Navient (NAVI) 22 Apr 202020 Q1 Earnings call transcript

Ladies and gentlemen, thank you for standing by. And welcome to the Navient First Quarter 2020 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. [Operator Instructions].

to conference like speaker to now Mr. today, would hand over the your I Fisher. Joe you. Thank ahead. go Please

Thank you, are morning, After the Earnings CEO, Lashana. call Good Chris their Call. First Navient's and will With Quarter prepared XXXX for remarks, me open our questions. today Lown, Jack we our and Remondi, CFO. welcome up to

different here. in will Form with the and filings forward-looking expectations could we keep SEC. the may to of Before future predictions, a begin, discussed the discussion other in refer factors. contain mind those from be due be Listeners company's materially Actual factors and on This to our results those of discussion variety XX-K statements. the should

associated COVID-XX magnitude, duration disclosure internal did our travel in For financial close among controls factors not But Navient, pandemic. restrictions systems, these put affect over include, our financial home the uncertainties that of and with policies procedures. or the others, place reporting reporting negatively controls work and our maintain the from risks been and and books and to have severity, ability the

on of this Investors to earnings, in During we to description refer measures, a the navient.com. call quarter XXXX can first call, the This our our A posted earnings. page full disclosure. will we reconciliation GAAP and is GAAP core found measures, non-GAAP results conference core be earnings supplemental at

over Jack. call Thank the you. And I'll now, to turn

our have share estimates and and about we've you times. safe. And results in challenging everyone. the the your These impacts. morning, Good for will made healthy discuss we crisis, to us the taken morning, I Joe. future you staying we steps This financial review response and Thanks, quarterly joining today. families are thank hope are

me Let to crisis. with COVID-XX our response the start

early hygiene protect practices We and needed took safety those action from to and come and of health safety our office. evolved, protect decisive to expanded and capabilities implemented our As this best teammates. to to the the we work and crisis home who

of our able We were to from work a quickly status. to home team move XX% successfully and

As employees. than less had a handful among our cases result, we of have positive thankfully a

focused of customers our the on also We've and meeting needs clients.

to team across only rapidly meeting businesses. deploying COVID but and and implementing normal challenge, information the workflow, rose relief Our our not this options

call, my that In on the we some of to is are customers, providing listening, implemented important programs it the are clear frontlines. our have whom relief

receiving. We've the also and of the impacted those responded to states hundreds are unemployment COVID-XX by to surge crisis processing deploying assist ongoing of they by claims teammates

provide few incoming able just to repurposing we days to Navient a is skills team to to were calls With is a great respond crisis. the of our during prepare, and support. example help This how

business and our could how As our support the thought rapidly we prepared help for our also we about we environment, changing team communities.

stockpiling had business with prior included in need continuity higher Our these a process NXX our of a the responders supply masks. communities. met Clearly, planning masks frontline

to sick. those So, our others XX,XXX treating we the nearly protect and stockpile help to masks local who donated hospitals of are

healthy, met team To needs on and and everyone our this clients the employed. we gainfully kept best me, team of our is news that of quarter the kept customers our

the Turning $X.XX per $X.XX quarter provision $X.XX a Earnings were quarter to earnings in for a to results. year-ago compared million $X.XX the this loan $XX financial share. our share and or Core fourth this in quarter included quarter. losses

strong. side, On remains company the our financial

from sheet. capital loan and and our liquidity managing cash balance carefully are ample flow portfolio seeing are our we and We expenditures steady We processing student have businesses. we expenses, and performance believe

bonds. the new of Early the short-term maturities proceeds and in quarter, our the for we financing first unsecured completed raising activity extending planned year,

funding ABS $X.X of warehouse some facilities. and size the the extended most issuance, completed and of in also expanded our We billion maturity term recently

contracts source levels remain services Looking experienced of very portfolio stress. loan as of forward, our liquidity lower cash flow a seasoned has from strong and loan portfolio our

clients options, by to in customers and we relief to our assist immediate are do who to offer To impacted relief including numerous continue here the need be payment economic so. we'll virus are those clear, and consequences. and We its

borrowers We've the plans. also of to trend make has seen has continued payments their into delinquent April. loans most continue rates forbearance to have while according This And risen, payment balance not.

of a our both in defaults will As than at lower FFELP the in result, significantly that be portfolios we start private and the expected expect XXXX year.

timing long close work know last, full like How many recovery and customers, our it attention guess all this are can the crisis early the how too questions impact to the at. we more of and is paying we're what only does will to recovery. this While the lose or path look of crisis will

Nonetheless, looked to other crises, have Great more and the disasters us. toward Recession including significant recent natural the we economic guide regional

represents loan provision of totaled total this at which portfolio As bringing for losses quarter loan risk reserves component FFELP reserves our private X.X% a to and of billion equal portfolio. result, our of quarter-end, $XX sharing to $X XX% the million, our our

historic we things strong the worse. get to provide prepared and hope US are economy resilience While for for the portfolio's characteristics our credit of the best,

last loan student portfolio income was with and few line expectations. weeks, spreads rates funded. Our Despite basis very volatility over is the conservatively in net and seasoned and the interest

for floor our was of which and Volatility margin, this negative liabilities higher net by a income. quarter offset in interest FFELP levels the our assets basis was spreads of

quarter. expect We the second basis in spread this improve to

the for include of was strong Demand $X.X new through XX% Other billion, March. refi over very originations for quarter our products up notable items year-ago quarter. the

materially reduce the originations greater visibility Given have economic a we outlook. efforts we the until future our and in tightened economic funding costs and reduced marketing to credit uncertainty funding with both and costs outlook,

declined XX% $XX charge-offs economy the decline into strength to March. in the first of to compared quarter. loan by quarter in million driven Private was the $XX million This fourth the

payment relief the our options. of to use lower original be XXXX We forecast XXXX the charge-offs during given expect XXXX, balance increased than for of and

XX. driven by XX. April options. at increase to entirely $X.X to is continued relief This COVID-XX in increased X.X% billion forbearance our loans in $X.X or Private forbearance Loans billion the of April increase as to of in portfolio March

in operating This saw seasonal was efficiency. the quarter fourth in expenses. million also from continued quarter, quarter total this while unchanged OpEx payroll-related includes And $X improvements

At adjusted net to equity quarter-end, our ratio declined X.X%. tangible

will to in in detail later I like the hedging call, Chris to period environments. provide floor that each our greater falling book would of marked derivative While remind reduces portion and income folks is the rate equity market

reflected income, floor The is we increases and, in its market falling not not value our equity. value in offsetting receive therefore, is to marked in environments rate which however,

larger-than-normal delivered The rates significant this in decline a quarter. negative mark

March position cumulative a $XXX will that derivative for equity reduced is at result, a reverse GAAP to hedge our by as million As mature. XX, contracts valuations zero

with are we result, a equity As is while outlook. below our our our target and position ratio our range, comfortable

our crisis While initiatives. the important center to taken stage, has we've response other on continued also work to

continue efforts year. our And off remaining our on we mainframe. upcoming our products we focused move loan example, delivering systems to our in-school academic the For remain for

of COVID-XX unprecedented across lives. has aspects all The our created crisis challenges

Your a position substantial this financial company crisis through. see entered and of from to operational this strain crisis

safety. needs responded inspired to I'm has for and and meet the that customers. of by with clients health team our thankful flexibility, commitment, and and their I'm resilience, innovation Our

I'll results. this now deeper review the quarter's to Chris? for of turn Chris call a over

everyone unprecedented times. Jack. you, for you these on interest to during thank today's call And Navient Thank your in

navigate incredible and resilience to challenging Navient for support, Team customers environment. add their thanks my like this our I'd helping to

earnings in During the the results I'll and the XX. section. my and insights prepared COVID-XX on can call XXXX found April the on for Investors will provide company's the through remarks, I on website referencing be of which be review quarter business pandemic portfolio the additional impact first our presentation,

loan Starting borrowers as $X.XX quarter April provided impacted slide by over and originated COVID-XX include: compared highlights of from XX, X, student $XXX a EPS returned immediate shareholders year repurchase core Navient the million on through XX cents, relief shares. to adjusted million refi payment and $X.X of from million XXX,XXX to in dividends billion key $XXX to the ago, Delivered of loans

Let's fall quarter-end, forbearance XX.X% slightly provide seen Loans on XX% Since relief Federal we payment COVID-XX. we to to by and X. increase with as our those the slide Education move reporting, impacted segment rate delinquency to have to our rate additional beginning

have of in status. borrowers previously additional some over who were relief context, repayment add delinquent forbearance To XX% or requested a the FFELP

charge-offs loans in defaulted a requires the to of result of number. company CECL, The related implementation charge-off discount the increase the which primarily to in or the quarter was include in the premium

Going delinquencies relief. a forward, seek and as to of we anticipate charge-offs decline the XXXX borrowers through greater of rest payment percentage

within The for first our guidance. XX basis the quarter, margin net interest was points

earning $X.X million resets a half of X, second of result In lower not floor of rate loans annually loans of of therefore, we interest The these and environment. on for July $XX billion as so rate earned the this we do billion anticipate year. income of unhedged $XX.X on the income quarter, the loans portion on on floor the

offset the differences the between an reset in primarily quarter basis unhedged benefit and monthly The on daily from timing floors our average funded by are are assets with that was resets. the in

positively outlook the rest interest remain margin during rates the interest should FFELP we impact the While our cautious, portfolio XXXX. current net on for of

have impacted slide Much increase provide and Now, rate turn portfolio, we prior the to forbearance from quarter-end, additional by slightly XX% rise our we seen X.X% increase to and let's to as a our in rate six relief forbearance segment. in an quarter. Since decrease delinquency like from COVID-XX. have and to delinquencies those our seen the FFELP X.X% Lending we payment Consumer

net charge-off points further borrowers improvement increase repayment the in year primarily During XX% decline quarter, to funds. in was XXX cost interest relief. driven as of and basis saw reductions expect seek by the rate margin an immediate this we in a impacted Year-over-year the

loans is low points. of with at interest impact that full-year dislocation of that funded margin volatility original increased points basis that anticipate basis $XX lead guidance occurred rates our a of primary net negatively this is in We to will the March to the continue to spread our and XXX on XXX anticipated are LIBOR. in billion end The

education private grew refi primarily by Total driven X% in growth $XX.X originations. portfolio billion, the to

$X.X high originated refinance we quality of education billion loans. quarter, the During

million. we first of the XX days Through April, originated have $XX

in reflect new ABS increase We have in and we volumes market, originations updated increased the see in until managing ABS on funds anticipate pricing the market. lower of the cost to activity to

and transaction-related review XX to we healthcare management month. services first Let's segment. of slide are in the Processing to previous Through revenue both Business compared the days the to our first days cycle lower of X continue government seeing significantly placements XX April,

help result to as of of state BPS BPS experienced the Act. COVID-XX. seeing we is to These our opportunities expected in residents clients working support CARES new colleagues access are have impact However, to able negative a been the hundreds their implemented newly unemployed transition to reduce benefits

occurred in XX% In from of efficiencies primarily ago. to margin COVID-XX. and fell driven X% the with improve impact second decline The the terminations that operating a of the quarter, to EBITDA was contract total long-term investments margin year in planned half expirations by combined XXXX, BPS and

accessed financing this turn issuance Let's to debt $XXX successfully during which beginning XXXX of quarter, X, issuance million of March our used reduce first activity. slide unsecured $XXX markets in the of dollars maturities. the funding with to million matures highlights was XXXX. the that We

In facility $XXX we in of refinance million total quarter, both reduced XXXX education education of education private capacity On term extended costs. refinanced billion $X.X the and to issued X, private expanded $X.X the a FFELP overall that our ABS we private extended billion. facility term facilities April to and and repurchase

of cash. $X.X quarter of is which liquidity, X.X% We ratio equity and sources an ended with adjusted of billion $X.X billion tangible of primary the

Let's the and allowance greater occurred move during our slide equity in X quarter. to to that the on detail movement provide

by As to The which our XXXX. of was million, of capital range. within $XXX the previously reduced CECL adoption ratios, over rebuild we plan expected, disclosed course implementation of equity the CECL reduced our which

was that shares marks In in hedge addition, as a result occurred derivatives change GAAP result repurchase in equity accelerated reduced of of January that on the that occurred interest a rates. the as and of derivative

$XXX mark-to-market quarter in the on million, mark equity to the first million. The reduced bringing negative the derivatives shareholders' $XXX by cumulative

marks hedge contracts will several reverse the these to the over next as negative years. mature zero Importantly,

quarter a loss per recorded share quarter of net GAAP of negative million Finally, $X.XX $X.XX XXXX. on income We compared in share $XXX first to million per or a let's GAAP slide with turn first or of $XXX the results net XX.

hedging in derivatives loss significant loss quarter in first reduction the mark-to-market result and interest result the a rates. net $XXX as million pretax was The the on of of activities of

them variety borrowers successfully a providing began positioned summary, navigate our start from a help with and to we In of on environment, the the strong are for a to successfully our and customers to XXXX transitioned current executed workforce us that financings to this solutions home year, well model, work pandemic.

pandemic liquidity partially at While suspend difficulty uniquely us providing loan time of positioned the of a our the a led and portfolio, are and result with as guidance. full-year this guidance we robust temporarily well-seasoned guaranteed to has

open for now call questions. I will the

[Operator Instructions].

comes question DeVries first with Your Mark from line Barclays. of

Good a little the Yeah, delinquencies sounds give of you us is a of push thank much also, here. think charge-offs more anticipate? it on near-term, trajectory should into we sense forbearance of how more credit and you. kind to from And XXXX activity like, the lower, you and forbearance Could going going morning. how but beyond? about It might color

Mark. Thanks,

of increasing forbearance pace gave tens forbearance each exited week. accelerating And XX last the although the April demand of March dollars why the was then, April. the point. accelerated. this millions we So, rates and for been has it's over as of demand still we certainly The Since declining, in the day data is into

point private loan payments past of due the about is XX% meaning and at days less one than time, current over not still Still, we current, is XX even our past this either XX% or in due. of portfolio they're in have day their portfolio

And means our better consumers. refi which with that of weathering more here, a student loans very and most very a seasoned optimistic private crisis our this base, of outcome borrower originated kind mixture so, that's recently are loans, than obviously current

is things base be crisis how this customer are terms be we're managing happened much challenge of that's crises is that be go type the and the as to, the at that how well job as it as and in right, loss. The going payment is appears But looking of things does long big last, forbearances does of sit we monitoring. hoped we those disaster past to other this away, here, for. here, Those happens point what to as today, deeper recovery we're move forms in our can have here

of give Okay, versus against loans from reserved credit great. performance And your you're loans can kind you should allowance? different sense groups' expect consolidation for two – newer on how a us what we season your those and

Yeah.

our included model cumulative those. part each different definitely their for the losses Analytics weights stress We use as scenarios for we estimate. to the of So, CECL models this and outcomes expected severe are of modeling Moody's and have higher future very quarter's differently expectations

at that reserves have terms if And now as our But are I said, if well expectations of have student you what loan portfolio within are our total consumer others publishing there. we in been debt on look private overall, at against portfolio. X.X% the debt, publishing you people ratios ranges look and our coverage

If that you about portfolio weighting our the might say, losses that the differences and of little loan portfolio. credit the the X.X% you a a mix, over if imply life refi on for assume remaining from, think of X% it X%, would differently said, to coverage bit over private legacy ratio move

right in now, a very change. the sit we position. but impact, this where can a think conditions we of economic conservative certainly, So, And different could from have duration we're

Okay, Thank you. great.

line from Caintic with of Your next Stephens. Vincent comes question the

you Good in capital remind about Could and your this ratios thinking how thinking thanks. Hey, you're how us also return? morning. about time you're capital

Great.

as put you remember, we last guidance had by we So, better would X% out to the or of adjusted year-end. call, tangible in equity get ratio that

if the throughout There up happen As capital same rates reverse March, of we derivative interest we'll out. of around marks we're be our a somewhere will at the year. naturally lot in build profitability with X.X%. portfolio, our that'll our on mentioned stay Obviously, XX%

ratio. throughout help of are positives And so, build trying back will get X% capital the to year, number ATE a to there us that that

already buyback program significant our a XXXX. for portion of have pretty We completed

and the be rest will year. we very of the flexible And opportunistic throughout so,

how thinking is and our build. our about we looking liquidity but about very feel great that feel good about capital, we're So, capital We position.

that So, it months. to build really place the managing just over next back to the getting and us right XX is XX

segment you the bit. you Okay, if out great. so, little the Thank could Maybe break a – gave guidance appreciate And you. next that on NIM.

nice that get to able different funding, to see funding So, you're sources.

should And say, also then, expect getting so, we should think the describe, going and income the funding as yields you're about the price how and could you there. floor we If then of availability forward. –

have, part the are mentioned we after that, are resets rate So, income environment will interest July floor obviously, I there annual portfolio floor expect accrue, continue although of floor income X, we in receiving that to stop our income on. to

a More some the So, we in is on first our obviously significant we But amount got our that side, financing plan. financing We inevitably an accelerated quarter. activities. important expecting, than were more of than done component. the

this at So, company $XXX posted has done coupon. the yield rate a high we yield lowest got the million ever high

actually yield high coupon. And a we posted so,

of will And on and and the execute We, but of have those and will the so financing to year like watch rest gets have really we ABS when – improve recover obviously, financing needs. year, real for rest there actually, the no pressure look back, to would a markets for no we the to market from the real we we capacity. to

Perfect. Thanks very much.

question next Credit Moshe from Suisse. comes Orenbuch with line Your of

And anything next balance of the and collect you rate amount got general and How slowdown Great, Chris of that loans? Jack, either the all flows cash you've in the little and talk, change, terms Obviously, thanks. we of these or that life your a forbearance you've to both about do given see changes? bit the Could probably likely this over prepayments. likely in you'll that the think you're a got about the of that? of of portfolio, the year from means cash

Thanks Moshe, great for asking. question.

number, because out. it only to all forecasts as so is our the a we obviously, you removed saw, flow them wanted guidance forward-looking we materials and from So, pull cash

stress decline over testing residual top position have our tell crisis. will is revised slight our four flows cash meaningfully versus cash done of expectation there could we cash is were don't a of cash cash flows, weeks. to before strong last Obviously, in we're expect be three still be Even what impaired. flow are a the our own estimates, amount pretty in on the expecting I this waterfall. flows but with our servicing And you to a we internal we What significant that flows

of And worse, we of moves that deterioration. helpful, move that a I some a gets stress the there think, that's really If obviously, are as be significant wasn't economic made as environment this. significantly inevitably, will but in our some testing there result today.

But I our just cash of you amount given component, a component, the and given tell is would really that return servicing resiliency benefit there company. the around the significant interest principal that versus flows,

to The just assets are work, down liabilities I our borrowers of add that financing the to using structures would forbearance, duration way principal our that. ABS extending. as are funding are payments if are markets those coming the

is And hold our in so, match-off cash why up of which test a it's during so flows, crises like this. stress those strongly terms scenarios

life Got if flows us, more just future would Is it. you'd Got there's in of into And it. adding I that, those though, assume we periods be that correct? cash in front does tables extension, mean had that that later periods.

And That's value higher be right. as would asset well longer your life. has them average a the of absolute because

Right, right.

about just more in these answers much can one the give guess, I is annual an a and that you of half? the impact Like, how could on that significant floor how detail of income? previous back have about the Okay. resets maybe little

I'd the given say, portfolio. Well, the interest huge portfolio. in rates, But benefit billion our anyway low [ph] XX-ish-billion dollar of also there's FFELP $X.X a it's

$X.X impactful it not isn't wash, So, $XX sounds. versus a that billion but inevitably, as billion it's as the clearly

this. did earn of original add do income the just ever reset And year anyways. second annual annual the just income formula the year any works. half rarely we Obviously, for the floor not would have of on in very floor the I our Yeah, on way loans reset guidance because

set fourth of So, rates they come the late to the it's X rate beginning money, before happened of value, through the so this year. into which each fall a June quarter for amount out have XX and into in May, fairly is significant and July when set the quarter any first timeframe, obviously the

Yeah.

unique where of it have that very So, year a compared sort not to for was portfolio we did them. years

still of So, effectively, a it expected than down was QX, year? the beginning step in a step as the up but in higher at QX,

yes. of Because rates where are,

Right.

a Thanks great. lot. Okay,

you. Thank

Your next with from Cooperman question comes Lee of the line Family the Omega Office.

I'm fine. to glad that Thank the hear in functioning staff good is and shape that you. majority Good the of morning. you're

bit a I'm little to me out. help And confused. you like I'd

and words opportunistic. You like use unprecedented times, we're flexible but

you're the first quarter. you prices. obviously, more different at On you pay the sorry has about aggressive the changed the in that bought that paid we the rapidly than stock much. back the quarter, has million you you stock thought you XX the deteriorated The back worth at things But you're $XX.XX more because But spent stock assume be you $X.XX, too in stock bought have shares, that – currently in these the you $X.XX. basically motivate $XX.XX around Or deteriorated? sorry, means stock is enough does environment price $XXX is different if first for repurchase, prices? million of were stock the I to lower

and of explicit is intention Question So, is status what is What be the buyback? of one, like the asking, number status intention and as buyback? one. you the to the I'm possible. I'd as And really what

stock Question need don't that I'm the for is no question recommending understand you assistance? not would who government if these wingers number two. have dividend eliminate government and capitalism, scenario Do assistance. stop who you where buying reason And left you're you back that they envision are your asking case any looking

like those things. I'd you So, address to two

your And an is clearly you of you to was are stock when is back expectations think bought quite or important as $XX. asked was come just $XX, thought thinking. to price of you one as this worth academic. average five do people yours $XX that bought it's $XX you what clean thought important back I you response worth market? were explain first you if your Well, you ago it in than buyback years the my But back and maybe be The think why $XX, buying is at philosophy stock you you is XXs. by which and more the vindicated going were to a I much lot

your Lee. question, for Thanks

that FFELP loans. our and and dividends has portfolios story, credit the return through as and So, amortization, was to principally a portfolio and we through of back an capital our And private have story because to amortizing that generated repurchases. practice share those legacy been released of capital their policy fact return shareholders earnings

through opportunities time. difficult in repurchase And return. an that's point normal capital back Typically, kind is to block concept opportunity of much where excess normally, to a that daily daily get buying basis activity. share financial $XXX in we And of this be around the million typically we repurchase buying year, our basis shares expected a at trading the we we And single a of return. a number buy through been unusual is approximately large available our share that price averaging we've would of we're a of about had back year on those This have amount we kind – year. set that on course regular back capital the on XX% forecasts – amount January back how of where to in activity shares based don't

opportunity. a So, that was unique

did I reverse that play to had different. at But back obviously, rather the I if it can't again, you'd January love that. price. the I'd today to we, hand than been be have Obviously, shares buying

the done, you was this left $XXX point doesn't We've million $XXX balance do year. whole million of the quarter. plan Right as first year. our for this to out, lot now, that a through leave So,

have capital we're also ratio that hit. targets to the trying We

we see for to had wouldn't number expect So, the I year. forecasted above what that anyone originally rise

would of it's those Similarly, some flow government benefits the And extend we're payment in that from and possible process. that use may government we the think terms to get Those relief our they government didn't are need And balance of of we've assistance company. form FFELP assistance, sheet some in as or student loans, federally-owned available very government by expect both not while portfolios. received programs last laid may to this perspective. financial a any customers on strong benefits borrowers, out be financial morning, cash this through any In the the to we position are crisis. assistance not by during assistance we a

you to Should you not about that got it's if asset to million buy intelligent worth? at we a accelerate something left to question you out loud anticipated of fraction value. buying to seem $XX just share stock? back buy answers or I say we price. back X.X to the $X as you ask dollars it book gave. back what spend ask look your – Or –you stock some We're below changed myself billions of sales Does the it a business? value think of The view I I selling that capital at so the times of current the

of your why or $X.XX. People process? stock, low bill be $X.XX a of sell your buyback terms income for not historically want creative capital assets in of income, the historically more we okay? fixed thought release not and your government-backed more dollar have assets, those in So, high fixed valuations of Why now, valuations off

we Yeah. that whether what opportunities. We certainly look securitize own evaluate securitization private equity transaction. a when loan it's component the a and Effectively, we is – student a or at federal in

that, something like X% the right? loan or about of It's

it's whatever residual is. private that and the interest on – wider Yeah, smaller FFELP. on It's residual

crisis, market unfortunately, today's government not that market have the conditions, student not a guaranteed, as pricing indicate And the those market. market efficient on loan We would even in in in spreads some portfolios view that side of those widened We particularly the past. sold are though have tightened. transactions the FFELP

there's opportunities, of So, buyers terms we limited in there. still I would – think,

those things That that doesn't stage in at we game, be situations wouldn't presented but the this themselves, wouldn't mean the would expect opportunities. if look realistic I at

you less Thank would Good I thing creative, you sad – to what Well, be left something seems than luck. more paid I at million but have This is you. be buy recently. to $XX do the know? half for

Thanks, Lee.

Rick of line Shane Your J.P. comes with question from Morgan. next

Hey, questions. guys. taking for my Thanks

curious that the that terms assumptions economic cited timing those You could of at were of what the models in if Moody's models. versus you unemployment were us understand your embedded the key assumptions in time help today. I'm are they and where

Thanks, Rick.

March number the So, our ran at quarter, March and look we scenarios their if process, when were CECL then updating model our is what XX pandemic you for Moody's for CECL we XX.

scenarios inputs you generally. are those the And can all So, public. see

what banks that we of the What seeing the think I as have and across what well. you're reported would with using looked we've I relied heavily is universe – financial most highlight very is line on as in much

And post much and second up did air we're post is, up rely Moody's will and the but where end Moody's primary the impact. to your show it's those the But quarter-end think deterioration on I numbers, model. the has and what some at model what quarter-end, updated our of continued still were in to most what will been March models the obviously, up date There, so, XX was since going very question quarter. be Moody's we pandemic foundation

Got it. That's Great. helpful.

and TDRs historically loss there's and some confusion reserves. delinquent and loans we not. Second things And current about historically, of question. have Look, think when had do life I loss like reserves think forbearance life loans of

And a so, the perception of two. this convergence between there's been

think an methodology. them that reserving you're is in the that portfolio despite the of about loan the is as that policies? and reality using CECL have for loan, to fact same might that the than your experiencing impact different But continue a you we will the Should on current forbearance performance reserve a now increases be forbearance under

in our Certainly, as have argue, forbearance same expectations. years life loan status have CECL, in in would different a versus today. like I in was XX and shown that's a moves is kind methodology than crisis, loans forbearance current TDR, the So, a everything are But that loan in experience environment that obviously, loss loan over forbearance to a a different economic loans very reserve loss a effectively reserve has expectations. we that's what positive of in of

cycle. who And we where at is our their look borrower they types look what so, in we at are repayment are,

in just plus who majority or our different graduating than borrower who that, loan has example recently repayment which going someone portfolio. just risk a school out for an private been the of successfully is to As of is years, be of is five a

and the down again They last coming the a have flexibility more our years non-bank to forbearance we expect rates to result relief Because do right expect have though periods more like came first our book We during rates even in in we that and over XXXX quarter. periods now. down And have of charge-off unemployment offer to seen usage decline. flexible been we a several options repayment materially. defaults as that, private in rise on during increase, we do entity, we're as

rates in And delinquency as so, look default and the what we forward might borrowers is what be forecasted of the like terms to XXXX, would be. forbearance look likely economy in exiting and

forward to many jobs of of Those impact here, their For ability return. But our this take. is customers, their and to expect difficult recover to our when recovery professional the deep make shape going some obviously – we right it and to how to payments that's, question what and is with to are continue like mark look the predict particularly does degrees obviously, now. and such, their income recover does and big

would add pretty we've declines modeling all history last forbearance and the is how I given of plays the disasters out, seen forbearance over we Rick, understanding have component of years. our just and the we've CECL XX a exercise, economic long natural a seen that and

process. CECL of the isn't And part so, forbearance It's a thing. new modeling

contemplated And watch we'll out. our model something in and is continue so, it reserve to and of loan life

That's do for good guys. you been able it work the your some all employees to have your And customers. through this. like to sounds for hard very you've manage And and done things thank Terrific. you helpful,

So thank you.

Thank you.

you. Thank

Your next question comes Mark Bank line from of of with the America Yield. High Hammond

Thank you. morning. Hi, good

private the as meaningfully thought far end XXXX about as of term? give slide cash in like, not flows the So, impaired, comment your well ed FFELP cash about cash for earlier be near XXXX for So, on mean? $X.X could flow near you of side ed terms a sense just deck year, what impaired meaningfully as then. a it hit? about loans mean the cash What's in impaired of private flows thinking the on XX% like the would example, at from Is the billion you and would term, meaningfully thinking just be might the not flows

at broad line inside materially what what year-end. we're by we In cash think XX%. expecting. something saw strokes, of with in be to I our broadly And is said, quarter-end I different not Like position expected is

is relatively position similar quiddity Our quarter-end. as

next some number sort But three off. XX%, not the forbearance see play of over the And so, inside come far is will your quarters. of XX% inevitably, into of we

Christian, that's really I And for too, same helpful. suppose? FFELP

even probably maybe less impacted. Actually, Yeah.

one And it. the on Got the… then, last

pretty of the flows, because there or already not was [indiscernible] a in repayment. of people component "forbearance" servicing high

animal. different a So, slightly

answered to I it. Got I just Yeah, ask, on. you going think it was

between two securitization private flow and differences the or in between cash of then the terms nuances any FFELP. Just

to a It cash the non-paying component how really the much or the as income forbearance part sort portfolio was of and of of goes back relative the or impact. interest is the that, servicing already of amount flows in change that

important of these too these resilient. I of incredibly to lot to are things There think the highlight a trusts. is one is resiliency built-in trusts

So, a over with four I we like very that amount or feel last next testing we and over comfortable we said, three just did the and position are our highlight I the year. of today significant where weeks stress

Thanks answering All Much questions. for appreciated. right. my

from question line next Sakhrani Your with comes of KBW. Sanjay

how any there's the was this cycle portfolio going we feel I guys terms the have of you of guys your through wondering any seasoned that you just come couple professional exposures? if and of of others. versus A out questions. are about portfolio breakdown customers better Do you of some the than better might talked Hope Thanks. One, clarity about well. others. some of more those across occupations in

areas once recover be would will back period jobs happen the borrowers recovery disappear to time. But up high obviously, for population So, in expect be now. that's in to across the of better not one particularly we would professionals, – impacted we starts that are running. group than that don't might more be dental But entire a And the the portfolio. those where area. medical of the right those longer have and concentrations our will a Dentists, refi working of our practices space, segments

have of kind don't medical, of dental, that much a We breakdown how is stuff?

That detail. we either the I But portfolio forbearance continue No, relief look flows of portfolio is well in a – back all But, private don't is of look that depends where on long cash current, to of would I how to offering that will going up their outcomes holding and like households. the at whole. and customer past statistics this going think due. again, think economy by are of customers help to the you ultimately adjusted no than is past the I they felt, statement be earlier, it is drive Obviously, and disclose XX% we the a be to need there payment that current the impacts seasoning strength rates, that vast are manage here. extremely changes less is and so them payment their mentioned in majority kind as about of who base or options relief their immediate days meaning XX be days portfolio they the or the can to portion due total loan of

Jack to provide down or our people an seeing had to these is to six, not back either delay weeks. But cash corporations. to ramp – shifts It's detail for little lot is a proprietary a of medical shut it's them having eight will as a medical, their It's which elimination who shut so just Sanjay, we're had and have down of in more practices, – said. what up. us, offices and And, the flow four, dental, jobs you've two, inevitably, on what

that are forbearance again our and dental what before. but is back usage, medical saw get some to you running expectation up businesses did will go way these services the and using people so, and they And

on part, a job it's us, for scenario. not So, really unemployment an elimination their a delay or

it. guess, period of could the and arise question as on Got environment follow-up of my that weakness. competitive this I is a opportunities result

thinking a at through you been an not that guys opportunities are being had there obviously, some fintech of incumbents. any ankles extended a period whether present these I'm the sort companies of opportunities would how biting of rise just there curious given presented, have downturn? in You've, themselves? that be or might the Or of

it's in real those outlook what you're I your opportunities using what right on estimates with is of here. And of lack challenge look think hard – that, because the little is the the a now. to visibility, is economic some Sanjay, the of that execute outlook

think marketing loan of long-term there's in through As the not issuance cut we costs take outlooks an mentioned we're because our the beginning, us opportunity comments our I and back or of those funding clarity for lot them, my a where here. more little really, terms become refi economic more confident or on we've visible When a at products, market can. bit to share of I ABS about there's execute in

side, our of tells states and you claim one the on our infrastructure, been within working able team to the call the and do And to we team. a have unemployment less from reactive, responsive reposition think bit to be but respond are fintech who create we've is and who like center that can equation, to been side reposition where operational we those been little able processing. we've things have I help assistance, opportunities very on need of been flexibility this that our to things including about operational home activity, our folks responsive – the to the how for also have be

I'm proud of our said, which XXX% of crisis, employed that been through this So, as we've gainfully very I team ability. to able keep

are a now have in that highlight Sanjay, opportunity, I'd we we – bank signed also with the partner. up in-school

to market, We that going would think to well. be loans read, for to It's increase as but I which bank opportunity place have see the the you're some able academic in technology from next originate withdraw an early there quarter. further

a uncertainty said, that think tough we real it's given as a there navigate Jack out do as academic be to more the are not see what more going it less year, the I I market, to may happens. But so, in and to robust around opportunity. prepared of And believe what's happen. roll way. ready And in that space And regardless in we next

partner was? And who remind me can Okay. bank you that

Bank. One American

Okay, you will guys done? guys options, for the done, period assumption the know cool. some inside the I are – Or provision of you deferral this and earlier, after is but These about One guys them is today? clarification. COVID you final COVID-XX kind relief talked the making period reserve

not months. where several they the are It's over where It's next expect we loans be just the today. to

is our model. going model another by is unemployment forbearance, need increase if to So, forecast X, the Y% and incorporated says be to going would in that

All right, Thanks. great. Okay.

[Operator Instructions].

question comes with Jefferies. from the Hecht line next John Your of

in forbearance Most thanks my And for though, your kind wondering, answered just with all this the asked. I'm you have rates? of at call of servicing guys. kind been they higher the change very and morning. do when of change Morning, patterns, with questions much fees the have DoE, forbearance

result slight decrease So, as Act. changes on of in account. we our And based paid servicing that to our status are forbearance we of during the granted expenses change for well. of those monthly do as contract, period, operating the loans Department some see some But a on under Education status the of expect CARES the revenue

that operational is flow that much the is working calls planning for back borrowers into communications on. easier phone to we've that's and right move customers out Frankly, things, our and going now manage both in. something repayment. and those it's through been to And to concern of something – exit biggest have We're

things because company is across we've I I think well mentioned done only the one I the prepare. think and team done and of has this extremely well extremely plan the

are allow. quickly some as arrangement from the and work take our it's statuses of extremely XX% the type in COVID and to going conditions we quick what were able our we And faster started team for get to in return back teammates office a home today so the Our back in those warrant CARES anyone We the to necessary, into for repayment could and as of preparing than provisions to else of February the see and we back Act licenses We or implement bought the equipment, that issues. to began preparation space. these status. customers bandwidth when

in their Processing things do disrupted. fee color. think then, and municipalities the Okay. you within of environment recovery gets of have been of some are state Obviously, And Business about That's this toll kind present different of servicing for any kind How that for themselves segment, of income, opportunities like the there special helpful governments? that guys the impacted. other and obviously, obviously, elements

those in drive So, tolls parking we're BPS for there's transactions no our managing workflow. that if or they right? volumes business, question our our and opportunity, an authority are, down, And so, are as impacts

are of And all down have the medical delayed. billings side equation, across services our healthcare types as been of optional

to have been residents. what it assisting helping to of a their is do, able and we them chunk So, good and our states for new reposition that efforts arising and issues are

help day We've providing unemployment we need of are need 'We they states number example. for called services representatives And or two programs. a processing, of the within need a where states to said, So, our on it answering those we that and done now the where questions, the those phone, and of residents advantage work take now.' the and mentioned for

look continue we'll So, the and doing opportunities to the as that conditions here. change are for market those things the we're

very much. guys, you, Thank

Welcome.

Your next Wedbush. with the line Coffey question comes from of Henry

delinquencies if levels to COVID is going and forecast light? to for be it fair your by, your CECL, Or guide that in rises example, of their also issues? Yes, forbearance good impacted that March morning. or keeps outlook was Moody's the in fairly other it for stay my provision in idiots' where thank In And you is question. that taking assume, given terms to charge-offs,

the it, of portfolio. and think the reserve CECL you Moody's Well, a model the clearly, of future is we'll the the about loan. loan if entire to be But models, monitoring life encompass

really have. we components be and think performance, other into and be. inputs own driven those the we of and what so, we the see heavily by models portfolio that will some Moody's weigh lot Obviously, our a is what And impact inputs as on that cetera. is future overlay there will But et the what

should see. in So, that, XX% better see there our right But did we you're our adverse relatively would I if the or be would portfolio, there true-ups do development we that say apply we it's kind number. of an overlays or Moody's XX%, what reactions to if more would XX/XX same, rule that that be

the was the there the extensive of know return other I buyback. side around dividend. of is capital But discussion

obviously, you it. as cash what thought of is to dividend You, cetera, and flow thought stress on the terms What process your the et earnings the the well look have here? cover process in issues, at when testing in is

which return, and a then that plan So, or builds between cash capital of inevitably we looks as think release, our put capital capital we and our Jack Today, our capital stock dividends every year, divide flows, buybacks. in place return back at mentioned, a to with of over of $XXX yield, the high We're three and in which line plan a try yield. next happens maintain stock. X%, that X% sort that pretty going quarters. is million bought to plan, given is We stay attractive we what

alter payout but So, ratio, in we about, we we confident yield we about, don't the something in feel analyze, see today, is dividend today. any dividend talk how especially think to we our high we're but position the given it's

much. Great. Thank very you

you. Thank

from Cyganovich Your Citi. Arren the with question line comes final of

Thanks.

we whack, to of Just of the to been getting expect pretty income be floor kind on where would it's but it still relative of treasuries. LIBOR off out bit the it's one-month issue, a little the better, has far

your improve income portfolio? normalize, on further kind that be that earning floor the As continues that of you'll will to

Yeah.

back or funds curves XXs and the a That two low the points, basis of So, – the help to yesterday that, was because of lot as will by market do dislocation that's been There's there's it say, a to yes. XX the where show right? great of is like obviously money One-month getting LIBOR The because it parts government. should said. it. about US question be. you actually intervention One,

But, our floor impact So, yeah, has should A, prime improve an also portfolio. income. B, it on

seen XX margin. with And portfolio weeks. low sort three in you a dislocation, – the XXX LIBOR the XXX therefore, that against one-month LIBOR. are last It's is about that LIBOR, prime and benchmarked dislocate one-month see was relationship the XXs. that in obviously, improving ago. we've that and assets – what of is, meaningfully Our been change now mentioned, prime actually, been basis funded basis point over as inevitably, three basis points primarily And historically, points, you can weeks It's has

it to get expect We back.

in primarily as expect do So, that's impacted I talked curves what to portfolio. the our which that months. it's couple suggesting. our that been about And over next prime consumer are of dislocation has we're we well the But improve watching portfolio, But by closely. something

So, your from you'll benefit actually sides that…? get book both a of then on

how on is right over have what moving to out that couple faster it weeks that even we've the we to number. depends fast improves. back LIBOR, seen lower one-month But last curves Yes. now. of guidance the It getting Obviously, are don't

been kind the faster moving of week, has lower every So, curve that suggested. than curve week's previous

of portion X that I guess, that resets, the I portion of be, the by that reset, for book? the And guess to book, period the did the have July fixed

that that floor after expect book not would we annual X. earns reset Yeah, income July

When on X, set of they money. July reset the they out

money. So, XX out the points of basis typically

So, basis XX rates fall would have to points.

Negative.

Okay. All right.

that was Sorry, that happening portfolio, not unusual.

very had just benefit of the last something in year, not so, a but consistently period And we've it time. it's for long was a

is Business lastly, there a a just to we're bit then, have going expenses your slowdown room now to And area, any cut in of Services there? that

capacity the that side. expenses. happened, them not our fact, the aggressively people, given for been only in we on the but have see other may able state into BPS all reallocate to And furloughed positive thing given next over additional people So, opportunity additional on put potentially, side what we BPS we who is looking opportunities we're at pretty The quarters. or are few actually the were looking actually to

the put in to side, around perspective, term, medium still may to the – efficiency technology. And given have target. is as of environment. profitability. short space, a to that target, around But light great out people opportunities We be the place the opportunities we've try we short the opportunity office on actually And hit staffed expense, there which even current be so, from you which an probably is to lower in majority know, ratio there may of an expense are we is in want expenses be the

a we've the It we primary can that and continually BPS, not been how get four, corporate expenses so, six on weeks. we it, our And in down, but only over last, digging focus is into Consumer business. are focused in call Lending

you Thank right. All Okay. very much.

like There Fisher I questions. conference turn remarks. back closing are would no Mr. to now the additional Joe for to over

thank on any me or concludes to everyone you, colleague, call. Thank contact follow-up I'd if other Lashana. have for today's today's like questions. Nathan call. joining my Rutledge, This you us Please

Ladies and gentlemen, does this conclude conference. today's

may disconnect. now all You