Terry Ma

Terry Ma asked about the sustainability of the strong 90% cure rate for defaults, considering that more recent vintages might have less embedded equity as they season.

Answer

Dan Kobell, Senior Executive Vice President and Interim CFO, stated that the company will continue to monitor cure trends, noting that new defaults still show significant embedded equity. He highlighted a conservative 92.5% cumulative cure rate in reserving assumptions and reported no significant pockets of concern across geographies, credit segments, or vintages.

Terry Ma inquired about updated financial metrics for the recently closed Inigo acquisition and the expected stickiness of strong cure trends for mortgage defaults, especially for more recent vintages with potentially less embedded equity.

Answer

Dan Kobell, Senior Executive Vice President and Interim CFO, confirmed no significant changes to initial Inigo financial guidance, reiterating the expected mid-teens return on the $1.7 billion investment, leading to approximately $170 million in incremental pre-tax net income with low execution risk. Regarding credit, Mr. Kobell noted continued significant embedded equity in new defaults and a conservative 92.5% cumulative cure rate assumption, with no current pockets of concern across geographies, credit segments, or vintages.

Terry Ma inquired about Radian's credit loss expectations amid macroeconomic uncertainty and the company's potential responses on pricing or underwriting. He also asked for the drivers behind the 7.5% default-to-claim rate and its sensitivity to economic scenarios like unemployment.

Answer

President and CFO Sumita Pandit stated that credit performance remains strong, with the portfolio default rate declining to 2.33% and cures outpacing new defaults. She reiterated the expectation for a sub-3% through-the-cycle default rate. Ms. Pandit explained the 7.5% default-to-claim rate is a through-the-cycle assumption based on favorable cure trends driven by home price appreciation and would be re-evaluated if the macroeconomic outlook changed drastically.

Terry Ma inquired about Radian's credit and default rate outlook for 2025, asking if the seasoning of large vintages would push the default rate meaningfully higher, and requested more detail on cure activity during the quarter.

Answer

Derek Brummer, President of Radian Mortgage Insurance, responded that while typical seasonal impacts are expected, he anticipates the default rate will remain below 3%, barring a significant economic shift. He noted that cure activity has been strong across all recent vintages and payment buckets. CFO Sumita Pandit added that excluding hurricane-impacted areas, new defaults actually declined by 3% quarter-over-quarter.

Terry Ma inquired about the expected impact of the Sequoia and Endpoint technology platforms on First American Financial's margins and the drivers of commercial revenue growth in 2026.

Answer

Mark Seaton (CEO) explained that the margin drag from technology investments will gradually decrease as the company shifts focus to modern platforms like Endpoint and Sequoia, reducing investment in legacy systems. He highlighted the goal of improving employee experience and achieving a competitive advantage. For 2026 commercial revenue growth, he anticipates a higher percentage will come from increased transaction volumes rather than average revenue per order (ARPO) growth.

Terry Ma asked about the impact of the Sequoia and Endpoint platforms on First American's margins, particularly how the previously discussed technology drag is expected to subside. He also sought clarification on whether 2026 commercial revenue growth would be driven more by order count or average revenue per order (ARPU).

Answer

CEO Mark Seaton explained that the margin drag would gradually alleviate as investments shift from legacy to modern platforms, contributing to a strong success ratio. He highlighted Endpoint's live status in one market and Sequoia's 40% automation rate for refinance search/examination in four markets, expecting these tools to improve employee experience, transaction volume, and customer satisfaction. For 2026 commercial growth, he anticipated a higher percentage coming from increased orders rather than ARPU.

Terry Ma requested an update on the timelines and early results for the Endpoint and Sequoia pilot programs, specifically asking if Endpoint's December rollout was on track.

Answer

CEO Mark Seaton confirmed Endpoint is on track for its first office rollout in December, with a broader national rollout expected over two years, emphasizing anticipated productivity improvements and enhanced user interface. For Sequoia, he noted the AI engine is live for refinance orders in three counties, exceeding expectations, and the first purchase transaction is planned for Q1, with a national rollout also expected over two years.

Terry Ma requested an update on the timelines and early results for the Sequoia and Endpoint pilot programs, specifically asking if the Endpoint pilot was still on track for a December rollout.

Answer

CEO Mark Seaton confirmed Endpoint is on track for its first office rollout in December, with a broader national rollout expected over two years, emphasizing anticipated productivity improvements and enhanced user interface. For Sequoia, he noted the AI engine is live, running refinance orders in three counties with hit rates exceeding expectations, and the first purchase transaction is planned for Q1, also with a two-year national rollout.

Terry Ma from Barclays questioned the sustainability of the strong title segment margin into the second half of the year and requested an update on the progress and rollout plans for the company's technology investments, Sequoia and Endpoint.

Answer

CFO Matthew Wajner acknowledged the strong margin performance but noted that the year-over-year margin improvement gap is expected to narrow in the second half due to more challenging comparisons. CEO Mark Seaton provided updates on technology, stating that Endpoint is set for a pilot in a direct office in December, with a broader rollout in Q1. For Sequoia, he mentioned progress in building out instant decisioning for purchase transactions and a planned rollout of refinance automation in September.

Terry Ma from Barclays questioned the sustainability of the strong title segment margin into the second half of the year and requested an update on the progress and rollout plans for the company's technology investments, Sequoia and Endpoint.

Answer

CFO Matthew Wajner acknowledged the strong margin performance but cautioned that year-over-year comparisons will become more challenging in the second half, causing the margin improvement gap to narrow. CEO Mark Seaton updated on technology initiatives, stating that the Endpoint platform will be piloted in a direct office in December, with a broader rollout beginning in Q1. For Sequoia, he noted continued progress on instant decisioning for purchase transactions and a planned rollout of its refinance automation capabilities in September.

Terry Ma from Barclays questioned the sustainability of the strong 13.2% adjusted pretax margin into the second half of the year and requested an update on the progress of technology investments, specifically Sequoia and Endpoint.

Answer

CFO Matthew Wajner acknowledged the strong margin performance, noting a 220 basis point year-to-date improvement, but cautioned that comparisons will become more challenging in the second half, likely causing the margin gap to narrow. CEO Mark Seaton provided updates on technology, stating that the Endpoint platform will be piloted in a direct office in December, with a broader rollout starting in Q1. For the Sequoia platform, he mentioned they are planning a rollout across California and will launch its refinance automation capabilities in September, emphasizing that both are long-term initiatives expected to show benefits in two to three years.

Terry Ma inquired about the strength and outlook for the commercial business, given recent macro uncertainty, and asked for details on the net investment income performance and forecast.

Answer

CEO Mark Seaton expressed cautious optimism for the commercial segment, noting it was the third consecutive quarter of meaningful year-over-year improvement with broad-based strength across asset classes. CFO Matt Wajner explained that net investment income was impacted sequentially by seasonally lower balances and reduced mortgage warehouse income, but he anticipates modest full-year improvement over 2024, even with potential rate cuts.

Terry Ma asked for expectations on title revenue growth for 2025, referencing industry forecasts for purchase volumes, and how this growth might translate into margin expectations or the company's success ratio.

Answer

CFO Mark Seaton stated that the company expects growth similar to MBA forecasts, with tailwinds in all three major markets: purchase, refinance, and commercial. CEO Ken DeGiorgio added that given these modest tailwinds, improved investment income, and continued cost controls, they expect to improve margins at least commensurate with the market, building on the 10% margin achieved in the prior two challenging years.

Terry Ma questioned how the $67 million benefit from the investment portfolio repositioning would be affected by anticipated Fed rate cuts and asked for color on the momentum in the commercial business.

Answer

CFO Mark Seaton explained that the $67 million benefit would effectively offset more than four 25-basis-point Fed cuts, with potential for further insulation from rising business volumes. CEO Kenneth DeGiorgio expressed confidence in the commercial segment, citing the first year-over-year revenue growth since Q2 2022, strong demand, progress on price discovery, and a robust deal pipeline.

Terry Ma inquired about the health of the consumer looking into 2026, seeking color on credit trends by state or region, and whether any states are experiencing more stress. She also asked about the acceleration of quarterly runoff in Q4 and the outlook for persistency early in the new year.

Answer

Adam Pollitzer, President and CEO, noted broad macro and housing market resiliency but also highlighted risks like labor market strain, high consumer debt, and declining confidence. Aurora Swithenbank, CFO, reported no notable emerging credit trends by geography or cohort, beyond previously discussed home price appreciation downward trends. Mr. Pollitzer added that NMI's RateGPS tool helps manage geographic mix, preventing default concentrations. Ms. Swithenbank confirmed a 50 basis point decline in Q4 persistency due to rate rallies, expecting it to normalize towards historical norms, driven by refi activity. Mr. Pollitzer added that lower rates unlock purchase and refi volume, which often has stronger credit characteristics.

Terry Ma asked about the health of the consumer and the macro environment looking into 2026, seeking specific color on credit trends by state or region and any particularly stressed areas. He also questioned the acceleration of quarterly runoff in Q4 and the outlook for persistency.

Answer

Adam Pollitzer, President and CEO, noted broad macro resiliency with low unemployment and business investments, but also acknowledged risks like labor market strain and high consumer debt. Aurora Swithenbank, CFO, stated no notable emerging credit trends by geography or cohort, beyond previously discussed areas with downward home price appreciation. Mr. Pollitzer added that NMI uses RateGPS to manage geographic mix, mitigating concentrations. Ms. Swithenbank and Mr. Pollitzer explained the Q4 persistency decline was expected due to rallying rates spurring refi activity, anticipating a return to historical norms over time, with potential for increased NIW from lower rates.

Terry Ma from Barclays inquired about the composition of credit reserves, specifically the lower prior-period reserve release, and sought details on the increased claims activity from the 2022 vintage.

Answer

CFO Aurora Swithenbank clarified that accounting for cures from the current year masks the true cure rate, which remains stable at 29%. President and CEO Adam Pollitzer added that the rise in claims expense is expected due to seasonality and portfolio seasoning, noting that underlying new default trends (excluding storms) showed encouraging signs of strength.

Terry Ma asked about the accelerated year-over-year increase in new default notices and lower cure rates, questioning if it was episodic or a sign of vintage seasoning. He also requested more color on the targeted changes made to risk cohorts.

Answer

President and CEO Adam Pollitzer explained that the rise in defaults is expected and reflects normal seasonal trends and the natural seasoning of their growing portfolio, particularly the 2022 and 2023 vintages. He assured there were no other underlying issues. Regarding risk cohorts, Pollitzer stated that the company continuously refines its pricing via its Rate GPS engine, making targeted adjustments in specific local markets like Florida and Texas that are experiencing affordability constraints after significant home price appreciation.

Terry Ma sought an update on the timing for the Spirit aircraft to return to service, asking how much of this was contemplated in the 2026 guidance and when all aircraft are expected to be back in service. He also asked for a rank order of AerCap's most attractive capital allocation priorities for 2026.

Answer

CFO Pete Juhas confirmed that the downtime for Spirit aircraft is baked into the 2026 guidance, with the first aircraft expected back in the second half of 2026, and some potentially bleeding into early 2027. CEO Aengus Kelly declined to rank capital allocation priorities, stating that buybacks, asset acquisitions (engines, aircraft, M&A), or all three are acceptable as long as they increase the company's value and earnings on a risk-adjusted basis, emphasizing discipline over growth for growth's sake.

Terry Ma asked for an update on the timing of Spirit Airlines aircraft returning to service, how much of this was contemplated in the 2026 guidance, and when all these aircraft are expected to be back. He also requested a rank order of AerCap's most attractive uses of capital for 2026.

Answer

CFO Pete Juhas confirmed that the downtime from Spirit aircraft is baked into the 2026 guidance, with the first aircraft expected to return in the second half of 2026, and some potentially drifting into early 2027. CEO Aengus Kelly declined to rank capital allocation priorities, stating that all uses—shareholder returns, asset acquisitions, or M&A—are considered equally valid as long as they increase company value and earnings on a risk-adjusted basis, emphasizing discipline over growth for growth's sake.

Terry Ma from Barclays asked about AerCap's capital allocation strategy, including the attractiveness and ranking of buybacks, the Spirit Airlines deal, other sale-leaseback opportunities, and engine acquisitions, as well as the expected delivery cadence for additional freighters.

Answer

CEO Aengus Kelly reiterated a focus on accretive transactions and shareholder returns, emphasizing the value of share repurchases given the market arbitrage. He noted ongoing pursuit of sale-leaseback and engine opportunities with strict hurdle rates. CFO Peter Juhas and CEO Aengus Kelly outlined that five freighters have been delivered, with a few more expected by year-end and another five or six next year.

Terry Ma inquired about AerCap's capital allocation strategy, seeking an update on sale-leaseback and engine deal opportunities, and their relative attractiveness compared to accelerated share buybacks. He also asked about the delivery cadence for additional converted freighters.

Answer

CEO Aengus Kelly reiterated that capital allocation prioritizes shareholder returns, executing on accretive transactions like the Spirit deal and bilateral aircraft/engine buys. He highlighted share repurchases as particularly attractive due to the valuation arbitrage (selling assets at 200% of book, buying stock at 110%). He confirmed AerCap is pursuing other sale-leaseback opportunities but only if they meet desired hurdles. CFO Pete Juhas and CEO Aengus Kelly stated that five freighters have been delivered, with a couple more expected before year-end and five to six more in 2026.

Terry Ma of Barclays inquired about the potential size of the Air France KLM partnership, the overall capital allocation strategy given low leverage, and the outlook for leasing expenses.

Answer

CEO Aengus Kelly described the Air France KLM venture as a long-term strategic investment that will start small. CFO Pete Juhas outlined capital allocation priorities, including the remaining $800 million share buyback authorization and $6 billion in 2025 CapEx, noting that low leasing expenses are expected to continue due to record-high lease extension rates.

Terry Ma from Barclays asked about the potential size of the Air France KLM partnership, the company's overall capital allocation strategy given its low leverage, and the outlook for leasing expenses.

Answer

CEO Aengus Kelly described the Air France KLM venture as a long-term investment that opens up a new customer base for their engine business, with its initial size being small but expected to grow. CFO Pete Juhas detailed capital allocation, noting over $1B in buybacks and $3B in aircraft purchases year-to-date, with another $3B in CapEx and $800M in buybacks planned. He highlighted attractive opportunities in sale-leasebacks and engine deals. Juhas also explained that leasing expenses are trending lower due to a record-high 97% extension rate, which reduces transition costs.

Terry Ma inquired about the potential for more bilateral transactions amid tariff uncertainty and how these opportunities compare to engines and helicopters. He also asked why the full-year EPS guidance was not raised further despite strong share buybacks, questioning if freighter conversion delays were the primary offset.

Answer

CEO Aengus Kelly confirmed that AerCap's scale should lead to more bilateral deals, citing a recent 787 sale-leaseback as an example. CFO Peter Juhas clarified that the guidance increase of $0.80 directly reflected Q1's gains on sale. He explained that the strong quarter was driven by higher-than-average net maintenance contribution and other income, which included some one-time items. While freighter conversion delays are a factor, these positive drivers more than compensate, and the company expects to finish in the top half of its guidance range.

Terry Ma sought confirmation that the 2025 EPS guidance only includes the announced $1 billion buyback and asked about the strategy for returning to the target leverage ratio. He also requested details on the high Q4 gain on sale margin and its outlook.

Answer

CFO Pete Juhas confirmed the guidance is based on the new $1 billion program and the remainder of the old one, nothing more. He noted the company is deploying significant capital to both growth and shareholder returns. Regarding sales, he stated the strong margin was broad-based and, while likely to remain above historical averages in 2025, the record-high Q4 level may not be sustained.

Terry Ma from Barclays asked for color on credit trends observed by region or state and inquired about the composition and drivers of the quarter's reserve release, comparing its magnitude and makeup to prior quarters.

Answer

CFO and Chief Risk Officer Nathan Colson indicated that MGIC has not observed significant geographic movement in new delinquency notices, with no particular states standing out. Regarding reserve releases, Mr. Colson clarified that the approach remains consistent, with development stemming from older delinquency notices as they age and cure rates continue to exceed initial expectations, leading to re-estimation of ultimate losses.

Terry Ma asked for color on credit trends by region or state. He also inquired about the drivers and magnitude of the reserve release in the quarter, comparing it to prior quarters where releases were noticeably larger.

Answer

Nathan Colson, Chief Financial Officer and Chief Risk Officer, stated that MGIC has not seen significant movement in new delinquencies on a geographic basis, with no states standing out. He explained that the approach to reserving and reserve releases remains unchanged, with the timing of development shifting as notices age. He noted that the company continues to re-estimate new notice quarters down from initial estimates.

Terry Ma inquired about the drivers behind the simultaneous decrease in the new notice claim rate and the increase in new notice severity, and also asked for details on the lower operating expense guidance for 2025.

Answer

Chief Financial Officer Nathaniel Colson explained that higher severity is due to a mix shift towards newer, larger loans from the 2022-2024 vintages, while the underlying severity-to-exposure ratio target is unchanged. Regarding OpEx, he noted the reduction is from the cumulative effect of multi-year efficiency initiatives and that the 2025 guidance reflects the current run-rate, which he believes is not the lowest achievable level.

Terry Ma asked for clarification on changes to the static pool delinquency curve reporting and inquired about the credit performance of the 2022 and 2023 vintages, questioning if default rates might eventually exceed pre-pandemic levels.

Answer

CFO Nathan Colson explained that the delinquency curve reporting was updated to show quarterly data points instead of annual ones for more granularity. He noted that while the 2022 vintage is performing marginally worse than surrounding vintages, overall credit quality remains very strong, with high cure rates leading to favorable loss reserve development. He anticipates a seasonal rise in delinquencies but does not expect them to surpass pre-pandemic levels in the near term.

Terry Ma inquired about MGIC's adjustments to pricing or underwriting in response to macroeconomic uncertainties like tariffs, and asked for clarification on the assumptions behind the 7.5% new notice claim rate, specifically if it's tied to a particular unemployment rate.

Answer

CEO Timothy Mattke explained that the company's pricing models already account for a wide range of economic scenarios, rather than reacting to specific events like tariffs. CFO and CRO Nathaniel Colson added that the 7.5% new notice claim rate is not pegged to a specific unemployment rate but is set to be sufficient across various outcomes. He noted that if the economy deteriorated, the first impact would be less favorable reserve development before they would consider adjusting the rate itself.

Terry Ma asked about PennyMac Financial's strategy to address unexpected competitive dynamics and higher MSR runoff in Q4, despite prior capacity increases, and sought more detail on the company's mid-to-high teens ROE guidance.

Answer

Chairman and CEO David Spector explained that increased market capacity and stronger-than-expected refinance competition impacted Q4 production margins. He detailed strategic actions including accelerating Vesta implementation, adding more capacity, and refining recapture strategies, expressing confidence in achieving mid-to-high teen ROEs by mid-year. He further elaborated on the ROE guidance, outlining expectations for market growth, consumer direct and TPO expansion, stable correspondent share, and continued efficiency gains, while noting that margin expansion was not factored into current forecasts.

Terry Ma followed up on the 2025 operating ROE guidance of mid-to-high teens, asking what conditions are needed to reach the higher end of that range. He also asked for color on the recent increase in portfolio delinquencies.

Answer

Executive Daniel Perotti projected that ROE would naturally drift toward the high teens due to servicing efficiencies, even in the current rate environment. Executive David Spector added that any rate rally could quickly push ROE to 20% or higher. Regarding delinquencies, Spector attributed the slight rise to seasonality and expressed confidence in PFSI's servicing expertise and technology to manage any credit shifts.

Terry Ma questioned the sustainability of servicing margins heading into next year, given the potential for rising delinquencies. He also asked about competitive dynamics and performance in the correspondent channel.

Answer

Daniel Perotti (executive) expressed confidence in maintaining servicing margins, citing ongoing efficiency gains and scale benefits as offsets to any potential modest increase in delinquencies. David Spector (executive) added that in the correspondent channel, PFSI has maintained strong share and margins despite some irrational pricing by competitors, emphasizing their role as a consistent market participant.

Terry Ma from Barclays questioned the credit performance of the private refi book, noting an uptick in delinquencies, and asked about reserve adequacy and the expected direction of credit metrics. He also sought clarification on the drivers behind the projected 50% increase in in-school originations.

Answer

President and CEO Dave Yowan acknowledged a slight uptick in refi delinquencies but expressed confidence in the overall position due to low absolute rates and expectations for improvement. He highlighted the high credit quality of 2024 and 2025 originations and confirmed that refi reserve levels were modestly adjusted in Q3, with lifetime losses expected to remain below 2%. For in-school originations, he attributed the projected 50% increase to strong momentum from 2025 (best year ever) and the additional opportunity from Grad PLUS.

Terry Ma asked about the noticeable uptick in delinquencies within the private refi book, specifically the 20 basis point year-over-year increase in 90-day delinquencies, and the implications for reserve adequacy. He also questioned the drivers behind the projected 50% increase in in-school originations.

Answer

President and CEO Dave Yowan acknowledged a slight uptick in refi delinquency levels but emphasized the absolute low rates and expectations for improvement, highlighting the high credit quality of recent originations. He confirmed refi reserve levels were adjusted in Q3 and are considered appropriate, with lifetime losses expected below 2%. For in-school originations, he attributed the confidence in 50% growth to strong momentum from 2025 and the additional opportunity from Grad PLUS.

Terry Ma from Barclays inquired about the tracking of Synchrony Financial's Product, Pricing, and Policy Changes (PPPCs) relative to expectations, specifically the 75% pricing-in target by June, and the potential for further Net Interest Margin (NIM) lift beyond 2026. He also asked about the nature of growth-related investments driving expense growth in line with receivables and the outlook for operating leverage post-2026.

Answer

CFO Brian Wenzel stated that Synchrony Financial is slightly ahead of schedule on APR changes due to elevated payment rates, and the paper statement fee has stabilized, with e-bill growth offsetting. He expressed satisfaction with PPPC performance. Regarding expenses, he detailed significant growth investments, primarily in reserves for new programs like Walmart and Lowe's, as well as launch costs, marketing, and staffing. He also noted increased capital spend in AI, cloud acceleration, and the health and wellness business, anticipating positive operating leverage after 2026.

Terry Ma asked about the updated revenue guide, specifically what incremental factors throughout the quarter led to lowering the high end of the range, and followed up on PPPC modifications, inquiring if the updated TJ Maxx agreement was the previously cited rollback and if additional conversations were happening.

Answer

Brian Wenzel (EVP and CFO) explained that the lower revenue guide was influenced by continued improvement in delinquencies (leading to lower late fees) and elevated payment rates, partially offset by positive impacts from Product Pricing and Policy Changes (PPPCs). Brian Doubles (President and CEO) clarified that the company does not comment on specific partner programs, confirmed one prior partner change and one fragmented space change (totaling less than $50 million in revenue) were already incorporated into the outlook, and stated that any future discussions would be part of normal course business.

Terry Ma inquired about the key drivers for the significant step-up in the net interest margin (NIM) guidance to 15.6% for the second half of 2025 and whether the pre-pandemic NIM of around 16% is achievable long-term.

Answer

EVP and CFO Brian Wenzel attributed the H2 2025 NIM expansion to three main factors: a higher mix of loan receivables as excess liquidity is deployed, the continued positive impact of product pricing changes (PPPCs) on loan yield, and benefits from CD book repricing. Wenzel stated there are no structural barriers to reaching a 16% NIM again, suggesting it could be achieved as the credit mix normalizes away from super-prime, the interest rate environment stabilizes, and the full benefits of PPPCs are realized.

Terry Ma of Barclays asked about Synchrony's growth outlook, seeking to understand the drivers for the expected return to positive loan receivables growth by year-end despite recent declines in purchase volume and account growth. He also questioned how a shortfall in loan growth might impact the phase-in of the company's product, pricing, and policy changes (PPPCs).

Answer

CFO Brian Wenzel explained that growth is expected to accelerate in the back half of the year due to easier year-over-year comparisons and continued consumer resilience. He noted that current performance is in line with expectations and the outlook does not factor in potential credit loosening. Wenzel also clarified that lower purchase volume would actually accelerate the positive impact of PPPCs on the existing book of receivables.

Terry Ma followed up on credit performance, asking about the potential for further year-over-year improvement in delinquency rates. He also inquired about the outlook for the allowance for credit losses ratio, noting it ended Q4 higher than previously expected.

Answer

EVP and CFO Brian Wenzel expressed high confidence in lowering the net charge-off rate, citing favorable entry rates and improved late-stage collections. He expects a smaller-than-usual seasonal delinquency lift in Q1 2025. Regarding the allowance, Wenzel explained the higher Q4 level was due to a lower loan denominator and some conservatism. He suggested a downward bias on the reserve rate through 2025, contingent on declining charge-offs and a stable macroeconomic environment.

Terry Ma asked for a breakdown of the components driving the year-over-year increase in loan yields and questioned how credit performance has evolved relative to initial 2024 expectations, given the charge-off rate is above 6%.

Answer

EVP and CFO Brian Wenzel declined to break out the specific components of the product, pricing, and policy changes (PPPCs) but confirmed they are performing in line with expectations, with lower-than-expected customer attrition being a positive sign. On credit, Wenzel explained that proactive credit actions taken earlier in the year to de-risk the portfolio, combined with slightly lower purchase volume, impacted the charge-off rate's denominator, but he expressed confidence in the current credit trajectory.

Terry Ma questioned the return on investment (ROI) for the significant increase in non-interest expense for 2026 and beyond, and the confidence level in the 2026 credit guidance, considering increased extended grace, exiting loan modifications, and a challenging job market for new graduates.

Answer

CEO Jon Witter emphasized that the investment targets a 'once-in-a-lifetime opportunity' with up to 70% TAM growth from PLUS reform, applying strong governance to ROI measurement despite expected lower marketing efficiency in year one. CFO Pete Graham added that even with increased expenses, the efficiency ratio remains strong. Regarding credit, Pete Graham highlighted the successful performance of loan modifications, with 75% of the 2023 cohort current. Jon Witter acknowledged slightly elevated unemployment for new grads but noted historical patterns of post-graduation stress and the critical role of co-signer rates.

Terry Ma from Barclays asked about Sallie Mae's return on investment (ROI) measurement for the significant increase in non-interest expenses and investment dollars planned for 2026, and the higher growth rate anticipated post-2026. He also inquired about the confidence level in the 2026 credit guidance, specifically the charge-off assumption range, considering the rise in loans in extended grace, the cohort exiting loan modifications in December, and the challenging job market for recent graduates.

Answer

CEO Jon Witter emphasized that the investment is driven by a "once-in-a-lifetime opportunity" for significant market growth (up to 70% increase in originations due to PLUS reforms), which is expected to lead to meaningful increases in earnings potential and market cap. He assured investors of strong governance and discipline in ROI measurement for marketing and product innovation, acknowledging that marketing efficiency might be lower in year one due to phase-in and lack of serialization benefits. CFO Pete Graham added that even with the increased expenses, Sallie Mae's efficiency ratio remains strong compared to peers and is projected to return to the low 30s. Regarding credit, Pete Graham highlighted the successful performance of loan modifications, with 75% of the 2023 cohort current at the end of 2025, indicating positive payment habits. Jon Witter acknowledged elevated unemployment rates for new college grads but noted that the data shows a balanced story, with a slower but not substantially different ramp to full employment normalization compared to previous years. He reiterated that Sallie Mae is well-equipped with programs and a high co-signer rate to support students during this transition, and all these factors are baked into the 2026 guidance.

Terry Ma asked for clarification on the credit outlook, specifically why the current 4% delinquency rate would not imply higher charge-offs for 2026, given the historical correlation between delinquencies and net charge-offs. He also inquired about the drivers behind the 11% year-over-year increase in graduate originations, questioning if it was due to borrower behavioral changes from recent legislation or market share gains.

Answer

CFO Pete Graham reiterated that the loan modification programs are performing as intended, leading to stable levels of late-stage delinquency and roll rates, which supports the expectation of no higher charge-offs for 2026. He reconfirmed the company's guidance for the current year and its longer-term net charge-off range. CEO Jon Witter explained that while share numbers for the quarter were not yet available, the increase in graduate originations is likely a combination of customer behavioral changes due to Plus Reform and the company's increased focus on innovating in graduate marketing in preparation for a larger opportunity ahead.

Terry Ma inquired about the historical correlation between delinquencies and net charge-offs, asking why the current 4% delinquency rate would not imply higher charge-offs for 2026. He also asked for color on the 11% year-over-year increase in grad originations, specifically if it was driven by borrower behavioral changes due to federal policy or market share gains.

Answer

CFO Pete Graham reiterated confidence in loan modification programs, stable late-stage delinquencies, and roll rates, which support the reaffirmed guidance and long-term net charge-off range. CEO Jon Witter attributed the grad origination growth to increased focus on graduate marketing in anticipation of Plus Reform, noting it's an exciting opportunity for future volume.

Terry Ma of Barclays questioned if the significant upside from federal lending reform could alter Sallie Mae's long-term growth algorithm of high single-digit receivables growth and double-digit EPS growth. He also asked for color on the performance of borrowers exiting extended grace periods and the year-over-year increase in 30-59 day delinquencies.

Answer

CFO Pete Graham affirmed the existing framework remains relevant, noting the opportunity is primarily for 2027 and beyond. He suggested balance sheet growth might trend toward the higher end of the mid-to-high single-digit range. Regarding credit, he stated that delinquency and grace period trends are following normal seasonality and that the company has not seen abnormal pressure on borrowers exiting grace programs.

Terry Ma followed up on credit performance, asking for color on why the delinquency rate, particularly in early-stage buckets, increased year-over-year despite improving sequentially. He also asked about the implications of higher usage of the extended grace period and what it indicates about borrower behavior after exiting the program.

Answer

CFO Peter Graham explained that the year-over-year increase in delinquency metrics is partly due to a change in practice involving customers in the qualifying periods for loan modification programs. He noted that adjusting for this factor would lower the delinquency rate for the quarter to 3%. Regarding the extended grace period, Graham stated that its usage is indicative of the program operating as intended to assist borrowers during the high-stress transition from school to repayment, rather than a sign of broader economic weakness.

Terry Ma of Evercore ISI inquired about the Net Interest Margin (NIM) assumptions in the 2025 EPS guidance and the company's capacity and underwriting standards for potential volume from PLUS loan reform.

Answer

CFO Pete Graham stated the long-term NIM expectation remains in the low to mid-5% range, with short-term pressure abating after older, low-rate funding matures in early 2025. CEO Jon Witter addressed PLUS reform, noting that while supportive of thoughtful changes, a majority of PLUS loans would likely not fit Sallie Mae's credit box. He emphasized that the company has internal scenarios but no external volume estimates without a specific proposal.

Terry Ma asked about the short-term outlook for Net Interest Margin (NIM), questioning if it could dip below 5% amid rate cuts, and inquired about the drivers behind the quarterly increase in early-stage delinquencies.

Answer

CFO Pete Graham explained that NIM will likely face continued pressure into early 2025 due to the repricing dynamics of their deposit book but reaffirmed the long-term target of a low-to-mid 5% range. Regarding delinquencies, Graham stated the company is focused on improving later-stage trends and is not concerned by early-stage movements, attributing them to normal seasonality.

Terry Ma asked about the outlook for consumer health and Capital One's growth, considering the consistent year-over-year decline in credit card delinquencies, consumer stimulus from tax refunds, and the previously flagged loan growth 'brownout,' including how long the brownout is expected to persist.

Answer

Chairman and CEO Richard Fairbank explained the 'brownout' is due to Discover's prior credit policy cutbacks and Capital One's targeted trimming, expecting it to continue until Discover's tech integration. He described the U.S. consumer and macroeconomy as resilient, with low unemployment and growing wages. He noted higher tax refunds in 2026 as a likely one-time benefit for consumer credit and observed that credit card and auto delinquencies are settling out after a year of steady improvement.

Terry Ma asked for an outlook on consumer health and growth at Capital One, specifically how long the loan growth 'brownout' will persist, considering improving credit card delinquencies, consumer stimulus, and tax refunds.

Answer

Chairman and CEO Richard Fairbank explained that the 'brownout' is temporary, driven by Discover's scaled-back originations and Capital One's trimming of higher-balance revolvers, and will continue until Discover's tech integration is complete. He described the U.S. consumer and macroeconomy as resilient, with low unemployment, growing wages, and robust spending. Mr. Fairbank noted that higher tax refunds in 2026 are expected to be a one-time benefit for consumer credit. He added that credit metrics appear to be settling out after steady improvement, with both card and auto portfolios performing well.

Terry Ma from Barclays asked about Capital One's capital return strategy, including the increased buyback pace in Q3 2025 and the new authorization, inquiring about the expected timeframe to optimize towards the 11% internal CET1 target. Terry also asked about the 'trimming' of the Discover portfolio and its expected duration.

Answer

Richard Fairbank, Capital One's Chairman and CEO, confirmed the step-up in repurchases and the new $16 billion authorization, indicating that the pace would likely pick up in the near term, depending on capital levels and the environment. He explained that the Discover portfolio's 'growth brownout' was due to Discover's prior credit policy pullbacks, Capital One's planned trimming of higher-balance revolvers, and the timing required for tech integration to enable broader growth expansions.

Terry Ma inquired about Capital One's capital return strategy, including the increased buyback pace and the new authorization, asking for a timeframe to optimize towards the 11% internal CET1 target. He also followed up on the 'headwind' from trimming the Discover portfolio and its expected duration.

Answer

Richard Fairbank, CEO and Chairman, stated that Capital One stepped up repurchases to $1 billion in Q3 and now has a $16 billion authorization, with plans to pick up the pace of share repurchases in the near term, depending on capital levels and the environment. He explained the Discover portfolio's 'growth brownout' is due to Discover's prior credit policy cutbacks (2023-2025), Capital One's strategic trimming of certain high-balance revolver programs, and the timing disconnect between these cutbacks and future growth expansions post-tech integration.

Terry Ma of Barclays PLC inquired about the updated economics of the Discover acquisition, including long-term earnings power and return targets. He also asked for the expected timing of new capital level guidance and the rationale for the combined company's CET1 target.

Answer

Richard Fairbank, Founder, Chairman & CEO, expressed bullishness on the deal's economics but offered no new specific targets beyond his prepared remarks. CFO Andrew Young added that while the company is operating with excess capital at 14% CET1, they need more time to model Discover's data before providing a long-term capital target, though share repurchases may increase as that work progresses.

Terry Ma questioned the drivers behind the 19% year-over-year increase in marketing spend, asking where the company sees the most compelling opportunities and how it's balancing growth investments with risk management, particularly in the subprime segment.

Answer

Richard Fairbank, Chairman and CEO, detailed three key areas of marketing investment: fueling customer growth with advanced analytics, winning heavy spenders at the top of the market with premium benefits, and building out their national digital bank. He affirmed they are leaning into opportunities across the credit spectrum, including subprime, due to the consumer's current strength, while remaining vigilant about economic uncertainties.

Terry Ma asked for a framework to understand how much lower delinquencies could trend and what might cause an inflection. He also inquired about the Auto business, asking if loan growth would accelerate and about the profitability of new originations versus historical levels.

Answer

CEO Richard Fairbank explained that while consumer health is strong and recoveries provide a tailwind, the unwinding of delayed charge-offs prevents a definitive call on credit improvement. He noted a new seasonality benchmark with less amplitude. For the Auto business, Mr. Fairbank expressed a bullish outlook, stating that credit performance is strong and delinquencies are below pre-pandemic levels. After pulling back due to prior margin and credit concerns, the company is now positioned to "lean in" to growth as market conditions have normalized.

Terry Ma asked about the auto business, focusing on the competitive environment and the outlook for growth, given that originations have been positive for three consecutive quarters. He also questioned if growth would be measured due to ongoing mindfulness of used car prices.

Answer

Chairman and CEO Richard Fairbank confirmed that after pulling back on originations in 2022 and early 2023, the company is now leaning into growth opportunities. He stated that credit performance in the auto portfolio remains strong, and industry headwinds like high interest rates and vehicle prices are easing. With improved front-book margins and stable credit, Mr. Fairbank expressed confidence that Capital One is well-positioned to grow its auto business in a disciplined and resilient manner, leveraging its data-driven underwriting and dealer relationships.

Terry Ma inquired about the credit trends, specifically the lower new notices but higher provision, seeking color on vintage or geography makeup. He also asked about the higher claims amount and severity.

Answer

Mark Casale, Chairman and CEO, explained that there were no specific geographic or vintage trends, attributing the higher provision to an increase in average loan size. David Weinstock, Chief Financial Officer, noted that claims fluctuations depend on document timing, and severity remains below reserves.

Terry Ma of Barclays asked about Essent's expectations for home prices, its pricing strategy in a potentially negative home price appreciation (HPA) environment, and the credit profile of recent vintages. He also inquired about the composition and outlook for new defaults.

Answer

Mark Casale, Chairman & CEO, responded that home price trends are highly localized at the MSA level, driven by supply and job growth, and that some market weakening is healthy. He expressed confidence in recent vintages due to the portfolio's overall embedded equity. Regarding new defaults, Casale noted they are returning to normal seasonal patterns and are not a major concern given the portfolio's strong equity buffer, which reduces the probability of defaults transitioning to claims.

Terry Ma from Barclays inquired about Essent's risk management strategy amidst macroeconomic uncertainty and tariff headlines, asking if any pricing or underwriting adjustments have been made and what the current expectations are for credit loss.

Answer

Chairman and CEO Mark Casale responded that Essent prices through the cycle and is currently in a "wait and see" mode regarding macro events like tariffs, stating a significant catalyst would be needed for broad pricing changes. He reaffirmed that the 2% to 3% default rate expectation remains valid, with current levels at the lower end of that range. Casale also emphasized that a default does not automatically translate into a paid claim, as homeowners with equity can often sell their homes, mitigating losses for Essent.

Terry Ma of Barclays asked for commentary on the counter-seasonal decline in new default notices (excluding hurricane impacts) and questioned if the underlying default rate has reached a stabilization point due to portfolio seasoning.

Answer

CFO David Weinstock noted that the 2024 default pattern was generally favorable compared to historical trends. Chairman and CEO Mark Casale added that it's too early to call a stabilization, suggesting that as the portfolio's average age lengthens, it's natural for the default rate to continue rising toward the 2-3% range in 2025, which is within their expectations.

Terry Ma of Evercore ISI inquired about the quantifiable impact of recent hurricanes on default rates and whether the acceleration in new notices was due to the seasoning of post-COVID vintages.

Answer

Mark Casale, Chairman and CEO, stated that the hurricane impact was minimal in Q3 but could create noise in Q4. He attributed the rise in defaults to portfolio seasoning, seasonality, and the normalization of forbearance activity. He emphasized that 70% of defaults are from the 2021 vintage and prior, which have significant home price appreciation, lowering the probability of actual claim payouts.

Terry Ma of Barclays followed up on the expense outlook, asking if the margin impact from health claims would subside and if the company was confident in its 15-20% margin target. He also inquired about the sustainability of momentum in the commercial business.

Answer

CEO Mike Nolan affirmed confidence in the 15% to 20% title margin target for the year, noting that while health claims will remain elevated, they should moderate from the Q2 peak. He highlighted a strong commercial pipeline, particularly in national orders, and a significant pickup in commercial refinance activity, which he believes bodes well for the second half of the year and into 2026.

Terry Ma from Barclays sought clarification on the margin impact from health care claims for the remainder of the year and asked about management's confidence in maintaining the 15% to 20% title margin target. He also inquired about the sustainability of the strong momentum in the commercial business.

Answer

CEO Mike Nolan affirmed confidence in the 15% to 20% margin range, stating that while health claims will remain elevated, they should moderate from Q2 levels and normalize in 2026. He noted that the second half of 2025 is expected to resemble the second half of 2024. Regarding commercial, Nolan highlighted a strong national pipeline, five consecutive quarters of double-digit growth in national open orders, and a notable pickup in commercial refinance orders, which bodes well for the back half of the year.

Terry Ma from Barclays asked for the key drivers behind the year-over-year title margin expansion in Q1 and sought commentary on the sustainability of that expansion. He also requested more detail on the commercial pipeline across different sectors.

Answer

CEO Mike Nolan attributed the 100-basis-point margin expansion to outperformance across all business lines, including direct, agency, commercial, and ancillary. While expecting sequential margin expansion in Q2, he noted the rate of growth might not match the prior year due to market uncertainty. For the commercial pipeline, he highlighted continued strength in multifamily, industrial, affordable housing, and data centers, noting that the office sector remains soft but is showing anecdotal signs of recovery.

Terry Ma asked about the sustainability of the strong growth in the commercial title business, particularly in the national segment, and requested an update on FNF's strategic thinking regarding a potential spin-off of F&G.

Answer

CEO Mike Nolan expressed optimism for continued strength in the commercial business in 2025, citing a strong pipeline of national orders and the potential for additive growth from a recovery in the office sector. On the F&G topic, CFO Tony Park stated that the board's clear direction is to continue growing F&G's AUM and earnings. He acknowledged that the option to execute a tax-free spin becomes available in June but emphasized that this is not the current focus.

Terry Ma of Barclays questioned the future trajectory of non-interest expenses, given recent moderation and the servicing build-out, and asked for an update on the 10b5-1 stock sale plan.

Answer

Chairman, CEO & President Mat Ishbia noted that fixed expenses, viewed as investments in scalability and technology, are expected to continue moderating. Regarding the 10b5-1 plan, he reiterated its purpose is to increase the public float based on investor feedback, stating it's a long-term play despite the current low stock price.

Terry Ma from Barclays asked about the higher-than-expected Q4 operating expenses, inquiring if there were one-time items and what the future run rate might be. He also asked about the company's initiatives and outlook for the refinance market.

Answer

CEO Mathew Ishbia characterized the higher costs not as expenses but as strategic "investments" to ensure market dominance, stating they are prepared to double business volume with minimal new hires, leading to a flattening of future expense growth. Regarding refinances, Ishbia reiterated that UWM is prepared for a significant increase in volume as trillions in mortgages are close to being "in the money" for refinancing with a small drop in rates.

Terry Ma from Barclays asked about the progress of UWM's investments in preparing for a refinance boom, referencing the recent 'stress test,' and inquired about future plans to increase the stock's public float.

Answer

Chairman and CEO Mathew Ishbia affirmed that investments in technology and staffing have prepared the company to handle significantly more volume without major new hiring. Regarding the float, he acknowledged investor feedback and confirmed the company has taken steps to increase it and will remain opportunistic, though no further actions are planned for the current year.

Terry Ma of Barclays inquired about the progress on remarketing the $5 billion in lower-yielding leases set to expire and the expected impact on the portfolio yield. He also asked about capital allocation priorities, specifically how Air Lease evaluates share buybacks against other opportunities given its improved leverage and freed-up capital.

Answer

EVP & CFO Gregory Willis confirmed that the company is tracking along its previously guided path for a 150-200 basis point yield improvement and that the composition of the sales pipeline is helping this trend. CEO John Plueger added that while buybacks are an attractive option, the company's focus is on building a strong balance sheet to ensure any capital deployment is meaningful and does not jeopardize its investment-grade credit ratings.

Terry Ma from Barclays asked whether the lease spread margin would increase in line with lease yields and questioned the timing of revenue recognition from recent lease extensions.

Answer

CFO Greg Willis projected that margins in 2025 would likely remain around 2024 levels, as higher interest costs offset the gradual rise in lease yields. He confirmed that revenue from Q4 extensions will begin flowing through in 2025, contributing to a 'steady grind higher' on the top line as more leases from the COVID era are renewed at higher market rates over the next two years.

Terry Ma from Barclays inquired about the potential for a normalized, through-the-cycle profit margin and whether any structural changes would prevent a return to pre-pandemic margin levels.

Answer

CFO Gregory Willis explained that while no specific 2025 guidance is being given, positive drivers for margins include new aircraft deliveries, lease extensions at higher rates, and benefits from interest rate cuts. He stated that nothing structurally prevents a return to higher pre-pandemic margins, but it will take time to work through COVID-era lease placements. The strong demand environment is a key positive factor.

Terry Ma asked for the expected timeline for the credit card portfolio to achieve return parity with the core personal loan business and questioned the potential impact of a recent tax bill on OneMain's borrowers.

Answer

CEO Doug Shulman stated that while there's no specific timeline for the card business, he is confident its capital generation return on receivables will eventually be similar to personal loans, driven by high yields offsetting higher losses. On the tax bill, he clarified that while 40-50% of their portfolio is in industries that could benefit, the company is not baking any positive impact into its forecasts.

Terry Ma inquired about the sustainability of recent positive credit trends and the key factors that would determine whether 2025 charge-offs land at the high or low end of the company's guidance. He also asked for more color on the drivers of portfolio yield improvement.

Answer

CFO Jenny Osterhout expressed confidence in the improving credit trends, citing better-than-historical delinquency patterns and the crossover to year-over-year improvement in consumer loan net charge-offs. She explained that the 2025 charge-off range depends on the runoff pace of the 'back book,' delinquency roll rates, origination growth, and the macroeconomic environment. Regarding yield, Osterhout noted that while pricing actions are flowing through, the rate of improvement will be moderated by the mix of products, particularly the growth in the lower-yield auto business.

Terry Ma of Stephens Inc. asked for clarification on the full-year net charge-off guidance, questioning if it includes the Foursight policy adjustment and what factors are driving the forecast toward the higher end of the range. He also inquired about the company's confidence in charge-offs having peaked in the first half of 2024.

Answer

CFO Jenny Osterhout confirmed the net charge-off guidance includes the Foursight impact and attributed the higher-end forecast to slower-than-anticipated macro improvement. Both Osterhout and CEO Douglas Shulman expressed confidence that charge-offs peaked, citing improving delinquency trends which historically lead loss performance by two quarters, and the growing share of higher-quality 'front book' loans.

Terry Ma of Barclays asked what specific triggers the company needs to see before unwinding its credit tightening actions and whether the trend of improving credit roll rates has continued.

Answer

EVP & CFO Perry Beberman explained that credit strategy is dynamic, with targeted adjustments already occurring. A broader loosening would be gradual and depend on seeing consumers with improved credit profiles. He confirmed that roll rates have continued to improve, which was a key factor in the updated guidance, though mid-to-late stage rates remain elevated compared to pre-pandemic levels.

Terry Ma requested more detail on the magnitude of credit roll rate improvements across FICO buckets and asked how to reconcile this with the unchanged annual charge-off guidance. He also asked how the reduced loan growth forecast impacts the phasing of mitigation efforts like APR increases.

Answer

EVP and CFO Perry Beberman characterized the roll rate improvements as modest, slow, and gradual across all risk bands, not a sudden or dramatic shift. Regarding the loan guidance, he explained that the slight reduction does not materially impact the phasing of mitigants but is more reflective of slower new account growth and some anticipated softness in consumer spending.

Terry Ma asked for color on the cadence of revenue growth throughout 2025, given the low single-digit guide and the rollout of mitigants. He also questioned if the historical relationship between delinquencies and charge-offs is expected to hold, referencing past comments on elevated roll rates.

Answer

EVP & CFO Perry Beberman explained that the revenue cadence is subject to many moving parts, including the timing of Fed rate cuts and the pace of delinquency improvement, but reiterated the full-year NIM guide of being slightly higher than last year. He confirmed that delinquency-to-loss roll rates have been at historic highs but that they are just beginning to see slight improvement. A more material improvement in roll rates is needed to accelerate the decline in losses.

Terry Ma of Barclays asked about the strong 20% growth in net card fees and whether the upcoming Platinum refresh would be additive to this growth rate or merely sustain it.

Answer

CFO Christophe Le Caillec reiterated the company's previous guidance that the card fee growth rate is expected to moderate in Q3 and Q4 of 2025. He explained that due to the timing of how fee increases are recognized, any acceleration from the Platinum refresh would likely not materialize in the P&L until 2026.

Terry Ma followed up on the product refresh strategy, asking if the high number of planned refreshes might be delayed due to macro uncertainty and the potential impact on the marketing budget.

Answer

CEO Stephen Squeri stated there are no plans to change the marketing budget or delay the refresh strategy. He explained that these are long-term initiatives that are imprudent to stop and start. He expressed confidence in the ROI, noting that customer acquisition is always managed against the credit environment at the specific time of acquisition, independent of the refresh cycle.

Terry Ma questioned why the net card fee growth guidance of mid-to-high teens for 2025 includes moderation, especially when major product refreshes have historically fueled acceleration.

Answer

CFO Christophe Le Caillec (identified as Unknown Executive) explained that the recent acceleration to 19% growth in Q4 was driven by the product refresh cycle. This effect will persist in Q1 2025, after which growth will moderate to a still-strong mid-teens rate, similar to early 2024. He emphasized the trajectory remains robust, supported by high renewal rates and the fact that 70% of new cards are fee-paying.

Terry Ma from Barclays pointed to healthy card acquisitions and accelerating net card fee growth, asking if the performance of recent product refreshes is running ahead of the company's internal expectations.

Answer

CEO Stephen Squeri responded that the strong performance is in line with what the company expected. He reiterated that product refreshes create market demand and improve marketing efficiency. The resulting card fee revenue growth builds predictably over time as new members are acquired and existing members are repriced, reinforcing the value of their fee-paying, highly engaged customer base.

Terry Ma from Barclays followed up on the student loan opportunity, asking if an in-school graduate loan product could coexist with SoFi's existing student loan refinance business without significant cannibalization.

Answer

CEO Anthony Noto confirmed the products 'absolutely can coexist.' He explained that potential prepayments from future refinancing are factored into the initial loan valuation. He framed it as core to SoFi's mission to help members reduce debt. Refinancing their own members to a lower rate upon credit improvement is a desired outcome that aligns with their member-centric strategy and is financially sound.

Terry Ma from Barclays questioned the 2025 outlook for the Lending business, specifically regarding origination volumes, balance sheet growth, and the assumptions for the loan platform business (LPB).

Answer

CFO Chris Lapointe stated that the Lending segment is expected to grow in the low-double-digits to teens in 2025, with modest balance sheet growth in the single-digit billions. He expressed strong optimism for the LPB, citing a new $5 billion, two-year agreement with Blue Owl Capital Funds as evidence of robust demand from loan buyers.

Terry Ma inquired about the outlook for loan originations and lending growth, specifically the balance between holding loans on SoFi's balance sheet versus originating for partners.

Answer

CFO Chris Lapointe stated that the outlook for on-balance-sheet growth remains unchanged, with expectations for only modest growth in dollar terms. He noted that SoFi is satisfied with its current balance sheet size and is leveraging the loan platform business to meet excess demand. He anticipates that a lower rate environment would primarily drive growth in the student loan and home loan businesses, not the personal loan portfolio.

Terry Ma inquired about the specific drivers that could propel Mr. Cooper to the high end (20%) of its revised 16-20% ROTCE target and whether this is achievable without a favorable shift in interest rates. He also asked about the sustainability of the double-digit growth in services fee revenue and the company's long-term target for this higher-multiple earnings stream.

Answer

CFO Kurt Johnson stated that the asset-light, fee-based services segment and a stronger originations environment could drive ROTCE to the higher end, independent of the rate environment. CEO Jay Bray emphasized operating leverage as a key driver, citing significant servicing portfolio growth with minimal headcount additions. President Mike Weinbach added that strong execution, not interest rates, is the primary factor. Regarding fee income, Weinbach confirmed the company believes it can sustain its growth, noting its stability and potential to attract a higher valuation multiple.

Terry Ma from Barclays asked for clarification on the Q4 originations pretax income guidance of $45 million to $65 million, questioning if this is a new normalized run rate and seeking details on its drivers. He also inquired about the performance of the Direct-to-Consumer (DTC) channel versus the correspondent channel during the third quarter.

Answer

President Mike Weinbach confirmed the $45 million to $65 million guidance, noting its dependence on interest rate movements but highlighting momentum from business enhancements and strong customer equity for cash-out opportunities. Chairman and CEO Jay Bray emphasized that the company's balanced business model means the Servicing segment would benefit if rates remain high, offsetting lower originations. Weinbach explained that Q3 DTC performance was strong, especially with rate-term refinances picking up in the latter half of the quarter, while correspondent growth was driven by strategic changes to pricing models, client relationships, and capital markets execution.

Terry Ma asked about the strategic fit of a potential expansion into Grad PLUS originations alongside the existing Earnest refinance business, questioning if the two could be complementary or if they might compete with each other.

Answer

CFO Joe Fisher explained that the businesses are highly complementary. He noted that Navient already originates in-school loans to graduate students through Earnest, and establishing that relationship early creates brand familiarity and value, which would be an advantage when those same students later seek to refinance.

Terry Ma asked to quantify the addressable market for student loan refinancing if rates fall by 100 basis points and inquired if the Q4 buyback target represents a new run rate.

Answer

CFO Joe Fisher estimated a potential addressable refinance market of roughly $30 billion, cautioning that the actual volume depends on whether a 100-basis-point rate drop is sufficient to entice borrowers away from federal programs. CEO David L. Yowan reiterated that future buybacks are part of a flexible capital allocation strategy, not a fixed run rate, and will be balanced against opportunities for loan growth and debt reduction.

Terry Ma asked about the assumptions underlying the updated FFELP net interest margin (NIM) guidance, specifically regarding rate cuts and prepayment levels, and also questioned the priorities for excess cash generated from loan prepayments.

Answer

CFO Joe Fisher explained that the updated FFELP NIM guidance incorporates one potential rate cut but is primarily pressured by elevated prepayment activity accelerating premium amortization. He noted that while consolidation requests have recently declined, the guidance conservatively assumes prepayment levels comparable to Q1. Regarding excess cash, Fisher reiterated CEO David Yowan's stated priorities: investing in the business, reducing unsecured debt, and shareholder distributions.

Terry Ma inquired about the number of rate cuts assumed in the updated FFELP NIM guidance, the potential impact of court decisions on prepayments, and the company's priorities for excess cash from loan prepayments.

Answer

CFO Joe Fisher stated that one rate cut is factored into the guidance, but the primary driver of NIM pressure is accelerated premium amortization from prepayments. He noted that while consolidation requests have recently declined, the guidance conservatively assumes elevated prepayment levels continue. He reiterated CEO David Yowan's comments that excess cash priorities are investing in the business, reducing debt, and capital distributions.