Financial Data and Key Metrics Changes - GAAP diluted EPS for Q3 2025 was $0.63 per share, with loan originations of $2.9 billion, reflecting a 6.4% increase year-over-year and 6% growth year-to-date [4][5] - Net interest income for Q3 2025 was $373 million, up $14 million from the prior year, with a net interest margin of 5.18%, an increase of 18 basis points year-over-year [6][7] - Provision for credit losses decreased to $179 million from $271 million in the prior year, largely due to a $119 million provision release from the loan sale [6][7] Business Line Data and Key Metrics Changes - The cosigner rate for Q3 was 95%, up from 92% in the year-ago quarter, and the average FICO score at approval increased to 756 from 754, indicating strong underwriting discipline [5] - Private education loan net charge-offs were $78 million, representing 1.95% of average private education loans in repayment, down 13 basis points from the year-ago quarter [5][6] - Non-interest expenses for Q3 were $180 million, compared to $167 million in the prior quarter and $172 million in the year-ago quarter [9] Market Data and Key Metrics Changes - 4% of private education loans in repayment were 30 days or more delinquent, up from 3.6% at the end of the year-ago quarter, attributed to changes in loan modification eligibility criteria [7][8] - The company has seen stability in late-stage delinquencies and roll rates, with 80% of borrowers in loan modification programs making consistent payments after one year [8][9] Company Strategy and Development Direction - The company is optimistic about the long-term outlook for private student lending and is exploring alternative funding partnerships in the private credit space [10][11] - A first-of-its-kind partnership is expected to be announced soon, aimed at unlocking the value of the customer base and setting the stage for sustainable growth of fee-based revenues [11][12] - The company anticipates selling a small portfolio of seasoned loans and a portion of recent peak season originations, expecting GAAP earnings per common share for 2025 to be between $3.20 and $3.30 [12] Management's Comments on Operating Environment and Future Outlook - Management noted that despite economic ambiguity, there has been no material change in borrowers' ability to meet obligations [5][10] - The company is preparing for the impact of recent federal reforms, which are expected to create opportunities for growth in private student lending [10][11] - Management expressed confidence in maintaining a net charge-off rate in the high 1% to low 2% range over the long term [14][26] Other Important Information - The company has reduced outstanding shares by 55% since initiating its capital return strategy in 2020, repurchasing 5.6 million shares at an average price of $29.45 per share [5][6] - The liquidity ratio at the end of the quarter was 15.8%, with total risk-based capital at 12.6% and CET1 capital at 11.3% [9] Q&A Session Summary Question: Outlook for delinquency performance - Management expressed satisfaction with loan modification programs and expected stability in late-stage delinquencies and roll rates, despite a slight uptick in early-stage delinquencies [14][15] Question: Details on loan sale partnership - Management indicated that details on the loan sale partnership would be released once finalized, emphasizing the importance of the deal [15][20] Question: Impact of modifications on delinquency rates - Management noted that borrowers in modification programs have shown strong payment patterns, and they are optimistic about the upcoming wave of graduates transitioning into repayment [19][48] Question: Credit outlook and potential charge-offs - Management acknowledged the correlation between delinquencies and charge-offs but maintained confidence in their guidance and the effectiveness of their loan modification programs [24][34] Question: Buyback strategy and appetite - Management confirmed a commitment to aggressive share buybacks, with plans to assess timing and quantity post-partnership completion [86][87] Question: Opportunities from Plus Reform - Management sees Plus Reform as a significant opportunity for growth in private student lending, with potential annual origination increases projected in the $4 to $5 billion range [92][93]

Financial Data and Key Metrics Changes - The company reported distributable earnings of $81.6 million or $0.40 per share for Q4 2024, and $1.74 for the full year, translating to a return on equity (ROE) of approximately 14% [40] - The forecast for distributable earnings in 2025 has been adjusted to a range of $0.30 to $0.35 per quarter due to changes in the macroeconomic climate [41][12] - The company experienced elevated legal and consulting fees due to short-sell reports, estimated to impact earnings by approximately $0.03 to $0.05 per share going forward [42] Business Line Data and Key Metrics Changes - The company modified $4.7 billion of loans over the last two years, with $4.1 billion modified in 2024 alone, indicating a strong focus on loan modifications [15][16] - The agency business had a strong Q4 with $1.35 billion in new originations, closing the year with $4.3 billion in GSP agent fee volume [28][29] - The single-family rental business saw $1.7 billion in new loans in 2024, significantly above the previous year's production [32] Market Data and Key Metrics Changes - The company noted a 100 basis point decrease in SOFR, which has reduced earnings on cash and escrow balances [11][58] - Total delinquencies decreased by 13% to approximately $819 million as of December 31, down from $945 million at the end of Q3 [46] - The average yield on core investments decreased to 8.52% from 9.04% due to a reduction in SOFR [60] Company Strategy and Development Direction - The company is focused on repositioning REO assets and expects to significantly grow the NOI from these assets over the next 12 to 24 months [23][24] - A capital-light agency platform is a critical part of the company's strategy, allowing for significant long-dated income streams [26] - The company plans to originate between $1.5 billion to $2 billion in bridge loans in 2025, enhancing returns and efficiency [25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the challenging interest rate environment, noting that they are well-capitalized and have a cushion between earnings and dividends [8][9] - The outlook suggests that elevated rates will persist, creating headwinds for agency origination volumes [10] - Management is optimistic about the potential for future earnings growth if interest rates decline [24][37] Other Important Information - The company has grown its book value by 26% over the last five years, contrasting with a 25% erosion in net asset values among peers [15][55] - The company has successfully transitioned new sponsors to manage assets, which is expected to create more predictable future income streams [17][19] Q&A Session Summary Question: Dividend expectations for 2025 - Management appreciates the clarity provided regarding dividend expectations, indicating that the market is better prepared for this information now rather than later [66] Question: Institutional money and distressed bridge loans - Management noted that there is institutional capital available for distressed assets, but the market is currently experiencing a pause due to rising interest rates [68][70] Question: Performance of modified loans - Management indicated that the majority of modified loans are performing well, with a focus on ensuring sponsors bring in additional capital [82][86] Question: Servicing escrow balances - Management explained that the reduction in earnings from escrows and cash is due to lower SOFR rates and decreased cash balances, projecting earnings of $80 million to $85 million going forward [90][92] Question: Confidence in book value and potential buybacks - Management expressed confidence in the book value, stating that while there may be minor adjustments, they believe they have adequately reserved for potential losses [115][123]