Hello, thank you for standing by. Welcome to Sallie Mae Q1 2023 earnings conference call. At this time, all participants are on a listen only mode. After the speaker's presentation, there will be a question-and-answer session. To ask the question during this time, you will need to press star one one on your telephone. You will hear our automated message advising your hand is raised. To withdraw your question, please press star one one again. I will now like to hand the conference over to Melissa Bronaugh. You may begin.
Thank you, Towanda. Good morning. Welcome to Sallie Mae's first quarter 2023 earnings call. It is my pleasure to be here today with Jon Witter, our CEO, and Steve McGarry, our CFO. After the prepared remarks, we will open the call up for questions. Before we begin, keep in mind our discussion will contain predictions, expectations, and forward-looking statements. Actual results in the future may be materially different from those discussed here. This could be due to a variety of factors. Listeners should refer to the discussion of those factors on the company's Form 10-Q and other filings with the SEC. For Sallie Mae, these factors include, among others, the potential impact of COVID-19 on our business results of operations, financial conditions, and/or cash flows. During this conference call, we will refer to Non-GAAP measures we call our core earnings.
A description of core earnings, a full reconciliation to GAAP measures, and our GAAP results can be found in the Form 10-Q for the quarter ended March 31st, 2023. This is posted along with the earnings press release on the investors page at SallieMae.com. Thank you. Now I'll turn the call over to Jon.
Thank you, Melissa and Towanda. Good morning, everyone. Thank you for joining us today to discuss Sallie Mae's first quarter 2023 results. I'm pleased to report on a successful quarter and progress towards our 2023 goals. I hope you will take away three key messages today. First, we delivered strong results in the quarter. Second, our balance sheet and liquidity position are solid despite disruption in the larger banking industry. Third, we believe we have momentum for continued positive performance throughout the rest of the year. Let's begin with the quarter's results. GAAP diluted EPS in the first quarter of 2023 was $0.47 per share, as compared to $0.45 in the year ago quarter. Our results for the first quarter were driven by a combination of strong business performance as well as improvements in credit trends.
Private education loan originations for the first quarter of 2023 were $2.4 billion, which is up 12% over the first quarter of 2022. This quarter marked our highest level of originations in the company's history. Q1 freshman originations were also the highest in the company's history, with 27% of originations coming from this group of students. As we have mentioned previously, underclass originations have higher lifetime value to us due to greater serialization opportunity. This trend is especially encouraging for future peak seasons. This is a strong start to 2023 and is tracking better than our plan for the year. We are also happy to communicate that for the full year 2022, we were able to increase our market share by 90 basis points over full year of 2021.
Our market share is 58% of the full private student lending marketplace. Credit quality of originations was consistent with past years. Our cosigner rate for the first quarter of 2023 was 89% versus 88% in the first quarter of 2022. Average FICO score for the first quarter of 2023 was 746 versus 748 in the first quarter of 2022. We are also encouraged about the improvements we have seen in credit trends for the first quarter of 2023. Net private loan charge-offs in Q1 were $83 million, representing 2.11% of average loans in repayment. This is down 104 basis points from the fourth quarter of 2022 and ahead of where we expected, but still elevated compared to 1.89% in the year ago quarter.
During our fourth quarter 2022 earnings call, I mentioned that we were already seeing improvements in delinquency and default trends in our January results. Those improvements have continued into February and March. For Q1 of 2023, we saw the lowest entry rate into delinquency since the first quarter of 2022, and in March of 2023, the lowest roll to default rate in over a year. This improvement is driven by a number of factors. We believe we are seeing the continued normalization of the transient factors we discussed last year. We also believe we are starting to see the benefits of operational and strategic changes we made starting last year. You may also remember that we discussed seeing elevated levels of delinquency and charge-offs in narrow pockets of our portfolio toward the end of 2022.
We have continued to closely monitor the performance of those loans over the quarter and have not seen similar elevated levels expand into other parts of our portfolio. With that said, we acknowledge that three months of improved performance does not yet constitute a sustained trend. Additionally, the economic environment is uncertain and general economic worsening is still a possibility. We will continue to monitor these trends and adjust our expectations around credit normalization for the full year as appropriate. Following the recent turbulence in the banking sector, we thought it prudent to provide additional commentary about funding and liquidity. Despite the disruption in the larger banking industry, our balance sheet and liquidity position remain strong. We ended the first quarter of 2023 with liquidity of 19.7% of total assets. Marketable securities make up a portion of our approximately $6 billion liquidity portfolio.
At the end of Q1 of 2023, our unrealized loss on that portfolio totaled $155 million. In the unlikely event we had to sell this portfolio and recognize losses, we would incur a regulatory capital charge of approximately 50 basis points. Deposits have been very stable for Sallie Mae. Balances at the end of Q1 of 2023 were slightly higher than at the end of both the fourth quarter of 2022 and the first quarter of 2022. At the end of Q1 2023, our uninsured deposits made up only 2% of our deposit base. Additionally, during the quarter, we were able to execute an ABS funding transaction at spreads that came in about 23 basis points better than our previous transaction completed in 2022.
Our treasury team continues to effectively manage interest rate risk and has grown our net interest margin from 5.29% in the first quarter of 2022 to 5.7% in Q1 of 2023. In February, we stated that we expected to sell $3 billion of loans in 2023, with sales likely to take place in the second and third quarters. We are pleased to share that we have agreed to pricing terms for the sale of approximately $2 billion of private education loans. We are able to discuss the transaction. We expect the transaction to close in early May of 2023. Given general bank valuation trends, I'm confident our investors will agree that completing a larger sale earlier in the year is the prudent thing to do.
We were able to reach this preliminary agreement with our buyer at prices consistent with the assumptions in our 2023 guidance. Our plan is to use the gain and capital release from the sale to buy back stock at current levels to create shareholder value and minimize the impact of more capital on our NIM. We expect to do so while maintaining prudent capital and liquidity levels, recognizing the uncertain macroeconomic environment. Our assets continue to be in demand from a deep pool of well-informed loan buyers. We expect to execute future loan sales at attractive premiums. We expect to sell an additional $1 billion of loans this year, likely in the third quarter. Steve will now take you through some additional financial highlights of the quarter. Steve?
Thank you, Jon. Good morning, everyone. I'll continue this morning's discussion with a detailed look at the drivers of our loan loss allowance, a discussion of some key performance metrics, and finally, our strong liquidity and capital position. The private education loan reserve, including reserve for unfunded commitments, was $1.5 billion, or 6.3% of our total private education loan exposure, which under CECL includes the on-balance-sheet portfolio, plus the accrued interest receivable of $1.3 billion and unfunded loan commitments of another $684 million. Our reserve at 6.3% of our portfolio is unchanged from the prior quarter. We incorporate several inputs that are subject to change from quarter to quarter when preparing our allowance for loan losses. These include CECL model inputs and overlays deemed necessary by management.
Economic forecasts and weightings drive quarter-to-quarter movement in the allowance. In the current and year ago quarters, we used Moody's base S1 and S3 forecasts weighted 40%, 30%, and 30% respectively. We expect to use this mix going forward, except during extraordinary periods of uncertainty. Despite concerns about the health of the economy, the forecasts provided by Moody's are remarkably stable. As an example, the weighted average forecast for college graduate unemployment is virtually unchanged from the prior quarter at 2.64%. Prepay speeds in Q1 2023 were essentially unchanged compared to Q4 2022, resulting in no meaningful reserve requirement changes. Prepay speeds were lower than the year ago quarter, which is a contributor to the year-over-year change in the reserve. We continue to view slower prepay speeds as a real positive, as our assets are expected to stay on our books for longer.
While the first quarter is a large disbursement quarter for students funding the spring semester, many of these loans were reserved for at the time of commitment in the fall of 2022. Provision for new unfunded commitments totaled $56 million in the quarter. Our total provision for loan losses booked on our income statement this quarter was $114 million. As Jon mentioned, we saw improvements in many of our credit metrics this quarter, I wanted to spend some time looking at these in more detail. They can be found in our investor presentation on page 7. Private education loans delinquent 30-plus days were 3.4% of loans in repayment, down from 3.77% in Q4 2022, as well as from 3.5% in the year ago quarter.
We do expect 30-plus day delinquencies to continue to improve compared to the prior year, but remain in the mid 3% range for 2023. Private education loans in forbearance were 1.4% at the end of the quarter, a decrease from 1.8% at the end of Q4 2022, and unchanged from the year ago quarter. We do believe we are appropriately staffed across all of our collection buckets, and we have seen agent effectiveness improve as agent tenure increases, as evidenced by an increase in loss mitigation program usage, which is a big positive. Net charge-offs for the portfolio were 2.11% in the first quarter, compared to 3.15% in Q4 2022, and 1.89% in the year ago quarter.
As Jon mentioned earlier, while we are encouraged by this sharp decline, we will look for sustained improvement before we adjust our outlook on net charge-offs and the reserve for the full year of 2023. Jon has already reported on our solid NIM performance. The increase in NIM is the result of our conservative funding approach, the predictable asset performance and consistent origination quality. Because we have raised long-term funding through asset-backed securities and broker deposits, the amount of funding we are required to raise each year is very manageable. We also continue to benefit from a rising rate environment because our interest-earning assets reprice faster than our cost of funds. The interest rate sensitivity tables in our 10-Q measure earnings over a two-year period.
While we remain asset sensitive over the first full year period, we revert to a slightly liability sensitive position in the second full year period. This is a static analysis, however, and assumes no additional loan sales. If we continue our current loan sale strategy, which we expect to do, we remain asset sensitive. At this stage of the rate cycle, we are comfortable with the position and could easily hedge it with derivatives if our outlook or strategy changes. Lastly, NIM can be seasonal quarter to quarter and is heavily influenced by liquidity builds associated with peak season disbursements, and we expect full year 2023 NIM to be comparable to, but slightly higher than full year 2022. Regarding the loan sale that we expect to close in May, we did have new bidders included in the process and expect additional participants in future loan sales.
This demonstrates the attractiveness of our assets even in the most volatile environments. Income tax expense for the first quarter was $37 million, representing an effective tax rate of 24%, which is slightly below the expected annual run rate of 25%. Consistent with guidance, first quarter operating expenses were $155 million, elevated from both Q4 2022 at $138 million and $132 million in the year ago quarter. $4.1 million of the year-over-year increase was driven by one-time reorganizational costs. Roughly $6 million of the increase over the year ago period relates to higher FDIC assessment fees. We do expect our FDIC assessment fees to be higher in 2023 than in 2022.
This increase is due partially to a benefit we received in 2022 related to the late application of a change in TDR accounting that made the 2022 assessment lower and partially driven by changes to industry and company specific factors. We consider this part of the cost of having access to high quality, low cost and stable funding. Volume increases in our originations, servicing and collections operations account for $5.5 million of the increase in operating expenses over the year-ago quarter. The remaining $7.4 million increase relates to both our absorption of the effects of the current inflationary environment as well as the increase in our staffing levels over where they were in Q1 2022, and this includes the costs related to our Nitro acquisition, which occurred in early March 2022. Finally, our liquidity and capital positions are strong.
As Jon referenced, we ended the quarter with liquidity of 19.7% of total assets, substantially higher than the year ago liquidity of 17.2%. At the end of the first quarter, total risk-based capital was 13.3%, Common Equity Tier 1, 12%. GAAP equity plus loan loss reserves over risk-weighted assets, an important measure post CECL, was a very strong 15.7%. As we are phasing in the CECL impact to regulatory capital at the beginning of each year, we absorb 25% of the adjusted transition amount, which of course impacts our capital ratios. We have now phased in 50% of the transition, with the remaining 50% to be phased in in January of 2024 and 2025. In closing, we believe we are well positioned to grow our business and return capital to shareholders going forward.
I'll now turn the call back to Jon Witter.
Thanks, Dave. I hope you agree that we executed well in the first quarter and share my belief that we are well positioned to continue that trend throughout 2023. We are excited about the loan sale that is pending settlement and are eager to put our loan sale, share buyback arbitrage to work in the second quarter while our stock is trading at what we believe to be a significant discount. In addition to our origination growth in the first quarter, Steve also mentioned the continuation of slower prepayment speeds, both of which are positives for balance sheet growth and interest income as we look toward the second quarter of the year. We will continue to focus on operational execution, expense management and NIM to drive results. Let me conclude with a discussion of 2023 guidance.
As I mentioned earlier, we are encouraged by both the successful Q1 origination season as well as the positive trends we are seeing with credit performance. We are optimistic that these things will lead to a successful 2023. Just as we were cautious about building our reserve in the fourth quarter of 2022, we remain cautious in our guide for the year. We are reaffirming the 2023 guidance that we communicated on our last earnings call for all key metrics. With that, Steve, let's open up the call for some questions. Thank you.
Thank you. Ladies and gentlemen, as a reminder to ask the question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Michael Kaye with Wells Fargo. Your line is open.
Good morning. On the loan sale, I know you plan to sell $3 billion, but I just wanted to check on the openness to selling more. It sounds like there's pretty good demand and given where the stock price is. I was just wondering what's the appetite to do potentially more than that.
Good morning, Michael. It's Jon. Thanks for your question. Our plan at this point contemplates an additional $1 billion of loan sales. I think if there's one thing that hopefully we've demonstrated over the last couple of years, is our belief in sort of the power of capital allocation and the arbitrage strategy that we have underway. Every year, we continue to assess sort of the depth of the market, the premium, sort of the state of our arbitrage grid. I think you can have confidence that if we see an opportunity to create significant shareholder value by adjusting our plan, we will look and our board will look favorably on doing that. Again, at this point, what we have in our plan is an additional $1 billion.
Okay. You know, you know, it's a really strong quarter, you know, outperformance on, you know, all your outlook items. You know, I was surprised you left the guidance unchanged, particularly on the credit outperformance, you know, even originations. You know, what's holding you back from increasing the guidance? I know it's early in the year, but, is it more conservatism early on? Is it more concerns about the macro?
Michael, I think it's a good question, and it's obviously something we debated extensively internally. I think our view is exactly what you just said. It is early in the year. The, you know, the economic environment is uncertain, and there's obviously, you know, the potential for that to have an impact on credit. As I think, you know, you and many others who have followed us for a long time know and understand, originations are heavily influenced by peak season, which has yet to happen. While I think we are very encouraged and, you know, very happy with what we are seeing, we just felt it prudent to see a little bit more sustained performance before we updated guidance.
Okay, thank you so much.
Thank you. Please stand by for our next question. Our next question comes from the line of Moshe Orenbuch with Credit Suisse. Your line is open. Check to see if you're on mute.
Sorry about that. Can you hear me now?
We can hear you, Moshe. How are you?
Great. All right. Thanks. Thanks. Thanks. You had mentioned, you know, kind of 12% origination growth and kind of the highest level that you've seen, the high freshman origination. You know, there are some players that are out there, you know, kind of trying to enter. You know, I can think of a couple.
Some of which have, you know, long histories in student lending that have been entering the in-school market. Could you talk a little bit about, you know, what drove the success now and, you know, how we should think about that for the balance of the year?
Sure, Moshe. Happy to, and obviously wanna be a little bit sensitive in that, you know, we have investors on the call, but I'm sure we also have some competitors on the call as well. I think we have outlined for the last couple of years the investments that we have been making in our, you know, marketing and originations machine. Whether that's, you know, significant investments in technology, whether that's significant investments in data and analytics, and whether that is significant investments in expanding sort of the channels and the effectiveness of the channels that we use. I would look to, you know, sort of both partnerships, but I would also look to things like our acquisition of Nitro.
I think we have a thesis and a belief that there are real tangible things that we can do to both, you know, increase the effectiveness of our marketing through those levers. I think also importantly, to do so in a way that gives us greater control over cost and inflation over time. We are encouraged by both the trends that we are seeing in volumes and in the composition of those volumes, but we're also encouraged by the trends that we're seeing in our Cost to Acquire metrics, especially in the general inflationary environment right now that so many digital marketers are experiencing.
You know, I think it is those things that are really driving, sort of the results that we are seeing in addition to the things that we've always had, which are just a really strong brand, great relationships with schools and the like, all of which we continue to invest heavily in. At this point, as I said in my remarks, we are slightly ahead of, you know, our plan for the year. You know, I would certainly view originations growth as a potential opportunity for us going forward. As I said a few minutes ago to Michael, I think so much of that is driven by peak season.
You know, we wanna see a little bit how, you know, the second quarter shapes out and the early sort of, run up to peak is looking before we change guidance for the year.
Got it. Thanks. Recognizing that you didn't wanna, you know, say anything about the premium that you're gonna get on the loan sale, but could you talk about how much capital is freed up in total, kinda taking into account, you know, the capital on the loans, the after-tax reserve and the premium kind of together? Give us some sense for that, Steve.
Yeah, sure, Moshe. As you can see, we have 13.3% total risk-based capital on the balance sheet. I think that gives you a pretty good indication of how much capital we will free up when we free these loans from our balance sheet. We have a 6.3% loan loss reserve, and we sell representative samples of our pool. That gives you a pretty good indication of, you know, considerable amount of reserve that we will free up with this loan sale. You know, look, regarding the premium, I think Jon gave you a very good indication by saying that it's within, you know, the range of what we assumed when we put together our guidance. It's a very nice and respectable premium that we earned on this loan sale.
You can expect us to be back in the market to buy back stock in a reasonable fashion in the near term.
Steve, touch quickly on the tax adjustment of those, just for anyone who's doing the math for the first time.
Yeah, sure. There's no tax impact on the capital release. Of course, the provision goes through the income statement, so that will be tax effective as well.
As with the premium.
As with the premium, yeah.
Thanks so much.
Thank you. Please stand by for our next question. Our next question comes from the line of Sanjay Sakhrani with KBW. Your line is open.
Thanks. Good morning. Maybe first question on the loan sale, obviously very positive. Steve, could you just talk about how the prospects of that sale sort of migrated across the quarter? Because I'm sure, you know, it wasn't even because of all the banking stuff that was happening and obviously the rate movements. I'm just curious if at any point during the quarter there was any risk in terms of not being able to do the sale.
I mean, look, Sanjay, it was a very incredibly volatile period that we were operating in. Base rates are a very important part of the premium since, you know, 55% of these loans are a fixed rate product. You know, we started the process, shortly after we released earnings, and the process typically takes four weeks to six weeks. As I've said many times in the past, the buyers of these loans now understand the performance, of the credit and the cash flows of these portfolios very well. You know, We debated whether or not internally we should hedge the fixed rate component of the process, to give ourselves a little bit of insurance. We chose not to. The process worked out, very well for us.
You know, Rates continue to be favorable for future loan sales, and Jon and I probably discuss daily whether or not we should hedge that component of the process. That's probably the biggest wild card. Credit is a pretty well-known factor, and cash flows are pretty well understood by buyers as well.
Sanjay, I would also just add, and I think Steve said it exactly right, but if you look back over, you know, now the three years that I've been here and, you know, we've been executing this strategy for about that same amount of time, you know, my recollection is there's been a couple of quarters before this where we likewise saw, you know, some really industry-driven or economic-driven sort of volatility in the marketplace. I think in each one of those quarters, there were always questions of, could we get the loan sale done? You know, certainly there may come a day and there may come an economic situation where the volatility is so great that it can't happen. I'm certainly not guaranteeing that, you know, that there could never be a case where that happens.
I will tell you, I have been impressed by sort of the resilience of these markets, even during quarters where there was a lot of things happening more broadly and globally. I think this quarter, you know, you always worry when you're having some of the kinds of factors that we're seeing. I think at the end of the day, the interest, you know, sort of may have taken a day or two off, but rebounded very quickly, exactly as we have seen during other periods of volatility.
No, absolutely. It's quite positive. Steve, I think I also heard, you mentioned it seems like the operational issues seem to be resolving themselves and the tenor of the average collector has improved. Are there any more milestones that we need to be thinking about? Have I assume everything has stabilized there.
Yeah, Sanjay, I'll take that one. Look, I think as we said on the last call, you know, we took the performance in the fourth quarter, you know, as a real opportunity for us to sort of step back and, you know, challenge ourselves in an area that has historically worked very well and very predictably for our company. We have implemented a bunch of changes, but quite frankly, there are, you know, I think additional ideas and changes that the team is working on that we think will make us, you know, both more effective and able to take just better care of our customers and continue to do that in a in a in a really cost-effective and attractive way. I think you should expect that we will continue to work at this.
You know, it's always hard to talk about long-term charge-off trends because they're so reliant on the broader economic sort of environment. You know, I think we view this as a good step, a good first step. You know, hopefully, there's more to come.
Thank you, Jon.
Thank you. Please stand by for our next question. Our next question comes from the line of Rick Shane with J.P. Morgan. Your line is open.
Thanks, guys, for taking my questions. Look, one of the things that obviously stands out in the quarter is the NCO rate. When we look at, recoveries, strong recoveries contributed to that. You've talked about operational changes. I'm curious, when you look at the improvement in recoveries, was that a function of exclusively of the operational changes, or were there increased sales of charge-offs, loans?
No, Rick, there was nothing unusual going on in terms of recoveries. Our process regarding loan sales is literally to sell half as they charge off and then sell the remainder 6 months after, you know, we work the remainder for 6 months and then sell the, what is left. If anything, I think, there's probably room for recoveries to improve in future quarters as we have had significant, you know, charge-offs in the back end of 2022. I think, the, you know, the big improvement in performance is related to the fact that the transitory effects that we spent, you know, a considerable amount of time talking about in, the 2022 results have worked their way through.
Just as a reminder, that was the gap year population, which has pretty much completely worked its way through the portfolio. We think that there was an acceleration of defaults from the changes in our forbearance policies. I think a lot of that acceleration has now run its course. We can't validate that 100%. Look, our collection unit improved their performance sharply, a shout-out to them for helping us improve our performance here. Anything you'd like to add to that, Jon?
Said it well.
Yeah.
Thank you. Please stand by for our next question. Our next question comes from the line of Jeff Adelson with Morgan Stanley. Your line is open.
Yeah. Hi, thanks for taking my questions. Understood that you guys, you know, have yet to close on this $2 billion of loans being sold in early May. I guess just in trying to think about how this compares to the last deal you did in October. Can you maybe talk a little bit about some of the puts and takes of what your buyers liked about this deal versus last deal, what they didn't like? Just trying to get a sense of how that compares to the recent deal you did.
Sure, Jeff. I'll try and take a crack at that. like we literally sell representative pools of our assets. What we put in front of buyers from process to process is, you know, essentially the same pool of loans. The field of buyers continues to grow and evolve. I don't think there were any pros or cons different to, from the, to this sale from any previous sale. I think what we are seeing, quite simply, is a population of potential buyers that are gaining a more thorough understanding of the asset class. We'll look forward to continue to participate each time that we come to the market. I mean, you know, the credit performance is basically the same. The cash flows are all the same.
The one wild card, as we discussed, earlier in the conversation, is the underlying interest rate environment. You know, that's just the fact of the marketplace that we're operating in.
I think, Steve, just to answer or to finish that thought, I think the interest rate environment was pretty close to where it was at the last sale, maybe slightly higher. Is that correct?
It was almost identical.
Yeah.
by the time we closed the sale. Yeah.
Got it. You saw a really nice result for originations this quarter, obviously, with some of the freshman benefit coming through. Just wanted to key in a little bit on the Nitro, the Nitro benefit you're getting there. Can you help us understand maybe how much of your flow is coming through that channel at this point, and maybe what your expectations are for that going forward or?
Yeah, happy to take that. Unfortunately, one, I don't think we've disclosed the specific volumes that come through there. Two, Nitro is becoming so integrated with the rest of our digital marketing, that it is oftentimes hard in a sort of a multi-touch world to know, you know, what was impacted by Nitro versus what was not. I think, you know, I'll offer a couple of thoughts. You know, number one, I think what Nitro does a great job of is establishing relationships with customers, you know, customer-initiated, high quality, trust-based relationships, before they are necessarily looking for a private student loan. That allows us to cultivate those relationships, that allows us to build, you know, trust and affinity to the brand.
It allows us, you know, through insights that we have to anticipate when a customer might start to look for a private student loan and to be there kind of at the right time with the right offer, you know, and communicating them, you know, with them in the right way. The strategic value of that customer acquisition machine, I think is very powerful for us. The reason it's hard to separate is, you know, sometimes that call to action, you know, is branded Nitro. Sometimes that call to action is branded Sallie Mae. At the end of the day, it's all driven by the positive customer acquisition that comes through.
I think you should expect even beyond Nitro for us to continue to invest in that kind of, you know, sort of content-generated, you know, acquisition models going forward. We think it's highly effective. We think it is really attractive from a cost and CTA perspective. And we think it allows us to own and to establish customer relationships much earlier in the life cycle. Which means we're not having to compete as much in, you know, Google auctions and the like to get access to customers that we would wanna talk to. We, we like all of that strategically. I think what I would feel comfortable saying is the Nitro deal has surpassed our expectations from the deal economics that we set out a year ago. And we are very happy with the performance of the overall deal.
Great. Thanks for taking my questions.
Thank you. Please stand by for our next question. As a reminder, ladies and gentlemen, it's star one to ask the question. Our next question comes from the line of Mark DeVries with Barclays. Your line is open.
Yeah, thanks. Jon, I think you mentioned that you saw a continuation of the improved delinquency trends from January and February and March. Any update you can provide us on what you've seen so far in April?
No, we have not disclosed anything for April. You know, honestly, when you look at the normal patterns of operations, you know, they areAs is the case in many collection shops, you know, very back-end loaded to the end of the month. Anything that we gave you, even with just a few short days left in the month, would be, you know, far from a complete picture. You know, I would point you to, you know, we do issue data quarterly and monthly on credit trends. You know, we think those tend to be pretty good rough indicators of where we're going. I would point anyone who's interested to those releases, which we do over time.
Okay, got it. Then Steve, I think you mentioned that, you know, you remain asset sensitive and can, you know, and think about hedging that. Can you talk a little bit more about, you know, your thinking around that, you know, given that the Fed now appears to be kind of nearing the end of their tightening cycle?
Sure. Great question, Mark, and let me tell you what our approach is. Our approach is essentially to lock in a steady net interest margin on our portfolio. Did we think interest rates were gonna rise? Yes, we did, but that wasn't the primary motivation for us laying in more fixed rate funding. The primary motivation for that was the fact that the component of our loans that borrowers that were choosing fixed rates continued to increase. You know, I talk about the asset sensitivity, the liability sensitivity. It kind of tends to go between, you know, +2%, -2%. We aren't really making any interest rate bets, but just trying to maintain a good, steady spread on the portfolio.
To your point, you know, we may or may not be at the end of a interest rate cycle, and if it does look like, you know, rates are gonna continue to decline, I'm sorry, if rates, it does look like rates are gonna continue to rise, we would put on some forward-starting pay fixed swaps, for example. Right now, our exposures are pretty limited, and there's not a lot to do prior to the next peak lending season, which is nice to be in a seasonal business like this. We get to watch how things unfold through the summer here. Our primary goal is to lock in a good, solid, consistent net interest margin and not to play what the Fed is going to do next.
Okay. If I could just squeeze in one last question. Was hoping to get a little bit of color of the nature of the buyers for your loans. What I'm trying to understand is, like, how sensitive are they to volatility in funding markets? Are these like insurance companies who just hold them as whole loans and don't care what's going on in the ABS markets? Do you have buyers who really do and really had to hit pause as they were thinking about the deal in the first quarter?
The end buyers of basically the residuals and the more subordinated classes of what ends up being of the portfolios that end up being securitized are very large credit funds and, to your point, insurance funds. Look, they are absolutely sensitive to the rises and rising and falling interest rates, and they price their bids accordingly. That is a fact of life. It's something that, you know, we focus on here. Like I mentioned earlier, Jon and I continue to review whether or not we should be hedging future loan sales, and we absolutely have the ability to do that. We are, you know, very much susceptible to the interest rate environment.
Okay, got it. Thank you.
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.
Morning. Thanks, guys, for taking my questions. Actually, Mark just asked one of my questions, just a moment ago on the characteristics of the buyers. I guess I have a couple marginal questions. Number one, I forgive me if you had comments on this. I'm juggling a few different earnings this morning. Any thoughts on kind of the pay-- the kind of the, you know, the clipping of the payments moratorium and how that affects second half demand and broadly speaking, credit quality? The second question would be if you can kind of decon-- you know, obviously positive commentary with NIM expansion year-over-year, but maybe deconstruct how you think deposit betas trend and where kind of the yields go over the course of the year as well.
Yeah, John, good morning. I'll take the first question. I'll turn it over to Steve for the second question. You know, first of all, I would just remind everybody that, you know, post-COVID, we worked very hard to, you know, end our disaster forbearance program. We worked very hard with our customers, to encourage them back into good, regular payment, sort of patterns and habits. You know, that is a track record that has now been, I think, well established over the last, you know, 2, two and a half plus years, you know, even while the federal loan pause has been in place and, you know, folks have had a different federal experience. I think through that lens, you know, we feel, we feel great about the payment habits of our customers.
We continue to feel great about things like the refreshed FICO scores of our customers, and the general sort of quality of our underwriting and credit administration practices. With that said, I think both of the major, sort of federal policies being discussed today, would have a net positive on, you know, sort of repayment, and kind of creditworthiness. Certainly, any type of loan forgiveness has a, you know, on average net impact on our customers, the majority of whom also have federal loans. Certainly anything that moves to income-based repayment, would have a, you know, sort of a strong, positive credit impact on us.
We've done some work and have talked, John, in the past that we think the, you know, the sort of restarting of Federal loan payments, you know, is probably sort of a modest detractor, but we don't see it as having a really material impact on creditworthiness for sort of the things and the reasons I've talked about. We certainly don't think it has, you know, any type of a long-term impact on originations. We think the reasons customers seek out us are very different from why they seek out a Federal loan. We think they're very complementary and think they will continue to be complementary in the longer term. You know, John, you know, I would add just one other bonus topic.
You know, I think it is our hope that, you know, all of the discussion around the federal program really shines a bright light on the fact that there are real issues with the PLUS program. I think we are starting to see evidence in the sort of political dialogue that there is an appreciation on both sides of the aisle that there is, you know, a need for smart and sensible reform to make sure that, you know, you know, students both have access to and ability to complete college, but that the federal program does not put families in an untenable position from a debt load perspective.
We think, you know, longer term, you know, any sensible reform to the PLUS programs almost certainly has a positive impact on our business, and we look forward to being a productive and constructive part of those dialogues.
Great. Thank you.
Regarding.
Yeah. Beta question. Yeah.
Yeah. Regarding our deposit betas. Thank you for the question. Look, our bank is in a very strong position. I'd like to repeat that we ended 2022 with 97% insured deposits. That's now up to 98% insured deposits based on our disclosures. You can see that we had just $600 million of uninsured deposits, and that was largely centered in our retail/internet deposits. Just $200 million of those deposits left over the course of, you know, a very interesting quarter regarding the banking industry. I guess, we should take that as a compliment that people feel so strongly about the strength of Sallie Mae Bank. By the way, in the retail deposit market, Sallie Mae Bank does have a very strong reputation.
The fact of the matter is the vast majority of our deposits are either term or the pricing is locked in, that leaves just about $6 billion of our retail deposits that are, you know, market-based money market deposits. We have seen extreme stability on that front, even through the months of March and into April. Our deposit betas are continuing to run sort of in the low 70% sort of ZIP code throughout the Fed rate rising cycle, even through the most recent one. We're not in a big fundraising season right now, and our pricing is, you know, not very aggressive and with the pack of competitors that we compete with. What we're seeing is inflows of deposits into the bank over the course of April.
You know, we feel very good about the position that we're in and expect that we already commented on NIM earlier in the conversation, but I guess you missed it because you were on that other call. I'll repeat that, our net interest margin tends to be seasonal. It declines during periods liquidity for our big disbursement periods and then rises after that. We expect our net interest margin to come in for the full year, slightly higher than where it was in 2022, and we feel very good about having a net interest margin that has a, you know, a five handle on it. The outlook is very good for 2023.
Great. Thanks very much. Appreciate that.
Welcome.
Thank you. Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back to Jon.
Thank you very much, Towanda. Appreciate your help this morning. Thank you everyone on the call, for your participation and interest in Sallie Mae. It goes without saying that the entire IR team is here, and standing by to answer any additional follow-up questions and provide whatever resources, we can as you digest the quarter and look forward to the end of the year. With that, I will hand it back to Melissa for some closing business.
Thank you for your time and questions today. A replay of this call and the presentation will be available on the investors page at SallieMae.com. If you have any further questions, feel free to contact me directly. This concludes today's call.
Thank you for your participation. You may now disconnect.