delinquencies. Let's loans It of in plus X.X% were delinquent X.X% QX days from is XX result credit quarter. a uptick ago slight year X.X% repayment, forbearance Private

plus forbearance the our day to policy plus expect recently In to usage. levels through now We we at changes, XX XX equal delinquencies is the forbearance remain rate implemented fact, in experienced our XXXX. delinquency since decline increase in

an Private ago year education the from loans X.X% and and quarter, the forbearance increase the at lower end of of QX, were X.X% the at from end X.X% quarter. than

XXXX. up As year usage. forbearance it X.XX% quarter to the May offs in the XXXX compared year charge push for charge ago in X.X% and QX November in Full X.X% were X.X% graduates X.XX% Net and in exit seasonal compared in their grace the quarter. in were see pressures to portfolio is fourth to offs December, period typical

charge X.X% private X.X%. the for to of XXXX expect We education full loan the offs total year to

are we outlook. appropriately earlier, for mentioned reserved this Jon As

me life further XX% for was our that long be in elevated context whereas fact the XXXX cycle that our be With is charge loss. expectations rate. rate X.XX% either. to belief to should mentioned our Today's underwriting. reflected offs the of Let long default believe term we that at term do This some rate our believe the X.X% that of XXXX also to provide has lifetime does said, provision, not of with offs implications our reflect and through driven reflect not around discussion loan two long our highlighted projections run Jon expected our believe continue charge charge next over earlier, the We by off we increase years. consistent term loss expectations of rates closer

beneath recent lot have for In well that a that. catch of reasons seen loss discussed. was I year and Jon we rates XXXX already years, have up a

over curves returns XX% will that of to However, generating drive profitability think range and time, anticipated forward, within on the loan return when losses despite life look the will of be estimated at credit our assets we continue equities attractive remaining credit expected range, the performance we loan and performance. at recent in life of going underwriting and vintage

I solid Jon of on a that would benefit has rates. that performance. to to rising we sensitive our discussion continuation like remain and asset should add already reported from NIM marginally

which NIM continue rate year for Income an for $XXX expect of our run was throughout reasonable represents company. XX.X%, We expense X% to tax our a is million. effective the exceed to XXXX. rate tax This

in increased down million operating the and Expenses lending year and in from expenses ago loan million quarter business operating were season. the pressures core year peak XX.X%. significant quarter. compared in was expenses up the dispersed which were student our prior $XXX volume despite quarter prior X.X% Full from inflationary $XXX $XXX our just being quarter the to Fourth year million prior

and focus on unit a driving continue will costs acquisition lower servicing We to both on basis.

reserves risk based loss loan of We capital are strong. going environment the assets was At strong plus fourth the we with return We our quarter Tier positioned XX.X%. XX.X%. important in well assets. to was remained and forward. capital over an metric the ended equity total to risk our believe and to capital Finally, the grow total and positions of continue GAAP capital liquidity are of liquidity a and X business weighted very XX.X% shareholders quarter, was end CECIL equity common XX.X%

turn now I'll to the Jon. back call

Jonathan Witter

Thanks, Steve.

said Mae believe Sallie positioned previously, is I I As future. well for the

student market private rate a of strong the XXXX well back is to year sheet bode which our growth more or COVID return engine both expect lending slow, in balance we post loan continue prepayment normalized speeds the growth of and compared to sales. XXXX, continued bounce for to originations to While

management. and resilient we demonstrated have is expense strong NIM Our

offs charge expect should we operational increasing have effects. help from that we changes reserves measures these future elevated, making performance While insulate and by taken are

also XXXX top where markets. On of we income levels fixed are are the are factors, our normalizing signs loan positive prepayment seeing Rates these speeds now sales. slowing. we spreads Credit at executed the in and

All sale future of this plans. support helps loan

in place such, with market plan program. share to keeping our and QX. sale are to likely past take loans These As to we loan in billion subject QX $X sales sell buyback in arbitrage of conditions, XXXX and

seek to purchase for still this program, to $XXX do worth board addition, anticipate repurchases We under share our repurchase the we of authority have In shares additional not million approval this year. year. having XXXX

to Beyond strategy. our return remain capital committed XXXX, we

this to like in is for It context, provide our I'd guidance XXXX.

year full year loan earnings GAAP X%. expect diluted of growth between we Specifically, Full per non core education $X.XX. X% and share origination private $X.XX to

between earlier, our million $XXX stated our between year million. charge offs expect full $XXX $XXX be to And expenses net and for be as XXXX loan We the of million. expect portfolio and $XXX we non-interest million will

With call open up questions. for that, the Steve, let's

Operator

question Orenbuch Credit first from Our comes Moshe with Suisse.

open. is line Your

Moshe Orenbuch

We or seeing you Jon, Thanks. that of you're about you're that what -- -- in the of is think some this about, talked an grow originations the has least started happened just in do know element over conservatism what's context the how given class about strength that Great. think to now? has that Maybe see been morning that at you you to college do the or years. in I guide enrollment there about report of last freshman declines in a can it couple think expecting, the again. deceleration XXXX, is

to the X% can in for So put us? X% you context

Jonathan Witter

Moshe, for question. Happy morning. to, Thanks sure. good and Yes, your

college. toward had to I think in the material aid impact that we with COVID. requirements colleges HEERF were a just on of dealing And more lot remember direct biggest money the to in a result had, impacts program directly borrowing remember, you'll of thing assistance is, as the for federal pretty still of geared as XXXX as a students government

And market. sort to sort in that expected have this is away of will single And to look program the a believe our think that a this sort statute. I we are -- in. is absolutely think digits. of upper that's mid And we last our of rebound that market normal the numbers expectation of by the more that We a I year see is brought growing in went like market we view term long year

think, We the sort XXXX, by market put out gains. performance both growth I share our in market in of excited terms been, of and have we the of the

setting fact we January I start very As think a a originations. before, I strong, mentioned our in saw record in

our about different wise so, program I rate the optimistic the led from market to of HEERF are XXXX. view but a outlook, really it's to we of originations loss think just And XXXX that a growth

Moshe Orenbuch

in kind a how little hear a that to thinking about follow-up, Okay. think see of how as the slowing, Got getting gain on bit margin you about about good achieve? the your very things little prepays, the somewhat but whether environment sale improving it. the bit to is those be a of we spread Thanks. just should value rate this better. slowing Can And can with the that of losses, interest credit can environment, higher comments context we about loans, you talk

Steve McGarry

a stab take I'll that Moshe. answering Sure, at question.

from market has rates saw we where back So basis volatile last extremely interest the and income fixed been down come up go executed. we and our over XXX points

points a single fund I in which widely And purchases time, spreads, pretty think, actually of deals digits. loan we [ABS] it's done ABS open bit market think is last to since that I are buyers getting known very and our their many (ph) executed the high then. tightened that the since actively. The little in wide go to market have

very, that's encouraging. So very

residual big loans like significantly, that something we additional I that life fact slowed a prepayments and generates XX% think consolidations extends year-over-year The have down of these saw cash the very flows, is positive.

probably that had in in So some will certainly of on did pricing I XXXX product. exceed -- think life a their expectations discussed, that and major XXXX. into our a XXXX and is which factor I as what detail, loan offs expectations, to charge going have don't we our the look little and that while investors impact into bit into think has We on persist

want In we our we don't here. expect were in bit to the I a against And of guidance, negotiating receive. myself start little that to premiums terms conservative

but execute we buyers optimistic grow plus up, I each steadily that billion sales. some that of I many, sell shouldn't continues as that brought we out year. finally, interested [indiscernible] So we loan be will will And many are able to even there loans point to maybe are strong very very $X

have are process rolling looking released the encouraged that earnings. now we to get we and So very

Moshe Orenbuch

Thanks. I'll back Great. in queue. the get And

Operator

you. Thank

DeVries from Our comes next with question Barclays. Mark

is line Your open.

Mark DeVries

last follow-up comments, on kind Is consistent should just Or Steve, you on Yes, guidance. sale gain margin one on those than the potentially or conservative, about that? of say think the sale lower how when it in that? we assumed with

Steve McGarry

on any that give to Mark. not specificity prefer I further front

Mark DeVries

Okay, enough. fair

is it alluded just of you on to think Well, being kind consistent. Next rates. I question cosigner

that? been what just are loans also last have cosigner? the population of of Can what's and over the it's talk charge offs And don't kind a driving coming think share you several where steadily about from I migrating delinquencies the down you years. of

Jonathan Witter

Mark, part let that the me take first question. of

not material rate would have cosigner our of what changes mix sort describe in a seen adjust I basis. We on as

So when have you types look change a of you those there. at the sort at the look population of various seen of schools we and not schools,

sort credit established fact cosigner a the in in that of different change older is biggest to seen set decision. a who underwriting more and the a think programs, attract a don't risks growth tend I we which need to customers of support oftentimes have

example individual their (ph) of of would the good think about degree, the recently is, a and a back indicator that's get has [army] got not services of decided old this So, year go of XX, kind that great a pretty have XX to out cosigner. the person

I steady we of not so, segments the customers. think the normalize have noticed drift we referring of sort to, as And for down that that patterns you're of underlying

I do sort if don't Steve if Steve, views that. not specific non-cosigner cosigner, me follow-up We have -- the on you have ask Mark, that do can you default certainly of on rates. let

Steve McGarry

in stats last every to versus of reality, XX% Look, in been come we defaults we no from the over I think that obviously there years. of over percentage from meaningful quarter the has move and non- couple pour the went full cosigned. cosigned XX% And

it that either. a shift been really in So hasn't big mix

Mark DeVries

Thank got you. Okay, it.

Operator

you. Thank

with Wells Our Fargo. next question Michael comes from Kaye

is open. line Your

Michael Kaye

Hi, good morning.

previously thought Steve heard up heard I Jon X.XX%. think now I mention I I estimates X.X%. lifetime say loss

having estimating of in these that which can increase I current metrics, happened quarter lifetime have also, to losses wanted Correct? So even forecasting that's an And estimate. you're QX? when confidence trouble credit you in how ask

Steve McGarry

Thank you that for question, Michael.

is, information essentially said conference life quarter call I Barclays the since that the the rater basically the rates the on what cohorts we interest continuous offs rates where seeing at what took of being I occur the back enrollment try that our is, six basically with was charge rates. talked loan normalizing collection we off X.X% default look and the I seen included changes was a of have acceleration of the I implemented to best and what repayment the charge to seen centers, things And that Jon estimates done a by that applied went informed I current origination our disclosures are that increase CECL loan XX.X principal taken we divided and and normalized was I've charge issues What done life what defaults the out. and trying with disclosed for our into in really and the that in what perspective. look put was a provide excluding we also and illustrative in that defaults default at comment we've like his look, off about in program quarter estimate So have we by well basically as of we've from cohorts at and the would year as is issues I've gap an forbearance come population continuation from

like are are to to look, calculate The management judgment think the appropriate issues changes and do add anything with I rely on you'd And forecast. and add to to and confronted difficult just what Michael we that meaningful that. that we overlays. would administrative Jon, doesn't we're that, model quite to need candidly operational

Jonathan Witter

and has then more is the who last is continues and and in and that you seriously the Yes, to were there fact takes in is think one I. your who the something performance Steve there more frustration Michael, And losses me of question you, sort assure thank no And It you feel appreciate charge disappointed of forecasting just that sort our have we on behind it showed one utmost no those let for year. attention. let is that all, first we and Steve, was understand say, off all of I I me right.

economic As environment. a let in first pretty uncertain forward, of say, I all, look me we're

forward give things to change obviously perspective, macroeconomic outlook we're things then dramatically I sort So three and on in can in that our of broad confidence say is But our the there's to last everything predict change. in better ability that a obviously, than we about context, going have me year. views if think, our Michael,

into practice administration that the referenced. seasoning of First, Steve we're of now a the last credit the full changes year

credit look year-over-year in think a early understand kind the January me is and to Getting disentangling I to changes really, you went sort if sort life seasonality, serves frankly right. quite saw last last really sort just I historic off a that the everyone post us the memory of of and normalization in for useful basis behave start have ability on and charge differently performance versus delinquency impacts COVID, administration of where of think than norms. of

is seasoning first at. I think I thing that look would So the

Secondly, be you not surprised all. at will

unique analytics look forecasting. And the We have loss unique really in the ripped specifically different drive kind XXXX. the loss apart seemed I our and and started to models patterns, around that performance reconstructed outsized to has particular, that new for build and think in subpopulations of track

now is, seen again, have that feel have than a our couldn't we because the between we have models historic good in take and those I differently account. again And had and populations previously, before specifically we And we the we similarities were that like news into good differences understanding think behave So those models that validated analytics think the them. we of that. XXXX actually

understanding post in analytical grown world. I really has our of So administration level think credit this

at opportunity And incredibly with is, an an as impressed I out when to great little understand And originations to a a it's swarm there. example. bit opportunity would I look, ability is of tangent, look a the third thing company's am but we our

of are years, a saw real pretty made say and good being you we a biased, origination we and as for on of see we that space. you but is, two services that us we will I back changes. opportunity if made I we think changes, would We am and And distinction changes, we the engine. go marketing I leadership what huge think the source financial changes, talent a made I analytic process in technology verge made had

understand I After and mitigation years XXXX improve to me, loss degree. lots programs of we performance, to of think don't that we had the our Believe coming that And recognize we've collections that we the medicine good out opportunity of I that have months taken. tough about last hard we think done now. things really talked put we over many into the to change effect. And six

think continue. I some things to And gain will traction. starting already we those of are

As we to quite in said lowest I our my shot. Michael, make and trust to to appropriate And talking we our points regain sure to hard their level. work ability that that losses call frankly, actual that get can in your

we've forward look say to really back kind gotten you day on the footing will there. a of right We where

your it. that's would appreciate I to question. add But what So Steve, maybe

Michael Kaye

for in you opening what's whole mentioned impact of you health Besides the I Thank borrowers? issues Could seeing some kind impact XXXX, that what's of elaborate that credit. you the something on to changes follow-up going think on financial going question like forbearance My on? are policy weakness about that. of staffing underlying the statements. also the is and a pockets your operational of just

Jonathan Witter

to. Yes, Michael, happy

I of my evidence ask do sort see What smaller as call First risk fourth the started of as layered of and was of we year to stress across we statements, we on really said quarter see this think kind I of what stress to sort of but portfolio. I look, growing I to continue the segments I say not third last the all, of to want would through broad the portfolio. into partway continue quarter, in recently yesterday,

So I'll example. give you an

of if you and in of and but charge sort performance you to see start in If payment, by you look our at payment, payments high difference offs a years between don't much low of layer repayment.

have high see first cohort would like of hundred you payment in the than repayment, dollars amount, different to very year for seen start performance in similar say, what levels So past. a several over we

we've deep we've the understanding these talked into pockets. work of earlier, layered about And done that so, as kind analytical very risk I gotten really

to mentioned forecasting way, going we now think loss from. populations I that have as the methodologies our the risk earlier, is are tried understand where I coming we of kinds into explicitly those that forward. By build

So of that but products attention have as customers. we types these need are specific know go didn't now. we in that maybe past after procedures, we're to, developing we pay And the to things to programs, much to those policies,

is -- outlook. really not risks dimension but of our meaningful again, of it it performance and sort where So driving part layered are difference. two And sort credit to of outsized the forward-looking broad, that is of think a we starting is three pockets I see

Michael Kaye

you're seeing weakness the cycle want understand just there? that of pockets and happening? to I payments have you I So make right? that sure Is that that relative saying repayment. of the they're in Why are higher is borrowers of that weakness these their earlier life What's that? why Like

Jonathan Witter

Yes.

sense. of Michael, it a think, lot makes I

If out or and grown income-wise college your payment of you full brand is inflation a going into maybe haven't X% year. X% and you're new a fully up

a payment someone can than small who why be some the see thinner So, again, other you later income balance statement and variable sheet. all has when that have of about and person's sub-segment very income of maybe post-graduate but sudden balance of very top clearly On that in loans, think a journey. customers their different individual three you rate exact they sheet, might same it's that, years statement

And we do economic direct sort broader see of so environment. and pretty the think between I the layered segments risk correlation a

better the believe think recessionary stress whole. that's have there is there today. it of scattered a to environment and is But we're way see a I broad borrowers in why sort of to lack as hitting we with describe portfolio borrowers that And I think for those the a help we I Again, financial don't to are, them the tracking return manage that's there where showers places think where I you, environment economic sort some really what this certain out health. And that do harder. analogy, would trying we to don't of

Michael Kaye

much. you so Thank Okay.

Jonathan Witter

you, Yes. Thank Michael.

Operator

with comes question Our KBW. from next Sakhrani Sanjay

open. line Your is

Sanjay Sakhrani

some process of that? of quarter been do wrong on Good we case can could and you the what's follow what over you. specifically with a remediate went morning. about up the study to there? Thank previous Maybe just it just I maybe talk the fourth element wanted a of Jon, bit questions. to little done

Jonathan Witter

sort -- would do that. Yes. hour analysis probably I all And we we've an Sanjay, question, and on justice and thank the done. great to for that of you need diagnostics mean

historical patterns the think about in all day, talked it the is, think economic we I the analytics we environment, the starts of see And and of these think that say our thing I at the segments And our very to of retrain exhibiting I of approaches. different modeling have are that would that I past. to at end in simplest our with think types exhibit I the sort risk portfolio. to seen day, of end them layered experience than of some before this retrain I the needed

short of I give Sanjay, are can't in and give couple time. think we And to the you important you doing But most I let what we again, what a actually maybe it. like a period me be, examples changing? flavor you with a is of question about comprehensive it are of

are and we've the we they sort First, talent changes really we've meaningful and that these have in of people that the the at and that skills way looked on teams space. hard leadership of organized made

as populations being of that working layered we developing programs We effective at hard for as sure risk can. make these specific to are we're sort

to about was now. loss historically. feeling a what I'm that's mitigation above one We So heads stress implemented right shoulders pre-delinquency that seems real that done subpopulation a year that be program this recognizing and new-to-repayment is particularly we've excited

the just way, where situation cosigner, right-party just again, if -- we of the understand establishing the for exist financial existing text simple recommunicating they're contacts, that sure sort before help them they make be and cosigner, making a even them borrower, should beginning even So, GRP. communication things information lot we programs contact. trouble, some into by like gets to first it's to like someone so get we that Graduated a do and e-mail Repayment feeling that stress, with reinforcing borrower, easier have Program, options into our And delinquent,

the or major two over implemented quarter the collection have improvements technology space. last pretty We in

give us the for lot to doing with them make these and That's of get our time. period easier efficiently right it that. cost customers in more the them to So effectively navigate We're workflows an shorter looking are into work great and programs to way awful manage programs. we sort a lot at tools a to of and the for of a right now them training

We we today. fully where from different were are That's mid-year. staffed

as really classes we new reach seeing are brought expected. would set in, proficiency the in a areas as not and all collectors We our effectiveness despite quickly have we high-quality of

So we're a work. lot of doing

tools right way sort actual experiences them example, at how right train we to versus looking for For sure of and the the like. make and we've got what's in person remote, the do them

way. we I the exactly it, we before that rest all loss go So, assured mentioned same see saw we you into probably are in can't the swarmed but opportunity mitigation the of opportunity in that swarming way the in can originations, we

Sanjay Sakhrani

X%, a Discover, I trying maybe of just that. X% to reconcile recall, to I to just that there? when like then still just reconcile of number And closer I understanding to Thanks. range that peers And follow-up something seem look that loss Great. right? the like in they trying I'm portfolio their some portfolio. I'm question X.X%. in Is of smaller the past, at I annualized kind for was they're Okay. rate. different there about in mean your have of terms a versus sort Steve.

Steve McGarry

what recent seasoning of credit the in lenders the our look, see card So talked we about portfolio. have borrowers,

cohorts five in six school defaults that are losses go older. three years origination make That makes you that will older, take months So XXXX, P&I our full come from sense plus and because basically years you Half plus starting exactly are good origination and not which to a emerged look and disclosure payments to while if they're after people expect where XX% borrowing come cohorts it from. that where -- would basically in is XX% graduation. to you see of until with of from perfectly from and losses on our back at

point if loans, X.X% there repayment at which look that XXXX cohort, of you high totaled loans the So volume wasn't in at in time. of a

cohorts obviously, older rates. of had default organization, XXXX rates take in at default was the default we a challenges cohorts, look some higher on total Obviously, you than the If the X.XX%. rate were P&I run sort the much our

rate is to a show basically and disclosures across back I you default rate those more that through X.X% apply So believe at rate. reasonable. P&I default I normalized arrived time, which number, that if than you walk you perfectly triangulate more -- to cohorts be you could I'd And to those how happy offline

down the at peaked look time sort then to they P&I cohort, rates default from over X% and at back drop level. into you X% of cohort If

Ours changes. that for the example, hotter for AB we've our from, what kind of for our but that administrative the accommodate rates default all can now. are time see did spreadsheet in over potential Sanjay? you, you compared higher applied conference verbally that rates for much Difficult default make was disclosures. running are on a Obviously, describe forbearance sense call, seen a stressed did What to to of I Reg to

Sanjay Sakhrani

just I'm guys private about in same Yes. others in the to to that guess I think in student -- trying you loan. right, space, relative

Steve McGarry

very it's XXXX in now point are than important of repayment we higher in XXXX. that in a volume XXXX, have loans to we did much actually and So out,

year in to to X.X% or see or expect So rates. our even default math full you run when our what up P&I out disclosures X.X% or and illustrative to default a X.X% publish Jon's with year a rates add doesn't try we at rate in

issue and higher book think ago, months $X the are and we $X So XX went is I now "Hey, their half billion grew billion origination $X those over where from that said, seasoning to emerge." very it really billion starting cohorts and -- billion they defaults one to the described similar now Our $X to call on time.

changes it really been and was operational in from loan talking bit that telegraphed So an life the increase our just with a an of well Jon we've forbearance changes of charges is about that talking seasoning of charge-offs that both issue little XXXX. about since

Jonathan Witter

it's Jon. And Sanjay,

companies. only strategies. hard add the there's discussion. compare there's think I pricing across to to I underwriting different different It's customer would rates thing There's strategies, different strategies, loss Steve's

I'm the crosswalk. to of sort one sure try to right sort the not specific I'm of so do And

loan. on is but impact matter the ROE would isolation, obviously, no rate context me, to that of though, acquire lifetime And is within the that in at important that in process process. reputational those And We kind be sort how a what rate and We the we not I that every from for of has those We charge-off perspective credit customers, cost we sale. expected it look of we just loss guardrails, really uncomfortable think those could to a there's on the we sales. for think rate look charge-off much at at price unique risk credit But the time. pretty rigorous credit overall I with is over a the loans the employ the look look of that that's and customer charge-off level versus at not on we pricing within we of of And which we're is But or what again what for where it's high-quality feel the those can vintage our we sort why, majority if routinely our we we previously? like lifetime generating manage we know what attractive of is, we that we loss those stay a if we ROE we then our know curves business. expected it earning about kind within on of focus off cells the place that at frankly, investors to small best credit are reputations focus much appreciate. sort sales. quite returns, assume in really of talked that should at that, Steve so our because to use really very do And will really ex interest losses underwriting, sale.

Sanjay Sakhrani

very much. you Thank Okay.

Operator

Thank you.

John question from Jefferies. comes with next Our Hecht

is open. Your line

John Hecht

Good of asked. is the refresher. the guess, a know of Maybe repricing been guys. mechanisms my The I one I I very pretty are during refresh much. you QX Most Thank just there resets big portfolio? guess, in questions kind up yields can from moved question just, year. have the about us QX. morning, maybe to some

Steve McGarry

Sure, John.

at our of for one tied as choosing higher originations been straightforward. years rate fixed is a all portfolio of obvious reasons. month the fixed to is Basically, rate pretty much So last for portfolio in three half rate. Borrowers or two the have LIBOR

obviously changing a that plus the is percent which degree marginally two, four were surely. over is from year we but we over have So up certain mix to in The the last that, positioned and or last line the asset sensitive bottom slowly, rise LIBOR, benefited year. is

try somewhat. a we from that pretty But have balanced benefited book. and we So run

in getting taking rate we're So over terms our SKUs not really interest risk. of out

to much sweet a NIM pretty right spot I think and book goal now. in solid year real in we're And is Our nice that out. year

John Hecht

about think XXXX. targeting terms other then And of sales amount program? in like your that Thanks. of of allocation, of what similar I kind Okay. in just of XXXX XXXX capital versus capital mean, terms versus you're or cadence seems we buyback in thinking a facets like return comparable in How it do XXXX means

Steve McGarry

Sure.

have in go $XXX then the $X.X the this do Last want that see We million expect we year additional did phased did have We left be maintain bit that in more time challenging we our So year, the to slight it a million. gets billion balance acquire Board we're to over buyback. indicated $X to we past of sheet program authorization CECL billion, the We Board-approved and little in do mark. here. buyback $XXX is balanced to in, the size share we Jon trying his plus to remarks of want maintain growth authorization. at steady program repurchase not from as that back prepared to to a

and lot I on we on with the a the phase-in phase-in this fully to but shareholders can a that two balance always program means an loan grow in will we only obviously, generate not indication then bit as very charge that process, reserve significant get So medium return the of to a applied big we loan think to CECL hefty you without about $XXX the where past probably we capital under to that's our I because important CECL sheet, talk loan size return nice earnings in and to don't our the equity, reminding point shareholders mind in keep the charge to we the to term, premium, think on do without that's return can to capital that? to balance a start have Jon, sale. but sheet. would chunk that indicated And people release go, the sale payment a did grow of of we you million. to year, little add capital a loss our that anything make worth to contemplating We and down that a to second it's CECL probably we're it's like we earn balance major gives our shareholders. we sheet left the And just

Jonathan Witter

I think well, you covered it Steve.

John Hecht

Very helpful. Thanks guys.

Steve McGarry

welcome. You’re

Operator

Thank you.

Stanley. Our next with Adelson question from comes Morgan Jeff

Your open. line is

Jeffrey Adelson

side, bit it underwrite? to to out modeling terms down wondering credit the to like for taking far anything given that But as more apply today? the Thanks know some longer all your the in I'm the actions that’s anything play that's you're color doing you've I to so impact sounds I and on there end my is repay just the a issues if my you you're the seeing. remediate your But taking of takes taking from question, I Hi. of P&I of you're it on Jon, questions. underwriting to guess line. front you're away there's side. analytics appreciate wondering, little the book the on also on new

Jonathan Witter

and Yes, same Jeff, And getting great goes question. that a just you through our a imagine described the ago. effectively that's few thought minutes of can it I lot process

of look this we all that. go from And about. talked will do of ROEs we will I've returns, that season, will will sort losses pricing, result of look these layered that we risk and and we at will we at sort the every peak sort by at So the head at we'll look the as we of segments look year, all the into back, again

two, will into this this at am you believe on you I a to don't point that that think sure remember, redefinition. think of course, for major potential I of underwriting I we're that reason have four some at incorporate be margin. loans greater And sort insight that to three, have time a now. adjustments have Any P&I come into from will be years the we about that will point, losses, there year, process. today

we make loss also on to versus picking lifetime because is sure we're what just that want change true so And blip of a up a factors. environmental

as will think we all that this. through a part of of So

strain, yes, way, feel we and strain, absolutely where think we see conditions. that, through more optimize underwriting we like we during those So times by this the times do less we during like a just too we're see little not the that always where good to trying

Jeffrey Adelson

then don't year. see as willing thought thinking this rate start accept Can to bit up little lifetime the is to just buyers think follow-up other on from are but that the Got to you today? Or they're them? a buyers bit? handing process of assumption, mentioned higher you it. getting these about And interest because of potential the changing what's your with maybe the I are know a tick you're that be sales you questions your maybe little loan losses maybe this what the some they loan on may shed light

Steve McGarry

the and meaningful portfolio the the life confident at of in Are expectations long-term the I the an serious stress X% I historical going on with pricing the that not buyers the to they when of increase up get and day. buyers conclusions. be having does a is think and portfolio they the IRR that issue loan draw assess or and this students performance a it of better in challenge portfolio portfolio, are doubt default us performance point that our So we're appropriate loan case losses issues their to premium? this always they're have very our that assets, that but a on able time think pretty carry loan whatsoever, I'm of try X% No and will of will

monthly improvement we rates. that as see manifest to cetera. will remarks prepared that, think starting next example, in that they the ABS et his are default for And in the mentioned I Jon report, stats in some emerge, itself servicing in

question. answers hopefully, So your that

Jeffrey Adelson

question. Thanks my Great. taking for

Operator

Thank you.

comes Our Arren Citi. Cyganovich next from question with

is line Your open.

Arren Cyganovich

wanted net follow-up interest on to Yeah. just margin. I the

you You think And an give idea swings guided kind Can X%? above of of quarter-to-quarter? I your net usually much cadence, X%. around kind margin us that of what cash interest about

Steve McGarry

Sure.

So I mean, answer the much possible. and with question as try I'll candor as

long or XXXX. case that handful pretty is pretty you what think margin Give that basis It saw is and take net points. funding a to of steady our be you close the term. be our confident I should pretty relatively can that interest in

given and in good pretty actually portfolio year in XX% don't XX% done of net performance we're and job So we I to I year of is funding a year, have know, any our predictable. very replacing, out. our margin interest And our estimating think

So in I did. that statement making pretty confident just the I feel

you And correct. are

So for big total with quarter to of fund liquidity positioned XX.X% on year. example, we we this ended in the year of loan books was that the first the and disbursements that made the

do there as carried but in days than we is NIM, when the the cyclicality it was we today. in it's as back So a less liquidity not meaningful lot

Arren Cyganovich

are is what more kind that kind part for And charge-off the need Great. originations? of question because this it's quarter, the the additional of -- reduce I the towards into this guide? the loss essentially last That's kind assuming provision charge-off just geared of of of rate. other that the booked in net expectations I your unemployment builds helpful. rate higher then different you the, year with know well it's then is kind provision last above does guess, And

Steve McGarry

Sure.

at we think were are expected and this our in many I quarter. you time losses And think benefit can't any in thorough So, the in I of given pretty all point future. more, one of CECL, for build is that, reserve reserved the

are of outlook economy, So the in the should the originations. be loan is XXXX portfolio our for there for new doing performance major only reserve or the changes unless in we building

that's think situation there. the I So

the seeing a rates, the of In terms which SX, is improvement we large. Moody's which of economic blend unemployment at a assumptions rates the in and the And the forecast. user prediction for base, and are unemployment is unemployment economy graduate is college pretty unemployment level, slight the a We household the when We're rate. economy and downturn. compare SX, expected we both meaningful level economic steady

So for QX example, QX. from no changes, major to

the default outlook, model Although negative a to said, of -- change a there as outlook. was being in and that build component the probability the the in change was that economic -- reserve of attributable of economic the result in

Arren Cyganovich

you. Thank

Operator

Thank you.

question next Compass with Giuliano from Our comes Bologna Point.

Your line is open.

Giuliano Bologna

the of sales. the morning. God curious forecasting expectation -- lot your you realize these around about and around subjects have questions asked. a One your about, I been I'm thing reserve when think

top never that highlighting seasoned higher I'm at a early student source with payment of of realize about a payments of It's loan it's way you moment. it's with that lot [indiscernible]. But weakness kind were borrowers the that on I I'm weakness of how curious a higher on the or had borrowers life think forbearance. an payment higher we of because how a from ending out. loans you less cycle those federal in the additional being are been curious the You larger think contribution been playing about restart obviously seeing payments.

Jonathan Witter

Jon. to it's that Happy Giuliano, question. Yes. take

student their make other forecast. to no to to true There easy a but that's But example payments specific as we our I back forbearance, been gave sure and debt loan of around. federal head kind active small come one pretty that you question there's just perspective to a misunderstanding, pockets is sort a while again, for to First your forgiveness get forbearance longer that when when I probably -- of think a I I of negative happen think our indicative be forecast. is the will that's has student all, our and positive folks is loans are an of for believe analysis no it example. when well, it think that And loss should it's a -- slight small

sort and So both of middle probably proposals neutral of A B you a pick the cost can just benefit, or column down of a marginal even federal column or marginal maybe it's happen. from various

really of or actively that's thing on the customers, our and very August we note rarely so into remind repayment this is, important of to of Steve September think me move back XXXX. XXXX, I

So important people do. financial we thing most in that we like keeping habit good the really is feel can

repayment Sallie going is, And in And the think part do of of your making if so, by to regular you're the I a get way, if for forbearance you're like. your we borrowers impact believe muted think of probably and is we you lot other feel there's of to federal because is, do why see clearly continue payments and habit pretty to Mae, to of what the income-based probably more that. I stressed the programs, forms federal options

so really payment, are my through are for will in with federal of that sort added the program. ones guess trouble to and the they that have federal And that is, options available really other struggling them

that move that it's our And think think but all the sort So meaningfully of nothing small probably you we believe of sort master. will in of kind we a mix of put negative, I proverbial results. I believe

that perspective. you gives some So hopefully,

Giuliano Bologna

it. the I and will helpful back in appreciate I very jump That’s queue.

Operator

Jon questions. for I'd no to further call closing There back you. like Thank turn are remarks. to Witter the over

Jonathan Witter

make moving I you challenging thought say everyone. they the bit of little and that a a Well, great. let provided you. to Great. just thank pieces information of were And Hopefully, with use know sense here is can questions you parts. of thanks I quarter lots what to good me really

do can Melissa I in group our reach the I do sort please helpful sort to of happy you engagement quarter, any assessment and IR be of of your everyone's us really and So out, continue of appreciate engage. continue just if offer would thoughtful as to to

back turning the that, I'm to with call Melissa, you. think I over

Melissa Bronaugh

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

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

Operator

This program. concludes the

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

SLM (SLM) 2 Feb 232022 Q4 Earnings call transcript