SEC Filing | SLM Corporation

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slm-20230630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-13251

SLM Corporation

(Exact name of registrant as specified in its charter)


Delaware			52-2013874
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

300 Continental Drive	Newark,	Delaware	19713
(Address of principal executive offices)			(Zip Code)

(302) 451-0200

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, 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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

(Do not check if a smaller reporting company)

Smaller reporting company

☐

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of June 30, 2023, there were 226,080,858 shares of common stock outstanding.

SLM CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

INDEX


Part I. Financial Information
Item 1.	Financial Statements	3
Item 1.	Notes to the Financial Statements	12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	53
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	83
Item 4.	Controls and Procedures	86
PART II. Other Information
Item 1.	Legal Proceedings	87
Item 1A.	Risk Factors	87
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	87
Item 3.	Defaults Upon Senior Securities	87
Item 4.	Mine Safety Disclosures	87
Item 5.	Other Information	87
Item 6.	Exhibits	88

2 SLM CORPORATION


CONSOLIDATED BALANCE SHEETS (Unaudited)
	June 30,		December 31,
(Dollars in thousands, except share and per share amounts)	2023		2022
Assets
Cash and cash equivalents	$	3,875,758	$	4,616,117
Investments:
Trading investments at fair value (cost of $43,260 and $47,554, respectively)	52,146		55,903
Available-for-sale investments at fair value (cost of $2,563,816 and $2,554,332, respectively)	2,372,846		2,342,089
Other investments	95,771		94,716
Total investments	2,520,763		2,492,708
Loans held for investment (net of allowance for losses of $1,364,716 and $1,357,075, respectively)	19,219,518		19,626,868
Loans held for sale	—		29,448
Restricted cash	150,585		156,719
Other interest-earning assets	11,952		11,162
Accrued interest receivable	1,300,136		1,202,059
Premises and equipment, net	134,895		140,728
Goodwill and acquired intangible assets, net	113,756		118,273
Income taxes receivable, net	325,063		380,058
Tax indemnification receivable	2,902		2,816
Other assets	53,075		34,073
Total assets	$	27,708,403	$	28,811,029

Liabilities
Deposits	$	20,361,485	$	21,448,071

Long-term borrowings	5,213,698		5,235,114

Other liabilities	326,856		400,874
Total liabilities	25,902,039		27,084,059
Commitments and contingencies
Equity
Preferred stock, par value $0.20 per share, 20 million shares authorized:
Series B: 2.5 million and 2.5 million shares issued, respectively, at stated value of $100 per share	251,070		251,070
Common stock, par value $0.20 per share, 1.125 billion shares authorized: 438.0 million and 435.1 million shares issued, respectively	87,599		87,025
Additional paid-in capital	1,129,537		1,109,072
Accumulated other comprehensive loss (net of tax benefit of ($26,845) and ($30,160), respectively)	(83,564)		(93,870)
Retained earnings	3,485,732		3,163,640
Total SLM Corporation stockholders’ equity before treasury stock	4,870,374		4,516,937
Less: Common stock held in treasury at cost: 211.9 million and 194.4 million shares, respectively	(3,064,010)		(2,789,967)
Total equity	1,806,364		1,726,970
Total liabilities and equity	$	27,708,403	$	28,811,029

See accompanying notes to consolidated financial statements.

SLM CORPORATION 3


CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands, except per share amounts)	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Interest income:
Loans	$	568,342	$	446,040	$	1,151,126	$	904,084
Investments	12,037		8,513		23,368		13,992
Cash and cash equivalents	53,526		8,478		97,009		9,993
Total interest income	633,905		463,031		1,271,503		928,069
Interest expense:
Deposits	191,407		60,468		374,938		110,005
Interest expense on short-term borrowings	3,299		2,973		6,317		5,848
Interest expense on long-term borrowings	52,568		36,782		98,549		74,376

Total interest expense	247,274		100,223		479,804		190,229
Net interest income	386,631		362,808		791,699		737,840
Less: provisions for credit losses	17,729		30,545		131,841		128,595
Net interest income after provisions for credit losses	368,902		332,263		659,858		609,245
Non-interest income:
Gains on sales of loans, net	124,754		239,997		124,745		249,878
Gains (losses) on securities, net	(1,213)		667		498		(2,913)
Gains (losses) on derivatives and hedging activities, net	—		—		—		(5)
Other income	20,513		17,589		40,522		33,218
Total non-interest income	144,054		258,253		165,765		280,178
Non-interest expenses:
Operating expenses:
Compensation and benefits	78,233		66,011		165,882		137,992
FDIC assessment fees	9,851		1,225		21,380		6,909
Other operating expenses	66,080		64,494		121,441		118,835
Total operating expenses	154,164		131,730		308,703		263,736
Acquired intangible assets amortization expense	2,245		2,417		4,517		3,150

Total non-interest expenses	156,409		134,147		313,220		266,886
Income before income tax expense	356,547		456,369		512,403		622,537
Income tax expense	91,482		114,296		128,820		151,652
Net income	265,065		342,073		383,583		470,885
Preferred stock dividends	4,274		1,757		8,337		3,032
Net income attributable to SLM Corporation common stock	$	260,791	$	340,316	$	375,246	$	467,853
Basic earnings per common share	$	1.11	$	1.30	$	1.57	$	1.74
Average common shares outstanding	235,061		261,333		238,261		269,112
Diluted earnings per common share	$	1.10	$	1.29	$	1.56	$	1.72
Average common and common equivalent shares outstanding	237,592		264,122		240,554		272,343
Declared dividends per common share	$	0.11	$	0.11	$	0.22	$	0.22

See accompanying notes to consolidated financial statements.

4 SLM CORPORATION


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(Dollars in thousands)	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income	$	265,065	$	342,073	$	383,583	$	470,885
Other comprehensive income (loss):
Unrealized gains (losses) on investments	(14,512)		(48,188)		21,044		(129,229)
Unrealized gains (losses) on cash flow hedges	7,575		15,895		(7,424)		68,425
Total unrealized gains (losses)	(6,937)		(32,293)		13,620		(60,804)
Income tax (expense) benefit	1,706		7,808		(3,314)		14,702
Other comprehensive income (loss), net of tax (expense) benefit	(5,231)		(24,485)		10,306		(46,102)
Total comprehensive income	$	259,834	$	317,588	$	393,889	$	424,783

See accompanying notes to consolidated financial statements.

SLM CORPORATION 5


CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited)
		Common Stock Shares
(In thousands, except share and per share amounts)	Preferred Stock Shares	Issued	Treasury	Outstanding	Preferred Stock		Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Treasury Stock		Total Equity
Balance at March 31, 2022	2,510,696	434,608,189	(163,524,633)	271,083,556	$	251,070	$	86,922	$	1,086,852	$	(39,514)	$	2,913,544	$	(2,254,667)	$	2,044,207
Net income	—	—	—	—	—		—		—		—		342,073		—		342,073
Other comprehensive loss, net of tax	—	—	—	—	—		—		—		(24,485)		—		—		(24,485)
Total comprehensive income	—	—	—	—	—		—		—		—		—		—		317,588
Cash dividends declared:
Common stock ($0.11 per share)	—	—	—	—	—		—		—		—		(28,083)		—		(28,083)
Preferred Stock, Series B ($0.70 per share)	—	—	—	—	—		—		—		—		(1,757)		—		(1,757)

Dividend equivalent units related to employee stock-based compensation plans	—	—	—	—	—		—		166		—		(167)		—		(1)
Issuance of common shares	—	493,893	—	493,893	—		99		(97)		—		—		—		2
Stock-based compensation expense	—	—	—	—	—		—		8,375		—		—		—		8,375

Common stock repurchased	—	—	(19,997,008)	(19,997,008)	—		—		—		—		—		(360,095)		(360,095)
Shares repurchased related to employee stock-based compensation plans	—	—	(196,301)	(196,301)	—		—		—		—		—		(3,426)		(3,426)
Balance at June 30, 2022	2,510,696	435,102,082	(183,717,942)	251,384,140	$	251,070	$	87,021	$	1,095,296	$	(63,999)	$	3,225,610	$	(2,618,188)	$	1,976,810

See accompanying notes to consolidated financial statements.

6 SLM CORPORATION


CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited)
		Common Stock Shares
(In thousands, except share and per share amounts)	Preferred Stock Shares	Issued	Treasury	Outstanding	Preferred Stock		Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Treasury Stock		Total Equity
Balance at March 31, 2023	2,510,696	437,644,884	(195,395,127)	242,249,757	$	251,070	$	87,530	$	1,121,082	$	(78,333)	$	3,250,478	$	(2,804,732)	$	1,827,095
Net income	—	—	—	—	—		—		—		—		265,065		—		265,065
Other comprehensive loss, net of tax	—	—	—	—	—		—		—		(5,231)		—		—		(5,231)
Total comprehensive income	—	—	—	—	—		—		—		—		—		—		259,834
Cash dividends declared:
Common stock ($0.11 per share)	—	—	—	—	—		—		—		—		(25,303)		—		(25,303)
Preferred Stock, Series B ($1.70 per share)	—	—	—	—	—		—		—		—		(4,274)		—		(4,274)


Issuance of common shares	—	349,009	—	349,009	—		69		163		—		(234)		—		(2)
Stock-based compensation expense	—	—	—	—	—		—		8,292		—		—		—		8,292
Common stock repurchased	—	—	(16,389,696)	(16,389,696)	—		—		—		—		—		(257,402)		(257,402)
Shares repurchased related to employee stock-based compensation plans	—	—	(128,212)	(128,212)	—		—		—		—		—		(1,876)		(1,876)
Balance at June 30, 2023	2,510,696	437,993,893	(211,913,035)	226,080,858	$	251,070	$	87,599	$	1,129,537	$	(83,564)	$	3,485,732	$	(3,064,010)	$	1,806,364

See accompanying notes to consolidated financial statements.

SLM CORPORATION 7


CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited)
		Common Stock Shares
(In thousands, except share and per share amounts)	Preferred Stock Shares	Issued	Treasury	Outstanding	Preferred Stock		Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Treasury Stock		Total Equity
Balance at December 31, 2021	2,510,696	432,013,372	(153,056,639)	278,956,733	$	251,070	$	86,403	$	1,074,384	$	(17,897)	$	2,817,134	$	(2,061,383)	$	2,149,711
Net income	—	—	—	—	—		—		—		—		470,885		—		470,885
Other comprehensive loss, net of tax	—	—	—	—	—		—		—		(46,102)		—		—		(46,102)
Total comprehensive income	—	—	—	—	—		—		—		—		—		—		424,783
Cash dividends declared:
Common stock ($0.22 per share)	—	—	—	—	—		—		—		—		(58,576)		—		(58,576)
Preferred Stock, Series B ($1.21 per share)	—	—	—	—	—		—		—		—		(3,032)		—		(3,032)

Dividend equivalent units related to employee stock-based compensation plans	—	—	—	—	—		—		784		—		(801)		—		(17)
Issuance of common shares	—	3,088,710	—	3,088,710	—		618		(168)		—		—		—		450
Stock-based compensation expense	—	—	—	—	—		—		20,296		—		—		—		20,296

Common stock repurchased	—	—	(29,530,400)	(29,530,400)	—		—		—		—		—		(536,038)		(536,038)
Shares repurchased related to employee stock-based compensation plans	—	—	(1,130,903)	(1,130,903)	—		—		—		—		—		(20,767)		(20,767)
Balance at June 30, 2022	2,510,696	435,102,082	(183,717,942)	251,384,140	$	251,070	$	87,021	$	1,095,296	$	(63,999)	$	3,225,610	$	(2,618,188)	$	1,976,810

See accompanying notes to consolidated financial statements.

8 SLM CORPORATION


CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited)
		Common Stock Shares
(In thousands, except share and per share amounts)	Preferred Stock Shares	Issued	Treasury	Outstanding	Preferred Stock		Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Treasury Stock		Total Equity
Balance at December 31, 2022	2,510,696	435,121,140	(194,445,696)	240,675,444	$	251,070	$	87,025	$	1,109,072	$	(93,870)	$	3,163,640	$	(2,789,967)	$	1,726,970
Net income	—	—	—	—	—		—		—		—		383,583		—		383,583
Other comprehensive income, net of tax	—	—	—	—	—		—		—		10,306		—		—		10,306
Total comprehensive income	—	—	—	—	—		—		—		—		—		—		393,889
Cash dividends declared:
Common stock ($0.22 per share)	—	—	—	—	—		—		—		—		(51,938)		—		(51,938)
Preferred Stock, Series B ($3.32 per share)	—	—	—	—	—		—		—		—		(8,337)		—		(8,337)


Issuance of common shares	—	2,872,753		2,872,753	—		574		637		—		(1,216)		—		(5)
Stock-based compensation expense	—	—	—	—	—		—		19,828		—		—		—		19,828
Common stock repurchased	—	—	(16,389,696)	(16,389,696)	—		—		—		—		—		(257,402)		(257,402)
Shares repurchased related to employee stock-based compensation plans	—	—	(1,077,643)	(1,077,643)	—		—		—		—		—		(16,641)		(16,641)
Balance at June 30, 2023	2,510,696	437,993,893	(211,913,035)	226,080,858	$	251,070	$	87,599	$	1,129,537	$	(83,564)	$	3,485,732	$	(3,064,010)	$	1,806,364

See accompanying notes to consolidated financial statements.

SLM CORPORATION 9


CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
	Six Months Ended June 30,
(Dollars in thousands)	2023		2022
Operating activities
Net income	$	383,583	$	470,885
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provisions for credit losses	131,841		128,595
Income tax expense	128,820		151,652
Amortization of brokered deposit placement fee	5,986		6,575
Amortization of Secured Borrowing Facility upfront fee	1,441		1,218
Amortization of deferred loan origination costs and loan premium/(discounts), net	6,402		8,186
Net amortization of discount on investments	(1,317)		1,022

Increase in tax indemnification receivable	(86)		(221)
Depreciation of premises and equipment	9,145		8,489
Acquired intangible assets amortization expense	4,517		3,150
Stock-based compensation expense	19,828		20,296
Unrealized (gains) losses on derivatives and hedging activities, net	(339)		(27)
Gains on sales of loans, net	(124,745)		(249,878)
(Gains) losses on securities, net	(498)		2,913
Acquisition transaction costs, net	—		2,602
Other adjustments to net income, net	8,883		7,983
Changes in operating assets and liabilities:
Increase in accrued interest receivable	(511,089)		(372,454)

Increase in non-marketable securities	(691)		(992)
Increase in other interest-earning assets	(790)		(528)

Increase in other assets	(37,573)		(39,862)
Decrease in income taxes payable, net	(74,596)		(118,724)
Increase in accrued interest payable	10,433		(2,535)

Decrease in other liabilities	(17,301)		(25,846)
Total adjustments	(441,729)		(468,386)
Total net cash (used in) provided by operating activities	(58,146)		2,499
Investing activities
Loans acquired and originated	(3,132,075)		(2,857,411)
Net proceeds from sales of loans held for investment and loans held for sale	2,157,028		2,333,188
Proceeds from FFELP Loan claim payments	26,477		14,642
Net decrease in loans held for investment and loans held for sale (other than loans acquired and originated, and loan sales)	1,605,292		2,007,215
Purchases of available-for-sale securities	(44,782)		(753,129)
Proceeds from sales and maturities of available-for-sale securities	148,092		741,059
Purchase of subsidiary, net of cash acquired	—		(127,568)
Total net cash provided by investing activities	760,032		1,357,996
Financing activities

Brokered deposit placement fee	(2,634)		(3,790)
Net decrease in certificates of deposit	(303,027)		(1,131,940)
Net increase (decrease) in other deposits	(793,068)		353,506

Borrowings collateralized by loans in securitization trusts - issued	569,513		—
Borrowings collateralized by loans in securitization trusts - repaid	(596,692)		(716,561)
Issuance costs for unsecured debt offering	(15)		(360)



Fees paid on Secured Borrowing Facility	(2,850)		(2,833)

Common stock dividends paid	(51,938)		(58,576)
Preferred stock dividends paid	(8,337)		(3,032)
Common stock repurchased	(259,331)		(545,498)
Total net cash used in financing activities	(1,448,379)		(2,109,084)
Net decrease in cash, cash equivalents and restricted cash	(746,493)		(748,589)
Cash, cash equivalents and restricted cash at beginning of period	4,772,836		4,545,344

10 SLM CORPORATION


Cash, cash equivalents and restricted cash at end of period	$	4,026,343	$	3,796,755
Cash disbursements made for:
Interest	$	449,268	$	174,681
Income taxes paid	$	82,307	$	120,330
Income taxes refunded	$	(8,157)	$	(2,023)
Reconciliation of the Consolidated Statements of Cash Flows to the Consolidated Balance Sheets:
Cash and cash equivalents	$	3,875,758	$	3,649,651
Restricted cash	150,585		147,104
Total cash, cash equivalents and restricted cash	$	4,026,343	$	3,796,755

See accompanying notes to consolidated financial statements.

SLM CORPORATION 11

1. Significant Accounting Policies

Basis of Presentation

The accompanying unaudited, consolidated financial statements of SLM Corporation (“Sallie Mae,” “SLM,” the “Company,” “we,” or “us”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information. Accordingly, they do not include all the information and footnotes required by GAAP for complete consolidated financial statements. The consolidated financial statements include the accounts of SLM Corporation and its majority-owned and controlled subsidiaries after eliminating the effects of intercompany accounts and transactions. In the opinion of management, all adjustments considered necessary for a fair statement of the results for the interim periods have been included. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Operating results for the three and six months ended June 30, 2023 are not necessarily indicative of the results for the year ending December 31, 2023 or for any other period. These unaudited financial statements should be read in conjunction with the audited financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”).

Consolidation

The consolidated financial statements include the accounts of the Company and its majority-owned and controlled subsidiaries after eliminating the effects of intercompany accounts and transactions.

We consolidate any variable interest entity (“VIE”) where we have determined we are the primary beneficiary. The primary beneficiary is the entity which has both: (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance; and (ii) the obligation to absorb losses or receive benefits of the entity that could potentially be significant to the VIE.

12 SLM CORPORATION

2. Investments

Trading Investments

We periodically sell Private Education Loans through securitization transactions where we are required to retain a five percent vertical risk retention interest (i.e., five percent of each class issued in the securitizations). We classify those vertical risk retention interests related to the transactions as available-for-sale investments, except for the interest in the residual classes, which we classify as trading investments recorded at fair value with changes recorded through earnings.

At December 31, 2022 we had a $5 million investment in a convertible debt security classified as a trading investment. In March 2023, this security, and the related accrued interest, was converted into equity securities classified as investments in non-marketable securities.

At June 30, 2023 and December 31, 2022, we had $52 million and $56 million, respectively, classified as trading investments.

Available-for-Sale Investments

The amortized cost and fair value of securities available for sale are as follows:


As of June 30, 2023 (dollars in thousands)	Amortized Cost		Allowance for credit losses(1)		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available-for-sale:
Mortgage-backed securities	$	419,251	$	—	$	1	$	(66,340)	$	352,912
Utah Housing Corporation bonds	3,460		—		—		(405)		3,055
U.S. government-sponsored enterprises and Treasuries	1,708,890		—		—		(103,082)		1,605,808
Other securities	432,215		—		129		(21,273)		411,071
Total	$	2,563,816	$	—	$	130	$	(191,100)	$	2,372,846

As of December 31, 2022 (dollars in thousands)	Amortized Cost		Allowance for credit losses(1)		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available-for-sale:
Mortgage-backed securities	$	389,067	$	—	$	2	$	(68,705)	$	320,364
Utah Housing Corporation bonds	3,584		—		—		(357)		3,227
U.S. government-sponsored enterprises and Treasuries	1,804,726		—		—		(115,416)		1,689,310
Other securities	356,955		—		33		(27,800)		329,188
Total	$	2,554,332	$	—	$	35	$	(212,278)	$	2,342,089

(1) Represents the amount of impairment that has resulted from credit-related factors and that was recognized in the consolidated balance sheets (as a credit loss expense on available-for-sale securities). The amount excludes unrealized losses related to non-credit factors.

SLM CORPORATION 13


2.			Investments (Continued)

The following table summarizes the amount of gross unrealized losses for our available-for-sale securities and the estimated fair value for securities having gross unrealized loss positions, categorized by length of time the securities have been in an unrealized loss position:


(Dollars in thousands)	Less than 12 months				12 months or more				Total
	Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value
As of June 30, 2023:
Mortgage-backed securities	$	(879)	$	44,532	$	(65,461)	$	308,309	$	(66,340)	$	352,841
Utah Housing Corporation bonds	—		—		(405)		3,055		(405)		3,055
U.S. government-sponsored enterprises and Treasuries	(4,419)		93,990		(98,663)		1,511,818		(103,082)		1,605,808
Other securities	(4,121)		195,551		(17,152)		161,252		(21,273)		356,803
Total	$	(9,419)	$	334,073	$	(181,681)	$	1,984,434	$	(191,100)	$	2,318,507

As of December 31, 2022:
Mortgage-backed securities	$	(13,956)	$	99,598	$	(54,749)	$	220,576	$	(68,705)	$	320,174
Utah Housing Corporation bonds	(357)		3,227		—		—		(357)		3,227
U.S. government-sponsored enterprises and Treasuries	(28,128)		689,300		(87,288)		1,000,010		(115,416)		1,689,310
Other securities	(15,852)		232,546		(11,948)		92,883		(27,800)		325,429
Total	$	(58,293)	$	1,024,671	$	(153,985)	$	1,313,469	$	(212,278)	$	2,338,140

At June 30, 2023 and December 31, 2022, 211 of 216 and 191 of 194, respectively, of our available-for-sale securities were in an unrealized loss position.

Impairment

For available-for-sale securities in an unrealized loss position, we first assess whether we intend to sell, or it is more likely than not that we will be required to sell, the security before recovery of its amortized cost basis. If either of these criteria is met, the security’s amortized cost basis is written down to fair value through net income. For securities in an unrealized loss position that do not meet these criteria, we evaluate whether the decline in fair value has resulted from credit loss or other factors. In making this assessment, we consider the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, adverse conditions specifically related to the security, as well as any guarantees (e.g., guarantees by the U.S. Government) that may be applicable to the security. If this assessment indicates a credit loss exists, the credit-related portion of the loss is recorded as an allowance for losses on the security.

Our investment portfolio contains mortgage-backed securities issued by Ginnie Mae, Fannie Mae, and Freddie Mac, as well as Utah Housing Corporation bonds. We own these securities to meet our requirements under the Community Reinvestment Act (“CRA”). We also invest in other U.S. government-sponsored enterprise securities issued by the Federal Home Loan Banks, Freddie Mac, and the Federal Farm Credit Bank. Our mortgage-backed securities that were issued under Ginnie Mae programs carry a full faith and credit guarantee from the U.S. Government. The remaining mortgage-backed securities in a net loss position carry a principal and interest guarantee by Fannie Mae or Freddie Mac, respectively. Our Treasury and other U.S. government-sponsored enterprise bonds are rated Aaa by Moody’s Investors Service or AA+ by Standard and Poor’s. We have the intent and ability to hold these bonds for a period of time sufficient for the market price to recover to at least the adjusted amortized cost of the security. Based on this qualitative analysis, we have determined that no credit impairment exists.

We periodically sell Private Education Loans through securitization transactions where we are required to retain a five percent vertical risk retention interest. We classify the non-residual vertical risk retention interests as available-for-sale investments. We have the intent and ability to hold each of these bonds for a period of time sufficient for the market price to recover to at least the adjusted amortized cost of the security. We expect to receive all contractual cash flows related to these investments and do not consider a credit impairment to exist.

14 SLM CORPORATION


2.			Investments (Continued)

As of June 30, 2023, the amortized cost and fair value of securities, by contractual maturities, are summarized below. Contractual maturities versus actual maturities may differ due to the effect of prepayments.


As of June 30, 2023 Year of Maturity (dollars in thousands)	Amortized Cost		Estimated Fair Value
2023	$	65,001	$	64,075
2024	698,726		670,849
2025	298,314		283,644
2026	548,440		493,250
2027	98,409		93,990
2038	70		71
2039	693		681
2042	2,483		2,148
2043	4,263		3,830
2044	5,357		4,906
2045	5,254		4,678
2046	7,902		6,965
2047	8,311		7,331
2048	2,051		1,949
2049	16,013		14,251
2050	112,190		90,329
2051	158,214		126,858
2052	55,191		48,119
2053	143,586		133,023
2054	79,538		72,081
2055	94,046		90,092
2056	109,203		109,203
2058	50,561		50,523
Total	$	2,563,816	$	2,372,846

Some of the mortgage-backed securities and a portion of the government securities have been pledged to the Federal Reserve Bank (the “FRB”) as collateral against any advances and accrued interest under the Primary Credit lending program sponsored by the FRB. We had $562 million and $547 million par value of securities pledged to this borrowing facility at June 30, 2023 and December 31, 2022, respectively, as discussed further in Notes to Consolidated Financial Statements, Note 9, “Borrowings” in this Form 10-Q.

Other Investments

Investments in Non-Marketable Securities

We hold investments in non-marketable securities and account for these investments at cost, less impairment, plus or minus observable price changes of identical or similar securities of the same issuer. Changes in market value are recorded through earnings. Because these are non-marketable securities, we use observable price changes of identical or similar securities of the same issuer, or when observable prices are not available, use market data of similar entities, in determining any changes in the value of the securities. In March 2023 our $5 million investment in a convertible debt security, classified as a trading investment, and the related accrued interest were converted into equity securities and were reclassified to investments in non-marketable securities. As of June 30, 2023, and December 31, 2022, our total investment in these securities was $14 million and $8 million, respectively.

SLM CORPORATION 15


2.			Investments (Continued)

Low Income Housing Tax Credit Investments

We invest in affordable housing projects that qualify for the low-income housing tax credit (“LIHTC”), which is designed to promote private development of low-income housing. These investments generate a return mostly through realization of federal tax credits and tax benefits from net operating losses on the underlying properties. Total carrying value of the LIHTC investments was $76 million at June 30, 2023 and $80 million at December 31, 2022. We are periodically required to provide additional financial support during the investment period. Our liability for these unfunded commitments was $40 million at June 30, 2023 and $46 million at December 31, 2022.

Related to these investments, we recognized tax credits and other tax benefits through tax expense of $1 million at June 30, 2023 and $9 million at December 31, 2022. Tax credits and other tax benefits are recognized as part of our annual effective tax rate used to determine tax expense in a given quarter. Accordingly, the portion of a year’s expected tax benefits recognized in any given quarter may differ from 25 percent.

3. Loans Held for Investment

Loans held for investment consist of Private Education Loans and FFELP Loans. We use “Private Education Loans” to mean education loans to students or their families that are not made, insured, or guaranteed by any state or federal government. Private Education Loans do not include loans insured or guaranteed under the previously existing Federal Family Education Loan Program (“FFELP”). We use “Credit Cards” to refer to the suite of Credit Cards that we previously held. At September 30, 2022, we transferred our Credit Card portfolio to loans held for sale and subsequently sold the Credit Card portfolio to a third party in May 2023. For additional information, see Notes to Consolidated Financial Statements, Note 4, “Loans Held for Sale” in this Form 10-Q.

Our Private Education Loans are made largely to bridge the gap between the cost of higher education and the amount funded through financial aid, government loans, and customers’ resources. Private Education Loans bear the full credit risk of the customer. We manage this risk through risk-performance underwriting strategies and qualified cosigners. Private Education Loans may be fixed-rate or may carry a variable interest rate indexed to LIBOR, the London interbank offered rate, or SOFR, the Secured Overnight Financing Rate. As of June 30, 2023 and December 31, 2022, 40 percent and 45 percent, respectively, of all of our Private Education Loans were indexed to LIBOR or SOFR. We provide incentives for customers to include a cosigner on the loan, and the vast majority of Private Education Loans in our portfolio are cosigned. We also encourage customers to make payments while in school.

FFELP Loans are insured as to their principal and accrued interest in the event of default, subject to a risk-sharing level based on the date of loan disbursement. These insurance obligations are supported by contractual rights against the United States. For loans disbursed on or after July 1, 2006, we receive 97 percent reimbursement on all qualifying claims. For loans disbursed after October 1, 1993, and before July 1, 2006, we receive 98 percent reimbursement on all qualifying claims. For loans disbursed prior to October 1, 1993, we receive 100 percent reimbursement on all qualifying claims.