SLM Corp (SLM) 2016 Q2 法說會逐字稿

Good morning. My name is Karina and I will be your conference operator today. At this time, I'd like to welcome everyone to the 2016 Q2 Sallie Mae earnings conference call.

(Operator Instructions)

Mr. Brian Cronin, Senior Director of Investor Relations, you may begin your conference.

Thank you, Karina. Good morning and welcome to Sallie Mae's second-quarter 2016 earnings call. With me today is Ray Quinlan, 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 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.

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 June 30, 2016. This is posted along with the earnings press release on the Investors page at salliemae.com.

Thank you. I will now turn the call over to Ray.

Thanks, Brian, and welcome all of you to the call. I am happy to report we had a very good quarter. We continue to make progress on our road with great market results, financial metrics that continue be excellent, credit is on track to our models, our outlook is very good, and our relationship with all of our primary regulators has been very productive.

We will continue on our mission to assist American families in realizing their dreams for the younger generation. I'll go through some of variables, hand over the call to Steve, and then we'll come back to, as Brian said, Q&A.

In regard to volumes, our originations are up 10% from 2Q 2015. As you all know, the market continues to grow at approximately 5%, so our being up 10% we view to be a very good sign. In actual numbers, $423 million were disbursed to new loans this quarter versus $384 million a year ago.

In regard to initial credit quality, we remain consistent. The co-signed rate for this part of the season is 78%, was 78% last year.

Our through the door FICO for new loans, it is approximately flat to last year at 747 year-to-date versus 749 year-to-date last year. Our NIM has been a terrific performer. We ended the quarter -- or, in the quarter, we experienced 5.84% versus 5.51% last year. Year-to-date we are at 5.81% in NIM basis points versus 5.56%.

As you know, due to our seasonality, as we enter the third quarter and build up cash on the balance sheet, in order to anticipate the disbursements which will occur in late August and September, the NIM will drop but will stay above for the full year the number that Steve and I had previously talked about in this forum, which is 5.6%.

Operating expense continues to be a good story. As you all know, in 2014 we did our spin. In 2015, we stabilized our operating platforms and made significant investments, with the idea of improving them both in the quality of service to our customers, as well as in the cost efficiency, and we are starting to realize the benefits associated with that.

Despite the fact that our loan portfolio is up over 30% year-to-year from a servicing standpoint, our operating expenses have increased only $4 million from $91 million last year in the second quarter to $95 million this year. As a result, the efficiency ratio is showing dramatic improvement.

Last year, in the second quarter it was 49.9%; this year, 41.6%. Year-to-date, we are at 41% versus 47.3%. Last year, we had one favorable item, which you will recall from the first quarter related to a Upromise that accounts for approximately 2% of that delta. Having said that, our full-year guidance, as you saw, will drop from the 47% 2015 level, and we're now predicting 42%, or down fully 10% rate-on-rate for 2016.

In regard to credit performance, delinquency from the first quarter to the second quarter is flat at 2.1%. Our forbearance has improved slightly as a rate of the portfolio, from 3% to 2.9%. Our charge-offs moving from 0.95% to 1.05% on basis points, so far as a full P&I part of the portfolio. It is exactly where we want it to be from a modeling standpoint. All those numbers are consistent.

The balance sheet reflects both our intentions as well as our realized performance, so that the private student loan portfolio continues to growth, as I said, at a very healthy rate. Last year in the second quarter, the balances were $9.2 billion; this year they are $12.2 billion, an increase of 32.6%.

The total balance sheet moved from $12.9 billion to $15.6 billion, and so that's up 21%. In actual numbers, the private student loan portfolio has grown through this 12 months $3 billion. The total balance sheet has grown less, $2.7 billion.

So our balance sheet is changing rapidly, as the increase in private student loans is actually 107% of all the increase in the balance sheet, which of course you see reflected in the improved NIM and overall efficiency. The bottom line -- our EPS for, the quarter at $0.12 to be compared with last year's $0.20 GAAP minus the effect of the asset sale, which was done last year, which is $0.11. So we compare it consistent business to consistent business, $0.12 this year, $0.09 last year, EPS is up 33%. Our ROE at 12.73% stays in the range we had talked about and we are very comfortable with that.

In regards to our regulators, our primary regulators are the FDIC, the Utah Department of Financial Institutions, and the Consumer Financial Protection Bureau. We have had reviews with all three this year, and indeed more or less constantly. We did, as you know, have our first review with the CFPB.

Their team was here for a couple of months from March till May. We have a very good relationship with them. While the results are confidential, I can say that the CFPB recently completed a review of the Bank's compliance management system and Management has no follow-ups at this time.

As the CFPB is our primary compliance regulator, we're expect these reviews to take place on an ongoing basis. We're off to a very good start with them.

And so, in wrapping things up, through the quarter, we had several accomplishments in addition to these financial metrics I have been discussing. We launched a parent loan on April 18. It is on expectations. We opened an expansion of our Indiana processing site on June 30, giving us capability that provides back-up to the Delaware site, as well as giving us an increase in our space envelope, which we need to accommodate our service expansions.

Our service levels continue to improve, both in customer satisfaction as well as in efficiency, reflecting our 2015 actions and investments. Our model for the business of originate holds 100% service all of our loans is doing well. As you recall, in January, we announced to this group that we would not sell assets going forward.

We would be able to fund, both in a capital sense, as well as in a liquidity sense, all of our acquired assets. That is in fact 100% what we are doing. Our balance sheet is growing at approximately 22% this year.

In late July, we will have our first DFAS filing. We are on track to do that and the results look very good.

In closing, we had a great quarter. We are staying the course. We have continued improvement in product, sales, service, and credit management. Our financial management continues at its current excellent levels.

Thank you for your time and all I'll turn the call over to Steve.

Thank you, Ray. Ray covered an awful lot of the quarter. I'm just going to fill in a few more details around portfolio yield funding, with provision allowance and then our capital position.

The average yield on our private education loan portfolio in Q2 was 7.98%; that compares with 8.03% in the prior quarter and 7.96% in the year-ago quarter. We expect the yield on the portfolio to hover in this neighborhood for the next four quarters, barring any additional said rate hikes. Our cost of funds was 134 basis points, up 8 basis points from the prior quarter and 17 basis points from the year-ago quarter.

The change from the prior quarter was principally driven by extending the duration of our liabilities and consistent with our long-term funding plan. Over the next four to eight quarters, we don't expect that our cost of funds is going to tick up meaningfully from this 134 basis points area.

In May, we executed a $551 million ABS transaction at a spread of LIBOR plus 138 basis points. We've always said that we will access the ABS market opportunistically and that's exactly what we have been doing. Due to the demand to our bonds and continued ABS market stability, we decided to go right back out for an additional transaction in July.

We announced last week that we recently raised an additional $607 million in a deal that has had an average spread to LIBOR of 136 basis points. These transactions again provide good long-term funding with cost wells within our long-term funding plan. Just a little color on where we're headed in this area. As we look out at our long-term funding plan today, we estimate that by end of 2018, just under 20% of our loan portfolio will be funded by ABS and the rest, of course, will be funded with deposits.

Turning to the provision for private education loan losses, that came in at $42 million in the quarter compared with $15 million in the year-ago quarter. We ended the quarter with an allowance for loan losses of 116 basis points of total loans and 178 basis points of loans in repayment.

As the portfolio grows and seasons, you can expect that our provision and allowance will also. To put that into perspective, we now have $4.3 billion of loans in full P&I. We ended the quarter with 35% of loans in full P&I up from 30% a year ago. We expect that this number will climb to $5.7 billion by the end of Q2 2017, which is the period for which our loan loss allowance is covering.

It is this growth and the seasoning of our loan portfolio that's driving our provision in loan loss allowance. So even though the loan loss allowance is larger, we expect that the charge-off rate measured as a percentage of loans in full principal and interest repayment to decline in future quarters. Just as a point of reference, that stack is was 2.6% in Q2, so the charge-off rate for loans in full P&I came in at 2.6%, up from 2.1% in Q1.

The increase this quarter is well within our expectations as the initial defaults from the Q4 repay wave that we talked an awful lot about tend to occur in Q2, resulting in a peak charge-off quarter on a percentage basis. So that's basically what's going with the provision, the allowance for loan losses. It's very consistent with how we expect our portfolio to perform over the long run here.

And then finally, just a word on capital as we wrap up. The Bank remains well-capitalized with a risk-based capital ratio of 14.5% at the end of the quarter, significantly exceeding the 10% total risk-based capital ratio required to be considered well-capitalized. Our TRBC ratio will decline towards 13.5% at the end of the year as our portfolio grows in 2016.

But keep in mind, as we mention often, that the parent Company has excess capital available to the Bank as an additional source of strength that's not reflected in the capital numbers that we publish. Finally, we continue to expect that we will not return capital to shareholders as we reinvest in our high-growth business.

One final comment; in the first quarter, the tax rate was 37.7% compared with 39.8% a year ago. We now expect that the tax rate for the full year will come in around 38%. That's a little bit lower than what we have been talking about previously.

So that pretty much wraps up the prepared remarks and we look forward to taking your questions now.

(Operator Instructions)

Michael Tarkan, Compass Point.

Did I hear you right that you expect charge-offs as a percentage of at loans and repayment to decline from the 2Q levels, just first one on this?

Mike, in Q3 and Q4, as the portfolio continues to grow and as we get past that peak season of the initial zero pay charge-offs, we do expect that the charge-off rate will trail off for the remember of this year. As the portfolio grows and seasons, and charge-offs start to dissipate, we would expect that comparative periods in 2017, both for loans in full P&I and [for whole] portfolio should decline modestly.

The overarching point here is that despite -- people have noticed the marked jump in our provision this quarter. Our portfolio is continuing to perform exactly as we have underwritten it to.

Thanks. Then from a timing perspective, I know the $2.4 billion of loans went into repayment this quarter. Typically, is there a six-month lag in terms of when we would see that show up in some of the charge-off numbers?

No. What happens if a loan goes into repayment in November or December, the charge-offs are going to take place -- the first wave of the charge-offs will take place in April and May and then decline again in June. You can see that in the full package of performance statistics that we put out yesterday afternoon after we released our 10-Q.

Understood. Thanks for the color around the CFPB. Just wondering if you have an update on the consent degree that the Bank is operating under right now, as well?

Sure. We have looked at, of course, all the provisions in the consent decree. We believe we are in compliance with all of them. The regulators have given us very good feedback in regard to that.

They are looking to do a sustainability review in regard to it, and by the regulators, I mean here primarily, the FDIC. So we're coming along just fine on that. These things, as you know, happen at a leisurely pace but we are on the right road.

Okay, thanks. And then just high level, from an operational perspective, has operating under the consent decree had any meaningful impact, whether it's from an expense perspective, capital, or how should we think about that if it was ever to get lifted?

In a perverse way, the timing of the launch of this Company, the consent order and the financial crisis which preceded it, happened in a very favorable sequence. We did our spin on May 1 of 2014. All the ink was dry in regard to the consent order on that day.

So we were able to set up our initial operations in full compliance with any changes that had occurred in the regulatory frame, post the crisis, and in addition to that, for every item in the consent decree. From our first day of operating, we've had it built into our specs for the performance of customer service, collection, underwriting, et cetera.

So we haven't had, in some sense, any adjustment to operating features because of the consent decree which preceded the launch of the Company by several hours. So the answer to your question would be there's nothing in any of these that will provide incremental cost to the current run rate that we have. We were fortunately launched after most of the new rules were written.

Okay, thank you.

Moshe Orenbuch, Credit Suisse.

You talked about the level of charge-offs being stable within your estimate -- within your parameters, and also probably moderating some. Could you talk a little about the development of the reserve over the next year?

Sure. Obviously we don't give provision guidance, but I will give you a little bit of color around where we expect the allowance to trend as a percent of loans and repayments. It jumped from 1.01% to 1.16%. That could head towards 1.3% of the total portfolio before the end of the year.

Basically, what we are covering here is our losses expected for the next year, as well a build to cover life of loan losses on our TDR portfolio. Let's talk a little bit about TDR development.

This is our second year of operation. In June of 2014, when we had our first earnings call, our portfolio was essentially pristine because prior to that all loans were sold to the holding corp once they became delinquent or had a period of forbearance.

Fast-forward a year, we saw large growth in our TDR portfolio, and over the course of the last year, it has more than doubled. So quickly, it has become roughly 11% of loans in full P&I, so very rapid acceleration. We would expect that to decelerate now, so looking out a year, obviously the TDR portfolio is going to grow, but as a percentage of loans in full P&I, it's not going to have that meaningful ramp up.

And the other thing to note about the big chunk of our allowance, which is for life of loan losses, these losses don't emerge particularly rapidly and they will dribble out into the portfolio over the life of the portfolio. Cumulative defaults on our TDR portfolio is something that we will constantly monitor and adjust. I don't know if that answers the question, Moshe, but that is pretty much what we are looking at in terms of the loan off allowance over the next couple of quarters.

That's helpful. Can you -- maybe switching gears a little bit, have you guys had a chance to review the servicing standards? Is there anything in there that is going to be -- either something that you've got to change or affirmation of what you've got going on?

I read the press release from the Department of Education yesterday and it didn't seem to impact our Bank's portfolio of private education loans. What I saw in there was a lot about how Department of Education services are incented and how Department of Education services communicate with their customers and making sure that income base repayment plans are being offered effectively and efficiently.

So my takeaway was it had very little to do with how we operate our business here. In Ray's introductory remarks, he mentioned the fact that we have just had a full servicing review and we don't have any takeaways. That pretty much sums it up.

Arren Cyganovich, D.A. Davidson.

Origination activity continues to somewhat accelerate a little bit. I noted that it's coming off of last year's disbursements, but just curious as to how you are viewing that and any thoughts leading into your important third-quarter origination activity?

As we enter the third quarter, it's almost a break in the action. The first quarter has the dynamic of spring semester, the second quarter is more or less a fallow quarter, and the third quarter is the student loan equivalent of the retail business at the Christmas season. As we enter that equivalent of a Christmas season, we are in very good shape.

But if you are asking retailers how the year is going and you ask them on November 15, you would, as you might imagine, get a whole bunch of caveats under the heading of we'll know a lot better over the next six weeks. That quote applies quite well to us.

So we are in good position going in. We didn't see any particular changes in the competitive frame offered by any of the major players in the field. We feel good about it. But we have a lot of volume between now and September 30 to account for.

That makes sense. All right. In terms of the funding mix, you talked about growing your ABS to 20% eventually. What about the mix in terms of retail online deposits and brokered deposits? How do you see that framing out?

We've been targeting a mix of 60%/40%, 60% brokered, 40% retail. We've been looking at a number of opportunities in the retail space, such as taking deposits from HSA providers and 529 providers and we've had some initial successes there. That may tend to bring the ratio down closer toward 50%/50% between brokered and retail.

We will also step up the pace on BankRate.com Internet type of deposits, as we grow the portfolio significantly across 2017. I wouldn't expect any major changes in that ratio, but if anything, it would probably migrate more towards 50%/50%.

We still like very much the brokered deposit market, as whenever I talk about funding, I like to point out that what we do there is we raise long-term deposits and swap them back into LIBOR to match the index that's predominant on our loan portfolio. The longer the duration of the deposits, the better for the long-run to lock in our net interest margin. That's basically where we are headed on the deposit front.

Great, thank you.

(Operator Instructions)

Sanjay Sakhrani, Keefe, Bruyette & Woods.

My first question is just on your ability to grow so fast relative to the market. What do you think is attributing to your success there? How long can be this outpaced growth last?

One is we're a very focused and capable competitor in our market. If you were to look at the competitors that we have who break into large and relatively smaller, most of them are not totally dedicated to the student loan market as we are. So I do think that, that type of focus does show up in results.

It's also true that, in a financial sense, because of the spin and when it occurred, the receivable that's associated with student loan portfolio was a relatively low number, at about $4 billion. Increases in that number, which show up in our balance sheet and EPS are somewhat elevated due to the fact that the denominators were small over the last couple of years.

We have talked repeatedly about this in investor calls and investor conferences. The combination of the financial calculations and our good performance in the field, and we have gained market share each of the years that we have been operating as an individual Company. So it's a virtuous cycle of good performance and a relatively clean and smaller balance sheet to start.

As you look at the second quarter here, we are approximately a $16 billion Bank. The day we launched in May 1 of 2014, we were a $10 billion Bank. So we've grown quite rapidly on the balance sheet. We've also increased market share. Those two things work together to give us very nice compounding.

Then, Steve, as far as the asset sale market, is that something you are even entertaining at this point, or does it still not make economic sense?

No, we're an originate and hold model. I obviously monitor out of curiosity where premiums may or may not be in the marketplace, but I don't think they are anywhere close back to where we executed the [5.15]% despite tightening in the ABS market.

But it is not something that we are contemplating at this point in time. The Company and our shareholders are better served by holding onto these high-quality assets to generate long-term earnings than to call in a premium in the marketplace.

Final question, obviously the stock has been under pressure for a variety of reasons, but one of them being all the headlines around what may or may not happen to student lending. Is there anything that's been out there that concerns you, credibly concerned you, in terms of a proposal?

We've looked at the documented proposals such as they are for both of the major candidates, and we've also looked at their likelihood of implementation. It is the case that we are coming away thinking that there will always be proposals, but we are not particularly threatened by any of these specific proposals that are currently extant. Both parties need to do quite a bit more work in order to it get down to the details.

But I would have to say that, so far, it's concern about concern about the proposals that has hurt us more than any concern about the proposals themselves. So as we look at them, there will always be proposals out there; there have been as long as student lending has been around, so that is part of the atmospherics with which we must deal. Having said that, though, we don't see anything that has a high likelihood of hurting our franchise.

Okay, thank you very much. Appreciate it.

Eric Beardsley, Goldman Sachs.

Just wanted to clarify a couple items. One, Ray, you might have addressed what the margin outlook was for the rest of the year, but if you could just repeat that and help us understand where it should go from this level?

Okay, and Eric, if margin is NIM, which I'll take it to be, the second quarter, as you all know, was 5.84%. Last year at this time, it was 5.51%, so it's been a gratifying improvement. Year-to-date, we are at 5.81% versus last year-to-date at 5.56%.

We expect the third quarter to be seasonally low as we build up cash on the balance sheet, which has negative carry. We expect for the full year that we will be in excess of the number that Steve and I have previously guided folks to of 5.6%. So we are 5.81% year-to-date, we expect to be over 5.6%, with some decline over the next several months.

Got it. So closer to 5.7% or closer to mid-5.6%s or is it too early to say here?

There may have been some static on the line. We are going to be over 5.6%

Okay. Then just as we think about the other income here, what's a good run rate for that -- for thinking about this quarter, how much is recurring versus not?

I'm sorry, Eric, can you repeat the question?

Just wondering how much of the other income would you classify as recurring versus non-recurring here?

We had a $2 million catch-up on an uncertain tax position that was certainly non-recurring but net-net for the full year it's on -- the payable was marked up last quarter. We caught up with the receivable this quarter, but the rest of it is all run rate net income.

Got it. Then lastly, could you just repeat what the exact dollar amount of loans in full P&I was? I think you said that, that would go up to, I believe, $5.7 billion by next second quarter, but just wanted to clarify those numbers?

It is $4.3 billion at the end of June and that should move up to $5.7 billion by the end of June 2017.

Okay, great. So only another $1.4 billion total including whatever amortization you have of that principle over that time?

Yes, that's correct. That $5.7 million would include amortization, as well.

Okay. Great, thank you.

Mark DeVries, Barclays.

I had a question about long-term capital needs. You are consuming capital at a pretty rapid pace with the robust loan growth. Do you foresee the potential that you might need to raise capital at some point or do expect your ROE to converge on your loan growth before that happens?

Let me answer that question with perfect clarity. There is no expectation whatsoever that we will need to raise capital. Mark, I pointed out in my prepared remarks that we have excess cash at the corp, that you will actually start to see us inject into the Bank, over the course of 2017 to maintain the appropriate capital cushion.

As you know, we're at 14.5% today; we drift down toward 13.5% at the end of the year. The agreement that we have with our regulators today, as we speak, is a total risk-based capital ratio of 13%. No matter how we model out our portfolio and portfolio growth, we are in no way pressured to raise capital to maintain that type of a total risk-based capital cushion.

Okay. That's helpful. How much cash do you have at the hold company that's available to inject in?

About $265 million, give or take.

Okay, great. As you head into your big disbursement season, are you seeing any signs yet that the competitors are pressing down rates at all or are yields holding pretty firm here?

From everything that we can see, and you will remember we have 40 people who are in the field 100% of the time, and so what we can see is quite detailed, school by school, state by state, city by city. The competitive frame is extremely consistent with both the players, as well as the offerings that were extant last year. So we see very little change in that environment.

Okay. And then just finally on the parent loan product, looks like it's not going to be that material in 2016, but any idea how much it could add over time? Could you just talk about what your credit expectations are for that compared to your normal product?

Sure, we did launch it in April. Several colleges were very anxious for us to have that additional offering, which is a way for families to fund the higher education of their next generation without burdening the student with additional debt upon graduation. It's off to a start that we are watching very carefully. We expect over a period of time that it will build up to a decent level; it's not going to change our disbursement levels dramatically one way or the other.

We think this is part of the evolution of our product offerings. So it will be incremental, but we don't think in any way that it will be significantly an increase in our net disbursements as we go forward. It's part of the continued enhancement of our product offerings so that we can continue to improve at a relatively low level our very high market share that we start with.

Okay. Would you expect credit and returns on that to be comparable to your existing business?

Yes, our goal has them very close. There are minor differences between the two, but we are modeling it for the same returns, the same losses, and the same sort of expectations.

Got It. Thank you.

Michael Kaye, Citigroup.

Is there any update on what's happening with some of these marketplace lenders like SoFi? Are you seeing any change in their behavior given some of them are having some trouble selling loans? And just talk about what steps you're taking to defend yourselves against them?

Sure. Of course, the fintechs as a group, just to use one moniker, have received quite a bit of attention over the last three years. I would say that attention, while it's been consistent for three years, there's been nothing consistent about the performance of the fintechs over those three years.

First, soaring and disruptive, and then starting to gain volume, and then, as we all know, over these last several months, one bad story, or story about their development, after another across several of those individual players. As is well-publicized, they have, for the most part, and as a group, cut back on their marketing activities in order to reflect their difficulties in funding, and to some extent, in the performance of their portfolios in a credit sense.

We have, on prior occasions, been asked about the fintechs and whether or not they are a factor in the early liquidation of our loans, as they look at some consolidations. We have found consistently that they are a tiny factor, if at all, we're talking tens of basis points across the entire portfolio for the entire industry.

We are gratified that they are cutting back on their marketing, which is always a good thing in a competitive world, but they were not a big factor for us at any time in our history, 2014, 2015, or 2016. They continue to not be a big factor. We follow their developments but it's not a financial modeling adjustment for us.

That's great to hear [the stock]. One final question, you are talking pretty clear about the competitive environment has been very stable for months, some of your big peers. But just reading an interesting development this morning about Wells Fargo coming to an agreement with Amazon where they offer discounts on student loans to some Amazon prime customers. Just wanted to get your thoughts on that initiative and what the impact could be to the Company?

Sure. That is a very recent development, as you know. Promotions come and go in the industry.

We haven't been able to model that. We don't know if that will be a big factor or not. But historically, this type of promotion doesn't have much impact on what is much more of a steady emotional and financial process as a family works through the capability to fund their children's education.

So this is not an impulse buy for the most part. People have been at it for months, they've worked through financial factors, they consult with the schools, and so a splash promotion is relatively incongruous with the pacing of the ways these decisions are made for families. Having said that, they are trying something and we will watch it carefully.

Thank you very much.

Rick Shane, JPMorgan.

Thanks guys for taking my questions. They were on allowance and they have been asked and answered.

Great.

There are no further questions. I now turn the call over to Mr. Ray Quinlan.

Thank you. Thank you all for your attention, as well as your questions. It's a pleasure to be able to talk with you all this morning.

We are very happy with the performance of the Company. It continues at a very high level from the standpoint of financial results.

The marketplace results are good. Our servicing is both good, as well as improving and the results to show up concretely.

So our change in guidance for the efficiency ratio, which was essentially an 8% to 10% improvement from last year's 47% and now the fact that we can be confident that we will beat the upper end of that range and improve the efficiency ratio rate on rates more than 10% in a year, I believe to be a dramatic improvement. To the extent that we believe it to be consistent with what our modeling is and sustainable going forward, both as a level, as well as a trend, is very satisfying.

Our EPS change in guidance from what was $0.49 to $0.51 to $0.51 to $0.52 also reflects the fact that the excellent results that we received this quarter we believe to be non-anomalous and that they will continue to be reflected as we go forward. Thank you all for your attention, for your questions, and we look forward to the second half of the year.

Thank you, Ray. Thank you for your time and your question today.

A replay of this call and the presentation will be available on the Investors page at salliemae.com. If you have any further questions, feel free to contact me directly. This concludes today's call.