Sallie Mae Q3 Earnings Lag on Higher Expenses, Provisions Decline Y/Y

Core Insights - Sallie Mae (SLM) reported third-quarter 2025 earnings per share (EPS) of 63 cents, missing the Zacks Consensus Estimate of 84 cents, but showing improvement from a loss of 23 cents per share in the prior-year quarter [1][8] - The company's GAAP net income was $136 million, compared to a net loss of $45 million in the prior-year quarter [2] Financial Performance - Third-quarter net interest income (NII) totaled $372.9 million, up 3.8% year over year, but missed the Zacks Consensus Estimate by 0.8%. The net interest margin was 5.18%, an increase of 18 basis points from the prior-year quarter [3] - Non-interest income reached $172.7 million, significantly up from $24.5 million in the year-ago quarter [3] - Non-interest expenses rose 4.9% year over year to $180.4 million [3] Credit Quality - Provision for credit losses was $179.4 million, down 33.8% from the prior-year quarter [4] - Net charge-offs for private education loans were $78 million, up 1.3% year over year, with a percentage of average private education loans held for investment in repayment at 1.95%, contracting 13 basis points year over year [4] Balance Sheet Position - As of September 30, 2025, deposits were $20 billion, down 2.3% sequentially [5] - Private education loans held for investment were $21.6 billion, up 5.6% from the prior-year quarter, with loan originations increasing by 6% from the year-ago quarter [5] Share Repurchase - In the third quarter, SLM repurchased 5.6 million shares for $166 million under its 2024 share buyback program [6] 2025 Outlook - The company expects diluted EPS in the range of $3.20-$3.30 and anticipates total loan portfolio net charge-offs as a percentage of average loans in repayment of 2.0%-2.2% [7][9] - Private education loan originations are expected to grow 5%-6% year over year, with non-interest expenses projected to be in the range of $655-$675 million [9] Overall Assessment - Sallie Mae's financial performance appears decent, with robust loan origination, rising net interest income, and higher non-interest income being encouraging factors. However, rising expenses present a significant near-term challenge [10]