SLM
#So Mike, we have now completed the first three months of a 12 month year.
The quarter was very, very strong, but we do have a three-point range in our EPS guidance, $0.49 to $0.51.
I can be constructive and say that the beat certainly moves us towards the higher end of that range, but I think it is a little premature to alter our guidance.
We are very positive on our outlook for the year and we don't see any hidden trapdoors or pitfalls.
But we think the prudent thing to do is to remain our guidance ---+ maintain our guidance for at least another quarter as we watch our performance here.
So actually what we anticipate happening is for the NIM to remain pretty steady through the second quarter and in the third quarter as we start to build cash to position for our peak season and Jan 17 disbursements, we would expect a little bit of a drag on the NIM as we hold higher cash balances earning a negative carry.
But to answer your question for the average for the year we expect to certainly be 560 or slightly above that.
And to the point that <UNK> was making, if you look at our cash balances from the fourth quarter to first quarter they dropped off over $1.5 billion.
Mike, to be totally honest with you we don't really focus on the loan servicing opportunities that exist out there.
It's not really the business that we are in.
It's not something that we've looked at.
It is not something that we've considered.
My guess is that under the non-compete at this point in time we would not be able to participate in that if we wanted to.
But to <UNK>'s point, it is our concentration to originate and service in good form our customers, and we are in a consumer franchise business.
And as you know with the receivables growing 24% maintaining quality there is in any sort of growth scenario, is always a challenge and that will be our focus.
There's at least three parts that we could talk about in regard to that.
The main piece that we should have in our thinking here is that a large part of the first quarter disbursements are actually related to the prior year's contract and sign-offs, and so a typical scenario would be, you know, student gets accepted by school, they go to freshman year in September and they have a second disbursement in the Spring.
As so as we look at the first quarter, it'd be the first four months of disbursements, there's a significant portion of that is related to what we refer to in the industry as serialization of the pre-existing customer and the pre-existing contract.
And so that makes it a little bit cloudy not knowing others' dynamics in regards to that to estimate the size of the market period, but also any changes in the market.
It is the case of course that we are up 8% and prior models would indicate that for the full year the market will be up some number, 5% or so.
So we think we are in a good range but in the first quarter this mix of prior-year, current year and then sort of life changes as things move along, and so I think it is a little bit hard to estimate the share growth, but I would rather be at 8% than 4%.
Sure.
So the $2.9 billion goes into repayment in two separate chunks.
There is a May/June repay wave of roughly $700 million, and then in November/December there is a $1.5 billion repay wave and then the [cats and dogs] come into repayment across that period.
So we are always provisioning for losses for the next year and of course the life of loan allowance for our TDR portfolio.
So the timing will give you an idea as to when to expect the provision to cover those loans entering repayment.
Over the course of 2016 we expect our provision to remain pretty stable throughout the course of the year with the peaks being in the third quarter of 2016.
No.
As we are looking into product, and we had previewed it with many of our partners at the schools, we think that the pricing is extremely competitive and we think that the servicing associated with it is both better and simpler.
And so in regard to the design of a product we have taken the relative competition into account, and we think we're in a good position.
That is the yields we think we are projecting, we think are very competitive as well as very good for our shareholders.
So, <UNK>, the 560 number that I threw out there, upside from that is basis points, in the single basis points, when we do look at, when we do model, we do model with the yield curve factored in there.
And we would expect that if the Fed does raise rates again, and my personal view is that they probably won't, but we would model in that ---+ the cost of our money market deposits would increase by 85% of whatever the increase in Fed funds was.
And I think it is reasonable.
Nobody was really surprised that sector of the bank deposit market did not react to the first Fed funds rate hike in whatever it was,10 years.
But I would suspect that if there is another there probably would be some pressure on that component of the bank deposit market.
Sure, so we will hold steady to a 60% brokered 40% retail ratio.
We and our regulators are very comfortable with that approach.
We do have in our 2016 plan that we will tap the ABS market.
The ABS market does, as I mentioned earlier, look like it is tightening in.
However, if it doesn't get inside of our hurdle rate we will forgo the ABS market and grow our retail and brokered deposit mix, which we are very confident that we would be able to do in the absence of wholesale funding availability.
I don't want to tip my hand to the ABS market.
I'm sorry.
Well we're talking about points to LIBOR, so it would be way south of 3%.
That's right.
We'll start growing our deposit balance in the third quarter and the cash balances will remain fairly lofty through the January disbursements.
I was going to ask you, were you curious about the reset characteristics of the assets and liabilities on the balance sheet.
The third quarter disbursements happen for the most part in August and September.
So we will be starting to tap the various deposit markets in late June, July, August, September, October and so on and so forth.
So there is not that lengthy of a ramp.
No, not really.
I mean the brokered deposit market is pretty price sensitive.
We know where the market is and we place orders and basically they get filled.
Depending upon the name and the timing and the term, we have some leeway in terms of being 5 or10 basis points under or over the market.
But we typically target longer-term funding, [call it] one, two, three, five year CDs and not a lot of guys are out there in those sectors.
But we will also fill in the holes around the three and the six month deposit market as well.
There is a little bit more of a ramp time in the retail deposit market because we will have to start posting our rates in there.
We typically raise money in the MMDA arena and one and three-year CDs.
But the dynamic is pricing and demand elasticity, it's not quantity purchased.
Thank you all for your attention.
It has been a pleasure to report on what we believe is a very strong quarter.
We are off to a good start on all major parameters for 2016.
We believe that the numbers are starting to illustrate more graphically the strength of the franchise.
Spreads are good, we have steady income, our credit is where we want it to be.
We think there's a very viable base on which to grow the franchise.
As you saw, our major revenue-generating asset is growing at 24% versus last year.
We expect that rate to continue, and so it is a real pleasure to be able to report back on these results which of course are the reflection of all the efforts of our entire team.
So thank you for your attention.
