Q4 2023 SLM Corporation Earnings Call
Yeah.
Hello, and thank you for standing by walking to Sallie Mae 'twenty twenty-three Q4 earnings conference call at.
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I would now like to hand, the conference over to Melissa Bruno you may begin.
Melissa Bruno: Thank you Linda good evening and welcome to Sallie Maes fourth quarter 2023 earnings call.
It is my pleasure to be here today, with John Winter, our CEO and Pete Graham our CFO.
Melissa Bruno: After the prepared remarks, we will open the call for questions.
Melissa Bruno: Before we begin keep in mind, our discussion will contain predictions expectations and forward looking statements.
Melissa Bruno: Actual results in the future may be materially different from those discussed here this could be due to a variety of factors.
Listeners should refer to the discussion of those factors on the Companys form.
Melissa Bruno: Thank you and other filings with the SEC for.
Melissa Bruno: Or Sallie Mae. These factors include among other results of operations financial condition, and our cash flows as well as any potential impacts of the COVID-19 pandemic on our business.
Melissa Bruno: 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 any earnings supplement for the quarter ended December 31st 2023.
This is posted along with the earnings press release and the earnings presentation on the investors page at Sallie Mae Dotcom.
Melissa Bruno: You and now I'll turn the call over to John Thank you Melissa to Wanda. Good evening, everyone. Thank you for joining us today to discuss Sallie Mae's fourth quarter and full year 2023 results.
John: I'm pleased to report on a successful year and discuss our outlook for 2024.
I hope you'll take away three key messages today first we delivered strong results in 2023.
John: Second our credit performance is in line with the expectations, we laid out in the beginning of the year and we anticipate that we will experience continued improvement in the coming year.
John: And third we believe we have strong momentum entering 2024 and are well positioned to deliver on the investment thesis, we introduced approximately a month ago.
Let me begin with a discussion of 2023 results.
Melissa Bruno: GAAP diluted EPS in the fourth quarter was 72 cents compared to a loss of 33 cents a share in Q4 of 2022.
Melissa Bruno: Our full year GAAP diluted EPS was $2 41 compared to $1 76 in 2022.
Melissa Bruno: Without the noncash write down of the intangible asset associated with the Nitro trade name and trademark, which Pete will discuss in more detail.
Melissa Bruno: GAAP diluted EPS would have been 91 cents for Q4 and $2 59 for the year well within our guidance expectations for 2023.
Melissa Bruno: Private education loan originations for the fourth quarter of 'twenty, three were $839 million, which is up 2% over fourth quarter of 2022.
Pete: Consistent with guidance provided on our last earnings call. Our full year originations ended at approximately $6 4 billion, which is up 7% over 2022.
Pete: Application volume also increased year over year by 10% that has been fueled by a 12% increase in underclass applications. This.
Pete: This is especially important given the greater serialization potential and lifetime value of this group.
Melissa Bruno: In a year, where students returned to campus in record numbers post pandemic. We are pleased that we were able to maintain our 55% share of the private student loan lending market. According to the most recent industry report.
Melissa Bruno: Credit quality of originations was consistent with past years, our cosigner rate for the fourth quarter of 2003 was 84% up slightly from 82% in the fourth quarter of 'twenty two.
Melissa Bruno: Our average FICO score for the fourth quarter of 'twenty three was $7 50, an increase over the fourth quarter of 2022 at $7 47.
Melissa Bruno: For the full year, our originations were 87% cosigned and had an average FICO score of 748.
Melissa Bruno: Both improvements over full year 2022.
Melissa Bruno: We remain focused on credit and our path back to normalcy and are pleased that we have seen the expected improvement in performance this year.
Melissa Bruno: We ended the year with net charge offs as a percentage of average loans in repayment of two 4% and at the lower end of our net charge off guidance for the year at $375 million.
Melissa Bruno: Having assessed the underwriting programmatic and operational changes made to date and segmented the performance of our portfolio. We continue to believe that the right net charge off goal for our portfolio is the high ones to low 2% range.
Melissa Bruno: Understanding that we won't see a reversion to those rates immediately.
Melissa Bruno: We're happy with the progress made from 'twenty two to 'twenty three and expect continued progress from twenty-three into 24 of course, assuming no changes to the broader economic environment.
Melissa Bruno: We did see a rise in delinquencies in the fourth quarter to three 9%.
Melissa Bruno: We believe this is largely a mechanical result of borrowers enrolling in new programs, who are in their qualifying period versus a broader worsening of performance. In fact, we are seeing early indicators of success of our new payment programs and then December observed the lowest roll.
The default rate in over two years.
Turning to capital return in the fourth quarter of 'twenty, three we repurchased 6 million shares at an average price of $15.43. We.
Melissa Bruno: We have reduced the shares outstanding since January one 'twenty three by 9% at an average price per share of $15 64.
Melissa Bruno: And by approximately 50% since January one of 2020 at an average price of $15 and 93.
Melissa Bruno: Before I hand, the call over to Pete I am pleased to share that last week, we agreed to indicative pricing terms for the sale of approximately $2 billion of private education loans.
Pete: We expect the transaction to close in early February.
Pete: With general market improvements in the consumer lending segment during the fourth quarter of 23 as well as the improvements we saw in ABS spreads.
Pete: Encouraged by the price that we received which is in line with our expectations for the year we.
We expect to sell additional loans in 2024.
Melissa Bruno: Conditions will dictate the timing of additional sales and volume will be driven by our balance sheet growth targets, we expect our balance sheet growth to be in line with or slightly above the strategy. We shared at our Investor Forum, just a month ago, roughly 2% to 3% balance sheet growth in 2020.
Melissa Bruno: Four.
Speaker Change: Kate will now take you through some additional financial highlights of the quarter Pete over to you.
Speaker Change: Thanks, John and good evening everyone.
Kate Smith: Let's continue with a discussion of our loan loss allowance and provision.
Kate Smith: Our total provision for credit losses on our income statement was $16 million in the fourth.
Kate Smith: The provision build $86 million was driven almost entirely by volume increases.
Melissa Bruno: Was offset by a $69 million reduction associated with the $1 billion loan sale that closed in the fourth quarter.
Melissa Bruno: This fourth quarter provision represents a decrease of $182 million from the prior.
Melissa Bruno: And the $282 million decrease from a year ago.
Melissa Bruno: Net charge offs for our private education loan portfolio in the fourth quarter were $93 million.
Melissa Bruno: Or two 4%.
Melissa Bruno: <unk> to a $116 million or three 1% a year ago quarter.
Melissa Bruno: Full year net charge offs were $375 million or two 4%.
Melissa Bruno: And at the low end of our guidance for the year.
Melissa Bruno: These provisions and net charge offs in the fourth quarter reduce our private education loan reserve to $1 4 billion.
Melissa Bruno: Were five 9% or total student loan exposure.
Melissa Bruno: Which under Cecil includes the on balance sheet portfolio.
Melissa Bruno: Plus the accrued interest receivable of $1 4 billion.
Melissa Bruno: And unfunded loan commitments of $2 $2 billion.
Our reserve rate continues to improve as compared to 6% in the third quarter of this year.
Melissa Bruno: Six 3% at the end of 2022.
Melissa Bruno: Private education loans, delinquent 30 days or more three 9% loans in repayment and increase over three 7%.
Melissa Bruno: Third quarter.
Melissa Bruno: As well as three 8% of the year.
Melissa Bruno: Sure.
Melissa Bruno: We believe this uptick in delinquencies is primarily driven by the increase in enrollment from our new loss mitigation programs that John discussed earlier.
Melissa Bruno: We really negative credit syndicate.
Melissa Bruno: Year after year, a quality loan portfolio generated significant interest income.
John: For the full year of 2023, we earned $1 6 billion net interest income higher than full year 2022.
John: Net interest margin for 2023 was five 5%.
Melissa Bruno: Compared to five 3% in 2022.
Melissa Bruno: Going into 2024, we continue to expect NIM to be in the low to mid 5% range.
Melissa Bruno: Fourth quarter operating expenses were $143 million compared to $167 million in the third quarter.
Melissa Bruno: Third $38 million in the year ago quarter.
Melissa Bruno: Operating expenses are down from the prior quarter, which was our peak lending season.
Melissa Bruno: Total non interest expenses in the fourth quarter were $202 million.
Melissa Bruno: Compared to $170 million in the prior quarter and $140 million a year ago quarter.
Melissa Bruno: The increase to noninterest expenses in the fourth quarter relates to the rate associated with the <unk> trade name and trademark.
We continue to be very pleased with our acquisition of Nitro.
Melissa Bruno: So <unk> built a more resilient marketing model and driven down our cost to acquire.
Melissa Bruno: Interestingly as we've integrated Nitro and begun to test the effectiveness of the programs and strategies.
Speaker Change: Soup performance meaningfully better using the Sally so many mediums and club.
Speaker Change: For example, we're testing performance with one of our affiliate channels. So we made brands perform 68% better than the Nitro brand measuring conversion rates.
Melissa Bruno: We believe that continuing to build on this early and so we may platforms will accelerate growth.
Melissa Bruno: With this decision to stop using the Nitro brand, we determined that the intangible asset associated with the Mercury trade name and trademark.
Zero.
As a reminder, this with some intangible assets established using a 10 year life.
That would have continued to incur amortization expense of approximately $7 million per year until 2031.
Melissa Bruno: The decision to write this asset down this year resulted in a noncash charge of $56 million.
Melissa Bruno: Corrected earnings per share for the quarter by 19 and for the year by <unk>.
Melissa Bruno: Absent this right Joe.
Melissa Bruno: <unk> expenses would've been $146 million in the fourth quarter and $629 million for the full year.
Melissa Bruno: Within our guidance expectations.
Melissa Bruno: Finally, our liquidity and capital positions are solid.
Melissa Bruno: Ended the quarter with liquidity of 21, 4% of total assets.
Melissa Bruno: At the end of the fourth quarter total risk based capital was 13, 6%.
Melissa Bruno: Common equity tier one capital was 12, 3%.
Melissa Bruno: Another measure of loss absorption capacity of the balance sheet, because GAAP equity plus loan loss reserves over risk weighted assets, which was a very strong 15, 8%.
Melissa Bruno: We believe we are well positioned to grow our business and return capital to shareholders going forward.
Joe: Now I will turn the call back to Joe.
Joe: Thanks Pete.
Joe: 2023 was a year of incredible progress we feel like we're on the right path to normalizing credit and are happy to finish 2023 with credit performance consistent with our previous expectations, we experienced excellent originations growth in 'twenty, three and expect considerable originations growth in 'twenty four and 'twenty five.
Joe: <unk> as one of our largest competitor is exiting the business.
Joe Smith: We were also able to return meaningful capital to shareholders through the successful loan sale and share buyback arbitrage strategy and are already seeing positive momentum in this space for 2024.
Joe Smith: Just over a month ago in our Investor Forum, we introduced an investment thesis built on four principles.
<unk> strong and predictable balance sheet growth.
Joe Smith: Strong EPS performance and return on common equity third meaningful capital return and fourth all within manageable risk.
Joe Smith: As we embark on the next year, we expect to deliver on these principles, we believe that meaningful origination expansion, coupled with loan sales to moderate growth and a steadfast focus on expense management will allow for both organic earnings growth and generous capital return to shareholders.
Joe Smith: It is in this context I would like to provide our guidance for 2024, specifically, we expect full year education loan origination growth of 7% to 8%.
Joe Smith: Total loan portfolio net charge offs will be between 340 and $370 million or two two to two 4% of average loans in repayment.
Joe Smith: Non interest expenses for the full year of 2024 to be between 300, 635, and 655 million and.
Melissa Bruno: Full year diluted non-GAAP core earnings per share between $2 60, and $2 70.
Melissa Bruno: In addition, today, we are announcing a new share repurchase authority to buy up to $650 million of common share stock over the next two years.
Melissa Bruno: While dependent on share price continued planned loan sales and other factors, we expect to repurchase roughly half in 2024 and the remainder in 2025.
Melissa Bruno: We expect to continue programmatically buying back our stock over the next few years and look for opportunities to buy more on days when market conditions are favorable.
Melissa Bruno: We continue to support our longer term capital return plans and our clear commitment to shareholder return.
Melissa Bruno: With that let's go ahead and open up the call for some questions. Thank you.
Melissa Bruno: Thank you.
Melissa Bruno: Ladies and gentlemen, as a reminder to ask a question. Please press star one on your telephone and then wait to hear your name announced to withdraw your question. Please press star one again.
Melissa Bruno: Please standby, while we compile the Q&A roster.
Our first question comes from the line of Darren <unk> with Citi. Your line is open.
Melissa Bruno: Please standby.
So over to questions Aaron Your line is open.
Melissa Bruno: Hi can you hear me, yes, we can hear you characterize.
Melissa Bruno: Got it thank you sorry about that.
Melissa Bruno: It looks like you have some.
Melissa Bruno: Some modest market share increase assumed with one of your larger competitors.
Melissa Bruno: <unk>.
The market. This year for next year are there any other kind of items of note that you have included in there in terms of like enrollment trends et cetera for the 2425 academic year.
Melissa Bruno: Yes, Aaron its.
Melissa Bruno: It's John Let me, let me take that.
John Hecht: We build up our projections bottom up and top down so we do a bottom up analysis, where we're absolutely absolutely looking at sort of enrollment trends and the like and we do sort of a top down analysis, which is more of a share based approach and we triangulate those two things together in this year.
John: Those numbers were.
John: Pretty close so yes, we do have.
John: Views around enrollment increases, yes, we do have our views around the effectiveness of our various marketing programs, which we feel have been getting more effective each year over the last several years, given both organic investments and the acquisitions, we've done and yes, we have assumptions in there around.
John Hecht: The potential for a competitor to be exiting the space I do think the thing that's important and I'll, just say a proactive way.
John Hecht: Any asset will likely impact the fall peak season more than it will impact this spring.
Joe Smith: So you may remember from my comments, we believe any market share gains driven by that will likely be spread over two years not entirely resident just within 2024.
Joe Smith: Yes that makes sense and then.
Joe Smith: Second question on the gain on sale it looks like the <unk> is a bit lower than.
Joe Smith: Normal or what it has been recently.
Joe Smith: Was that because it was struck during the third quarter when rates were high and I believe you said that you expect that to improve in the first quarter sale of the $2 billion.
Joe Smith: Yes.
Peter M. Graham: Aaron This is Pete.
Peter M. Graham: That's right, it's the timing of when.
Peter M. Graham: When the deal was struck that was sort of a peak rates.
And we've seen obviously improvement in the rate.
Peter M. Graham: Environment as we moved into the year.
Peter M. Graham: And so again as we said in the prepared remarks, it's largely a logo.
Peter M. Graham: Our expectations for this year.
Peter M. Graham: Got it thank you.
Peter M. Graham: Thank you.
Peter M. Graham: Ladies standby for our next question.
Peter M. Graham: Our next question comes from the line of Moshe Orenbuch with TD Cowen Your line is open.
Peter M. Graham: Great. Thanks.
Peter M. Graham: Maybe.
John: John If you could talk a little bit about how you think about the capital deployment to $650 million.
John: It was a nice large number.
John: And given the fact that you've already agreed to the first loan sale of the year can you talk about the pace of net capital deployments over the next 12 months to 24 months.
John: Yes.
John: Moshe happy too.
John: Pete jump in if you want to add anything to that.
Moshe Ari Orenbuch: I think if you look back historically really given the low rate environment. Our philosophy has been one of deploy.
Moshe Ari Orenbuch: Deploying capital very very quickly.
Moshe Ari Orenbuch: Because of the potential impact that that has on NIM.
Moshe Ari Orenbuch: While we do not divulge specific plans or timing around capital deployment I think you should assume that higher rates give us a bit more flexibility to be thoughtful strategic and a bit more opportunistic about how we deploy that capital.
Moshe Ari Orenbuch: And so I think you should expect.
Moshe Ari Orenbuch: And I think we said this in our comments that we will take.
Moshe Ari Orenbuch: A more programmatic approach, we will obviously look to be opportunistic.
Moshe Ari Orenbuch: At times, where we think market conditions are favorable for buybacks, but I think we also want to make sure that we are being.
Moshe Ari Orenbuch: Sort of consistent in our approach are reasonably consistent our approach across that time period.
Moshe Ari Orenbuch: Great. Thanks, and maybe just as a follow up I mean, one of the things that we talked about a little around the time of your call last month was kind of the.
Moshe Ari Orenbuch: The dynamic elements of your plan could you talk a little bit about how you would think about.
If the market share gains and origination gains later in the year were better.
Moshe Ari Orenbuch: Then you had.
Moshe Ari Orenbuch: Then you kind of included in your forecast I mean, how do you think about what you do with that difference.
Moshe Ari Orenbuch: Is it something that you are more likely to increase the amount of loans sold.
Moshe Ari Orenbuch: Greece the amount staying on the balance sheet can you talk about just your thought process.
Moshe Ari Orenbuch: Yes, Im happy too I think if you go back to our investment thesis Moshe number one on that is strong and predictable balance sheet growth and I think in my comments, we talked about likely balance sheet growth. This year in the 2% to 3% range.
Moshe Ari Orenbuch: I think you should assume that that is going to be sort of the primary determinant of how many how much loans that we sell versus how much we keep on the balance sheet sort of plus or minus.
Moshe Ari Orenbuch: And obviously, if we end up in a place where market conditions are extremely favorable to loan sales, we might sort of pushed that a little bit to the lower end. If we found a place where market conditions weren't as favorable maybe we push it a little bit to the upper end, but I think our goal very much as we.
Moshe Ari Orenbuch: <unk> discussed in the Investor for them is to have really measured predictable balance sheet growth couple that with really strong operating leverage to be sure that we're driving quite attractive EPS growth, but also returning during that time significant capital to shareholders. So I think that's how we think about it yes. It is.
Moshe Ari Orenbuch: Again, I think really based on predictable balance sheet growth as as we say on the investment basis.
Moshe Ari Orenbuch: Great. Thanks, so much.
Moshe Ari Orenbuch: Okay. Thank.
Thank: Thank you.
Thank: Please standby for our next question.
Thank: Our next question comes from the line of Terry MA with Barclays. Your line is open.
Thank: Alright, thanks, good afternoon.
Terry MA: Can you maybe just comment on the credit outlook for this year. It seems like the high end of the range implies not.
Terry MA: Not much improvement compared to 2023, so maybe just talk about what gets US there gets you to the high end versus the low end and then longer term.
Terry MA: Should we think about the timeframe for getting back within your target underwriting levels.
Terry MA: Yes.
Terry MA: Happy to.
Terry MA: I think we've tried to give a range obviously, recognizing it's sort of early in the year end.
John Hecht: We continue to be I think in a little bit of a volatile sort of economic environment and I think.
John Hecht: We want to be sensitive to that.
John Hecht: What we have effectively done in building up that forecast.
John Hecht: Is it pretty deep look at sort of the programs and new programs we have developed.
John Hecht: The use of those programs the uptake of those programs that will be effectiveness. We have seen recognizing some of those are in early days, yes, we have looked at the credit and underwriting changes that we've made in sort of the differential performance between loans that we continue to underwrite versus guys. We down we've looked at things like the <unk>.
John Hecht: <unk>, a gene and vintages of our portfolio understanding that different loans behave differently over time and we.
We've looked down into the details of those portfolios at things like balances in fixed rate versus variable rate again, knowing that the performance of some of those things is a little bit different.
John Hecht: And I think at the end of the day.
Sort of how we arose.
John Hecht: Same to you.
John Hecht: The thing that would take us to the lower end is if we.
Felt like the programs that we have put in place were slightly sort of better and more effective than we've seen in the early days and I think the things that would take us to the upper end would be sort of the opposite of that.
John Hecht: But I think what you ought to take away is we are and continue to be very confident in sort of year over year improvement in credit.
John Hecht: I think that detailed analysis I described makes us more comfortable as I said in my talking points at the high ones to low twos.
John Hecht: Is really the right place for us to be.
John Hecht: Thank you should expect.
And we believe.
John Hecht: But we will see continued performance improvement in 25 of course, assuming no broader macroeconomic changes I have to say that.
John Hecht: Whether we get all the way back.
John Hecht: Our normalized level of 25% or just close I think it's a little bit too far out to make that call, but I think we are confident in continued and meaningful improvement.
John Hecht: Got it.
John Hecht: Then longer term for your market share how should we think about how that evolves over the next few years as the competitor fully exits.
John Hecht: Yes, I think we would.
Assuming all of those plans that move forward as the media has suggested I think we would expect that there will be.
John Hecht: Jump ball market share for us to compete for much like their widest when wells made the decision.
John Hecht: To leave the marketplace several years ago.
John Hecht: We will compete for that in exactly the same way that we compete for any other business will decide which are bad business, we like versus not based on credit characteristics pricing characteristics, all sort of resulting in the expected Roe of those loans.
John Hecht: My guess is we will end up competing for and trying to compete for a good piece of it but I don't know that will necessarily compete for all of it. It's just too early to sort of tell.
John Hecht: But I think our hope is that this does represent a near term sort of multi year, but one one time opportunity to increase share in <unk>.
Terry MA: We're excited to compete for that and what is and I think continues to be a.
Terry MA: <unk> nicely competitive marketplace, where we expect other competitors to show up in very much a compete with equal zeal as we're competing.
Terry MA: Got it thank you.
Terry MA: Thank you.
Terry MA: Please standby for our next question.
Terry MA: Our next question comes from the line of Sanjay <unk> with <unk>. Your line is open.
Terry MA: Thanks, I guess question for Pete.
Terry MA: Can you just talk about the 2024 assumptions on.
Peter M. Graham: Level of loan sales like the gain on sale margins.
And maybe what youre, assuming in terms of share repurchases in the guidance.
Peter M. Graham: Yes.
Peter M. Graham: Kind of laid that out.
Peter M. Graham: At the Investor Forum.
In large part our guidance is pretty similar to that.
Peter M. Graham: In terms of sizing of the overall program this year.
Peter M. Graham: Again, we're targeting that.
Peter M. Graham: Sort of 2% to 3% balance sheet growth.
Peter M. Graham: And.
Peter M. Graham: That will determine the ultimate.
Peter M. Graham: So the overall level.
Peter M. Graham: Two 2 billion that we.
Peter M. Graham: Agreed indicative terms on is a good start to that program for the year.
And we will begin to utilize the capital generated by the as John said, a programmatic approach to.
Peter M. Graham: The share repurchase and then.
John Hecht: When we do have a second installment of loan sales at some point later in the year.
John Hecht: We'll build it will build as we go.
John Hecht: And then Mike that 2 billion that's been sold already that's consistent in the range that you guys articulated at the investor forums sort of like mid singles, a little bit higher than that.
John Hecht: Correct.
John Hecht: Okay.
Mike: And maybe just on rates interest rates could you just remind us sort of how as rates come down that affects the <unk>.
Mike: And sort of what's been done.
Mike: Around rates and what you've assumed in the guidance.
Yeah sure so.
Mike: Over the course of the loss.
A couple of years.
Mike: We've had a little bit of a tailwind on our NIM because.
Mike: In the rising rate environment.
Mike: Our our loans tend to reprice.
Mike: Faster than than our liabilities reprice.
Mike: And that's why we kind of peaked.
Mike: Where we did.
Mike: In 'twenty three.
Mike: Our expectation is that that will start to moderate which is where.
Mike: Our guidance for this year around NIM is.
Mike: As is lower than where we were last year.
Mike: And we're we're.
Mike: We're not necessarily.
Speaker Change: Taking a position on res, we're just acknowledging we do have some timing disconnects in terms of in terms of pricing.
Speaker Change: Our bias.
Over the course of this year for.
Speaker Change: Incrementally lower cost of funding is our liabilities reprice.
How many rate cuts have you factored in here.
Speaker Change: We base our we.
Speaker Change: Those are assumptions on your kind of forward curve. So I think the market the market assumption, there's probably five rate cuts.
Speaker Change: Okay.
Speaker Change: So theres a punitive impact.
Speaker Change: <unk> rate cuts in the NIM right now to the extent that doesn't happen that would that should help all else equal.
Speaker Change: Oh.
Speaker Change: Yes, perhaps I mean again it's.
Anytime you are forecast.
Speaker Change: Interest rates theres always going to be some level of variability.
Speaker Change: <unk> until it actually happens.
We tend to run a very balanced book.
So any moves should be.
Speaker Change: Hello, gradual likely within the guidance range.
Speaker Change: We've articulated.
Great. Thank you so much.
Speaker Change: Thank you.
Speaker Change: Please standby for all next question.
Speaker Change: Our next question comes from the line of Michael Kaye with Wells Fargo. Your line is open.
Michael Kaye: I was hoping you could dig a little bit more into those new borrower assistance programs that you've rolled out and you alluded to I know it's early days.
Michael Kaye: But could you just give us some of the early signs of how Thats performing and secondly could you talk about how that enhanced recovery strategy with you recently implemented how is that going to go according to plan.
John: Yes, Michael its John happy to.
John: In terms of the specifics there is a few different flavors of programs we have developed in.
John: As quick context review will remember with the.
John Hecht: Our credit administration changes we made.
John Hecht: Several years ago.
We moved from having a very effective.
John Hecht: I sort of got very general Forbearance program to a strategy, where we had more programs, but much more tailored much more focused on a specific customer needs.
Melissa Bruno: <unk> had the advantage of being aligned with I think sense at the time with OCC guidance. It also allows us again to be really efficient and effective in the design of those programs and really test for their effectiveness over time, recognizing that theyre, all still pretty new so to give you a sense of that we've.
Melissa Bruno: <unk> developed a newer early to repayment assistance program and this is specifically designed to.
Melissa Bruno: To help folks who are literally just coming out of school and starting to take on their financial obligations.
Joe Smith: We've developed a term extension and loan modification program that allows us to tailor and offer a slightly more combinations of rate and 10 year modification again really to the idea of specifically tailoring.
Joe Smith: The sort of mod to the unique needs of our circumstances of that borrower and we haven't done it yet, but we are looking at establishing a more permanent loan modification program for our borrowers who were really experiencing longer term hardship and dor as sort of a per.
Joe Smith: Eminent reduction.
Joe Smith: And in their income and so hopefully that gives you a little bit of a sense of the kinds of programs, but again I would put it in the context of very tailored and specific and focused programs as a replacement or a substitute for the more general and flexible program that we had before.
Michael Kaye: We like the results, we're seeing so far Michael to answer that part of the question.
Michael: I think we are seeing our first and foremost our agents being able to communicate the benefit of these programs to our customers I think the programs that we've developed are largely matching what customers need we see that because we can see sort of the improved uptake of <unk>.
Michael: Those programs when we offer it and we can literally go back and listen to this falls and monitor all of that very very closely.
Michael: Is it too early to be able to start to do what we will eventually do which is the sort.
Michael: Sort of a longer term loss curves of those programs and whether or not they are generating meaningfully better outcomes or not that will certainly be a part of the fine tuning that we will do.
Over the quarters ahead, but obviously the programs have to run their term and then we have to observe behavior and success of customers going forward.
Michael: I think it is really important to note our goal here is.
Is to work as productively as we can with all of our borrowers who have fallen on hard times.
Michael: Recognize that there is a human behind every one of those customers who are struggling with their loans and we want to be as helpful. As we can and we think that this targeted approach is really a great step in that direction.
And the part about that enhanced recovery strategy.
I know you've made some changes.
Michael: How is that going yes.
Michael: It has continued to perform along our expectations. There is that there is no update there and we continue to believe that that is the right program and have confidence in that decision.
Michael: Great and.
Michael: My second follow up question is.
Michael: And is there any early signs of increased competition from new and existing players with one of your competitors looking to exit for example, eyesore word that the Carlyle group purchased $415 million up.
Michael: Student loans and made a strategic investment in.
Michael: And a company called Monogram.
Michael: Yes, Michael I think it's sort of too early and not the season to really see the change in competitive intensity.
Michael: You have to remember number one.
Michael Kaye: Lots of the spring disbursements happen in the very end of 'twenty, three or the beginning of 'twenty four but they were really setup by the great work that we and our competitors do during the fall peak season.
Michael Kaye: By the way if you look at the announcement of the competitor in question, Yes. They were very clear to articulate that they were going to stop originations on February one, which we imagine is a nod to that dynamic. They obviously want to see the business that they've already committed through through to add to a natural conclusion.
I think we will really start to sort of understand the change in competitive dynamics as we move into peak season. This summer.
Michael Kaye: As it relates to the monogram investment by Carlyle.
Michael Kaye: No.
Im not sure I read a lot into that I think there has been.
Certainly interest by private equity players in all manner of asset generators for a while now thats a very clear part of their strategy, what I take away from it. It is a sign that another really smart and savvy investor Carlisle.
Michael Kaye: <unk> the incredible value in this asset class and I think we view that as net net a positive.
Michael Kaye: Okay. Thanks.
Carlisle: Thank you.
Carlisle: Ladies sandbox around next question.
Carlisle: Our next question comes from the line of John Hecht with Jefferies. Your line is open.
John Hecht: Afternoon, guys. Thanks for taking my questions.
John Hecht: I guess going back to Sanjay is inquiry about NIM, maybe just talking about the asset side. I mean, you do have a mix of some adjustable rate mortgages or xqc student loans.
John Hecht: Can you tell us kind of a cadence of how the assets move specifically with interest rates.
John Hecht: Yes.
John Hecht: I'd say in large part.
John Hecht: Software based and their price repricing on a monthly.
John Hecht: <unk>.
John Hecht: Whereas the.
John Hecht: As I said earlier on the funding side.
John Hecht: It tends to be more quarterly resets.
Speaker Change: And how much of the assets reprice monthly against Sofa.
Speaker Change: The bulk of our floating rig.
For variable rate.
Speaker Change: Loans with new supervision.
Speaker Change: Okay.
Speaker Change: And then.
Speaker Change: Maybe.
The second question I have is the provision against unfunded commitments.
Speaker Change: I think we are familiar with <unk> and how you would.
Provision against a new loan, but maybe can you refresh us about how you provision against unfunded commitments because I think the.
Speaker Change: The ratio of fluctuated this year versus last year in the same period.
Speaker Change: Yes, I think in general terms, we're we're taking.
Speaker Change: Our reserve rate and we're applying it to that commitment. So there again under overseas. So we've got a fully provisioned for LIFO.
Speaker Change: The life of loan expectation for loss.
Speaker Change: And we do the.
Speaker Change: Yes.
Speaker Change: Programmatic manner.
Speaker Change: New buildings.
Speaker Change: And then as those funds, we transfer balances out and into the into the overall provision, but when we give.
Speaker Change: Statistics around our overall rates, where we're combining those together.
Speaker Change: The rates I was quoting in my prepared remarks included protocol combined view of.
Speaker Change: Provision on the.
Melissa Bruno: The loans on balance sheet as well as the piece related to them.
Melissa Bruno: And do unfunded commitments kind of as a percentage of seasonal originations or are they fairly yes.
Melissa Bruno: Typical or consistent or is there some.
Melissa Bruno: Fluctuations in that part of the equation.
John Hecht: Again, it's going to be largely dependent on the.
John Hecht: Serialization and so we make those commitments largely in the peak season from the first tranche of the students are entering the fall semester in them.
The other piece will remain.
John Hecht: And unfunded commitment.
So until the spring.
John Hecht: Disbursements.
And that's again June a generalization based on them.
John Hecht: Assume two semesters.
John Hecht: Most of University experiences, we have other programs for different types of schools.
John Hecht: Funds slightly differently.
John Hecht: Okay. Thanks very much.
John Hecht: Thank you.
John Hecht: Please standby for our next question.
John Hecht: Our next question comes from the line of Mark Devries with Deutsche Bank. Your line is open.
Mark C. DeVries: Mark toxicity, if you're on mute.
Mark C. DeVries: Mark just to see if your line is on mute.
Mark C. DeVries: And our response I'll go to the next participant.
Mark C. DeVries: Please standby for our next question.
Our next question comes from the line of Jeff Adelson with Morgan Stanley.
Jeff Adelson: Hi, yes, good evening, thanks for taking my questions.
Jeff Adelson: So just to circle back on this exit from one of your large competitors understood the potential benefits here to originations, but just also wanted to understand in any of the other potential benefits that could flow through here.
Jeff Adelson: Are you contemplating any sort of benefits your credit as a result of that or could that be upside.
Jeff Adelson: And as we think about the loan sale of that portfolio is there anything to be thinking about in terms of.
Jeff Adelson: Demand or supply of loan sales in the market impacting your loan sales going forward.
Jeff Adelson: Yes.
Jeff Adelson: Jeff.
Jeff Adelson: We have thought through it.
Jeff Adelson: And obviously, we have general industry knowledge and hypotheses about the.
Jeff Adelson: The nature of different competitors and where are they.
Out of favor or disfavor within their buy box and underwriting grades and I think.
Jeff Adelson: We can make some educated guesses on that but but at the end of the day.
Jeff Adelson: We don't have the level of insight that I think will allow us to make perfect assessments around.
Jeff Adelson: Sort of the impact that that would have on our credit.
Thank you.
Jeff Adelson: The general comment I would make is.
Jeff Adelson: I think.
Jeff Adelson: We will continue to stay very true to our credit discipline, we will continue to stay very true to our ROE.
Jeff Adelson: Sort of framework around how we think about the profitability of alone.
Jeff Adelson: But I think it will sort of take a little bit of time to see how that plays through directly.
Jeff Adelson: Which is why I think we've given a range around our origination guidance for the year because it could obviously churn out in <unk>.
Jeff Adelson: Slightly more favorable ways or slightly less favorable ways, but I think all of the outcomes are.
Jeff Adelson: Are still favorable lines.
Jeff Adelson: Remind me the second part of your question Jeff.
Jeff Adelson: Yes. Thanks.
Jeff Adelson: Your line.
Your line sales with another 10 billion of sales coming into the market just any sort of impact to be thinking about there are considerations.
Jeff Adelson: Yes look good.
Jeff Adelson: Demand for various asset classes, including our asset classes is pretty deep.
Jeff Adelson: <unk>.
Jeff Adelson: Our discussions with various parties in the market, we don't feel like.
Jeff Adelson: That's going to impact demand for.
Jeff Adelson: For our loans or.
Jeff Adelson: Were put on order for us about funding in general as we move into this year.
Jeff Adelson: In fact, Jeff I would add I think anecdotally, we heard when the last <unk>.
Jeff Adelson: Major competitor left the space.
Jeff Adelson: That actually may have been a net positive for demand for loans because.
Jeff Adelson: It was a large transaction and encourage lots of people to get smart on the space and encourage lots of people to allocate resources to the space.
Jeff Adelson: And obviously on there can only be one one winner of that so I think we view it as yes.
At worst a neutral probably a slight positive but.
Again, we feel like the market for the asset class is deep we feel like it's matured significantly over the last half decade and we.
Jeff Adelson: We think there will be.
Jeff Adelson: Lots of positives that come from that.
Jeff Adelson: Okay, great and just on $650 million repurchase authorization I know you talked about doing half this year half next year.
Jeff Adelson: Does that also contemplate the plan you laid out at the Investor Forum in kind of a base case for loan sales or.
Jeff Adelson: Is that more of a conservative outlook on your part because it does look like half and half is a little bit below what you did this past year.
Jeff Adelson: Yes.
Roughly in line, we didn't say exactly which says you know.
Joe Smith: Approximately half.
Joe Smith: And as I said in my remarks.
Joe Smith: For your question.
Joe Smith: This amount of that'll be governed by.
Joe Smith: The loan sales that we do this year, we're off to a good start with the 2 billion.
Joe Smith: I will close this quarter and.
Joe Smith: The timing and amounts will be dictated by.
Joe Smith: When when we do additional loan sales as we can.
Joe Smith: Sure.
Joe Smith: Okay, and just one last one for me on federal student loan payments.
Joe Smith: No.
Joe Smith: Anything you can update us on what Youre seeing from your borrowers that are making those payments I think there are some puts and takes to come here with.
Joe Smith: The new the full benefit of the new income driven plan kicking in in July but then you have this onramp expiring later in the year, just maybe give us a quick update on what youre seeing what youre expecting there.
Yes, Jeff happy to.
Jeff Adelson: We track as best we can sort of the performance of our customers, who have federal student loans and as you down.
Jeff Adelson: We don't know is perfectly who hasnt enrolled in which.
Jeff Adelson: Income driven repayment program or.
Jeff Adelson: Sort of other programs, but but but but we have we have a pretty good sense of it.
Jeff Adelson: As of the last month I saw data for which was pretty recently, we have not yet seen any material divergence in performance between those with or without federal loans.
Jeff Adelson: And so we continue to watch it closely.
Jeff Adelson: We recognize that the on ramp is.
Jeff Adelson: Powerful tool for customers, we understand that the income driven repayment plans are a powerful tool for federal customers.
Jeff Adelson: But as of yet we have not seen anything that would strike us as a as a material divergence.
Jeff Adelson: Okay perfect. Thank you.
Jeff Adelson: Thank you.
Jeff Adelson: Please standby for our next question.
Jeff Adelson: Our next question comes from the line of Vincent <unk> with Stephens. Your line is open.
Vincent Caintic: Hey, good afternoon, thanks for taking my questions.
First one.
Vincent Caintic: Wanted to get your industry thoughts on the student loan refinancing market.
Vincent Caintic: Expectation of.
Five rate cuts and what that would do and then for Sallie Mae specifically, how youre thinking about.
Maybe any consolidation pressure on your thoughts on the balance sheet growth. Thank you.
Vincent Caintic: Yes, I'll take first crack in Germany, and Italy.
Vincent Caintic: If I Miss any of the high points.
Vincent Caintic: <unk>.
<unk> market is really a rate driven.
Vincent Caintic: Exercise and so as rates are going down we do expect.
Vincent Caintic: Our return in some respect of the consolidation.
Yes.
Vincent Caintic: Players, but I think the wildcard in it for us is what impact the new programs.
Vincent Caintic: Literal space.
Vincent Caintic: Have on sort of deterring folks from.
Vincent Caintic: From consolidated their loans because generally.
Vincent Caintic: It's going to be.
Vincent Caintic: A big factor in terms of.
Vincent Caintic: Whether someone wants to give up the potential benefits.
Vincent Caintic: They might be able to get on with federal programs in order to get.
Vincent Caintic: The overall lower rates so it sounds like we've got our eye on.
Vincent Caintic: And certainly we have expectations that our outlook.
Vincent Caintic: We're consolidations.
Vincent Caintic: And that's considered within our guidance.
Yes, I think thats, what thats going to have to play out.
Vincent Caintic: Yeah, and Vincent I think the only thing that I would add and let me preface it the way I always do when I get questions on consolidations. This is obviously not our core business I'm sure. There's people out there who have deeper insight into sort of the economics of the refi game than we do.
Vincent Caintic: But I think if you look at even the sort of rate cuts that are being assumed that doesn't take us anywhere back to the kind of Uber low rate environment, but I think we've been living in for the last 20 years.
Vincent Caintic: And you asked me for my opinion I will give you my opinion I don't think we're going to see that kind of Uber low rate environment ever again.
Vincent Caintic: And so I think you have to realize there's an awful lot of recent college grads and Theres, an awful lot of quite frankly, even current college seniors juniors and sophomores, who made loans under a much lower interest rate environment than what we've seen over the course of the last 18 months. So I think when you think about sort of.
Vincent Caintic: In our refi economics, I think you have to look at it through the lens of when did different borrowers make loans.
Vincent Caintic: What is the prevailing interest rate when they made those loans and what are the rates today.
Vincent Caintic: We have done and will continue to do manners of those analyses.
I agree with what Pete said, there will be some time in the future where consolidations come back into our larger than they are today.
Vincent Caintic: But I think we saw a golden age of.
Vincent Caintic: Loan consolidations, given the super low rate environment.
Peter M. Graham: I think we'll all have to see if we ever see that kind of Golden age again.
Peter M. Graham: Okay. That's helpful. Thank you and second question just on the.
Peter M. Graham: The forbearance programs and actually how we should think about the numbers. So I guess as these modification programs rollout should we be expecting that I guess, the forbearance number will stay will increase from this level and I'm just wondering how that plays out because usually.
Peter M. Graham: Forbearance he might be might be concerned, but it's from these new programs that are driving some more success just want anticipate that in advance.
Peter M. Graham: Yeah, Vincent it's it's a wonderful simple answer question deserving a simple answer I'm going to make it slightly more complicated.
Vincent Caintic: The answer is for most customers using what we call hardship forbearance today, which is still allowable under sort of OCC guidance and our program is is it's absolutely geared to that.
It is a short.
Vincent Caintic: Short in duration and highly limited in use.
Vincent Caintic: It's really no longer a substitute as we've used it today or have used it for the last few years for the kind of more <unk>.
Speaker Change: Tailored and systematic programs that both Pete and I described earlier.
Speaker Change: There are some of our programs.
Speaker Change: For which forbearance is a part of the recipe.
Speaker Change: But I think our plan is to sort of break those out separately in our reporting so that you can see those.
Speaker Change: But I would not necessarily expect.
Speaker Change: That there would be huge changes in forbearance, because I think we.
Speaker Change: Largely operated under the new system for the last two years and.
Speaker Change: And I think at the end of the day, it's serving a fundamentally different purpose than these other programs at this point in time.
Speaker Change: Okay very helpful. Thanks, so much.
Speaker Change: Thank you.
Speaker Change: Please standby for our next question.
Speaker Change: Okay.
Okay.
Speaker Change: Our next question comes from the line of Mark Devries with Deutsche Bank. Your line is open.
Speaker Change: Hi can you hear me now.
Yep Yep Hello, Okay.
Okay, great. Thank you sorry about that.
Speaker Change: I have a couple of follow up questions on credit.
John Hecht: Just wanted to clarify some of the comments made John I thought I heard you indicate that part of the reason for the rise in delinquencies is related to some of the enrollment in some of these borrower assistance programs did I hear that correctly and if so what's kind of the dynamic there or are you moving them into a status. It has to be treated as delinquent or is there something else affecting that.
John Hecht: Yes so.
John Hecht: It's really a fairly mechanical answer when when someone enters.
John Hecht: One of our.
John Hecht: Payment programs.
John Hecht: Before we can re age them to current.
John Hecht: Guidelines and standards, saying they have to make I think it's typically three qualifying payments.
John Hecht: And so and yes.
Our past World, we may have collected on that customer and a password. They may have gone through to default in the past world.
John Hecht: Oral years ago, they may have used forbearance and been broad.
John Hecht: Our current more quickly here, we have to see that period positive pay before we can re aged and so as we parse apart the delinquency data and we look at what portion of it is driven by what I would call normal sort of delinquent situations versus which are caused.
By.
John Hecht: This this phenomenon of customers, making payments, but waiting to re age.
John Hecht: That's what we believe has driven sort of the small increase that we talked about.
Okay got it that's helpful.
John Hecht: And it sounds like you're still pretty confident about year over year improvement in the charge offs.
John Hecht: This year included one.
John Hecht: Other charge off comes in at the low end or the high end of that guidance range.
Joe Smith: Should we expect charge offs to be kind of higher in the first half of the year and then start trending down in the back half of 2024.
Joe Smith: Yes, there is a seasonality to our charge offs, which I think always occurs.
Joe Smith: Because and.
Joe Smith: And I think we've talked about this on past calls.
Joe Smith: Most likely time, Unfortunately, when a borrower gets into financial distress is pretty soon after they've entered repayment.
Joe Smith: These are young borrowers they may not have.
Joe Smith: Sort of Bell.
Joe Smith: <unk> any any savings at that point, they may be experiencing disruptions moving into the labor force. They may just not have yet the same financial habits that they would have later in life and so we always see a period of seasonality in our results and I think you should expect that same pattern of seasonality to <unk>.
Joe Smith: <unk> and 'twenty four.
Joe Smith: Okay understood. Thank you.
Joe Smith: Youre welcome.
Joe Smith: Thank you. Thank you.
Joe Smith: Please standby for our next question.
Joe Smith: Our next question comes from the line of Rick Shane with Jpmorgan. Your line is open.
Hey, guys. Thanks for taking my question.
Historically this has been an industry that was concentrated amongst three originators to have essentially exited the business.
Richard Shane: You know theres been some conversation about new entrants, but at the end of the day what it what is the binding constraint in terms of your market share.
Richard Shane: Rick I think other than a 100%.
Richard Shane: [laughter].
Richard Shane: Yes.
Richard Shane: We absolutely continue to face I think lots of good competition in this business reckon.
Richard Shane: Again.
Im not sure I want to go much deeper in predicting what's going to happen with the latest set of news, we'll see that play out over the next couple of months.
Richard Shane: But there are very formidable smaller private and other players that that we compete against.
Richard Shane: And at the end of the day, I think what sort of binds our market share potential is.
Richard Shane: A little bit of competition.
Richard Shane: A little bit of customer choice.
It's a little bit of different marketing strategies and focusing on different parts of the credit spectrum.
Richard Shane: At the end of the day, we love our 55% market share. We think there is opportunity for it to go up a little bit it's obviously ground.
Richard Shane: Nicely over the last three years.
But I don't think anyone should expect that.
Richard Shane: We will be.
Richard Shane: 70%, 80% market share player I think there will always be good competition in the market in and quite frankly, we welcome that.
Richard Shane: It makes us better when we've got great competition out there I think it's better for the customers.
Richard Shane: So I would expect there to be that limit probably driven by a number of different factors and forces.
Richard Shane: Got it okay. That's helpful. Thank you.
Richard Shane: Moshe asked a question sort of trying to dimensionalize growth asset growth.
<unk> and we're in this unique window right now where.
Richard Shane: There was a lot of market share up for grabs and gain on sale has improved and so potentially the economics are shifting or clearly are shifting to be more favorable than they were at the end of last year or at the end of 'twenty three.
Moshe Ari Orenbuch: When you think about what the priority will be imagine a scenario where volumes market share is better than you are looking for gain on sale is solid.
Moshe Ari Orenbuch: That gives you the ability to hit the high end of your earnings guidance.
It also potentially gives you the ability to form enough capital to grow beyond your 2% to 3% range.
Moshe Ari Orenbuch: Conversely, theyre going to be times, where it is not going in your favor in your in your favor.
Moshe Ari Orenbuch: Is the priority is going to be to solve for earnings and let the growth of assets.
Moshe Ari Orenbuch: The swing factor or is it going to be targeting the asset growth and leading earnings fluctuate.
Moshe Ari Orenbuch: I think we were pretty clear in the December Investor Forum.
We're going to step in to grow over time, we're going to be relatively flat this year or final sort of seasonal transition year and then we'll we'll go mostly.
Joe Smith: In subsequent years, so that framework calls for us to use loan sales as a governor of that but I hope you group those fully what we intend to do as we embark on this strategy. So in your scenario of higher originations.
Joe Smith: Growth.
Joe Smith: Then at the margins, we might do more loan sales as long as the pricing.
Joe Smith: Dynamic.
Joe Smith: Make sense from an economic perspective.
Joe Smith: Got it so your priority is to follow that.
Joe Smith: Asset growth profile that you laid out in that five your case as closely as possible, regardless, regardless of conditions, but within a reasonable set of expectations.
Joe Smith: Patients.
Joe Smith: Yes, I think we said there to the extent we start to see.
Joe Smith: There are multiple expansion.
Joe Smith: Getting rewarded for balance sheet growth will do a little bit more of that.
Joe Smith: But if if if.
Joe Smith: If things stay status quo and will do marginally more loan sales as long as the as long as the trade is there.
It's a dynamic revaluation of.
Joe Smith: The value, we're getting in the local market versus the implied valuation for <unk>.
Joe Smith: Balance sheet that we're getting in the equity markets.
Joe Smith: Great.
Joe Smith: Its financing questions, what's going to happen in the next 12 months.
Joe Smith: Even harder over the next five years. So thank you for <unk>.
Matt: Hey, Matt.
Matt: Sure. Thank you.
Matt: Please standby for our next question.
Matt: Our next question comes from the line of Giuliano Bologna with Compass point Your line is open.
Matt: Good evening.
Matt: A question that might be a little bit of a follow up on what's already been said was kind of touching on but.
Matt: From a different angle.
Matt: The thing that I'm curious about is.
Matt: You've pivoted your kind of mix of originations towards fixed rate, which obviously has benefits.
Matt: As rates move down because it will make you more liability sensitive.
But I'm curious.
Matt: At what point do you think about pivoting that strategy because originating more fixed rate loans at peak rates could also make them much more susceptible to.
Matt: Consolidations in the future I'm kind of curious at what point do you think about pivoting or youre moving back towards a higher mix of <unk>.
Matt: Fixed rate originations.
Vincent Caintic: Yes, I mean the pricing.
Vincent Caintic: Eric is always something that we have control over the margins, but I think.
Vincent Caintic: Theres also.
Vincent Caintic: A human emotional element in terms of what selections.
Vincent Caintic: Borrowers are making.
Vincent Caintic: <unk>.
Vincent Caintic: Emotional reaction to.
Vincent Caintic: The dramatic increase in rates over the last year.
Vincent Caintic: Think about during during the fall there was.
Vincent Caintic: More potential for further increases as inflation has not started to subside yet so I think that overall customer choice has been.
Vincent Caintic: A pretty dramatic impact on the mix of origination I think that naturally.
Vincent Caintic: It will subside as we go into this year, but we'll be looking at that mix.
Vincent Caintic: In terms of how we set our pricing grid. So as we go into peak this year.
Vincent Caintic: Yes, I think the only thing I would add is we clearly don't have the ability to set those pricing grids in isolation, we do that.
Set up through the lens of our economic models, but we also do that through the lens of competitive realities.
Vincent Caintic: And so the fact is it fixed rate is what the customers want and if competitors are pricing fixed rate at a level that makes that attractive.
There is there is a certain competitive dynamics that you know.
Vincent Caintic: <unk> said, it well or our ability to influence that is on the margin.
Vincent Caintic: But it is much as part of the broader competitive set.
Vincent Caintic: That's very helpful. And then one quick one just thinking about that.
Vincent Caintic: Central for market share gains.
Vincent Caintic: Would be curious when you think about the kind of depth in the market for for loan sales, if you're able to count for some additional market share.
Vincent Caintic: Numbers.
The midpoint of the 7% to 8% growth is already 200 million or so above the.
Investor from sorry, your number for Julian.
You're fading in and out maybe if you could get closer to you Mike.
Michael Kaye: Sorry about that.
Michael Kaye: It's a little bit better now.
Michael Kaye: As you potentially gain market share I am curious when you think about the depth of the loan sales market.
Michael Kaye: Is there do you think there's any limitations to the amount of loans you can sell.
Michael Kaye: Any given calendar year at this point.
Michael Kaye: Good luck.
Michael Kaye: Be absorbed by.
Michael Kaye: Zero.
Yeah, I think the dynamic.
Michael Kaye: We've seen over the last half decade is.
Michael Kaye: Pretty dramatic.
Michael Kaye: Search for yielding assets to support.
Michael Kaye: Pension liabilities insurance liabilities.
Michael Kaye: In the mutual fund complexes so.
Michael Kaye: I think there is a strong demand for student loans I think we have a.
Michael Kaye: Preeminent.
Michael Kaye: ABS platform in this space.
Michael Kaye: No.
Michael Kaye: I don't see any issue.
In both loan sales or <unk>.
Michael Kaye: Avs funding to phone balance sheet growth.
As we sit here now.
Terry MA: Infinite, but we don't need.
Terry MA: Demand for the asset class.
Terry MA: That's great. Thank you very much and I'll jump back in the queue.
Terry MA: Thank you.
Ladies and gentlemen, Im showing no further questions I would now like to turn the call back over to John <unk> CEO for closing remarks.
Terry MA: Great. Thank you and I appreciate everyone dialing in Tonight appreciate the interest in Sallie Mae as always.
Our IR team is standing by and happy to help follow up on specific questions that folks may have and look forward to talking to you all again in about three months time about.
Ah.
Melissa Bruno: Our performance in the first quarter with that Melissa I will turn it back to you for I think a little bit of closing business.
Melissa Bruno: Okay.
Melissa Bruno: Thank you for your time and questions today, a replay of this call and the presentation will be available on the investors page at Sallie Mae Dot com.
Melissa Bruno: You have any further questions feel free to contact me directly this concludes today's call.
Melissa Bruno: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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Melissa Bruno: Okay.
Melissa Bruno: Okay.
Melissa Bruno: Yes.
Melissa Bruno: Okay.
Melissa Bruno: Okay.
Melissa Bruno: Okay.
Melissa Bruno: Yes.
Melissa Bruno: Okay.
Melissa Bruno: [music].
Sure.
Melissa Bruno: [music].
Melissa Bruno: Yes.
Melissa Bruno: [music].
Melissa Bruno: Yes.
Melissa Bruno: Okay.
Okay.
Melissa Bruno: [music].
Melissa Bruno: Okay.
Melissa Bruno: Okay.
Melissa Bruno: Yes.
Okay.
Melissa Bruno: Okay.
Melissa Bruno: Thank you.
Melissa Bruno: Yes.
Melissa Bruno: Sure.
Melissa Bruno: Okay.
Melissa Bruno: Okay.
Melissa Bruno: [music].