A month has gone by since the last earnings report for Sallie Mae (SLM Quick QuoteSLM - Free Report) . Shares have added about 3.9% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Sallie Mae due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Sallie Mae Reports Loss in Q2 as Provisions Increase

Sallie Mae reported second-quarter 2020 loss per share of 22 cents (on core basis) as against earnings of 31 cents reported in the prior-year quarter. The Zacks Consensus Estimate was pegged at earnings of 6 cents.

Higher provisions due to the coronavirus pandemic’s crippling impact on the economy resulted in the dismal performance. Also, declines in deposits and loan balance were headwinds. Further, results were affected by lower net interest income and elevated expenses. However, the negatives were partially offset by higher non-interest income.

The company’s GAAP net loss attributable to common stock was $87.7 million as against net income of $145.9 million a year ago.

Lower Net Interest Income, Higher Expenses

Net interest income for the second quarter was $348.8 million, down 12.1% year over year. The decline is attributable to lower interest income. Net interest margin contracted to 4.55% in the quarter from 5.88% reported in the year-ago quarter.

The company incurred non-interest income of $28.8 million compared with $19.4 million in the prior-year quarter. The upside mainly stemmed from higher other income.

The company’s non-interest expenses climbed 2% year over year to $141.6 million. The rise mainly resulted from higher compensation and benefits expenses.

Credit Quality: A Mixed Bag

Provision for loan losses was $351.9 million, substantially up from $93.4 million witnessed in the prior-year quarter.

Delinquencies as a percentage of private education loans in repayment were 2.2%, down 5 bps from the year-ago quarter.

Loans & Deposits Decline

As of Jun 30, 2020, deposits of Sallie Mae were $23.6 billion, down from $24.4 billion as of Mar 31, 2020. Lower brokered deposits contributed to the downside.

Loans held for investment stood at $21.2 billion as of Jun 30, 2020, down 2.4% sequentially. Private education loan portfolio (93% of total loans) was $19.8 billion, down 1.9% on a sequential basis. During the quarter, the company witnessed private education loan originations of $497 million.

Capital Position Strong

As of Jun 30, 2020, Sallie Mae’s common equity Tier 1 capital was 12.4%, exceeding the “well-capitalized” industry benchmark in regulatory requirements.

Outlook

Management expects to originate loans of more than $2 billion in the second half of the year, bringing full-year originations to $5 billion.

Student loan balances are expected to remain stable with the 2019-end reported figure.

Net charge-offs for 2020 is expected to be 1.7%.

NIM is anticipated to be 4.9%

The company expects full-year operating expenses of $565 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 105.88% due to these changes.

VGM Scores

Currently, Sallie Mae has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Sallie Mae has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.