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SLM Corp (SLM)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 GAAP diluted EPS was $0.50 and net income attributable to common stock was $107M; net interest margin compressed to 4.92% vs 5.37% in Q4 2023, driven by funding rates catching up to asset yields .
  • Credit performance remained stable YoY: net charge-offs were 2.38% of average loans in repayment (annualized) vs 2.43% in Q4 2023; delinquencies improved to 3.68% vs 3.90% in Q4 2023 .
  • Management introduced FY 2025 guidance: GAAP diluted EPS $3.00–$3.10, private education loan originations +6–8% YoY, total loan portfolio net charge-offs 2.0–2.2% of average loans in repayment, and non‑interest expenses $655–$675M .
  • Balance sheet trends: Private Education Loans held for investment (net) ended at $20.90B (+5.7% YoY) with deposits at $21.07B; share repurchase capacity remained $402M with $46M repurchased in Q4 and a $0.13 common dividend paid .
  • Near-term catalysts: early‑February ~$2B private education loan sale with pricing in line with expectations; continued programmatic buybacks sized to loan sale capital and a CET1 of 11.3% and total risk-based capital 12.6% supporting capital returns .

What Went Well and What Went Wrong

What Went Well

  • Originations momentum and credit quality: Q4 private education loan originations rose 17% YoY to $982M; average approval FICO increased to 755 and cosign rate to 88.5% . “We delivered strong results in 2024… well‑positioned to continue to execute on the balance sheet growth strategy” — CEO Jonathan Witter .
  • Loss mitigation programs performing: 80%+ of borrowers in loan modification programs completed first 3 payments; 70% completed first 6 payments, supporting long‑term NCO targets .
  • Capital return and balance sheet strength: 2.0M shares repurchased for $46M in Q4; $402M authorization capacity remaining; total risk-based capital 12.6%, CET1 11.3% at Q4 .

What Went Wrong

  • NIM compression: Q4 NIM declined to 4.92% (–45 bps YoY) as funding costs repriced higher versus loan yields; management expects normalization after early‑2025 as legacy funding matures .
  • Provision burden: Q4 provision for credit losses rose sharply to $108M (vs $16M in Q4 2023) due to higher commitments and funded disbursements, partially offset by improving reserve rate YoY .
  • Sequential uptick in delinquencies: 30+ day delinquency ticked to 3.7% from 3.6% in Q3, which management attributed to seasonality and eligibility refinements in modification programs .

Financial Results

P&L and EPS vs prior periods

MetricQ4 2023Q3 2024Q4 2024
Total interest income ($M)$669 $653 $661
Net interest income ($M)$386 $359 $362
Provision for credit losses ($M)$16 $271 $108
Total non-interest income ($M)$57 $24 $28
Total non-interest expenses ($M)$202 $172 $150
Net income attributable to common ($M)$164 $(50) $107
GAAP diluted EPS ($)$0.72 $(0.23) $0.50

Margins and Yield

MetricQ4 2023Q3 2024Q4 2024
Net interest margin (%)5.37% 5.00% 4.92%
Yield – total interest‑earning assets (%)9.30% 9.07% 8.98%
Cost of funds (%)4.17% 4.35% 4.31%

Ending balances and capital

MetricQ4 2023Q3 2024Q4 2024
Private Education Loans held for investment, net ($M)$19,772 $20,460 $20,902
Deposits ($M)$21,653 $21,445 $21,069
CET1 ratio (%)12.3% 11.6% 11.3%
Total risk‑based capital (%)13.6% 12.9% 12.6%

KPIs and portfolio quality

KPIQ4 2023Q3 2024Q4 2024
Originations ($M)$839 $2,800 $982
Cosigner (% of originations)84.2% 92% (quarterly mix) 88.5%
Average FICO at approval750 754 755
Delinquencies (% of loans in repayment)3.90% 3.60% 3.68%
Net charge-offs (% annualized of avg loans in repayment)2.43% 2.08% 2.38%
Provision for credit losses ($M)$16 $271 $108

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
GAAP diluted EPSFY 2025—$3.00–$3.10 Introduced
Private education loan originations growthFY 2025—+6%–8% YoY Introduced
Total loan portfolio net charge-offs (% of avg loans in repayment)FY 2025—2.0%–2.2% Introduced
Non‑interest expenses ($M)FY 2025—$655–$675 Introduced
GAAP diluted EPSFY 2024$2.70–$2.80 Achieved $2.68 Slightly below (–$0.02)
Total loan portfolio net charge-offs ($M; %)FY 2024$325–$340; 2.1%–2.3% Actual $332; 2.19% In‑range
Non‑interest expenses ($M)FY 2024$635–$655 Actual $642 In‑range
Common dividend per shareQ4 2024$0.11 $0.13 paid Raised
Common dividend per shareQ1 2025—$0.13 declared Maintained vs Q4 level

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Net interest margin trajectoryNIM 5.3%; compression expected as deposits reprice; LT target low–mid 5% NIM 5.0%; further near-term compression as legacy deposits reprice NIM 4.92%; target remains low–mid 5% after early‑2025 maturities; liquidity build impacts Near-term pressure; normalization expected in 2025
Loan sales and private credit demand$1.6B sale with $112M gains; market demand supportive Potential late-year sale to balance growth/earnings ~$2B sale early Feb with pricing in line; private credit inflows supportive Strong execution; continued use as growth “governor”
Loss mitigation programsEnhanced programs show 84% payment rates; eligibility optimization possible Reserve rate improvement expected; procedural change on mod “effective” status 80%+ complete first 3 payments; 70% first 6; seasonal DQ uptick explained Sustained positive performance; scaling/tuning
Competitive dynamics & originationsQ2 originations +6% YoY; FAFSA delays elongate peak Peak originations +13% YoY; revised originations guidance +8–9% Q4 originations +17% YoY; 2025 originations +6–8% guided Elevated share capture; normalizing growth cadence
PLUS reform/regulatoryGeneral positioning; deposit pricing dependence Monitoring credit behavior post federal repayment; no issues No assumptions in 2025 guide; majority of PLUS would not fit credit box; supportive of thoughtful reform Watchful; contingency planning in place
Capital returns (buybacks/dividends)Programmatic repurchases staged to loan sales Q3: 5.3M shares @ $115M; $448M remaining capacity $46M repurchased in Q4; $402M remaining; buybacks aligned to sales; $0.13 dividend Ongoing, formulaic execution

Management Commentary

  • Strategy and momentum: “We delivered strong results in 2024… strong momentum entering 2025… well‑positioned to continue to execute on the balance sheet growth strategy” — Jonathan Witter, CEO .
  • NIM outlook: “Low to mid‑5 is what we would point to… once longer-term funding put on at much lower rates matures… we’ll start to see that pressure abate” — Peter Graham, CFO .
  • Loan sale pipeline: “Preliminary agreement… sale of approximately $2 billion of private education loans… encouraged by the price… in line with our expectations” — CEO .
  • Loss mitigation impact: “80‑plus percent of borrowers… completing their first 3 payments… 70%… first 6 payments… important step towards achieving long‑term net charge‑off targets” — CFO .
  • PLUS reform stance: “A majority of [PLUS] loans would not fit our credit box… supportive of broader and thoughtful PLUS reform” — CEO .

Q&A Highlights

  • NIM and timing: Low–mid 5% target reiterated; NIM pressure expected to abate after early‑2025 as legacy funding reprices; liquidity build around “mini peak” also weighed on Q4 .
  • PLUS underwritability and appetite: Majority of potential PLUS volumes likely outside SLM’s credit box; would respond with targeted products and balance loan sales vs portfolio growth if reforms shift volume .
  • Buyback cadence: Buybacks are programmatic and sized to capital from loan sales; ~$400M remaining under authorization with framework consistent with prior Investor Forum .
  • Reserve rate discussion: Reserve rate was essentially flat QoQ given higher originations; management focuses on YoY improvement and expects continued declines over time .
  • Market conditions for loan sales: Private credit inflows supportive; execution environment strong into early 2025 .

Estimates Context

  • S&P Global consensus estimates were unavailable due to data access limitations; therefore, we cannot provide EPS or revenue estimate comparisons for Q4 2024 or Q3 2024 at this time. Values would be retrieved from S&P Global when available. Comparisons to company guidance and actuals are provided instead .

Key Takeaways for Investors

  • Expect near-term NIM pressure with normalization as legacy funding reprices over the next couple of quarters; management’s LT NIM target (low–mid 5%) remains intact .
  • FY 2025 guide implies EPS growth ($3.00–$3.10) despite modest originations growth (+6–8%); improving reserve rate and loss mitigation performance underpin credit outlook (NCOs 2.0–2.2%) .
  • Early‑February ~$2B loan sale is a catalyst for capital returns and balance sheet optimization; management uses loan sales as a “governor” to moderate growth while supporting buybacks .
  • Shareholder returns continue: $46M repurchased in Q4 with $402M capacity remaining and $0.13 quarterly dividend maintained entering Q1 2025 .
  • Credit quality momentum persists (higher FICOs, cosign rates, stable delinquencies); programs show strong borrower payment completion rates, supporting reserve rate improvement over time .
  • Watch potential policy shifts (PLUS reform); management sees limited underwriteable share from current PLUS borrowers and has contingency plans; no reform assumptions in 2025 guide .
  • Trading setup: Earnings quality supported by lower non‑interest expense and improving credit; NIM trajectory and upcoming loan sale execution are near-term stock drivers .