Navient Corp Q4 FY2022 Earnings Call

Ladies and gentlemen, thank you for standing by. Welcome to the Navient Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference may be recorded. I would now like to hand the conference over to your speaker host for today, Jennifer Earyes, Head of Investor Relations. Please go ahead.

Hello, good morning, and welcome to Navient's earnings call for the fourth quarter of 2022. With me today are Jack Remondi, Navient's CEO; and Joe Fisher, Navient's CFO. After their prepared remarks, we will open up the call for questions. Before we begin, keep in mind our discussion will contain predictions, expectations, forward-looking statements and other information about our business that is 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. So 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, adjustable tangible equity ratio and various other non-GAAP financial measures that are derived from core earnings. We will also refer to adjusted core earnings which are measurements derived from core earnings and adjusted to exclude one-time expenses related to regulatory and restructuring costs. Our GAAP results and description of our non-GAAP financial measures can be found in the fourth quarter 2022 supplement earnings disclosure, which is posted on the Investors page at navient.com. You will find more information about these measures beginning on Page 18 of Navient's fourth quarter earnings release. There is also a full reconciliation of core earnings to GAAP results included in the disclosure. Thank you. And now I will turn the call over to Jack.

Thank you, Jen. Good morning, everyone, and thank you for joining us today. Thank you for your interest in Navient. We completed 2022 with another quarter of strong financial performance. We delivered adjusted core earnings of $0.85 for the quarter and $3.43 for the year and a core return on equity of 17%. These results demonstrate our ability to deliver solid financial performance even in disruptive economic environments. The business environment ended 2022 very differently than it started. For example, inflation pressured operating expenses, rising rates, and the CARES Act extensions virtually eliminated current demand for student loan refinancing and rule changes impacting the management of defaulted federal loans ended our portfolio management business earlier than anticipated. A strength of our franchise is our ability to adjust to both expected and unexpected events to deliver for our customers and investors. For example, in-school originations grew 52% this year, with our growth outlook increasing. We are leveraging our client relationships to win new business processing contracts. We successfully reduced operating expenses in a high inflationary environment, and our hedging strategies and efficient funding programs mitigated the impact of rising rates on our net interest margins. Your management team is focused on delivering exceptional results by executing our strategy, delivering on our growth potential, maximizing our loan portfolio cash flows, continuously improving our operating efficiency and prudent and consistent capital management. In Consumer Lending, we are focused on growing originations of high-quality loans with attractive risk-adjusted returns. In 2022, rising rates and zero interest federal loans reduced our opportunities in refinancing to $1.7 billion in new originations. We rapidly adapted to these conditions to cut marketing spend and focus on our in-school products. Here, we grew new loan volume by 52% over last year to $321 million, an estimated 10 times market growth. We also continued to build relationships with students planning to go to college, adding over 700,000 new students to our Going Merry platform. Here, we help students and families complete the FAFSA, compare financial aid award packages from schools, and apply for scholarships. We see these products as important ways of helping students and families throughout their college journey. In our Business Processing Solutions segment, we grew non-pandemic-related revenue by $25 million or 11%. It's also worth noting that our pandemic-related contracts extended longer than the original award, and we have been able to leverage this success to win several new contracts in 2022, both strong statements on the value we provided to our clients. Our large and profitable portfolio of student loans is a key contributor to earnings. Our goal has continued to be to maximize the performance of this portfolio. This includes helping borrowers navigate repayment options and avoid default with innovative funding and hedging strategies to maximize net interest income. Our funding and hedging strategies helped deliver a stable net interest margin despite the rapid rise in rates this year. Since our founding in 2014, we have excelled at maximizing the value of our portfolio, and we will continue to do so. We are also continuously improving our operating efficiency. In 2022, operating expenses declined by 21% or $205 million. We delivered improved efficiency in our operating segments, and we continue to take action that reduced our risk profile. In the final area, we seek to be excellent stewards of your capital. Our goals are to be efficient and prudent while delivering attractive returns. Here, our priorities remain unchanged: invest capital in attractive and relevant growth opportunities, support our dividend, and return excess capital to you via share repurchases. This consistent and transparent approach supports our business growth, our debt investors, our corporate ratings, and enabled the return of $491 million via dividends and share repurchases last year. Our financial and business success last year positions us for another year of strong performance. For 2023, we are focused on the same four objectives: profitably growing our loan origination and BPS revenue; maximizing the performance of our loan portfolios; improving operating efficiency; and prudent and consistent capital management. In Consumer Lending, we expect to double in-school loan originations, building on the progress we made in 2022. We expect that demand for refinancing loans will continue to be suppressed, but we are prepared to move quickly when market conditions change. We will also continue to grow and build long-term relationships with students and families as we support their college journey. In BPS, we are well positioned to deliver 10% growth in revenue from our traditional clients. With this growth, we also expect to earn a high-teen EBITDA margin, and new contract wins in late 2022 and expansions of existing contracts have created a clear path to these goals. As a result of our ongoing focus on operating efficiency, we will reduce operating expenses by an additional 10% in 2023. And in capital management, our plan is to complete approximately $310 million in share repurchases. Our results this quarter capped a strong year for Navient. They reflect our commitment and ability to generate high-quality, high-value products and services and deliver solid financial results even in volatile and changing markets. They also reflect our ongoing commitment to simplify our business model and reduce our risk profile. More importantly, our efforts have built a solid foundation from which to create and deliver value. Our guidance for 2023 reflects our confidence in our ongoing ability to grow new business, maximize portfolio performance, deliver better margins through operating efficiency, and deliver attractive returns on capital. I want to thank my colleagues for their efforts and commitment to success. Together, we look forward to delivering another great year of results in 2023. Joe will now provide a more detailed review of our results.

Thank you, Jack, and thank you to everyone on today's call for your interest in Navient. During my prepared remarks, I will review the fourth quarter and full-year results for 2022 and provide our outlook for 2023. I'll be referencing the earnings call presentation, which can be found on the company's website in the Investors section. In 2022, we successfully met or exceeded our original full-year guidance targets. Key highlights from the quarter and year, beginning on Slide 3, include fourth quarter adjusted core EPS of $0.85 and full-year EPS of $3.43. We achieved an ROE of 17% and an overall efficiency ratio of 52% for the year in the face of a challenging inflationary environment. FFELP NIM of 94 basis points and full-year NIM of 101 basis points, private NIM of 287 basis points and full-year NIM of 281 basis points. We grew in-school originations by 52% to $322 million for the full year and achieved total originations of $2 billion. Reported BPS revenues of $70 million in the quarter and $330 million for the year while achieving full-year EBITDA margins of 16%, increased our adjusted tangible equity ratio to 7.7% while returning $491 million to shareholders through dividends and repurchases. I'll provide additional detail on the quarter and our 2023 full-year outlook by segment, beginning with Federal Education Loans on Slide 5. In the Federal Education Loan segment, we achieved a net interest margin of 101 basis points for the full year, exceeding our original mid-90s guidance in a volatile interest rate environment. The quarter's results continue to be impacted by an incremental level of consolidation activity from previously announced loan forgiveness proposals. The incremental prepayments that were processed during the fourth quarter represented 3% of our portfolio. This activity reduced FFELP net interest margin by 11 basis points to 94 basis points. There has since been a significant decline in consolidation request to historical levels. Our expectation for full-year 2023 FFELP NIM is between 100 basis points and 110 basis points, assuming that prepayment speeds remain at historical levels in 2023. FFELP delinquency rates decreased to 15.6% from 18.6% in the third quarter, and charge-offs declined by $1 million, resulting in a net charge-off rate of 13 basis points in the quarter. We anticipate a net charge-off rate between 10 basis points and 20 basis points for full-year 2023. Let's turn to our Consumer Lending segment on Slide 6. Net interest income in the quarter was $147 million and resulted in a net interest margin of 287 basis points, an improvement of 11 basis points compared to the prior year. We are seeing a slowdown in prepayment speeds in the overall portfolio as borrowers with fixed interest rates have less of an incentive to refinance in the current environment, which is benefiting net interest income. We anticipate our full-year net interest margin for 2023 to be between 280 basis points and 290 basis points. Our credit trends continue to perform as expected as net charge-offs ended on the low end of our original guidance of 1.5% to 2% with 156 basis points for the quarter and 159 basis points for the full year of 2022. The $17 million of provisions in the quarter included $3 million related to new originations. We feel confident that we are adequately reserved for the expected life of loan losses, given the well-seasoned and high credit quality of our portfolio and anticipate net charge-offs to remain in the 1.5% to 2% range for 2023. In the quarter, we originated $169 million of private education loans. This was comprised of $35 million of new in-school volume, representing a 52% increase compared to the prior year. The expected decline in refinance loan origination volume to $134 million was primarily driven by the higher rate environment and a delay in Department of Education loans entering repayment. We expect that the higher rate environment continues throughout 2023, and the extension of the CARES Act will result in lower quarterly originations for our refi product. Let's continue to Slide 7 to review our Business Processing segment. Revenue from our traditional BPS services increased 27% from the year-ago quarter, partially offsetting the expected wind down of revenue from pandemic-related services. Fourth quarter revenues totaled $70 million and earned an 11% EBITDA margin. The 11% margin was below our targeted levels due to wind down costs associated with pandemic-related services in the quarter. We anticipate the benefit of recent efficiency initiatives to increase the margin in this segment as we progress throughout the year. We expect to see continued fee revenue growth of 10% in our traditional services in 2023 with full-year EBITDA margins in the high teens. Turning to our financing and capital allocation activity that is highlighted on Slide 8. During the year, we reduced our share count by 15% due to repurchase of 24.8 million shares. In total, we returned $491 million to shareholders through share repurchases and dividends while increasing our adjusted tangible equity ratio to 7.7% from 5.9% a year ago. Our 2023 guidance includes the repurchase of $310 million of shares while building our adjusted tangible equity ratio to a range of 8% to 9%. Turning to GAAP results on Slide 9. We recorded fourth quarter GAAP net income of $105 million or $0.78 per share compared with a net loss of $11 million or a loss of $0.07 per share in 2021 for the same period. In closing and turning to our outlook for 2023 on Slide 10, the success of 2022 and the steps we have taken to simplify the business, improve efficiency while building capital positions us well for 2023. As a result, we expect our 2023 adjusted core earnings per share to be between $3.15 and $3.30, reflecting our continued efforts to improve efficiency. Our outlook excludes regulatory and restructuring costs, assumes no gains or losses from future loan sales or debt repurchases, reflects a continued rising interest rate environment, and no meaningful impact from an expiration of the CARES Act in 2023. Thank you for your time, and I will now open the call for questions.

Thank you. Our first question is from Matthew Hurwit with Jefferies. Your line is open.

Hi, there. I'm on for John Hecht and thanks for taking our questions. Our first one is just about funding markets. If you can provide a bit more detail on puts and takes for NIM over the next few quarters, that would be helpful.

So from a funding perspective, we feel we're very well positioned. We have $1.3 billion due this coming year, of which $1 billion is actually being paid off today. So we have $1.5 billion sitting on our balance sheet at the end of the year. So we're well cushioned for the remainder of 2023. Also, we feel we're well placed for entering into 2024. We certainly think that the securitization market overall is starting to move on. We're starting to see benefits here over the last month. While we expect to do fewer securitizations compared to prior years, that's primarily driven just by the growth of our refi business. We do anticipate that there will be less originations on the refi side compared to the prior year. But if that market potentially picks up, if you see a change in the interest rate environment or the expiration of CARES Act, I would anticipate that you would see further securitizations from us.

Okay. Great. Thank you. And the second question would be mix of business in the Business Services segment and what's growing or shrinking? You mentioned COVID services slowing down. Could you provide more detail on mix otherwise?

Sure. So during the pandemic, we picked up a number of contracts with various states and municipalities to help them deliver COVID relief initiatives. Some of that would be things like unemployment insurance, contact tracing, vaccination awareness, etc. Those naturally do run off, and that's a good thing, right, that they're running off because it means we, as a country, don't need them any longer. What is growing is our traditional services. These would be things that we do for states, municipalities, toll authorities, and healthcare institutions. We're excited about the growth opportunities in these areas. Some of them were certainly suppressed during the pandemic, and they're starting to rebound. More importantly, we’ve been able to leverage the work we did for a number of entities during the pandemic to translate that into new, more permanent contracts. This is what we do, handling communications for these entities, both inbound and outbound, and processing forms, completing applications, and things of that nature. This is right within our wheelhouse from years of experience we’ve developed in loan servicing. We expect to grow that revenue by 10% next year on the traditional side, excluding all the pandemic-related revenue we generated, and we are forecasting a high-teens EBITDA margin in that business.

Got it. Thanks very much.

And our next question coming from the line of Bill Ryan with Seaport. Your line is open.

Thanks and good morning. A couple of questions. First, to start off with, there have been some proposed changes in IDR and debt forgiveness in the Federal Register. I wonder if you’ve taken a look at it and maybe give some initial thoughts about how it might impact your business. It seems like the administration is trying to implement changes around the debt forgiveness program. Thanks. That's just the first question.

Sure. Thanks, Bill. So on the first – on broad-based loan forgiveness, this is in limbo right now; a number of states filed lawsuits against the proposed administration, and it is now scheduled for hearing at the Supreme Court sometime later this year. Briefs are just being filed as we speak. We'll learn more about where that goes in the next couple of weeks and months. As you pointed out, the administration also announced broad changes to the income-based repayment programs that they offer to students on the federal program side. These are proposed right now and are open for comments and questions. They are pretty significant in terms of their reach compared to what was in place before and what Congress had initially established as the guidelines for income-based repayment plans. We need to wait and see here what those comments are and what kinds of challenges might arise. But to some extent, you're looking at what's the impact on the private loan originations business. I think the area that probably is going to have the greatest impact would be on the graduate school side of the equation, graduate school demand and how that is financed. The bigger questions we would have as taxpayers might be how do these programs relieve pressure on schools to control the cost of education, just to make it more likely or not that college costs increase faster. Those are some of the policy issues that we'll be watching.

Thanks. And just as a follow-up, it looks like you kind of bumped up your adjusted tangible equity ratio target from what it had been historically, and that's reflected in the buyback. Is that in anticipation of growing the in-school loans, which have higher capital requirements? Or is there some other type that you might be looking at?

Yes. That's a good question. In terms of the 8% to 9% guidance, that is purely a function of what we anticipate our book to look like over the next year and beyond. As the refinancing loan originations are anticipated to shrink for this year, we hold 5% capital against refinance loans and we hold closer to 10% for our in-school loans. It really is benefiting the overall capital ratio that mix shift of growing the in-school volume, which brings us above our levels that we had guided last year of about 6% to that range of 8% to 9% for this coming year.

Thank you. And our next question coming from the line of Sanjay Sakhrani with KBW. Your line is open.

Thanks. Good morning. Jack, could you provide us an update around the loan forgiveness plan? I think it’s with the Supreme Court right now. Maybe also just to the extent that it’s an adverse ruling, how you intend to proceed going forward?

Sure. As I mentioned, it is at the Supreme Court, briefs have been filed from the Department of Education. The states or the plaintiffs’ briefs are due this Friday. Hearings will be scheduled sometime in February, and the Supreme Court will issue their opinion, but the timing is somewhat unknown. We expect it before they recess in the June-July timeframe. Right now, the proposal from the administration is only for direct loans. So FFELP loans are not eligible, and former FFELP borrowers cannot become eligible via loan consolidation. It's not clear how that would necessarily impact perception versus reality. However, as Joe mentioned in his comments, last year, we saw a significant increase in consolidation activity of borrowers as they were hoping to qualify for various forgiveness initiatives announced by the administration, which stopped and returned to pre-pandemic levels in December and January so far. We expect more of that. However, I think the politics of this make it an area that we will continue to watch very closely and manage our portfolio and react to changes that might be announced in the future.

Okay. Great. And then maybe just a question on the economy and how you see your customers behaving? I think you added a little bit to the reserve this quarter. I mean, what are you guys assuming inside your economic forecast? And are you seeing any potential weaknesses of any kind?

Yes. We began to be concerned about changes in the economic outlook earlier last year and reflected a more conservative position in terms of rising rates and potentially a significant or mild slowdown in the economy. We look at our reserve and really see it as hedging strategies that we've been able to employ that have helped mitigate the rise in rates that took place in 2022. Our NIMs were relatively stable. Our reserve levels are adequate for the economic outlook that we see. You're seeing some rising delinquency and charge-off rates in both our FFELP and private loan portfolios. These are consistent with what we expected. During the pandemic, we offered various payment relief options, and as those ended, some borrowers that were previously on a path to default slowed down and didn’t. You're seeing a rise in delinquency and default rates. We expect those to return to more normalized levels next year. The outlook for delinquencies and defaults remains consistent with what we saw last year and takes into account a belief in an economic slowdown.

Okay. Great. Is there a specific unemployment rate assumption you guys are using?

We would not in terms of the generic default rate. In our portfolio, the factors driving delinquencies and defaults are where the borrowers are in their life cycle. Students who are graduating from college or leaving college early have our greatest exposure. For borrowers in repayment for extended periods with high levels of income, there’s generally less sensitivity to changes in unemployment rates, which has been consistent for years. Unemployment rates for college graduates typically run about half the national average, so those numbers might spike in different areas, but they tend to impact college graduates less than the rest of the population.

Okay. Great. Thank you so much.

Thank you. And our next question coming from the line of Mark DeVries with Barclays. Your line is open.

Yes. Thanks. Just wanted to clarify some of the comments around the FFELP NIM and the guidance. Joe, did you imply that there was about an 11 basis point drag in the quarter from elevated prepayment speeds? If that normalizes, that gets you to about 105 basis points, kind of the midpoint of your guidance range for 2023?

That is correct. The incremental activity was above what we were anticipating entering the third quarter. So absent that impact, we would have been at 105 basis points.

Okay. Got it. And can you give us any sense of how kind of rate-sensitive your guidance is for both the FFELP and private student loan NIM? If you got a 100 basis point rate shock, kind of up or down, what might that do to your expected NIM?

From a FFELP perspective, it's really the pace at which it increases. The assets themselves are resetting daily and our liabilities typically lag, resetting either monthly or quarterly. As you've seen over the last year, you get a benefit as rates continue to increase. In the first half of the year, where the expectation is that those rates continue to increase, you would see a little bit of a pickup before that levels out. So that 100 basis points shock upward would benefit us. Any downward movement in rates, we'd start to benefit from a floor income perspective. So we feel confident, just based on the forward rate curve, within our guidance of that 100 basis points to 110 basis points. Similar on the private side, the impact is you have the lag of assets earning off of prime and funded through LIBOR. So you have the reverse effect where there's a drag from the rate environment increasing. As we anticipate leveling out in the back half of the year, you would get a slight benefit.

Okay. So just in terms of cadence over the course of the year, should we expect – for FFELP, it's a little more front-end loaded and then for private, it's a little bit more back-end loaded in terms of where the NIM averages out to?

Yes, I'd say just overall, it should be fairly consistent throughout the year within the bands, but that's a decent way of thinking about it.

Thank you. And our next question coming from the line of Moshe Orenbuch from Credit Suisse. Your line is now open.

Great, thanks. Maybe just, Joe, a little further clarification on the guide. You mentioned that on the FFELP, you expect normal prepays. It’s hard to know exactly what normal is given especially since they've been elevated beyond your earlier expectations the last couple of quarters. And same sort of thing is like what's the assumption in the guide for the consumer loan or private loan, given the level of originations now are low?

Our overall prepay assumptions for the FFELP portfolio for consolidation loans are generally thought of as 8% CPR, for refinancing 5%. On the private portfolio, our assumptions are 15% for the refinance and 10% for our legacy book. If we go back a year on the refinancing side, it was much higher in a lower rate environment. We are benefiting from the fact that, for our refinance portfolio, with less incentive to prepay, you're seeing a slowing of those CPRs. Similarly, on the FFELP side, we’ve seen a dramatic decline at the start of this year in terms of overall consolidation requests. We would anticipate that that remains at these historical levels going forward.

Thank you. And our next question coming from the line of Richard Shane with JPMorgan. Your line is open.

Thanks guys for taking my questions this morning. Look, you guys have done a really good job managing expenses. You've done a really good job of managing capital in the face of a shrinking balance sheet and revenue declines. When we look at the different business units, should we expect this year to by year-end see loan balances in the Consumer Lending segment up on a year-over-year basis? Should we see that inflection this year? Or what would need to happen for that to occur?

Yes, from a private side, we would continue to expect a slight decline year-over-year. If you think about the CPR assumptions that I just provided, the legacy book is running off at greater than 10%, with refinancing at 15%. Our originations overall that Jack cited would not make up for the overall decline in the book.

Got it. And when we look at the contour of that runoff, as we moved into the beginning of 2022, you were starting to show growth there and then that obviously decelerated with the inflection in rates. Is the main variable there to ultimately drive that growth going to be the opportunity on the consolidation side? What type of rate environment would you need to see that inflection?

I think it's a combination of both the refinancing opportunities in the in-school side of the equation. Refinance has historically been a greater opportunity in terms of immediate impact because you're addressing all outstanding loans, whereas in-school is just addressing students who are currently borrowing in the private loan segment. It's a somewhat smaller opportunity set year-over-year. The other key difference is the in-school portfolio has a longer average life and undergoes a lower prepayment fee compared to refinancing, which typically has about a three-year average life portfolio. We are getting closer to an inflection point in the private sector. It will depend on our overall originations and how quickly the refinance market rebounds. With the rise in rates, we saw about an 80% decline in what we would say is the addressable market size, which means borrowers with a higher coupon than what we are currently offering. Most of that is in the federal space. A significant portion of outstanding inventory is variable-rate on the private loan side, giving us opportunity to offer a refinance product to those customers. We've made changes to our products to allow for a cosigner on a refinance loan, which would allow us to target undergraduate in-school borrowings with a variable prime rate, even in this high-rate environment. We are working to create additional opportunities for borrowers to save money through refinancing. We value this product highly. We've always said the two biggest risks in student lending are whether the student graduates, and whether their income upon graduation supports their debt levels. We are focused on driving volume in that area when opportunities arise.

Okay. Got it. And if you would indulge one last question. I'm trying to see where the green shoots will be in terms of growth. And clearly, it's going to be on in-school consumer lending. Can you talk a little bit more about your go-to-market strategy there? Is it traditional being on preferred lending lists? Is it omnichannel? When you think about the growth in 2023, is it a function of higher penetration for the existing institutions, or adding new institutions? And I apologize for such a long question.

Certainly. The marketplace and how students and families secure financing for college has changed. It has moved from almost universally going through the financial aid office and a requirement to be on their preferred lender list to online activities and referrals. The financial aid office remains an important channel, but we target marketing activities and outreach differently depending on these market segments. We see a significant new opportunity in working with high school students and their families and the guidance offices of high schools through our Going Merry products, building relationships with those consumers, helping them complete the FAFSA, helping them compare the different award letters they receive from colleges, and assisting with scholarship opportunities to reduce their need to borrow. We aim to be there with that additional product when they need private student loans. These are various ways to target our opportunities in the in-school marketplace. With the doubling of originations next year, we expect to continue to grow our market share in that space. We grew 52% this year, which is 10 times the market rate—a very high-growth opportunity for us, albeit starting from a relatively small origination base.

And our next question comes from Giuliano Bologna from Compass Point. Your line is open.

Good morning, and thanks for taking my question. One thing I was curious about was when we look at the FFELP NIM outlook, the 100 basis points to 110 basis points implies 105, and that's roughly about 10 basis points above the original outlook when you guys were going into 2022. There was a discussion in the last two quarters about how you guys were able to hedge out some of your floor income during the lows from a rate perspective and if that was having a benefit on a flow-through basis. I'm curious how we should think about that impact? And if there's any kind of duration to those hedges that might roll off in a higher rate environment and how that could impact FFELP NIM as we move throughout 2023 and into 2024?

Sure. Two things regarding benefits. We’re completely hedged for 2023 in terms of floor income. The benefits discussed the last several quarters have more to do with the fact that we've increased our fixed-rate funding in 2021 compared to what we've done historically. That benefit will continue to offset the component of the unhedged floor income that has declined over the last four quarters. We expect that benefit to continue into 2023. As we enter into 2024, we’ll generate interest rate assumptions and explore opportunities to swap the floating. Otherwise, we feel very confident based on the current curves about achieving the 100 basis point to 110 basis point range.

Thank you. Our next question is from a representative at Bank of America. Your line is now open.

Hey, good morning guys. Thanks for taking my questions. I know you mentioned that you're paying off the $1 billion of notes due in January with cash today. I guess, you guys still have the $1.2 billion of unsecured maturities through the first half of 2024. Can you just talk about your appetite and kind of the attractiveness of refinancing that in the high-yield market currently seems to have opened up a little bit? And then can you remind us of how much capacity you have to refinance a portion of that in the ABS market?

We have $1.5 billion of cash on hand. We provided our cash flow projections on the private portfolio and the FFELP portfolio in our earnings deck. You can see the cash generated to meet upcoming maturities as well as $1.6 billion of unencumbered FFELP and private assets that we can tap into, and additional $5.2 billion of over-collateralization. We have a number of funding mechanisms available to address maturities in 2023, 2024, and beyond. Your comment about the unsecured markets returning positively is something we keep an eye on. Should there be an attractive market opportunity, we may refinance through unsecured debt. Otherwise, we'll consider other options available to us, whether that's cash on hand or the previously mentioned elements.

Hey, thanks. And then, I guess, given the delay in the CFPB resolution, has been a point for some of the rating agencies, but just wondering if there’s been any ability to negotiate or if conversations have happened regarding potential upgrades, given the current regulatory environment?

We have conversations with the rating agencies frequently, certainly as recently as yesterday in preparation for this call. That dialogue has continued. Unfortunately, there's no update to provide to the agencies on the path of that court case. However, from a quantitative perspective, we should be rated higher across the board in terms of elements within our control. Our capital ratios are increasing, and we have reduced our debt stack. We've done everything we can do to meet fixed-income investor expectations, beating their expectations, and positioning ourselves well for the remainder of this year as well as 2024.

Thank you. I'm showing no further questions at this time. I would now like to turn the call back over to Jennifer Earyes for any closing remarks.

Thank you, Olivia. We'd like to thank everyone for joining us on today's call. Please contact me if you have any other follow-up questions. This concludes today's call. Thank you.

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.