Financial Data and Key Metrics Changes - GAAP diluted EPS for Q4 2025 was $1.12, and full-year GAAP diluted EPS was $3.46, an increase from $2.68 in 2024 [7] - Private education loan originations for Q4 2025 were $1.02 billion, totaling $7.4 billion for the full year, representing a 6% increase over 2024 [7][8] - Net charge-offs for the private education loan portfolio were $98 million in Q4 2025 and $346 million for the full year, equating to 2.15% of average private education loans in repayment, down four basis points from 2024 [8][14] Business Line Data and Key Metrics Changes - The company reported a net interest margin (NIM) of 5.21% for Q4 2025, up 29 basis points year-over-year, and 5.24% for the full year, an increase of five basis points [9] - The total allowance as a percentage of private education loan exposure (reserve rate) was 6% at the end of 2025, up from 5.93% in the previous quarter and 5.83% at the end of 2024 [12] Market Data and Key Metrics Changes - College enrollment trends for Tier 1 schools are up, indicating continued value seen in higher education by students and parents [5] - The company anticipates that the recent federal student lending reforms could contribute an estimated $5 billion in annual originations, representing approximately 70% growth over 2025 [6] Company Strategy and Development Direction - The company is focused on supporting school partners and students as education evolves due to technological changes, emphasizing the importance of acquiring necessary skills for future competitiveness [5][6] - The strategic partnership with KKR aims to enhance capital efficiency and risk transfer benefits, with expectations of significant growth in private education loan originations [7][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the private student lending sector's robustness and a strong outlook for 2026, expecting private education loan origination growth of 12%-14% [18] - The company is prepared for potential economic uncertainties and believes that its strategic initiatives will lead to significant value creation opportunities [22] Other Important Information - The company repurchased 3.8 million shares for $106 million in Q4 2025, totaling 12.8 million shares for $373 million over the full year [9] - Non-interest expenses for the full year were $659 million, a modest increase of 2.6% year-over-year, reflecting disciplined expense management [16] Q&A Session Summary Question: Impact of postponement of wage garnishment on performance - Management indicated that while some customers have federal loans, most do not have Sallie Mae private student loans, and the postponement is not expected to significantly impact the business [24] Question: Modeling 1H vs 2H growth related to Grad PLUS - Management expects modest incremental volume in the first year of phase-in, with growth stepping up over the next two to three years [25][26] Question: Volumes for partnerships and loan sales in 2026 - The first strategic partnership has a minimum commitment of $2 billion in new originations, with expectations of designating about 30% of originations for sale [30] Question: ROI measurement for increased investment - Management emphasized the significant market opportunity for growth and the disciplined approach to measuring ROI on investments [40][41] Question: Confidence level on credit guidance for 2026 - Management expressed confidence in the performance of borrowers in modification programs, with positive payment habits indicating a strong likelihood of success [50][51]

Summary of Sallie Mae Investor Forum 2025 Conference Call Company Overview - **Company**: Sallie Mae - **Industry**: Private Education Loans Key Points and Arguments Strategic Updates - Sallie Mae is evolving its strategy to enhance its position in the private education loan market, focusing on customer acquisition and engagement, underwriting capabilities, and funding models [4][5][6] - The company successfully acquired nearly 4 million new members in 2025, including two-thirds of all college-bound freshmen, marking a 30% increase from three years ago [5] - The underwriting model has improved, with a five-point increase in average FICO scores at approval and a four-percentage-point increase in cosign rates [10] Financial Performance - In 2024, Sallie Mae grew originations and market share by 10% and 12% respectively compared to 2023 [9] - The company returned nearly $800 million to shareholders through dividends and share repurchases in 2023 and 2024 [10] - The funding model has maintained net interest margins in the low to mid-5% range, demonstrating resilience across varying rate environments [7] PLUS Program Changes - Anticipated changes to the PLUS program could lead to an additional $4.5-$5 billion in annual private education loan originations once fully implemented [13] - The company is preparing to target new cohorts and improve marketing strategies to capitalize on this opportunity [14] Customer Base and Product Opportunities - Despite acquiring a large customer base, less than 10% of these relationships resulted in private student loans, indicating significant growth potential [15] - The company aims to introduce innovative funding solutions to tap into the remaining high-quality borrowers who did not apply for loans [15] Private Credit Market Growth - The private credit market has grown from $300 billion in 2009 to $2.3 trillion today, with significant opportunities for expansion in the higher education sector [17] - Sallie Mae's partnership with KKR is expected to enhance its ability to originate high-quality loans and diversify revenue streams [18][21] Strategic Partnership Model - The new partnership model is designed to optimize capital efficiency and reduce reliance on traditional loan sales, with expectations of modest EPS decline in the first year but growth returning in subsequent years [22][31] - The partnership approach is anticipated to provide greater flexibility and risk diversification compared to traditional funding methods [21][19] Future Outlook - The company projects a gradual shift in loan sales from traditional methods to strategic partnerships, aiming for a more predictable revenue stream [26][28] - Over the next five years, Sallie Mae expects to generate approximately $2.5 billion to return to shareholders [29] - The strategic evolution aims to build a resilient, growth-focused enterprise that delivers sustainable performance and superior returns [31] Additional Important Content - The company emphasizes the importance of maintaining a robust bank environment alongside private credit partnerships to mitigate risks [34][46] - The management team is committed to disciplined capital allocation and is exploring innovative capital market strategies to optimize capital levels [36][47] - The potential for originating loans outside the bank's typical risk appetite is being considered, which could provide additional upside beyond current projections [59][60]