Financial Data and Key Metrics Changes - The company reported net sales of SEK 69.3 billion in Q4, with organic sales growing by 6% year-on-year, despite a reported sales decrease of 5% due to negative currency effects of SEK 6.8 billion [17] - Adjusted gross margin reached 48% in Q4, supported by cost reduction measures and operational excellence [18] - Adjusted EBITDA was SEK 12.7 billion, up by SEK 2.4 billion, with an EBITDA margin increase of around 4 percentage points to 18.3% [18] - For the full year, net sales amounted to SEK 236.7 billion, with organic sales growing by 2% [19] - Adjusted EBITDA increased to SEK 42.9 billion, with a margin of 18.1% [21] Business Line Data and Key Metrics Changes - In the Networks segment, sales decreased by 6% year-over-year to SEK 44.2 billion, but organic sales increased by 4% [22] - The Cloud and Software and Services segment saw a 3% increase in sales year-over-year to SEK 20 billion, with organic sales growing by 12% [24] - Enterprise sales stabilized with a 2% organic growth in Q4, but reported sales decreased by 25% due to the sale of iconectiv [25] Market Data and Key Metrics Changes - Sales grew in the Europe, Middle East, and Africa market area, as well as in Southeast Asia, while the Americas market was broadly stable [17] - North America experienced slight growth driven by higher software sales, while Northeast Asia saw a decline due to timing of network investments [22] Company Strategy and Development Direction - The company aims to lead in mobile networks with high-performance autonomous and programmable networks that are 5G native, while also scaling its mobile platform to new areas like Mission Critical Enterprise Solutions [10] - The focus is on investing in technology leadership, particularly in areas like AI applications and defense, with a commitment to organic growth rather than large acquisitions [14] - The board proposed an increased dividend of SEK 3 per share and a buyback program of up to SEK 15 billion, totaling SEK 25 billion in shareholder distributions [14][15] Management's Comments on Operating Environment and Future Outlook - Management noted a strong end to the year with improved margins and cash flow, despite a flattish demand environment for mobile networks [5][6] - The outlook for 2026 anticipates a flattish RAN market, but growth is expected from new areas such as Mission Critical networks and 5G Core [31][32] - The company is preparing for potential geopolitical impacts and market changes, particularly in Europe regarding high-risk vendors [61][63] Other Important Information - The company reduced headcount by 5,000 over the past year and plans to continue this trend to improve operational efficiency [5] - Cash flow before M&A was SEK 14.9 billion in Q4, contributing to a net cash position of SEK 61.2 billion [27] Q&A Session Summary Question: Medium-term trajectory and R&D balance - Management emphasized the need for continuous R&D efficiency and strategic investment in key areas like Mission Critical networks and defense applications [37][39] Question: Investment in Defense and Mission Critical - The company sees a sizable market opportunity in defense due to increased spending in the U.S. and Europe, and plans to ramp up investments in this area [42][45] Question: Supply chain shortages and memory price increases - Management stated that they have worked on supply chain resiliency and are in a good position to handle memory price fluctuations [48][50] Question: Buyback program and net cash position - The board's capital allocation principles emphasize maintaining a solid net cash position while distributing excess cash to shareholders [54][56] Question: Changes in the mobile networks market - Management noted that the market has been flattish for two decades, with potential growth opportunities arising from geopolitical changes and competition dynamics [61][63] Question: Revenue outlook and growth opportunities - Management indicated that while the market outlook is flattish, there are opportunities for low to mid single-digit growth driven by new areas like Mission Critical and Enterprise solutions [76][78]

Financial Data and Key Metrics Changes - The company reported net sales of SEK 69.3 billion in Q4, with organic sales growing by 6% year-on-year, despite a reported sales decrease of 5% due to negative currency effects [14][16] - Adjusted gross margin reached 48% in Q4, supported by cost reduction measures and operational excellence [14][15] - Adjusted EBITDA was SEK 12.7 billion, up by SEK 2.4 billion, with an EBITDA margin of 18.3%, reflecting improved operational efficiency [15][16] Business Line Data and Key Metrics Changes - In the Networks segment, sales decreased by 6% year-on-year to SEK 44.2 billion, but organic sales increased by 4% [17][18] - The Cloud and Software and Services segment saw a 3% increase in sales year-on-year to SEK 20 billion, with organic sales growing by 12% [18][19] - The Enterprise segment's sales stabilized with a 2% organic growth, although reported sales decreased by 25% due to the sale of iconectiv [19][20] Market Data and Key Metrics Changes - Sales growth was observed in the Europe, Middle East, and Africa markets, as well as in Southeast Asia, while the Americas market remained stable with slight growth in North America [14][16] - The Northeast Asia market experienced a decline due to timing of network investments [17][18] Company Strategy and Development Direction - The company aims to lead in mobile networks with high-performance, autonomous, and programmable networks that are 5G native, while also expanding into mission-critical enterprise solutions [9][10] - The focus is on investing in technology leadership, particularly in areas like AI applications and mission-critical networks, to capture new growth opportunities [12][26] - The company plans to maintain a solid net cash position while increasing shareholder distributions, proposing a dividend increase and a share buyback program [12][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strategic direction, highlighting the importance of operational efficiency and continued investment in technology [25][26] - The outlook for the mobile networks market is expected to remain flattish, but growth is anticipated from new areas such as mission-critical 5G and enterprise solutions [25][27] - Global uncertainties, including potential tariff changes and macroeconomic factors, are acknowledged, but the company remains focused on executing its strategy [23][25] Other Important Information - The company has reduced its headcount by 5,000 over the past year as part of cost initiatives [4] - The board proposed a total shareholder distribution of approximately SEK 25 billion, marking the largest in the company's history [12][13] Q&A Session Summary Question: Medium-term trajectory and R&D balance - Management acknowledged the need for continuous R&D efficiency and strategic allocation to new areas like Mission Critical and defense applications [31][33] Question: Exposure in Defense and Mission Critical - The company sees significant opportunities in the defense market due to increased spending, particularly in the U.S. and Europe [36][39] Question: Supply chain shortages and memory price increases - Management indicated that they have worked on supply chain resiliency and are in a good position to handle memory price increases [42][43] Question: Revenue outlook in a flattish market - Management believes that low to mid single-digit growth is possible due to opportunities in mission-critical and enterprise segments [71][72] Question: Silicon strategy and competition - The company has chosen a strategy to disaggregate software and hardware, allowing flexibility in hardware choices for customers [75][76] Question: Visibility of North American RAN market - Management noted that while investment levels are healthy, the timing of capital investments may vary between quarters [88][90]

Financial Data and Key Metrics Changes - The company reported net sales of SEK 69.3 billion in Q4, with organic sales growing by 6% year on year, despite a reported sales decrease of 5% due to negative currency effects [13][15] - Adjusted gross margin reached 48% in Q4, supported by cost reduction measures and operational excellence [13][14] - Adjusted EBITDA was SEK 12.7 billion, up by SEK 2.4 billion, with an EBITDA margin of 18.3%, reflecting improved operational efficiency [14][16] Business Line Data and Key Metrics Changes - In the Networks segment, sales decreased by 6% year on year to SEK 44.2 billion, with organic sales increasing by 4% [17][18] - The Cloud and Software and Services segment saw a 3% year-on-year sales increase to SEK 20 billion, with organic sales growing by 12% [18][19] - Enterprise sales stabilized with a 2% organic growth, although reported sales decreased by 25% due to the sale of iconectiv [19] Market Data and Key Metrics Changes - Sales growth was observed in Europe, the Middle East, and Africa, as well as Southeast Asia, while the Americas market was broadly stable, impacted by intense competition in Latin America [13][15] - Northeast Asia experienced a decline due to timing of network investments [17] Company Strategy and Development Direction - The company aims to lead in mobile networks with high-performance autonomous and programmable networks that are 5G native, while also expanding into mission-critical enterprise solutions [7][25] - The strategy includes significant investments in AI applications and devices, anticipating a shift towards hyper-connectivity [5][25] - The company plans to maintain a strong focus on technology leadership through R&D investments, with a proposed increased dividend and share buyback program reflecting confidence in its strategy [11][12][21] Management Comments on Operating Environment and Future Outlook - Management noted a stable demand environment for mobile networks, with expectations for modest growth driven by new areas such as mission-critical applications and enterprise solutions [24][26] - The geopolitical landscape and macroeconomic factors were highlighted as potential risks, with a cautious outlook for the North American RAN market in 2026 [22][24] Other Important Information - The company has reduced headcount by 5,000 over the past year as part of cost initiatives, with expectations for continued reductions [3][4] - The board proposed a total shareholder distribution of SEK 25 billion, the largest in the company's history, including a dividend increase and a buyback program [11][12] Q&A Session Summary Question: Medium-term trajectory and R&D balance - Management emphasized the need for continuous R&D efficiency and strategic allocation to critical areas like Mission Critical and defense applications, despite a flattish market outlook [29][31] Question: Exposure in Defense and Market Size - The company sees significant potential in the defense market due to increased spending in the U.S. and Europe, with a shift towards cost-effective, 3GPP-enabled solutions [33][35] Question: Supply Chain Shortages and Memory Price Increases - Management stated that they have worked on supply chain resiliency and are in a good position to handle memory price increases, maintaining strong relationships with suppliers [38][40] Question: North American RAN Market Visibility - Management indicated healthy investment levels in North America but noted that capital investment timing may vary between quarters [80][82] Question: Revenue Outlook and Growth Opportunities - Management expressed optimism about mid-single-digit revenue growth driven by mission-critical and enterprise opportunities, despite a flattish RAN market [62][64]

Financial Data and Key Metrics Changes - The company reported a net income of $90.5 million for Q4 2025, a 16.5% increase from $77.7 million in Q3 2025 [4] - Diluted earnings per share increased by 18.3% to $1.33 in Q4, up from $1.13 in Q3 [4] - For the full year 2025, net income was $315.1 million, a 10.1% increase from $286 million in 2024 [4] - The net interest margin increased to 3.36% in Q4 from 3.31% in Q3 [11] - Total deposits increased by $373 million or 7.6% on an annualized basis during Q4 [9] Business Line Data and Key Metrics Changes - Total gross loans grew by $42 million, driven by increases of $80 million in commercial real estate (CRE) loans and $17 million in residential loans [5] - Non-accrual loans were 0.6% of total loans as of December 31, 2025, down $53.3 million to $112.4 million compared to the prior quarter [8] - The average loan-to-value of CRE loans remained steady at 49% [6] Market Data and Key Metrics Changes - The company expects loan growth in 2026 to be between 3.5% and 4.5% [5] - For 2026, deposit growth is expected to range between 4% and 5% [9] Company Strategy and Development Direction - The company plans to announce a new buyback program after approvals are received, with $12 million remaining under the current buyback program [4] - The management is focused on transitioning some of the maturing CDs into non-interest-bearing deposits while being sensitive to defending the existing base [18] Management's Comments on Operating Environment and Future Outlook - Management anticipates further benefit to the net interest margin from declining deposit costs supported by the fixed-rate proportion of the loan portfolio [11] - The competitive landscape in the local LA and New York markets remains strong, particularly for maturing CDs [18] - Management does not see any particular trends in credit migration but is closely monitoring special mention loans [20] Other Important Information - The company recorded $17.2 million in provisions for credit losses in Q4 compared to $28.7 million in Q3 [9] - The effective tax rate for Q4 2025 was 20.23% compared to 17.18% for Q3 [13] Q&A Session Summary Question: Can you speak more in terms of what you're assuming for deposit betas embedded in that NIM outlook? - The company is assuming deposit betas in the 60% range, with market competition remaining rational in Q4 [17] Question: What are you seeing in terms of credit and any migration into criticized and overall trends? - Management noted that there are no particular trends in credit migration, with some loans being downgraded to special mention due to short-term financial issues [20][21] Question: Have you seen an elevated level of competition for incremental loan growth? - Management indicated strong competition in the C&I segment, with existing portfolios facing the most competition [29][30]

Financial Data and Key Metrics Changes - The company reported a net income of $90.5 million for Q4 2025, a 16.5% increase from $77.7 million in Q3 2025 [4] - Diluted earnings per share increased by 18.3% to $1.33 in Q4, up from $1.13 in Q3 [4] - For the full year 2025, net income was $315.1 million, a 10.1% increase from $286 million in 2024 [4] - The net interest margin increased to 3.36% in Q4 from 3.31% in Q3 [11] - Total deposits increased by $373 million or 7.6% on an annualized basis during Q4 [9] Business Line Data and Key Metrics Changes - Total gross loans grew by $42 million, driven by increases of $80 million in commercial real estate (CRE) loans and $17 million in residential loans [5] - Non-accrual loans were 0.6% of total loans as of December 31, 2025, down $53.3 million to $112.4 million compared to the prior quarter [8] - The average loan-to-value of CRE loans remained steady at 49% [7] - Net charge-offs for Q4 were $5.4 million, down from $15.6 million in the prior quarter [8] Market Data and Key Metrics Changes - Total uninsured deposits were $9.3 billion, net of $0.9 billion in collateralized deposits, representing 44.6% of total deposits [9] - The company has $7.5 billion of unused borrowing capacity from the Federal Home Loan Bank, $1.3 billion from the Federal Reserve Bank, and $1.6 billion in unpledged securities [9] Company Strategy and Development Direction - The company plans to announce a new stock buyback program after approvals are received, with $12 million remaining under the current buyback program [4] - The company expects loan growth in 2026 to be between 3.5% and 4.5% [5] - The effective tax rate for 2026 is expected to be between 20.5% and 21.5% [13] Management's Comments on Operating Environment and Future Outlook - Management anticipates further benefit to the net interest margin from declining deposit costs supported by the fixed-rate proportion of the loan portfolio [11] - The company expects deposit growth to range between 4% and 5% for 2026 [9] - Management noted that the local LA and New York landscape remains competitive, particularly with nearly $4 billion of maturing CDs in the first quarter [18] Other Important Information - The company recorded $17.2 million in provisions for credit losses in Q4 compared to $28.7 million in Q3 [9] - The Tier 1 risk-based capital ratio increased to 13.27% from 13.15% in Q3 [13] Q&A Session Summary Question: Can you speak more in terms of what you're assuming for deposit betas embedded in that NIM outlook? - Management assumes deposit betas in the 60% range, with market competition remaining rational in Q4 [17] Question: What are you seeing in terms of credit and any migration into criticized and overall trends? - Management noted some migrations into special mention but does not see any particular trends [20] Question: Have you seen an elevated level of competition for incremental loan growth? - Management observed strong competition in the C&I segment, with a decline in rates, while residential mortgage growth was strong [30][31]

Financial Data and Key Metrics Changes - The company reported a net income of $90.5 million for Q4 2025, a 16.5% increase from $77.7 million in Q3 2025 [4][39] - Diluted earnings per share increased by 18.3% to $1.33 in Q4, up from $1.13 in Q3 [4][39] - For the full year 2025, net income was $315.1 million, a 10.1% increase from $286 million in 2024 [4][39] - The net interest margin increased to 3.36% in Q4 from 3.31% in Q3 [10][45] Business Line Data and Key Metrics Changes - Total gross loans grew by $42 million, driven by increases of $80 million in commercial real estate (CRE) loans and $17 million in residential loans [5][39] - Non-accrual loans were 0.6% of total loans as of December 31, 2025, down $53.3 million to $112.4 million compared to the prior quarter [7][42] - The average loan-to-value of CRE loans remained steady at 49% [5][40] Market Data and Key Metrics Changes - Total deposits increased by $373 million or 7.6% on an annualized basis during Q4, primarily driven by $366 million increases in core deposits [8][44] - As of December 31, 2025, total uninsured deposits were $9.3 billion, representing 44.6% of total deposits [8][44] Company Strategy and Development Direction - The company expects loan growth in 2026 to be between 3.5% and 4.5% [5][39] - The company plans to announce a new stock buyback program after approvals are received, with $12 million remaining under the current buyback program [4][39] Management's Comments on Operating Environment and Future Outlook - Management anticipates further benefit to the net interest margin from declining deposit costs supported by the fixed-rate proportion of the loan portfolio [10][45] - The effective tax rate for Q4 2025 was 20.23%, with expectations for 2026 to be between 20.5% and 21.5% [12][46] Other Important Information - The company recorded $17.2 million in provisions for credit losses in Q4 compared to $28.7 million in Q3 [8][43] - The Tier 1 risk-based capital ratio increased to 13.27% from 13.15% in Q3 [12][47] Q&A Session Summary Question: Can you speak more in terms of what you're assuming for deposit betas embedded in that NIM outlook? - The company is assuming deposit betas in the 60% range, with market competition remaining rational in Q4 [16][18] Question: What are you seeing in terms of credit and any migration into criticized and overall trends? - There are no particular trends observed, but some loans have been downgraded to special mention due to not meeting certain debt covenants [20][50] Question: Have you seen an elevated level of competition for incremental loan growth? - There is strong competition for the right type of assets and loans, particularly in the C&I segment, which has seen the most competition [29][52]

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]

Financial Data and Key Metrics Changes - GAAP diluted EPS for Q4 was $1.12, and full-year GAAP diluted EPS was $3.46, compared to $2.68 in 2024, indicating a significant increase [8][10] - Private education loan originations for Q4 of 2025 were $1.02 billion, and for the full year, $7.4 billion, representing a 6% increase over 2024 [8][10] - Net charge-offs for the private education loan portfolio were $98 million in Q4 and $346 million for the full year, representing 2.15% of average private education loans in repayment, down four basis points from 2024 [9][15] Business Line Data and Key Metrics Changes - The company delivered its inaugural private credit strategic partnership, which is expected to contribute significantly to future originations [7][8] - The net interest margin was 5.21% for Q4, up 29 basis points year-over-year, and 5.24% for the full year, up five basis points [10] - Non-interest expenses for the full year were $659 million, a 2.6% increase year-over-year, reflecting disciplined expense management [17] Market Data and Key Metrics Changes - College enrollment trends for Tier 1 schools are up, indicating continued value in higher education [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 [7] Company Strategy and Development Direction - The company plans to invest ahead of anticipated volume growth, with expected non-interest expenses for 2026 between $750 million and $780 million [20] - The strategic partnership business is expected to grow, with a gradual increase in the bank portfolio by one to two percentage points per year post-2026 [22] - The company aims to improve its efficiency ratio each year, targeting a return to the low 30s by 2030 [20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the private student lending sector's robustness and the importance of education in the evolving job market [5][6] - The company expects private education loan origination growth of 12%-14% for 2026, driven by the new PLUS caps [19] - Management acknowledged the challenges in the job market for new graduates but emphasized the effectiveness of their support programs [56] Other Important Information - The company announced a new two-year $500 million share repurchase authorization [10] - The total allowance as a percentage of private education loan exposure was 6% at the end of 2025, up from 5.93% in the previous quarter [14] Q&A Session Summary Question: Impact of wage garnishment postponement on loan performance - Management indicated that the postponement would likely have a net benefit but not a significant impact on their business due to the difference in customer bases [26] Question: Modeling growth from Grad PLUS changes - Management expects modest incremental volume in the first year, with growth stepping up over the next two to three years [28] Question: Loan sales and partnership volumes in 2026 - The strategic partnership has a minimum commitment of $2 billion in new originations, with expectations of selling approximately 30% of originations [32] Question: ROI measurement for increased investments - Management emphasized the significant market opportunity and the disciplined approach to measuring returns on investments [42][44] Question: Confidence in credit outlook for 2026 - Management expressed confidence in the performance of borrowers in modification programs and the overall credit outlook [53][56]

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 [8] - Private education loan originations for Q4 2025 were $1.02 billion, totaling $7.4 billion for the full year, a 6% increase over 2024 [8][9] - Net charge-offs for the private education loan portfolio were $98 million in Q4 2025 and $346 million for the full year, representing 2.15% of average private education loans in repayment, down four basis points from 2024 [9][14] Business Line Data and Key Metrics Changes - The company reported a net interest margin of 5.21% for Q4 2025, up 29 basis points year-over-year, and 5.24% for the full year, up five basis points [10] - 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 [13] - Private education loans delinquent 30 days or more represented 4% of loans in repayment as of year-end, unchanged from Q3 and up from 3.7% at the end of 2024 [14] Market Data and Key Metrics Changes - College enrollment trends for Tier 1 schools are up, indicating continued value seen in higher education [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][7] Company Strategy and Development Direction - The company is focused on supporting school partners and students as education evolves due to technological changes [5][6] - A new two-year $500 million share repurchase authorization was announced, reflecting a commitment to returning capital to shareholders [10] - The company expects private education loan origination growth of 12%-14% in 2026, driven by the new PLUS caps [19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the private student lending sector's robustness and the company's strategic positioning for future growth [5][19] - The company is prepared for potential economic uncertainties and believes that improvements in collections effectiveness will mitigate risks associated with early-stage delinquencies [16][51] - Management anticipates EPS acceleration beginning in 2027, with high teens to low 20% growth expected as the PLUS opportunity materializes [22] Other Important Information - Non-interest expenses for the full year were $659 million, a modest 2.6% increase year-over-year, reflecting disciplined expense management [17] - The company ended the quarter with liquidity of 18.6% of total assets and total risk-based capital of 12.4% [18] Q&A Session Summary Question: Impact of wage garnishment postponement on loan performance - Management indicated that while many customers have federal loans, most federal loan customers do not have Sallie Mae private student loans, and the postponement is expected to have a minimal impact on business [25] Question: Modeling growth from Grad PLUS changes - Management expects modest incremental PLUS volume in the first year, with growth stepping up over the next two to three years [26] Question: Volumes for partnerships and loan sales in 2026 - The strategic partnership includes a minimum commitment of $2 billion in new originations, with approximately 30% of originations expected to be sold [30] Question: ROI measurement for increased investment - Management emphasized the significant market opportunity for growth, estimating a potential 70% increase in originations over the next few years [38] Question: Confidence in credit outlook for 2026 - Management expressed confidence in the performance of borrowers in modification programs, with 75% of the 2023 cohort current at the end of 2025 [46][48]

Financial Data and Key Metrics Changes - The company reported net income of $35.2 million and earnings per diluted share of $1.57, representing increases of 17% and 28% respectively compared to the previous year [16] - Return on average assets was 1.87% and return on average tangible equity was 26.7%, compared to 1.61% and 25.5% respectively during the same quarter last year [16] - Deposits totaled $6.4 billion, a decrease of $170 million year-over-year, primarily due to an increase in custodial deposits [16][17] - Average deposits during the quarter were approximately $90 million higher than the previous year [17] Business Line Data and Key Metrics Changes - Net interest income from commercial finance increased by $9.2 million due to higher balances and slightly higher yields [14] - Non-interest income showed solid results, particularly in core card and deposit fees, with growth attributed to new partners [15] - The company originated $1.9 billion in loans during the quarter, with $678 million in commercial finance and $1.2 billion in consumer finance [17] Market Data and Key Metrics Changes - The company experienced favorable deposit balances at multiple partners due to a strong holiday season and continued partner growth [17] - The government shutdown impacted secondary market revenues, but this is expected to normalize in subsequent quarters [15][46] Company Strategy and Development Direction - The company aims to optimize its balance sheet by rotating from securities to loans, increasing net interest income without growing overall asset size [9] - The focus is on generating fee income from balance sheet velocity and originating loans while maintaining a steady balance sheet [10] - The company is committed to enhancing the client experience through an evolved operating model that supports partner growth and scalability [8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in revenue growth from new partnerships and the upcoming tax season, which is expected to drive more consumers into tax preparation offices [11][45] - The company is optimistic about the impact of new partner announcements and the normalization of pricing in the industry [41][42] - Management highlighted the importance of monitoring the performance of new partners and the potential for increased revenue from tax-related financial products [43][45] Other Important Information - The company repurchased approximately 652,000 shares at an average price of $72.07, leaving 4.3 million shares available for repurchase [21] - The fiscal year 2026 guidance for EPS has been raised to a range of $8.55-9.05, assuming no additional rate cuts and an effective tax rate of 18-22% [21] Q&A Session Summary Question: What is the trajectory of the adjusted NIM for Q2? - Management indicated that the adjusted NIM for Q2 is expected to be around 5.31%, with potential for it to be flat to up depending on the macroeconomic environment [25][26] Question: Can you quantify the recovery recorded within the net charge-offs? - Management did not provide specific figures but mentioned that the details would be available in the earnings release [27] Question: How does the company view the threat of FinTechs obtaining their own bank charters? - Management believes that while some FinTechs may pursue bank charters, the complexity and scale required to operate effectively will limit their competitive pressure [29][30] Question: What is the current partner pipeline and expectations for future announcements? - Management reported a full partner pipeline and expressed optimism about future announcements, indicating that the number of partnerships is increasing [42] Question: What factors will influence the updated guidance for the fiscal year? - The timing of new partner contributions and the success of the tax season are key factors that will influence the guidance range [43][45]