SLM - Earnings call transcript Q1 2024

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Operator

Welcome to the Sallie Mae First Quarter 2024 Earnings Conference Call. [Operator Instructions].

I would now like to turn the call over to Melissa Bronaugh, Head of Investor Relations. Please go ahead.

Melissa Bronaugh

Thank you, David. to First welcome Call. XXXX and evening, Sallie Quarter Mae's Earnings Good is here Pete CEO; be pleasure Graham, with CFO. It to our today my Jon Witter, our and questions. we the prepared will the remarks, call After for open

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

others, For occur flows, of expectations or Sallie XXXX. or after Mae, potential factors these that factors to as undertake statements XX, well forward-looking business. financial include, impacts cash update events among no and/or our any various or to circumstances external results today, on revise conditions predictions, any reflect April of operations, Wednesday, as We obligation

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

Jonathan Witter

joining Thank messages and Melissa I'm report you, Thank quarter key quarter on hope XXXX our goals. you'll a X Mae's and pleased I for David. to away take results. to 'XX successful evening, everyone. discuss Sallie towards first progress today. you us Good today

in XXXX. First, we're to a fast off start

Second, credit positive we seen believe the by momentum of trends we for in we're encouraged performance. we have year. have the our And third, the rest

GAAP in as first the results. EPS quarter was diluted quarter. the $X.XX to compared share quarter's in $X.XX 'XX Let's per begin the with of year-ago

the first were trends of year. the strong performance, credit business first sale and Our of results our improvement on for driven by quarter combination a the gain in loan

X% is 'XX. quarter of the 'XX Loan were originations of first first for $X.X over billion, which the up quarter

well, volume believe seen grow year-over-year. XXXX. a is increasing have We We solid start to application X% our this that as

was originations years. of past consistent with quality Credit

first XXX quarter in XXXX the for cosigner for versus XX% XX% of quarter XXXX. was quarter the the improvement first of quarter Average that first the of first score was education XXXX. the average through XX 'XX. representing observed expectations. better of XXX The in of continued This credit in private X.XX% quarter fourth has in 'XX QX versus Med ] Our first repayment. FICO from we [ and points and quarter charge-offs down of is loans XXXX than XXXX basis were $XX of million, loan

in the to are positive our roll medium-term with stages loss we performance seeing Although programs are delinquency. we all pleased still of well as and the are rates, performance as stages implementation, of trends early in mitigation improvement of our default in

call, mechanical who programs the entering described we As point of did a due are qualifying see that as to their in delinquencies rise results in we our year-end period. in into new borrowers we in mentioned fourth the quarter at what payment

metrics desired and our have forbearance around additional delinquency results. We disclosure both are added the seeing and

Excluding those in in are in X.X% modification QX period, of their down borrowers from QX to qualifying of that XXXX. loan quarter-over-quarter delinquencies XXXX X.X% are

able with to were $XX of in in X% $X.X billion the the were that generated sale 'XX. quarter or of consistent loan The in execute million forbearance hardship XXXX, QX QX Loans disaster end we performance in first at gains.

balance conditions targets by dictating to our X% year for encouraged expect in volume. the sell in sheet still to remains additional are expectations. our and expectations We We with XXXX price sheet growth which line at balance growth we received, with the market loans the X%. is the dictating The timing

price shares continued XXXX, strategy First a an X.X repurchasing average $XX.XX. quarter of at of by capital return we million

of reduced began have since and $XX.XX. an the in at by XX% XXXX strategy outstanding We just this price shares we over average

future the year. gain stock programmatically release throughout capital We loan and to from expect the buyback to sales and use continue to strategically

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

Peter Graham

Thank you, Jon. Good evening, everyone.

earnings of our the drivers a into for release, may earnings Before noticed to you I investor guidance key wanted quarter, have that change in metrics mention to we presentation. our jump the

reporting discontinued have the this non-GAAP GAAP related as X quarter. quarters, last its our and earnings earnings We including been metrics, core core in identical it to has

purposes are now non-GAAP place in earnings such, we using the our calculation metric. [ dollar of XXXX As GAAP of guidance, in per ] for share of the earnings earnings core

the $X.XX at guidance However, range $X.XX. is to unchanged

after income. [ discussion earnings for of net generated interest Now our quality a key year, significant drivers ]. portfolio loan Year

income. X% first level with the the we million from year earned This fourth quarter For interest down prior the quarter $XXX quarter of of and XXXX. XXXX, net is of

the resulted up in over interest year Although average ago million a interest-earning assets are about interest-earning are down year basis ago income average balances the decrease period. $XX from XX quarter, points asset yields of which slightly, in

Interest to million points as higher rates quarter ago quarter. basis expense ] increased for $XX.X approximately was in year X.X% compared X.X% interest borrowing prior year. the the from Net [ was XX the margin first

to continue long mid-X% NIM the the We target. is believe appropriate low to term that over

to in origination associated billion loan peak that prepayment the sale the the volume in during statement first each $XX year. the and $X.X we of first majority offset quarter with of an credit comprised release updates, completed This of of is provision of increase for losses quarter. million provision The a million provision income occurs the related assumption during $XXX total Our related volume XXXX. in $XXX was of the is million increase by quarter to main

of increase reduced long-term quarter. which for the XX% the prepayment we during our Additionally, assumption, approximately accounted

a balance this in change we provision, of interest-earning sheet period Although a continue our is on will long-term has negative a for on to keep as positive impact longer assumption this time. assets our

education first X.X%, quarter. or the with portfolio quarter our consistent in Net charge-offs year million the $XX ago loan were for private

loan first $X.X private quarter accrued total which interest portfolio education of receivable sheet at is plus end the loan on-balance reserve of of billion. X.X% the includes the or $X.X Our billion. exposure, student the

XXXX. the rate over prior year X.X% of Our levels consistent quarter end improvement shows with reserve the the in and at

and and consistent at more, XXXX of X.X% the loans the year ago end XX X.X% the of days with education repayment, loans at delinquent decrease the Private end X.X% quarter. from of or a

[ around visibility earlier, of As period ] mentioned are borrowers that refined to related just the get who qualifying new into numbers one programs. in Jon adjusting privilege and and remove When our we've our X-month more a performance. delinquencies to our the I discussed credit both disclosure

in end X.X% The that quarters. in compared and coming improvement in monitor is and We as and we'll quarter. delinquencies the of of the programs, loans end the the performance compelling. medium-term new to X.X% indicator ago this is days ] [ XXXX of At of a the at X.X% XX continue quarter, success year loans believe more, first were the becomes repayment linked the disclose of to or

the expenses prior increasing $XXX operating $XXX million majority the the prior to million this volume compared ago million ]. compared were in million disbursements expenses Total in year, year increase the first quarter the year quarter XXXX. was in prior quarter of [ in relates X% compared First ]. This $XXX the quarter $XXX the in of ago quarter a quarter in increasing quarter first were increase to The million in noninterest increase to XX% $XXX with quarter. X% and compared applications and million the to $XXX [ to and

was end capital ended was equity solid. total and of of risk-based quarter XX.X% first and capital positions capital liquidity Tier quarter, XX.X% liquidity with At We the the X total of are XX.X%. common our the Finally, assets.

continue of we're the grow measure GAAP sheet to Another forward. our loan to well We -- loss very which to going loss over the plus a reserves balance positioned absorption was believe equity capacity assets, and is capital XX.X% business return risk-weighted strong shareholders

Jon. to back call the turn now I'll

Jonathan Witter

we fast delays hope of Pete. has with on this agree and season. we likely been XXXX. peak executed will associated that already of you do condense of implications but momentum At and potential some issues in impact new these first share that the the technical cause the the positive full for not an well belief material question launching that about believe issues volume, may There you short we Thanks, reform. I quarter Education's point, Department have that year my the have

through schools families. our families this Externally, our materials assist we to available capabilities website, process. other available through our Sallie and to we Through partner on scholarship [ search calculation the continue to tools provide with ]

We are frictionless as as peak make help possible. season this there to

other Internally, for peak enhanced improved and with digital other staffing condensed and capabilities actions. we self-service a are preparing

our While new for early, one competitors we exiting will are of market. also major compete the afford We of believe this paying attention the to to impact opportunity business. the

relationship While that with volume borrowers too a suggests early competitor. a analysis to previously declare definitively, that had increase slight early from

the and the into expect season the first signs real summer over peak during see to opportunity of fall. We

we look positive the the growth to for also the addition continuation growth quarter our sheet second Pete quarter, in balance which both income of the first year. interest as and of In are mentioned slower prepayment speeds, of toward originations

expense to drive management execution, NIM and focus We will continue on to operational results.

with conclude a XXXX me Let discussion guidance. of

are earlier and first we season, origination credit seeing both this with we loan the performance the are trends As execution evening, encouraged sale successful the I our mentioned by year. of positive QX

on medium-term the to reaffirming will will performance look successful these you that continue our our the We year. metrics. that things throughout of on optimistic forward lead that all are a guidance communicated earnings progress we updating last believe We also to this we success key are XXXX. call, time, At to the we normalize programs XXXX and

some questions. the ahead go let's Pete, call that, With up and for open

Operator

Instructions]. [Operator

first from coming Sakhrani KBW. with Our is question Sanjay

Steven Kwok

I maintained. Sanjay. around line? in first come maintain better it trying tie was for expectations, guess than and in guidance you're did that in just Was is ] is quarter quarter Or thus back that the year quarter. to the Kwok just Steve question how the to the [ that is have your than the Relative because your was we're original This it guidance? I to your was expectations that early in guidance

Peter Graham

would the in say although in positive some developments we it's earlier largely and it quarter, expected Jon line it's still there the year. I'd trends said, And be. what in with are Yes, as

quarters, we'll develop we start. but wait and good how see things the over about feel coming the So

Steven Kwok

to trends the are credit it. side. And just credit around Got funding positively. then see that It's nice the

at the how credit over over reserve [ we been time? break as about Just as look has improved, get think rate, the to what you ] your like reserve can metrics

Peter Graham

improvements et see don't think think it over put I to reserves makes I charge-offs, that Yes, we the see cetera, that overall credit can that up. rate time. in continue to metrics absolute call for to like that modest of a were But ready level we real the improvements number as in required sense we're

very we've that, [ time That the with well. as that is itself underwriting and think changes to continue coupled each quality year, we over will strong. ] I ] in origination the made [ be treat

Operator

Ma Barclays. question with next our take from We'll Terry

Terry Ma

has more our pretty more you from what So you maybe mod looks more of to programs. year? about in to get before talk positive kind it Can your happen what loan like confidence some the getting guide you results see need you're some updating just or for

Jonathan Witter

John. it's take one. Terry, I'll that Yes.

results As the you with progress so very indicated, are the we seen far. that we've and pleased

metrics we at of the entering a can a our exceeding All look of meeting that stages the at, or modestly customer loan expectations. mod or early

of rate like would those qualifying, metrics other payments. be making people So types of things their the of is examples success what qualifying

So medium-term of positive of sort I that. we sort described we think And like of results. all it as

we Ultimately, relatively I we here though, something and more programs. see and think bit seasoning of of passing strong do early still their that But month guidance. enjoy And is thought more like each that programs each quarter. we real felt I passing before on want do graduate with think to the folks about gain success updating just confidence other financial a proof from side was given they think stages, more we I in that's it will the those

Operator

Jeff our from We'll with Edelson Morgan take question next Stanley.

Jeffrey Adelson

kind versus increased it, along at base look and et just in I'm at can lines mods you of ago. [ alluded -- guess you same Xs this seeing point just a to the ]. extended periods. period know if percent I at as I guess year wondering at the of look to these don't right if you way the of look the to there But is forbearance, in but credit. any Are I just rate, know payments, qualifying has how number the use look the hardship that us up you and that, delinquency the if grace gone of I Yes, cetera. the metrics we extended you're percent

help for So show your that confidence up going going perform putting in how a and those where you're a and as rate are that us them not now. do even give just into from to now the expected you to default credit bucket isn't year

Jonathan Witter

away go think want Yes, to can We disclosure that about and look, fair is question. certainly Jeff, there. additional we make there

at Those think normalization We for rest to those are have very long-term various varied we that well forward X.X% internally. project metrics as when as look hard year then not of the about the sort the out today. we X.X% metrics we guidance to assured, of back Certainly guidance done start that to range. the

all But to we're next that that programs delinquency ultimately, rate the with going us back that in that is delinquency right target over to shooting these the comfortable for. and charge-off rate is get seasoned quarters fully to way for get see we the that be to think several

So we with additional I feel what is guidance comfortable Thank we very you of sort for consistent the question we'll but given. think about think seeing disclosure. the that of that have we're that

Jeffrey Adelson

of comment from a mean going your given like I customers coming than more meaningful season a with presence school. in interest. before? showing back kind circle benefit? on just alluded their market there slighter It Okay. existing exiting got to meaningful might competitor the why their be a it Got peak to wouldn't summer more be you've modest more just benefit freshmen of to seems it. I benefit you the slight And about guess,

Jonathan Witter

Yes, to the the opportunity leave think they you way of sort the fulfilled that until would not have the they already for market had Jeff, I had and made after question that that loans to. in explain competitor committed the I commitment spring is their did remember

the ] we spring, follows business, the follow-on cash in first largely that business, of the fact think follows our spring fall sort about So for [ semester I fall, die is second that talk often in that quarter.

So the saying season. little we've by extremely really consistent we to peak impact this very strategic to I summer competitor got been think in expect move it until of this be we

existing sort and that we because I with frankly, expecting surprised there the semester. any business of really weren't of spring at additional we customers had we relationships improvement sort think saw looked this we at competitor when modest were the incremental pleasantly that the in quite

you in I the to see why doesn't June kids wouldn't peak start think in for more, think season August. to earliest. school and at your back It second I in of fall, the until because really going the earnest question really going it's July gets

so second think start have think still expectations quarter earnings, will early batches but be I in And the an I real we'll to it to set preliminary.

really benefit type competing on is for sort we the in and obviously business always will new our sort conversation. I understand think when quarter success third where of report is this fully of we of which out peak been performance,

Operator

our We Jefferies. will from question John Hecht take with next

John Hecht

what Just looking should NIM adjustable the the stabilizing. as deposits X/X loans. the like curve wondering I'm outlook, I you at fixed well, think margin, of rate are NIM, about given of direct-to-consumer it -- we about kind yield X/X kind and have fluctuations think loans looks rate

then give the that think of quarters. could group. kind and kind should few looks And CD about liabilities repricing and so about cost of we period thinking us about reset NIM you that some the for maybe of how the what of maturities of that, next affects how of over kind And details kind

Peter Graham

then the necessarily this last Yes. we the we to want talked cuts set it. X I liability-sensitive say also we're I get longer is were parts of and about all when in what mechanical into flip time. over don't asset-sensitive of being year. rate guidance, that would we But our mildly originally period a And expecting of call to

near ] this the is, because quickly. the don't of on us short term in sort asset the get short-term earn longer, we'll side term rates least as at to for higher lower in [ mildly so beneficial And the more

the the over probably at they NIM margins, how net year and maybe see towards happen course. positive happening, anticipated and it for develops doesn't compression wait So we'll as in But it's the that fast.

John Hecht

off remind reset Okay. occurs -- the reset -- the what then when when of rate And [ me us ]? remind of it's adjustable and

Peter Graham

flows. as in that. terms can a funds sulfur ABS [ slightly rates, reset. in deposits reset market, Obviously, deposit other the are loans competitively but largely of referencing our the then based priced generally And but be [ Fed sort periods ] is the off on the also set So short-term generally, and or are ] based of monthly sulfur but of longer

Operator

our with from We'll next [Operator Instructions]. take JPMorgan. question Shang Rick

Richard Shane

call as bit about little I'd to qualifying well. quarter, harder that were think implicitly, we talk What quarter. pull go started, show I'd million little the loans. and you period it the modification, the dollars a it, there calibrate X.X the if sort the in or like you X.X. represents, dollars Look, would helpful as from XX to loans how were that If the mod now about on and of of the about basis with we've really modified? that that of a migration in is -- Jeff like threat actually and loans fully and difference show is I back successful thinking would seen of That worth That's emerged which forbearance, -- was and loans to percentage for loans be period. $XXX between this to of points last of $XXX million the

Jonathan Witter

qualifying that whatever way as particular up the they were loan was. think of being only modified they the be I that making would I counted for go as a would modified loan Rick, and if it payments, think at successful show into and is their would X a then program about Yes, duration

be short-term that were certain a if if further, a different be was rate would time -- a time it frame, frame. it it would longer-term was if a So reduction, a that

if put that level at you've delinquency a into your payment made generally unless X your as the bucket payments you fail counted you the have were back But get that you payments. numbers X would And make been given qualifying rule, history. don't to those you in qualifying

test. if very that at and the is a rest of been then course into are it delinquency quickly months. as the one mind, qualifying successful my don't move pretty you continue of as And X result. in that would and So for a, back have over qualify, age sort customers perform payments in you of here you The you the buckets to clean the a are quarter, those

Richard Shane

But it. what trying to understand. Got here's I'm

between me been X.X wrong, So The difference and have the be X.X X.X not but the people X.X have quarter, to the last who yet understand payment I'm modifications, if that off of loan and standard. quarter. X last correct I quarter met this

still up So is they but expectation showing are will if meet that as standard, migrate. that delinquent the they they

And in the or specifically is, million $XXX what were were implicitly I'm looking that that quarter, of loans in last period. at there test

sequentially, declined quarter, delinquencies million. $XX This

we trying understand that rolled delinquencies? put $XXX million the So to it improvement to and did through contribute your How $XX what I'm much $XXX that saw? is million million that improve of

Jonathan Witter

I that and we detail I have Yes, of question. disclosure. understand think Rick, level, provided don't that

Richard Shane

Got it.

Okay. it. I appreciate

Peter Graham

sort -- for need you Just into give modification on reach it. you to add, tabular you at in we amounts of do to football there's the doesn't calculation out then -- back that to in what of some just do additional can for, Melissa, disclosure looking you're that, look if then dollar the

Richard Shane

you when an one GAAP And flows, the last can Terrific. Presumably loan it just perspective? if to changes accruals does I change from the cash appreciate indulge the change? income how economics that. do -- How is modified, one. I do

Peter Graham

they the terms will et the are it's book and whether which whatever in and ] of a ran-based the to once Yes. bucket then program, drive program, accruals. payments into It qualifying back [indiscernible] they those will the delinquency based modification And again, made, [ rate the out depend come modified go are will programs, whether cetera. on it's cause

Richard Shane

questions. some I pretty you much. Thank realized I had very in-the-weeds

Operator

Arfstrom from question next RBC our take with Capital We'll Markets. John

Jon Arfstrom

made a a you prepayment that? guys read comment that at You you. if to do continue? expect to curious slower Anything And surprise all about speeds. And was that for into

Peter Graham

levels that we've run as we prepayment. at process, for different of -- us improvement we in the continuing of of quarter, assumption of trend overall seen longer-term or looked the regarding get and to past recent out sort And that roll over [ another caused time it just it's each lower through And our performance we trends. kind look No, the ] a prepayment. recent at

Jonathan Witter

prepayment. because the Jon, I a number is that part Obviously, think there. I sort of And big calculation environment of there's add think rate the of a I we seen thing would have factors influence

think I me, the changing they ] beginning so behaved outlook And if slow. I would way to you that the behave, surprised of to said, that have that. the continued surprised you you [ no, are year, this consolidations way, the rate have said would from by not I'm had

well. environment, beginning were into we think the all that different rate the a think expecting of the I year, equation at I and goes as

Jon Arfstrom

And one then more. Fair enough. Okay. just

recently. Your stock has done well

think deserve like still are just that. on it. on zone curious buyback? green we I be to And you'd the you the how in But aggressive

If you thinking? your can provide us with any color on

Peter Graham

And as Yes. And point the time they the themselves. start -- sort that will quarter present in done year. as probably we was we today, little evaluate we spot of in a be transactions. volatile than has [indiscernible] in this be that other Again, on time you we But as there the the maybe game fairly been but expectation are will move when favorable rate time. more a point call with here, that we transaction time observed, reassess market to a opportunities were first had at

Jon Arfstrom

buyback, share repurchase Pete, how I I was think you but are. confused the guys the I aggressive question, on asking program, the

Peter Graham

Yes.

earnings we're So said the the program around year. more buyback programmatic in as be call, I to last this going

going time. we're year to be ] year the first of with days be in try we sale opposed loan [ and as quarter, across periods market across the completed plan to in so the the in put to back we shares, that to any the a place this buy of programmatic And and trading

Operator

Witter to like This to for would does conclude the clone I floor portion Q&A turn over now Jon remarks. the Mr. call. of today's

Jonathan Witter

joined to Again, you joined and excited this performance. first the evening. you, everyone are thank about and we who quarter thank us in David,

about to as discuss [ the with for are think I unfold. to excited outlook quarters performance the year and look the continuing our ] we forward you guys

if there's the always, reach course and next please the detailed couple days. to out of As to quarter. follow have Mae. in free to [ again great evening. a we happy team questions feel and Thank of things And didn't until or you to that over we you Melissa for your more ] to up talk Have next interest Sallie our

I say closing sorry, you business. some for back I'm to

Melissa Bronaugh

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

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

Operator

This you. Webcast. disconnect line today's XXXX your Mae have time, Sallie wonderful and a evening. at concludes Conference Quarter Thank this and First Earnings Call Please

SLM (SLM) 24 Apr 242024 Q1 Earnings call transcript