Navient Corporation (NASDAQ:NAVI) Q3 2024 Earnings Call Transcript

Navient Corporation (NASDAQ:NAVI) Q3 2024 Earnings Call Transcript October 30, 2024

Navient Corporation beats earnings expectations. Reported EPS is $1.45, expectations were $0.25.

Operator: Good day, and thank you for standing by. Welcome to the Navient Third Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Jen Earyes, Vice President, Investor Relations. Please go ahead.

Jen Earyes: Hello. Good morning, and welcome to Navient’s earnings call for the third quarter of 2024. With me today are David Yowan, Navient’s CEO; and Joe Fisher, Navient’s CFO. After their prepared remarks, we will open up the call for questions. A presentation accompanies today’s discussion, which you can find on navient.com/investors. Before we begin, keep in mind our discussion will contain predictions, expectations, forward-looking statements, and other information about our businesses based on management’s current expectations as of the date of this presentation. Actual results in the future may be materially different from those discussed here. This could be due to a variety of factors. Listeners should refer to the discussion of those factors on the company’s Form 10-K and other filings with the SEC.

During this conference call, we will refer to non-GAAP financial measures, including core earnings, adjusted tangible equity ratio, and various other non-GAAP financial measures that are derived from core earnings. Our GAAP results, description of our non-GAAP financial measures, and the reconciliation of core earnings to GAAP results can be found in Navient’s Q3 2024 earnings release, which is posted on our website. Thank you. And I now will turn the call over to Dave.

David Yowan: Thanks, Jen. Good morning, everyone. Thank you for joining the call and for your interest in Navient. The third quarter was highly productive along our transformation journey. Our results reflect healthy loan origination growth, strong expense discipline, lower levels of FFELP prepayments, and includes several other significant items. As a result, we are more than doubling our targeted share repurchases in the fourth quarter compared to the third quarter. We variablized a significant part of our expense base by outsourcing loan servicing to a third party. We recently completed the borrower conversion and are working to ensure a seamless transition for borrowers. We reached agreement with the CFPB to settle the nearly decade long investigation and litigation.

This puts these issues and the overhang of contingent liability behind us in a way that’s consistent with our go-forward activities. We set out to explore strategic options including divestment for business processing solutions. These businesses were not being fully valued within Navi and they were not at sufficient scale to be cost-efficient. Outsourcing servicing will lower our overall costs over time, but would increase shared service allocations, especially IT to BPS. Divestment of BPS now enables us to substantially reduce operating expenses across the enterprise. We determined the most beneficial divestment strategy was to separate healthcare from government services. These businesses have different growth, margins, valuation multiples, and customers.

We closed on the sale of our healthcare business at a price of $369 million. This is an outstanding outcome that we think reflects the full value of that business. We remain in active discussions about the sale of government services in which growth, margins and multiples are far lower than in healthcare. Government services operations rely much more heavily on shared service infrastructure than healthcare. These shared service expenses are not justified by the future revenues of the government services businesses, which will be impacted by developments during the quarter on key contracts. We’ve recorded a write down of the goodwill associated with government services as a result of these developments. We took additional steps to further reduce our corporate footprint.

Our results for the quarter include restructuring expenses reflecting rightsizing actions. Turning to our core growth business, Ernest showed strong loan growth in the quarter across refi and in school products. Year-to-date loan originations were $1.37 billion, 39% higher than last year. We are in good position to meet our planned origination volumes for the year. The Fed rate reductions in September and the current yield curve imply a lower rate environment into 2025. We have the readiness and the capacity to capitalize on expanded demand for our student loan refinance product when customers take advantage of opportunities to lower their rate, payments or both. The tremendous progress we’ve made provides visibility into the remaining steps to complete outsourcing in healthcare, divest government services and eliminate expenses.

We continue to believe the robust cash generation and significant expense reductions that we anticipated from these actions are achievable. The elimination of shared services expenses will likely occur several quarters after the divestment of government services with incremental reductions occurring along the way. We are adding $40 million to our planned share repurchases in the Q4, which result in a doubling of the amount we purchased in the third quarter. Additionally, we retired this month’s unsecured debt maturity in the Q4 with cash on hand. After these uses, we are confident in our capacity to fund incremental loan origination volume that a lower rate environment might present. Our 2025 business plan will include a capital allocation among investments in loan growth, debt reduction and distributions that we feel best positions us to deliver value to shareholders.

I want to take a moment to acknowledge the work of colleagues across the company who made the Q3 so tremendously productive. I’m proud of the work they’ve done and the way they’ve come together and committed themselves to our transformation journey. Next, Joe will share our results for the quarter, which reflects strong performance against certain key metrics, includes some additional special items. With that, let me turn it over to Joe. I look forward to your questions later in the call.

Joe Fisher: Thank you, Dave, and everyone on today’s call for your interest in Navient. During my prepared remarks, I will review the Q3 results for 2024 and provide updated guidance underlying our outlook for the remainder of the year. In the third quarter, we’ve reported GAAP EPS loss of $0.02. On a core basis we delivered third quarter EPS of a $1.45. A primary difference in the quarter between GAAP and core earnings with the exclusion of doing well and intangible asset impairment the amortization of $0.98 related to our government services business. Our other significant items that impacted the quarter included $1.54 gain from the sale of our Healthcare Services business, $0.10 of regulatory expenses primarily related to the resolution of the CFPB lawsuit, $0.12 of restructuring expenses driven by the strategic actions we are undertaking to reshape and right-size the expense base of the company and $0.15 of provision related to lower expected recovery rates on defaulted private education loans.

Adjusting for these items, we earned $0.28 on a core basis and expect our fourth quarter EPS to be between $0.25 and $0.32. I will provide further detail on our outlook and results by segment beginning with the Federal Education Loan segment on Slide 5. The net interest margin increased to 46 basis points from 36 basis points in the second quarter as prepayments declined to just under $1 billion from $2.5 billion. We continue to see lower levels of prepayments than experienced earlier in the year as recent injunctions caused certain federal forgiveness benefits and resulted in lower consolidation activity. The self-portfolio continues to perform as expected from a credit perspective. Compared to the prior year, our greater than 90 day delinquency rates improved to 7.3%, the charge-off rate improved to 14 basis points and forbearance rates remained flat at 16.4%.

Slide 6 illustrates the rise of prepayments over the last few quarters as borrowers consolidated to the direct loan program and the sharp decline that occurred this quarter. We continue to encourage borrowers who are experiencing or have historically experienced difficulty repaying their loans to understand and take advantage of programs that are only offered to direct loan customers. While we are seeing lower levels of prepayment activity, we cannot predict whether this level is temporary or reflects a more permanent change in prepayment trends. Our EPS guidance reflects prepayments in the Q4 that are consistent with what we have experienced during the third quarter. Now let’s turn to our consumer lending segment on Slide 7. Net interest margin in this segment was 284 basis points in the quarter compared to 317 a year ago and 289 in the prior quarter.

Originations grew over 30% to $500 million compared to $382 million a year ago and are in line with our expectations as we remain focused on generating growth from high quality borrowers. Late stage delinquency and forbearance rates increased from the prior quarter to 2.4% and 2.8% respectively. The increase in forbearance is primarily a result of the disaster relief that is granted to borrowers impacted by a federally declared natural disaster. Much of this activity occurred late in the quarter and we have since granted $92 million of additional relief in October from recent events. At the end of the third quarter, our allowance for loan loss for our entire education loan portfolio is $836 million which is highlighted on Slide 8. During the quarter, we released $5 million for FFELP loans as a result of the prepayment activity in the quarter.

New private education loan origination volume contributed $15 million to the allowance and $21 million is related to the recovery adjustment I mentioned earlier in my remarks. Let’s continue to Slide 9 to review our Business Processing segment. We achieved total fee revenue of $70 million and 20% EBITDA margins in the quarter excluding the $219 million gain from the sale of our healthcare services business and $138 million impairment related to our government services business. The decline in government services revenue to $42 million is primarily driven by an unfunded federal program within a government services contract. There is uncertainty as to when or ASAP program will receive congressional funding approval. For the remainder of the year, we expect government services revenue to be consistent with the third quarter.

We will continue to provide services to the healthcare business for a period of time after closing. Our expenses and the offsetting revenue we receive under these transition services agreements, or TSAs, will be reported in the other segment. Let’s turn to expenses beginning on Slide 10. Total expenses for the quarter excluding regulatory and restructuring expenses were down 9% to $170 million. This quarter represents the first full quarter of our transition to a variable cost based servicing structure. We are also providing services to MOHELA under the TSAs. The revenue and expenses associated with these services will also be reported in the other segment. We anticipate the completion of the transition services related to health care and to MOHELA to occur by the end of the first half of 2025.

The completion of the TSAs are important steps in our ability to remove these expenses. We remain confident in our ability to achieve the level of expense savings we outlined at the beginning of the year. Turning to our capital allocation and financing activity that is highlighted on Slide 11. We continue to maintain disciplined asset liability and capital management strategies with 83% of our education loan portfolio funded to term and in an adjusted tangible equity ratio of 9.8%. In the quarter, we repurchased 2.1 million shares for $33 million. Given our current capital levels and outlook for cash flows, we plan to double the amount of purchases in the fourth quarter assuming we continue to trade at a significant discount to tangible book value.

As we look at the next 12 months, we have $176 million of remaining authorization under the current plan. With $1.1 billion of cash on hand, unsecured debt maturities of $1.1 billion and the potential for a favorable rate environment that will allow for us to significantly grow our high quality refinance loan product. Our excess cash will be available over time to invest, reduce outstanding debt and distribute to shareholders. In summary, our updated full year 2024 core earnings per share outlook of $2.45 to $2.50 reflects the move to a more variable cost based servicing structure, the completed sale of extend healthcare, the resolution of legacy regulatory matters and further execution on strategic actions to reduce our shared service expenses in order to enhance overall value for shareholders.

As I close, I’d like to express my appreciation to Navient team members for their hard work as we continue to execute on our strategic actions. Thank you for your time, and I will now open the call for any questions.

Q&A Session

Operator: Thank you. And at this time, we’ll conduct a question-and-answer session. [Operator Instructions] Our first question comes from the line of Bill Ryan from Seaport Research Partners. Your line is open.

Bill Ryan: First question, just on the expense side of the equation. Looking back at the announcement in January and the expenses that were outlined for the other segment, unallocated corporate overhead, I think the target was initially to kind of get to a $200 million annualized run rate. And then when I look at Q3 and it was $63 million in the other segment and you kind of take out some of the regulatory expenses. It looks like you’re pretty much there, if I did the math correctly and have the initial target correct. So looking into 2025, I know you said it might be a little bit slower cadence to reduce I’ t, but are you kind of now targeting a level of expenses better than $200 million annualized run rate in the unallocated corporate overhead?

Joe Fisher: We’re certainly pleased with the results so far this quarter from an expense takeout perspective. I would say also one thing to consider is we do have TSA expenses, as I mentioned in my remarks that have moved from with the federal segment and then will ultimately move from the BPS segment into the other segment. That’s going to represent a little bit less than $10 million in the fourth quarter, but those are things that we expect to take out by the first half — by the end of the first half of 2025. So in all, we are on pace to obviously be better than that $200 million and pleased with the results, but there’s still a lot of work ahead of us.

Bill Ryan: And one follow-up, Joe. Some of your securitizations, I know, are kind of like in early amortization and it’s due to the going past the legal final maturity date. I believe there’s a lot of cash trapped in these securitizations. What is the dollar amount of securitizations involved in this early amortization period? And what are the chances that those things could be called to release some capital to the company?

Joe Fisher: So I can get back to you offline with the full dollar amount of each securitization. But as you mentioned, when the trust get to that 10% level, they become full turbo features at that point, which means that they are not releasing cash to us. So we looked at that on a trust-by-trust basis in terms of whether that makes sense economically to call the trust at this time. So there’s no specific time frame that I could give you when we would call those, but it’s certainly something that we look at based on the current funding environment and whether it makes sense to call the trust at those times.

Operator: One moment for our next question. Our next question comes from the line of Sanjay Sakhrani from KBW. Your line is open.

Sanjay Sakhrani: Joe, could you go over, sort of what led to the expected decline in the recovery values of the private student loans and sort of how we should think about that going forward and the risk for more?

Joe Fisher: So as Sanjay, you follow this company for a long time, and we evaluate all of our critical accounting assumptions sort of quarterly, but also take a bigger push in the third quarter. So if you look to prior periods, you’ve seen us adjust that recovery rate more significantly in the third quarter. So case in point, a year ago, we adjusted our recovery rate down and that was about a $25 million impact. This quarter it was $21 million. So we’ll continue to adjust for that. I would say that as we look at the overall curve, we’re comfortable of where we are now. The challenge for us is that these are very high-quality borrowers that half of our book is certainly new originations, higher quality, the other half very well-seasoned.

So as these borrowers ultimately hit that default, they have utilized a number of the programs that we have offered over the past, which makes it more challenging to recover. So certainly, the risk to that is the entire Ripco balance that we look at. It’s roughly around $180 million and it’s something that we evaluate. But today, we feel very comfortable with that 17% -so recovery rate.

Sanjay Sakhrani: And then just as we think about the path of interest rates as it goes down, I know this is forward curve. I’m just trying to think about, how we should think about the net interest margins across both asset classes on a go forward basis and maybe just some sort of sensitivities, if you don’t mind, Joe, just so that we inform our models accordingly?

David Yowan : Thanks. Yes. I think first of all, I think there’s a significant opportunity for us. If these rates play out the way that they’re forecasted, just from a rate drop perspective, the refi opportunity for new volume is substantial, something that we haven’t seen in several quarters here. So you have to go back to 2021 when we were doing $6 billion of originations. I think there’s a good opportunity here. We have a significant decline in rates. But you’re right, that does cause pressure on our FFELP NIM as you’ve seen in the past with falling rate environments. The assets themselves reset daily and the liabilities lag are either quarterly or monthly, so that does create additional pressure. Some of that pressure you actually saw in this quarter, although it occurred late in the quarter, and we would anticipate that on the FFELP spread occurring into the Q4.

So, if you think about the guidance that I gave for quarterly guidance as it relates to EPS, that translates to roughly similar levels of NIM for the FFELP spread in the fourth quarter. And if the rates continue to decline as predicted, that would go into the first half of the year as well.

Sanjay Sakhrani: And is there any sense of like sensitivity to rates? Like so if you have another 100 basis points next year, like how should we think about what that does to the NIMs?

Joe Fisher : So you start actually getting a pickup from that 100 basis points in terms of the pickup of floor income. So I would say, if you’re thinking about 100 basis points and that’s, say, 25 or evenly distributed over the quarters, that should start to offset as you get beyond 50 basis points. And once these rates finally settle down, if it’s a flat low rate environment, you get back to the NIMs that we’ve historically experienced.

Operator: One moment for our next question. Our next question comes from the line of Rick Shane from JPMorgan. Your line is open.

Rick Shane: I have to queue in a little faster than Sanjay because I wanted to talk about the change to the reserve policy or the recovery policy. Only other question I have is, you’ve talked about increasing the cadence for repurchases in the Q4. Should we see that as an ongoing sort of target run rate as we move through 2025?

Joe Fisher : Look, we set out on the strategic actions, we’ve talked about our ability to generate some cash through the divestment of BPS as well as the cash flows from our loan portfolio. And we’ve talked about three potential uses of that, investing in loan growth, share repurchases and reducing debt. In the fourth quarter, we’ve got a little bit of all three of that, if you will. I think our — and as we look at our tangible book value, for example, it increased this quarter by almost $2.20 a share. So it’s up around $21. At today’s sale price, the opportunity for us to buyback our stock at roughly 75% of net asset value feels pretty attractive to us. As we look into ‘25, we’re going to complete the business plan. We’ll have a combination you should expect a combination of debt reduction, share repurchases, and investment in loan growth that we think best provides value to shareholders.

It will depend on market conditions, rates, the value of our shares, et cetera. So stay tuned for the 2025 plan and think about the environment and changing mix as conditions may change.

Rick Shane: Just one other sort of housekeeping, and this isn’t housekeeping because this is obviously a pretty sensitive issue to the folks impacted. But in the prior quarter, you talked about an 80% to 90% reduction in force over time. Where do we stand in that process now? And what does the trajectory of that look like through ‘25? Do you expect to be most of the way through that by the end of next year?

Joe Fisher: We’re about halfway through that, that’s accomplished other half is accomplished largely through, the MOHELA transfer, which occurred on July 1st. It also occurred largely through the health care transaction, which occurred mid-September. And then there have been incremental reductions in our corporate expense footprint over time. The GS, government services transaction, if we can find one and we’re working hard to do so, would be also a significant chunk of that. And then there’s still some remaining wind down work and further reductions in corporate expense footprint. So we’re about halfway along that journey as we sit here today. We have clear visibility into what the other steps are to get us to the target and the guidance that we’ve given you around that.

Rick Shane: Perfect. Thank you. And again, I do realize for the folks impacted that’s a sensitive issue. So thank you for taking the question.

Operator: One moment for our next question. Our next question comes from the line of Mark DeVries from Deutsche Bank. Your line is open.

Mark DeVries: I was hoping to get an update on kind of where you think you are in your efforts to grow the in-school lending business. How many of the target schools are you now kind of on preferred lenders list and making loans? How much room is there to go? How much room is there to share to grow share of wallet at those schools? And also any anticipated uplift to kind of your market share from resolving all your issues with the CFPB?

Joe Fisher: Hey, Mark. So look, we feel like we just concluded a successful peak season in in-school. We met our targets for that. You saw the robust loan growth we had across both refi and in-school products. I would remind you that we have a particular swim lane as I like to describe it in that market. The market as a whole, of course, includes schools like for profit schools that we do not offer loans in. In the schools that meet our criteria, we feel good about our penetration in terms of preferred lending list and we’re going to leverage that as we have in this season to seek out the kind of borrowers that we feel best meet our economics, our credit profile, places where we feel like we can succeed. Our market share still remains in the low single digits there.

I don’t anticipate I don’t think the CFPB matter, I think, is a question of contingent liability. There was an overhang on the company. I don’t think it was an impediment to our in-school product. And so I don’t think it will be a catalyst for anything different occurring in that market either.

Mark DeVries: And sorry if I missed this, but any updated timing on when you think you might complete a government services sale? And am I right in thinking given kind of the impairment of the goodwill that you’ve kind of marked it to where you think it’s likely to sell and therefore it won’t be a meaningful P&L event when it happens?

David Yowan : Yes, Mark. So we’re working urgently to do that. Obviously, we’ve been working on that transaction for some time. It takes more than one party to do that. We’re working hard at it. I’m not going to give you a prediction on timing, but know that we are in active discussions and we’re working very hard on that use of that for sure.

Mark DeVries: And on the latter part of the question, is it am I right that it won’t be a P&L event in all likelihood when that happens?

David Yowan : Yes. I think when we sorry, when we took the goodwill impairment, we’ve obviously taken into account where we think we are and where we might end up if we get a sale transaction.

Operator: One moment for our next question. Our next question comes from the line of Terry Ma from Barclays. Your line is open.

Terry Ma: I was wondering if there’s any way for you to kind of size the addressable market for refi loans, if we do get 100 basis points of rate cuts. I think you called out 2021, you guys did about $6 billion but I think the rates were much lower, so the addressable market was also much higher.

Joe Fisher: Yes. Thanks, Terry. Good question. I think the way I’ve always thought about it and talked about it with investors is that you’ve got about $1.5 trillion of loans that are at the Department of Education, so within the direct loan portfolio. If you think about just 10% of that portfolio that’s looking to lower there payments and looking for their opportunity i think 20% of that qualifies for our programs. That puts you in roughly a $30 billion market. That’s obviously significantly higher than where we are today. And I would say the big wild card in all of this is in terms of for those borrowers is 100 basis points enough for them to move and take advantage of that lower rate versus the opportunities that are there from various forgiveness programs at the direct loan level.

So I would say that’s how we think about it as the total addressable market. And I just point back to, as you mentioned a few years ago, we were able to do $6 billion. So I think there’s a potential sizable opportunity available to us over the next couple of years that these interest rate forecasts play out.

Terry Ma: And I may have missed it, but the buyback guide for the fourth quarter the $70 million should we kind of expect that kind of run rate to continue in future quarters.

David Yowan: Yes, Terry, actually the amount that we’re targeting in the fourth quarter is $65 million that’s double what we did in the third quarter. And I would say, look, for going forward, what we tried to do is put ourselves in a position where we have financial capacity and financial flexibility to choose among three different use of proceeds, if you will. One is loan growth. Joe just talked about the sensitivity of the total addressable market and our opportunity to take advantage of that. And so if we have a low rate environment and we have the demand for that product, then we will allocate we intend to allocate some capital and resources to take our fair share of that increase in the marketplace. We have the capacity and flexibility to do that as well as make financial decisions about share repurchases.

I talked earlier about the fact that our tangible book value increased by $2.20 in the quarter. And so we now trade at a 75% value of tangible book value. We think that’s an attractive opportunity for the rest of our shareholders to buy back our the company shares at 75% of net asset value, and we took advantage of the cash on hand in the quarter to pay back debt. So it’s a question of capacity and flexibility that we’ve developed and we’ll take advantage of opportunities as we see them that we think best can deliver value to our shareholders.

Operator: One moment for our next question. Our next question comes from the line of Moshe Orenbuch from TD Cowen. Your line is open.

Moshe Orenbuch: Just wondering, you mentioned the $21 tangible book value. As part of the planning process, have you given thought to what type of return you’d need to earn on that to be able to sell at that tangible book value. And is that something that you would expect to get to or what steps does it take to get to that and do you think it’s something you’ll reach in ‘25, ‘26 like how do you think about that in broad-brush terms.

Joe Fisher: So when you say to sell, what are you referring to.

Moshe Orenbuch: In the marketplace, you mentioned a 75% price to net asset value, right? For stocks to trade out or above book value, they need a certain level of return on tangible book, right?

Joe Fisher: So, Moshe, my point is just that we see a discount to there is a discount to tangible book value today with our shares. We have the financial flexibility to buy them back. I’m not making a statement about above that amount. We’re just making a statement about in the fourth quarter and the current opportunity. Here is we think this is a good use of proceeds for the rest of our shareholder base.

Moshe Orenbuch: And I certainly appreciate that. I’m just wondering if you kind of gave thought to that as part of the planning process. Because what has happened is you’ve sold BPS is EPS all other things equal goes down, you offset some of that by buying back the stock, maybe all of it, maybe more than all of it. But in other words, you’d still have kind of portfolios that are in amortization. So I just wanted to know, how to think about that the level of returns on that tangible book value.

David Yowan : Yes. So we’re in our growth business in earnest, we’re pricing to earn mid double digit returns on there as that becomes one of the things about getting rid of divesting BPS is, earnest then becomes relatively a bigger part of the model. And so at the margin on loan growth, we’re targeting mid teens returns in that particular business.

Moshe Orenbuch: And just as a follow-up, you separate out the credit losses on the two pieces in your private portfolio, they’re roughly equal the legacy book and the refi book. Have you talked about what the margins are on those two, the averages in the 280s right, but if you separated out what the margins are on the legacy piece versus the refi piece?

Joe Fisher : Yes, we have not disclosed that historically, but typically the refi is below 2% and historically on the legacy assets, they’ve been above 4%.

Operator: One moment for our next question. Our next question will come from the line of Nate Richam from Bank of America. Your line is open.

Nate Richam: You previously talked about looking to get more lifetime value from your earnest relationships, potentially through like product extensions. Can you give us any update to what strategies you’re implementing there? And like if these product extensions are through your partner marketplace or like some kind of new product you plan to introduce? Thank you.

David Yowan : Yes. So we’ve talked about Ernest has a number of platforms that it uses to try to help students navigate through their education journey and help young professionals and graduate students manage their debt. And those programs are at the moment, all those are offered at no additional charge, if you will. There are a way to attract to help customers, help our target segment get engagement with them, help drive engagement top of the funnel kind of activity for us. The opportunity there, which we’re looking at is how do we increase engagement and with increased engagement, are there other opportunities to monetize those relationships. And so that could include driving volume to our existing products. It could look it could also include trying to drive volume to other products that we could manufacture or others could potentially manufacture.

Those are some of the possibilities. We’re still in the early stages of that, so we don’t have anything to announce, but that’s among the range of possibilities that we’re looking at.

Operator: One moment for our next question. Our next question comes from the line of Jeff Adelson from Morgan Stanley. Your line is open.

Jeff Adelson: Yes, I guess, I was just curious, I know your delinquency rate has been on the private lending product has been increasing pretty steadily for a few years now. I know some of that is probably the bit of the mix shift that’s going into the in-school versus refi product. But could you help us maybe pull a piece what’s happening within each bucket on delinquency trend, and how we should think about that going forward?

Joe Fisher : Sure, Jeff. So as we just look at the various delinquency buckets, on the private side, so from 31 to 60 early stage buckets have been fairly flat. If you look year-over-year, and just prior quarter. We have seen an uptick in late stage delinquencies. Overall, our charge-off expectations over the last couple of years have been at 1.5% to 2% and that’s been relatively consistent. I would just reiterate, as I said in my remarks, that we did see an uptick in terms of forbearance that was granted in the quarter just due to disaster relief. So what that will do is that additional $92 million that I referenced that we’ve seen occur in October is that will actually reduce delinquencies next quarter slightly, but we would anticipate that, that would flow back through over the course of the year. So while we do think, they’ll be slightly elevated from the levels that we’re seeing today, we feel we’re adequately reserved for any future charge off costs.

Jeff Adelson: And have you guys noticed any impact so far from any of the changes in government actions, specifically the end of the on ramp earlier in October?

Joe Fisher: No. If you look at our FFELP portfolio, it’s been fairly stable here and this is something that we’ve been preparing for several years in terms of borrowers getting back into repayments. So you may remember couple of years back, we were talking about this and from a reserve perspective, have started obviously watching that and preparing for it at that time. So at these early stages, we have not seen any impact.

Operator: Thank you. One moment for our next question. And our last question for today will come from the line of Ryan Shelly from Bank of America. Your line is open.

Ryan Shelley: I just wanted to ask about the upcoming debt maturity, the 6.75 note to June of ’25. How should investors think about you addressing that? Are you guys considering coming to market to refinance? Are you considering just paying down? Any color there would be very helpful.

Joe Fisher: Sure. So today we sit on $1.1 billion of cash, Now we have roughly $1.4 billion of unencumbered loans with $1.2 billion of that being our private portfolio. We have an additional $3 billion of over collateralization in our FFELP portfolio that we can borrow against as well as another nearly $2 billion of OC in our private credit portfolio. So all in all, we have $7.4 billion available to us to address any upcoming maturities on top of the additional cash flows that we expect to see over the next 9 months. I would say that we just paid off the maturity in October, this last Friday, so that does reduce that overall position cash and debt by $500 million. But we feel very comfortable with where we are sitting from just the cash available plus the cash generated. And to the extent we need to borrow against any of the items I listed, we have available liquidity there as well.

Ryan Shelley: So understood on that front. What are you considering issue — would you consider issuing in the high yield market again or are you comfortable with those resources?

Joe Fisher: We certainly evaluate that. And if you look over the last couple of years, we try to be opportunistic when possible. So right now, we’re very comfortable with our current position, but I’m certainly not going to rule anything out. If the markets are attractive, we may take advantage of that.

Operator: Thank you. And with that, I would now like to turn it back over to Jen Earyes for closing remarks.

Jen Earyes: Thank you, Victor, and thank you everybody for joining us this morning. This now concludes the call. Please contact me if you have any follow-up questions.

Operator: Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect. Everyone have a great day.