UNITED STATES
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

SLM CORPORATION

(Exact name of registrant as specified in its charter)

DELAWARE		001-13251		52-2013874
(State or other jurisdiction		(Commission File Number)		(I.R.S. Employer
of incorporation)				Identification No.)

300 Continental Drive, Newark, Delaware 19713
(Address of principal executive offices)(zip code)

Registrant’s telephone number, including area code: (302) 283-8000

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 July 20, 2011, SLM Corporation (the “Company”) issued a press release announcing its financial results for the quarter ended June 30, 2011. A copy of this press release is furnished as Exhibit 99.1 to this report.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

99.1*

SLM Corporation Press Release dated July 20, 2011.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

EXHIBIT INDEX

Exhibit No.		Description
99.1*		SLM Corporation Press Release dated July 20, 2011.

Exhibit 99.1

 

SALLIE MAE REPORTS SECOND-QUARTER FINANCIAL RESULTS

 

NEWARK, Del., July 20, 2011 — Sallie Mae (NYSE: SLM) today released second-quarter 2011 financial results that reflected increased student loan originations and improved student loan delinquencies.

 

“We today report solid second quarter performance. I am particularly pleased we continue to reduce credit costs and operating expenses as expected. I am also encouraged by private credit growth in a subdued economy,” said Albert L. Lord, vice chairman and CEO. “Sallie Mae is focused on our customers’ financial needs and enthusiastically builds new products to help students and families save and pay for college.”

 

GAAP second-quarter 2011 net loss was $6 million ($.02 diluted loss per share), compared to net income of $338 million ($.63 diluted earnings per share) in the same quarter last year. The decrease was due to a pre-tax $414 million unrealized, mark-to-market loss on certain derivative contracts recognized in GAAP but not in core earnings results, compared to a $211 million unrealized, mark-to-market gain in the year-ago quarter.

 

Core earnings were $260 million ($.48 diluted earnings per share) in second-quarter 2011, compared to $211 million ($.39 diluted earnings per share) in the year-ago period. Improved credit quality and operating expenses combined more than offset lower debt repurchase gains. The company manages its business segments on a core earnings basis, as described further below.

 

Consumer Lending

 

In the consumer lending segment, Sallie Mae originates, finances and services private education loans.

 

Core earnings were $49 million, compared to a net loss of $12 million in the second quarter last year. The improvement was primarily due to a decreased loan loss provision. Loan delinquencies and charge-offs both improved.

 

Highlights vs. second-quarter 2010 included:

 

 

Business Services

 

Sallie Mae’s business services segment includes fees from servicing, collections and college savings businesses.

 

Core earnings were $140 million in second-quarter 2011, compared to $127 million in the year-ago quarter. The improvement was driven by substantial FFELP loan acquisitions last year that increased FFELP loan servicing revenue.

 

Federally Guaranteed Loans (FFELP)

 

This segment represents earnings from Sallie Mae’s amortizing FFELP portfolio.

Core earnings were $108 million in second-quarter 2011, compared to $95 million in the year-ago quarter. Second-quarter 2011 net interest margin was 0.98 percent, compared to 0.95 percent in the year-ago quarter. These increases were primarily driven by last year’s substantial FFELP loan portfolio acquisitions.

 

Operating Expenses

 

Operating expenses were $268 million in second-quarter 2011, compared to $303 million in first-quarter 2011 and $309 million in the year-ago quarter.

 

Operating expenses in second-quarter 2011 included $13 million of servicing costs related to the $25 billion student loan portfolio acquisition at the end of last year and $2 million for litigation contingencies. The company expects these servicing costs to decline as the acquired portfolio converts to the company’s loan servicing system in 2011.

 

Funding and Liquidity

 

During the quarter, the company issued an $821 million FFELP asset-backed securitization and two private loan securitizations totaling $1.4 billion.

 

The company also repurchased $60 million of debt and realized $0.3 million of gains in second-quarter 2011, compared with $1.4 billion and $91 million in the year-ago quarter.

 

Dividend and Common Share Repurchase Program

 

In second-quarter 2011, Sallie Mae paid a common stock dividend of $.10 per share and repurchased 9.6 million common shares for $156 million as part of its previously announced $300 million share repurchase program.

 

Guidance

 

The company expects its results to be as follows:

 

 

***

 

Sallie Mae reports financial results on a GAAP basis and also presents certain core earnings performance measures. The primary difference between the company’s pre-tax core earnings and GAAP results for the quarter was unrealized, mark-to-market losses on certain derivative contracts. 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. See “Core Earnings — Definition and Limitations” for a further discussion and a complete reconciliation between GAAP net income and core earnings. Given the significant variability of valuations of derivative instruments on expected GAAP net income, the company does not provide a GAAP equivalent for its core earnings per share guidance.

 

Definitions for capitalized terms in this document can be found in the company’s Annual Report on Form 10-K for the year ended Dec. 31, 2010 (filed with the SEC on Feb. 28, 2011).

 

***

 

Presentation slides for the conference call discussed below, as well as additional information about the company’s loan portfolios, new operating segments, and other details, may be accessed at www.SallieMae.com/investors under the webcasts tab.

 

The company will host an earnings conference call tomorrow, July 21, 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 75902491 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 August 4, by dialing (800) 642-1687 (USA and Canada) or (706) 645-9291 (international) with access code 75902491.

 

This press release contains “forward-looking statements” and information based on management’s current expectations as of the date of this release. Statements that are not historical facts, including statements about the company’s beliefs or expectations and statements that assume or are dependent upon future events, are forward-looking statements. Forward-looking statements are subject to risks, uncertainties, assumptions and other factors that may cause actual results to be materially different from those reflected in such forward-looking statements. These factors include, among others, the risks and uncertainties set forth in Item 1A “Risk Factors” and elsewhere in the company’s Annual Report on Form 10-K for the year ended Dec. 31, 2010, and subsequent filings with the SEC; increases in financing costs; limits on liquidity; increases in costs associated with compliance with laws and regulations; changes in accounting standards and the impact of related changes in significant accounting estimates; any adverse outcomes in any significant litigation to which the company is a party; credit risk associated with the company’s exposure to third parties, including counterparties to the company’s derivative transactions; and changes in the terms of student loans and the educational credit marketplace (including changes resulting from new laws and the implementation of existing laws). The company could also be affected by, among other things: changes in its funding costs and availability; reductions to its credit ratings; failures of its operating systems or infrastructure, including those of third-party vendors; damage to its reputation; failures to successfully implement cost-cutting and restructuring initiatives and adverse effects of such initiatives on its business; changes in the demand for educational financing or in financing preferences of lenders, educational institutions, students and their families; changes in law and regulations with respect to the student lending business and financial institutions generally; increased competition from banks and other consumer lenders; the creditworthiness of its customers; changes in the general interest rate environment, including the rate relationships among relevant money-market instruments and those of its earning assets vs. its funding arrangements; changes in general economic conditions; and changes in the demand for debt management services. The preparation of the company’s consolidated financial statements also requires management to make certain estimates and assumptions including estimates and assumptions about future events. These estimates or assumptions may prove to be incorrect. All forward-looking statements contained in this release are qualified by these cautionary statements and are made only as of the date of this release. 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 its expectations.

 

***

 

Sallie Mae (NYSE:  SLM) is the nation’s No. 1 saving, planning and paying for college company. Serving 23 million customers, Sallie Mae offers innovative savings tools, tuition payment plans and education loans that promote responsible financial habits and reward success. Through its subsidiaries, the company manages or services $234 billion in education loans and administers $38 billion in 529 college savings plans. Members of its Upromise college savings rewards program have earned $600 million to help pay for college. Sallie Mae is also one of the leading financial service providers for universities and governments at all levels, including supporting $8 billion in ecommerce transactions annually at nearly 1,000 campuses. More information is available at www.SallieMae.com. SLM Corporation and its subsidiaries, commonly known as Sallie Mae, are not sponsored by or agencies of the United States of America.

 

# # #

 

CONTACTS:

 

Selected Financial Information and Ratios

 

 

 

 

Results of Operations

 

We present the results of operations below on a consolidated basis in accordance with GAAP. The presentation of our results on a segment basis is not in accordance with GAAP. We have four business segments: FFELP Loans, Consumer Lending, Business Services and Other. Since these segments operate in distinct business environments and we manage and evaluate the financial performance of these segments using non-GAAP financial measures, these segments are presented on a “Core Earnings” basis (see “‘Core Earnings’ Definitions and Limitations”).

 

GAAP Statements of Income (Unaudited)

 

 

GAAP Balance Sheet (Unaudited)

 

Consolidated Earnings Summary — GAAP-basis

 

Three Months Ended June 30, 2011 Compared with Three Months Ended June 30, 2010

 

For the three months ended June 30, 2011 and 2010, net income (loss) was $(6) million, or $(.02) diluted loss per common share, and $338 million, or $.63 diluted earnings per common share, respectively. The decrease in net income was primarily due to a $605 million increase in net losses on derivative and hedging activities and a $91 million decrease in gains on debt repurchases. These reductions were partially offset by a $63 million increase in net interest income after provisions for loan losses and a $61 million decrease in total expenses.

 

The primary contributors to each of the identified drivers of changes in net income for the current quarter compared with the year-ago quarter are as follows:

 

 

Six Months Ended June 30, 2011 Compared with Six Months Ended June 30, 2010

 

For the six months ended June 30, 2011 and 2010, net income was $169 million, or $.30 diluted earnings per common share, and $578 million, or $1.08 diluted earnings per common share, respectively. The decrease in net income for the six months ended June 30, 2011 as compared with the prior year period was primarily due to a $765 million increase in net losses on derivative and hedging activities and a $143 million decrease in gains on debt repurchases. These were partially offset by a $163 million increase in net interest income after provisions for loans losses and a $70 million decrease in total expenses.

 

The primary contributors to each of the identified drivers of changes in net income for the current six-month period compared with the year-ago six-month period are as follows:

 

 

 

“Core Earnings” — Definition and Limitations

 

We prepare financial statements in accordance with GAAP. However, we also evaluate our business segments on a basis that differs from GAAP. We refer to this different basis of presentation as “Core Earnings.” We provide this “Core Earnings” basis of presentation on a consolidated basis for each business segment because this is what we internally review when making management decisions regarding our performance and how we allocate resources. We also refer to this information in our presentations with credit rating agencies, lenders and investors. Because our “Core Earnings” basis of presentation corresponds to our segment financial presentations, we are required by GAAP to provide “Core Earnings” disclosure in the notes to our consolidated financial statements for our business segments.

 

“Core Earnings” are not a substitute for reported results under GAAP. We use “Core Earnings” to manage each business segment because “Core Earnings” reflect adjustments to GAAP financial results for two items, discussed below, that create significant volatility mostly due to timing factors generally beyond the control of management. Accordingly, we believe that “Core Earnings” provide management with a useful basis from which to better evaluate results from ongoing operations against the business plan or against results from prior periods. Consequently, we disclose this information as we believe it provides investors with additional information regarding the operational and performance indicators that are most closely assessed by management. The two items adjusted for in our “Core Earnings” presentations are: (1) our use of derivatives instruments to hedge our economic risks that do not qualify for hedge accounting treatment or do qualify for hedge accounting treatment but result in ineffectiveness and (2) the accounting for goodwill and acquired intangible assets.

 

While GAAP provides a uniform, comprehensive basis of accounting, for the reasons described above, our “Core Earnings” basis of presentation does not. “Core Earnings” are subject to certain general and specific limitations that investors should carefully consider. For example, 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. Accordingly, our “Core Earnings” presentation does not represent a comprehensive basis of accounting. Investors, therefore, may not be able to compare our 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, our board of directors, rating agencies, lenders and investors to assess performance.

 

Specific adjustments that management makes to GAAP results to derive our “Core Earnings” basis of presentation are described in detail in the section entitled ‘“Core Earnings’ — Definition and Limitations — Differences between ‘Core Earnings’ and GAAP” below.

The following tables show “Core Earnings” for each business segment and our business as a whole along with the adjustments made to the income/expense items to reconcile the amounts to our reported GAAP results as required by GAAP.