Conversely, there are going to be times where it’s not going in your favor. Is the priority going to be to solve for earnings and let the growth of assets be the swing factor? Or is it going to be targeting the asset growth and letting earnings fluctuate?
Pete Graham: I think we were pretty clear in the December Investor Forum, we’re going to step into growth over time, where we’re going to be relatively flat this year, our final sort of CECL transition year, and then we’ll grow modestly in subsequent years. And so that framework calls for us to use loan sales as a governor of that balance sheet growth. That’s fully what we intend to do as we embark on this strategy. So, in your scenario of higher originations growth, then at the margins, we might do more loan sales as long as the pricing dynamic makes sense from an economic perspective.
Rick Shane: Got it. So, your priority is to follow that asset growth profile that you laid out in that five-year case as closely as possible, not regardless of conditions, but within a reasonable set of expectations?
Pete Graham: Yeah, I think we said there that to the extent we start to see multiple expansion and we getting rewarded for balance sheet growth. We’ll do a little bit more of that. But if things stay kind of status quo, then we’ll do marginally more loan sales as long as the trade is there and it’s a dynamic evaluation of the value we’re getting in the loan sale market versus the implied valuation for our balance sheet that we’re getting in the equity market.
Rick Shane: Great. I know it’s fun answering questions what’s going to happen in the next 12 months, it’s even harder over the next five years. So, thank you for answering that.
Pete Graham: Sure.
Operator: Thank you. Please standby for our next question. Our next question comes from the line of Giuliano Bologna with Compass Point. Your line is open.
Giuliano Bologna: Good evening. I had a question that might be a little bit of a follow-up on the topic Vincent was kind of touching on, but from a different angle. One thing that I’m curious about is, you’ve pivoted your kind of mix of originations towards fixed rate, which obviously has benefits as rates move down because it’ll make you more liability sensitive. But I’m curious, at what point do you think about pivoting that strategy? Because originating more fixed-rate loans at peak rates could also make them much more susceptible to consolidations in the future. I’m kind of curious, at what point do you think about pivoting or moving back towards a higher mix of fixed rate originations.
Pete Graham: Yeah, I mean, the pricing dynamic is always something that we have control of at the margins, but I think there’s also a human emotional element in terms of what selections the borrowers are making. And I think the emotional reaction to the dramatic increase in rates over the last year, if you think about during the fall, there was more potential for further increases because inflation had not started to subside yet. So, I think that overall customer choice has been pretty dramatic impact on the mix of origination. I think that naturally will subside as we go into this year, but we’ll be looking at that mix in terms of how we set our pricing grids as we go into peak this year.
Jon Witter: Yeah. And Pete, I think the only thing I would add is, we clearly don’t have the ability to set those pricing grids in isolation. We do that sort of through the lens of our economic models, but we also do that through the lens of competitive realities. And so, the fact is, if fixed rate is what customers want, and if competitors are pricing fixed rate at a level that makes that attractive, there is a certain competitive dynamic that — I think Pete said it well, our ability to influence that is on the margin, but it is much — it is part of the broader competitive set.
Giuliano Bologna: That’s very helpful. And then one quick one, just thinking about the potential for market share gains. I’d be curious, when you think about the kind of depth of the market for loan sales, if you’re able to capture some more additional market share, the numbers based on the midpoint of the 7% to 8% growth is already called $200 million or so above the Investor Forum in ’24?
Pete Graham: Giuliano, you’re fading in and out. Maybe if you could get closer to your mic?
Giuliano Bologna: Sorry about that. Hopefully, it’s a little bit better now. As you potentially gain market share, I’m curious, when you think about the depth of the loan sales market, is there — do you think there’s any limitation to the amount of loans you could sell in any given calendar year at this point, or could market be absorbed by loan sales?
Pete Graham: Yeah. I think the dynamic that we’ve seen over the last half decade is a pretty dramatic search for yielding assets to support pension liabilities, insurance liabilities, and the mutual fund complexes. So, I think there’s a strong demand for student loans. I think we have a pre-eminent ABS platform in this space, and I don’t see any issue in both loan sales or ABS funding to fund balance sheet growth as we sit here now. It’s not infinite, but we don’t need infinite demand for the asset class.
Giuliano Bologna: That’s great. Thank you very much. And I’ll jump back in the queue.
Operator: Thank you. Ladies and gentlemen, I’m showing no further questions. I would now like to turn the call back over to Jon Witter, CEO, for closing remarks.
