SLM Corporation Q2 FY2025 earnings call

• Delivered solid results in Q2 and first half of 2025. GAAP diluted EPS $0.32 per share. - Loan originations $686M, roughly in line with prior year, with credit quality robust (cosigner rate 84%, average FICO at approval 754). - Continued capital return strategy, repurchasing 2.4 million shares. - Agreed to indicative pricing on $1.8B private education loan sale. - Discussed federal student loan reforms, anticipating $4.5B-$5B in additional private loan origination volume once reforms fully realized. - Engaged in readiness planning for federal lending changes and exploring private credit partnerships.

For the second quarter of 2025, loan originations were $686 million. Net interest income was $377 million, up $5 million from the prior year quarter, with a net interest margin of 5.31%. The provision for credit losses was $149 million, up from $17 million in the prior year quarter. Private education loans delinquent 30 days or more were 3.5% of loans in repayment. Net private education loan charge-offs in the second quarter were $94 million, representing 2.36% of average loans in repayment. Noninterest expenses were $167 million. Liquidity ratio was 17.8%, total risk-based capital was 12.8%, and common equity Tier 1 capital was 11.5%. Revenue contribution for private education loans was the primary segment.

• Expect year-over-year growth in private student loan portfolio. - Anticipate $4.5B-$5B in additional private education loan origination volume from federal reforms, with impacts building over time. - Plan for mid- to high single-digit private student loan portfolio growth. - Continue readiness planning for federal lending changes and evaluate funding strategies.

• External factors like macroeconomic conditions could impact results. - Potential short-term impact from schools and borrowers switching to federal loans due to recent reforms. - Cautious outlook due to softened Moody's macroeconomic forecast influencing reserve assumptions.

Q: Can you help narrow the gain on sale margin for the $1.8 billion loan sale?

A: We're in line with expectations for the year, pricing adjusted modestly from first quarter but pleased with execution.

Q: Should we assume a loan sale in the fourth quarter?

A: We'll monitor peak season, capital stress testing, and evaluate accordingly.

Q: What explains the uptick in net charge-off rate?

A: Attributable to disaster forbearance related to California wildfires shifting charge-off timing.

Q: How does federal lending reform impact upside for Sallie Mae?

A: Could create $4.5B-$5B in additional private loan volume, with impact building over time starting in 2027 and beyond.

Q: Thoughts on private credit exploration and P&L impacts?

A: We're in ongoing discussions, viewing private student loans as a valuable asset class, and open to structures that balance capital efficiency and returns while maintaining strong ROE.