Q1 2022 SLM Corp Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the 2022 Q1, Sallie Mae earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the special need to part one on your telephone if you require any further assistance. Please press star Zero I would now like to turn the call over to your host Brian Cronin Vice.
The investors you may begin.
Thank you Kevin Good morning, and welcome to Sallie Mae's first quarter 2022 earnings call. It's my pleasure to be here today with John Winter, our CEO and Steve Mcgarry our CFO .
After the prepared remarks, we will open up the call for questions before we begin keep in mind, our discussion will contain predictions expectations and forward looking statements actual results in the future may be materially different from those discussed here this could be due to a variety of factors listeners.
You should refer to the discussion of those factors on the Companys Form 10-Q , and other filings with the SEC for Sallie Mae. These factors include among others the potential impact of the COVID-19 pandemic on our business results of operations financial conditions and or cash flows.
During this conference call, we will refer to non-GAAP measures, we call our core earnings.
A description of core earnings a full reconciliation to GAAP measures and our GAAP results can be found in the Form 10-Q for the quarter ended March 31, 2022. This is posted along with the earnings press release on the investors page of Sallie Mae Dot com.
I'll now turn the call over to John .
Thank you, Brian and Kevin Good morning, everyone. Thanks for joining us to discuss Sallie Mae's first quarter results I.
I am pleased to report on a successful quarter and continued progress toward our 2022 goals.
Hope you'll take away three key messages today are first of all we delivered strong results in the first quarter.
Second we are well positioned to deliver solid results in 2022, recognizing its difficult to perfectly predict the future.
Given the current macroeconomic and geopolitical uncertainty.
And third we have a resilient business model and strategy that should allow us to continue to perform well even if some of the current rate and inflationary trends continue.
And or we eventually see some recessionary forces.
Before I review, our quarterly results, let me first discuss our loan sale and share buyback plans and performance.
And our guidance discussion in January we stated we expected to sell $1 billion of loans in Q1 and $2 billion in Q3.
During the quarter, we changed our plans and executed $2 billion of loan sales in Q2 and expect the final loan sale to take place in Q3, while we have built a reliable loan sale process. Its not unusual for target dates to fluctuate by a few weeks.
However, we are pleased that we completed the transaction before this earnings call. So we can discuss the transaction and implications for guidance to help you battle better model the remainder of the year.
Given uncertain market conditions I am confident our investors will agree that accelerating the sale of the additional $1 billion of volume was the prudent thing to do.
As you have seen in our press release, we have not changed our EPS guidance, which confirms that we were able to execute the loan sale at prices consistent with our market analysis before this period of major volatility began.
We received a premium that is securely in the low double digits. The buyer of our loans is just beginning their post closing process. Therefore to protect our buyers interest we will not be more specific on the premium execution at this point in time.
Our plan is to use the gain on sale and capital released through the sale to aggressively buy back stock at current depressed levels to create shareholder value and minimize the impact of more capital on our NIM.
Looking forward our assets continued to deliver the long predictable cash flows high yields and low losses that investors are seeking.
We believe this demand combined with a deep pool of well informed loan buyers should allow us to execute future loan sales at attractive premiums, we expect to sell the last billion of loans. This year in the third quarter.
Turning to the quarter's results.
GAAP diluted EPS in the first quarter of 2022 was <unk> 45.
Compared to $1 75 in the year ago quarter.
These solid earnings are lower than the prior year quarter, given that we sold $3 2 billion of loans in the first quarter of 2021 that generated $399 million in gains.
But education loan originations for the first quarter of 2022 were $2 2 billion, which is up 6% over the first quarter of 2021. This is a strong start to 2022 and is in line with the guidance for the year.
Credit quality at origination was consistent with past years, our cosigner rate for Q1 of 2022 was eight eight.
88% down slightly from 89% in Q1 of 2021.
Average FICO score for Q1 of 2022 was 748 versus $7 51 in Q1 of 2021.
In the first quarter of 2022, we continued our capital return strategy by repurchasing 10 million shares at an average price of $18 46.
We have reduced the shares outstanding since January one 2022 by 3%.
We have reduced the shares outstanding since January one of 2020 by 37% at an average price of $15 70.
As a reminder, our loan sale and share repurchase arbitrage program is an opportunistic strategy to take advantage of the disconnect between the price of our assets and our low stock price.
During seasonal phasing, we anticipate maintaining a relatively flat balance sheet and using the proceeds of loan sales for share repurchases.
Once we complete the phase in period, we will look to resume organic balance sheet growth by lowering loan sales and using a combination of organically generated capital and a nominal amount of loan sales to fund what we still expect to be a meaningful capital return program.
In addition to organic growth from our core businesses that we are expecting post seasonal phase and we are also exploring ways to monetize the value of our attractive and growing customer base. We are pleased to report that we officially closed on the Nitro acquisition.
You'll remember that we were excited about the purchase of Nitro, given its customer acquisition and management capabilities.
Nitro team and assets have been successfully transitioned to the Sallie Mae platform and both legacy teams are working hard to insurers nitro success in the upcoming peak season.
After peak season, we will look for ways to further integrate the nitro team and find ways to take additional steps on our journey towards increased organic growth Steve.
Steve will now take you through the financial highlights of the quarter, Steve. Thank you John Good morning, everyone, Let's start where we usually do with a discussion of our loan loss allowance and provision.
Private education loan reserve was $1 billion to $5 billion were five 3% of our total student loan exposure, which under Cecil includes not only be on balance sheet portfolio, but also the accrued interest receivable of $1 $3 billion in unfunded loan commitments of five.
$562 million.
The reserve rate is up slightly from five 2% in the prior quarter, but down from five 4% a year ago.
Let's now look at the major variables used to calculate our <unk> reserve.
Economic forecasts and waiting for a major input to our model in the current quarter and the year ago quarter, we used Moody's base S. One and S. III forecast weighted 40, 30, and 30% respectively.
We can be expected to use this mix going forward, except during extraordinary periods of uncertainty.
The contributor through the small decline in our reserve rate was the improved economic outlook to put a point on it the weighted average forecast college grad unemployment over the next two years declined from three 2% in Q1 to two 5% and the current <unk>.
<unk>.
Model inputs, such as prepayment speeds are an important driver as well. However, this quarter there were no major changes to these variables.
While the first quarter was a large disbursement quarter for students funding the spring semester. Many of these loans were reserved for at the time of commitment in the fall of 2021 <unk>.
Provision for new unfunded commitments was $47 million in the current quarter.
We booked a provision.
For loan losses of $98 million on our income statement this quarter.
<unk>.
Excuse me lets now discuss our credit metrics, which can be found on page eight of the investor deck.
Private education loans delinquent 30, plus days came in at three 5% of loans in repayment.
This is up from three 3% in Q4 and two.
Two 1% in the year ago quarter.
This is consistent with the outlook we provided in January .
We continue to expect 31, plus the delinquencies to hover in the low 3% range for 2022.
Private education loans, and forbearance were one 4% down from one 9% in Q4 and three 7% in the year ago quarter.
We have regularly discussed our transition to more stringent forbearance policies over the last year as expected we are seeing significant increases in cash resolutions of delinquent accounts.
Lou Forbearance however.
However, there is a population of loans that would have received forbearance in the past and are now entering delinquency, causing increased delinquency rates I would point out though that if you have some delinquencies in forbearance year over year, there was a meaningful decline.
Private education loan charge offs in the quarter were 189%.
Slightly below the forecast of 2% we provided last quarter.
We now expect private education loan charge offs for 2022 to peak in the second quarter, 2.25% and decrease over the remaining quarters and totaled just over 175% for the full year.
As you may recall in the prior quarter, we discuss the segments of loans that left school during the pandemic and just entered full P&I and our November December repay wave. These.
These loans are demonstrating higher loans to delinquency and.
Moving through the delinquency buckets more slowly than we had expected, but it was an isolated segments of our portfolio.
And we are very well reserved for the outlook. We are discussing here this morning.
Let's take a look at net interest margin reported on page seven of the investor deck.
NIM for the quarter came in at a strong 2.59% up significantly from four 4% in the year ago quarter.
We benefited from the fact that our deposits repriced more slowly than our assets. In addition, the drag on our NIM, primarily liquidity portfolio declined meaningfully as we invested our cash and medium term treasuries as interest rates have increased.
Rather than leaving cash on deposit and low yielding federal reserve balances.
We expect with high confidence that our NIM will remain in the low 5% percent of the.
For all of 2022.
As we look forward to 'twenty three we expect to maintain a similar to what we are seeing this year the.
The NIM stability is the result of our conservative funding approach.
Predictable asset performance and consistent origination quality.
Because we have raised long term funding through asset backed securities and brokered deposits. The amount of funding we are required to raise each year is very manageable.
Based on our current plan, we expect to raise just $3 $5 billion with new funding and each of the next several years.
And the upcoming peak season and in successive years, we plan to continue to exercise strong pricing discipline and originations to maintain attractive nims and return on equity.
Let's spend a minute discussing the loan sale that just closed as we are all aware base interest rates and credit spreads have increased significantly since our last loan sale and capital markets have been extremely volatile in a difficult economic and political environment.
Despite that the price we received for our assets reflected the underlying market conditions without a significant risk premium.
The long track record of consistent performance of our high quality assets through several economic cycles is broaden the appeal and acceptance of our assets and the capital markets. We are very pleased with this execution and believe it validates our loan sale.
Share buyback strategy.
Let's look at Opex operating expenses were $133 million compared to $125 million in the prior quarter and 126 million a year ago.
Driving expenses higher was a 6% increase from disbursements.
A 9% increase in applications processed which by the way is the biggest increase in applications, we have seen in quite a while.
Expenses associated with the acquisition of Nitro College, and other initiatives spending primarily in our marketing areas also contributed.
However, if you exclude the $3 million of expenses associated with closing the Nitro purchase Opex grew just 4% so.
So we feel that we are in very good shape to continue to drive servicing and acquisition costs lower on a unit basis.
Let me wrap up by discussing liquidity and capital we ended the quarter with liquidity of 17% of total assets.
Total risk based capital came in at 14, 2%.
CET 112, nine and GAAP equity plus loan loss reserves over risk weighted assets came in at a strong 15, 4%.
It's worth noting that we have now begun phasing and the seasonal impact to regulatory capital and made our first down payment of just over $200 million with three more payments to come.
We are well positioned to grow our business and return capital to shareholders going forward.
John back to you.
Thanks, Dave Let me wrap up with a few additional comments on the broader environment and a bit about our outlook for the remainder of 2022.
Overall, the political environment remains constructive with the administration and Congress focused on the federal loan program, specifically simplifying federal income based repayment programs, increasing Pell grants and increasing funding for HBC is.
As discussed previously we support these types of efforts as they target assistance to those who need it most and are complementary to our business.
Recently, the <unk> administration extended the federal payment holiday through August 31 of 2022, as we have mentioned in the past due to the overlap of the federal and Sallie Mae borrowers. We do expect some marginal credit quality benefits from this extension, which would extend to a federal loan.
Forgiveness, if any materializes.
We also expect marginal benefits in third party consolidations as the pressure to consolidate federal loans has pushed back.
We believe the deaths coupled with the rate increase environment will put real pressure on the profitability of the refi business.
We do expect continued headlines and actions regarding the payment holiday, specifically and loan forgiveness more broadly, but we expect any action will be targeted at the federal program.
We do not believe there is any legal basis that subjects private loans to the type of administrative action being used to delay repayments or proposed to forgive federal student debt.
As such any potential future announcements in this area should they occur should only apply to federal student loans.
We are in the final preparation stages of our 2022 peak season, while still early overall college enrollment for fall of 2022 is anticipated to reflect a modest increase over fall of 2021 with greater success at highly selective schools, we recently surveyed.
Our top 100 schools and 63% reported an increase in admission applications compared to the fall of 2021. This was led by significant demand growth in western and northeastern schools. Additionally, 83% of our top 100 schools expect to meet or exceed their.
Enrollment targets.
I would also like to spend a few minutes talking about how we view the current economic environment.
We have not seen market volatility or macroeconomic conditions like we're seeing today in many years I don't need to tell you that inflation as the main concern on everyone's mind. The building blocks for renewed inflation were already in place and were then exacerbated by the war in Ukraine. This has put increased pressure on consumer.
This is across the board.
It is important during periods of extreme volatility to step back and take a look at the bigger picture.
The Moody's forecast for consumer inflation is for a decline back to the mid 2% level by late 2002 and remain there.
That forecast is very similar to the consensus economic forecast, they compile and publish every quarter.
This inflation outlook is consistent with their forecast of a peak fed funds rate at two 8% over the next several years.
Fixed income markets have priced and most of this tightening already.
The consumer is in very solid shape at this point in time.
Moody's estimate that consumer savings are two seven trillion higher than the pre pandemic trends they were on.
Balance sheets have been significantly improved as consumers took advantage of federal pandemic relief funds to pay down existing levels of debt.
Disposable income to debt ratios are as high as they have been particularly for our client base in the upper quintile of earners.
Finally, the outlook for employment and wage gains remained solid these views are incorporated in our current guidance and outlook.
It is important to recognize however that our core business and strategy are resilient and we can adjust course as needed to changing economic conditions.
As a reminder, our high quality assets are derived from over a decade of conservative underwriting and funding college graduates have unemployment rates that are typically half of the U S population, our cosigner rates are consistently approaching 90% and provide us the security of another financially.
<unk> responsible party on our loans.
As a bank we have dynamic funding model, a dynamic funding model, which allows us to take advantage of our various funding options, including retail and broker deposits as well as secured funding.
Additionally, while we take advantage of our loan sale and share back arbitrage program. Our balance sheet is expected to remain relatively flat. This reduces the need to replace and grow our funding base significantly which allows us to be selective and opportunistic with our funding vehicles and different market conditions.
Lastly, we can influence our mix of fixed and variable rate loans by changing our pricing.
Our strategy is to match fund our loans on both the asset and liability side and extreme situations. We have the ability to change price on our loans to influence the fixed variable mix of our originations. This is not something we have had to do historically, but it is an option if extreme market conditions materialize in the future.
For these reasons, we remain confident in the performance of our portfolio and our ability to navigate potential macroeconomic challenges in the future.
Let me conclude with a discussion of 2022 guidance first we are reaffirming our guidance for earnings per share loan growth and expenses. We are adjusting our outlook for net charge offs slightly higher as a result of the higher delinquency roll rates, we are experiencing from the segments of loans that left school.
During the pandemic that Steve described earlier spin.
Specifically, we expect full year diluted non-GAAP core earnings per share between $2 80 and $3.
Private education loan origination growth of 8% to 10%.
We expect our non interest expenses for full year of 2022 to be between $555 and $565 million and we expect our total loan portfolio net charge offs will be between 270 and $290 million.
With that Steve, Let's open up the call for questions. Thank you.
Ladies and gentlemen, if you have a question or a comment at this time. Please press. The Star then the one key on your Touchtone telephone. If your question has been answered or you wish to remove yourself from the queue. Please press the pound key.
Our first question comes from Michael Kaye with Wells Fargo.
Hi, good morning, what's your appetite to do more than half of the $1 billion to $5 billion authorization in 2022, considering the disappointing stock performance. This year could you, perhaps do some more than the plan $3 billion total loan sales in 2022.
Premiums continue to hold up in the stock price remains near these levels.
Yes, Michael Good morning, and thanks for that question, let me take those in turn.
Has as I think we've discussed in the past.
We set up.
A stock repurchase program, we will obviously be more opportunistic when the price is lower we will be slightly more reserved in that program. When we think that the price is higher but I think in terms of our overall share repurchase authorization you should expect us to be.
As aggressive as we possibly can be during this period of lower.
Lower valuation.
We obviously have to work that within the constraint of <unk>.
Relative capital levels funds.
Funding requirements for our loans and so forth, but I think in general you can expect us and I think our past performance has demonstrated this to.
To be more opportunistic more opportunistic more aggressive when when the prices are low.
As it relates to your second question of selling more loans this year.
We have not contemplated that at this point and.
Are not not expecting to sort of make that decision with that said, we will always continue to evaluate the market the market for our equity the market for our loans and if we really saw that there was something materially different there from expectations.
Of course, we reserve the right to come back and make a different decision there.
Okay.
Okay. That's great. Thank you and then.
Just on industry.
The impact of the recovery from Covid, how do you think about the longer term secular growth trends in our private student lending industry. It seems historically, there's been some pretty good steady growth, but now there is some potential headwinds to think about changes in students attitudes towards higher education post COVID-19 .
Such as students attending college closer to home on a two year colleges that are for your call just to start out for example.
Do you think theres a permanent shipments this attitude towards higher education, that's going to impact the industry growth.
Michael It's a great question as you can imagine we think about the industry dynamics a lot.
Thank for our Rallo event planning horizon, which we typically think about and sort of the four to five year horizon.
I think our conclusion with a number of Gibbs and gas is that in the next four to five years, probably look a lot like the last four or five years, which with the exception of the Covid hiccup.
The implementation of the her funds, which we've talked about pretty extensively we're always in that sort of mid to upper single digits. I think the trends that you talked about are certainly true.
What we also see though is there is continued pressure on schools too.
Kris selectivity and the quality of their programs and amenities, we don't see that trend changing at all we don't see the trend of people staying closer to home or at least have no evidence yet that that's a permanent trend that really seems to be from our research more more focused on sort of the reaction to COVID-19 , but obviously, we'll watch that close.
<unk>.
That conclusion is based more at this point on.
Sort of perception and and judgment then it is a long litany of sort of hard data.
Also think that while the mix of programs is changing a little bit that also affords real opportunity for our business. So when you think about.
Certificate programs, when you think about professional and sort of training programs like pilot programs. Those are all things that we have nice business around and so even as some of those trends shift we're well positioned to take advantage of those.
Okay. Thank you.
Our next question comes from Moshe Orenbuch with credit Suisse.
Great. Thanks.
Maybe just to kind of drill down a little bit into the process that kind of allowed you to get $2 billion sold in this otherwise difficult environment.
I guess is there a way to talk about how much.
The variable rate portion of our portfolio helps with respect to that when you think about.
And as you kind of think about further loan sales during 2022 and heading into 2023, how do you how do you think about the resilience.
Your premium versus other stuff that we're seeing in the market.
So a great question Moshe let me make a couple of points.
Sort of from a higher level so.
Our team has worked with a lot of buyers for this paper and there are now quite a few investors up to speed on how to model student loan cash flows and performance and that's a very big positive.
This most recent auction we had a.
A brand new buyer that was axed to try in.
Access to this paper, which is another big positive and also.
Actually surprised me when I saw the stat in the first quarter of 2022, there was slightly more securitization done than in the first quarter of 2021, So the capital markets held up.
Very very well, so while the headlines and the volatility in the market.
Look.
Pretty frightening the underlying market did did hold in.
Very very well.
Terms of the fixed and variable portion of the pools.
The bond math works out pretty well.
The the fixed side of the portfolio.
Definitely the premiums decline as interest rates go up and depending upon how the buyer is expecting to finance the variable whether it is with fixed.
Fixed rate or variable rate funding.
The value and the variable rate side can offset a significant amount.
The deterioration in the fixed rate side and I do think that that is what we saw occurring this quarter and then the other wildcard is credit spreads, which moved out but not as significantly.
One would have expected so going forward we.
Feel very good about the program.
And we will continue to work with buyers to get them up to speed on how to.
Understand the cash flows in the portfolio and.
Look we as I mentioned in prepared remarks, we have a.
Long track record of performance that people can feel very good about and then the.
The other wildcard prepay speeds.
The components of the evaluation of these pools and if consolidations do start to slow as we certainly expect them to do and as we have already seen evidence that thing.
That can also be.
An added source of value.
These pools, so I rambled around there were a little bit, but I hope I.
Answered your question.
Yes, Thanks, Stephen maybe.
<unk>.
John .
Growth rate of originations was a little below your full year growth rate, but you maintained your guidance you talked a little bit about some of the survey work that you've done what other are there any other factors or factors that you would highlight in terms of your ability to get back to that higher growth rate in originations over the course of 2022.
Yes.
Moshe Great Great question, I would remind folks that what happens in the spring is really tied to what happened in the peak of 2021. So.
And in some respects day day follows night.
And really when we get into the fall that is a that is effectively a new peak season, and starting that trend all over again.
I think as we have looked through it and I think we talked about this a little bit when we set the original guidance and I think appropriately got some some good challenging questions on it I think theres two or three things that are really going to be different desk peak season versus last.
Number one is just the continued healing of the enrollment trends and the normalization back to a college experience like what we saw pre pandemic I think that was perhaps a little bit of that.
The impetus behind Michael's earlier question, but I also think the other big thing is the removal of the her funding, which I think we said statutorily had to sort of run its course by the spring of this year and I think we're in the very tail end of that happening now.
I think we shared back when we did first quarter earnings I'm, sorry fourth quarter earnings.
There was no appetite that we could see to extend or enhance that.
And that we didn't expect that to play out going forward.
You put on top of that just what we're seeing around the continued investments and our marketing capabilities. The continued improvements and enhancements that we're seeing to our customer management programs and we feel like the 6% growth in the quarter is very very aligned with the expectation.
That we had that take us to the 8% to 10% for the year.
Great. Thanks, John .
Our next question comes from Steven Kwok with <unk>.
Yes.
Hi, Steven filling in for <unk>. Thanks for taking my question and congrats on the completion of the loan sale I was just wondering given the buys that buyback in place how aggressive can you be limit of around one <unk>.
You can buy back in any given quarter.
Yes, Steve that there are absolutely rules and regs as to how we can implement and execute for example, a <unk>.
<unk> 501 program and they are basically anchored to the amount of.
Volume in the prior four weeks I believe it is but we have shown for example post tender offer that we can buy a significant amount of stock.
On a day to day basis, without having a material impact on the share price and.
That's exactly what we expect to do when the window opens and we can begin to repurchase stock again.
So yes, we think that we can execute quite a bit in a short period of time.
Impacting prices.
Got it got it and then just given the commentary around inflationary pressure on consumers and you get fairly real time data around that on the payment side are you seeing any signs of stress among the customer base.
We are absolutely not.
Except the one segment of the portfolio that we identified that as having higher roll rates into delinquency and default. The core part of the portfolio is performing very very well and look the flipside of.
Inflation as we are seeing as we all know recent college graduates and.
Young adults from the working for us are experiencing very strong a wage increase.
<unk> and <unk>.
Certainly enough to cover any increases in excuse me interest rates or pressure on their disposable income from inflationary pressures. So we feel very good about portfolios we've looked at it today.
Great. That's good to hear thanks for taking my questions.
Youre welcome.
Again, ladies and gentlemen, if you have a question or comment at this time. Please press Star then the one key on your Touchtone telephone.
Our next question comes from Vincent <unk> with Stephens.
Hey, good morning, Thanks for taking my questions and want to also give my congratulations to get into loan sale done.
Just wondering if you could talk about that in more detail I know you've already given a lot of detail, but if you could maybe talk about your.
The investors who are buying into that are you seeing more demand is it the same demand in <unk>.
Environment, where the fed funds rate expectations have increased as well as <unk>.
Credit deterioration in inflation that was pretty impressive that you're able to still get double digit gains. So is that sort of the rate expectation, we can think of going forward.
Even in a environment.
Where there might be some high volatility. Thank you.
Yeah, Vincent it's John and Thanks for your question and I won't I won't repeat the portions that Steve covered earlier, but let me add maybe a little bit of commentary.
I think the team has has really worked hard to make sure we have a robust process in two ways.
One is the continued seasoning and demonstrated performance of the high quality asset class.
And I think that that sort of speaks for itself and people can judge and evaluate the performance and what that looks like over time.
Then I think the second is really cultivating and managing a large pool of really quality potential borrowers and Steve mentioned, the fact that this quarter, we actually had.
Not a deterioration in the number of interested borrowers we actually had a very large and significant new borrower.
Enter the mix with with with.
With interest and so.
I think our view is we're going to continue to work both sides of that equation, we're going to really focus on making sure that our assets perform as well as they can that's going to be all around staying really diligent around underwriting around pricing, it's going to be staying really diligent around our various loss mitigation programs.
And I think at the very same time, we're going to continue to cultivate what we think is a very well subscribed and efficient auction process at the end of the day and I've said. This on a few calls I think we would be foolish to try to predict the specific outcome of any auction.
That's obviously going to be a very unique situation I think what we have seen pretty consistently though.
As these options are pretty rational.
And as we looked at the pricing we got.
I think Steve laid out on the last call some sort of a simple analytical construct to help people understand how pricing move.
As we look at the pricing we got we felt like it was certainly within.
The range of what that analytical construct would have suggested.
And so again I can't promise that the markets in the future will be or the outcome of the auction of the future will be rational, but we've certainly seen it behave rationally so far and I have no reason to expect that it wouldn't be.
Okay. Thank you I appreciate that and yet it does it stands out given some of the other participants in the capital markets with that maybe pulled pool sales or.
Had much higher cost to that so so I think that's a really standout job you guys done. Thank you.
Next just kind of a quick question.
222, EPS guidance being unchanged, even though the net charge off forecast guidance is a bit higher maybe if you could discuss the puts and takes of how the EPS is unchanged. If there's any offsets like maybe in a more aggressive share repurchases.
Any other I'll say thank you.
Yes, sure I mean, there are a lot of ingredients to the <unk>.
<unk> number I mean, one of the things that we're seeing is actually a stronger NIM. We do expect that we will buy back shares lower than we had in the initial plan, but I do want to point out that the mechanics of building. The reserve are important and we do have a life of loan loss reserve.
As a result of seasonal and to a certain extent.
Increases that we're seeing in defaults are not necessarily incremental to the life of loan, but actually more of a timing difference and I think we just increased the midpoint by about $15 million, which in the Grand scheme of things isn't that material, but.
<unk> building, the provision and the reserve and the.
Cecil World There is a lot different.
Then it was prior to that.
Okay, great very helpful. Thank you very much.
Youre welcome.
Next question comes from Rick Shane with JP Morgan.
Yes.
Yeah.
Good morning, Good morning, Rick.
Hey.
I wanted to circle back to inflation.
I think historically terrific.
<unk> presented.
Good afternoon everybody.
Everything else.
Thanks Dean.
I'm curious if you've gotten feedback.
School partners.
What expectations they have.
In terms of tuition pricing.
And what we might see.
Okay.
Okay.
Melissa Thank you.
Let me provide a couple of thoughts here and I will confess I have not looked at this data and perhaps a quarter or so so what I'm, telling you might be slightly dated but.
I think the way that I think about it is during the pandemic I think a lot of schools worked very hard to maintain stable tuition stable fees stable pricing just recognizing that.
The financial burden and the uncertainty on students and families. I think we saw as the pandemic began to break.
And our survey results schools indicated that they would likely expect some marginal increase in fees intuition overtime and I don't think theres anything that I've seen in recent data to suggest that that trend has not has not changed and I really do think it goes back to.
Set of understanding the broader structural issues that most universities face and as I've said, a couple of different times in a couple of different forums.
The single biggest thing that is driving it.
University administrators today is figuring out ways to improve.
The quality the prestige.
Sort of.
The desirability of their programs and if you think about how do you do that you do that by getting in investing in more and better academic programs you do that by investing in <unk>.
More and better amenities by the way I think increasingly you see that by our U C administrators trying to do that by.
Recruiting a more and more diverse.
Student base, and really bifurcated process, our pricing between sort.
The typical student and perhaps scholarship students.
But all of those trends I think we expect to continue in all of those trends put upward pressure on.
Tuition and fees going forward. So I think we have seen.
Both a short term effect around COVID-19 , but I also think and maybe this is back to Michael's earlier question I do think we believe that the the structural elements that have led to tuition and fee inflation are likely to persist.
For our relevant planning horizon.
At the very least we haven't seen any reason yet to assume anything different in our outlook.
Thank you.
Youre welcome.
And I'm not showing any further questions at this time I would like to turn the call to John <unk> for any closing remarks.
Very good well listen thank you everyone for joining I know this is your busy season.
We really do appreciate the continued interest in Sallie Mae and speaking on behalf of Brian Steve and myself obviously.
We are here our IR team is here to be helpful. In answering any questions and look forward to talking to you next quarter with that Brian I'll turn it over to you for closing.
Comments thank.
Thank you John Thank you for your time and your questions today, a replay of this call and the presentation will be available on the investors page at Sallie Mae Dot com.
You have further questions feel free to contact me directly. This concludes today's call. Thank you.
Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.
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