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Sallie Mae Reports Second-Quarter 2010 Results
RESTON, Va.--(BUSINESS WIRE)-- SLM Corporation (NYSE: SLM), commonly known as Sallie Mae, reported core earnings net income of $209 million ($.39 per diluted share) for the second quarter 2010, which included an after-tax gain of $57 million ($.11 per diluted share) from $1.4 billion of unsecured debt repurchases. These results compare to core earnings net income of $170 million ($.31 per diluted share) in the second quarter 2009. On a GAAP basis, net income was $338 million ($.63 per diluted share) in the second-quarter 2010, vs. a net loss of $123 million ($.32 per diluted share) in the year-ago period.
Core earnings net interest income after provision for loan losses was $377 million in the second quarter, compared to $343 million in the prior quarter and $55 million in the year-ago quarter.
CEO Albert Lord said, “Second quarter earnings were much improved from one year ago. On the credit front, it is quite evident that economic conditions continue to weigh heavily on our out-of-school customers, almost 20 percent of whom entered repayment in the last 8 months. We will continue to concentrate on service, quality private loan growth and new businesses that help families invest in college.”
Lord continued, “Management is intensely focused on refitting the company to its changed circumstances and enhancing value for our shareholders.”
Loan Originations
The company originated $3.1 billion in federal student loans in the 2010 second quarter, compared to $3.7 billion in the year-ago period. The decrease was the result of the termination of the guaranteed loan program effective June 30 and institutions’ transition to the government’s loan program.
During the second-quarter 2010, the company originated $219 million of private student loans, compared to $387 million in the year-ago period. Private student loan originations continue to be affected by increased federal student loan availability and more students’ enrollment at lower-cost institutions.
Private Education Loan Portfolio Quality
Managed private education loan charge-offs were $336 million in the second quarter compared to $284 million in the previous quarter and $355 million in the year-ago quarter. Delinquencies as a percentage of private education loans in repayment declined to 11.9 percent from the previous quarter’s 12.2 percent. The core earnings provision for private education loan losses was $349 million in the second quarter, compared to $325 million in the first quarter.
Funding and Liquidity
The company completed a $1.2 billion long-term federal student loan securitization during the quarter and had $11.8 billion of primary liquidity at June 30, 2010.
Other Income and Operating Expenses
Core earnings fee income, which includes the gain on debt repurchases, was $308 million in the second quarter, compared to the year-ago quarter’s $528 million.
Core earnings operating expenses excluding restructuring and related asset impairments were $331 million for the quarter, compared to $298 million in the year-ago quarter. With the passage of legislation that ended federal loan originations, the company accelerated the strategic restructuring of its business and initiated several investments to improve future operating efficiencies and position the company for additional growth. Restructuring ($24 million) and other litigation expenses totaled $43 million in the quarter.
GAAP
Sallie Mae officially reports financial results on a GAAP basis and also presents certain core earnings performance measures. The company’s management, equity investors, credit rating agencies and debt capital providers use these core earnings measures to monitor the company’s business performance. Both a description of the core earnings treatment and a full reconciliation to the GAAP income statement can be found at: www.salliemae.com/about/investors/stockholderinfo/earningsinfo/, click on the Second Quarter 2010 Supplemental Earnings Disclosure.
The company adopted Financial Accounting Standards Board updates as of Jan. 1, 2010, and as a result, the company’s GAAP and core earnings presentations for securitization accounting are the same, and managed and on-balance sheet (GAAP) student loan portfolios are now the same size.
The primary difference between the company’s second-quarter 2010 core earnings and GAAP results is the impact of derivative and hedge accounting. Second-quarter 2010 GAAP results include the net impact of a $301 million unrealized, mark-to-market, pre-tax gain on certain derivative contracts that are recognized in GAAP, but not in core earnings, results.
Presentation slides for the conference call discussed below may be accessed on www.salliemae.com/about/investors/stockholderinfo/webcast.
The company will host an earnings conference call tomorrow, July 21, 2010, at 8 a.m. EDT. Sallie Mae executives will discuss various highlights of the quarter and answer questions related to the company’s performance. Individuals interested in participating should call the following number tomorrow, July 21, starting at 7:45 a.m. EDT: (877) 356-5689 (USA and Canada) or (706) 679-0623 (International) and use access code 83583661. The conference call will be replayed continuously beginning at 11:30 a.m. EDT on July 21, 2010, and concluding at midnight EDT on Aug. 4, 2010. To access the replay, please dial (800) 642-1687 (USA and Canada) or dial (706) 645-9291 (International) and use access code 83583661. In addition, there will be a live audio Web cast of the conference call, which may be accessed at www.SallieMae.com. A replay will be available 30 to 45 minutes after the live broadcast.
This press release contains “forward-looking statements” based on management’s current expectations as of the date of this release. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Because such statements inherently involve risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks include, among others, changes in the terms of student loans and the educational credit marketplace arising from the implementation of applicable laws and regulations, and from changes in such laws and regulations, adverse results in legal disputes, changes in the demand for educational financing or in financing preferences of educational institutions, students and their families, limited liquidity, increased financing costs and changes in the general interest rate environment. For more information, see the company's filings with the Securities and Exchange Commission, including the forward-looking statements contained in the company’s Supplemental Financial Information Second Quarter 2010. All information in this release is as of July 20, 2010. The Company does not undertake any obligation to update or revise these forward-looking statements to conform the statement to actual results or changes in the Company’s expectations.
SLM Corporation (NYSE: SLM), commonly known as Sallie Mae, is the nation’s leading saving, planning and paying for education company. Sallie Mae’s saving programs, planning resources and financing options have helped more than 31 million people make the investment in higher education. Through its subsidiaries, the company manages $184 billion in education loans and serves 10 million student and parent customers. In addition, the company’s Upromise program has enabled 12 million members to earn more than $550 million in rewards to help pay for college. Its Upromise affiliates also manage more than $23 billion in 529 college-savings plans. Sallie Mae offers services to a range of institutional clients, including colleges and universities, student loan guarantors and state and federal agencies. More information is available at www.SallieMae.com. SLM Corporation and its subsidiaries are not sponsored by or agencies of the United States of America.
| SLM CORPORATION | ||||||||||||||||||||
| Supplemental Earnings Disclosure | ||||||||||||||||||||
| June 30, 2010 | ||||||||||||||||||||
| (In millions, except per share amounts) | ||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||
| Quarters ended | Six months ended | |||||||||||||||||||
| June 30, | March 31, | June 30, | June 30, | June 30, | ||||||||||||||||
| 2010 | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||
| SELECTED FINANCIAL INFORMATION AND RATIOS | ||||||||||||||||||||
| GAAP Basis(1) | ||||||||||||||||||||
| Net income (loss) attributable to SLM Corporation | $ | 338 | $ | 240 | $ | (123 | ) | $ | 578 | $ | (144 | ) | ||||||||
| Diluted earnings (loss) per common share attributable to SLM Corporation common shareholders | $ | .63 | $ | .45 | $ | (.32 | ) | $ | 1.08 | $ | (.42 | ) | ||||||||
| Return on assets | .68 | % | .50 | % | (.30 | )% | .59 | % | (.18 | )% | ||||||||||
| “Core Earnings” Basis(1)(2)(3) | ||||||||||||||||||||
| “Core Earnings” net income attributable to SLM Corporation | $ | 209 | $ | 212 | $ | 170 | $ | 421 | $ | 184 | ||||||||||
| “Core Earnings” diluted earnings per common share attributable to SLM Corporation common shareholders | $ | .39 | $ | .39 | $ | .31 | $ | .78 | $ | .28 | ||||||||||
| “Core Earnings” return on assets | .42 | % | .44 | % | .34 | % | .43 | % | .19 | % | ||||||||||
| OTHER OPERATING STATISTICS | ||||||||||||||||||||
| Average on-balance sheet student loans | $ | 184,571 | $ | 181,533 | $ | 153,588 | $ | 183,060 | $ | 151,636 | ||||||||||
| Average off-balance sheet student loans | — | — | 34,902 | — | 35,237 | |||||||||||||||
| Average Managed student loans | $ | 184,571 | $ | 181,533 | $ | 188,490 | $ | 183,060 | $ | 186,873 | ||||||||||
| Ending on-balance sheet student loans, net | $ | 183,643 | $ | 181,886 | $ | 154,157 | ||||||||||||||
| Ending off-balance sheet student loans, net | — | — | 33,961 | |||||||||||||||||
| Ending Managed student loans, net | $ | 183,643 | $ | 181,886 | $ | 188,118 | ||||||||||||||
| Ending Managed FFELP Stafford and Other Student Loans, net | $ | 67,457 | $ | 64,346 | $ | 68,374 | ||||||||||||||
| Ending Managed FFELP Consolidation Loans, net | 81,035 | 82,178 | 85,272 | |||||||||||||||||
| Ending Managed Private Education Loans, net | 35,151 | 35,362 | 34,472 | |||||||||||||||||
| Ending Managed student loans, net | $ | 183,643 | $ | 181,886 | $ | 188,118 | ||||||||||||||
| (1) | Diluted earnings per common share attributable to SLM Corporation common shareholders from continuing and discontinued operations on both a GAAP basis and “Core Earnings” basis for the quarters ended June 30, 2010, March 31, 2010 and June 30, 2009 and for the six months ended June 30, 2010 and 2009 was: |
| Quarters ended | Six months ended | ||||||||||||||||
| June 30, | March 31, | June 30, | June 30, | June 30, | |||||||||||||
| 2010 | 2010 | 2009 | 2010 | 2009 | |||||||||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
| GAAP Basis | |||||||||||||||||
| Diluted earnings (loss) per common share attributable to SLM Corporation common shareholders: | |||||||||||||||||
| Continuing operations | $ | .63 | $ | .45 | $ | (.31 | ) | $ | 1.08 | $ | (.31 | ) | |||||
| Discontinued operations | — | — | (.01 | ) | — | (.11 | ) | ||||||||||
| Total | $ | .63 | $ | .45 | $ | (.32 | ) | $ | 1.08 | $ | (.42 | ) | |||||
| “Core Earnings” Basis(2)(3) | |||||||||||||||||
| Diluted earnings (loss) per common share attributable to SLM Corporation common shareholders: | |||||||||||||||||
| Continuing operations | $ | .39 | $ | .39 | $ | .32 | $ | .78 | $ | .39 | |||||||
| Discontinued operations | — | — | (.01 | ) | — | (.11 | ) | ||||||||||
| Total | $ | .39 | $ | .39 | $ | .31 | $ | .78 | $ | .28 | |||||||
| (2) | “Core Earnings” are non-GAAP measures and do not represent a comprehensive system of accounting. For a greater explanation of “Core Earnings,” see the section titled “Reconciliation of ‘Core Earnings’ Net Income to GAAP Net Income” and subsequent sections. | |
| (3) |
“Core Earnings” does not include Floor Income unless it is Fixed Rate Floor Income that is economically hedged. The amount of this Economic Floor Income (net of tax) excluded from “Core Earnings” for the three months ended June 30, 2010, March 31, 2010 and June 30, 2009 and for the six months ended June 30, 2010 and 2009 was: |
| Quarters ended | Six months ended | ||||||||||||||
| June 30, | March 31, | June 30, | June 30, | June 30, | |||||||||||
| 2010 | 2010 | 2009 | 2010 | 2009 | |||||||||||
| Total Economic Floor Income earned on Managed loans, not included in “Core Earnings” (net of tax) | $ | 1 | $ | 3 | $ | 89 | $ | 4 | $ | 168 | |||||
| Total Economic Floor Income earned, not included in “Core Earnings” (net of tax) per common share attributable to SLM Corporation common shareholders | $ | — | $ | .01 | $ | .17 | $ | .01 | $ | .36 | |||||
| SLM CORPORATION | ||||||||||||
| Consolidated Balance Sheets | ||||||||||||
| (In thousands, except per share amounts) | ||||||||||||
| (Unaudited) | ||||||||||||
| June 30, | March 31, | June 30, | ||||||||||
| 2010 | 2010 | 2009 | ||||||||||
| Assets | ||||||||||||
| FFELP Stafford and Other Student Loans (net of allowance for losses of $122,192; $119,522; and $102,857, respectively) | $ | 47,280,248 | $ | 47,928,753 | $ | 44,044,636 | ||||||
| FFELP Stafford Loans Held-for-Sale | 20,177,860 | 16,418,101 | 18,159,232 | |||||||||
| FFELP Consolidation Loans (net of allowance for losses of $66,493; $66,693; and $50,181, respectively) | 81,034,596 | 82,177,664 | 70,102,304 | |||||||||
| Private Education Loans (net of allowance for losses of $2,042,413; $2,018,676; and $1,396,707, respectively) | 35,150,686 | 35,361,689 | 21,850,688 | |||||||||
| Cash and investments | 7,680,116 | 8,241,961 | 8,212,439 | |||||||||
| Restricted cash and investments | 6,252,914 | 6,115,399 | 5,245,702 | |||||||||
| Retained Interest in off-balance sheet securitized loans | — | — | 1,820,614 | |||||||||
| Goodwill and acquired intangible assets, net | 1,157,888 | 1,167,599 | 1,233,871 | |||||||||
| Other assets | 8,584,404 | 10,101,919 | 10,514,309 | |||||||||
| Total assets | $ | 207,318,712 | $ | 207,513,085 | $ | 181,183,795 | ||||||
| Liabilities | ||||||||||||
| Short-term borrowings | $ | 46,472,435 | $ | 41,102,389 | $ | 47,331,576 | ||||||
| Long-term borrowings | 152,250,912 | 157,983,266 | 125,880,044 | |||||||||
| Other liabilities | 3,508,617 | 3,671,734 | 3,120,636 | |||||||||
| Total liabilities | 202,231,964 | 202,757,389 | 176,332,256 | |||||||||
| Commitments and contingencies | ||||||||||||
| Equity | ||||||||||||
| Preferred stock, par value $.20 per share, 20,000 shares authorized: | ||||||||||||
| Series A: 3,300; 3,300; and 3,300 shares, respectively, issued at stated value of $50 per share | 165,000 | 165,000 | 165,000 | |||||||||
| Series B: 4,000; 4,000; and 4,000 shares, respectively, issued at stated value of $100 per share | 400,000 | 400,000 | 400,000 | |||||||||
| Series C: 7.25% mandatory convertible preferred stock: 810; 810; and 1,150 shares, respectively, issued at liquidation preference of $1,000 per share | 810,370 | 810,370 | 1,149,770 | |||||||||
|
Common stock, par value $.20 per share, 1,125,000 shares authorized: 553,571; 553,408; and 534,842 shares, respectively, issued |
110,715 | 110,682 | 106,969 | |||||||||
| Additional paid-in capital | 5,122,583 | 5,106,094 | 4,709,053 | |||||||||
| Accumulated other comprehensive loss, net of tax benefit | (43,333 | ) | (42,511 | ) | (48,683 | ) | ||||||
| Retained earnings | 391,169 | 72,062 | 229,865 | |||||||||
| Total SLM Corporation stockholders’ equity before treasury stock | 6,956,504 | 6,621,697 | 6,711,974 | |||||||||
| Common stock held in treasury: 67,775; 67,564; and 67,128 shares, respectively | 1,869,760 | 1,866,020 | 1,860,440 | |||||||||
| Total SLM Corporation stockholders’ equity | 5,086,744 | 4,755,677 | 4,851,534 | |||||||||
| Noncontrolling interest | 4 | 19 | 5 | |||||||||
| Total equity | 5,086,748 | 4,755,696 | 4,851,539 | |||||||||
| Total liabilities and equity | $ | 207,318,712 | $ | 207,513,085 | $ | 181,183,795 | ||||||
| Supplemental information — assets and liabilities of variable interest entities: | ||||||||||||
| June 30, | March 31, | June 30, | ||||||||||
| 2010 | 2010 | 2009 | ||||||||||
| FFELP Stafford and Other Student Loans | $ | 66,130,975 | $ | 62,163,939 | $ | 59,530,772 | ||||||
| FFELP Consolidation Loans | 79,558,032 | 81,460,381 | 69,618,020 | |||||||||
| Private Education Loans | 23,561,695 | 23,860,189 | 5,834,568 | |||||||||
| Restricted cash and investments | 5,881,972 | 5,724,454 | 4,389,635 | |||||||||
| Other assets | 2,856,872 | 4,323,164 | 3,567,605 | |||||||||
| Short-term borrowings | 37,014,277 | 33,766,308 | 40,814,409 | |||||||||
| Long-term borrowings | 127,904,461 | 130,114,526 | 90,454,256 | |||||||||
| SLM CORPORATION | |||||||||||||||||||
| Consolidated Statements of Income | |||||||||||||||||||
| (In thousands, except per share amounts) | |||||||||||||||||||
| (Unaudited) | |||||||||||||||||||
| Quarters ended | Six months ended | ||||||||||||||||||
| June 30, | March 31, | June 30, | June 30, | June 30, | |||||||||||||||
| 2010 | 2010 | 2009 | 2010 | 2009 | |||||||||||||||
| Interest income: | |||||||||||||||||||
| FFELP Stafford and Other Student Loans | $ | 325,042 | $ | 283,437 | $ | 323,939 | $ | 608,479 | $ | 666,755 | |||||||||
| FFELP Consolidation Loans | 550,920 | 523,325 | 460,690 | 1,074,245 | 950,052 | ||||||||||||||
| Private Education Loans | 575,340 | 565,154 | 393,019 | 1,140,494 | 780,060 | ||||||||||||||
| Other loans | 7,254 | 8,996 | 18,468 | 16,250 | 34,888 | ||||||||||||||
| Cash and investments | 6,299 | 4,949 | 7,044 | 11,248 | 13,015 | ||||||||||||||
| Total interest income | 1,464,855 | 1,385,861 | 1,203,160 | 2,850,716 | 2,444,770 | ||||||||||||||
| Total interest expense | 568,933 | 531,384 | 819,459 | 1,100,317 | 1,846,006 | ||||||||||||||
| Net interest income | 895,922 | 854,477 | 383,701 | 1,750,399 | 598,764 | ||||||||||||||
| Less: provisions for loan losses | 382,239 | 359,120 | 278,112 | 741,359 | 528,391 | ||||||||||||||
| Net interest income after provisions for loan losses | 513,683 | 495,357 | 105,589 | 1,009,040 | 70,373 | ||||||||||||||
| Other income: | |||||||||||||||||||
| Securitization servicing and Residual Interest revenue (loss) | — | — | 87,488 | — | (7,817 | ) | |||||||||||||
| Gains (losses) on sales of loans and securities, net | (3,515 | ) | 8,653 | — | 5,138 | — | |||||||||||||
| Gains (losses) on derivative and hedging activities, net | 95,316 | (82,410 | ) | (561,795 | ) | 12,906 | (457,770 | ) | |||||||||||
| Contingency fee revenue | 88,181 | 80,311 | 73,368 | 168,492 | 148,183 | ||||||||||||||
| Collections revenue | 17,219 | 21,966 | 23,933 | 39,185 | 67,589 | ||||||||||||||
| Guarantor servicing fees | 22,457 | 36,090 | 24,772 | 58,547 | 58,780 | ||||||||||||||
| Other | 164,899 | 190,410 | 399,065 | 355,309 | 591,523 | ||||||||||||||
| Total other income | 384,557 | 255,020 | 46,831 | 639,577 | 400,488 | ||||||||||||||
| Expenses: | |||||||||||||||||||
| Operating expenses | 346,520 | 328,020 | 308,164 | 674,540 | 603,280 | ||||||||||||||
| Restructuring expenses | 17,666 | 26,282 | 3,333 | 43,948 | 7,106 | ||||||||||||||
| Total expenses | 364,186 | 354,302 | 311,497 | 718,488 | 610,386 | ||||||||||||||
| Income (loss) from continuing operations, before income tax expense (benefit) | 534,054 | 396,075 | (159,077 | ) | 930,129 | (139,525 | ) | ||||||||||||
| Income tax expense (benefit) | 196,103 | 155,795 | (43,110 | ) | 351,898 | (48,627 | ) | ||||||||||||
| Net income (loss) from continuing operations | 337,951 | 240,280 | (115,967 | ) | 578,231 | (90,898 | ) | ||||||||||||
| Loss from discontinued operations, net of tax | — | — | (6,542 | ) | — | (52,716 | ) | ||||||||||||
| Net income (loss) | 337,951 | 240,280 | (122,509 | ) | 578,231 | (143,614 | ) | ||||||||||||
| Less: net income attributable to noncontrolling interest | 133 | 140 | 211 | 273 | 492 | ||||||||||||||
| Net income (loss) attributable to SLM Corporation | 337,818 | 240,140 | (122,720 | ) | 577,958 | (144,106 | ) | ||||||||||||
| Preferred stock dividends | 18,711 | 18,678 | 25,800 | 37,389 | 52,195 | ||||||||||||||
| Net income (loss) attributable to SLM Corporation common stock | $ | 319,107 | $ | 221,462 | $ | (148,520 | ) | $ | 540,569 | $ | (196,301 | ) | |||||||
| Net income (loss) attributable to SLM Corporation: | |||||||||||||||||||
| Continuing operations, net of tax | $ | 337,818 | $ | 240,140 | $ | (116,178 | ) | $ | 577,958 | $ | (91,390 | ) | |||||||
| Discontinued operations, net of tax | — | — | (6,542 | ) | — | (52,716 | ) | ||||||||||||
| Net income (loss) attributable to SLM Corporation | $ | 337,818 | $ | 240,140 | $ | (122,720 | ) | $ | 577,958 | $ | (144,106 | ) | |||||||
| Basic earnings (loss) per common share attributable to SLM Corporation common shareholders: | |||||||||||||||||||
| Continuing operations | $ | .66 | $ | .46 | $ | (.31 | ) | $ | 1.12 | $ | (.31 | ) | |||||||
| Discontinued operations | — | — | (.01 | ) | — | (.11 | ) | ||||||||||||
| Total | $ | .66 | $ | .46 | $ | (.32 | ) | $ | 1.12 | $ | (.42 | ) | |||||||
| Average common shares outstanding | 484,832 | 484,259 | 466,799 | 484,547 | 466,780 | ||||||||||||||
| Diluted earnings (loss) per common share attributable to SLM Corporation common shareholders: | |||||||||||||||||||
| Continuing operations | $ | .63 | $ | .45 | $ | (.31 | ) | $ | 1.08 | $ | (.31 | ) | |||||||
| Discontinued operations | — | — | (.01 | ) | — | (.11 | ) | ||||||||||||
| Total | $ | .63 | $ | .45 | $ | (.32 | ) | $ | 1.08 | $ | (.42 | ) | |||||||
| Average common and common equivalent shares outstanding | 527,391 | 526,631 | 466,799 | 527,013 | 466,780 | ||||||||||||||
| Dividends per common share attributable to SLM Corporation common shareholders | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
| SLM CORPORATION | ||||||||||||||||||||
| Segment and “Core Earnings” | ||||||||||||||||||||
| Consolidated Statements of Income | ||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||
| Quarter ended June 30, 2010 | ||||||||||||||||||||
| Total “Core | Total | |||||||||||||||||||
| Lending | APG | Other |
Earnings”(2) |
|
Adjustments |
|
GAAP | |||||||||||||
| Interest income: | ||||||||||||||||||||
| FFELP Stafford and Other Student Loans | $ | 324,052 | $ | — | $ | — | $ | 324,052 | $ | 990 | $ | 325,042 | ||||||||
| FFELP Consolidation Loans | 418,031 | — | — | 418,031 | 132,889 | 550,920 | ||||||||||||||
| Private Education Loans | 575,340 | — | — | 575,340 | — | 575,340 | ||||||||||||||
| Other loans | 7,254 | — | — | 7,254 | — | 7,254 | ||||||||||||||
| Cash and investments | 2,554 | — | 3,745 | 6,299 | — | 6,299 | ||||||||||||||
| Total interest income | 1,327,231 | — | 3,745 | 1,330,976 | 133,879 | 1,464,855 | ||||||||||||||
| Total interest expense | 571,952 | — | — | 571,952 | (3,019 | ) | 568,933 | |||||||||||||
| Net interest income | 755,279 | — | 3,745 | 759,024 | 136,898 | 895,922 | ||||||||||||||
| Less: provisions for loan losses | 382,239 | — | — | 382,239 | — | 382,239 | ||||||||||||||
| Net interest income after provisions for loan losses | 373,040 | — | 3,745 | 376,785 | 136,898 | 513,683 | ||||||||||||||
| Other income: | ||||||||||||||||||||
| Contingency fee revenue | — | 88,181 | — | 88,181 | — | 88,181 | ||||||||||||||
| Collections revenue | — | 17,219 | — | 17,219 | — | 17,219 | ||||||||||||||
| Guarantor servicing fees | — | — | 22,457 | 22,457 | — | 22,457 | ||||||||||||||
| Other income | 127,587 | — | 53,009 | 180,596 | 76,104 | 256,700 | ||||||||||||||
| Total other income | 127,587 | 105,400 | 75,466 | 308,453 | 76,104 | 384,557 | ||||||||||||||
| Expenses: | ||||||||||||||||||||
| Direct operating expenses | 166,761 | 75,256 | 52,872 | 294,889 | 9,710 | 304,599 | ||||||||||||||
| Overhead expenses | 27,325 | 11,115 | 3,481 | 41,921 | — | 41,921 | ||||||||||||||
| Operating expenses | 194,086 | 86,371 | 56,353 | 336,810 | 9,710 | 346,520 | ||||||||||||||
| Restructuring expenses | 15,762 | (109 | ) | 2,013 | 17,666 | — | 17,666 | |||||||||||||
| Total expenses | 209,848 | 86,262 | 58,366 | 354,476 | 9,710 | 364,186 | ||||||||||||||
| Income from continuing operations, before income tax expense | 290,779 | 19,138 | 20,845 | 330,762 | 203,292 | 534,054 | ||||||||||||||
| Income tax expense(1) | 106,600 | 7,016 | 7,641 | 121,257 | 74,846 | 196,103 | ||||||||||||||
| Net income from continuing operations | 184,179 | 12,122 | 13,204 | 209,505 | 128,446 | 337,951 | ||||||||||||||
| Loss from discontinued operations, net of tax | — | — | — | — | — | — | ||||||||||||||
| Net income | 184,179 | 12,122 | 13,204 | 209,505 | 128,446 | 337,951 | ||||||||||||||
| Less: net income attributable to noncontrolling interest | — | 133 | — | 133 | — | 133 | ||||||||||||||
| Net income attributable to SLM Corporation | $ | 184,179 | $ | 11,989 | $ | 13,204 | $ | 209,372 | $ | 128,446 | $ | 337,818 | ||||||||
| Economic Floor Income (net of tax) not included in “Core Earnings” | $ | 1,231 | $ | — | $ | — | $ | 1,231 | ||||||||||||
| (1) | Income taxes are based on a percentage of net income before tax for the individual reportable segment. | |
| (2) | “Core Earnings” are non-GAAP measures and do not represent a comprehensive system of accounting. For a greater explanation of “Core Earnings,” see the section titled “Reconciliation of ‘Core Earnings’ Net Income to GAAP Net Income” and subsequent sections. |
| SLM CORPORATION | |||||||||||||||||||
| Segment and “Core Earnings” | |||||||||||||||||||
| Consolidated Statements of Income | |||||||||||||||||||
| (In thousands) | |||||||||||||||||||
| (Unaudited) | |||||||||||||||||||
| Quarter ended March 31, 2010 | |||||||||||||||||||
| Total “Core | Total | ||||||||||||||||||
| Lending | APG | Other |
Earnings”(2) |
|
Adjustments |
|
GAAP | ||||||||||||
| Interest income: | |||||||||||||||||||
| FFELP Stafford and Other Student Loans | $ | 274,347 | $ | — | $ | — | $ | 274,347 | $ | 9,090 | $ | 283,437 | |||||||
| FFELP Consolidation Loans | 363,755 | — | — | 363,755 | 159,570 | 523,325 | |||||||||||||
| Private Education Loans | 565,154 | — | — | 565,154 | — | 565,154 | |||||||||||||
| Other loans | 8,996 | — | — | 8,996 | — | 8,996 | |||||||||||||
| Cash and investments | 445 | — | 4,504 | 4,949 | — | 4,949 | |||||||||||||
| Total interest income | 1,212,697 | — | 4,504 | 1,217,201 | 168,660 | 1,385,861 | |||||||||||||
| Total interest expense | 515,130 | — | — | 515,130 | 16,254 | 531,384 | |||||||||||||
| Net interest income | 697,567 | — | 4,504 | 702,071 | 152,406 | 854,477 | |||||||||||||
| Less: provisions for loan losses | 359,120 | — | — | 359,120 | — | 359,120 | |||||||||||||
| Net interest income after provisions for loan losses | 338,447 | — | 4,504 | 342,951 | 152,406 | 495,357 | |||||||||||||
| Other income: | |||||||||||||||||||
| Contingency fee revenue | — | 80,311 | — | 80,311 | — | 80,311 | |||||||||||||
| Collections revenue | — | 21,966 | — | 21,966 | — | 21,966 | |||||||||||||
| Guarantor servicing fees | — | — | 36,090 | 36,090 | — | 36,090 | |||||||||||||
| Other income | 141,317 | — | 56,521 | 197,838 | (81,185 | ) | 116,653 | ||||||||||||
| Total other income | 141,317 | 102,277 | 92,611 | 336,205 | (81,185 | ) | 255,020 | ||||||||||||
| Expenses: | |||||||||||||||||||
| Direct operating expenses | 145,758 | 75,557 | 62,218 | 283,533 | 9,712 | 293,245 | |||||||||||||
| Overhead expenses | 20,613 | 10,773 | 3,389 | 34,775 | — | 34,775 | |||||||||||||
| Operating expenses | 166,371 | 86,330 | 65,607 | 318,308 | 9,712 | 328,020 | |||||||||||||
| Restructuring expenses | 21,336 | 1,608 | 3,338 | 26,282 | — | 26,282 | |||||||||||||
| Total expenses | 187,707 | 87,938 | 68,945 | 344,590 | 9,712 | 354,302 | |||||||||||||
| Income from continuing operations, before income tax expense | 292,057 | 14,339 | 28,170 | 334,566 | 61,509 | 396,075 | |||||||||||||
| Income tax expense(1) | 107,068 | 5,257 | 10,327 | 122,652 | 33,143 | 155,795 | |||||||||||||
| Net income from continuing operations | 184,989 | 9,082 | 17,843 | 211,914 | 28,366 | 240,280 | |||||||||||||
| Loss from discontinued operations, net of tax | — | — | — | — | — | — | |||||||||||||
| Net income | 184,989 | 9,082 | 17,843 | 211,914 | 28,366 | 240,280 | |||||||||||||
| Less: net income attributable to noncontrolling interest | — | 140 | — | 140 | — | 140 | |||||||||||||
| Net income attributable to SLM Corporation | $ | 184,989 | $ | 8,942 | $ | 17,843 | $ | 211,774 | $ | 28,366 | $ | 240,140 | |||||||
| Economic Floor Income (net of tax) not included in “Core Earnings” | $ | 2,866 | $ | — | $ | — | $ | 2,866 | |||||||||||
| (1) | Income taxes are based on a percentage of net income before tax for the individual reportable segment. | |
| (2) | “Core Earnings” are non-GAAP measures and do not represent a comprehensive system of accounting. For a greater explanation of “Core Earnings,” see the section titled “Reconciliation of ‘Core Earnings’ Net Income to GAAP Net Income” and subsequent sections. |
| SLM CORPORATION | |||||||||||||||||||||||||
| Segment and “Core Earnings” | |||||||||||||||||||||||||
| Consolidated Statements of Income | |||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||
| Quarter ended June 30, 2009 | |||||||||||||||||||||||||
| Total “Core | Total | ||||||||||||||||||||||||
| Lending | APG | Other |
Earnings”(2) |
Adjustments | GAAP | ||||||||||||||||||||
| Interest income: | |||||||||||||||||||||||||
| FFELP Stafford and Other Student Loans | $ | 309,553 | $ | — | $ | — | $ | 309,553 | $ | 14,386 | $ | 323,939 | |||||||||||||
| FFELP Consolidation Loans | 394,288 | — | — | 394,288 | 66,402 | 460,690 | |||||||||||||||||||
| Private Education Loans | 558,667 | — | — | 558,667 | (165,648 | ) | 393,019 | ||||||||||||||||||
| Other loans | 18,468 | — | — | 18,468 | — | 18,468 | |||||||||||||||||||
| Cash and investments | 3,683 | — | 4,319 | 8,002 | (958 | ) | 7,044 | ||||||||||||||||||
| Total interest income | 1,284,659 | — | 4,319 | 1,288,978 | (85,818 | ) | 1,203,160 | ||||||||||||||||||
| Total interest expense | 832,030 | — | — | 832,030 | (12,571 | ) | 819,459 | ||||||||||||||||||
| Net interest income | 452,629 | — | 4,319 | 456,948 | (73,247 | ) | 383,701 | ||||||||||||||||||
| Less: provisions for loan losses | 401,790 | — | — | 401,790 | (123,678 | ) | 278,112 | ||||||||||||||||||
| Net interest income after provisions for loan losses | 50,839 | — | 4,319 | 55,158 | 50,431 | 105,589 | |||||||||||||||||||
| Other income: | |||||||||||||||||||||||||
| Contingency fee revenue | — | 73,368 | — | 73,368 | — | 73,368 | |||||||||||||||||||
| Collections revenue | — | 23,933 | — | 23,933 | — | 23,933 | |||||||||||||||||||
| Guarantor servicing fees | — | — | 24,772 | 24,772 | — | 24,772 | |||||||||||||||||||
| Other income (loss) | 359,363 | — | 46,273 | 405,636 | (480,878 | ) | (75,242 | ) | |||||||||||||||||
| Total other income | 359,363 | 97,301 | 71,045 | 527,709 | (480,878 | ) | 46,831 | ||||||||||||||||||
| Expenses: | |||||||||||||||||||||||||
| Direct operating expenses | 133,547 | 76,348 | 52,354 | 262,249 | 9,687 | 271,936 | |||||||||||||||||||
| Overhead expenses | 21,475 | 11,223 | 3,530 | 36,228 | — | 36,228 | |||||||||||||||||||
| Operating expenses | 155,022 | 87,571 | 55,884 | 298,477 | 9,687 | 308,164 | |||||||||||||||||||
| Restructuring expenses | 4,147 | (729 | ) | (85 | ) | 3,333 | — | 3,333 | |||||||||||||||||
| Total expenses | 159,169 | 86,842 | 55,799 | 301,810 | 9,687 | 311,497 | |||||||||||||||||||
| Income (loss) from continuing operations, before income tax expense | 251,033 | 10,459 | 19,565 | 281,057 | (440,134 | ) | (159,077 | ) | |||||||||||||||||
|
Income tax expense (benefit)(1) |
93,083 | 3,504 | 7,337 | 103,924 | (147,034 | ) | (43,110 | ) | |||||||||||||||||
| Net income (loss) from continuing operations | 157,950 | 6,955 | 12,228 | 177,133 | (293,100 | ) | (115,967 | ) | |||||||||||||||||
| Loss from discontinued operations, net of tax | — | (6,478 | ) | — | (6,478 | ) | (64 | ) | (6,542 | ) | |||||||||||||||
| Net income (loss) | 157,950 | 477 | 12,228 | 170,655 | (293,164 | ) | (122,509 | ) | |||||||||||||||||
| Less: net income attributable to noncontrolling interest | — | 211 | — | 211 | — |
211 |
|||||||||||||||||||
| Net income (loss) attributable to SLM Corporation | $ | 157,950 | $ | 266 | $ | 12,228 | $ | 170,444 | $ | (293,164 | ) | $ | (122,720 | ) | |||||||||||
| Economic Floor Income (net of tax) not included in “Core Earnings” | $ | 88,899 | $ | — | $ | — | $ | 88,899 | |||||||||||||||||
|
(1) Income taxes are based on a percentage of net income before tax for the individual reportable segment. |
|||||||||||||||||||||||||
|
(2) “Core Earnings” are non-GAAP measures and do not represent a comprehensive system of accounting. For a greater explanation of “Core Earnings,” see the section titled “Reconciliation of ‘Core Earnings’ Net Income to GAAP Net Income” and subsequent sections. |
|||||||||||||||||||||||||
| Net income (loss) attributable to SLM Corporation: | |||||||||||||||||||||||||
|
Continuing operations, net of tax |
$ | 157,950 | $ | 6,744 | $ | 12,228 | $ | 176,922 | $ | (293,100 | ) | $ | (116,178 | ) | |||||||||||
| Discontinued operations, net of tax | — | (6,478 | ) | — | (6,478 | ) | (64 | ) | (6,542 | ) | |||||||||||||||
| Net income (loss) attributable to SLM Corporation | $ | 157,950 | $ | 266 | $ | 12,228 | $ | 170,444 | $ | (293,164 | ) | $ | (122,720 | ) | |||||||||||
| SLM CORPORATION | |||||||||||||||||||
| Segment and “Core Earnings” | |||||||||||||||||||
| Consolidated Statements of Income | |||||||||||||||||||
| (In thousands) | |||||||||||||||||||
| (Unaudited) | |||||||||||||||||||
| Six months ended June 30, 2010 | |||||||||||||||||||
| Total “Core | Total | ||||||||||||||||||
| Lending | APG | Other |
Earnings”(2) |
Adjustments | GAAP | ||||||||||||||
| Interest income: | |||||||||||||||||||
| FFELP Stafford and Other Student Loans | $ | 598,399 | $ | — | $ | — | $ | 598,399 | $ | 10,080 | $ | 608,479 | |||||||
| FFELP Consolidation Loans | 781,786 | — | — | 781,786 | 292,459 | 1,074,245 | |||||||||||||
| Private Education Loans | 1,140,494 | — | — | 1,140,494 | — | 1,140,494 | |||||||||||||
| Other loans | 16,250 | — | — | 16,250 | — | 16,250 | |||||||||||||
| Cash and investments | 2,999 | — | 8,249 | 11,248 | — | 11,248 | |||||||||||||
| Total interest income | 2,539,928 | — | 8,249 | 2,548,177 | 302,539 | 2,850,716 | |||||||||||||
| Total interest expense | 1,087,082 | — | — | 1,087,082 | 13,235 | 1,100,317 | |||||||||||||
| Net interest income | 1,452,846 | — | 8,249 | 1,461,095 | 289,304 | 1,750,399 | |||||||||||||
| Less: provisions for loan losses | 741,359 | — | — | 741,359 | — | 741,359 | |||||||||||||
| Net interest income after provisions for loan losses | 711,487 | — | 8,249 | 719,736 | 289,304 | 1,009,040 | |||||||||||||
| Other income: | |||||||||||||||||||
| Contingency fee revenue | — | 168,492 | — | 168,492 | — | 168,492 | |||||||||||||
| Collections revenue | — | 39,185 | — | 39,185 | — | 39,185 | |||||||||||||
| Guarantor servicing fees | — | — | 58,547 | 58,547 | — | 58,547 | |||||||||||||
| Other income | 268,904 | — | 109,530 | 378,434 | (5,081 | ) | 373,353 | ||||||||||||
| Total other income | 268,904 | 207,677 | 168,077 | 644,658 | (5,081 | ) | 639,577 | ||||||||||||
| Expenses: | |||||||||||||||||||
| Direct operating expenses | 312,519 | 150,813 | 115,090 | 578,422 | 19,422 | 597,844 | |||||||||||||
| Overhead expenses | 47,938 | 21,888 | 6,870 | 76,696 | — | 76,696 | |||||||||||||
| Operating expenses | 360,457 | 172,701 | 121,960 | 655,118 | 19,422 | 674,540 | |||||||||||||
| Restructuring expenses | 37,098 | 1,499 | 5,351 | 43,948 | — | 43,948 | |||||||||||||
| Total expenses | 397,555 | 174,200 | 127,311 | 699,066 | 19,422 | 718,488 | |||||||||||||
| Income from continuing operations, before income tax expense | 582,836 | 33,477 | 49,015 | 665,328 | 264,801 | 930,129 | |||||||||||||
| Income tax expense(1) | 213,668 | 12,273 | 17,968 | 243,909 | 107,989 | 351,898 | |||||||||||||
| Net income from continuing operations | 369,168 | 21,204 | 31,047 | 421,419 | 156,812 | 578,231 | |||||||||||||
| Loss from discontinued operations, net of tax | — | — | — | — | — | — | |||||||||||||
| Net income | 369,168 | 21,204 | 31,047 | 421,419 | 156,812 | 578,231 | |||||||||||||
| Less: net income attributable to noncontrolling interest | — | 273 | — | 273 | — | 273 | |||||||||||||
| Net income attributable to SLM Corporation | $ | 369,168 | $ | 20,931 | $ | 31,047 | $ | 421,146 | $ | 156,812 | $ | 577,958 | |||||||
| Economic Floor Income (net of tax) not included in “Core Earnings” | $ | 4,097 | $ | — | $ | — | $ | 4,097 | |||||||||||
| (1) Income taxes are based on a percentage of net income before tax for the individual reportable segment. | |||||||||||||||||||
| (2) “Core Earnings” are non-GAAP measures and do not represent a comprehensive system of accounting. For a greater explanation of “Core Earnings,” see the section titled “Reconciliation of ‘Core Earnings’ Net Income to GAAP Net Income” and subsequent sections. | |||||||||||||||||||
| SLM CORPORATION | ||||||||||||||||||||||
| Segment and “Core Earnings” | ||||||||||||||||||||||
| Consolidated Statements of Income | ||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||
|
|
Six months ended June 30, 2009 | |||||||||||||||||||||
| Total “Core |
|
Total |
||||||||||||||||||||
| Lending | APG | Other |
Earnings”(2) |
Adjustments |
GAAP |
|||||||||||||||||
| Interest income: | ||||||||||||||||||||||
| FFELP Stafford and Other Student Loans | $ | 671,472 | $ | — | $ | — | $ | 671,472 | $ | (4,717 | ) | $ | 666,755 | |||||||||
| FFELP Consolidation Loans | 833,184 | — | — | 833,184 | 116,868 | 950,052 | ||||||||||||||||
| Private Education Loans | 1,121,949 | — | — | 1,121,949 | (341,889 | ) | 780,060 | |||||||||||||||
| Other loans | 34,888 | — | — | 34,888 | — | 34,888 | ||||||||||||||||
| Cash and investments | 5,862 | — | 9,447 | 15,309 | (2,294 | ) | 13,015 | |||||||||||||||
| Total interest income | 2,667,355 | — | 9,447 | 2,676,802 | (232,032 | ) | 2,444,770 | |||||||||||||||
| Total interest expense | 1,790,909 | — | — | 1,790,909 | 55,097 | 1,846,006 | ||||||||||||||||
| Net interest income | 876,446 | — | 9,447 | 885,893 | (287,129 | ) | 598,764 | |||||||||||||||
| Less: provisions for loan losses | 750,876 | — | — | 750,876 | (222,485 | ) | 528,391 | |||||||||||||||
| Net interest income after provisions for loan losses | 125,570 | — | 9,447 | 135,017 | (64,644 | ) | 70,373 | |||||||||||||||
| Other income: | ||||||||||||||||||||||
| Contingency fee revenue | — | 148,183 | — | 148,183 | — | 148,183 | ||||||||||||||||
| Collections revenue | — | 66,900 | — | 66,900 | 689 | 67,589 | ||||||||||||||||
| Guarantor servicing fees | — | — | 58,780 | 58,780 | — | 58,780 | ||||||||||||||||
| Other income | 461,731 | — | 96,054 | 557,785 | (431,849 | ) | 125,936 | |||||||||||||||
| Total other income | 461,731 | 215,083 | 154,834 | 831,648 | (431,160 | ) | 400,488 | |||||||||||||||
| Expenses: | ||||||||||||||||||||||
| Direct operating expenses | 257,262 | 159,769 | 98,140 | 515,171 | 19,446 | 534,617 | ||||||||||||||||
| Overhead expenses | 40,701 | 21,271 | 6,691 | 68,663 | — | 68,663 | ||||||||||||||||
| Operating expenses | 297,963 | 181,040 | 104,831 | 583,834 | 19,446 | 603,280 | ||||||||||||||||
| Restructuring expenses | 5,684 | (74 | ) | 1,496 | 7,106 | — | 7,106 | |||||||||||||||
| Total expenses | 303,647 | 180,966 | 106,327 | 590,940 | 19,446 | 610,386 | ||||||||||||||||
| Income (loss) from continuing operations, before income tax expense | 283,654 | 34,117 | 57,954 | 375,725 | (515,250 | ) | (139,525 | ) | ||||||||||||||
| Income tax expense (benefit)(1) | 105,094 | 11,751 | 21,472 | 138,317 | (186,944 | ) | (48,627 | ) | ||||||||||||||
| Net income (loss) from continuing operations | 178,560 | 22,366 | 36,482 | 237,408 | (328,306 | ) | (90,898 | ) | ||||||||||||||
| Loss from discontinued operations, net of tax | — | (52,588 | ) | — | (52,588 | ) | (128 | ) | (52,716 | ) | ||||||||||||
| Net income (loss) | 178,560 | (30,222 | ) | 36,482 | 184,820 | (328,434 | ) | (143,614 | ) | |||||||||||||
| Less: net income attributable to noncontrolling interest | — | 492 | — | 492 | — | 492 | ||||||||||||||||
| Net income (loss) attributable to SLM Corporation | $ | 178,560 | $ | (30,714 | ) | $ | 36,482 | $ | 184,328 | $ | (328,434 | ) | $ | (144,106 | ) | |||||||
| Economic Floor Income (net of tax) not included in “Core Earnings” | $ | 168,287 | $ | — | $ | — | $ | 168,287 | ||||||||||||||
|
(1) Income taxes are based on a percentage of net income before tax for the individual reportable segment. |
||||||||||||||||||||||
|
(2) “Core Earnings” are non-GAAP measures and do not represent a comprehensive system of accounting. For a greater explanation of “Core Earnings,” see the section titled “Reconciliation of ‘Core Earnings’ Net Income to GAAP Net Income” and subsequent sections. |
||||||||||||||||||||||
| Net income (loss) attributable to SLM Corporation: | ||||||||||||||||||||||
| Continuing operations, net of tax | $ | 178,560 | $ | 21,874 | $ |
36,482 |
$ |
236,916 |
$ | (328,306 | ) | $ | (91,390 | ) | ||||||||
| Discontinued operations, net of tax | — | (52,588 | ) | —
|
(52,588 |
) |
(128 | ) | (52,716 | ) | ||||||||||||
| Net income (loss) attributable to SLM Corporation | $ | 178,560 | $ | (30,714 | ) | $ |
36,482 |
$ |
184,328 |
$ | (328,434 | ) | $ | (144,106 | ) | |||||||
| SLM CORPORATION | ||||||||||||||||||||
| Reconciliation of “Core Earnings” Net Income to GAAP Net Income | ||||||||||||||||||||
| (In thousands, except per share amounts) | ||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||
| Quarters ended | Six months ended | |||||||||||||||||||
| June 30, | March 31, | June 30, | June 30, | June 30, | ||||||||||||||||
| 2010 | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||
| “Core Earnings” net income attributable to SLM Corporation(1)(2) | $ | 209,372 | $ | 211,774 | $ | 170,444 | $ | 421,146 | $ | 184,328 | ||||||||||
| “Core Earnings” adjustments: | ||||||||||||||||||||
| Net impact of securitization accounting | — | — | (25,861 | ) | — | (224,451 | ) | |||||||||||||
| Net impact of derivative accounting | 301,421 | 120,107 | (494,581 | ) | 421,528 | (440,571 | ) | |||||||||||||
| Net impact of Floor Income | (88,419 | ) | (48,886 | ) | 90,002 | (137,305 | ) | 169,045 | ||||||||||||
| Net impact of acquired intangibles | (9,710 | ) | (9,712 | ) | (9,758 | ) | (19,422 | ) | (19,401 | ) | ||||||||||
| Total “Core Earnings” adjustments before income tax effect | 203,292 | 61,509 | (440,198 | ) | 264,801 | (515,378 | ) | |||||||||||||
| Net income tax effect | (74,846 | ) | (33,143 | ) | 147,034 | (107,989 | ) | 186,944 | ||||||||||||
| Total “Core Earnings” adjustments | 128,446 | 28,366 | (293,164 | ) | 156,812 | (328,434 | ) | |||||||||||||
| GAAP net income (loss) attributable to SLM Corporation | $ | 337,818 | $ | 240,140 | $ | (122,720 | ) | $ | 577,958 | $ | (144,106 | ) | ||||||||
| GAAP diluted earnings (loss) per common share attributable to SLM Corporation common shareholders | $ | .63 | $ | .45 | $ | (.32 | ) | $ | 1.08 | $ | (.42 | ) | ||||||||
|
(1) “Core Earnings” diluted earnings (loss) per common share attributable to SLM Corporation common shareholders |
$ | .39 | $ | .39 | $ | .31 | $ | .78 | $ | .28 | ||||||||||
| (2) Total Economic Floor Income earned on Managed loans, not included in “Core Earnings” (net of tax) | $ | 1,231 | $ | 2,866 | $ | 88,899 | $ | 4,097 | $ | 168,287 | ||||||||||
| Total Economic Floor Income earned, not included in “Core Earnings” (net of tax) per common share attributable to SLM Corporation common shareholders | $ | — | $ | .01 | $ | .17 | $ | .01 | $ | .36 | ||||||||||
|
“Core Earnings” |
| In accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”), we prepare financial statements in accordance with GAAP. In addition to evaluating the Company’s GAAP-based financial information, management evaluates the Company’s business segments on a basis that, as allowed under the Financial Accounting Standards Board’s (“FASB’s”) Accounting Standards Codification (“ASC”) 280, “Segment Reporting,” differs from GAAP. We refer to management’s basis of evaluating our segment results as “Core Earnings” presentations for each business segment and we refer to this information in our presentations with credit rating agencies and lenders. While “Core Earnings” are not a substitute for reported results under GAAP, we rely on “Core Earnings” to manage each operating segment because we believe these measures provide additional information regarding the operational and performance indicators that are most closely assessed by management. |
| Our “Core Earnings” are not defined terms within GAAP and may not be comparable to similarly titled measures reported by other companies. “Core Earnings” net income reflects only current period adjustments to GAAP net income as described below. Unlike financial accounting, there is no comprehensive, authoritative guidance for management reporting and as a result, our management reporting is not necessarily comparable with similar information for any other financial institution. Our operating segments are defined by products and services or by types of customers, and reflect the manner in which financial information is currently evaluated by management. Intersegment revenues and expenses are netted within the appropriate financial statement line items consistent with the income statement presentation provided to management. Changes in management structure or allocation methodologies and procedures may result in changes in reported segment financial information. |
|
Limitations of “Core Earnings” |
| While GAAP provides a uniform, comprehensive basis of accounting, for the reasons described above, management believes that “Core Earnings” are an important additional tool for providing a more complete understanding of the Company’s results of operations. Nevertheless, “Core Earnings” are subject to certain general and specific limitations that investors should carefully consider. For example, as stated above, unlike financial accounting, there is no comprehensive, authoritative guidance for management reporting. Our “Core Earnings” are not defined terms within GAAP and may not be comparable to similarly titled measures reported by other companies. Unlike GAAP, “Core Earnings” reflect only current period adjustments to GAAP. Accordingly, the Company’s “Core Earnings” presentation does not represent a comprehensive basis of accounting. Investors, therefore, may not compare our Company’s performance with that of other financial services companies based upon “Core Earnings.” “Core Earnings” results are only meant to supplement GAAP results by providing additional information regarding the operational and performance indicators that are most closely used by management, the Company’s board of directors, rating agencies and lenders to assess performance. |
| Other limitations arise from the specific adjustments that management makes to GAAP results to derive “Core Earnings” results. For example, in reversing the unrealized gains and losses that result from ASC 815, “Derivatives and Hedging,” on derivatives that do not qualify for hedge accounting treatment, as well as on derivatives that do qualify but are in part ineffective because they are not perfect hedges, we focus on the long-term economic effectiveness of those instruments relative to the underlying hedged item and isolate the effects of interest rate volatility and changing credit spreads on the fair value of such instruments during the period. Under GAAP, the effects of these factors on the fair value of the derivative instruments (but often not on the underlying hedged item) tend to show more volatility in the short term. While our presentation of our results on a “Core Earnings” basis provides important information regarding the performance of our Managed portfolio, a limitation of this presentation is that we are presenting the ongoing spread income on loans that have been sold off-balance sheet for GAAP purposes to a trust managed by us. While we believe that our “Core Earnings” presentation presents the economic substance of our Managed loan portfolio, it understates earnings volatility from securitization gains, securitization servicing income and Residual Interest Income. Our “Core Earnings” results exclude certain Floor Income, which is real cash income, from our reported results and therefore may understate earnings in certain periods. Management’s financial planning and valuation of operating results, however, does not take into account Floor Income because of its inherent uncertainty, except when it is Fixed Rate Floor Income that is economically hedged through Floor Income Contracts. |
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Pre-Tax Differences between “Core Earnings” and GAAP |
| Our “Core Earnings” are the primary financial performance measures used by management to evaluate performance and to allocate resources. Accordingly, financial information is reported to management on a “Core Earnings” basis by reportable segment, as these are the measures used regularly by our chief operating decision makers. Our “Core Earnings” are used in developing our financial plans and tracking results, and also in establishing corporate performance targets and incentive compensation. Management believes this information provides additional insight into the financial performance of the Company’s core business activities. “Core Earnings” net income reflects only current period adjustments to GAAP net income, as described in the more detailed discussion of the differences between “Core Earnings” and GAAP that follows, which includes further detail on each specific adjustment required to reconcile our “Core Earnings” segment presentation to our GAAP earnings. |
| 1) |
Securitization Accounting: Under GAAP, prior to the adoption of topic updates to ASC 810, “Consolidation,” certain securitization transactions in our Lending operating segment were accounted for as sales of assets. Under “Core Earnings” for the Lending operating segment, we presented all securitization transactions on a “Core Earnings” basis as long-term non-recourse financings. The upfront “gains” on sale from securitization transactions, as well as ongoing “securitization servicing and Residual Interest revenue (loss)” presented in accordance with GAAP, were excluded from “Core Earnings” and were replaced by interest income, provisions for loan losses, and interest expense as earned or incurred on the securitization loans. We also excluded transactions with our off-balance sheet trusts from “Core Earnings” as they were considered intercompany transactions on a “Core Earnings” basis. On January 1, 2010, the Company prospectively adopted the topic updates to ASC 810, which resulted in the consolidation of these off-balance sheet securitization trusts at their historical cost basis. As of January 1, 2010, there are no longer differences between the Company’s GAAP and “Core Earnings” presentation for securitization accounting. As a result, effective January 1, 2010, the Company’s Managed and on-balance sheet (GAAP) portfolios are the same. |
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| Upon the adoption of topic updates to ASC 810, the Company removed the $1.8 billion of Residual Interests (associated with its off-balance sheet securitization trusts as of December 31, 2009) from the consolidated balance sheet and the Company consolidated $35.0 billion of assets ($32.6 billion of which are student loans, net of a $550 million allowance for loan losses) and $34.4 billion of liabilities (primarily trust debt), which resulted in an approximate $750 million after-tax reduction of stockholders’ equity (recorded as a cumulative effect adjustment to retained earnings). After the adoption of topic updates to ASC 810, the Company’s results of operations no longer reflect securitization servicing and Residual Interest revenue (loss) related to these securitization trusts, but instead report interest income, provisions for loan losses associated with the securitized assets and interest expense associated with the debt issued from the securitization trusts to third parties, consistent with the Company’s accounting treatment of prior on-balance securitization trusts. | |||||
| 2) |
Derivative Accounting: “Core Earnings” exclude periodic unrealized gains and losses that are caused primarily by the mark-to-market derivative valuations prescribed by ASC 815 on derivatives that do not qualify for hedge accounting treatment under GAAP. These unrealized gains and losses occur in our Lending operating segment. In our “Core Earnings” presentation, we recognize the economic effect of these hedges, which generally results in any cash paid or received being recognized ratably as an expense or revenue over the hedged item’s life. |
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| 3) |
Floor Income: The timing and amount (if any) of Floor Income earned in our Lending operating segment is uncertain and in excess of expected spreads. Therefore, we only include such income in “Core Earnings” when it is Fixed Rate Floor Income that is economically hedged. We employ derivatives, primarily Floor Income Contracts and futures, to economically hedge Floor Income. As discussed above in “Derivative Accounting,” these derivatives do not qualify as effective accounting hedges, and therefore, under GAAP, they are marked-to-market through the “gains (losses) on derivative and hedging activities, net” line in the consolidated statement of income with no offsetting gain or loss recorded for the economically hedged items. For “Core Earnings,” we reverse the fair value adjustments on the Floor Income Contracts and futures economically hedging Floor Income and include in income the amortization of net premiums received on contracts economically hedging Fixed Rate Floor Income. |
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| 4) |
Acquired Intangibles: Our “Core Earnings” exclude goodwill and intangible impairment and the amortization of acquired intangibles. |
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CONTACT:
Sallie Mae
Media Contact:
Martha Holler, 703-984-5178
or
Investor Contacts:
Steve McGarry, 703-984-6746
or
Joe Fisher, 703-984-5755
KEYWORDS: United States North America Virginia
INDUSTRY KEYWORDS: Education University Other Education Professional Services Banking Finance Other Professional Services
MEDIA:
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