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false0001032033 0001032033 us-gaap:CommonClassAMember 2020-01-22 2020-01-22 0001032033 us-gaap:NoncumulativePreferredStockMember 2020-01-22 2020-01-22 0001032033 2020-01-22 2020-01-22


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

Date of Report (date of earliest event reported): January 22, 2020

SLM CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
001-13251
52-2013874
 
(State or other jurisdiction of incorporation or organization)
(Commission File Number)
(I.R.S. Employer Identification No.)
 
 
 
 
 
 
 
 
300 Continental Drive
Newark,
Delaware
19713
 
(Address of principal executive offices)
(Zip Code)
 

Registrant's telephone number, including area code: (302) 451-0200
(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common stock, par value $.20 per share
SLM
The NASDAQ Global Select Market
Floating Rate Non-Cumulative Preferred Stock, Series B, par value $.20 per share
SLMBP
The NASDAQ Global Select Market

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:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o




ITEM 2.02    RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On January 22, 2020, SLM Corporation issued a press release announcing its financial results for the quarter and year ended December 31, 2019. The press release is furnished as Exhibit 99.1 and incorporated by reference herein.
The press release at Exhibit 99.1 and incorporated by reference herein is being furnished and shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that Section and shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise expressly stated in such filing.

ITEM 9.01    FINANCIAL STATEMENTS AND EXHIBITS.

(d) Exhibits
Exhibit
Number
 
Description
 
 
 
 99.1*
 
 
 
 
104
 
Cover Page Interactive Data File (formatted as Inline XBRL)

*
Furnished herewith.










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.

                        
 
 SLM CORPORATION
Date: January 22, 2020
By:
/s/ STEVEN J. MCGARRY
 
 
Steven J. McGarry
 
 
Executive Vice President and Chief Financial Officer


                

                            
                    
Exhibit


Exhibit 99.1
https://cdn.kscope.io/4a8f35d01855136d5ffbd7f5f4be3081-smbla03.jpg
 
 
 
News Release
 
For Immediate Release

SALLIE MAE REPORTS FOURTH-QUARTER AND FULL-YEAR 2019 FINANCIAL RESULTS

Fourth-Quarter GAAP Net Income Attributable to Common Stock of $137 Million, $0.32 Per Diluted Share; Full-Year 2019 GAAP Net Income Attributable to Common Stock of $561 Million, $1.30 Per Diluted Share Which Is an Increase of 21% Compared to Year-Ago Period

Fourth-Quarter “Core Earnings” Net Income Attributable to Common Stock of $142 Million, $0.33 Per Diluted Share; Full-Year 2019 “Core Earnings” Net Income Attributable to Common Stock of $547 Million, $1.27 Per Diluted Share Which Is an Increase of 19% Compared to Year-Ago Period

Private Education Loan Portfolio Totals $22.9 Billion, Up 13% From Year-Ago Quarter

Company Plans $3 Billion of Private Education Loan Sales to Fund Expected $600 Million in Share Repurchases in 2020

NEWARK, Del., Jan. 22, 2020 - Sallie Mae (Nasdaq: SLM), formally SLM Corporation, today released fourth-quarter and full-year 2019 financial results. Highlights of those results are included in the attached supplement. Complete financial results are available at www.SallieMae.com/investors.

Sallie Mae will host an earnings conference call tomorrow, Jan. 23, 2020, at 8 a.m. EST. Executives will be on hand to discuss various highlights of the quarter and to answer questions related to Sallie Mae’s performance. To participate, dial 877-356-5689 (USA and Canada) or 706-679-0623 (international) and use access code 6334858 starting at 7:45 a.m. EST. A replay of the conference call will be available approximately two hours after the call’s conclusion and will remain available through Feb. 6, 2020, by dialing 855-859-2056 (USA and Canada) or 404-537-3406 (international) with access code 6334858.

A live audio webcast of the conference call, presentation slides and an infographic may be accessed at www.SallieMae.com/investors.

Sallie Mae (Nasdaq: SLM) believes education and life-long learning, in all forms, help people achieve great things. As the leader in private student lending, we provide financing and know-how to support access to college and offer products and resources to help customers make new goals and experiences, beyond college, happen. Learn more at SallieMae.com. Commonly known as Sallie Mae, SLM Corporation and its subsidiaries are not sponsored by or agencies of the United States of America.
Contacts:
Media
Rick Castellano, 302-451-2541, rick.castellano@SallieMae.com

Investors
Brian Cronin, 302-451-0304, brian.cronin@SallieMae.com



 
https://cdn.kscope.io/4a8f35d01855136d5ffbd7f5f4be3081-smbl2a03.jpg
Sallie Mae Reports Fourth-Quarter and Full-Year 2019 Financial Results

Fourth-Quarter GAAP Net Income Attributable to Common Stock of $137 Million, $0.32 Per Diluted Share; Full-Year 2019 GAAP Net Income Attributable to Common Stock of $561 Million, $1.30 Per Diluted Share Which Is an Increase of 21% Compared to Year-Ago Period

Fourth-Quarter “Core Earnings” Net Income Attributable to Common Stock of $142 Million, $0.33 Per Diluted Share; Full-Year 2019 “Core Earnings” Net Income Attributable to Common Stock of $547 Million, $1.27 Per Diluted Share Which Is an Increase of 19% Compared to Year-Ago Period

Private Education Loan Portfolio Totals $22.9 Billion, Up 13% From Year-Ago Quarter

Company Plans $3 Billion of Private Education Loan Sales to Fund Expected $600 Million in Share Repurchases in 2020
“We continue to help families establish a foundation for success through higher education and are taking tangible actions to position the franchise for long-term success. To ensure we are well positioned to invest in our customers and deliver shareholder value, we will focus our resources on key growth opportunities, providing high-quality private student loans and competitive financing for grad school.”

“Our 2020 outlook reflects continued momentum across our business and strong operational execution. In addition, our new share repurchase program underscores the Board and management’s confidence in the continued strength of the company. With an anticipated $3 billion in loan sales during the year, we will have ample capital to return capital to shareholders and invest in our business to drive growth.”
Raymond J. Quinlan, Chairman and CEO, Sallie Mae

Fourth-Quarter 2019 Highlights vs. Fourth-Quarter 2018 Highlights

•
Net interest income of $419 million, up 9%.
•
Private education loan originations of $717 million, down 2%.
•
Average private education loans outstanding of $23.2 billion, up 13.8%.
•
Average yield on the private education loan portfolio was 9.12%, down 22 basis points.
•
Private education loan provision for loan losses was $82 million, up from $39 million.
•
Private education loans in forbearance were 4.1% of private education loans in repayment and forbearance, up from 3.8%.
•
Private education loan delinquencies as a percentage of private education loans in repayment were 2.8%, up from 2.6%.
•
Personal loans outstanding of $984 million, down 12.8% from prior year.
•
Average yield on the personal loan portfolio was 12.39%, up 79 basis points.
•
Paid fourth-quarter common stock dividend of $0.03 per share and repurchased $9.6 million of common stock under the 2019 share repurchase program at an average price of $8.73 per share.

GAAP Diluted EPS

 
Non-GAAP “Core Earnings” Diluted EPS(1)
 
Private Education Loan
 Originations

 
Non-GAAP Operating Efficiency Ratio(2)
 
Total Education Loan Assets

 
Common Equity Tier 1 Risk-Based Capital Ratio
4Q19: $0.32 2019: $1.30
 
4Q19: $0.33 2019: $1.27
 
4Q19: $717 million 2019: $5.6 billion
 
4Q19: 33.6% 2019: 34.7%
 
Dec. 31, 2019:
$23.7 billion
 
Dec. 31, 2019: 12.2%
 
 
 
 
 


    
Investor Contact:
Brian Cronin, 302-451-0304
brian.cronin@SallieMae.com
 
 
 
Media Contact:
Rick Castellano, 302-451-2541
rick.castellano@SallieMae.com
 



 

The following are significant items or events that will affect the company’s performance in 2020.

2020 Share Repurchase Program*
    The company has been authorized to repurchase up to $600 million in common stock in 2020, under a new share repurchase program, which is effective immediately and expires on Jan. 21, 2022. Repurchases may occur from time to time and through a variety of methods, including open market repurchases, repurchases effected through Rule 10b5-1 trading plans, negotiated block purchases, accelerated share repurchase programs, tender offers or other similar transactions.

Loan Sales*
     The company expects to sell approximately $3 billion in loans in 2020, dependent upon market conditions. The company expects to remain well capitalized during the phase-in of regulatory capital following the implementation of CECL (as defined below). Loan sales will allow the company to return excess capital to shareholders through share repurchases.

Adoption of CECL*
     On Jan. 1, 2020, the company adopted the Financial Accounting Standards Board’s Accounting Standards Update No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“CECL”). CECL requires the company to measure its allowance for losses based upon the estimate of current expected credit losses, and will have a significant impact on diluted GAAP earnings per share and diluted “Core Earnings” per share as adjustments are made to the allowance for loan losses in future periods to reflect life-of-loan expected losses.
     CECL will have a material impact on how the company records and reports its financial condition and results of operations and on regulatory capital. The company’s first-quarter 2020 financial results will reflect a transition adjustment that is currently estimated to increase the allowance for loan losses by approximately $1.1 billion, increase the liability representing its off-balance sheet exposure for unfunded commitments by approximately $115 million, and increase the deferred tax asset by approximately $300 million, resulting in a cumulative effect adjustment currently estimated to reduce retained earnings by approximately $950 million. The Private Education Loan allowance for losses as a percentage of ending total Private Education Loan balance after the adoption of CECL is estimated to initially be approximately 6.7 percent. These adjustments will be refined and reflected in the company’s first-quarter 2020 financial results. The company has elected the three-year phase in for the initial impact of adopting CECL for regulatory capital adequacy purposes.

Discontinuation of Personal Loan Originations*
     The company discontinued new Personal Loan originations in the fourth quarter of 2019 to focus resources on core business strategic priorities and drive shareholder value and does not expect to originate or purchase Personal Loans in 2020. The company processed completed Personal Loan applications received by Dec. 15, 2019 and continues to provide Personal Loan customers with the high-quality service they have come to expect. At Dec. 31, 2019, the company held $1.0 billion in total originated and purchased Personal Loans.

Guidance*
     For 2020, the company expects the following, which includes the expected CECL impact on the provisions for credit losses:
•
Full-year diluted “Core Earnings” per share of $1.85 - $1.91.**
•
Full-year provisions for credit losses of $285 million - $305 million.
•
Full-year total portfolio net charge-offs of $275 million - $285 million.
•
Full-year Private Education Loan originations year-over-year growth of 6%.
•
Full-year non-interest expenses of $570 million - $580 million.
•
Full-year loan sales of approximately $3 billion to fund up to $600 million of share repurchases.

     Beginning in 2020, the company plans to evaluate management’s performance internally using a measure that starts with “Core Earnings” attributable to SLM Corporation common stock for a period, and further adjusting it by increasing it by the impact of the GAAP provisions for credit losses and decreasing it by the total portfolio net charge-offs recorded in that period, net of the tax impact of these adjustments.



* See page 5 for a cautionary note regarding forward-looking statements.
** See “Core Earnings” to GAAP Reconciliation on page 9 for a description of non-GAAP “Core Earnings”. GAAP net income attributable to SLM Corporation common stock is the most directly comparable GAAP measure. However, this GAAP measure is not accessible on a forward-looking basis because the company is unable to estimate the net impact of derivative accounting and the associated net tax expense (benefit) for future periods.




 



Quarterly and Full Year
 Financial Highlights

 
4Q 2019
3Q 2019
4Q 2018
2019
2018
Income Statement ($ millions)
 
 
 
 
 
Total interest income
$600
$590
$538
$2,331
$1,935
Total interest expense
181
185
155
708
522
Net interest income
419
405
383
1,623
1,413
Less: provisions for credit losses
98
99
58
354
245
Total non-interest income (loss)
(4)
17
13
49
(52)
Total non-interest expenses
142
154
146
574
557
Income tax expense
35
41
44
165
72
Net income
141
128
148
578
487
Preferred stock dividends
4
4
4
17
16
Net income attributable to common stock
137
124
143
561
472
“Core Earnings” adjustments to GAAP(1)
4
(2)
(5)
(15)
(1)
Non-GAAP “Core Earnings” net income attributable to common stock(1)
142
122
138
547
471
 
 
 
 
 
 
Ending Balances ($ millions)
 
 
 
 
 
Private Education Loans, net
$22,897
$22,856
$20,295
$22,897
$20,295
FFELP Loans, net
784
799
848
784
848
Personal Loans, net
984
1,062
1,128
984
1,128
Credit Cards, net
4
—
—
4
—
Deposits
24,284
22,629
18,943
24,284
18,943
-Brokered
13,809
12,542
10,295
13,809
10,295
-Retail and other
10,475
10,086
8,648
10,475
8,648
 
 
 
 
 
 
Key Performance Metrics
 
 
 
 
 
Net interest margin
5.41%
5.55%
6.11%
5.76%
6.10%
Yield - Total interest-earning assets
7.75%
8.09%
8.59%
8.27%
8.36%
-Private Education Loans
9.12%
9.30%
9.34%
9.32%
9.10%
-Personal Loans
12.39%
12.16%
11.60%
12.09%
11.08%
Cost of Funds
2.52%
2.75%
2.71%
2.72%
2.47%
Non-GAAP Operating Efficiency Ratio(2) 
33.6%
36.6%
37.6%
34.7%
41.0%
Return on Assets (“ROA”)(3)
1.8%
1.7%
2.3%
2.0%
2.0%
Non-GAAP “Core Earnings” ROA(4)
1.8%
1.7%
2.2%
1.9%
2.0%
Return on Common Equity (“ROCE”)(5)
19.2%
18.0%
22.6%
20.7%
20.3%
Non-GAAP “Core Earnings” ROCE(6)
19.8%
17.7%
21.8%
20.1%
20.2%
 
 
 
 
 
 
Per Common Share
 
 
 
 
 
GAAP diluted earnings per common share
$0.32
$0.29
$0.33
$1.30
$1.07
Non-GAAP “Core Earnings” diluted earnings per common share(1)
$0.33
$0.29
$0.31
$1.27
$1.07
Average common and common equivalent shares outstanding (millions)
425
427
440
431
440
 

3




Footnotes:

(1) Sallie Mae provides “Core Earnings” because it is one of several measures management uses to evaluate management performance and allocate corporate resources. The difference between “Core Earnings” and GAAP net income is driven by mark-to-fair value unrealized gains and losses on derivative contracts recognized in GAAP, but not in “Core Earnings” results. See the “Core Earnings” to GAAP Reconciliation in this press release for a full reconciliation of GAAP and “Core Earnings.” “Core Earnings” exclude periodic unrealized gains and losses caused by the mark-to-fair value valuations on derivatives that do not qualify for hedge accounting treatment under GAAP, but include current period accruals on the derivative instruments. For periods prior to July 1, 2018, “Core Earnings” also exclude the periodic unrealized gains and losses that are a result of ineffectiveness recognized related to effective hedges under GAAP, net of tax. Under GAAP, for our derivatives held to maturity, the cumulative net unrealized gain or loss over the life of the contract will equal $0. Management believes the company’s derivatives are effective economic hedges, and, as such, they are a critical element of the company’s interest rate risk management strategy. Our “Core Earnings” are not defined terms within GAAP and may not be comparable to similarly titled measures reported by other companies.

(2) We calculate and report our non-GAAP operating efficiency ratio as the ratio of (a) the total non-interest expense numerator to (b) the net revenue denominator (which consists of the sum of net interest income, before provision for credit losses, and non-interest income, excluding any gains and losses on sales of loans and securities, net and the net impact of derivative accounting as defined in the “‘Core Earnings’ to GAAP Reconciliation” table in this press release). This ratio provides useful information to investors because it is a measure used by our management team to monitor our effectiveness in managing operating expenses. Other companies may use similarly titled non-GAAP financial measures that are calculated differently from our ratio. Accordingly, our non-GAAP operating efficiency ratio may not be comparable to similar measures used by other companies.

(3) We calculate and report our Return on Assets (“ROA”) as the ratio of (a) GAAP net income numerator (annualized) to (b) the GAAP total average assets denominator.

(4) We calculate and report our non-GAAP “Core Earnings” Return on Assets (“Core Earnings ROA”) as the ratio of (a) “Core Earnings” net income numerator (annualized) to (b) the GAAP total average assets denominator.

(5) We calculate and report our Return on Common Equity (“ROCE”) as the ratio of (a) GAAP net income attributable to common stock numerator (annualized) to (b) the net denominator, which consists of GAAP total average equity less total average preferred stock.

(6) We calculate and report our non-GAAP “Core Earnings” Return on Common Equity (“Core Earnings ROCE”) as the ratio of (a) “Core Earnings” net income attributable to common stock numerator (annualized) to (b) the net denominator, which consists of GAAP total average equity less total average preferred stock.














***















 

4


 


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 our beliefs, opinions or expectations and statements that assume or are dependent upon future events, are forward-looking statements. This includes, but is not limited to: the company’s expectation and ability to pay a quarterly cash dividend on its common stock in the future, subject to the determination by the company’s Board of Directors, and based on an evaluation of the company’s earnings, financial condition and requirements, business conditions, capital allocation determinations, and other factors, risks and uncertainties; the company’s 2020 guidance; the company’s three-year horizon outlook; the company’s expectation and ability to execute loan sales and share repurchases; the company’s projections for originations and earnings growth and balance sheet position; and any estimates related to accounting standard changes. 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, 2018 (filed with the Securities and Exchange Commission (“SEC”) on Feb. 28, 2019) and subsequent filings with the SEC; increases in financing costs; limits on liquidity; increases in costs associated with compliance with laws and regulations; failure to comply with consumer protection, banking and other laws; changes in accounting standards and the impact of related changes in significant accounting estimates, including any regarding the measurement of our allowance for loan losses and the related provision expense; 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 education loans and the educational credit marketplace (including changes resulting from new laws and the implementation of existing laws). We could also be affected by, among other things: changes in our funding costs and availability; reductions to our credit ratings; cybersecurity incidents, cyberattacks and other failures or breaches of our operating systems or infrastructure, including those of third-party vendors; damage to our reputation; risks associated with restructuring initiatives, including failures to successfully implement cost-cutting programs and the adverse effects of such initiatives on our 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; changes in banking rules and regulations, including increased capital requirements; increased competition from banks and other consumer lenders; the creditworthiness of our customers; changes in the general interest rate environment, including the rate relationships among relevant money-market instruments and those of our earning assets versus our funding arrangements; rates of prepayments on the loans that we own; changes in general economic conditions and our ability to successfully effectuate any acquisitions; and other strategic initiatives. The preparation of our consolidated financial statements also requires us 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. We do not undertake any obligation to update or revise these forward-looking statements to conform such statements to actual results or changes in our expectations.



























 

5


SLM CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
 
 
 
December 31,
 
December 31,
 
 
2019
 
2018
Assets
 
 
 
 
Cash and cash equivalents
 
$
5,563,877

 
$
2,559,106

Investments:
 
 
 
 
Available-for-sale investments at fair value (cost of $485,756 and $182,325, respectively)
 
487,669

 
176,245

Other investments
 
84,420

 
55,554

Total investments
 
572,089

 
231,799

Loans held for investment (net of allowance for losses of $441,912 and $341,121, respectively)
 
24,667,792

 
22,270,919

Restricted cash
 
156,883

 
122,789

Other interest-earning assets
 
52,564

 
27,157

Accrued interest receivable
 
1,392,725

 
1,191,981

Premises and equipment, net
 
134,749

 
105,504

Income taxes receivable, net
 
88,844

 
41,570

Tax indemnification receivable
 
27,558

 
39,207

Other assets
 
29,398

 
48,141

Total assets
 
$
32,686,479

 
$
26,638,173

 
 
 
 
 
Liabilities
 
 
 
 
Deposits
 
$
24,283,983

 
$
18,943,158

Short-term borrowings
 
289,230

 
—

Long-term borrowings
 
4,354,037

 
4,284,304

Upromise member accounts
 
192,662

 
213,104

Other liabilities
 
254,731

 
224,951

Total liabilities
 
29,374,643

 
23,665,517

 
 
 
 
 
Commitments and contingencies
 
 
 
 
 
 
 
 
 
Equity
 
 
 
 
Preferred stock, par value $0.20 per share, 20 million shares authorized:
 
 
 
 
Series B: 4 million and 4 million shares issued, respectively, at stated value of $100 per share
 
400,000

 
400,000

Common stock, par value $0.20 per share, 1.125 billion shares authorized: 453.6 million and 449.9 million shares issued, respectively
 
90,720

 
89,972

Additional paid-in capital
 
1,307,630

 
1,274,635

Accumulated other comprehensive income (loss) (net of tax expense (benefit) of ($3,995) and $3,436, respectively)
 
(12,367
)
 
10,623

Retained earnings
 
1,850,512

 
1,340,017

Total SLM Corporation stockholders’ equity before treasury stock
 
3,636,495

 
3,115,247

Less: Common stock held in treasury at cost: 32.5 million and 14.2 million shares, respectively
 
(324,659
)
 
(142,591
)
Total equity
 
3,311,836

 
2,972,656

Total liabilities and equity
 
$
32,686,479

 
$
26,638,173



6




SLM CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
 
 
 
Quarters Ended
 
Years Ended
 
 
December 31,
 
December 31,
 
 
2019
 
2018
 
2019
 
2018
Interest income:
 
 
 
 
 
 
 
 
Loans
 
$
577,087

 
$
524,597

 
$
2,249,169

 
$
1,894,687

Investments
 
2,335

 
1,181

 
7,607

 
6,162

Cash and cash equivalents
 
21,044

 
12,435

 
74,256

 
34,503

Total interest income
 
600,466

 
538,213

 
2,331,032

 
1,935,352

Interest expense:
 
 
 
 
 
 
 
 
Deposits
 
141,769

 
116,195

 
547,746

 
389,349

Interest expense on short-term borrowings
 
2,493

 
1,156

 
6,193

 
5,833

Interest expense on long-term borrowings
 
37,103

 
37,995

 
153,778

 
127,106

Total interest expense
 
181,365

 
155,346

 
707,717

 
522,288

Net interest income
 
419,101

 
382,867

 
1,623,315

 
1,413,064

Less: provisions for credit losses
 
97,558

 
57,619

 
354,249

 
244,864

Net interest income after provisions for credit losses
 
321,543

 
325,248

 
1,269,066

 
1,168,200

Non-interest income (loss):
 
 
 
 
 
 
 
 
Gains on sales of loans, net
 
—

 
—

 
—

 
2,060

Losses on sales of securities, net
 
—

 
—

 
—

 
(1,549
)
Gains (losses) on derivatives and hedging activities, net
 
(3,635
)
 
6,238

 
17,825

 
(87
)
Other income (loss)
 
(211
)
 
6,446

 
31,102

 
(52,319
)
Total non-interest income (loss)
 
(3,846
)
 
12,684

 
48,927

 
(51,895
)
Non-interest expenses:
 
 
 
 
 
 
 
 
Compensation and benefits
 
68,016

 
61,524

 
278,229

 
252,346

FDIC assessment fees
 
9,064

 
6,853

 
32,852

 
32,786

Other operating expenses
 
64,599

 
77,594

 
263,172

 
271,844

Total non-interest expenses
 
141,679

 
145,971

 
574,253

 
556,976

Income before income tax expense
 
176,018

 
191,961

 
743,740

 
559,329

Income tax expense
 
34,666

 
44,449

 
165,464

 
71,853

Net income
 
141,352

 
147,512

 
578,276

 
487,476

Preferred stock dividends
 
3,885

 
4,199

 
16,837

 
15,640

Net income attributable to SLM Corporation common stock
 
$
137,467

 
$
143,313

 
$
561,439

 
$
471,836

Basic earnings per common share attributable to SLM Corporation
 
$
0.33

 
$
0.33

 
$
1.31

 
$
1.08

Average common shares outstanding
 
421,346

 
435,586

 
427,292

 
435,054

Diluted earnings per common share attributable to SLM Corporation
 
$
0.32

 
$
0.33

 
$
1.30

 
$
1.07

Average common and common equivalent shares outstanding
 
425,042

 
440,264

 
430,674

 
439,681

Declared dividends per common share attributable to SLM Corporation
 
$
0.03

 
$
—

 
$
0.12

 
$
—



7




SLM CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)

 
 
Quarters Ended
 
Years Ended
 
 
December 31,
 
December 31,
 
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
 
$
141,352

 
$
147,512

 
$
578,276

 
$
487,476

Other comprehensive income (loss):
 
 
 
 
 
 
 
 
Unrealized gains (losses) on investments
 
547

 
3,335

 
7,993

 
(2,561
)
Unrealized gains (losses) on cash flow hedges
 
9,799

 
(24,953
)
 
(38,414
)
 
11,907

Total unrealized gains (losses)
 
10,346

 
(21,618
)
 
(30,421
)
 
9,346

Income tax (expense) benefit
 
(2,530
)
 
5,229

 
7,431

 
(2,333
)
Other comprehensive income (loss), net of tax (expense) benefit
 
7,816

 
(16,389
)
 
(22,990
)
 
7,013

Total comprehensive income
 
$
149,168

 
$
131,123

 
$
555,286

 
$
494,489



8



“Core Earnings” to GAAP Reconciliation

The following table reflects adjustments associated with our derivative activities.
 
 
 
Quarters Ended
 
Years Ended
 
 
December 31,
 
December 31,
(Dollars in thousands, except per share amounts)
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
 
“Core Earnings” adjustments to GAAP:
 
 
 
 
 
 
 
 
GAAP net income
 
$
141,352

 
$
147,512

 
$
578,276

 
$
487,476

Preferred stock dividends
 
3,885

 
4,199

 
16,837

 
15,640

GAAP net income attributable to SLM Corporation common stock
 
$
137,467

 
$
143,313

 
$
561,439

 
$
471,836

 
 
 
 
 
 
 
 
 
Adjustments:
 
 
 
 
 
 
 
 
Net impact of derivative accounting(1)
 
5,818

 
(7,092
)
 
(19,469
)
 
(1,284
)
Net tax expense (benefit)(2)
 
1,422

 
(1,722
)
 
(4,758
)
 
(312
)
Total “Core Earnings” adjustments to GAAP
 
4,396

 
(5,370
)
 
(14,711
)
 
(972
)
 
 
 
 
 
 
 
 
 
“Core Earnings” attributable to SLM Corporation common stock
 
$
141,863

 
$
137,943

 
$
546,728

 
$
470,864

 
 
 
 
 
 
 
 
 
GAAP diluted earnings per common share
 
$
0.32

 
$
0.33

 
$
1.30

 
$
1.07

Derivative adjustments, net of tax
 
0.01

 
(0.02
)
 
(0.03
)
 
—

“Core Earnings” diluted earnings per common share
 
$
0.33

 
$
0.31

 
$
1.27

 
$
1.07

______
(1) Derivative Accounting: “Core Earnings” exclude periodic unrealized gains and losses caused by the mark-to-fair value valuations on derivatives that do not qualify for hedge accounting treatment under GAAP, but include current period accruals on the derivative instruments. For periods prior to July 1, 2018, “Core Earnings” also exclude the periodic unrealized gains and losses that are a result of ineffectiveness recognized related to effective hedges under GAAP, net of tax. Under GAAP, for our derivatives held to maturity, the cumulative net unrealized gain or loss over the life of the contract will equal $0.

(2) “Core Earnings” tax rate is based on the effective tax rate at Sallie Mae Bank, where the derivative instruments are held.


The following table reflects our provisions for credit losses and total portfolio net charge-offs:
 
 
Quarters Ended
 
Years Ended
 
 
December 31,
 
December 31,
(Dollars in thousands)
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
 
Provisions for credit losses
 
$
97,558

 
$
57,619

 
$
354,249

 
$
244,864

Total portfolio net charge-offs
 
(69,539
)
 
(45,098
)
 
(253,143
)
 
(153,722
)

Beginning in 2020, we plan to evaluate management’s performance internally using a measure that starts with “Core Earnings” net income as disclosed above for a period, and further adjusting it by increasing it by the impact of GAAP provisions for credit losses and decreasing it by the total portfolio net charge-offs recorded in that period, net of the tax impact of these adjustments.




9



Average Balance Sheets - GAAP
The following table reflects the rates earned on interest-earning assets and paid on interest-bearing liabilities and reflects our net interest margin on a consolidated basis.  
        
 
 
Quarters Ended December 31,
 
Years Ended December 31,
 
 
2019
 
2018
 
2019
 
2018
(Dollars in thousands)
 
Balance
 
Rate
 
Balance
 
Rate
 
Balance
 
Rate
 
Balance
 
Rate
Average Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Private Education Loans
 
$
23,202,502

 
9.12
%
 
$
20,391,032

 
9.34
%
 
$
22,225,473

 
9.32
%
 
$
19,282,500

 
9.10
%
FFELP Loans
 
791,430

 
4.64

 
858,903

 
4.90

 
814,198

 
4.79

 
888,301

 
4.57

Personal Loans
 
1,108,960

 
12.39

 
1,165,432

 
11.60

 
1,141,503

 
12.09

 
900,152

 
11.08

Taxable securities
 
456,106

 
2.06

 
182,652

 
2.56

 
324,849

 
2.35

 
235,700

 
2.61

Cash and other short-term investments
 
5,191,653

 
1.61

 
2,254,767

 
2.19

 
3,693,245

 
2.01

 
1,844,404

 
1.88

Total interest-earning assets
 
30,750,651

 
7.75
%
 
24,852,786

 
8.59
%
 
28,199,268

 
8.27
%
 
23,151,057

 
8.36
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-interest-earning assets
 
1,371,139

 
 
 
1,169,125

 
 
 
1,318,290

 
 
 
1,157,628

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
32,121,790

 
 
 
$
26,021,911

 
 
 
$
29,517,558

 
 
 
$
24,308,685

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Liabilities and Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Brokered deposits
 
$
13,331,782

 
2.48
%
 
$
9,777,361

 
2.66
%
 
$
11,760,646

 
2.66
%
 
$
9,028,589

 
2.43
%
Retail and other deposits
 
10,315,056

 
2.25

 
8,532,952

 
2.36

 
9,588,747

 
2.44

 
8,142,449

 
2.08

Other interest-bearing liabilities(1)
 
4,877,868

 
3.22

 
4,419,040

 
3.52

 
4,658,075

 
3.43

 
3,948,001

 
3.37

Total interest-bearing liabilities
 
28,524,706

 
2.52
%
 
22,729,353

 
2.71
%
 
26,007,468

 
2.72
%
 
21,119,039

 
2.47
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-interest-bearing liabilities
 
355,351

 
 
 
379,361

 
 
 
392,173

 
 
 
461,327

 
 
Equity
 
3,241,733

 
 
 
2,913,197

 
 
 
3,117,917

 
 
 
2,728,319

 
 
Total liabilities and equity
 
$
32,121,790

 
 
 
$
26,021,911

 
 
 
$
29,517,558

 
 
 
$
24,308,685

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest margin
 
 
 
5.41
%
 
 
 
6.11
%
 
 
 
5.76
%
 
 
 
6.10
%
______
(1) 
Includes the average balance of our unsecured borrowing, as well as secured borrowings and amortization expense of transaction costs related to our term asset-backed securitizations and our Secured Borrowing Facility.
 


10



Earnings per Common Share
Basic earnings per common share (“EPS”) are calculated using the weighted average number of shares of common stock outstanding during each period. A reconciliation of the numerators and denominators of the basic and diluted EPS calculations follows.


 
 
Quarters Ended
 
Years Ended
 
 
December 31,
 
December 31,
(In thousands, except per share data)
 
2019
 
2018
 
2019
 
2018
Numerator:
 
 
 
 
 
 
 
 
Net income
 
$
141,352

 
$
147,512

 
$
578,276

 
$
487,476

Preferred stock dividends
 
3,885

 
4,199

 
16,837

 
15,640

Net income attributable to SLM Corporation common stock
 
$
137,467

 
$
143,313

 
$
561,439

 
$
471,836

Denominator:
 
 
 
 
 
 
 
 
Weighted average shares used to compute basic EPS
 
421,346

 
435,586

 
427,292

 
435,054

Effect of dilutive securities:
 
 
 
 
 
 
 
 
Dilutive effect of stock options, restricted stock, restricted stock units, performance stock units and Employee Stock Purchase Plan (“ESPP”) (1)(2)
 
3,696

 
4,678

 
3,382

 
4,627

Weighted average shares used to compute diluted EPS
 
425,042

 
440,264

 
430,674

 
439,681

 
 
 
 
 
 
 
 
 
Basic earnings per common share attributable to SLM Corporation
 
$
0.33

 
$
0.33

 
$
1.31

 
$
1.08

 
 
 
 
 
 
 
 
 
Diluted earnings per common share attributable to SLM Corporation
 
$
0.32

 
$
0.33

 
$
1.30

 
$
1.07


__________

(1) 
Includes the potential dilutive effect of additional common shares that are issuable upon exercise of outstanding stock options, restricted stock, restricted stock units, performance stock units and the outstanding commitment to issue shares under the ESPP, determined by the treasury stock method.
 
(2)  For the quarters ended December 31, 2019 and 2018, securities covering no shares and less than 1 million shares, respectively, and for years ended December 31, 2019 and 2018, securities covering no shares and less than 1 million shares, respectively, were outstanding but not included in the computation of diluted earnings per share because they were anti-dilutive.
 


11



Allowance for Loan Losses Metrics

 
 
Allowance for Loan Losses
 
 
Quarter Ended December 31, 2019
(Dollars in thousands)
 
FFELP
Loans
 
Private Education
Loans
 
Personal
Loans
 
Credit
Cards
 
Total
Allowance for Loan Losses
 
 
 
 
 
 
 
 
 
 
Beginning balance
 
$
1,689

 
$
342,544

 
$
70,173

 
$
—

 
$
414,406

Total provision
 
158

 
82,281

 
14,503

 
103

 
97,045

Net charge-offs:
 
 
 
 
 
 
 
 
 
 
Charge-offs
 
(214
)
 
(57,621
)
 
(20,362
)
 
(1
)
 
(78,198
)
Recoveries
 
—

 
7,096

 
1,563

 
—

 
8,659

Net charge-offs
 
(214
)
 
(50,525
)
 
(18,799
)
 
(1
)
 
(69,539
)
Ending Balance
 
$
1,633

 
$
374,300

 
$
65,877

 
$
102

 
$
441,912

Allowance:
 
 
 
 
 
 
 
 
 
 
Ending balance: individually evaluated for impairment
 
$
—

 
$
186,697

 
$
—

 
$
—

 
$
186,697

Ending balance: collectively evaluated for impairment
 
$
1,633

 
$
187,603

 
$
65,877

 
$
102

 
$
255,215

Loans:
 
 
 
 
 
 
 
 
 
 
Ending balance: individually evaluated for impairment
 
$
—

 
$
1,581,966

 
$
—

 
$
—

 
$
1,581,966

Ending balance: collectively evaluated for impairment
 
$
783,306

 
$
21,607,625

 
$
1,049,007

 
$
3,884

 
$
23,443,822

Net charge-offs as a percentage of average loans in repayment (annualized)(1)
 
0.14
%
 
1.24
%
 
6.82
%
 
0.17
%
 
 
Allowance as a percentage of the ending total loan balance
 
0.21
%
 
1.61
%
 
6.28
%
 
2.63
%
 
 
Allowance as a percentage of the ending loans in repayment(1)
 
0.26
%
 
2.23
%
 
6.28
%
 
2.63
%
 
 
Allowance coverage of net charge-offs (annualized)
 
1.91

 
1.85

 
0.88

 
25.50

 
 
Ending total loans, gross
 
$
783,306

 
$
23,189,591

 
$
1,049,007

 
$
3,884

 
 
Average loans in repayment(1)
 
$
617,406

 
$
16,359,538

 
$
1,102,953

 
$
2,373

 
 
Ending loans in repayment(1)
 
$
617,646

 
$
16,787,670

 
$
1,049,007

 
$
3,884

 
 

____________

(1) Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period.





12


 
 
Allowance for Loan Losses
 
 
Quarter Ended December 31, 2018
(Dollars in thousands)
 
FFELP
Loans
 
Private Education
Loans
 
Personal
Loans
 
Total
Allowance for Loan Losses
 
 
 
 
 
 
 
 
Beginning balance
 
$
1,080

 
$
274,684

 
$
53,210

 
$
328,974

Total provision
 
238

 
38,671

 
18,336

 
57,245

Net charge-offs:
 
 
 
 
 
 
 
 
Charge-offs
 
(341
)
 
(40,849
)
 
(9,878
)
 
(51,068
)
Recoveries
 
—

 
5,437

 
533

 
5,970

Net charge-offs
 
(341
)
 
(35,412
)
 
(9,345
)
 
(45,098
)
Ending Balance
 
$
977

 
$
277,943

 
$
62,201

 
$
341,121

Allowance:
 
 
 
 
 
 
 
 
Ending balance: individually evaluated for impairment
 
$
—

 
$
120,110

 
$
—

 
$
120,110

Ending balance: collectively evaluated for impairment
 
$
977

 
$
157,833

 
$
62,201

 
$
221,011

Loans:
 
 
 
 
 
 
 
 
Ending balance: individually evaluated for impairment
 
$
—

 
$
1,257,856

 
$
—

 
$
1,257,856

Ending balance: collectively evaluated for impairment
 
$
846,487

 
$
19,246,609

 
$
1,190,091

 
$
21,283,187

Net charge-offs as a percentage of average loans in repayment (annualized)(1)
 
0.21
%
 
1.00
%
 
3.21
%
 
 
Allowance as a percentage of the ending total loan balance
 
0.12
%
 
1.36
%
 
5.23
%
 
 
Allowance as a percentage of the ending loans in repayment(1)
 
0.15
%
 
1.90
%
 
5.23
%
 
 
Allowance coverage of net charge-offs (annualized)
 
0.72

 
1.96

 
1.66

 
 
Ending total loans, gross
 
$
846,487

 
$
20,504,465

 
$
1,190,091

 
 
Average loans in repayment(1)
 
$
665,151

 
$
14,166,945

 
$
1,163,782

 
 
Ending loans in repayment(1)
 
$
665,807

 
$
14,666,856

 
$
1,190,091

 
 


____________

(1) Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period.


13





 
 
Allowance for Loan Losses
 
 
Year Ended December 31, 2019
(Dollars in thousands)
 
FFELP
Loans
 
Private Education
Loans
 
Personal
Loans
 
Credit
Cards
 
Total
Allowance for Loan Losses
 
 
 
 
 
 
 
 
 
 
Beginning balance
 
$
977

 
$
277,943

 
$
62,201

 
$
—

 
$
341,121

Total provision
 
1,478

 
279,570

 
72,783

 
103

 
353,934

Net charge-offs:
 
 
 
 
 
 
 
 
 
 
Charge-offs
 
(822
)
 
(208,978
)
 
(74,313
)
 
(1
)
 
(284,114
)
Recoveries
 
—

 
25,765

 
5,206

 
—

 
30,971

Net charge-offs
 
(822
)
 
(183,213
)
 
(69,107
)
 
(1
)
 
(253,143
)
Ending Balance
 
$
1,633

 
$
374,300

 
$
65,877

 
$
102

 
$
441,912

Allowance:
 
 
 
 
 
 
 
 
 
 
Ending balance: individually evaluated for impairment
 
$
—

 
$
186,697

 
$
—

 
$
—

 
$
186,697

Ending balance: collectively evaluated for impairment
 
$
1,633

 
$
187,603

 
$
65,877

 
$
102

 
$
255,215

Loans:
 
 
 
 
 
 
 
 
 
 
Ending balance: individually evaluated for impairment
 
$
—

 
$
1,581,966

 
$
—

 
$
—

 
$
1,581,966

Ending balance: collectively evaluated for impairment
 
$
783,306

 
$
21,607,625

 
$
1,049,007

 
$
3,884

 
$
23,443,822

Net charge-offs as a percentage of average loans in repayment(1)
 
0.13
%
 
1.17
%
 
6.07
%
 
0.13
%
 
 
Allowance as a percentage of the ending total loan balance
 
0.21
%
 
1.61
%
 
6.28
%
 
2.63
%
 
 
Allowance as a percentage of the ending loans in repayment(1)
 
0.26
%
 
2.23
%
 
6.28
%
 
2.63
%
 
 
Allowance coverage of net charge-offs
 
1.99

 
2.04

 
0.95

 
102.00

 
 
Ending total loans, gross
 
$
783,306

 
$
23,189,591

 
$
1,049,007

 
$
3,884

 
 
Average loans in repayment(1)
 
$
631,029

 
$
15,605,927

 
$
1,138,887

 
$
786

 
 
Ending loans in repayment(1)
 
$
617,646

 
$
16,787,670

 
$
1,049,007

 
$
3,884

 
 

____________

(1) Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period.


14


 
 
Allowance for Loan Losses
 
 
Year Ended December 31, 2018
(Dollars in thousands)
 
FFELP
Loans
 
Private Education
Loans
 
Personal
Loans
 
Total
Allowance for Loan Losses
 
 
 
 
 
 
 
 
Beginning balance
 
$
1,132

 
$
243,715

 
$
6,628

 
$
251,475

Total provision
 
980

 
169,287

 
74,317

 
244,584

Net charge-offs:
 
 
 
 
 
 
 
 
Charge-offs
 
(1,135
)
 
(154,701
)
 
(19,690
)
 
(175,526
)
Recoveries
 
—

 
20,858

 
946

 
21,804

Net charge-offs
 
(1,135
)
 
(133,843
)
 
(18,744
)
 
(153,722
)
Loan sales(1)
 
—

 
(1,216
)
 
—

 
(1,216
)
Ending Balance
 
$
977

 
$
277,943

 
$
62,201

 
$
341,121

Allowance:
 
 
 
 
 
 
 
 
Ending balance: individually evaluated for impairment
 
$
—

 
$
120,110

 
$
—

 
$
120,110

Ending balance: collectively evaluated for impairment
 
$
977

 
$
157,833

 
$
62,201

 
$
221,011

Loans:
 
 
 
 
 
 
 
 
Ending balance: individually evaluated for impairment
 
$
—

 
$
1,257,856

 
$
—

 
$
1,257,856

Ending balance: collectively evaluated for impairment
 
$
846,487

 
$
19,246,609

 
$
1,190,091

 
$
21,283,187

Net charge-offs as a percentage of average loans in repayment(2)
 
0.16
%
 
1.01
%
 
2.11
%
 
 
Allowance as a percentage of the ending total loan balance
 
0.12
%
 
1.36
%
 
5.23
%
 
 
Allowance as a percentage of the ending loans in repayment(2)
 
0.15
%
 
1.90
%
 
5.23
%
 
 
Allowance coverage of net charge-offs
 
0.86

 
2.08

 
3.32

 
 
Ending total loans, gross
 
$
846,487

 
$
20,504,465

 
$
1,190,091

 
 
Average loans in repayment(2)
 
$
691,406

 
$
13,303,801

 
$
889,348

 
 
Ending loans in repayment(2)
 
$
665,807

 
$
14,666,856

 
$
1,190,091

 
 
________
(1) 
Represents fair value adjustments on loans sold.
(2) 
Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period.








15



Private Education Loan Key Credit Quality Indicators

    
 
 
Private Education Loans
 
 
Credit Quality Indicators
 
 
December 31, 2019
 
December 31, 2018
(Dollars in thousands)
 
Balance(1)
 
% of Balance
 
Balance(1)
 
% of Balance
 
 
 
 
 
 
 
 
 
Cosigners:
 
 
 
 
 
 
 
 
With cosigner
 
$
20,709,636

 
89
%
 
$
18,378,398

 
90
%
Without cosigner
 
2,479,955

 
11

 
2,126,067

 
10

Total
 
$
23,189,591

 
100
%
 
$
20,504,465

 
100
%
 
 
 
 
 
 
 
 
 
FICO at Original Approval(2):
 
 
 
 
 
 
 
 
Less than 670
 
$
1,665,589

 
7
%
 
$
1,409,789

 
7
%
670-699
 
3,570,025

 
16

 
3,106,983

 
15

700-749
 
7,670,748

 
33

 
6,759,721

 
33

Greater than or equal to 750
 
10,283,229

 
44

 
9,227,972

 
45

Total
 
$
23,189,591

 
100
%
 
$
20,504,465

 
100
%
 
 
 
 
 
 
 
 
 
FICO-Refreshed(2)(3):
 
 
 
 
 
 
 
 
Less than 670
 
$
2,979,437

 
13
%
 
$
2,416,979

 
12
%
670-699
 
2,883,122

 
13

 
2,504,467

 
12

700-749
 
6,806,602

 
29

 
6,144,489

 
30

Greater than or equal to 750
 
10,520,430

 
45

 
9,438,530

 
46

Total
 
$
23,189,591

 
100
%
 
$
20,504,465

 
100
%
 
 
 
 
 
 
 
 
 
Seasoning(4):
 
 
 
 
 
 
 
 
1-12 payments
 
$
5,351,702

 
23
%
 
$
4,969,334

 
24
%
13-24 payments
 
4,004,151

 
17

 
3,481,235

 
17

25-36 payments
 
2,902,365

 
12

 
2,741,954

 
13

37-48 payments
 
2,213,944

 
10

 
1,990,049

 
10

More than 48 payments
 
3,030,024

 
13

 
2,061,448

 
10

Not yet in repayment
 
5,687,405

 
25

 
5,260,445

 
26

Total
 
$
23,189,591

 
100
%
 
$
20,504,465

 
100
%
______
(1) 
Balance represents gross Private Education Loans.
(2) 
Represents the higher credit score of the cosigner or the borrower.
(3) 
Represents the FICO score updated as of the fourth-quarter 2019.
(4) 
Number of months in active repayment (whether interest only payment, fixed payment, or full principal and interest payment status) for which a scheduled payment was due.

16



Personal Loan Key Credit Quality Indicators
      
 
 
Personal Loans
 
 
Credit Quality Indicators
 
 
December 31, 2019
 
December 31, 2018
(Dollars in thousands)
 
Balance(1)
 
% of Balance
 
Balance(1)
 
% of Balance
 
 
 
 
 
 
 
 
 
FICO at Original Approval:
 
 
 
 
 
 
 
 
Less than 670
 
$
47,367

 
4
%
 
$
77,702

 
7
%
670-699
 
259,098

 
25

 
339,053

 
28

700-749
 
521,856

 
50

 
554,700

 
47

Greater than or equal to 750
 
220,686

 
21

 
218,636

 
18

Total
 
$
1,049,007

 
100
%
 
$
1,190,091

 
100
%
 
 
 
 
 
 
 
 
 
Seasoning(2):
 
 
 
 
 
 
 
 
0-12 payments
 
$
469,940

 
45
%
 
$
1,008,758

 
85
%
13-24 payments
 
505,318

 
48

 
181,333

 
15

25-36 payments
 
73,749

 
7

 
—

 
—

37-48 payments
 
—

 
—

 
—

 
—

More than 48 payments
 
—

 
—

 
—

 
—

Total
 
$
1,049,007

 
100
%
 
$
1,190,091

 
100
%
______
(1) 
Balance represents gross Personal Loans.
(2) 
Number of months in active repayment for which a scheduled payment was due.


17



Private Education Loan Delinquencies


 The following table provides information regarding the loan status of our Private Education Loans. Loans in repayment include loans making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period.
 
 
Private Education Loans
 
 
December 31,
 
December 31,
 
 
2019
 
2018
(Dollars in thousands)
 
Balance
 
%
 
Balance
 
%
Loans in-school/grace/deferment(1)
 
$
5,687,405

 
 
 
$
5,260,445

 
 
Loans in forbearance(2)
 
714,516

 
 
 
577,164

 
 
Loans in repayment and percentage of each status:
 
 
 
 
 
 
 
 
Loans current
 
16,315,651

 
97.2
%
 
14,289,705

 
97.4
%
Loans delinquent 31-60 days(3)
 
288,051

 
1.7

 
231,216

 
1.6

Loans delinquent 61-90 days(3)
 
121,302

 
0.7

 
95,105

 
0.7

Loans delinquent greater than 90 days(3)
 
62,666

 
0.4

 
50,830

 
0.3

Total Private Education Loans in repayment
 
16,787,670

 
100.0
%
 
14,666,856

 
100.0
%
Total Private Education Loans, gross
 
23,189,591

 
 
 
20,504,465

 
 
Private Education Loans deferred origination costs and unamortized premium/(discount)
 
81,224

 
 
 
68,321

 
 
Total Private Education Loans
 
23,270,815

 
 
 
20,572,786

 
 
Private Education Loans allowance for losses
 
(374,300
)
 
 
 
(277,943
)
 
 
Private Education Loans, net
 
$
22,896,515

 
 
 
$
20,294,843

 
 
Percentage of Private Education Loans in repayment
 
 
 
72.4
%
 
 
 
71.5
%
Delinquencies as a percentage of Private Education Loans in repayment
 
 
 
2.8
%
 
 
 
2.6
%
Loans in forbearance as a percentage of Private Education Loans in repayment and forbearance
 
 
 
4.1
%
 
 
 
3.8
%
_______
(1) 
Deferment includes customers who have returned to school or are engaged in other permitted educational activities and are not yet required to make payments on the loans (e.g., residency periods for medical students or a grace period for bar exam preparation).
(2) 
Loans for customers who have requested extension of grace period generally during employment transition or who have temporarily ceased making full payments due to hardship or other factors, consistent with established loan program servicing policies and procedures.
(3) 
The period of delinquency is based on the number of days scheduled payments are contractually past due.


18



Personal Loan Delinquencies

The following table provides information regarding the loan status of our Personal Loans.

 
 
Personal Loans
 
 
December 31,
 
December 31,
 
 
2019
 
2018
(Dollars in thousands)
 
Balance
 
%
 
Balance
 
%
Loans in repayment and percentage of each status:
 
 
 
 
 
 
 
 
Loans current
 
$
1,023,517

 
97.6
%
 
$
1,172,776

 
98.5
%
Loans delinquent 31-60 days(1)
 
9,435

 
0.9

 
6,722

 
0.6

Loans delinquent 61-90 days(1)
 
7,172

 
0.7

 
5,416

 
0.5

Loans delinquent greater than 90 days(1)
 
8,883

 
0.8

 
5,177

 
0.4

Total Personal Loans in repayment
 
1,049,007

 
100.0
%
 
1,190,091

 
100.0
%
Total Personal Loans, gross
 
1,049,007

 
 
 
1,190,091

 
 
Personal Loans deferred origination costs and unamortized premium/(discount)
 
513

 
 
 
297

 
 
Total Personal Loans
 
1,049,520

 
 
 
1,190,388

 
 
Personal Loans allowance for losses
 
(65,877
)
 
 
 
(62,201
)
 
 
Personal Loans, net
 
$
983,643

 
 
 
$
1,128,187

 
 
Delinquencies as a percentage of Personal Loans in repayment
 
 
 
2.4
%
 
 
 
1.5
%
_______
(1) 
The period of delinquency is based on the number of days scheduled payments are contractually past due.



Summary of Our Loan Portfolio
Ending Loan Balances, net
 
 
December 31, 2019
(Dollars in thousands)
 
Private
Education
Loans 
 
FFELP
Loans
 
Personal
Loans
 
Credit
Cards
 
Total
Portfolio
Total loan portfolio:
 
 
 
 
 
 
 
 
 
 
In-school(1)
 
$
4,288,239

 
$
81

 
$
—

 
$
—

 
$
4,288,320

Grace, repayment and other(2)
 
18,901,352

 
783,225

 
1,049,007

 
3,884

 
20,737,468

Total, gross
 
23,189,591

 
783,306

 
1,049,007

 
3,884

 
25,025,788

Deferred origination costs and unamortized premium/(discount)
 
81,224

 
2,143

 
513

 
36

 
83,916

Allowance for loan losses
 
(374,300
)
 
(1,633
)
 
(65,877
)
 
(102
)
 
(441,912
)
Total loan portfolio, net
 
$
22,896,515

 
$
783,816

 
$
983,643

 
$
3,818

 
$
24,667,792

 
 
 
 
 
 
 
 
 
 
 
% of total
 
93
%
 
3
%
 
4
%
 
—
%
 
100
%
_______

(1) Loans for customers still attending school and who are not yet required to make payments on the loans.
(2) Includes loans in deferment or forbearance. Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period.


19


 
 
December 31, 2018
(Dollars in thousands)
 
Private
Education
Loans
 
FFELP
Loans
 
Personal
Loans
 
Total
Portfolio
Total loan portfolio:
 
 
 
 
 
 
 
 
In-school(1)
 
$
4,037,125

 
$
163

 
$
—

 
$
4,037,288

Grace, repayment and other(2)
 
16,467,340

 
846,324

 
1,190,091

 
18,503,755

Total, gross
 
20,504,465

 
846,487

 
1,190,091

 
22,541,043

Deferred origination costs and unamortized premium/(discount)
 
68,321

 
2,379

 
297

 
70,997

Allowance for loan losses
 
(277,943
)
 
(977
)
 
(62,201
)
 
(341,121
)
Total loan portfolio, net
 
$
20,294,843

 
$
847,889

 
$
1,128,187

 
$
22,270,919

 
 
 
 
 
 
 
 
 
% of total
 
91
%
 
4
%
 
5
%
 
100
%
 _______

(1) Loans for customers still attending school and who are not yet required to make payments on the loans.
(2) Includes loans in deferment or forbearance. Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period.

Average Loan Balances (net of unamortized premium/discount)

 
 
Quarters Ended
December 31,
 
Years Ended
December 31,
(Dollars in thousands)
 
2019
 
2018
 
2019
 
2018
Private Education Loans
 
$
23,202,502

 
93
%
 
$
20,391,032

 
91
%
 
$
22,225,473

 
92
%
 
$
19,282,500

 
92
%
FFELP Loans
 
791,430

 
3

 
858,903

 
4

 
814,198

 
3

 
888,301

 
4

Personal Loans
 
1,108,960

 
4

 
1,165,432

 
5

 
1,141,503

 
5

 
900,152

 
4

Total portfolio
 
$
25,102,892

 
100
%
 
$
22,415,367

 
100
%
 
$
24,181,174

 
100
%
 
$
21,070,953

 
100
%



Loan Activity

 
 
Quarter Ended December 31, 2019
(Dollars in thousands)
 
 Private
Education
Loans
 
FFELP
Loans
 
Personal
Loans
 
Credit
Cards
 
Total
Portfolio
Beginning balance
 
$
22,855,728

 
$
798,682

 
$
1,062,254

 
$
1,143

 
$
24,717,807

Acquisitions and originations:
 
 
 
 
 
 
 
 
 
 
Fixed-rate
 
449,271

 
—

 
73,601

 
—

 
522,872

Variable-rate
 
273,315

 
—

 
—

 
4,407

 
277,722

Total acquisitions and originations
 
722,586

 
—

 
73,601

 
4,407

 
800,594

Capitalized interest and deferred origination cost premium amortization
 
352,034

 
6,832

 
(102
)
 
—

 
358,764

Sales
 
—

 
—

 
—

 
—

 
—

Loan consolidations to third-parties
 
(466,152
)
 
(5,519
)
 
—

 
—

 
(471,671
)
Allowance
 
(31,756
)
 
56

 
4,296

 
(102
)
 
(27,506
)
Repayments and other
 
(535,925
)
 
(16,235
)
 
(156,406
)
 
(1,630
)
 
(710,196
)
Ending balance
 
$
22,896,515

 
$
783,816

 
$
983,643

 
$
3,818

 
$
24,667,792



20


 
 
Quarter Ended December 31, 2018
(Dollars in thousands)
 
Private
Education
Loans
 
FFELP
Loans
 
Personal
Loans
 
Total
Portfolio
Beginning balance
 
$
20,030,806

 
$
868,138

 
$
1,079,959

 
$
21,978,903

Acquisitions and originations:
 
 
 
 
 
 
 
 
Fixed-rate
 
479,469

 
—

 
184,752

 
664,221

Variable-rate
 
258,951

 
—

 
—

 
258,951

Total acquisitions and originations
 
738,420

 
—

 
184,752

 
923,172

Capitalized interest and deferred origination cost premium amortization
 
302,969

 
7,767

 
(55
)
 
310,681

Sales
 
—

 
—

 
—

 
—

Loan consolidations to third-parties
 
(317,513
)
 
(6,264
)
 
—

 
(323,777
)
Allowance
 
(3,259
)
 
103

 
(8,991
)
 
(12,147
)
Repayments and other
 
(456,580
)
 
(21,855
)
 
(127,478
)
 
(605,913
)
Ending balance
 
$
20,294,843

 
$
847,889

 
$
1,128,187

 
$
22,270,919

 
 
Year Ended December 31, 2019
(Dollars in thousands)
 
Private
Education
Loans
 
FFELP
Loans
 
Personal
Loans
 
Credit
Cards
 
Total
Portfolio
Beginning balance
 
$
20,294,843

 
$
847,889

 
$
1,128,187

 
$
—

 
$
22,270,919

Acquisitions and originations:
 
 
 
 
 
 
 
 
 
 
Fixed-rate
 
3,784,860

 
—

 
480,398

 
—

 
4,265,258

Variable-rate
 
1,866,914

 
—

 
—

 
5,933

 
1,872,847

Total acquisitions and originations
 
5,651,774

 
—

 
480,398

 
5,933

 
6,138,105

Capitalized interest and deferred origination cost premium amortization
 
722,153

 
28,258

 
(323
)
 
—

 
750,088

Sales
 
—

 
—

 
—

 
—

 
—

Loan consolidations to third-parties
 
(1,512,279
)
 
(27,461
)
 
—

 
—

 
(1,539,740
)
Allowance
 
(96,357
)
 
(656
)
 
(3,676
)
 
(102
)
 
(100,791
)
Repayments and other
 
(2,163,619
)
 
(64,214
)
 
(620,943
)
 
(2,013
)
 
(2,850,789
)
Ending balance
 
$
22,896,515

 
$
783,816

 
$
983,643

 
$
3,818

 
$
24,667,792



 
 
Year Ended December 31, 2018
(Dollars in thousands)
 
Private
Education
Loans
 
FFELP
Loans
 
Personal
Loans
 
Total
Portfolio
Beginning balance
 
$
17,244,830

 
$
929,159

 
$
393,652

 
$
18,567,641

Acquisitions and originations:
 
 
 
 
 
 
 
 
Fixed-rate
 
3,082,544

 
—

 
1,157,875

 
4,240,419

Variable-rate
 
2,252,948

 
—

 
—

 
2,252,948

Total acquisitions and originations
 
5,335,492

 
—

 
1,157,875

 
6,493,367

Capitalized interest and deferred origination cost premium amortization
 
597,997

 
31,093

 
(71
)
 
629,019

Sales
 
(43,988
)
 
—

 
—

 
(43,988
)
Loan consolidations to third-parties
 
(991,044
)
 
(30,076
)
 
—

 
(1,021,120
)
Allowance
 
(34,228
)
 
155

 
(55,573
)
 
(89,646
)
Repayments and other
 
(1,814,216
)
 
(82,442
)
 
(367,696
)
 
(2,264,354
)
Ending balance
 
$
20,294,843

 
$
847,889

 
$
1,128,187

 
$
22,270,919




21


Private Education Loan Originations
The following table summarizes our Private Education Loan originations. Originations represent loans that were funded or acquired during the period presented.
        
 
 
Quarters Ended 
 December 31,
(Dollars in thousands)
 
2019
 
%
 
2018
 
%
Smart Option - interest only(1)
 
$
158,611

 
22
%
 
$
155,471

 
21
%
Smart Option - fixed pay(1)
 
193,667

 
27

 
195,438

 
27

Smart Option - deferred(1)
 
244,555

 
34

 
258,087

 
35

Smart Option - principal and interest
 
1,325

 
—

 
1,618

 
—

Graduate Loan
 
106,233

 
15

 
107,903

 
15

Parent Loan
 
12,180

 
2

 
14,960

 
2

Total Private Education Loan originations
 
$
716,571

 
100
%
 
$
733,477

 
100
%
 
 
 
 
 
 
 
 
 
Percentage of loans with a cosigner
 
83.2
%
 
 
 
85.2
%
 
 
Average FICO at approval(2)
 
745

 
 
 
746

 
 

        
 
 
Years Ended 
December 31,
(Dollars in thousands)
 
2019
 
%
 
2018
 
%
Smart Option - interest only(1)
 
$
1,234,246

 
22
%
 
$
1,164,229

 
22
%
Smart Option - fixed pay(1)
 
1,560,496

 
28

 
1,410,124

 
27

Smart Option - deferred(1)
 
2,082,147

 
37

 
2,017,927

 
38

Smart Option - principal and interest
 
9,806

 
—

 
8,450

 
—

Graduate Loan
 
622,181

 
11

 
609,742

 
11

Parent Loan
 
115,910

 
2

 
104,771

 
2

Total Private Education Loan originations
 
$
5,624,786

 
100
%
 
$
5,315,243

 
100
%
 
 
 
 
 
 
 
 
 
Percentage of loans with a cosigner
 
86.6
%
 
 
 
87.2
%
 
 
Average FICO at approval(2)
 
746

 
 
 
746

 
 

_______ 
(1) 
Interest only, fixed pay and deferred describe the payment option while in school or in grace period.
(2) 
Represents the higher credit score of the cosigner or the borrower.

Deposits
Interest bearing deposits are summarized as follows:
        
 
 
December 31, 2019
 
December 31, 2018
 
(Dollars in thousands)
 
Amount
 
Year-End Weighted Average Stated Rate(1)
 
Amount
 
Year-End Weighted Average Stated Rate(1)
 
 
 
 
 
 
 
 
 
 
 
Money market
 
$
9,616,547

 
2.04
%
 
$
8,687,766

 
2.46
%
 
Savings
 
718,616

 
1.71

 
702,342

 
2.00

 
Certificates of deposit
 
13,947,743

 
2.44

 
9,551,974

 
2.74

 
Deposits - interest bearing
 
$
24,282,906

 
 
 
$
18,942,082

 
 
 
_____
(1) Includes the effect of interest rate swaps in effective hedge relationships.

22



Regulatory Capital

Salle Mae Bank’s required and actual regulatory capital amounts and ratios under U.S. Basel III are shown in the following table.
 
 
Actual
 
U.S. Basel III
Regulatory Requirements(1)
(Dollars in thousands)
 
Amount
Ratio
 
Amount
 
Ratio
As of December 31, 2019:
 
 
 
 
 
 
 
Common Equity Tier 1 Capital (to Risk-Weighted Assets)
 
$
3,264,309

12.2
%
 
$
1,876,050

>
7.0
%
Tier 1 Capital (to Risk-Weighted Assets)
 
$
3,264,309

12.2
%
 
$
2,278,060

>
8.5
%
Total Capital (to Risk-Weighted Assets)
 
$
3,600,668

13.4
%
 
$
2,814,074

>
10.5
%
Tier 1 Capital (to Average Assets)
 
$
3,264,309

10.2
%
(2) 
$
1,282,642

>
4.0
%
 
 
 
 
 
 
 
 
As of December 31, 2018:
 
 
 
 
 
 
 
Common Equity Tier 1 Capital (to Risk-Weighted Assets)
 
$
2,896,091

12.1
%
 
$
1,528,209

>
6.375
%
Tier 1 Capital (to Risk-Weighted Assets)
 
$
2,896,091

12.1
%
 
$
1,887,787

>
7.875
%
Total Capital (to Risk-Weighted Assets)
 
$
3,196,279

13.3
%
 
$
2,367,226

>
9.875
%
Tier 1 Capital (to Average Assets)
 
$
2,896,091

11.1
%
 
$
1,039,226

>
4.0
%
________________ 
            
(1) 
Required risk-based capital ratios include the capital conservation buffer.
(2) 
The Bank’s Tier 1 leverage ratio exceeds the 5 percent well-capitalized standard for the Tier 1 leverage ratio under the prompt corrective action framework.



23