SLM

Welcome to the Sallie Mae First Quarter 2026 Earnings Conference Call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for your questions following the prepared remarks. If you would like to ask a question at that time, please press star one on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star two. So others can hear your question clearly, we ask that you pick up your handset for best sound quality. Lastly, if you should require operator assistance, please press star zero. I would now like to turn the call over to Melissa Berna, Managing Vice President, Strategic Finance. Please go ahead.

Thank you, Erica. Good evening, and welcome to Sallie Mae's first quarter 2026 earnings call. It is my pleasure to be here today with Jon Witter, our CEO, and Pete Graham, our CFO. After the prepared remarks, we will open the call for questions. Before we begin, keep in mind our discussion will contain predictions, expectations, and forward-looking statements. Actual results in the future may be materially different from those discussed here due to a variety of factors. Listeners should refer to the discussion of those factors in the company's Form 10-Q and other filings with the SEC. For Sallie Mae, these factors include, among others, results of operations, financial conditions, and/or cash flows, as well as any potential impacts of various external factors on our business.

We undertake no obligation to update or revise any predictions, expectations, or forward-looking statements to reflect events or circumstances that occur after today, Thursday, April 23rd, 2026. Thank you. Now I'll turn the call over to Jon.

Thank you, Melissa and Erica. Good evening, everyone. Thank you for joining us to discuss Sallie Mae's first quarter 2026 results. Our performance in the quarter was strong as we continue to reap the benefits of the strategy we have been pursuing for the last several years. Diluted EPS in the first quarter was $1.54 per share as compared to $1.40 in the year-ago quarter. Loan originations were $2.9 billion, up 5% from the prior year quarter. These results were driven by strength in our loan disbursement funnel. Importantly, this performance precedes the expected multi-year growth in both undergrad and graduate lending tied to federal reforms, which we believe could increase our originations by up to 70% over the next several years.

We have been actively preparing for this opportunity, driving improvements across our full delivery system, from products and features to enhanced client acquisition strategies and improved servicing and fulfillment capabilities. We have already rolled out several of these enhancements, including our new medical and dental school offering, with more to come. Our goal is to serve as many students, families, and university partners as possible as the higher education sector navigates this time of change. Net charge-offs and delinquencies were consistent with or slightly better than our expectations. Net charge-offs were $89 million, driven by continued underwriting discipline and the ongoing optimization of our loss mitigation, collections, and recovery strategies. In Q1 of 2025, the granting of disaster-related forbearance tied to the California wildfires and the North Carolina floods temporarily suppressed both net charge-offs and delinquencies, creating tougher year-over-year comparisons.

Shifting gears, you will remember customers started exiting our new loan modification program at the end of 2025. I'm happy to report that their performance has been slightly better than what we assumed in our loss outlook. Although we will need to see several more months of data to develop full confidence in these trends. These results support our belief that we have built a business and are executing a strategy that is capable of performing in almost any environment. We've sharpened our customer acquisition strategies to extend our market-leading position. We've enhanced our underwriting practices and strengthened our credit and collection capabilities to better support borrowers during times of financial distress. We have built an efficient cost structure with diversified, efficient funding sources that continues to support strong net interest margins.

We have developed a strong capital allocation framework by adding strategic partnerships to our existing portfolio loan sale capabilities, giving us greater ability to grow recurring earnings and return capital. Our belief in our strategy, coupled with a desire to act nimbly and decisively when market opportunities arise, led us to accelerate our already robust capital return program. We executed a $2 billion seasoned loan portfolio sale during the quarter, coupled with a planned 10b5-1 share repurchase plan, and also launched a $200 million ASR, all to take advantage of what we believe to be the disconnect between the premium from our whole loan sales and our equity valuation. Pete will now take you through some additional details. Pete?

Thank you, Jon. Good evening, everyone. During the first quarter, we executed $3.3 billion in loan sales, generating $146 million in gains at attractive economics. This included $1.3 billion of planned new origination sales through our strategic partnerships business, as well as a $2 billion seasoned loan portfolio sale executed at gains in the mid to high single-digit range. As we have done in the past when our equity valuation became disconnected from the market value of our loans, we deliberately leaned into our capital flexibility to advance shareholder value. Following the loan sale, we entered into a $200 million accelerated share repurchase program. Year to date, we have repurchased approximately 12 million shares, 6% of the outstanding shares at the end of 2025, at an average price of $21.50 per share.

Since 2020, we have reduced shares outstanding by approximately 58% at an average price of $17.15 per share, underscoring our disciplined approach to long-term value creation. We expect to fully utilize our $500 million share repurchase authorization during the calendar year 2026. Strong ongoing investor demand in the structured finance markets continue to support capacity for both seasoned portfolio sales and our strategic partnerships business. We have already completed meaningful groundwork for our next strategic partnership, which we expect to launch before the end of this year. Turning to earnings. Net interest income for the first quarter was $375 million, consistent with the prior year period. Net interest margin of 5.29% increased both sequentially and year-over-year, reflecting the benefit of lower funding costs and continued discipline in balance sheet management.

As we progress through this year, we expect NIM to moderate modestly, reflecting the higher liquidity we're carrying following the loan sale we executed in March. We recorded a $11 million negative provision in the first quarter, driven primarily by $131 million release of reserves associated with loan sales and loans held for sale, partially offset by growth in loan commitments and updates to our economic assumptions. Our reserve rate was 6.05% at the end of the quarter, modestly higher than the prior quarter, and reflective of seasonal origination patterns rather than changes in underlying credit performance. Credit quality across new originations remains strong, with cosigner rates increasing to 95% and average FICO at approval rising modestly to 754. It's interesting to note that just five years ago, our cosigner rate was 86%, and our average FICO at approval was 750.

The change reflects a deliberate multi-year persistent focus on enhancing credit quality. Across the portfolio, delinquency trends were stable. Loans delinquent 30 days or more were 3.98% of loans in repayment at the end of the quarter, modestly lower than at the end of 2025, with later stage delinquency buckets remaining steady at 1%. Net charge-offs for the quarter were $89 million, modestly ahead of our expectations. First quarter non-interest expenses were $171 million, compared to $155 million in the year-ago quarter. This increase primarily reflects targeted investments to support growth, particularly across our graduate lending programs, while maintaining a strong efficiency ratio of 30.6% for the quarter. Finally, our liquidity and capital positions remain solid. We ended the quarter with liquidity of 21.2% of total assets. Total risk-based capital was 13.7%, and Common Equity Tier 1 capital was 12.4%.

We continue to believe we are well positioned to grow our business and return capital to shareholders. I'll now turn the call back to Jon.

Thanks, Pete. We are pleased with our first quarter performance and the momentum it provides for the year ahead. Let me conclude with a few thoughts about the higher education environment and an update on our guidance. We believe students and families continue to see strong value in higher education. Our upcoming How America Plans for College report will show that nearly 90% of those surveyed view higher education as an investment, over 80% believe it's worth the cost, and nearly three-quarters would rather borrow than forego college. This sentiment is also reflected in improving recent college enrollment trends and FAFSA completion rates that are up almost 20% from this time last year. Colleges, universities, and other higher education institutions are continuing to innovate to ensure that their students have the skills to compete in the future economy. We see schools integrating AI-related coursework into new and traditional programs.

Students are also responding by better aligning their majors and skill sets with those likely needed in an AI-enabled future. The employment picture for recent college grads remains resilient even during times of economic uncertainty. While unemployment among recent graduates temporarily rose last summer, the gap versus historical norms closed in March. Reflecting this confidence, a recent National Association of Colleges and Employers survey indicated employers expect to increase new graduate hiring this academic year by 5.6%. With this backdrop, we feel well positioned as we look ahead to the balance of the year and beyond. Let me now turn to our 2026 guidance. We expect our diluted earnings per common share for 2026 to be between $3.10-$3.20. This revised outlook assumes the full utilization of our $500 million share repurchase authorization and roughly $1 billion of incremental loan sales beyond our initial plan.

At the same time, we are reaffirming all other elements of our 2026 outlook, including originations growth, net charge-offs, and net interest expense metrics. With that, let's open the call for questions. Thank you.

Thank you. The floor is now open for questions. At this time, if you have a question or comment, please press star one on your telephone keypad. If at any point your question is answered, you may remove yourself from the queue by pressing star two. Again, we ask that you pick up your handset when posing your question to provide optimal sound quality. Thank you. We'll start our questions today with Terry Ma from Barclays. Please go ahead.

Hey. Thank you. Good evening. You mentioned we should expect another partnership by year-end. Any kind of early color on how we should think about it? As we take a step back with an additional partner, I think you just mentioned an incremental $1 billion of loan sales, are you just transitioning more to a capital-light model, and should we expect the balance sheet to shrink a little bit more this year?

Yeah. Thanks for the question, Terry. On the first part of that, when we launched the inaugural partnership with KKR last year, we indicated that it was our intention to build this into a business. That's been a part of our plan all along. We've started discussions with some of the folks that were involved in our process last year and weren't the final sort of partner that we went with. Those are early days, but well underway and we're confident that we'll get something done by the end of this year. I think in the context of growing the partnerships, I'll remind that that initial KKR partnership was really sized and scoped to deal with our traditional undergrad student loan product. We always knew that we were going to need to expand and grow that to be at scale for the grad opportunity.

We're working on getting ahead of that so that we have something in place well in advance of when the major increase in volume from grad comes online.

Got it. Maybe just on credit, it sounds like the borrowers exiting mod are performing a little bit better than expected. Any color on new mods thus far this year, whether or not that's in line with your expectations? As we look forward, should we expect the percentage of borrowers in mod to start to come down this year? Any way to think about that? Thank you.

Yeah. I think in the context of the exits, as we said, we're pleased with the early performance, and it's in line with the outlook that we had when we set that charge-off guidance for the year. The absolute value of entries to mod will fluctuate as the payment waves come through and depending on the sort of overall size of those payment waves. Nothing really out of the ordinary in that regard for this. Overall level of new mods we believe will begin to stabilize as we move through this year and into next.

Great. Thank you.

Thank you. Our next question will come from Moshe Orenbuch from TD Cowen. Please go ahead.

Great. Thanks. Jon, could you talk a little bit about how you see the kind of developing competitive environment in the Grad PLUS market? Saw some announcements this week from one of your major competitors, but haven't seen that many across the board, but maybe you could put a little finer point on that, if you would.

Yeah. Moshe, happy to. Obviously, I think everyone understands the opportunity that the PLUS reform provides. I think different competitors certainly look at the market opportunity, the segments of the market opportunity differently. I think there are some who have expressed more interest for certain segments than for others. I think we certainly do expect there to be a heightened level of competition as a new kind of market normal shapes out here over the next couple of years. We see a little bit of early evidence of that just in things like some of the digital marketing spend. We can see some activity from some players and begin to understand a little bit of the testing and the programs that they are looking to develop.

I think more importantly, though, we have tremendous confidence in our incoming position, and we have incredible confidence in the work that we are doing to prepare for this opportunity. I think the credit models, the relationships with schools, the organic marketing channels that we have really pioneered here over the last five years serve as a really important foundation. All of those will need to be enhanced and grown and expanded, in particular to get after the grad opportunity. While there's a lot of similarities, there are differences. I think you heard in my prepared remarks, we are leaving no stone unturned in preparing to compete rigorously.

Whether it's a lot more competitive, modestly more competitive or not more competitive at all, I think we feel really great about what we're doing, how we're going to show up, and most importantly, our ability to serve students, families, and our important university partners, because we know every loan we do is enabling someone's higher education dream.

Got it. Thanks. Maybe as a follow-up, just on the loan sale process, kudos to you and the team for recognizing to do a loan sale and take advantage of that arbitrage. How do you think about the outlook and balancing the various types of loan sale opportunities as you go forward, and probably adding in the potential for an incremental partner that you had talked about?

Yeah, thanks, Moshe. That's a good question. Just a reminder, the KKR structure, again, focused on traditional undergrad product, and that was sized at a $2 billion a year commitment. Think of that roughly academic year. So as we think about this next partnership, we're looking to build upon that to create capacity for flow sale of grad originations and starting to build capacity for the real growth in the grad space that will come 2027 and 2028. As we get that started, I would expect that the way that we will do that will be similar to how we did the first transaction, which is enter into a flow agreement, but also start the process with some sort of a seasoned portfolio sale. That's within our expectation for the latter part of this year.

Again, I think in terms of overall balance sheet size, our original guidance and initial plan was a flat-ish balance sheet. I think now with this shift in our approach on accelerating capital return, as Jon said in his prepared remarks, it's probably an incremental $1 billion of loan sales over our original plan. That would be flat to down-ish overall balance sheet. We'll fine-tune that as we see the origination levels coming in during peak, and we have a better line of sight to overall levels of growth in the business.

Thanks very much.

Thank you. We'll go next to Jeff Adelson with Morgan Stanley. Please go ahead.

Hey, good evening, Jon and guys. I was just curious if, Jon, you made the comment on the recent college graduate unemployment trends headed in the right direction once again. You brought up the survey of employers intending to increase hiring by about 5% or 6% this year. I guess my question is: How do you think about the benefit of that flowing through to salary? Is that something you think can really start to flatten out your delinquency trends, which look like they continue to uptick a little bit at these levels?

Yeah, Jeff, maybe a couple of thoughts here and, Pete, you should jump in if you want to add anything. I'm not sure we yet see the unemployment trends and the hiring as a tailwind. I think what we're really describing is the slight air pocket that I think we saw in employment through the course of last summer has normalized. I think we've talked for a couple of calls now about the resiliency of students and the fungibility of the skills that are afforded by higher education and their ability to figure out a changing employment landscape. I think we've sort of seen the evidence of that. I'm not sure we're in a positive enough territory versus historical norms that I would say that's sort of deserving of a tail`wind sort of classification.

In terms of the delinquency trends, we're very comfortable with the delinquency rates where they are. As I said in my comments, they are in line and slightly better than expectations. I think if you look at, in particular, the stability of the later stage delinquency trends, they are sort of where we thought we would be. I think you always have to be a little bit careful in looking at any ratio because there's both obviously a numerator and a denominator. When you sell a couple of $2 billion of loans earlier in the ye`ar than you expected, that could have a little bit of a denominator effect. I think prudence would suggest that be considered in interpreting the results. We feel very solid about where we are from a delinquency perspective.

Okay, great. Thank you. Maybe just quick follow-up on Grad PLUS. Obviously, you're looking for that to start kicking into gear come July. You spoke a lot about how you're preparing for that and you're talking to the schools. Maybe just quick update of what you're seeing on the ground and how you think those expectations are going to play out as you hit the back half of the year, and recognizing, obviously, it's still pretty early.

Yeah, Jeff. Obviously, it's very early. Peak season really hasn't started at all yet in any of the grad segments we're talking about. Maybe a couple of thoughts. One, I think our conversations with schools have been extremely positive. As you can appreciate, their number one concern post-PLUS reform was what is this going to mean for their ability to fill their classrooms and support their students and sort of their higher education journey. I think the work that we have done around product design, around underwriting, around terms and conditions, as we've gone through that with schools, I think they have been quite impressed by the customer-backed thoughtfulness that we have brought to really thinking about these as new products and new businesses and deserving of a fresh set of eyes. I think they've liked the early reads.

I would say, as we have implemented changes, and Grad has obviously been a part of our portfolio for a long time, but a small part, we are starting to see impressive and meaningful increases, percentage increases in our performance. Those are super leading indicators and trends based on small sample sizes. I think it's not just the reaction we're getting from schools. We're actually seeing that flow through in things like early origination numbers and the like. We feel good about the guidance that we've put out around originations. We haven't seen anything that leads us to believe it's not achievable, but we're going to continue to soldier away and make sure we put ourselves in the best position we can to win.

Okay, great. Thank you.

Thank you. We'd like to take our next question from Don Fandetti with Wells Fargo. Please go ahead.

Good evening. I know it's early, but I was wondering if you could talk a little bit about 2027. I think last quarter you provided some thoughts. Obviously, you're going to have a higher base here in 2026.

I think the only thing I'm really prepared to talk about with regard to 2027 is kind of like the origination opportunity that we see from grad. I think we've kind of sized that at roughly a $5 billion incremental opportunity over time. The way that will size in really will be modest this year and then grow more exponentially as we go 2027 and into 2028. In terms of overall guidance around earnings or anything like that, I wouldn't feel comfortable this early giving any reads on that.

Okay. I heard the comments on the potential new partners. Obviously, there's been a lot of dislocation in private credit. It sounds like you're not seeing any kind of hesitancy or different terms. Is that maybe just because it's consumer product? Or what are your thoughts on the future demand from private credit?

Yeah, I think obviously there's been pockets of private credit that have been challenged. I think even within the structured finance or ABF part of private credit, there's been areas where there's been frauds or other issues. That's really caused kind of like a more of a flight to quality, and we've got a very high-quality asset type that still has very strong demand for it, particularly sort of in the consumer space, given the ability for us to provide duration as well as high yield and low losses. We've continued to see strong demand both for our own funding securitizations, but also the securitizations that we do on behalf of the loan buyers have been well subscribed and well priced, and we expect that to continue as we move forward here.

Certainly in the context of beginning dialogue for setting up next partnerships, we've had great engagement from the interested parties and feel like the market demand is still really there for our product.

Thank you.

Thank you. We'll take our next question from Sanjay Sakhrani, please go ahead with KBW.

Thank you. Jon, maybe just to put a little bit of a finer point on some of the initiatives you have and the step-up in expenses in 2026. I know it sounds like you feel pretty good about it. How do we see it unfold and measure it as we look out across this year and next? I know Pete talked about a step-up in originations next year from the opportunity, but how do we see it unfold and do we get leverage off of that into next year?

Sanjay, thanks, and great question. I think I would refer back to maybe also some of the comments I made during the fourth quarter earnings call. I think our view is, yes, expenses are elevated this year on both a marketing basis as we start to go after the expanded opportunity, but also a lot of the fixed costs, some of the things we've talked about around products and systems and customer experience and the like. I think what we've committed to and what we still believe in is that rate of expense growth will moderate after this year. We may see a slight uptick in our efficiency ratio, but we actually expect at the end of the growth period for our efficiency ratio to be better than it was at the starting point.

To put a little bit of rough justice math to it, if we were at a mid-30s efficiency ratio historically, I think during this time of growth, we may get up to the high 30s, which by the way, I think is still a pretty compelling efficiency ratio. I think if the market evolves the way we think it's going to, and if our share evolves the way we think it's going to, I think by the end of the growth period, we said we would hope to be back down in the low 30s. I think that is the very definition of operating leverage. At the end of the day, we recognize the need to invest against what we both think is both a great market opportunity for us, but also a real need for students and university partners.

We think that's a relatively short invest ahead of the curve with real leverage coming in not very many years after that.

Got it. And then Pete, just so I have the numbers correct in terms of the guidance raise, the raise, and the fact that you're selling another $1 billion. By my math, if you use the 6% or so gain and then the reserve release, it sounds like most of that raise is just the mechanics of the $1 billion being sold at some point in the rest of the year, and any idea on timing? Thanks.

Yeah, sure. I think in the context of the full year guidance, the increase in the EPS guidance for the full year is roughly split half and half between share count reduction and incremental gain from the incremental loan sale. If you think about the mechanics of what we discussed here of what's happened in the first quarter, we really accelerated that through the actions that we've taken and have a much lower share count for a longer period during the year. That's how you should really think about that. We haven't updated any other elements of our original guidance. The impact is really just that, the incremental loan sale gain and the share count reduction. It's roughly half and half for the full year.

Got it. Okay. Thank you very much.

Yep.

Thank you. We'll take our next question from Mark DeVries with Deutsche Bank. Please go ahead.

Yeah, thanks. Jon, I believe you indicated that the FAFSA completion rates are up almost 20% from this time last year. Do you have a sense for what's behind that? Is this a reflection of a significant increase in just demand for higher education? Is there something wonky behind that? If it is demand, what does it say for your conviction just around your origination guidance?

Yeah. Mark, I think it's probably too early to know exactly all the different factors that are driving that rate. This is obviously sort of in the moment. I think what we've seen is if you exclude two years ago, when you'll remember the Department of Education rolled out a new FAFSA form and maybe had a few implementation hiccups along the way. I think what this really reflects is sort of a continued steady drumbeat of sort of growth, which I think matches well with what we've seen around general trends in sort of the percentage of eligible high school seniors who are choosing to go to college.

A lot has been made around the demographic trends, but I think that batting average, if you want to call it that, of how many people actually go, has also been a nice contributor to the growth in enrollment over a period of time. If I broaden it out a little bit and look at our soon-to-be-released survey, because I think that gives Mark a little bit more detailed insight. I think what it really shows is the promise of higher education and the dream of higher education continues to be really a kind of a key thing for many students and families out there. There's been a lot of talk about sort of the changing cost of higher education and is it worth it. I think our survey says pretty conclusively that the vast majority of American families out there really see that it is.

Understand the key to sort of job creation skills, understands the key to sort of economic mobility, and understands the role that I think it's played historically that we believe it will play going forward. I look forward to the survey coming out. I think that will probably happen next week. I think a lot of great data in there that Mark will give you even more insight into your question.

Okay, great. Thank you.

Thank you. We'll take our next question from Carolyn Latta from Bank of America. Please go ahead.

Hi, guys. I think you mentioned last quarter that you expect after 2026 that the private education portfolio will inflect up to 1%-2% growth. Is that expectation changed if you were to add another private credit partner, or did that comment contemplate another potential partner?

Yeah. Thanks, Carolyn. I think in our original long-range planning that formed the basis of our original guidance for this year, we kind of assumed flattish balance sheet this year, and we assumed that kind of 1%-2% growth going into 2027 and sort of getting up to the kind of mid-single digits over time. I think obviously, with the change in approach around acceleration of the share repurchase this year, we'll probably be a little down this year, call it $1 billion lower than flattish. We would look to kind of still step back into growth over time. I don't think the creation of a new partnership really changes that dynamic.

We still have a broad opportunity around originations growth that will drive if we don't do those partnerships or other types of loan sales, would drive a much higher rate of balance sheet growth than that. We do have lots of different levers that we can choose to optimize that. What it will impact, though, is sort of the mix of seasoned sale versus new origination sale as we step into 2027 and beyond. Again, that's purposeful because the grad opportunity for which we don't currently have a flow arrangement for will begin to become a much larger portion of our originations as we move into 2027 and then again into 2028. We want to make sure we've got a good complement of funding capabilities to meet that need.

Great. Thank you. Maybe just given that the buyback this year, if you complete the plan, will be a pretty big step up, how should we be thinking about the cadence of buybacks and capital returns further out into 2027 and 2028?

Yeah. Again, I think if you look at our sort of original plan, we were targeting roughly 5%-6% of outstanding share count would be part of the buyback within a year. I think as we start to normalize, that's probably a reasonable sort of benchmark going forward. As always, as market conditions change and if there's an opportunity to do more than that, then we would do what we did in the first quarter, which is accelerate some loan sales and take advantage of that market dislocation.

Okay. Thanks, guys.

Thank you. We'll take our next question from John Hecht with Jefferies. Please go ahead.

Yeah. Thanks, guys. Maybe quick, just relative to our forecast, you had a beat on OpEx or upside EPS and lower OpEx. Maybe can you talk about the cadence on investments in the PLUS program over the year?

Yeah, sure. We're getting ready for peak season, which starts in the kind of the summer. If you think about the comments we made at year-end when we talked about expenses for this year, of the increase year-over-year, we said roughly a third was increase around marketing and customer acquisition, and roughly a third was the preparation for the opportunity in terms of the things Jon talked about around program design and customer experience and some of the tech changes we'll need to enable. That readiness will be more front-loaded before peak, and the marketing spend will be more in the moment in that peak season. Again, our sort of staging of expenses and our plan for expenses, we were modestly ahead of plan for the first quarter. We feel still comfortable with our overall guidance range for the full year.

Okay. Second question is kind of the evolution of the program management servicing fees. Was there anything in this quarter with that? How do we think that grows over the course of this year?

Sure. The inaugural partnership that we inked with KKR in the fourth quarter of last year has the program management fee built into that. As we have completed sales of assets into that, those program management fees will start to earn on sort of the AUM, if you will, under management. We did another $1.3 billion of sales to that partnership in the quarter, and we will continue to build on that. As we grow the next partnership, our anticipation is that those program management fees, or something akin to those program management fees, will be part of the economics of those deals as well. Our intent, again, with this is. We can continue to build more recurring fee-based revenue over time and give ourselves a different sort of capital allocation capability with these forward flow sales.

Okay, thanks.

Yep.

Thank you. We'll go next to the line of Rick Shane with JPMorgan. Please go ahead.

Hey, guys. Thanks for taking my questions this afternoon. I'd like to talk a little bit about credit. You guys provided an update on your net charge-off guidance for the year and reiterated your prior guide. I'm curious, when you think about the credit performance of the portfolio, where it is in your targeted range. Is it within the range? Is it above the range? Is it below the range long term? To the extent it is varying from the range, is there anything you're doing on the underwriting side to either tighten or widen the credit bucket in order to sort of meet that efficient frontier?

Rick, it's Jon. Couple of thoughts, and tell me if this gets to your question. First of all, I think we are operating within the sort of long-term credit range that we talked about. I think we said a couple of years ago, we thought the right destination was high ones to low twos. I think we spent a lot of time in the fourth quarter earnings call when we were laying out guidance, doing a bit of a crosswalk around that percentage to the loan or the charge-off guidance that we've given for this year, recognizing that the wild card there was the shift in strategy to sell new originations versus seasoned portfolios, and a little bit of the distortive effect that that had on our legacy ratio. I think we believe we're operating within that range and certainly feel good about the guidance that we've given out.

I think it's important to remember how we got there. We've talked about this a bit over the years, but we started three or four years ago, a very persistent, purposeful program to really look at and to optimize the credit buy box that we have. To make sure that we felt great about all of those originations. We've chronicled a couple of different times the extent of that, but suffice it to say that I think the changes that we made had a meaningful impact on origination volume. One of our great sources of pride was our ability to grow both nominal levels of originations and share while still tightening the credit box during that whole time.

I do think there is still a tail to come, and we've provided these details from time to time, but we still do have people who took those loans as freshmen and sophomores and maybe haven't entered full P&I yet, who are still coming into the heart of their repayment and sort of maximum stress period underneath the old sort of underwriting regime. I think in some respects, the full effect has yet to be felt in the portfolio. We feel great about those credit changes, underwriting changes we've made. We feel great about how our loss mitigation programs are performing, and we think we are generating the exact loss profile that we would hope for during a time that I would point out has been relatively stressed for some of these borrowers with the elevated unemployment rate that I talked about before over the last six months.

I think all in all, we feel really good about these results and look forward to the portfolio continuing to season.

I appreciate that. I am curious, and I apologize, maybe I don't know if I'm missing something, but do you provide an average loan in repayment number anywhere in the disclosures? The reason I ask is obviously this quarter when we calculated a net charge-off rate as a function of loans and repayment. I'm trying to understand how much that might be distorted by loan sales. One question I guess I should know the answer to, and I just don't off the top of my head is, are there seasoned loans in repayment that are part of the pools that you're selling? Or should we assume it is predominantly new originations that are less than 12 months seasoned?

All of our portfolio sales are sort of representative samples of the book. Really the only exclusions there are loans that are in later stages of delinquency are typically excluded from those pools. As we make portfolio sales, as Jon said, that can have an impact depending on when in the quarter or when in the year we make those sales because it does impact the denominator of some of those ratio calculations. I would also highlight again some of the commentary we made in the fourth quarter surrounding our disclosures in the 10-K. Because we calculate most of our loan disclosures on loans held for investment because we are moving loans to a held for sale status in association with these forward flow agreements, that does also have a nominal impact on some of the calculation.

Got it.

And Rick-

Sorry, go ahead.

Yeah. Just for the avoidance of any confusion, I think Pete did a nice job of laying out in his talking points also what were the new origination sales, which were $1.3 billion. Those are obviously what the name would suggest, new origination. I think we do try to break it out separately and obviously understand the importance of needing to continue to do that, both in understanding credit metric impacts, but also premium impacts.

Okay. I appreciate it, guys. Thank you very much.

Thank you. This concludes the Q&A portion of today's call. I would now like to turn the floor over to Mr. Jon Witter for closing remarks.

Erica, thank you, and thank you everyone who joined this evening. We appreciate your interest in Sallie Mae, and look forward to updating you again when we get together in three months for our second quarter earnings call. With that, Melissa, I'll turn it back to you for some closing business.

Thanks, Jon. Thank you all for your time and questions today. A replay of this call and the presentation will be available on the Investors page at salliemae.com. If you have any further questions, feel free to contact me directly. This concludes today's call.

Thank you. This concludes the Sallie Mae First Quarter 2026 earnings conference call and webcast. Please disconnect your line at this time and have a wonderful evening.