As it relates to the Monogram investment by Carlyle, I’m not sure. I read a lot into that. I think there’s been certainly interest by private equity players in all manner of asset generators for a while now. That’s a very clear part of their strategy. What I take away from it is, it is a sign that another really smart and savvy investor, Carlyle, sees the incredible value in this asset class. And I think we view that as, net-net, a positive.
Michael Kaye: Okay. Thanks.
Operator: Thank you. Please stand by for our next question. Our next question comes from the line of John Hecht with Jefferies. Your line is open.
John Hecht: Good afternoon, guys. Thanks for taking my questions. I guess going back to Sanjay’s inquiry about NIM, maybe just talking about the asset side, I mean, you do have a mix of some adjustable rate mortgages — or, excuse me, student loans. Can you tell us kind of the cadence of how the assets move, specifically with interest rates?
Pete Graham: Yeah, I would say in large part they’re SOFR based and they’re repricing on a monthly cadence, whereas as I said earlier on, the funding side tends to be more quarterly resets.
John Hecht: And how much of the assets reprice monthly against SOFR?
Pete Graham: The bulk of our floating rate or variable rate loans would be SOFR based.
John Hecht: Okay. And then maybe the second question I have is the provision against unfunded commitments. I think we’re familiar with CECL and how you would provision against a new loan, but maybe can you refresh us about how you provision against unfunded commitments? Because I think the ratio fluctuated this year versus last year in the same period.
Pete Graham: Yeah, I think in general terms, we’re taking a reserve rate and we’re applying it to that commitment. So again, under CECL, we’ve got a fully provisioned for our life of loan expectation for loss and we do that in a programmatic manner for the new commitments. And then as those funds, we transfer balances out and into the overall provision. But when we give statistics around our overall rates, we’re combining those together. So, the rates I was quoting in my prepared remarks included kind of a combined view of provision on the loans on balance sheet as well as the piece related to unfunded commitments.
John Hecht: And do unfunded commitments kind of as a percentage of seasonal originations, are they fairly typical or consistent, or is there some fluctuations in that part of the equation?
Pete Graham: Again, it’s going to be largely dependent on the kind of the serialization. And so we make those commitments largely in the peak season. We’ll fund the first tranche of that as the students are entering the fall semester. And then the other piece will remain as an unfunded commitment until the spring disbursements. Again, that’s — again a generalization based on assume two semesters and most university experiences. We have other programs for different types of schools that might fund slightly differently than that.
John Hecht: Okay. Thanks very much.
Operator: Thank you. Please stand by for our next question. Our next question comes from the line of Mark DeVries with Deutsche Bank. Your line is open. Mark, check to see if you’re on mute. Mark, check to see if your line is on mute. There is no response. I’ll go to the next participant. Please standby for our next question. Our next question comes from the line of Jeff Adelson with Morgan Stanley.
Jeff Adelson: Hi. Yes, good evening. Thanks for taking my questions. So, just to circle back on this exit from one of your large competitors, understood the potential benefits here to originations, but just also want to understand any of the other potential benefits that could flow through here. Are you contemplating any sort of benefit to your credit as a result of that, or could that be upside? And as we think about the loan sale of that portfolio, is there anything to be thinking about in terms of demand or supply of loan sales and the market impacting your loan sales going forward?
Jon Witter: Yeah. Jeff, we have thought through it, and obviously, we have general industry knowledge and hypotheses about the nature of different competitors and where they sort of favor or disfavor within their buy box and underwriting grades. And I think we can make some educated guesses on that. But at the end of the day, we don’t have the level of insight that I think would allow us to make perfect assessments around sort of the impact that that would have on our credit. I think the general comment I would make is, I think we will continue to stay very true to our credit discipline. We will continue to stay very true to our ROE sort of framework around how we think about the profitability of a loan. But I think it will sort of take a little bit of time to see how that plays through directly, which is why I think we’ve given a range around our origination guidance for the year because it could obviously turn out in slightly more favorable ways or slightly less favorable ways.
But I think all of the outcomes are still favorable ones. Remind me the second part of your question, Jeff.
Jeff Adelson: Yeah. Just as we think about your loan sales, with another $10 billion of sales coming into the market, just any sort of impact to be thinking about their considerations?
Pete Graham: Yeah. Look, the demand for various asset classes, including our asset class, is pretty deep. And our discussions with various parties in the market, we don’t feel like that’s going to impact demand for our loans or for that matter, for asset-backed funding in general as we move into this year.
Jon Witter: Yeah. And in fact, Jeff, I would add, I think anecdotally, we heard when the last major competitor left the space that it actually may have been a net positive for demand for loans because it was a large transaction. It encouraged lots of people to get smart on the space. It encouraged lots of people to allocate resources to the space. And obviously, there could only be one winner of that. So, I think we view it as, at worst, a neutral, probably a slight positive. But again, we feel like the market for the asset class is deep. We feel like it’s matured significantly over the last half decade, and we think there will be lots of positives that come from this.
