SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934
of The Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported): October 19, 2010
SLM CORPORATION
(Exact name of registrant as specified in its charter)
| DELAWARE | File No. 001-13251 | 52-2013874 | ||
| (State or other jurisdiction | (Commission File Number) | (IRS Employer | ||
| of incorporation) | Identification No.) |
12061 Bluemont Way, Reston, Virginia 20190
(Address if principal executive offices)(zip code)
(Address if principal executive offices)(zip code)
Registrant’s telephone number, including area code: (703) 810-3000
Not Applicable
(Former name or former address, if changed since last report)
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions:
| o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 Results of Operations and Financial Condition
On
October 19, 2010, SLM Corporation (the “Company”) issued a press release with
respect to its earnings for the fiscal quarter ended September 30,
2010, which is furnished as Exhibit 99.1 to this Current Report on Form 8-K. The Supplemental Financial Information Release
for the Third Quarter 2010 is available on the Company’s Web site at www.salliemae.com/about/investors/stockholderinfo/earningsinfo. Presentation slides used during the Company’s investor
conference call, set for October 20, 2010,
at 8:00 a.m. EDT., may be accessed at www.salliemae.com/about/investors/stockholderinfo/webcast no later than the starting time of the conference call.
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this
report to be signed on its behalf by the undersigned hereunto duly authorized.
| SLM CORPORATION |
||||
| By: | /s/ JOHN F. REMONDI | |||
| Name: | John F. Remondi | |||
| Title: | Vice Chairman and Chief Financial Officer | |||
Dated:
October 19, 2010
3
SLM CORPORATION
Form 8-K
CURRENT REPORT
EXHIBIT INDEX
Form 8-K
CURRENT REPORT
EXHIBIT INDEX
| Exhibit | ||
| No. | Description | |
99.1 |
Press Release dated October 19, 2010 |
4
Exhibit 99.1
FOR IMMEDIATE RELEASE
SALLIE MAE REPORTS THIRD-QUARTER 2010 RESULTS
RESTON, Va., Oct. 19, 2010 — SLM Corporation (NYSE: SLM), commonly known as Sallie Mae, reported
core earnings net income of $189 million ($.35 diluted earnings per share) for the third-quarter
2010, compared to $164 million ($.26 diluted earnings per share) for the year-ago quarter.
“This quarter’s results are indicative of our current earnings power until we finish rightsizing
the company in 2011,” said Albert L. Lord, vice chairman and CEO. “We recognize the magnitude of
this task and are confident that we will achieve it.”
On a GAAP basis, the company reported a net loss of $495 million ($1.06 diluted loss per share),
vs. $159 million net income ($.25 diluted earnings per share) in the same quarter last year, after
writing off $660 million of goodwill and intangible assets and an unrealized, net loss from the
mark to market on hedging activity. The former is primarily the result of new market data and the
business impact of recent legislation: the company determined that goodwill and intangible assets
within certain operating segments were impaired. The non-cash charge does not impact the company’s
tangible capital or capital ratios.
Loan Originations and Servicing
During the quarter, the company originated $835 million in private education loans, 92 percent of
which had cosigners.
In addition to its owned and serviced loans, the company serviced in the third quarter
approximately 2.5 million accounts on behalf of the federal government and other third-party
clients. Since quarter end, the servicing operation has added 1.3 million third-party accounts.
In September, the company announced an agreement to purchase an interest in $28 billion of
securitized federal student loans and related assets from The Student Loan Corporation. The
transaction is expected to close by year-end 2010.
Private Education Loan Portfolio Quality
The company had $25.8 billion of private education loans in repayment at Sept. 30, compared to
$21.7 billion one year earlier. At the same time, third-quarter 2010 delinquencies as a percentage
of private education loans in repayment (11.1 percent) declined from the previous quarter (11.9
percent) and the year-ago quarter (12.6 percent). This favorable trend reflects the improving
quality of the portfolio.
The third-quarter 2010 private education loan loss provision was $330 million, down from both the
previous and year-ago quarters. Net charge-offs were $348 million in the 2010 third quarter, an
expected seasonal increase from the second quarter’s $336 million related to the timing of
graduates’ entry into repayment, and a decrease from the year-ago quarter’s $443 million.
Funding and Liquidity
In the third quarter, the company completed a $760 million federal student loan securitization and
two private loan securitizations totaling $2.6 billion.
The company used the private loan transaction proceeds to redeem $1.5 billion of higher-priced
issuances and to net approximately $1 billion.
Other Income and Operating Expenses
Core earnings fee income was $227 million in the third quarter, compared to the year-ago quarter’s
$337 million that included a $74 million gain from debt repurchases.
Core earnings operating expenses excluding restructuring and related asset impairments were $319
million in the third-quarter 2010, compared to $331 million in the previous quarter and $303
million in the year-ago quarter.
GAAP
Sallie Mae 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/investors by clicking on Earnings.
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 third-quarter 2010 core earnings and GAAP results is
the impact of a $660 million goodwill and intangible asset pre-tax impairment and a $183 million
unrealized, mark-to-market, pre-tax loss on certain derivative contracts, both of which are
recognized in GAAP but not in core earnings results.
Presentation slides for the conference call discussed below may be accessed at
www.SallieMae.com/investors under the Webcasts tab.
***
The company will host an earnings conference call tomorrow, Oct. 20, at 8 a.m. EDT. Sallie Mae
executives will be on hand to discuss various highlights of the quarter and to answer questions
related to the company’s performance. Individuals interested in participating in the call should
dial (877) 356-5689 (USA and Canada) or dial (706) 679-0623 (international) and use access code
12880301 starting at 7:45 a.m. EDT. A live audio webcast of the conference call may be accessed at
www.SallieMae.com/investors. Investors may access a replay of the conference call via the company’s
website within one hour after the call’s conclusion. A telephone replay may be accessed two hours
after the
call’s conclusion through Nov. 4 by dialing (800) 642-1687 (USA and Canada) or (706) 645-9291
(international) with access code 12880301.
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 Third Quarter 2010. All information
in this release is as of Oct. 19, 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. The
company services $202 billion in education loans and serves 10 million student and parent
customers. Its affiliate Upromise Investments, Inc., manages $27 billion in 529 college savings
plans, and members of Upromise by Sallie Mae have earned more than $575 million in rewards to help
pay for college. 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.
# # #
CONTACTS:
| Media | Martha Holler, (703) 984-5178, martha.holler@SallieMae.com Patricia Nash Christel, (703) 984-5382, patricia.christel@SallieMae.com |
| Investors | Steve McGarry, (703) 984-6746, steven.mcgarry@SallieMae.com Joe Fisher, (703) 984-5755, joe.fisher@SallieMae.com |
SLM
CORPORATION
Supplemental Earnings Disclosure
September 30, 2010
(In millions, except per share amounts)
(Unaudited)
Supplemental Earnings Disclosure
September 30, 2010
(In millions, except per share amounts)
(Unaudited)
| Quarters ended | Nine months ended | |||||||||||||||||||
|
September 30, |
June 30, |
September 30, |
September 30, |
September 30, |
||||||||||||||||
| 2010 | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||
|
SELECTED FINANCIAL INFORMATION AND RATIOS
|
||||||||||||||||||||
|
GAAP Basis(1)
|
||||||||||||||||||||
|
Net income (loss) attributable to SLM Corporation
|
$ | (495 | ) | $ | 338 | $ | 159 | $ | 83 | $ | 15 | |||||||||
|
Diluted earnings (loss) per common share attributable to SLM
Corporation common shareholders |
$ | (1.06 | ) | $ | .63 | $ | .25 | $ | .06 | $ | (.17 | ) | ||||||||
|
Return on assets
|
(1.00 | )% | .68 | % | .37 | % | .06 | % | .01 | % | ||||||||||
|
“Core Earnings”
Basis(1)(2)(3)
|
||||||||||||||||||||
|
“Core Earnings” net income attributable to SLM
Corporation
|
$ | 189 | $ | 209 | $ | 164 | $ | 611 | $ | 348 | ||||||||||
|
“Core Earnings” diluted earnings per common share
attributable to SLM
Corporation common shareholders |
$ | .35 | $ | .39 | $ | .26 | $ | 1.13 | $ | .54 | ||||||||||
|
“Core Earnings” return on assets
|
.38 | % | .42 | % | .31 | % | .42 | % | .23 | % | ||||||||||
|
OTHER OPERATING STATISTICS
|
||||||||||||||||||||
|
Average on-balance sheet student loans
|
$ | 184,139 | $ | 184,571 | $ | 157,530 | $ | 183,424 | $ | 153,622 | ||||||||||
|
Average off-balance sheet student loans
|
— | — | 33,929 | — | 34,797 | |||||||||||||||
|
Average Managed student loans
|
$ | 184,139 | $ | 184,571 | $ | 191,459 | $ | 183,424 | $ | 188,419 | ||||||||||
|
Ending on-balance sheet student loans, net
|
$ | 182,135 | $ | 183,643 | $ | 158,846 | ||||||||||||||
|
Ending off-balance sheet student loans, net
|
— | — | 33,335 | |||||||||||||||||
|
Ending Managed student loans, net
|
$ | 182,135 | $ | 183,643 | $ | 192,181 | ||||||||||||||
|
Ending Managed FFELP Stafford and Other Student Loans, net
|
$ | 66,681 | $ | 67,457 | $ | 73,040 | ||||||||||||||
|
Ending Managed FFELP Consolidation Loans, net
|
79,912 | 81,035 | 84,235 | |||||||||||||||||
|
Ending Managed Private Education Loans, net
|
35,542 | 35,151 | 34,906 | |||||||||||||||||
|
Ending Managed student loans, net
|
$ | 182,135 | $ | 183,643 | $ | 192,181 | ||||||||||||||
| (1) | Diluted earnings (loss) 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 September 30, 2010, June 30, 2010 and September 30, 2009 and for the nine months ended September 30, 2010 and 2009 was: |
| Quarters ended | Nine months ended | |||||||||||||||||||
|
September 30, |
June 30, |
September 30, |
September 30, |
September 30, |
||||||||||||||||
| 2010 | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||
|
GAAP Basis
|
||||||||||||||||||||
|
Diluted earnings (loss) per common share attributable to SLM
Corporation common shareholders:
|
||||||||||||||||||||
|
Continuing operations
|
$ | (1.07 | ) | $ | .63 | $ | .26 | $ | .05 | $ | (.04 | ) | ||||||||
|
Discontinued operations
|
.01 | — | (.01 | ) | .01 | (.13 | ) | |||||||||||||
|
Total
|
$ | (1.06 | ) | $ | .63 | $ | .25 | $ | .06 | $ | (.17 | ) | ||||||||
|
“Core Earnings”
Basis(2)(3)
|
||||||||||||||||||||
|
Diluted earnings (loss) per common share attributable to SLM
Corporation common shareholders:
|
||||||||||||||||||||
|
Continuing operations
|
$ | .34 | $ | .39 | $ | .27 | $ | 1.12 | $ | .67 | ||||||||||
|
Discontinued operations
|
.01 | — | (.01 | ) | .01 | (.13 | ) | |||||||||||||
|
Total
|
$ | .35 | $ | .39 | $ | .26 | $ | 1.13 | $ | .54 | ||||||||||
| (2) | “Core Earnings” are non-GAAP measures and do not represent a comprehensive basis 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 September 30, 2010, June 30, 2010 and September 30, 2009 and for the nine months ended September 30, 2010 and 2009 was: |
| Quarters ended | Nine months ended | |||||||||||||||||||
|
September 30, |
June 30, |
September 30, |
September 30, |
September 30, |
||||||||||||||||
| 2010 | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||
|
Total Economic Floor Income earned on Managed loans, not
included in “Core Earnings” (net of tax)
|
$ | 12 | $ | 1 | $ | 23 | $ | 16 | $ | 191 | ||||||||||
|
Total Economic Floor Income earned, not included in “Core
Earnings” (net of tax) per common share attributable to SLM
Corporation common shareholders
|
$ | .02 | $ | — | $ | .05 | $ | .03 | $ | .41 | ||||||||||
SLM
CORPORATION
Consolidated Balance Sheets
(In thousands, except per share amounts)
(Unaudited)
Consolidated Balance Sheets
(In thousands, except per share amounts)
(Unaudited)
|
September 30, |
June 30, |
September 30, |
||||||||||
| 2010 | 2010 | 2009 | ||||||||||
|
Assets
|
||||||||||||
|
FFELP Stafford and Other Student Loans (net of allowance for
losses of $120,386; $122,192 and $101,343, respectively)
|
$ | 46,026,138 | $ | 47,280,248 | $ | 43,257,743 | ||||||
|
FFELP Stafford Loans
Held-for-Sale
|
20,655,561 | 20,177,860 | 23,846,566 | |||||||||
|
FFELP Consolidation Loans (net of allowance for losses of
$68,880; $66,493; and $54,384, respectively)
|
79,911,599 | 81,034,596 | 69,246,231 | |||||||||
|
Private Education Loans (net of allowance for losses of
$2,035,034; $2,042,413; and $1,401,496, respectively)
|
35,541,640 | 35,150,686 | 22,494,955 | |||||||||
|
Cash and investments
|
6,992,621 | 7,680,116 | 7,021,808 | |||||||||
|
Restricted cash and investments
|
5,837,546 | 6,252,914 | 5,760,583 | |||||||||
|
Retained Interest in off-balance sheet securitized loans
|
— | — | 1,838,203 | |||||||||
|
Goodwill and acquired intangible assets, net
|
488,220 | 1,157,888 | 1,224,272 | |||||||||
|
Other assets
|
10,653,449 | 8,584,404 | 11,753,563 | |||||||||
|
Total assets
|
$ | 206,106,774 | $ | 207,318,712 | $ | 186,443,924 | ||||||
|
Liabilities
|
||||||||||||
|
Short-term borrowings
|
$ | 45,388,432 | $ | 46,472,435 | $ | 53,406,554 | ||||||
|
Long-term borrowings
|
153,003,935 | 152,250,912 | 124,647,818 | |||||||||
|
Other liabilities
|
3,140,330 | 3,508,617 | 3,400,527 | |||||||||
|
Total liabilities
|
201,532,697 | 202,231,964 | 181,454,899 | |||||||||
|
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 1,012 shares, respectively, issued at liquidation
preference of $1,000 per share
|
810,370 | 810,370 | 1,012,370 | |||||||||
|
Common stock, par value $.20 per share, 1,125,000 shares
authorized:
|
||||||||||||
|
553,787; 553,571; and 541,849 shares, respectively, issued
|
110,758 | 110,715 | 108,362 | |||||||||
|
Additional paid-in capital
|
5,127,313 | 5,122,583 | 4,862,071 | |||||||||
|
Accumulated other comprehensive loss, net of tax benefit
|
(44,159 | ) | (43,333 | ) | (44,143 | ) | ||||||
|
Retained earnings (loss)
|
(122,565 | ) | 391,169 | 346,347 | ||||||||
|
Total SLM Corporation stockholders’ equity before treasury
stock
|
6,446,717 | 6,956,504 | 6,850,007 | |||||||||
|
Common stock held in treasury: 68,011; 67,775 and
67,159 shares, respectively
|
1,872,640 | 1,869,760 | 1,860,989 | |||||||||
|
Total SLM Corporation stockholders’ equity
|
4,574,077 | 5,086,744 | 4,989,018 | |||||||||
|
Noncontrolling interest
|
— | 4 | 7 | |||||||||
|
Total equity
|
4,574,077 | 5,086,748 | 4,989,025 | |||||||||
|
Total liabilities and equity
|
$ | 206,106,774 | $ | 207,318,712 | $ | 186,443,924 | ||||||
Supplemental
information — assets and liabilities of consolidated
variable interest entities:
|
September 30, |
June 30, |
September 30, |
||||||||||
| 2010 | 2010 | 2009 | ||||||||||
|
FFELP Stafford and Other Student Loans
|
$ | 65,557,473 | $ | 66,130,975 | $ | 64,993,570 | ||||||
|
FFELP Consolidation Loans
|
78,396,367 | 79,558,032 | 68,696,728 | |||||||||
|
Private Education Loans
|
24,511,699 | 23,561,695 | 9,200,713 | |||||||||
|
Restricted cash and investments
|
5,522,584 | 5,881,972 | 4,658,009 | |||||||||
|
Other assets
|
4,373,606 | 2,856,872 | 4,334,239 | |||||||||
|
Short-term borrowings
|
36,806,456 | 37,014,277 | 46,553,608 | |||||||||
|
Long-term borrowings
|
128,473,542 | 127,904,461 | 92,222,000 | |||||||||
|
Net assets of consolidated variable interest entities
|
$ | 13,081,731 | $ | 13,070,808 | $ | 13,107,651 | ||||||
2
SLM
CORPORATION
Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
| Quarters ended | Nine months ended | |||||||||||||||||||
|
September 30, |
June 30, |
September 30, |
September 30, |
September 30, |
||||||||||||||||
| 2010 | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||
|
Interest income:
|
||||||||||||||||||||
|
FFELP Stafford and Other Student Loans
|
$ | 320,234 | $ | 325,042 | $ | 303,192 | $ | 928,713 | $ | 969,947 | ||||||||||
|
FFELP Consolidation Loans
|
564,586 | 550,920 | 481,592 | 1,638,831 | 1,431,644 | |||||||||||||||
|
Private Education Loans
|
610,893 | 575,340 | 396,339 | 1,751,387 | 1,176,399 | |||||||||||||||
|
Other loans
|
7,190 | 7,254 | 11,042 | 23,440 | 45,930 | |||||||||||||||
|
Cash and investments
|
7,630 | 6,299 | 6,881 | 18,878 | 19,896 | |||||||||||||||
|
Total interest income
|
1,510,533 | 1,464,855 | 1,199,046 | 4,361,249 | 3,643,816 | |||||||||||||||
|
Total interest expense
|
638,599 | 568,933 | 673,870 | 1,738,916 | 2,519,876 | |||||||||||||||
|
Net interest income
|
871,934 | 895,922 | 525,176 | 2,622,333 | 1,123,940 | |||||||||||||||
|
Less: provisions for loan losses
|
358,110 | 382,239 | 321,127 | 1,099,469 | 849,518 | |||||||||||||||
|
Net interest income after provisions for loan losses
|
513,824 | 513,683 | 204,049 | 1,522,864 | 274,422 | |||||||||||||||
|
Other income (loss):
|
||||||||||||||||||||
|
Securitization servicing and Residual Interest revenue
|
— | — | 155,065 | — | 147,248 | |||||||||||||||
|
Gains (losses) on sales of loans and securities, net
|
1,607 | (3,515 | ) | 12,452 | 6,745 | 12,752 | ||||||||||||||
|
Gains (losses) on derivative and hedging activities, net
|
(344,458 | ) | 95,316 | (111,556 | ) | (331,552 | ) | (569,326 | ) | |||||||||||
|
Contingency fee revenue
|
83,746 | 88,181 | 82,200 | 252,238 | 230,383 | |||||||||||||||
|
Collections revenue
|
13,097 | 17,219 | 21,241 | 52,282 | 88,830 | |||||||||||||||
|
Guarantor servicing fees
|
15,996 | 22,457 | 48,087 | 74,543 | 106,867 | |||||||||||||||
|
Other
|
90,502 | 164,899 | 150,006 | 445,811 | 741,229 | |||||||||||||||
|
Total other income (loss)
|
(139,510 | ) | 384,557 | 357,495 | 500,067 | 757,983 | ||||||||||||||
|
Expenses:
|
||||||||||||||||||||
|
Operating expenses
|
319,219 | 336,810 | 303,130 | 974,337 | 887,008 | |||||||||||||||
|
Goodwill and acquired intangible assets impairment and
amortization expense
|
669,668 | 9,710 | 9,774 | 689,090 | 29,176 | |||||||||||||||
|
Restructuring expenses
|
11,082 | 17,666 | 2,492 | 55,030 | 9,598 | |||||||||||||||
|
Total expenses
|
999,969 | 364,186 | 315,396 | 1,718,457 | 925,782 | |||||||||||||||
|
Income (loss) from continuing operations, before income tax
expense (benefit)
|
(625,655 | ) | 534,054 | 246,148 | 304,474 | 106,623 | ||||||||||||||
|
Income tax expense (benefit)
|
(127,558 | ) | 196,103 | 80,423 | 224,340 | 31,796 | ||||||||||||||
|
Net income (loss) from continuing operations
|
(498,097 | ) | 337,951 | 165,725 | 80,134 | 74,827 | ||||||||||||||
|
Income (loss) from discontinued operations, net of tax
|
3,211 | — | (6,417 | ) | 3,211 | (59,133 | ) | |||||||||||||
|
Net income (loss)
|
(494,886 | ) | 337,951 | 159,308 | 83,345 | 15,694 | ||||||||||||||
|
Less: net income attributable to noncontrolling interest
|
61 | 133 | 198 | 334 | 690 | |||||||||||||||
|
Net income (loss) attributable to SLM Corporation
|
(494,947 | ) | 337,818 | 159,110 | 83,011 | 15,004 | ||||||||||||||
|
Preferred stock dividends
|
18,787 | 18,711 | 42,627 | 56,176 | 94,822 | |||||||||||||||
|
Net income (loss) attributable to SLM Corporation common stock
|
$ | (513,734 | ) | $ | 319,107 | $ | 116,483 | $ | 26,835 | $ | (79,818 | ) | ||||||||
|
Net income (loss) attributable to SLM Corporation:
|
||||||||||||||||||||
|
Continuing operations, net of tax
|
$ | (498,158 | ) | $ | 337,818 | $ | 165,527 | $ | 79,800 | $ | 74,137 | |||||||||
|
Discontinued operations, net of tax
|
3,211 | — | (6,417 | ) | 3,211 | (59,133 | ) | |||||||||||||
|
Net income (loss) attributable to SLM Corporation
|
$ | (494,947 | ) | $ | 337,818 | $ | 159,110 | $ | 83,011 | $ | 15,004 | |||||||||
|
Basic earnings (loss) per common share attributable to SLM
Corporation common shareholders:
|
||||||||||||||||||||
|
Continuing operations
|
$ | (1.07 | ) | $ | .66 | $ | .26 | $ | .05 | $ | (.04 | ) | ||||||||
|
Discontinued operations
|
.01 | — | (.01 | ) | .01 | (.13 | ) | |||||||||||||
|
Total
|
$ | (1.06 | ) | $ | .66 | $ | .25 | $ | .06 | $ | (.17 | ) | ||||||||
|
Average common shares outstanding
|
484,936 | 484,832 | 470,280 | 484,678 | 467,960 | |||||||||||||||
|
Diluted earnings (loss) per common share attributable to SLM
Corporation common shareholders:
|
||||||||||||||||||||
|
Continuing operations
|
$ | (1.07 | ) | $ | .63 | $ | .26 | $ | .05 | $ | (.04 | ) | ||||||||
|
Discontinued operations
|
.01 | — | (.01 | ) | .01 | (.13 | ) | |||||||||||||
|
Total
|
$ | (1.06 | ) | $ | .63 | $ | .25 | $ | .06 | $ | (.17 | ) | ||||||||
|
Average common and common equivalent shares outstanding
|
484,936 | 527,391 | 471,058 | 486,209 | 467,960 | |||||||||||||||
|
Dividends per common share attributable to SLM
Corporation common shareholders |
$ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
3
SLM
CORPORATION
Segment and “Core Earnings”
Consolidated Statements of Income
(In thousands)
(Unaudited)
Segment and “Core Earnings”
Consolidated Statements of Income
(In thousands)
(Unaudited)
| Quarter ended September 30, 2010 | ||||||||||||||||||||||||
|
Asset |
||||||||||||||||||||||||
|
Performance |
Total “Core |
Total |
||||||||||||||||||||||
| Lending | Group | Other | Earnings”(2) | Adjustments | GAAP | |||||||||||||||||||
|
Interest income:
|
||||||||||||||||||||||||
|
FFELP Stafford and Other Student Loans
|
$ | 319,153 | $ | — | $ | — | $ | 319,153 | $ | 1,081 | $ | 320,234 | ||||||||||||
|
FFELP Consolidation Loans
|
409,973 | — | — | 409,973 | 154,613 | 564,586 | ||||||||||||||||||
|
Private Education Loans
|
610,893 | — | — | 610,893 | — | 610,893 | ||||||||||||||||||
|
Other loans
|
7,190 | — | — | 7,190 | — | 7,190 | ||||||||||||||||||
|
Cash and investments
|
3,214 | — | 4,416 | 7,630 | — | 7,630 | ||||||||||||||||||
|
Total interest income
|
1,350,423 | — | 4,416 | 1,354,839 | 155,694 | 1,510,533 | ||||||||||||||||||
|
Total interest expense
|
598,890 | — | — | 598,890 | 39,709 | 638,599 | ||||||||||||||||||
|
Net interest income
|
751,533 | — | 4,416 | 755,949 | 115,985 | 871,934 | ||||||||||||||||||
|
Less: provisions for loan losses
|
358,110 | — | — | 358,110 | — | 358,110 | ||||||||||||||||||
|
Net interest income after provisions for loan losses
|
393,423 | — | 4,416 | 397,839 | 115,985 | 513,824 | ||||||||||||||||||
|
Other income (loss):
|
||||||||||||||||||||||||
|
Contingency fee revenue
|
— | 83,746 | — | 83,746 | — | 83,746 | ||||||||||||||||||
|
Collections revenue
|
— | 13,097 | — | 13,097 | — | 13,097 | ||||||||||||||||||
|
Guarantor servicing fees
|
— | — | 15,996 | 15,996 | — | 15,996 | ||||||||||||||||||
|
Other income (loss)
|
57,869 | — | 55,928 | 113,797 | (366,146 | ) | (252,349 | ) | ||||||||||||||||
|
Total other income (loss)
|
57,869 | 96,843 | 71,924 | 226,636 | (366,146 | ) | (139,510 | ) | ||||||||||||||||
|
Expenses:
|
||||||||||||||||||||||||
|
Direct operating expenses
|
165,133 | 65,922 | 61,017 | 292,072 | — | 292,072 | ||||||||||||||||||
|
Overhead expenses
|
16,517 | 8,359 | 2,271 | 27,147 | — | 27,147 | ||||||||||||||||||
|
Operating expenses
|
181,650 | 74,281 | 63,288 | 319,219 | — | 319,219 | ||||||||||||||||||
|
Goodwill and acquired intangible assets impairment and
amortization expense
|
— | — | — | — | 669,668 | 669,668 | ||||||||||||||||||
|
Restructuring expenses
|
10,315 | 1,665 | (898 | ) | 11,082 | — | 11,082 | |||||||||||||||||
|
Total expenses
|
191,965 | 75,946 | 62,390 | 330,301 | 669,668 | 999,969 | ||||||||||||||||||
|
Income (loss) from continuing operations, before income tax
expense
|
259,327 | 20,897 | 13,950 | 294,174 | (919,829 | ) | (625,655 | ) | ||||||||||||||||
|
Income tax expense
(benefit)(1)
|
95,069 | 7,704 | 5,115 | 107,888 | (235,446 | ) | (127,558 | ) | ||||||||||||||||
|
Net income (loss) from continuing operations
|
164,258 | 13,193 | 8,835 | 186,286 | (684,383 | ) | (498,097 | ) | ||||||||||||||||
|
Income from discontinued operations, net of tax
|
— | 3,211 | — | 3,211 | — | 3,211 | ||||||||||||||||||
|
Net income
|
164,258 | 16,404 | 8,835 | 189,497 | (684,383 | ) | (494,886 | ) | ||||||||||||||||
|
Less: net income attributable to noncontrolling interest
|
— | 61 | — | 61 | — | 61 | ||||||||||||||||||
|
Net income attributable to SLM Corporation
|
$ | 164,258 | $ | 16,343 | $ | 8,835 | $ | 189,436 | $ | (684,383 | ) | $ | (494,947 | ) | ||||||||||
|
Economic Floor Income (net of tax) not included in “Core
Earnings”
|
$ | 12,145 | $ | — | $ | — | $ | 12,145 | ||||||||||||||||
| (1) | Income taxes are based on a percentage of net income before tax for the reportable segment. | |
| (2) | “Core Earnings” are non-GAAP measures and do not represent a comprehensive basis 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
|
$ | 164,258 | $ | 13,132 | $ | 8,835 | $ | 186,225 | $ | (684,383 | ) | $ | (498,158 | ) | ||||||||||
|
Discontinued operations, net of tax
|
— | 3,211 | — | 3,211 | — | 3,211 | ||||||||||||||||||
|
Net income (loss) attributable to SLM Corporation
|
$ | 164,258 | $ | 16,343 | $ | 8,835 | $ | 189,436 | $ | (684,383 | ) | $ | (494,947 | ) | ||||||||||
4
SLM
CORPORATION
Segment and “Core Earnings”
Consolidated Statements of Income
(In thousands)
(Unaudited)
Segment and “Core Earnings”
Consolidated Statements of Income
(In thousands)
(Unaudited)
| Quarter ended June 30, 2010 | ||||||||||||||||||||||||
|
Asset |
||||||||||||||||||||||||
|
Performance |
Total “Core |
Total |
||||||||||||||||||||||
| Lending | Group | 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 | — | 294,889 | ||||||||||||||||||
|
Overhead expenses
|
27,325 | 11,115 | 3,481 | 41,921 | — | 41,921 | ||||||||||||||||||
|
Operating expenses
|
194,086 | 86,371 | 56,353 | 336,810 | — | 336,810 | ||||||||||||||||||
|
Goodwill and acquired intangible assets impairment and
amortization expense
|
— | — | — | — | 9,710 | 9,710 | ||||||||||||||||||
|
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 reportable segment. | |
| (2) | “Core Earnings” are non-GAAP measures and do not represent a comprehensive basis 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. |
5
SLM
CORPORATION
Segment and “Core Earnings”
Consolidated Statements of Income
(In thousands)
(Unaudited)
Segment and “Core Earnings”
Consolidated Statements of Income
(In thousands)
(Unaudited)
| Quarter ended September 30, 2009 | ||||||||||||||||||||||||
|
Asset |
||||||||||||||||||||||||
|
Performance |
Total “Core |
Total |
||||||||||||||||||||||
| Lending | Group | Other | Earnings”(2) | Adjustments | GAAP | |||||||||||||||||||
|
Interest income:
|
||||||||||||||||||||||||
|
FFELP Stafford and Other Student Loans
|
$ | 340,652 | $ | — | $ | — | $ | 340,652 | $ | (37,460 | ) | $ | 303,192 | |||||||||||
|
FFELP Consolidation Loans
|
429,617 | — | — | 429,617 | 51,975 | 481,592 | ||||||||||||||||||
|
Private Education Loans
|
560,791 | — | — | 560,791 | (164,452 | ) | 396,339 | |||||||||||||||||
|
Other loans
|
11,042 | — | — | 11,042 | — | 11,042 | ||||||||||||||||||
|
Cash and investments
|
2,337 | — | 5,156 | 7,493 | (612 | ) | 6,881 | |||||||||||||||||
|
Total interest income
|
1,344,439 | — | 5,156 | 1,349,595 | (150,549 | ) | 1,199,046 | |||||||||||||||||
|
Total interest expense
|
659,971 | — | — | 659,971 | 13,899 | 673,870 | ||||||||||||||||||
|
Net interest income
|
684,468 | — | 5,156 | 689,624 | (164,448 | ) | 525,176 | |||||||||||||||||
|
Less: provisions for loan losses
|
447,963 | — | — | 447,963 | (126,836 | ) | 321,127 | |||||||||||||||||
|
Net interest income after provisions for loan losses
|
236,505 | — | 5,156 | 241,661 | (37,612 | ) | 204,049 | |||||||||||||||||
|
Other income:
|
||||||||||||||||||||||||
|
Contingency fee revenue
|
— | 82,200 | — | 82,200 | — | 82,200 | ||||||||||||||||||
|
Collections revenue
|
— | 21,241 | — | 21,241 | — | 21,241 | ||||||||||||||||||
|
Guarantor servicing fees
|
— | — | 48,087 | 48,087 | — | 48,087 | ||||||||||||||||||
|
Other income
|
129,286 | — | 55,821 | 185,107 | 20,860 | 205,967 | ||||||||||||||||||
|
Total other income
|
129,286 | 103,441 | 103,908 | 336,635 | 20,860 | 357,495 | ||||||||||||||||||
|
Expenses:
|
||||||||||||||||||||||||
|
Direct operating expenses
|
143,515 | 75,244 | 55,891 | 274,650 | (83 | ) | 274,567 | |||||||||||||||||
|
Overhead expenses
|
16,931 | 8,848 | 2,784 | 28,563 | — | 28,563 | ||||||||||||||||||
|
Operating expenses
|
160,446 | 84,092 | 58,675 | 303,213 | (83 | ) | 303,130 | |||||||||||||||||
|
Goodwill and acquired intangible assets impairment and
amortization expense
|
— | — | — | — | 9,774 | 9,774 | ||||||||||||||||||
|
Restructuring expenses
|
1,823 | 340 | 329 | 2,492 | — | 2,492 | ||||||||||||||||||
|
Total expenses
|
162,269 | 84,432 | 59,004 | 305,705 | 9,691 | 315,396 | ||||||||||||||||||
|
Income from continuing operations, before income tax expense
|
203,522 | 19,009 | 50,060 | 272,591 | (26,443 | ) | 246,148 | |||||||||||||||||
|
Income tax
expense(1)
|
75,113 | 8,502 | 18,483 | 102,098 | (21,675 | ) | 80,423 | |||||||||||||||||
|
Net income from continuing operations
|
128,409 | 10,507 | 31,577 | 170,493 | (4,768 | ) | 165,725 | |||||||||||||||||
|
Loss from discontinued operations, net of tax
|
— | (6,353 | ) | — | (6,353 | ) | (64 | ) | (6,417 | ) | ||||||||||||||
|
Net income
|
128,409 | 4,154 | 31,577 | 164,140 | (4,832 | ) | 159,308 | |||||||||||||||||
|
Less: net income attributable to noncontrolling interest
|
— | 198 | — | 198 | — | 198 | ||||||||||||||||||
|
Net income attributable to SLM Corporation
|
$ | 128,409 | $ | 3,956 | $ | 31,577 | $ | 163,942 | $ | (4,832 | ) | $ | 159,110 | |||||||||||
|
Economic Floor Income (net of tax) not included in “Core
Earnings”
|
$ | 22,607 | $ | — | $ | — | $ | 22,607 | ||||||||||||||||
| (1) | Income taxes are based on a percentage of net income before tax for the reportable segment. | |
| (2) | “Core Earnings” are non-GAAP measures and do not represent a comprehensive basis 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
|
$ | 128,409 | $ | 10,309 | $ | 31,577 | $ | 170,295 | $ | (4,768 | ) | $ | 165,527 | |||||||||||
|
Discontinued operations, net of tax
|
— | (6,353 | ) | — | (6,353 | ) | (64 | ) | (6,417 | ) | ||||||||||||||
|
Net income (loss) attributable to SLM Corporation
|
$ | 128,409 | $ | 3,956 | $ | 31,577 | $ | 163,942 | $ | (4,832 | ) | $ | 159,110 | |||||||||||
6
SLM
CORPORATION
Segment and “Core Earnings”
Consolidated Statements of Income
(In thousands)
(Unaudited)
Segment and “Core Earnings”
Consolidated Statements of Income
(In thousands)
(Unaudited)
| Nine months ended September 30, 2010 | ||||||||||||||||||||||||
|
Asset |
||||||||||||||||||||||||
|
Performance |
Total “Core |
Total |
||||||||||||||||||||||
| Lending | Group | Other | Earnings”(2) | Adjustments | GAAP | |||||||||||||||||||
|
Interest income:
|
||||||||||||||||||||||||
|
FFELP Stafford and Other Student Loans
|
$ | 917,552 | $ | — | $ | — | $ | 917,552 | $ | 11,161 | $ | 928,713 | ||||||||||||
|
FFELP Consolidation Loans
|
1,191,759 | — | — | 1,191,759 | 447,072 | 1,638,831 | ||||||||||||||||||
|
Private Education Loans
|
1,751,387 | — | — | 1,751,387 | — | 1,751,387 | ||||||||||||||||||
|
Other loans
|
23,440 | — | — | 23,440 | — | 23,440 | ||||||||||||||||||
|
Cash and investments
|
6,213 | — | 12,665 | 18,878 | — | 18,878 | ||||||||||||||||||
|
Total interest income
|
3,890,351 | — | 12,665 | 3,903,016 | 458,233 | 4,361,249 | ||||||||||||||||||
|
Total interest expense
|
1,685,972 | — | — | 1,685,972 | 52,944 | 1,738,916 | ||||||||||||||||||
|
Net interest income
|
2,204,379 | — | 12,665 | 2,217,044 | 405,289 | 2,622,333 | ||||||||||||||||||
|
Less: provisions for loan losses
|
1,099,469 | — | — | 1,099,469 | — | 1,099,469 | ||||||||||||||||||
|
Net interest income after provisions for loan losses
|
1,104,910 | — | 12,665 | 1,117,575 | 405,289 | 1,522,864 | ||||||||||||||||||
|
Other income:
|
||||||||||||||||||||||||
|
Contingency fee revenue
|
— | 252,238 | — | 252,238 | — | 252,238 | ||||||||||||||||||
|
Collections revenue
|
— | 52,282 | — | 52,282 | — | 52,282 | ||||||||||||||||||
|
Guarantor servicing fees
|
— | — | 74,543 | 74,543 | — | 74,543 | ||||||||||||||||||
|
Other income
|
326,773 | — | 165,458 | 492,231 | (371,227 | ) | 121,004 | |||||||||||||||||
|
Total other income
|
326,773 | 304,520 | 240,001 | 871,294 | (371,227 | ) | 500,067 | |||||||||||||||||
|
Expenses:
|
||||||||||||||||||||||||
|
Direct operating expenses
|
477,652 | 216,735 | 176,107 | 870,494 | — | 870,494 | ||||||||||||||||||
|
Overhead expenses
|
64,455 | 30,247 | 9,141 | 103,843 | — | 103,843 | ||||||||||||||||||
|
Operating expenses
|
542,107 | 246,982 | 185,248 | 974,337 | — | 974,337 | ||||||||||||||||||
|
Goodwill and acquired intangible assets impairment and
amortization expense
|
— | — | — | — | 689,090 | 689,090 | ||||||||||||||||||
|
Restructuring expenses
|
47,413 | 3,164 | 4,453 | 55,030 | — | 55,030 | ||||||||||||||||||
|
Total expenses
|
589,520 | 250,146 | 189,701 | 1,029,367 | 689,090 | 1,718,457 | ||||||||||||||||||
|
Income from continuing operations, before income tax expense
|
842,163 | 54,374 | 62,965 | 959,502 | (655,028 | ) | 304,474 | |||||||||||||||||
|
Income tax
expense(1)
|
308,737 | 19,977 | 23,083 | 351,797 | (127,457 | ) | 224,340 | |||||||||||||||||
|
Net income from continuing operations
|
533,426 | 34,397 | 39,882 | 607,705 | (527,571 | ) | 80,134 | |||||||||||||||||
|
Income from discontinued operations, net of tax
|
— | 3,211 | — | 3,211 | — | 3,211 | ||||||||||||||||||
|
Net income
|
533,426 | 37,608 | 39,882 | 610,916 | (527,571 | ) | 83,345 | |||||||||||||||||
|
Less: net income attributable to noncontrolling interest
|
— | 334 | — | 334 | — | 334 | ||||||||||||||||||
|
Net income attributable to SLM Corporation
|
$ | 533,426 | $ | 37,274 | $ | 39,882 | $ | 610,582 | $ | (527,571 | ) | $ | 83,011 | |||||||||||
|
Economic Floor Income (net of tax) not included in “Core
Earnings”
|
$ | 16,242 | $ | — | $ | — | $ | 16,242 | ||||||||||||||||
| (1) | Income taxes are based on a percentage of net income before tax for the reportable segment. | |
| (2) | “Core Earnings” are non-GAAP measures and do not represent a comprehensive basis 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
|
$ | 533,426 | $ | 34,063 | $ | 39,882 | $ | 607,371 | $ | (527,571 | ) | $ | 79,800 | |||||||||||
|
Discontinued operations, net of tax
|
— | 3,211 | — | 3,211 | — | 3,211 | ||||||||||||||||||
|
Net income (loss) attributable to SLM Corporation
|
$ | 533,426 | $ | 37,274 | $ | 39,882 | $ | 610,582 | $ | (527,571 | ) | $ | 83,011 | |||||||||||
7
SLM
CORPORATION
Segment and “Core Earnings”
Consolidated Statements of Income
(In thousands)
(Unaudited)
Segment and “Core Earnings”
Consolidated Statements of Income
(In thousands)
(Unaudited)
| Nine months ended September 30, 2009 | ||||||||||||||||||||||||
|
Asset |
||||||||||||||||||||||||
|
Performance |
Total “Core |
Total |
||||||||||||||||||||||
| Lending | Group | Other | Earnings”(2) | Adjustments | GAAP | |||||||||||||||||||
|
Interest income:
|
||||||||||||||||||||||||
|
FFELP Stafford and Other Student Loans
|
$ | 1,012,124 | $ | — | $ | — | $ | 1,012,124 | $ | (42,177 | ) | $ | 969,947 | |||||||||||
|
FFELP Consolidation Loans
|
1,262,801 | — | — | 1,262,801 | 168,843 | 1,431,644 | ||||||||||||||||||
|
Private Education Loans
|
1,682,740 | — | — | 1,682,740 | (506,341 | ) | 1,176,399 | |||||||||||||||||
|
Other loans
|
45,930 | — | — | 45,930 | — | 45,930 | ||||||||||||||||||
|
Cash and investments
|
8,199 | — | 14,603 | 22,802 | (2,906 | ) | 19,896 | |||||||||||||||||
|
Total interest income
|
4,011,794 | — | 14,603 | 4,026,397 | (382,581 | ) | 3,643,816 | |||||||||||||||||
|
Total interest expense
|
2,450,880 | — | — | 2,450,880 | 68,996 | 2,519,876 | ||||||||||||||||||
|
Net interest income
|
1,560,914 | — | 14,603 | 1,575,517 | (451,577 | ) | 1,123,940 | |||||||||||||||||
|
Less: provisions for loan losses
|
1,198,839 | — | — | 1,198,839 | (349,321 | ) | 849,518 | |||||||||||||||||
|
Net interest income after provisions for loan losses
|
362,075 | — | 14,603 | 376,678 | (102,256 | ) | 274,422 | |||||||||||||||||
|
Other income:
|
||||||||||||||||||||||||
|
Contingency fee revenue
|
— | 230,383 | — | 230,383 | — | 230,383 | ||||||||||||||||||
|
Collections revenue
|
— | 88,141 | — | 88,141 | 689 | 88,830 | ||||||||||||||||||
|
Guarantor servicing fees
|
— | — | 106,867 | 106,867 | — | 106,867 | ||||||||||||||||||
|
Other income
|
591,017 | — | 151,875 | 742,892 | (410,989 | ) | 331,903 | |||||||||||||||||
|
Total other income
|
591,017 | 318,524 | 258,742 | 1,168,283 | (410,300 | ) | 757,983 | |||||||||||||||||
|
Expenses:
|
||||||||||||||||||||||||
|
Direct operating expenses
|
400,777 | 235,013 | 154,031 | 789,821 | (39 | ) | 789,782 | |||||||||||||||||
|
Overhead expenses
|
57,632 | 30,119 | 9,475 | 97,226 | — | 97,226 | ||||||||||||||||||
|
Operating expenses
|
458,409 | 265,132 | 163,506 | 887,047 | (39 | ) | 887,008 | |||||||||||||||||
|
Goodwill and acquired intangible assets impairment and
amortization expense
|
— | — | — | — | 29,176 | 29,176 | ||||||||||||||||||
|
Restructuring expenses
|
7,507 | 266 | 1,825 | 9,598 | — | 9,598 | ||||||||||||||||||
|
Total expenses
|
465,916 | 265,398 | 165,331 | 896,645 | 29,137 | 925,782 | ||||||||||||||||||
|
Income from continuing operations, before income tax expense
|
487,176 | 53,126 | 108,014 | 648,316 | (541,693 | ) | 106,623 | |||||||||||||||||
|
Income tax
expense(1)
|
180,207 | 20,255 | 39,954 | 240,416 | (208,620 | ) | 31,796 | |||||||||||||||||
|
Net income from continuing operations
|
306,969 | 32,871 | 68,060 | 407,900 | (333,073 | ) | 74,827 | |||||||||||||||||
|
Loss from discontinued operations, net of tax
|
— | (58,940 | ) | — | (58,940 | ) | (193 | ) | (59,133 | ) | ||||||||||||||
|
Net income (loss)
|
306,969 | (26,069 | ) | 68,060 | 348,960 | (333,266 | ) | 15,694 | ||||||||||||||||
|
Less: net income attributable to noncontrolling interest
|
— | 690 | — | 690 | — | 690 | ||||||||||||||||||
|
Net income (loss) attributable to SLM Corporation
|
$ | 306,969 | $ | (26,759 | ) | $ | 68,060 | $ | 348,270 | $ | (333,266 | ) | $ | 15,004 | ||||||||||
|
Economic Floor Income (net of tax) not included in “Core
Earnings”
|
$ | 190,894 | $ | — | $ | — | $ | 190,894 | ||||||||||||||||
| (1) | Income taxes are based on a percentage of net income before tax for the reportable segment. | |
| (2) | “Core Earnings” are non-GAAP measures and do not represent a comprehensive basis 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
|
$ | 306,969 | $ | 32,181 | $ | 68,060 | $ | 407,210 | $ | (333,073 | ) | $ | 74,137 | |||||||||||
|
Discontinued operations, net of tax
|
— | (58,940 | ) | — | (58,940 | ) | (193 | ) | (59,133 | ) | ||||||||||||||
|
Net income (loss) attributable to SLM Corporation
|
$ | 306,969 | $ | (26,759 | ) | $ | 68,060 | $ | 348,270 | $ | (333,266 | ) | $ | 15,004 | ||||||||||
8
SLM
CORPORATION
Reconciliation of “Core Earnings” Net Income to GAAP Net Income
(In thousands, except per share amounts)
(Unaudited)
Reconciliation of “Core Earnings” Net Income to GAAP Net Income
(In thousands, except per share amounts)
(Unaudited)
| Quarters ended | Nine months ended | |||||||||||||||||||
|
September 30, |
June 30, |
September 30, |
September 30, |
September 30, |
||||||||||||||||
| 2010 | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||
|
“Core Earnings” net income attributable to SLM
Corporation(1)(2)
|
$ | 189,436 | $ | 209,372 | $ | 163,942 | $ | 610,582 | $ | 348,270 | ||||||||||
|
“Core Earnings” adjustments:
|
||||||||||||||||||||
|
Net impact of securitization accounting
|
— | — | 27,885 | — | (196,566 | ) | ||||||||||||||
|
Net impact of derivative accounting
|
(182,708 | ) | 301,421 | (36,598 | ) | 238,820 | (477,169 | ) | ||||||||||||
|
Net impact of Floor Income
|
(67,453 | ) | (88,419 | ) | (8,020 | ) | (204,758 | ) | 161,025 | |||||||||||
|
Net impact of goodwill and acquired intangibles
|
(669,668 | ) | (9,710 | ) | (9,774 | ) | (689,090 | ) | (29,176 | ) | ||||||||||
|
Total “Core Earnings” adjustments before income tax
effect
|
(919,829 | ) | 203,292 | (26,507 | ) | (655,028 | ) | (541,886 | ) | |||||||||||
|
Net income tax effect
|
235,446 | (74,846 | ) | 21,675 | 127,457 | 208,620 | ||||||||||||||
|
Total “Core Earnings” adjustments
|
(684,383 | ) | 128,446 | (4,832 | ) | (527,571 | ) | (333,266 | ) | |||||||||||
|
GAAP net income (loss) attributable to SLM Corporation
|
$ | (494,947 | ) | $ | 337,818 | $ | 159,110 | $ | 83,011 | $ | 15,004 | |||||||||
|
GAAP diluted earnings (loss) per common share attributable to
SLM
Corporation common shareholders |
$ | (1.06 | ) | $ | .63 | $ | .25 | $ | .06 | $ | (.17 | ) | ||||||||
|
(1) “Core
Earnings” diluted earnings per common share attributable to
SLM Corporation common shareholders
|
$ | .35 | $ | .39 | $ | .26 | $ | 1.13 | $ | .54 | ||||||||||
|
(2) Total
Economic Floor Income earned on Managed loans, not included in
“Core Earnings” (net of tax)
|
$ | 12,145 | $ | 1,231 | $ | 22,607 | $ | 16,242 | $ | 190,894 | ||||||||||
|
Total Economic Floor Income
earned, not included in “Core Earnings” (net of tax)
per common share attributable to SLM Corporation common
shareholders
|
$ | .02 | $ | — | $ | .05 | $ | .03 | $ | .41 | ||||||||||
“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, lenders and
investors. 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
9
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, lenders and investors 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 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.
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.
10
| 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. |
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. | |
| 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. | |
| 4) | Goodwill and Acquired Intangibles: Our “Core Earnings” exclude goodwill and intangible impairment and the amortization of acquired intangibles. |
11