SLM Corporation

Hello, and thank you for standing by. Welcome to Sally May 2023 Q4 Earnings Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. I would now like to hand the conference over to Melissa Bronoff You may begin.

Thank you, Tawanda. Good evening and welcome to Sally May's fourth quarter 2023 earnings call. It is my pleasure to be here today with John Witter, our CEO, and Pete Graham, our CFO. After the prepared remarks, we will open 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 should refer to the discussion of those factors on the company's Form 10-Q and other filings with the SEC. For Sally Mae, these factors include, among others, results of operations, financial conditions, and or cash flows, as well as any potential impacts of the COVID-19 pandemic on our business. 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 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 sallymay.com. Thank you. And now I'll turn the call over to John.

Thank you, Melissa and Tawanda. Good evening, everyone. Thank you for joining us today to discuss Sallie Mae's fourth quarter and full year 2023 results. 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. 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. 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 the discussion of 2023 results. GAAP diluted EPS in the fourth quarter was 72 cents. compared to a loss of $0.33 a share in Q4 of 2022. Our full-year GAAP diluted EPS was $2.41 compared to $1.76 in 2022. Without the non-cash write-down of the intangible asset associated with the nitro trade name and trademark, which Pete will discuss in more detail, GAAP-diluted EPS would have been $0.91 for Q4 and $2.59 for the year, well within our guidance expectations for 2023. Private education loan originations for the fourth quarter of 2023 were $839 million, which is up 2% over fourth quarter of 2022. 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. Application volume also increased year-over-year by 10% and has been fueled by a 12% increase in underclass applications. This is especially important given the greater serialization potential and lifetime value of this group. 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. Credit quality of originations was consistent with past years. Our cosigner rate for the fourth quarter of 23 was 84%, up slightly from 82% in the fourth quarter of 22. Our average FICO score for the fourth quarter of 23 was 750, an increase over the fourth quarter of 2022 at 747. For the full year, our originations were 87% co-signed and had an average FICO score of 748, both improvements over full year 2022. 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. We ended the year with net charge-offs as a percentage of average loans and repayment of 2.4%, and at the lower end of our net charge-off guidance for the year at $375 million. 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. Understanding that we won't see a reversion to those rates immediately, we are happy with the progress made from 22 to 23 and expect continued progress from 23 into 24, of course, assuming no changes to the broader economic environment. We did see a rise in delinquencies in the fourth quarter to 3.9%. We believe this is largely the 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 in December observed the lowest roll to default rate in over two years. Turning to capital return, In the fourth quarter of 23, we repurchased 6 million shares at an average price of $15.43. We have reduced the shares outstanding since January 1st of 23 by 9% at an average price per share of $15.64, and by approximately 50% since January 1st of 2020 at an average price of $15.93. Before I hand the call over to Pete, I'm pleased to share that last week we agreed to indicative pricing terms for the sale of approximately $2 billion of private education loans. We expect the transaction to close in early February. 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, we are encouraged by the price that we received which is in line with our expectations for the year. We expect to sell additional loans in 2024. Market 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 2024. Pete will now take you through some additional financial highlights of the quarter. Pete, over to you. Thanks, John.