SLM Corporation

Thank you, Chloe. Good evening and welcome to Sally Mae's third quarter 2025 earnings call. It is my pleasure to be here today with John Witter, our CEO, Pete Graham, our CFO, and Melissa Bernal, Managing Vice President of Strategic Finance. After the prepared remarks, we will open the call for questions. Before we begin, keep in mind our discussion will contain predictions, expectations, and forward-looking statements. Actual results in the future may be materially different from those discussed here due to a variety of factors. Listeners should refer to the discussion of those factors in the company's Form 10-Q and other filings with the FTC. For Sallie Mae, these factors include, among others, results of operations, financial conditions and or cash flows, as well as any potential impact of various external factors on our business. We undertake no obligation to update or revise any predictions, expectations, or forward-looking statements to reflect events or circumstances that occur after today, Thursday, October 23, 2025. Thank you, and now I'll turn the call over to John.

Thank you, Kate and Chloe. Good evening, everyone. Thank you for joining us to discuss Sallie Mae's third quarter 2025 results. I hope you'll take away three key messages today. First, we delivered a successful quarter and peak season. Second, we're pleased with our year-to-date performance and believe we have real momentum that will carry us through the rest of the year. And third, we're optimistic about the long-term outlook for private student lending and the growth of Sallie Mack. Let me begin with the quarter's results. GAAP diluted EPS in the third quarter with 63 cents per share. Loan originations for the third quarter were $2.9 billion, representing 6.4 percent growth over the year-ago quarter and 6 percent growth year-to-date We were pleased to see that the credit quality of originations remained strong, showing incremental improvement year over year and steady but meaningful improvement over the last several years. Our cosigner rate for the third quarter was 95% compared to 92% in the year-ago quarter, and the average FICO score at approval increased to 756 from 754. These indicators reflect continued discipline in our underwriting standards. We have continued to see positive momentum in our credit performance. Private education loan net charge-offs in Q3 of 25 were 78 million, representing 1.95% of average private education loans in repayment, down 13 basis points from the year-ago quarter. While we are certainly living in a period of economic ambiguity, we have not observed any material change in our borrowers' ability to meet their obligations to Sallie Mae. During the third quarter, we successfully completed the previously announced sale of approximately $1.9 billion in loans, generating $136 million in gains. We continued our capital return strategy in the third quarter, repurchasing 5.6 million shares at an average price of $29.45 per share. Since initiating this strategy in 2020, we have reduced our outstanding shares by 55% with an average price of $16.75. Pete will now take you through some additional financial highlights of the quarter. Pete?

Thank you, John. Good evening, everyone. Let's continue with a discussion of key drivers of earnings. For the third quarter of 2025, we earned $373 million of net interest income. This is up $14 million from the prior year quarter. Our net interest margin was 5.18% for the quarter, 18 basis points ahead of the year-ago quarter, and 13 basis points behind the prior quarter, given the drag from the initial liquidity that we hold to satisfy the requirements of peak season. We continue to believe that the annual NIM target and the low to mid 5% range remains appropriate over the longer term. Our provision for credit losses was $179 million in the third quarter, down from $271 million in the prior year. This was largely due to $119 million of provision release resulting from the third quarter loan sale. Our total allowance as a percentage of private education loan exposure modestly improved to 5.93%, slightly below the prior quarter's 5.95%, and just nine basis points above the year-ago quarter. The change from the year-ago quarter results from a few factors. As we noted last quarter, the Moody's economic forecasts that we use in our CECL models have deteriorated, driving a significant portion of the increase to our allowance. This model-driven impact was partially offset, however, by continued improvements in our credit performance and portfolio quality. At the end of the third quarter, 4% of private education loans and repayment were 30 days or more delinquent, up from 3.6% at the end of the year-ago quarter. It's important to note that this year-over-year increase is largely attributable to changes we made last year to our loan modification eligibility criteria. Specifically, since October of last year, we've restricted loan modifications to those who are at least 60 days delinquent. This change was purposeful, based on our observation that many early-stage delinquent borrowers tend to self-cure without intervention. We believe that approximately 25 basis points of delinquencies this quarter can be attributed to borrowers who would have qualified for a modification prior to entering our reported delinquency buckets under the prior eligibility criteria. Importantly, we've seen stability in our late-stage delinquencies and roll rates. Our loan modification programs continue to deliver strong results. When we look at borrowers who have been in the programs for over a year, 80 percent are consistently making payments. Additionally, following the previously mentioned change, monthly loan modification enrollments declined and have now stabilized around half the level that they were prior to the change. We continue to believe that our loss mitigation programs are helping our borrowers manage through periods of adversity and establish positive payment habits. Third quarter non-interest expenses were $180 million compared to $167 million in the prior quarter and $172 million in the year-ago quarter. This aligns with our full-year outlook and positions as well as we head into the final months of the year. And finally, our liquidity and capital positions remain strong. We ended the quarter with a liquidity ratio of 15.8%. Total risk-based capital was 12.6%. and common equity tier one capital was 11.3%. We're encouraged by the exciting opportunities ahead as we continue to grow and evolve our business, enabling strong return of capital to shareholders moving forward. Now I'll turn the call back to John.