Q2 2024 SLM Corp Earnings Call

Participants

Melissa Bronaugh; Head of IR; SLM Corp

Jon Witter; CEO; SLM Corp

Pete Graham; CFO; SLM Corp

Moshe Orenbuch; Analyst; TD Cowen

Sanjay Sakhrani; Analyst; Keefe, Bruyette & Woods, Inc.

Mark DeVries; Analyst; Deutsche Bank AG

Terry Ma; Analyst; Barclays PLC

Michael Kaye; Analyst; Wells Fargo Securities LLC

Jeff Adelson; Analyst; Morgan Stanley & Co LLC

Rich Shane; Analyst; JPMorgan Chase & Co.

John Hecht; Analyst; Jefferies LLC

Jon Arfstrom; Analyst; RBC Capital Markets

Giuliano Bologna; Analyst; Compass Point Research & Trading, LLC

Presentation

Operator

Good day, everyone, and welcome to the Sallie Mae second-quarter 2024 earnings conference call. (Operator Instructions)
And now at this time, I would like to turn things over to Melissa Bronaugh, Head of Investor Relations. Please go ahead, ma’am.

Melissa Bronaugh

Thank you, Beau. Good evening, and welcome to Sallie Mae’s second-quarter 2024 earnings call. It is my pleasure to be here today with Jon Witter, our CEO; and Pete Graham, our CFO. After the prepared remarks, we will open the call for questions.
Before we begin, keep in mind, our discussion will contain predictions, expectations, and forward-looking statements. Actual results in the future may be materially different from those discussed here due to a variety of factors. Listeners should refer to the discussion of those factors in the company’s Form 10-Q and other filings with the SEC.
For Sallie Mae, these factors include, among others, results of operations, financial condition and/or cash flows, as well as any potential impact of various external factors on our business. We undertake no obligation to update or revise any predictions, expectations, or forward-looking statements to reflect events or circumstances that occur after today, Wednesday, July 24, 2024.
Thank you, and now, I’ll turn the call over to Jon.

Jon Witter

Thank you, Melissa and Beau. Good evening, everyone. Thank you for joining us today to discuss Sallie Mae’s second-quarter 2024 results. I’m pleased to report on a successful quarter and progress toward our 2024 goals. I hope you’ll take away three key messages today.
We delivered strong results in the second quarter and first half of the year. We remain encouraged by the trends we have seen in our credit performance. And third, we believe we are well positioned to deliver solid results for the year by continuing to drive our core business and serve our customers.
Let’s begin with the quarter’s results. GAAP diluted EPS in the second quarter of 2024 was $1.11 per share as compared to $1.10 in the year-ago quarter. Our results were driven by a combination of strong business performance, improvements in credit trends, and a gain on our second loan sale of the year.
Loan originations for the second quarter of 2024 were $691 million, which is up 6% over the second quarter of 2023. In the quarter, we have seen slight year-over-year improvements in credit quality of originations, with cosigner rates increasing to 80% from 76% in the second quarter of 2023, and the average FICO score increasing 5 points from 747. to 752.
We continue to be pleased with our credit performance through the second quarter. Net private education loan charge-offs in Q2 were $80 million, representing 2.19% of average private education loans in repayment. This is down 50 basis points from the second quarter of 2023 and better than our expectations.
Our enhanced payment programs are proving to be a useful tool in helping our borrowers work through periods of adversity while establishing positive payment habits. We saw both delinquencies and forbearance decline this quarter over the year-ago quarter. We remain optimistic about future performance as we observe continued roll rate improvements in our late-stage delinquency buckets as compared to this time last year.
The $1.6 billion loan sale that we executed in the second quarter generated $112 million in gains. The balance sheet growth expectations for the year remained at 2% to 3%. In the second quarter of 2024, we continued our capital return strategy by repurchasing 2.9 million shares at an average price of $21.17.
We have reduced the shares outstanding since we began this strategy in 2020 by 51% at an average price of $16.03. We expect to continue to use the gain and capital released from loan sales to programmatically and strategically buy back stock throughout the year.
Pete will now take you through some additional financial highlights of the quarter. Pete?

Story continues

Pete Graham

Thank you, Jon. Good evening, everyone. Let’s continue with a discussion of key drivers of earnings. In the second quarter of 2024, we earned $372 million of net interest income, which equates to a net interest margin of 5.36%.
While we expected NIM compression in 2024, as funding rates catch up to our asset yields, we are ahead of our business plan and pleased with the NIM performance. We continue to believe that over the long term that the low mid to 5% range is the appropriate NIM target.
Our total provision for credit losses on our income statement was $17 million in the second quarter of 2024. The provision this quarter was primarily affected by the release of $103 million associated with the $1.6 billion private education loan sale that we completed during the quarter, an improved economic outlook offset by volume growth for new loan originations.
Our private education loan reserve at the end of the second quarter is $1.3 billion, or 6.1% of our total student loan exposure, which includes the on-ballot sheet portfolio plus the agreed interest receivable of $1.4 billion. Our reserve rate shows improvement over the 6.5% reported in the year-ago quarter and is consistent with levels experienced at the end of the first quarter.
This positive trend in our reserve rate reflects the seasoning of our improvements in credit and collections practices, as well as marginal improvements in the credit quality of originations. Private education loans delinquent 30 days or more were 3.3% of loans in repayment, a decrease from both the 3.4% at the end of the first quarter as well as from the 3.7% at the end of the year-ago quarter.
As Jon mentioned earlier, we believe our loss mitigation programs are helping our borrowers manage through periods of adversity and establish positive payment patterns. When adjusting the numbers that I just discussed to remove the borrowers who were in delinquency while they make repayments at their modified rate, loans delinquent 30 days or more becomes 2.8% of loans in repayment as compared to 2.7% at the end of the first quarter and 3.3% in the year-ago quarter.
We spoke last quarter about the increased usage of our enhanced loss mitigation programs and the effect that had on both delinquencies and forbearance. As we have observed the performance at the launch of these programs over the past quarter, we’re pleased with the level of success.
The level of new enrollments in our enhanced programs is normalizing, and the majority of borrowers enrolled in our extended grace program, which drove most of the increase in our forbearance enrollments in the first quarter, have exited in May and June. And while early days, delinquencies for those loans since their exit have been in line with our expectations.
The success rate for borrowers in our loan modification programs making their three qualifying payments is within or better than our expectations, with the vast majority of borrowers completing those payments and returning to current status.
Approximately 84% of borrowers in loss mitigation programs at the end of the second quarter are making loan payments, as compared to 64% making loan payments in programs pre-COVID. We believe that these enhanced programs are working as intended in helping our borrowers gain their financial footing. As we continue to monitor the performance, there may be an opportunity for us to further optimize eligibility for these programs.
The second-quarter non-interest expenses were $159 million compared to $162 million in the prior quarter and $156 million in the year-ago quarter. This was a 2% increase compared to the second quarter of ’23.
Finally, our liquidity and capital positions are solid. We ended the quarter with liquidity of 24.4% of total assets. At the end of the second quarter, total risk-based capital was 14.7% and common equity Tier 1 capital was 13.4%.
Another measure of loss-absorption capacity of the balance sheet is GAAP equity plus loan loss reserves over risk-rated assets, which was a very strong 17.3%. We believe we’re well positioned to continue to grow our business and return capital to shareholders going forward.
I’ll now turn the call back to Jon.

Jon Witter

Thanks, Pete. I hope you agree that we executed well in the second quarter and that you share my belief that we have positive momentum for the full year of 2024. Let me briefly touch on the delays and technical issues associated with the Department of Education’s recent launch of the new FASFA reform and its implications for our business.
The delay in the FASFA forms’ rollout has been primarily due to the complexity of the overall process. Given the delayed availability, families completed the form later, causing schools to be delayed in processing and delivering financial aid packages to students and families. This has led to uncertainty for many students and families regarding the exact dollar amount of private loans needed for school.
Through mid-July, the FAFSA completion rates for high school seniors are down approximately 11% year over year. with completion corrections still being processed. At this point, we believe that these issues have caused a small decline in application volume through the first six months of 2024.
To date, our volume plan remains aligned with our expectations, primarily due to operational and marketing improvements that have allowed us to offset this decline in applications. Our expectation is that the issues with the FAFSA will be remedied and that schools will catch up and process financial aid applications.
In this case, the impact on overall school enrollment would be minimal, although our peak season will likely be elongated and back-end compressed. If the decline in applications does not rebound and translates into a true decline in enrollments, we remain confident in our volume expectations on the year but with less opportunity for us to perform at the higher end of our guidance range.
The allowance incorporated into our EPS guidance assumes that we are able to end the year with originations at the higher end of our range. Externally, we continue to partner with our schools to assist families through this process. Through the calculation tools available on our website, our scholarship search capabilities, and other materials we provide to families, we are here to help make the peak season as frictionless as possible.
Internally, we are prepared for an elongated peak season with back-end compression and have enhanced our staffing, improved digital and other self-service capabilities, and taken other actions.
Let me conclude with a discussion of 2024 guidance. As I mentioned earlier this evening, our loan sale activity for the year has been at prices that were in line with and slightly favorable to our expectations. In addition, six months into 2024, we have not yet seen the reduction in interest rates expected when we originally set guidance.
Given these two factors, as well as the continuation of positive credit performance, we are updating our range for GAAP-diluted earnings per common share. We now expect full-year 2024 GAAP-diluted EPS to be between $2.70 and $2.80 per share.
The success to date with the usage of enhanced loss-mitigation programs has led to better-than-expected credit performance through the first six months of 2024. And we believe that this trend should continue through the remainder of the year.
The impact of this success has caused us to revise our outlook on total loan portfolio net charge-offs, which we now expect to be between $325 million and $345 million. We expect net charge-offs, expressed as a percentage of average loans in repayment, to be between 2.1% and 2.3%.
At this time, we are reaffirming the 2024 guidance that we communicated on our last earnings call for the private education loan originations’ year-over-year growth, as well as non-interest expense metrics. With that, Pete, why don’t we go ahead and open up the call for some questions?

Question and Answer Session

Operator

(Operator Instructions) Moshe Orenbuch, TD Cowen.

Moshe Orenbuch

Great, thanks. And thanks for taking the question. I guess, Jon, what’s the outlook in terms of when will you know how successful or unsuccessful the — essentially, the FAFSA fixes and college enrollments and therefore your loan origination will be, and could you also just talk a little bit about how you’re viewing kind of the competitive environment at this stage?

Jon Witter

Yes, Moshe, happy to touch on those, both those questions. First of all, I think it’s fair to say we are gaining more confidence in the, what I’ll call, the faster catch up each and every day. So we trend sort of this year’s completion rates for high school seniors versus past years. That gap is narrowing. We obviously track our application volumes on a sort of day-into-peak-season basis. We are seeing that application gap narrow over time.
So I think we believe we are starting to see positive signs of sort of what I described in my prepared remarks of schools catching up and the gap closing and potentially not translating into a true loss in enrollment.
Not to sound smart about it, I think at the end of the day, it will be sort of into the third quarter before I think we really have a good sense of how peak season ends. And I do think we expect it will be a little bit later than it normally is because we expect that schools will be later in sending bills.
They will likely give — some schools will likely give students more time to remit. And my guess is there could even be some of these situations, school by school, that stretch into the fourth quarter. But I think we feel, certainly by the end of the third quarter, we should have a pretty good sense of it. But I don’t want you to think we’re waiting for them. We do see sort of the good early signs of progress.
I think the competitive intensity motion to the second part of your question, my answer here is going to sound I think a lot like we have discussed in past years. We compete in a nicely competitive market. We’ve got good strong competitors out there who want to serve the very same customer that we do.
We always see aggressiveness around marketing spend, especially at the early part of peak season. And I think we’re seeing that this year too, maybe even a little touch more given some of the slowness in applications coming because of the FAFSA delays. But it’s nothing that I think causes us undue concern.
We continue to exercise great discipline in optimizing our marketing channels and sort of not spending in places where we don’t think we’ll get the return. So we like all of that, and I think we are well positioned to meet our origination goals for the year and somewhere within that range and look forward to seeing how peak season continues to unfold.

Moshe Orenbuch

Great. And just on the credit side, if — you did talk about the success of the modification and other programs. Just two things. I mean, Pete, you said you could potentially further optimize the eligibility for those programs. I’m wondering if you could expand on that a little bit. And maybe just talk a touch about the protections that you have or that investors have in terms of how these perform and what causes them to be successful or what happens if they’re not.

Jon Witter

Moshe, why don’t I see if I can take that, and Pete, feel free to sort of weigh in here. In terms of the optimization. If you go back and you think about the strategy we’ve been employing, we had previously a very flexible, very broad forbearance program. And that worked well in its flexibility.
What we’ve been working to replace it with is a series of more segmented and targeted programs that more closely match the needs of each of our customers who are — who is requesting assistance.
I think as we’ve opened up those programs, we have opened up with a little bit wider eligibility. I think there’s a possibility for us to tighten that down a little bit. So that could be both tightening in terms of moving people from slightly more generous to slightly less generous programs.
And on the margin, it could also be slight tightening in terms of people not qualifying for the programs because we actually believe that they or their co-signer has the ability and willingness to pay without assistance and would want to sort of pursue that avenue further.
I think it’s important to note that we have a pretty rigorous analytical and test and control structure and framework that we put around that. So ultimately, I think the way that we judge success is both on a sort of absolute and a relative basis.
On an absolute basis, we look at the sort of metrics throughout their time in the program and then their performance after the program. Are they making the qualifying payments? Are they coming current? Do they stay in the programs once they’re there? What’s the early stage delinquency immediately after they leave the payment?
Those would be those kinds of absolute metrics that we would look at. And certainly, as more time goes by and we have an even greater window to look back on, we would want to understand how these customers perform against other customers in like scenarios with like characteristics.
We also do that in a relative way through our testing control capabilities. So ultimately, what we’re looking for is on both absolute terms that people perform well against those metrics and on a relative basis that we’re getting lift versus what we would have expected had the program not been offered.

Moshe Orenbuch

Great. Thanks very much.

Operator

Sanjay Sakhrani, Keefe, Bruyette & Woods.

Sanjay Sakhrani

Thanks. A question on the big competitor now officially out of the market. I guess as we look towards the second half of this year, are you guys assuming share gains as it relates to that? And then just on a related note, I mean, they sold their portfolio at a pretty attractive gain on sale for the size of their portfolio. I mean, is there any read across to what you might potentially get as a gain on sale?

Jon Witter

Yes, Sanjay, it’s Jon. Why don’t I take the first, and I’ll let Pete take the second of your two questions? Yes, we absolutely built into our originations plan gains from large competitors or a large competitor leaving the marketplace. That is certainly part of our expectations, and I think that’s true in this case. And I think we’ve seen those types of share gains when other large competitors have left the space in the past.
To maybe give you sort of a bonus answer to your question, it is hard for us to track exactly what of our business would come from a competitor leaving that would have otherwise gone to that competitor versus ours. But we do look at a series of proxies.
So for example, we can look at how many of our new to firm originations are coming from customers who have, say, that competitor’s trade line in their bureau. Now we don’t know exactly what the trade line is for. It could be for any of the products that that competitor offers.
But what we have seen is a nice increase in the first six months of the year of our new to firm originations coming from customers with a trade line of the competitor that you are asking about. And I think we are seeing that increase accelerate over time. And that is 100% consistent with what we would have expected to have happened.
If you remember, this competitor effectively exited the business after the mini peak season of spring enrollment. So we would have expected to have done perhaps a little better in the first quarter, maybe a little bit better in the second quarter, but we are seeing that improvement grow. And we expect that to continue to accelerate as we get into the true heart of peak season, where those customers are really up for competition for truly the first time.
Pete, let me hand it to you on the loan sale.

Pete Graham

On the loan sale, I think there’s one caveat in that it’s not necessarily an apples-and-apples comparison because the overall book of business that that competitor had was slightly better credit quality on the margins than our book. So that’s one.
I would say our recent loan sale, on a kind of a gross premium basis, is probably slightly better than the overall premium that they got. And so that’s probably reflective of they’ve got a marginally higher credit quality book, but they had a much bigger size of transactions, so it took some discount for size there.
I think in terms of the overall backdrop, though, our expectation is that this just builds demand for the asset class. And there were multiple bidders that were ready to take down that entire portfolio, did the work to get up to speed on the asset class and be ready to invest. And only one of the consortiums that were bidding won.
And so what we saw after the similar process from [the exit] was there were a lot of people who were studying on the asset class and were eager to put money to work. And that had a benefit both in terms of demand for whole-month sales but also demand for securitization funding that gets done regularly in the space. So we’re encouraged by the success of that transaction.

Sanjay Sakhrani

Thank you. Just one follow up on the loss mitigation program impacts. I guess, given the success of these programs, do you anticipate sort of where you think or thought steady-state charge-off rates would be to be better than before? So I mean, maybe you can just give us a sense of sort of where you see the charge-off rate migrating. Are we hitting that point now or can it go lower?

Pete Graham

Yes, again, I think we’re still consistently viewing the long-term goal as being kind of high ones, low 2% net charge-off rate and noting that our — the updated guidance for this year is sort of touching at the low end of the range for this year, the top end of that sort of guidance for the longer term.
So we’re encouraged by the success of the programs, and we think it’s accelerating our journey that we thought we were already on, but no real change in long-term view in terms of the overall goal that we’re looking here to.

Sanjay Sakhrani

Okay. Thank you.

Operator

Mark DeVries, Deutsche Bank.

Mark DeVries

Yes, thanks. I believe, in the release, you alluded to some improvements from your loss-mitigation efforts on some of the roll to default rates. But it looks like most of the DQ improvement is kind of early stage. Where in the credit metrics can we kind of see that manifested?

Jon Witter

Mark, I think the way that I would think about it is as the programs sort of continue to sort of normalize in terms of entry rates and population in the credit programs, I think you should see the impact through most stages of delinquency, maybe not quite so much at the very end stage of delinquency.
There’s, I think, the potential for a little bit of numerator and denominator map here. As you sort of help more customers early on, those are fewer that will flow through and cure in the later buckets. So my guess is you’ll see most of the impacts in the earlier to mid-stage delinquency buckets.
You might actually see some counterintuitive metrics in the later buckets, depending on sort of how those — how the mix of customers change there.
But I think, ultimately, what you should really pay attention to is what’s happening to net charge-offs. Because we will effectively help customers at different points through their journey. But the real payoff is, are we getting close to that high 1, low 2 net charge-off rate that Pete talked about. So ultimately, that’s what I would look at.

Mark DeVries

Okay, great. And how are you thinking about managing the risk of repayments if we get a material drop in interest rates here? Is there anything you can do around loan sales to kind of sell off loans from borrowers who might appear to be higher risk?

Jon Witter

Yes, Mark, I think — we certainly believe that consolidations today are sort of below normal levels given the interest rate environment. I think, as a matter of sort of historical course, though, I would remind folks that even during the incredibly low interest rate environment post-Great Recession and certainly through COVID, consolidation volume was a modest sort of nuisance to the financial performance of the business. But it was not a major drag to the overall performance of the business.
And so I think at the end of the day, if it wasn’t a major drag when rates were as incredibly low as they got, I think it is our belief that while we will see some rate decline over the course of the quarters and months ahead, we’re probably or almost certainly not going back to the levels we saw. So again, I give you that, Mark, just as historical context.
I think within that context, we continue to look for ways to proactively identify customers who are likely to attrit. We have not found the code yet that allows us to go and refinance customers proactively. The cannibalization math of doing that just doesn’t make economic sense for us today.
But we certainly continue to look at all of those strategies, and candidly, as we develop deeper and deeper data relationships with our customers, which we’re doing today, we would expect to perhaps have better luck at that in the future.

Mark DeVries

Okay, great. Thank you.

Operator

Terry Ma, Barclays.

Terry Ma

Hey, thanks. Good evening. So if I look at your loans and modification as a percentage of loans repaid, it kind of improved about 20 basis points sequentially. But the delinquency rate, X those mods, kind of increased 10 basis points. How should we kind of interpret that? And how much of the increase, I guess, is seasonal versus just some of the loans that exited not going into delinquency?

Pete Graham

Yes, again, I think there’s going to be some noise quarter to quarter in those metrics. I think the overall thing that we’re looking at is the broader trends and success of those borrowers. So I wouldn’t necessarily try and parse and read too much into quarter-on-quarter movements in those.

Jon Witter

And I do think there is meaningful seasonality in those numbers. For example, we certainly know that more customers experience financial distress early after repayment. And so with the large November prepayment wave and other smaller waves throughout the course of the year, you can get a little bit of lumpiness, as Pete has described.

Terry Ma

Got it. So that was my follow-up question. Should we kind of expect a new seasonality to emerge with your credit metrics? Because historically, delinquencies have followed the two big repay waves, and then they just kind of roll the charge-offs.
But now you have this kind of interaction between the loan mods, entry into mods and exits, and the extended grace periods. So should we kind of expect just some sort of new seasonality to emerge or is it just going to be kind of lumpy?

Jon Witter

Yes, I think there probably will be some new curves that that reemerge. I don’t know that we yet have enough experience, just barely one year in, to really estimate what those are. But certainly, for example, if early stage customers are taking advantage of things like extended grace, which we think is an absolutely fabulous program and again very targeted only at people who are brand new to repayment, that could certainly elongate for some of those customers their trip to delinquency if they would have gotten there anyway.
We think it will actually prevent a bunch of customers from coming delinquent too. So you have both of those effects playing out. So I think the simple answer is yes, I would expect that the delinquency trends may change a little bit, maybe more month by month than quarter by quarter. But I’m not sure we have enough experience to provide great guidance on to exactly what those gives and gets would look like.

Terry Ma

Okay. Got it. Thank you.

Operator

Michael Kaye, Wells Fargo.

Michael Kaye

Hi. The new EPS guide at the midpoint is [$2.75]. If I back out the [$2.39] in the first half, that implies just about $0.36 EPS for the second half. I mean, that seems a lot lower than our estimates and likely consensus too.
I know you don’t give any quarterly EPS guide by quarter, but I just wanted to talk a little bit about the dynamic that’s happening. Is that implied lower second-half EPS really driven by Q3 where you probably have a — is it perhaps a loss in Q3 given the large CECL reserving for peak season? Is there any other drivers, or maybe it’s just some conservatism on EPS?

Pete Graham

Yes, I think I would point you back to the comment that Jon made in his prepared remarks that our assumption around provisioning and CECL provisioning in the second half of the year assumes we’re going to go the higher end of our guidance range on originations, and that’s going to be a primary driver of lower earnings coming out of peak season because we have to provision upfront for new originations. That’s where most of our originations comes in the year.
I think if you look back at historical quarterly sort of trends and strip out long sales, I think you’d see that we tend to have lower quarterly earnings in the second half of the year than we do in the first half of the year.

Michael Kaye

All right, and second question was about the share repurchases. It looks like according to my math, only about $89 million was repurchased in in the first half. Are you still committed to doing, let’s say, $325 million share with purchases in in 2024? And I get that just by taking the 650 authorization divided by 2.

Pete Graham

Yes, so I would sort of point you back to what we started with in the first quarter, which is we’re going to be programmatic in our share with purchases throughout the year, and we’re going to stage the programs as we complete loan sales.
So when we completed the loan sale in February, that generated an amount of capital that we put into a program that’s been running. And when we completed the second loan sale in the second quarter, that generated another pot of capital that could be deployed and that we implemented a plan. So you will see it take up modestly second quarter versus first, and you’ll see that continuing as we move through the year.

Michael Kaye

I mean, is the intention to do $300 million in costs this year? I mean, it seems like it’s programmatic. It’s a lot slower paced than at least what I was expecting.

Pete Graham

Yes, again, we gave some broad guidance as to what the authorization was and roughly how that was going to split out. We have not given specific guidance, so we’re only on exactly the level that we’ll obtain this year.

Jon Witter

But the broad guidance has not changed.

Michael Kaye

All right. Okay, thanks.

Operator

Jeff Adelson, Morgan Stanley.

Jeff Adelson

Hey, good evening. Thanks for taking my questions. Yes, I guess, looking at the 10-Q, I did notice that it looks like you implemented a new loan level future default rate model to come up with the reserve going forward.
So I guess just maybe give us some color into the decision to change that and what sort of changes in the process or reserve level we might be able to expect from such a change in the model.

Pete Graham

Yes, I think what I would say there is most organizations look to continually improve their capabilities around modeling. And we’re no different in that regard. We completed a very fulsome process of model development and implemented those models in our process in the second quarter.
The models themselves were an improvement over the prior generation models. And as a result, absolute level of overlays that are involved in the process were reduced as we implemented those. But when you take the old model plus overlays and the new model plus overlays, the difference was not a material difference. Just more of an improvement in precision of the computational tools that we have that we’re employing in the process.

Jeff Adelson

Got it. Thank you. And just as my follow up, just to circle back on the commentary on how you’re thinking about maybe tightening up on the eligibility for the loss-mitigation programs, I guess, are you finding that they’re just almost too successful? Like you’re just for growing revenue and you’d rather retain more of that?
Or just why not maybe expand on that a little bit more, just given — I think you were doing a lot higher level of that pre-COVID on the forbearance side. And I was also curious if you could maybe dive into a little bit on the differences in success rates of performance you’re seeing in the extended grace versus the modification side. Thanks.

Jon Witter

Jeff, I think on your question on the why optimize, first and foremost, I think it’s important to say we want to help every customer that is experiencing financial difficulty regain their financial footing if they have the ability and willingness to do so.
At the end of the day, we think that is a great economic answer. It is more importantly a great customer answer. If there’s ways that we can help someone who has the willingness, has the ability to regain their financial footing, we want to be there.
With that said, every single time we help a customer do that, there is some economic cost to that. And that economic cost can be through a rate reduction. It can be through a rate pause. By the way, that can be impactful to us.
By the way, some of the policies also have the potential of elongating a loan, which increases the total interest expense to a customer, and that makes it more expensive for them. And so I think this is a case where you really want to be as tailored, and you want to be as precise as you can in how you help people.
In a perfect world, you would have an individual program tailor made for each person to their individual case and give them the exact level of accommodation that they needed and no more. That’s impossible to execute. It’s impossible to operate. And by the way, we could never know with that kind of precision that people wanted.
So I think the whole point of a test-and-learn capability is for us to begin to sort of continue that optimization program, help people with the exact right amount that they need to get back on their feet, but hopefully not help them to a degree that’s more than that, which may not be as great for our shareholders or may not be as great for them as individual borrowers.
We will always look to optimize that, but again, I want to really stress, I think the goal is to make sure that we are helping customers get back onto good financial footing if they have the ability and the willingness to do so.
In terms of the performance of extended grace versus the other programs, as you can imagine, Pete and I get regular data. I don’t think we’ve seen any material difference in terms of sort of the success rate relative to expectation of those programs. I think we’re happy with the absolute performance of both those programs and really don’t see any material sort of distance or space between them.

Operator

Rich Shane, JPMorgan.

Rich Shane

Hey, guys. Thanks for taking my questions this afternoon. I’d like to sort of dive in a little bit deeper on the buyback. One observation, your cash position is as high as it’s ever been. To some extent, that makes sense headed into what should be one of your strongest peak seasons or your strongest peak season ever, but that has historically also been coincident with the pickup and your repurchases.
So I’m curious how we should think about that. You say in the press release, there’s $562 million remaining under the authorization. I believe that that runs out seven quarters. Is that correct? And should we sort of assume some even distribution in that remaining $562 million over that horizon?

Pete Graham

You’ll recall that when we obtained that authorization in the in the first quarter, it was a two-year authorization program. And what we said was we would roughly look to deploy that half and half over the two years.
And so that coupled with what I said previously to the prior question, we’ve been very transparent in terms of how we’re going to operate the program this year, funded sequentially with proceeds from completed loan sales and be programmatic in the deployment of that share repurchase capability.
So that’s part of the reason for the elevated cash balance. But also to your point, we do anticipate needing funding during the peak season, and so we tend to build for that. But other than that, I can’t really comment on the programs themselves.

Rich Shane

Got it. Okay. A small, sort of weird question. The cosine rate seems to dip down in the second quarter every year. Is there something in the nature of second quarter originations? Is it a different borrower type? Is it a different constituency that drives that? Or I’m just seeing randomness in the data?

Pete Graham

Yes, I think, just — if you think about the traditional college cycle and enrollments, it’s kind of a fall and spring enrollment cycle and that’s where the disbursements are. So by its nature, second quarter is going to be off that cycle. It’s going to be — it’s our smallest quarter, traditionally, of the year and it’s going to be non-traditional types of disbursements during that time period.

Rich Shane

Yes, that’s what I thought. Hey, and then one observation, anecdotally, Jonathan, schools don’t seem to be building later this year.

Jon Witter

Please send us your experience. We’d be interested in that. We know some are, but we want to hear about yours, and I hope your kids are having a great experience.

Rich Shane

They sure are. Thank you so much. Hope you guys are well.

Jon Witter

Take care.

Operator

John Hecht, Jefferies.

John Hecht

Good afternoon, guys. Thanks very much for taking my questions. Actually, my primary questions have been asked and answered, but I am curious as to your perspective on deposit pricing trends and how that might influence net interest margin in the coming quarters.

Pete Graham

Yes, look, we’re not a market leader in terms of setting pricing in deposits. And so we monitor that regularly, and we tend to be a follower on sort of posted rates and tend to be kind of in the middle of the pack in terms of rate-based deposit gatherers.
I will say that coming into this year, some of the market leaders were pretty aggressive in reducing their posted rates. And that’s backed up a little bit in the second quarter. So there’s some volatility as the overall rate environment has not changed a whole lot.
But my expectation is that as we start to get into Fed funds, rate cutting, that the primary posted rates for demand deposits are going to move kind of in lockstep with those rate decreases. And you’ll continue to see a modest lag on pricing of term deposits. And depending on the needs of the deposit gatherers, you’ll see ebbs and flows in terms of pricing of different tenors in the CD space.

John Hecht

Okay, that’s a good insight. A follow up is tied to the cadence of your loan sales. I went into this year thinking you were going to do a sale in the first quarter and the third quarter. You’ve done it in the first two quarters. I know, obviously, market conditions are key along with originations, but how do you prioritize the timing of the loan sales? Is there any kind of way for us to think about modeling it going forward?

Pete Graham

Yes, I would just say on this year, we definitely took advantage of what we thought was optimal market conditions in the second quarter to execute the second sale and appreciate that it’s hard to kind of model something that’s been very market driven. But we’re glad to be largely done with our loan sales for this year given what we think could be an environment of volatility in the second half of the year.

John Hecht

Great. Thank you so much.

Operator

Jon Arfstrom, RBC.

Jon Arfstrom

Thanks. Good afternoon. John Hecht took a couple of my questions, but for Jon Witter, you mentioned earlier that the faster issues may have caused a small decline in volumes for you in the first six months. Any estimate in terms of how much that was? As you’re thinking about some of these issues, you would have been closer to your 7% to 8% expectation.

Jon Witter

I think we’re largely exactly where we thought we would be for the year. I think always said that the growth this year would be A Tale of Two Cities there, Jon. In our business, spring follows fall, fall doesn’t follow spring. So the originations we’ve done this year really follow off of the peak season we had last fall.
I think the chance to pick up share gains to one of the earlier questions and start to get to that higher origination growth was really a peak season phenomenon, so something that we would expect to see starting to happen now.
And just while we’re dealing with the question, I think we also said in a previous call that as the large competitor exits the market, you should not expect to see all of that share come in one year. It won’t be one big year. It will be two medium years because we’ll do hopefully better this fall. But then next spring, we will follow that again and hopefully do better there.
So I think we’re exactly where we thought we would be for the year, despite the fact that applications are a little bit below where we expected them to be. And again, incredibly proud of the team for working hard around things like funnel optimization and marketing channel and program optimization to sort of get better pull through on the applications we did get. But I think it’s really a peak season, fall versus spring phenomena, that you’re seeing.

Jon Arfstrom

Okay, that’s good color. And then, Pete, one for you, a cleanup on expenses. The high end versus the low end of the range, is that simply volume driven or is there something else to think about there? Thank you.

Pete Graham

It’s largely — our focus is on delivering against the guidance that we’ve given there. I mean, I think to the extent we spend more on marketing, that’s a variable that we’ll evaluate going into and through the end of peak this year.
But largely, we have begun to transition to be more heavily focused on fixed-rate exposure. Think investments in technology, self-service capabilities and the like, and less a volume of people thrown at the problem type of organization. And so that’s why the range is as tight as it is to begin with.

Jon Arfstrom

Okay. All right. Thank you. Appreciate it.

Operator

Giuliano Bologna, Compass Point.

Giuliano Bologna

Congrats on a great quarter. Great to see the loan sales executed very well. The one thing I was curious about was obviously there’s that question about the mix of fixed versus floating. I’m curious. When you think about how — just your higher education loan yield starts to trend to lower this quarter. I’m curious if there’s any sense of where that should drift over the next few quarters, and how we should think about the cadence over the next few quarters here.

Pete Graham

I think your question was about fixed versus floating mix originations if I got that right.

Giuliano Bologna

And also how to think about the yield on the portfolio over the next few quarters. You came down 10 basis points one quarter. I’m curious if there’s anything that drove that specifically or an efficient — if the yield trended a little bit lower here.

Pete Graham

Yes, so a couple of points there. One, over the last couple of peak seasons, we have trended to more fixed-rate origination versus variable rate origination, and that has skewed the overall book currently to be more fixed rate. Our expectation over time is that that mix of originations will trend back more to historic norms and come back more 60-40 or 50-50.
So in terms of outlook for the future, that would be my point there. I think in terms of changes in the overall rate this year, quarter to quarter, the blended rate on the portfolio, that’s probably more driven by the impact of the loan sales that we’ve done during the period because we’re taking kind of a slice of the book and selling that off.
I wouldn’t read anything more into that than that dynamic. The portion of the book that is floating rate will reprice and sell for primarily on a monthly basis. But given the heavy skew towards fixed rate, it’s not really going to move all that much quarter to quarter.

Giuliano Bologna

No, that’s very helpful. I appreciate it. I’ll jump back in the queue.

Operator

Gentlemen, it appears we have no further questions today. Mr. Witter, I’d like to turn things back to you, sir, for any closing comments.

Jon Witter

Thanks so much for your help today and thanks to everyone for dialing in and your interest in Sallie Mae. We look forward to talking to you next quarter about the third-quarter results. And with that, Melissa, I’m going to turn it back to you for some closing business.

Melissa Bronaugh

Thank you for your time and questions 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.

Operator

Thank you, Ms. Bronaugh. Ladies and gentlemen, again, this concludes the Sallie Mae second quarter 2024 earnings conference call and webcast. Please disconnect your lines at this time and have a wonderful evening.