Salliemae(SLM) - 2024 Q1 - Quarterly Results

Q1 2024 Earnings Release Overview This section provides an overview of Sallie Mae's first-quarter 2024 financial results, including the earnings conference call details and the company's mission News Release and Company Information Sallie Mae announced its Q1 2024 financial results, detailed its earnings call, and reaffirmed its mission as a leader in private student lending - Sallie Mae (Nasdaq: SLM) released its first-quarter 2024 financial results on April 24, 2024, with complete details available on their investor relations website and SEC.gov[2] - Sallie Mae's mission is to support education and lifelong learning by providing financing and resources for college and beyond, positioning itself as the leader in private student lending[4] - An earnings conference call was hosted on April 24, 2024, at 5:30 p.m. ET, with a live audio webcast and presentation slides accessible via the company's investor website[3] Q1 2024 Financial and Operational Highlights Sallie Mae reported a strong start to 2024, executing its strategy, delivering robust financial results, and returning value to shareholders through loan sales and share repurchases, alongside positive credit performance trends Executive Summary of Key Metrics The company achieved a GAAP diluted EPS of $1.27, saw a 6% growth in private education loan originations, and completed a significant $2.1 billion sale of private education loans in Q1 2024 - CEO Jonathan Witter stated that Sallie Mae is off to a solid start in 2024, executing its strategy, delivering strong results, and returning value to shareholders, with encouraging credit performance trends[6] Q1 2024 Key Metrics | Metric | Q1 2024 Value | | :-------------------------------- | :-------------------------------- | | GAAP Diluted Earnings Per Common Share | $1.27 | | Private Education Loan Originations Growth (YoY) | 6% | | Sale of Private Education Loans | $2.1 Billion | | Total Net Charge-Offs | $83 Million (2.1% of Average Loans in Repayment, annualized) | | Non-Interest Expenses | $162 Million | Balance Sheet and Capital Allocation Summary Sallie Mae paid a common stock dividend of $0.11 per share, maintained strong capital ratios, and repurchased 1.3 million shares for $27 million, with $623 million remaining under the 2024 Share Repurchase Program Q1 2024 Balance Sheet and Capital Allocation | Metric | Q1 2024 Value | | :-------------------------------- | :-------------------------------- | | Common Stock Dividend Paid | $0.11 | | Total Risk-Based Capital Ratio | 13.5% | | CET1 Capital Ratio | 12.3% | | Shares Repurchased | 1.3 Million | | Value of Shares Repurchased | $27 Million | | Remaining Capacity (2024 Share Repurchase Program) | $623 Million (as of Mar. 31, 2024) | Income Statement and Earnings Summary The company reported GAAP Net Income attributable to common stock of $285 million, a net interest margin of 5.49% (down 21 bps YoY), and a significant gain of $143 million from loan sales Q1 2024 Income Statement Summary | Metric | Q1 2024 Value | Change from Q1 2023 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | GAAP Net Income Attributable to Common Stock | $285 Million | N/A | | Net Interest Margin | 5.49% | Decrease of 21 basis points | | Gain on Sale of Loans | $143 Million | N/A | | Provision for Credit Losses | $12 Million | Increase related to originations and prepayment assumptions, offset by $133M release from loan sale | Private Education Loan Portfolio Trends The private education loan portfolio saw a 1% decrease in average loans outstanding from Q1 2023, a significant reduction in provisions for credit losses, and improved delinquency rates, while hardship forbearance remained stable - Average loans outstanding, net, decreased by 1% to $21.4 billion from Q1 2023[9] Private Education Loan Portfolio Trends | Metric | Q1 2024 | Q1 2023 | Change (YoY) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Provisions for Credit Losses | $12 Million | $113 Million | Down $101 Million | | Allowance as % of Ending Total Loan Balance | 6.1% | 6.4% | Down 0.3 percentage points | | Loans in Hardship Forbearance | 1.0% | 1.0% | Unchanged | | Delinquencies (excluding loan modification qualifying period) | 2.7% | 3.1% | Down 0.4 percentage points | | Net Charge-Offs (annualized) | 2.14% | 2.11% | Up 0.03 percentage points | 2024 Full-Year Guidance For the full year 2024, Sallie Mae expects GAAP diluted earnings per common share between $2.60 and $2.70, private education loan originations growth of 7%-8%, and total loan portfolio net charge-offs between 2.2%-2.4% 2024 Full-Year Guidance | Metric | 2024 Guidance | | :-------------------------------- | :-------------------------------- | | GAAP Diluted Earnings Per Common Share | $2.60 - $2.70 | | Private Education Loan Originations Year-over-Year Growth | 7% - 8% | | Total Loan Portfolio Net Charge-Offs | $340 Million - $370 Million (or 2.2% - 2.4% of Average Loans in Repayment) | | Non-Interest Expenses | $635 Million - $655 Million | - The company has discontinued reporting non-GAAP "Core Earnings" and its related metrics, now using GAAP diluted earnings per common share for its 2024 guidance, with no changes to previously issued estimated numbers[8] Q1 2024 Consolidated Financial Data Table This table provides a detailed comparative overview of Sallie Mae's income statement, ending balances, key performance metrics, and per common share data for Q1 2024, Q4 2023, and Q1 2023 Q1 2024 Consolidated Financial Data | Metric | 1Q 2024 | 4Q 2023 | 1Q 2023 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Income Statement ($ millions) | | | | | Total interest income | $664 | $669 | $638 | | Total interest expense | 277 | 283 | 233 | | Net interest income | 387 | 386 | 405 | | Less: provisions for credit losses | 12 | 16 | 114 | | Total non-interest income | 174 | 57 | 22 | | Total non-interest expenses | 162 | 202 | 157 | | Income tax expense | 97 | 57 | 37 | | Net income | 290 | 168 | 119 | | Preferred stock dividends | 5 | 5 | 4 | | Net income attributable to common stock | $285 | $164 | $114 | | Ending Balances ($ millions) | | | | | Private Education Loans held for investment, net | $19,688 | $19,772 | $20,498 | | FFELP Loans held for investment, net | 513 | 534 | 590 | | Deposits | $20,903 | $21,653 | $21,804 | | Brokered Deposits | 10,289 | 10,275 | 10,275 | | Retail and other Deposits | 10,614 | 11,378 | 11,529 | | Key Performance Metrics | | | | | Net interest margin | 5.49% | 5.37% | 5.70% | | Yield - Total interest-earning assets | 9.41% | 9.30% | 8.97% | | Private Education Loans Yield | 11.01% | 11.02% | 10.66% | | Cost of Funds | 4.18% | 4.17% | 3.47% | | Return on Assets ("ROA") | 4.1% | 2.3% | 1.7% | | Return on Common Equity ("ROCE") | 65.6% | 40.2% | 30.5% | | Private Education Loan sales | $2,100 | $1,100 | $— | | Per Common Share | | | | | GAAP diluted earnings per common share | $1.27 | $0.72 | $0.47 | | Average common and common equivalent shares outstanding (millions) | 224 | 227 | 244 | Consolidated Financial Statements This section presents Sallie Mae's unaudited consolidated balance sheets and statements of income, offering a detailed view of the company's financial position and performance Consolidated Balance Sheets (Unaudited) This section presents Sallie Mae's financial position, detailing assets, liabilities, and equity as of March 31, 2024, compared to December 31, 2023, showing a decrease in total assets and liabilities Consolidated Balance Sheets (in thousands) | Balance Sheet Item | March 31, 2024 | December 31, 2023 | Change (vs. Dec 31, 2023) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Assets | | | | | Cash and cash equivalents | $3,584,013 | $4,149,838 | -$565,825 | | Total investments | $2,419,039 | $2,557,670 | -$138,631 | | Loans held for investment, net | $20,200,789 | $20,306,357 | -$105,568 | | Total assets | $28,277,282 | $29,169,468 | -$892,186 | | Liabilities | | | | | Deposits | $20,903,456 | $21,653,188 | -$749,732 | | Long-term borrowings | $4,976,882 | $5,227,512 | -$250,630 | | Total liabilities | $26,163,543 | $27,288,671 | -$1,125,128 | | Equity | | | | | Total equity | $2,113,739 | $1,880,797 | +$232,942 | Consolidated Statements of Income (Unaudited) This statement details Sallie Mae's financial performance for the three months ended March 31, 2024, showing increased net income and diluted earnings per common share compared to the prior year, driven by higher non-interest income and lower provisions for credit losses Consolidated Statements of Income (in thousands) | Income Statement Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Change (YoY) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Total interest income | $663,558 | $637,598 | +$25,960 | | Total interest expense | $276,542 | $232,530 | +$44,012 | | Net interest income | $387,016 | $405,068 | -$18,052 | | Less: provisions for credit losses | $12,041 | $114,112 | -$102,071 | | Net interest income after provisions for credit losses | $374,975 | $290,956 | +$84,019 | | Total non-interest income | $174,158 | $21,711 | +$152,447 | | Total non-interest expenses | $161,648 | $156,811 | +$4,837 | | Income before income tax expense | $387,485 | $155,856 | +$231,629 | | Income tax expense | $97,554 | $37,338 | +$60,216 | | Net income | $289,931 | $118,518 | +$171,413 | | Net income attributable to SLM Corporation common stock | $285,278 | $114,455 | +$170,823 | | Diluted earnings per common share | $1.27 | $0.47 | +$0.80 | Notes and Disclosures This section provides essential footnotes to the financial information and a cautionary note regarding forward-looking statements Footnotes to Financial Information This section provides detailed explanations for various financial metrics and accounting practices, including the rationale for discontinuing non-GAAP "Core Earnings" reporting due to its alignment with GAAP results in recent quarters - Sallie Mae discontinued reporting non-GAAP "Core Earnings" because, for the past eight quarters, there has been no difference between GAAP results of operations, net of tax, and non-GAAP "Core Earnings," making the non-GAAP metric no longer meaningful[15] - The percentage of loans in hardship and other forbearances is calculated as the ratio of private education loans in hardship (excluding extended grace periods) to private education loans in repayment and forbearance. Loans in hardship were approximately $145 million at March 31, 2024[16] - Delinquency metrics exclude loans in a loan modification qualifying period, which totaled approximately $214 million at March 31, 2024, where customers must make three consecutive monthly payments to qualify for reduced interest rates and extended terms[17] - Common shares were repurchased under a Rule 10b5-1 trading plan, with $623 million remaining under the 2024 Share Repurchase Program as of March 31, 2024[18] Cautionary Note Regarding Forward-Looking Statements This standard disclaimer highlights that the press release contains forward-looking statements based on management's current expectations, which are subject to various risks, uncertainties, and assumptions that could cause actual results to differ materially - The press release contains forward-looking statements, including strategies, goals, 2024 guidance, and projections, which are based on management's current expectations and beliefs[21] - Forward-looking statements are subject to numerous risks, uncertainties, and other factors, many beyond the company's control, which could cause actual results to differ materially from those projected[22] - Readers are cautioned not to place undue reliance on forward-looking statements, and the company undertakes no obligation to update or revise them to conform to actual results or changes in expectations[23]