Operator: One moment for our next question. Our next question comes from Bill Ryan with Seaport Research Partners. Your line is open.
Bill Ryan: Thanks and good morning. So first question, I want to take a step back to September. And there were some initial indications that there may have been some pickup in federal student loan, FFELP portfolio refi activity, because I believe that you had to consolidate under the direct loan program to qualify for IDR or the proposed IDR guidelines. Obviously with what you did accounting-wise this quarter, it looks like you did think that, well, it really became a non-event. And I’m kind of curious what’s kind of changed in that because initially there may have been some concern and that’s obviously dissipated. And part of that is, does that also mean, the private activity that you’re really not seeing a big uptake in application flow there for refinance either?
Dave Yowan: And so I would, I’ll have to answer the second part first. So on the refi, we are seeing just a small pickup, which you can see from last quarter to this quarter. So that’s primarily driven from borrowers coming from the direct loan program that otherwise would be refinancing before. The first part of your question, I would say over the last year, we obviously saw slower prepayments than we have had in the past two years and more on a normalized or below normalized levels. That has led to, in terms of what we’re witnessing in the portfolio review, that there is an extension of the portfolio. That combined with an increase in the Stafford rates to the borrower without necessarily an increase to what they are paying, because keep in mind those Stafford loans we set every year, but if they are in payment plans where that is a steady payment, that just naturally increases the term.
So all of these indicators are pointing to an extension of the portfolio. However, in saying that, there are a number of opportunities in place today for borrowers to consolidate to the Direct Loan Program. And if you are a distressed borrower or someone who is struggling to make a payment, you should be looking at those programs hard and you should be taking advantage of those and either contacting us or picking up the phone when we call you with these solutions. So I still encourage those borrowers to look at those solutions and what makes sense for them, but at this point, we’re just not seeing it in the activity in our portfolio.
Bill Ryan: Okay, thanks for the color on that. And just one follow-up, and I’m just going to throw it out there. Your discussion of the in-school channel, you’re obviously still very committed to it in the long-term. You talked about the capital intensity and other things. There’s been some discussion that one of your competitors may be looking to dispose of their business or looking for strategic alternatives. It seems like that could alleviate a lot of the pressures. I mean, it overcomes the seasonal growth issue. There’s ways it could be structured, etcetera, etcetera. Is that something that you might consider as an opportunity if such a business becomes available? Thanks.
Dave Yowan: Yes, hey, Bill. Good morning, I appreciate the question. We’re very focused right now on our in-depth reviews, and I wouldn’t comment on what other competitors are doing at this point.
Bill Ryan: Okay, thank you.
Operator: Thank you. [Operator Instructions] Our next question comes from Arren Cyganovich with Citi. Your line is open.
Arren Cyganovich: Thanks. So maybe, Joe, you could talk about the extension of the loan portfolios and how that’s impacting the net interest margins. I see that there’s the big catch-ups this quarter. Seems like things are moving kind of in line. How does that set it up for 2024 as we think about how it’s rolling into next year?
Joe Fisher: Yes, so what I tried to do in my remarks is just remove the significant items in terms of the adjustments that took place here. So give you a clearer look of what occurred in the quarter absent of those. And that’s while we recorded FFELP NIM of 152, 45 basis points was related to that extension. So that 107 is right in our range of 100 to 110 basis points and then similarly with the private portfolio, while we recorded 317, adjusting for that item or closer to 296. So above our guidance. So a lot of moving pieces here in terms of interest rate environment, just borrower activity with various programs that are in place. But I would say at least as we look in the near term and the way that the curve is shaped, that we’re comfortable with the ranges that we’ve given and what we’re seeing.
I would say while the curve is somewhat downward sloping at this point, couldn’t put some pressure on the FFELP NIM. That’s a slight positive for the private portfolio. So somewhat of an offset there.
Arren Cyganovich: Okay, got it. But I guess on the slowing of the in-school origination, I’m a little bit confused to tell you the truth. You’re talking about a doubling of last year’s originations, which was really not that much, a couple hundred million. I mean, relative to the market size, you have competitors who do billions of dollars and the idea of it being too capital intensive, it just seems at least at odds with what we see in the marketplace. And I don’t know if it’s just a matter of you’re just starting from such a slow level. If you have other items that you need capital for in the near term, it doesn’t really hit well, I think, at least from our standpoint.
Dave Yowan: Well, I guess I do view it as capital intensive, certainly relative to other, for example, to other consumer assets, Arren, just given the cost of origination, I think you’re, you have some visibility into the life of loan loss reserve, all those, those two things consume equity capital. And we’re trying to be good stewards of that capital and make sure that when we commit significant amounts to it, we’re earning the right returns on that. We have a 10% equity weight against SLO [Ph] loans, the advance rate on the securitizations of SLO loans, plus the equity we put against it doesn’t fully finance the loans. And so we have to issue unsecured debt in order to finance that, those are the things is particularly given perhaps my background as a balance sheet manager, those are capital intensive on a unit basis.
We’re not capital constrained. It’s not that we didn’t have the capital. I didn’t want to commit that substantial amount of capital over a long period of time until I was more confident that we were going to earn the returns that I think our shareholders expect from us.
Arren Cyganovich: Yes. I mean, I appreciate that it is a more capital intensive product and they are longer duration, but I would just say that you’re either in the business, you’re not in the business and to pull back to that kind of level, at least from prior expectations, it seems, a little at odds.
Dave Yowan: Yes. We are, to be clear, we are in the business.
Arren Cyganovich: Okay. Thanks.
Operator: One moment for our next question. Our next question comes from Jeff Adelson with Morgan Stanley. Your line is open.
Jeffrey Adelson: Hey, good morning. Thanks for taking my questions. Just in terms of the just to revisit the CFPB matter, I guess the question I have, and I know we’re going to get some more detail in the queue later today, but why establish the reasonably loss estimate now? Was there a shift in the conversation? Are you getting, is there anything happening in the, in the ongoing dialogue with the CFPB or is this more like a result of the ongoing review you’ve been doing across the business?
Dave Yowan: So, thanks for the question, Jeff. Look it’s we said that the, accrual and the establishment of the reasonably possible loss that you’ll see in our queue are based on developments in the matter since we last reported through to today. And I think I’ll just leave it at that and I encourage you to read the queue and that may provide a little more elimination.
