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During this conference call, we will refer to non-GAAP measures that we call our core earnings. A description of core earnings and a full reconciliation to GAAP measures and our GAAP results can be found in the second quarter 2012 supplemental earnings disclosure. This is posted along with the earnings press release on the Investors page at salliemae.com.Thank you and I will turn the call over to Al. Albert L. Lord Good morning, all and thank you for your interest in Sallie Mae. I'll take a few minutes of your time to discuss our quarterly performance, talk a little bit about future earnings and then share some thoughts with you about our business, the student lending business. With respect to the quarter, I would give us a decent grade for the quarter, certainly a strong B, although I read a half-dozen analyst reports which reminded me that we missed -- that's -- which is actually something I hadn't been thinking about. For the quarter, our origination volume was good. Our credit quality remains high with high FICO scores and cosigner rates, and we got our operating expenses down into a more reasonable range from Q1. The company is focused on sustaining cost control and continues to seek more productivity. As you all noticed, our earnings are reduced again by another so-called one-timer and that was a $50 million premium amortization, acceleration into the second quarter as a consequence of having some $4 billion or 3% of our portfolio consolidated into direct lending. Those -- that number is actually a little higher than we anticipated. That program ended June 30. Somewhat offsetting that premium amortization were $20 million of debt repurchased gains in the quarter. So our second quarter charge-offs were $235 million, that actually beat our full year plan. I personally was mildly disappointed after a very good first quarter and -- which really surprised us. But the second quarter was not the first quarter, and our charge-offs were higher and our delinquencies backed up a little bit.
Sallie Mae's provisions, which are outsized at the moment, will come down significantly, but not yet. Progress has been frustratingly slow. There's seasonality in our collections, and therefore Q2 is normally worse than Q1, but ultimately collection success follows the economy, and the economy obviously is backed up.Our net interest line is actually the line that gets most of my attention, it's our top line. Obviously in Sallie Mae's situation, it diminishes as our FFELP loans run off and they run off more quickly than our private loans grow. At some point, you will see growth in that line, but it will be a little bit of time. Our second quarter bore that $50 million charge that I talked about and so Q2's net interest was well down. In addition to that $50 million, it was also down another $27 million relating to FFELP volume going away, as expected. And also as expected, our margins have been tightened by higher cost of funds and a variety of other factors that Jon will cover with you. Fee income at $192 million was roughly flat with 2011, and very much as we expected it. It's holding up nicely considering the FFELP wind down pressures on the businesses. We are committed to growing this income source. Earnings per share, of course, are helped by share repurchases. Our share count's down 4% in the second from first and some 9% below where we were at this time in 2011. Last time we spoke, we told you we would freshen our outlook for 2012. I must say that I commend our current sell side analysts. Their numbers are very close to ours, or ours are close to theirs. I'm going to credit our guys for the transparency of our disclosures, which I -- which obviously helps you make your projections. I think we originally projected around $2 for this year. We're moving that up, as I think you've seen in our press release, to $2.15. I'll also tell you that we'll grow again in 2013 and -- with a caveat or 2. I'm not very uncomfortable with the kinds of numbers that are out there now with respect to 2013. One of the caveats, as I said, I'm not as precise as you guys are and we've got to caveat the economy. We're very pleased with our asset performance and the assets are looking strong, stronger than in quite some time, and that even includes our remaining nontraditional loans. But the real variable, obviously, in our credit costs are the direction of the economy. Read the rest of this transcript for free on seekingalpha.com