SLM Corp Q1 FY2025 earnings call

• Jon Witter noted a strong start to 2025, strong credit performance with cosigner rate 93% vs 91% y-o-y and average FICO at approval 753 vs 748 y-o-y. $2B loan sale in Q1 generated $188M gains, up $45M y-o-y. Continued capital return with 1M shares repurchased. - Pete Graham discussed net interest income, net interest margin, provision for credit losses, delinquency rates, noninterest expenses, and solid liquidity and capital positions. - Emphasized early credit performance driven by seasonality, collection practices, and loss mitigation programs, but remained mindful of macroeconomic uncertainty.

GAAP diluted EPS in Q1 was $1.40 per share vs $1.27 in year-ago quarter. Loan originations $2.8 billion, up 7.3% y-o-y. Net interest income $375 million, down $12M y-o-y but up $13M q-o-q. Net interest margin 5.27%, 35 bps ahead of prior quarter. Provision for credit losses $23M, up from $12M y-o-y. Private education loan charge-offs $76M, 1.88% of average loans in repayment, down 26 bps y-o-y. Noninterest expenses $155M, 4% decrease y-o-y. Liquidity 16.8% of total assets. Total risk-based capital 12.9%, common equity Tier 1 capital 11.6%. GAAP equity plus loan loss reserves over risk-weighted assets 16.4%.

Reaffirming 2025 guidance shared on last earnings call. Monitoring macroeconomic uncertainty closely and will provide updates in future calls. Expect continued normalization of program performance over medium term.

• Uncertainty from recent policy changes and their potential impact on broader macroeconomic environment. - Economic outlook being a key variable in reserve modeling, with need to closely monitor changes that could impact future estimates. - Potential impact of changes in college and university funding, international student numbers, etc., on origination outlook. - Volatility in student loan ABS market affecting loan sale gains and timing.

Q: Your credit charge-offs did well, attribute to loss mitigation programs? Any impact from government program changes?

A: Jon Witter said charge-offs due to seasonality, loss mitigation programs, and underwriting enhancements. On government program changes, saw no material change in FICO for customers with federal loans, joint customers have lower delinquency on federal loans and are current on Sallie Mae loans.

Q: Delinquency rate improved sequentially but up y-o-y, color on early stage bucket?

A: Peter Graham said impact of folks in mod programs in delinquency buckets, adjusting for that quarter's number is 3%.

Q: Growth in balance sheet and capital return post CECL phase-in?

A: Jon Witter said moderate, accelerating and predictable balance sheet growth, values balance sheet growth, capital return, and saving room for meaningful capital return through loan sale proceeds and potential dividend.

Q: EPS higher than consensus but guidance unchanged, reason?

A: Peter Graham said loan sale results factored into guidance, no real impact from macro uncertainty yet.

Q: Buyback slow start, plan to complete?

A: Peter Graham said share buyback pattern consistent with 2024, funded with loan sale proceeds, same playbook this year.

Q: Originations growth vs expectations, consistency?

A: Jon Witter said within expectations, spring effect smaller than fall, fall won't match last fall due to competitive changes spread over 2 years.

Q: Expense efficiencies, sustainability?

A: Peter Graham said ongoing focus on operating leverage, committed to full year guidance.

Q: Policy changes impact on origination outlook?

A: Jon Witter said too early to tell, gives and gets with university funding and international students, no material impact envisioned for this year.

Q: Student loan ABS trading since loan sale?

A: Peter Graham said market has volatility, currently fairly stable, monitoring for optimal time of next sale.

Q: Job market impact on numbers?

A: Jon Witter said recent grads still optimistic, transition to first job known stress point, not materially impacting net charge-off rates yet.

Q: Extended grace growth reflection?

A: Jon Witter said positive outcome from educating customers on available program, helping them during transition.