SLM Corporation

Thank you for standing by and welcome to the 2021 Q2 Saudi May earnings 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 will need to press star one on your telephone keypad. And to redraw your question, press the hash key. If you require technical support at any time, please press star zero. I would now like to hand the conference over to our speaker today, Brian Conan, Vice President of Investor Relations. Please go ahead.

Thank you, Julian. Good morning, and welcome to Sally Mae's second quarter 2021 earnings call. It's my pleasure to be here today with John Witter, 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 discussions 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 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 her business, results of operations, financial conditions, and or cash flows. During this conference call, we will refer to nine GAAP measures we call our core earnings. A description of our core earnings, a full reconciliation of GAAP measures, and our GAAP results can be found in the form 10Q for the quarter ended June 30th, 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, Julian, thank you, and good morning, everybody.

Thank you for joining us today for a discussion of Sally Mae's second quarter 2021 results. Our second quarter results are a welcome continuation of the success we had in Q1, and I think they reflect a continuing return to normalcy. We are executing our strategy and delivering strong results. As the world around us continues to reopen, we're encouraged by the implications for universities, and for students as they physically return to campus in the fall. I hope you walk away today with three key messages. First, we've delivered strong results in the second quarter. Second, we're executing our 2021 capital return program as expected. And third, we're well positioned to continue our performance trend this year by executing against our core strategic imperatives. GAAP EPS in the second quarter was 44 cents compared to a loss of 23 cents in the year-ago quarter. Our results were driven by a combination of strong business performance and continued improvements in the economic outlook. Let me start with the discussion of our business performance. Private education loan originations for the second quarter were $533 million, which is up 36 million, or 7%, over 2Q 2020. Our originations are right on forecast through the second quarter. Our market share in the first quarter of 2021, which reflects the most recent data available, was 56%, which was 8% higher compared to Q1 of 2020. Originations quality was consistent with past years. Our cosigner rate was 76% compared to 74% in Q2 of 2020, and our average FICO score was 750 versus 747 in Q2 of 2020. It's important to note that seasonally, the second quarter has lower cosigner rates due to a higher mix of nontraditional students, and we fully expect our cosigner rates to finish the year at historical levels. Our credit continues to be a highlight as we emerge from the pandemic. Private education loan annualized net charge-offs for the second quarter were 1.16% compared to 1.29% in the first quarter of 2021. Charge-offs are especially important in the second quarter of the year as they reflect the performance of the recent graduate vintage that entered P&I in the fourth quarter of the previous year. This cohort is performing well and in line with past cohorts. Our continued outperformance on the credit side has resulted in improved charge-off expectations that we will discuss shortly. The quarter was relatively quiet from a CECL perspective, and improving economic outlook modestly but positively impacted our CECL loss estimates and reserves. We also saw an increase in reserves because of new originations. CECL reserves generally trend higher in quarters two and three, reflecting the commitments made during peak season. This quarter was no exception, where we began to book very early commitments to the fall semester, which caused us to build reserves for these new loans. Steve will discuss the specifics of the quarterly change in more detail. In the second quarter, we continued our progress against our capital return strategy. 23 million shares were repurchased in the quarter under a 10B51 plan at an average price of $19.27. We have reduced the shares outstanding since January 1st of 2021 by 19% at an average price of $16.87. And we reduced the shares outstanding by 28% since January 1st of 2020 at an average price of $13.99. As of June 30, 2021, we have $295 million remaining from the original $1.25 billion share repurchase authority granted. We expect to continue to make significant progress against this remaining authority throughout the second half of the year. We remain committed to our strategy of selling loans and using the proceeds to repurchase stock while we believe the price is undervalued, and while we are phasing in the regulatory capital effects of CECL. The next $1 billion loan sale is still scheduled for the fourth quarter of this year. Steve will now take you through financial highlights of the quarter. Steve?