SLM Corp Q4 FY2024 earnings call

• Delivered strong results in 2024, exceeding origination volume and credit quality expectations. - Private education loan originations: Q4 2024 at $982M, full-year at $7B (10% over 2023). - Balance sheet growth: Full-year 3.1%, Private Education Loan portfolio 5.7%. - GAAP diluted EPS: Q4 $0.50, full-year $2.68 (11.2% Y/Y increase). - Credit quality improvement: Co-signer rates up from 87% in 2023 to 90% in 2024, average FICO at approval up from 748 to 752. - Net charge-offs: Q4 $93M, full-year $332M (2.2% of average, down 25bps). - Capital return: Repurchased 2M shares in Q4, reduced shares outstanding since Jan 2024. - Loan sale: Preliminary agreement on $2B private education loan sale, expected to close early Feb 2025.

Private education loan originations for the fourth quarter of 2024 were $982 million, with full-year originations at $7 billion, a 10% increase over 2023 and ahead of revised guidance. The full year balance sheet growth was 3.1%, with the Private Education Loan portfolio growing at 5.7%. GAAP diluted EPS in the fourth quarter was $0.50, and full-year GAAP diluted EPS was $2.68, an 11.2% year-over-year increase. Net charge-offs for the private education loan portfolio were $93 million in Q4 2024 and $332 million for the full year, representing 2.2% of average private education loans and repayment, down 25 basis points from 2023.

• 2025 Private Education Loan origination growth expected to be 6% to 8%. - Total loan portfolio net charge-offs anticipated to be between 2.0% and 2.2% of average loans and repayment. - Non-interest expenses for 2025 expected to be between $655 million and $675 million. - GAAP diluted earnings per common share expected to be between $3 and $3.10.

• Potential impacts of Plus reform with no specific proposals yet, requiring operational and financial contingency planning. - Seasonality and refinements to loan modification offerings impacting delinquencies.

Q: Can you talk about what NIM is contemplated in your EPS guide for the year and whether funding pressures have largely played out?

A: Pete Graham said the low to mid 5% is the expectation going forward, with longer term funding maturing and liquidity for mini peak being factors.

Q: What's your appetite to take on additional volume if Plus shifts to private market?

A: Jon Witter said a large percentage of customers have federal loans, but a majority of Plus loans may not fit credit box, with expectation of some opportunity shifting but no specific estimates.

Q: On the 6% to 8% origination growth guide for 2025, how does it connect?

A: Jon Witter said 2024 had a spring and outsized fall, with 2025 expected to have a larger spring but typical fall comping back, leading to 6%-8% growth.

Q: Why was buybacks below plan?

A: Pete Graham said growth of balance sheet took some capital and stock buyback plans were based on price trends.

Q: What happened to reserve rate being flat?

A: Pete Graham said higher originations made it flattish, but there's year-over-year improvement expected.

Q: Outlook for third party loan consolidations?

A: Jon Witter said small uptick, with consolidations a moderate cost of business.

Q: Thoughts on loan yields coming down?

A: Pete Graham said higher credit quality loans are priced differently, with focus on ROE.

Q: Regulatory potential changes?

A: Jon Witter said they work constructively with regulators and try to operate in a way that stands multiple administrations.

Q: Loss rates and further credit improvement?

A: Jon Witter said there's potential for additional NCO reduction through loss mitigation programs and credit enhancement of new loans.

Q: Changes in payment/credit behavior of borrowers in federal loan repayment?

A: Jon Witter said they observe but can't precisely know, with no sustained pattern divergence.

Q: Forbearance program performance?

A: Pete Graham said programs rolled out a year ago with two-year cycle, seeing good payment rates.

Q: Underwritability of Plus loans?

A: Jon Witter said a large percentage may not fit credit box, with thoughtful reform needed.

Q: Overlap with Plus programs and new programs?

A: Jon Witter said they have internal scenarios but can't share externally, with ability to tailor products for Plus opportunity.