• Private Education Loan Originations: $2.8 billion in Q3 2024, with a 13% growth compared to the prior year.
• New Unfunded Commitments: $3.9 billion in Q3 2024.
• GAAP Net Loss Per Common Share: $0.23 in Q3 2024.
• Net Charge-Offs: $77 million or 2.08% of average private education loans in repayment for Q3 2024.
• Interest Income: $653 million in Q3 2024.
• Net Interest Margin: 5% for Q3 2024.
• Provision for Credit Losses: $271 million in Q3 2024.
• Allowance for Losses: $1.4 billion for private education loans at the end of Q3 2024.
• Non-Interest Expenses: $172 million in Q3 2024.
• Liquidity: 19.9% of total assets at the end of Q3 2024.
• Total Risk-Based Capital: 12.9% at the end of Q3 2024.
• Common Equity Tier 1 Capital: 11.6% at the end of Q3 2024.
• Share Repurchase: 5.3 million shares at an average price of $21.58 in Q3 2024.
• Dividend Increase: From $0.11 to $0.13 per common share for Q4 2024.

Release Date: October 23, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• SLM Corp (NASDAQ:SLM) experienced a successful peak season with a 13% growth in private education loan originations compared to the previous year.
• The company reported a 17% increase in committed volume, reflecting strong demand and effective market positioning.
• Credit performance showed sustained improvements, with net charge-offs for private education loans decreasing by 45 basis points year-over-year.
• SLM Corp (NASDAQ:SLM) continued its capital return strategy by repurchasing 5.3 million shares and announced an increase in the fourth quarter dividend.
• The company maintained a solid liquidity position, ending the quarter with liquidity at 19.9% of total assets and a strong capital base with a total risk-based capital of 12.9%.

Negative Points

• SLM Corp (NASDAQ:SLM) reported a GAAP net loss per common share of $0.23, primarily due to the allowance required for new commitments.
• Net interest margin (NIM) decreased to 5%, reflecting compression as funding rates caught up to asset yields.
• Total provision for credit losses increased to $271 million, driven by successful peak season volume.
• Private education loans delinquent 30 days or more increased to 3.6% of loans in repayment, indicating some pressure in early-stage delinquencies.
• Non-interest expenses rose to $172 million, slightly higher than the previous quarter, despite higher levels of originations.

Q & A Highlights

Q: Can we expect the Net Interest Margin (NIM) to dip below 5% in the short term due to recent rate cuts, and what is the timeframe to return to the long-term target? A: Peter Graham, CFO, explained that the NIM might face pressure in the early part of next year due to the repricing of term deposits in a higher rate environment. However, as deposits put on a year ago reprice at lower rates, the NIM should start to normalize, aiming for a long-term target in the low to mid-5% range.

Q: Delinquencies increased in the 30 to 59-day bucket this quarter. Is this due to seasonality or other factors? A: Peter Graham, CFO, noted that the focus is on later-stage delinquency buckets, which have shown improvement. The early-stage delinquency increase is attributed to normal seasonality, and there are no concerns regarding early-stage movements.

Q: How will the sale of FFELP loans impact the company, and what was the decision behind it? A: Peter Graham, CFO, stated that the FFELP loans, now a non-core asset, create operational complexity. The decision to sell these loans, which have decreased significantly in volume, was made to simplify operations. The transaction is expected to close in the fourth quarter with no significant gain or loss.

Q: How did the exit of a competitor affect SLM's market share and origination growth? A: Jonathan Witter, CEO, mentioned that the competitor's exit, which had a 14-15% market share, allowed SLM to capture its share and possibly more, contributing to a 13% growth in originations. The company is focused on maintaining and building this momentum.

Q: What procedural changes were made to the loan modification programs, and how did they affect delinquencies? A: Peter Graham, CFO, explained that the procedural change involved considering a loan modification effective once a borrower accepts it, rather than after three qualifying payments. This change increased reported loan modifications but did not impact delinquency metrics.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.