With that said, we always want to recognize the power of the arbitrage strategy that I think we’ve demonstrated over the last 3 years. And while the rate environments are a little bit nonconducive right now to that, the equity markets absolutely are. And so I think we are continuing to think through what is that right timing, balancing the desire to be opportunistic and to understand the value creation of additional loan sales and share buybacks in the near-term with the desire to get to balance sheet growth in the longer term. So we’ve not made any decisions on that. As I said in my talking points, we certainly expect to have our next sort of installment of those thoughts as a part of the 2024 guidance. But I think I would just conclude with the statement of the obvious when I got here 3 years ago, January of 2025 and our last CECL payment seems like a very long time away.
When we talk to you next for earnings and guidance, that last payment will be less than 12 months away. And so it is absolutely the right and appropriate time in a multiyear planning context for us to start to think about what that looks like. And again, we look forward to sharing more of that information with you in the quarters ahead.
Operator: Next comes from the line of Rick Shane with JPMorgan.
Rick Shane: And Steve, I — this is not gratuitous in any way, but we really will miss you and appreciate all the conversations over the years, so thank you. I’d love to — sorry, I didn’t mean to interrupt. I wanted to delve in a little bit more on the gain on sale in the queue. There’s a reference to low mid-single digits. There was a comment on the call about $0.31 impact this quarter, that implies roughly $100 million pretax, but that’s obviously net of provision. Can you talk about sort of the mix between gain on sale and provision relief associated with that, so we can dimensionalize what the gain on sale would be a little bit more closely?
Steven McGarry: Rick, I think it’s pretty straightforward. I think the release is pretty close to the 6% that we carry on our balance sheet as we release say — as we sell a representative sample and the balance of that should be the gain on sale. Again, we like to not be too precise because our buyers are in the process of distributing all the securities involved in that transaction so there you have it.
Operator: Comes from the line of Jeff Adelson with Morgan Stanley.
Jeff Adelson: And Steve, I just wanted to say congratulations. Just on credit, the net charge-offs do seem like they’re starting to stabilize again in this 2.5% range. I know your year-to-date is coming in line with your expectations or better, but the earlier part of the year was so much better. I guess as we think about the next 12 months from here, are you expecting kind of a similar shape of seasonality where the first half of the year improves on the back of some of the dynamics you’ve discussed before. And just in light of the fact that delinquencies are actually improving year-over-year, are you still thinking you can kind of get down towards this low to high 1 over the next several years. And as kind of a part of that, the second part of the question, what are you seeing on student loan repayments starting this month, any of the early read or indications on how that’s potentially hitting the book right now?
Jonathan Witter: Yes, Jeff, it’s Jon. I’ll try to handle those 2, and Steve, feel free to jump in if I miss anything. On the sort of delinquency and charge-off trends, there is absolutely sort of seasonality quarter-to-quarter. And I think that is really driven by the fact that there is always an earlier spike of delinquencies and charge-offs related to sort of the early months after people enter repayment. And our customers enter repayment largely — not exclusively, but largely in sort of 2 major waves a year. So there’s absolutely a seasonality effect there. And I think if we talked — if you talk to our operations team, I think what they would say is those seasonality effects have changed slightly with the change in credit administration practices, but I think they’re largely pretty consistent.
And I think the basic shape of them will probably play out in a pretty consistent fashion year in and year out. If I think about the larger question of sort of path back to normalcy, I think you will remember from the beginning of this year, our view was most of the changes we were putting in place that we thought would have a longer-term effect on charge-off rates were going to happen in the second half of the year. And I think as we discussed last quarter, those are underwriting changes. Every year, we’ve always tightened our buybacks based on the most recent performance data we have. We certainly did that this year in light of the different experience we had last year. I think as we’ve talked about, we’ve also put in place a whole series of what I would describe as pre-delinquency programs.
So this is service programs for customers based on a risk profile to be helpful to them even before they’ve reached delinquency. I think we’ve talked a lot about sort of the programs we put in place, again, largely in the second half of the year around and new assistance programs, and those could be sort of interest payments, they could be term extensions and the like. And then we’ve obviously talked on this call about the enhanced recovery sort of changes that we’ve made. I think we’re just starting to see the effects of those things play out now. And I think some of them not even at all. We’ve gotten more changes that are going to go into place, I’m sure, in the fourth quarter and more fine-tuning that will happen next year. So I think we feel there is more opportunity for us to continue to drive our long-term charge-off rates down, obviously, recognizing they can fluctuate with economic conditions.
And I don’t think we have any reason to believe that getting back to sort of high 1s, low 2s isn’t in our future. I think you’re right. I think it will take another year or 2 to sort of get fully there, but I think we expect to continue to make good progress next year again, knowing that the macroeconomic condition can have an effect 1 way or the other, that’s hard for us to predict. In terms of student loan repayment, if you remember, the federal program has just restarted. It has the year-long on-ramp program. And I think we’ve talked pretty extensively about the really generous changes to payment programs that are available now to sort of borrowers. We have seen really no impact of that whatsoever in our results. And as we continue to be good students of sort of the academic research, there’s been a number of studies that have come out recently that I think have sort of further dimensioned the potential impact of the restart and said it’s pretty de minimis.
And again, we will continue to watch this closely. But I think at this point, we don’t view it as a material risk to our performance here over the sort of foreseeable future.
