SLM Corporation

Good day and thank you for standing by. Welcome to the Sally Mae First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Brian Cronin, Vice President of Investor Relations. Please go ahead.

Thank you, Regina. Good morning, and welcome to Sally Mae's first quarter 2021 earnings call. It is my pleasure to be here today with John Witter, our CEO, and Steve Begary, 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 than those discussed here. This could be due to a variety of factors. Listeners should refer to the discussion of those factors on the company's form thank you and other filings with the SEC. For Sally Mae, these factors include, among others, the potential impact of the COVID-19 pandemic on our business, result 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 of GAAP measures and our GAAP results can be found in the Form 10-Q for the quarter ended March 31, 2021. This is posted along with the earnings press release on the Investors page at sallymay.com. Thank you. I'll now turn the call over to John.

Brian, Regina, thank you. Good morning, everybody. Thank you for joining us today for a discussion of Sally May's first quarter results. It has been one year this week since I joined the company, and I am incredibly proud of the hard work of the Sallie Mae team and what we've accomplished during what can only be described as difficult times. We're off to a fast start in 2021, executing our strategy and delivering strong results. We are encouraged by the trends toward normalcy driven by vaccine distribution, And we're particularly encouraged by what this implies for colleges and universities in the fall. I hope you walk away today with three key messages. First, we've delivered strong results in the quarter. Second, we're executing our 2021 capital return program as expected. And third, I believe we are well positioned to continue our performance trend this year by executing against our core strategies. GAAP EPS in the first quarter was $1.75 compared to 87 cents in the year-ago quarter. Our results for the first quarter were driven by a combination of strong business performance, improvements in the economic outlook, and gains from the sale of loans. Let me start with the discussion of our business performance. Private education loan originations for the first quarter were $2.1 billion, While down 10% year-over-year as a result of the pandemic's impact on the overall market, we believe this is a strong start to the year and positions us well to achieve on our full-year goals. Remember, the first quarter of 2020 originations were not meaningfully impacted by the pandemic. Our market share results for the first quarter will be available in the next few weeks However, we are coming off a very strong 61% market share in the fourth quarter of 2020. Originations quality was consistent with past years. Our cosigner rate was 89% compared to 88% in the Q1 2020 quarter. Average FICO scores were 751 versus 746 in the year-ago quarter. We executed a $3.16 billion loan sale in the first quarter of 2021 and recorded a gain on sale of $399 million. This is just under a 13% gain on sale for these loans, which represents a new high watermark for our loan sale program. Our credit continues to be a highlight as we emerge from the pandemic. Private education loan annualized net charge-offs for the first quarter were 1.29% compared to 1.52% in the fourth quarter of 2020. Delinquencies are especially important in the first quarter of a year, as that number reflects the initial performance of the new graduate vintage of loans that entered P&I in the fourth quarter of the previous year. I'm happy to report this performance is in line with past cohorts, despite all of the challenges of the last year on the economy as a whole. During the first quarter, the economic outlook and assumed prepayment speeds in our CECL loss estimates impacted our reserves. As we have discussed on past calls, these aspects of CECL are difficult to forecast because of the changing assumptions around macroeconomic environment. While Steve will discuss both changes in more detail, The impact of these forecast related charges was a negative provision of $226 million in the first quarter, bringing our loan loss reserve down to $1.193 billion, which includes the reserve for unfunded commitments. In the first quarter, we made tremendous progress against our capital return strategy, some of which we have discussed during our January earnings call. On January 28th, we completed the 525 million accelerated share repurchase program and received 13 million additional shares of common stock over what had been returned in 2020. This was an extremely successful program where the company repurchased 58 million shares of common stock in total at an average price per share of $9.01. On February 2nd, the company announced the commencement of a modified Dutch auction tender offer to purchase up to $1 billion of the company's common stock. On March 16th, the company purchased 28.5 million shares of its common stock at a purchase price of $16.50 per share for a total purchase price of approximately $472 million. Although not fully subscribed, We were pleased with the outcome of the tender offer for two reasons. First, we were able to repurchase a significant number of shares in a short period of time and at an attractive price. Second, we believe the subsequent share price movement and the 47 percent participation rate demonstrate that investors believe in the fundamental value of the franchise. Soon after the tender closed, we began aggressively buying shares using a 10B51 program. Through April 20th, we spent $370 million to buy back 20 million shares at an average price of $18.51 through this program. I think it's important to keep our regular and persistent capital return program in perspective. In 2021, we have repurchased 16.5 percent of the shares outstanding at the beginning of the year. Since January 1st of 2020, we have repurchased 26% of the shares outstanding at that time. Said again, in a little over a year, we have repurchased a little bit over a quarter of the shares outstanding since we began our strategic capital return program. As of April 20th, 2021, we have $485 million in authority left under the original $1.25 billion authority granted under our 2021 share repurchase program. Although we have made considerable progress in our stock price, we remain committed to our strategy of selling loans and using the proceeds to repurchase stock while the price is undervalued and we are phasing in CECL. Before I turn the call over to Steve to discuss the quarter's financial results in more detail, I'd like to take just a moment to reflect on the progress we have made over the last year. On a Q1 to Q1 year-over-year basis, we have increased GAAP net income by 77%, reduced our operating expense by 15%, reduced our common shares outstanding 26%, and that's, again, since the beginning of 2020, and increased our GAAP EPS by 101%. Although the macroeconomic environment has added volatility to the results over this last year, I hope you will agree we are making progress against our strategic imperatives. Steve will now take you through the financial highlights of the quarter.