SLM Corporation (SLM) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. I'm Raymond Quinlan. I serve as Chairman of the Board of Directors of SLM Corporation. It is my pleasure to welcome you to the company's 2020 annual meeting of stockholders. Thank you for joining our meeting online. Before the meeting begins, I would like to take this opportunity to remind you of the rules of conduct. You may locate the meeting program on the lower right-hand corner of your screen, which includes an agenda and rules of conduct. Please be reminded, particularly that: One, only stockholders of record or their proxy holders may submit questions or comments during the meeting; two, all questions and comments may be submitted utilizing the ask a question box located on the lower left-hand portion of your screen. We will host a Q&A session at the end of the meeting to address stockholder questions. Three, the views and comments of all stockholders are welcome. However, the purpose of the meeting will be observed and a chairperson or another company representative in their discretion will not respond to questions or comments raised that are not relevant to the business of the meeting as previously provided in the notice of the meeting to stockholders. Fourth, we do not anticipate any technical difficulties today. However, in the event of a technical malfunction or disruption that interferes with our ability to continue the meeting, the meeting will be adjourned or expedited as needed. The polls will open immediately and will close 2 minutes thereafter. If the meeting is so adjourned, all votes received prior to the time, the polls are closed will be counted. The meeting may not be reconvened and the results will be announced publicly as required. Any adjournment to another time or place will be posted on our Investor Relations website. Thank you for your cooperation. We have a brief agenda for today's meeting. First, we'll conduct the formal portion of the meeting and hear the voting results for the proposals put to the stockholders for a vote. Allow me to introduce our Senior Vice President and General Counsel, Mr. Nicolas Jafarieh. Mr. Jafarieh will act -- will be acting as our inspector of election for tallying the results of voting on the proposals that are being presented today. Nick, can you confirm that you have taken the oath to act as an inspector?

Yes, Mr. Chairman.

Thank you. I will now turn to the nominees for election to the Board of Directors. The nominees named in our proxy statement are all standing for election to the Board of Directors. I would like to introduce you to the Board of Director Nominees who are joining us by phone. Mr. Paul Child, Ms. Mary Carter Warren Franke, Mr. Earl Goode, Ms. Marianne Keler, Mr. Mark Lavelle, Mr. Jim Matheson, Mr. Frank Puleo, Ms. Vivian Schneck-Last, Mr. William Shiebler, Mr. Robert Strong, Mr. Jonathan Witter, Ms. Kirsten Wolberg. Also with us today from KPMG LLP, the company's independent registered public accounting firm for 2020 are: Paul Laurenzano, Lead Audit Partner for the 2020 Audit; Peter Torrente, Account Executive; and Mira Poznyakovskaya, Senior manager. Questions may be submitted to utilizing the ask a question box located on the lower left-hand corner of your screen. Now let's get to the business portion of the meeting. Mr. Jafarieh, will you please report on sending the notice of the meeting to stockholders and the number of stockholders considered present at this meeting?

Thank you, Mr. Chairman. The Board of Directors set April 21, 2020, as a record date for this annual meeting. And all stockholders of record as of the close of business on that day are entitled to vote. The list of the registered stockholders can be viewed by clicking on the link in the right-hand corner of your screen. The company distributed the notice of the meeting and its proxy statement, which explains the items to be voted upon at this meeting on or about May 5, 2020, to all stockholders holding shares of the company's common stock as of the record date. In addition, at least a majority of the shares of the company's issued and outstanding common stock entitled to vote is represented in person or by proxy at today's meeting.

Thank you. On the basis of the General Counsel's report, I recognize the presence of a quorum for this meeting. There are 3 proposals for stockholders' consideration. The first proposal is the election to the Board of Directors of the 12 nominees identified in the proxy statement. The second proposal is the advisory vote on executive compensation. The third proposal is the ratification of the appointment of KPMG LLP as the company's independent registered public accounting firm for the year ending 2020. We have placed these 3 proposals before stockholders for their vote. Most of you have already voted by telephone or over the Internet. If you have not already voted and wish to do so now, the polls are now open and you may vote by clicking on the words, vote here, utilizing the voting box located on the right-hand side of your screen. As a reminder, stockholders attending the meeting may submit questions during this time. [Voting]

I now declare the polls closed. Mr. Jafarieh, would you present the preliminary report of the voting results?

Mr. Chairman, this is my preliminary report, which reflects votes tabulated as of the close of business yesterday. Any ballots properly voted and collected prior to the closing of the poll, but not included in this preliminary report, will be reflected in my final report and filed on a Form 8-K by the company within 4 business days after the meeting. For the election of each of the 12 individuals whose names appear on the ballot of directors. All of the nominees received more votes cast for than against his or her election to the Board. Accordingly, all the nominees have been elected to the Board of Directors by the required number of votes. For the proposal to approve an advisory vote on executive compensation, a majority of the shares of common stock represented at the meeting and entitled to vote on the proposal voted for the proposal. Accordingly, this proposal has been approved by the required number of votes. For the proposal to ratify the appointment of KPMG LLP to serve as the company's independent registered public accounting firm, a majority of the shares of common stock represented at the meeting and entitled to vote on the proposal voted for the proposal. Accordingly, this proposal has been approved by the required number of votes.

Thank you, Nick. And on behalf of the Board, thanks to our stockholders for electing the director nominees to serve them for another year. This concludes the business portion of the SLM Corporation's 2020 Annual Meeting of Stockholders. The 2020 annual meeting of shareholders is now officially adjourned. I would like to thank all of our stockholders for attending the meeting. Mr. Jonathan Witter, CEO, would like to take a few moments to address the stockholders and then Mr. Jafarieh will conduct a brief Q&A session.

Good morning. Thank you for joining us today for Sallie Mae's 2020 Annual Meeting of Stockholders. It's an honor to be with you today as Sallie Mae's new CEO. This year has been an extraordinary time in all of our lives, and I want to recognize the continued hard work and dedication of our team members as we position Sallie Mae, customers, and our business for continued long-term success. Let me reiterate how much I appreciate your interest in Sallie Mae. And on a personal note, I hope you and your families remain safe and healthy around the world. I look forward to further discussions with our shareholders over the coming weeks and months and thank you for your continued interest in and support of Sallie Mae. I am now turning it over to Mr. Jafarieh for the Q&A portion of our meeting.

Thank you, Jon. At this point, we will conduct a brief Q&A session where we will address questions that we have received from our stockholders. To allow us to try and answer more questions, we may summarize the questions, and we will also group together questions received from multiple stockholders on the same topic. If we do not get to your question before we run out of time or you have additional questions after the session, please feel free to reach out to our Investor Relations group. Their contact information is on our website. One question we have received from our stockholders is related to what we might have heard about colleges reopening in the fall. I will turn it over to Mr. Witter to address the question.

Thank you. First of all, let me say, as you can imagine, the situation with colleges like the situation with many of us is fluid. But we are seeing that schools are beginning to articulate their strategies for the fall. Roughly 1/3 of schools have communicated their plans, and we expect that remaining schools will release their plans by the early to middle part of July. So far, we are seeing what can best be described as a hybrid approach from the vast majority of schools. We believe most schools' students and their families all desire a safe return to campus as soon as possible. And schools are looking to get students into the classroom while practicing the social distancing practices we have become accustomed to. To reduce the density of students in the classroom, some schools are looking to supplement the in-classroom experience with online classes and smaller classes offered more frequently. We have also heard of schools limiting activities and breaks between August and Thanksgiving, many removing fall break to limit the travel on and off of campus. It's important to say there is not going to be a one size fits all school solution. Schools have different locations. They are exposed to different levels and concentrations of the virus and their physical plans allow for different strategies. However, we believe over the coming weeks, we will get insight into the changing plans of each of these schools for the fall. And that -- for the vast majority of the schools, those plans will involve a residential component. We do expect that some schools -- some students and families will change their plans for school under the current conditions. As a result, we believe that our originations will be lower than our original expectations for the year, and we expect that we will be able to better quantify the impact of this lower origination volume on earnings later this summer. Thank you.

Thank you. Another question we have received from stockholders is about the election this year and how these elections may impact the company? Jon, may I turn it to you?

Of course. As you can imagine, the political landscape is an important sort of factoring consideration in our business. And as such, we continue to monitor the Presidential Election as we do sort of activities at the federal and state level more broadly. We believe that we are well positioned, no matter who wins the election, to continue our business in good form. We believe the government has the responsibility to help lower-income families with the funding that they need in order to obtain the dream of higher education. For those who can afford to pay for education, however, Sallie Mae and other private lenders provide products and services to help. I think it's interesting to see what is happening at the state level. And states have begun to implement their own means-tested version of free tuition type programs with the New York Excelsior Program being the most well known, but programs in other states such as New Jersey, Maryland, and the list goes on. The New York program has been in place for several years at this point. And we've -- and our results in the early year -- first year, we experienced a slight drop in originations in New York after the implementation, but our originations have grown every year since then. It's also interesting to note that this program is very consistent with what Hillary Clinton's plan was in 2016 and the program that Vice President Biden has suggested in the current election. We believe means-tested programs like the New York Program, provide lower-income families with the financial support they need to obtain higher education, and we believe that these programs are complementary to our business and that our business is largely unaffected by these state programs in the long-term. Thank you.

Thank you. Another question from stockholders is about what the company is doing for our customers who are experiencing hardships as a result of the COVID-19 pandemic?

Yes. It's a great question. And let me start by saying that we recognize at every level of the company, the incredible, I think, economic hardship that the pandemic has presented to some customers. And I am proud, and I'll describe it in a few minutes. I am proud of the incredible work that the company has done to really try to serve customers during what we recognize is been an incredibly difficult and uncertain situation. So beginning in March of 2020, we began extending 3 months of disaster forbearance to customers who self-identified as impacted by COVID-19. And I think it's important to note that this is a program that we have successfully used in the past for customers who have been impacted by natural disasters such as hurricanes or wildfires. And we were able to very effectively extend that program to the unique characteristics and features of a global worldwide pandemic. It's also important to note that given the volume of requests that we expected to receive, it wasn't enough to have the program, we also had to be able to service those requests in a timely manner. So we quickly stood up self-service options in our IVR and our website to allow both customers to submit forbearance requests, but also for those forbearance requests to be processed in an automated or semi-automated fashion. And while nothing could perfectly have prepared us for the volume of requests received and the service impacts, I am proud at the rate in which we were able to respond to customers. And in tracking social media and in tracking customer surveys, the vast majority of our customers were pleased with both the experience and the outcome that they experienced. We believe the use of disaster forbearance to assist customers is in line with expectations from our regulators and legislators. And we have, of course, been in regular conversations with those groups to ensure their ongoing engagement and to gather their thoughts and perspectives. As we move out of the original sort of 90-day period, we will look to have conversations with our customers who are still in need of and requesting additional assistance, and to the greatest extent possible, look forward to having those conversations on a voice to voice basis. Our hope is to better understand their employment status, their co-borrowers' employment status, ability to repay and other important factors in considerations given the impact from COVID. Based on those discussions, there are a variety of different options available to us, including a continuation of a forbearance or placing that customer into any number of other repayment programs that we have developed in the past or in specific response to the pandemic, all of which are focused on helping that customer regain their financial footing and return to payment in good status. Overall, we feel good about our initial response and assistance provided to our customers so far. We will continue to work with our customers as we navigate these uncertain times. And I will say, we will also continue to be flexible and adaptive if the situation on the ground should change and factors require us to do something different. Thank you.

Thank you. We have also received questions about our Board composition and executive compensation. Those topics are extensively covered in our proxy statement. And in the interest of time, we refer you to our proxy statement disclosures on those topics. This now ends our Q&A session for today. As noted earlier, if we did not get to your question, please refer to our proxy statement or you are welcome to reach out to our Investor Relations group. Their information is available on our website. I will turn it over to Mr. Witter to conclude the meeting.

Thank you. We appreciate our stockholders' support. Thank you for joining us today. And I look forward to seeing you or talking with you at our next annual meeting of stockholders. Thank you very much.