UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-Q
 
(Mark One)
 	 	
þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
For the quarterly period ended September 30, 2015
or
 	 	
¨	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)
 
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   þ     No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 	 	 	 	 	
Large accelerated filer	  þ	 	Accelerated filer	  ¨ 	
 	 	 	 	 	
Non-accelerated filer	  ¨ 	(Do not check if a smaller reporting company)	Smaller reporting company	  ¨ 	
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).     Yes   þ     No   ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ¨ No þ 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

 	 	
Class
 	Outstanding at September 30, 2015	
Common Stock, $0.20 par value	426,108,435 shares	

 	

SLM CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS
INDEX

 	
 	 	 	 	 	
Part I. Financial Information	 	 	
 	
Item 1.	Financial Statements	 	3	
 	
Item 1.	Notes to the Financial Statements	 	10	
 	
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	 	40	
 	
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	 	65	
 	
Item 4.	Controls and Procedures	 	68	
 	
PART II. Other Information	 	 	
Item 1.	Legal Proceedings	 	69	
 	
Item 1A.	Risk Factors	 	70	
 	
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	 	70	
 	
Item 3.	Defaults Upon Senior Securities	 	70	
 	
Item 4.	Mine Safety Disclosures	 	70	
 	
Item 5.	Other Information	 	70	
 	
Item 6.	Exhibits	 	71	

1

SLM CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)

 	 	 	 	 	 	 	 	 	
 	 	September 30,	 	December 31,	
 	 	2015	 	2014	
Assets	 	 	 	 	
Cash and cash equivalents	 	$	1,281,797	
 	 	$	2,359,780	
 	
Available-for-sale investments at fair value (cost of $190,249 and $167,740, respectively)	 	190,944	
 	 	168,934	
 	
Loans held for investment (net of allowance for losses of $104,203 and $83,842, respectively)	 	11,909,148	
 	 	9,509,786	
 	
Restricted cash and investments	 	25,605	
 	 	4,804	
 	
Other interest-earning assets	 	47,604	
 	 	72,479	
 	
Accrued interest receivable	 	634,423	
 	 	469,697	
 	
Premises and equipment, net	 	80,224	
 	 	78,470	
 	
Acquired intangible assets, net	 	2,115	
 	 	3,225	
 	
Tax indemnification receivable	 	200,704	
 	 	240,311	
 	
Other assets	 	77,980	
 	 	64,757	
 	
Total assets	 	$	14,450,544	
 	 	$	12,972,243	

Liabilities	 	 	 	 	
Deposits	 	$	10,610,879	
 	 	$	10,540,555	
 	
Short-term borrowings	 	710,005	
 	 	—	
 	
Long-term borrowings	 	593,687	
 	 	—	
 	
Income taxes payable, net	 	117,531	
 	 	191,499	
 	
Upromise related liabilities	 	283,688	
 	 	293,004	
 	
Other liabilities	 	137,420	
 	 	117,227	
 	
Total liabilities	 	12,453,210	
 	 	11,142,285	

Commitments and contingencies	 	

 	 	 	 	 	
Equity	 	 	 	 	
Preferred stock, par value $0.20 per share, 20 million shares authorized	 	 	 	 	
Series A: 3.3 million and 3.3 million shares issued, respectively, at stated value of $50 per share	 	165,000	
 	 	165,000	
 	
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: 430 million and 425 million shares issued, respectively	 	86,075	
 	 	84,961	
 	
Additional paid-in capital	 	1,128,494	
 	 	1,090,511	
 	
Accumulated other comprehensive loss (net of tax benefit of $14,847 and $7,186, respectively)	 	(23,515	)	 	(11,393	)	
Retained earnings	 	281,761	
 	 	113,066	
 	
Total SLM Corporation stockholders' equity before treasury stock	 	2,037,815	
 	 	1,842,145	
 	
Less: Common stock held in treasury at cost: 4 million and 1 million shares, respectively	 	(40,481	)	 	(12,187	)	
Total equity	 	1,997,334	
 	 	1,829,958	
 	
Total liabilities and equity	 	$	14,450,544	
 	 	$	12,972,243	

See accompanying notes to consolidated financial statements.

2

SLM CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	 	Nine Months Ended	
 	 	September 30,	 	September 30,	
 	 	2015	 	2014	 	2015	 	2014	
Interest income:	 	 	 	 	 	 	 	 	
Loans	 	$	205,274	
 	 	$	164,106	
 	 	$	598,417	
 	 	$	486,379	
 	
Investments	 	2,640	
 	 	2,917	
 	 	7,746	
 	 	6,121	
 	
Cash and cash equivalents	 	987	
 	 	1,180	
 	 	2,568	
 	 	3,145	
 	
Total interest income	 	208,901	
 	 	168,203	
 	 	608,731	
 	 	495,645	
 	
Interest expense:	 	 	 	 	 	 	 	 	
Deposits	 	29,110	
 	 	24,177	
 	 	86,961	
 	 	67,842	
 	
Interest expense on short-term borrowings	 	1,951	
 	 	—	
 	 	4,719	
 	 	—	
 	
Interest expense on long-term borrowings	 	2,398	
 	 	—	
 	 	2,398	
 	 	—	
 	
Total interest expense	 	33,459	
 	 	24,177	
 	 	94,078	
 	 	67,842	
 	
Net interest income	 	175,442	
 	 	144,026	
 	 	514,653	
 	 	427,803	
 	
Less: provisions for loan losses	 	27,497	
 	 	14,898	
 	 	59,673	
 	 	55,071	
 	
Net interest income after provisions for loan losses	 	147,945	
 	 	129,128	
 	 	454,980	
 	 	372,732	
 	
Noninterest income:	 	 	 	 	 	 	 	 	
Gains on sales of loans, net	 	—	
 	 	85,147	
 	 	76,874	
 	 	120,963	
 	
(Losses) gains on derivatives and hedging activities, net	 	(547	)	 	5,401	
 	 	4,347	
 	 	(4,821	)	
Other	 	10,455	
 	 	5,461	
 	 	29,374	
 	 	28,826	
 	
Total noninterest income	 	9,908	
 	 	96,009	
 	 	110,595	
 	 	144,968	
 	
Expenses:	 	 	 	 	 	 	 	 	
Compensation and benefits	 	39,304	
 	 	31,597	
 	 	119,079	
 	 	92,931	
 	
Other operating expenses	 	53,560	
 	 	40,482	
 	 	144,771	
 	 	103,226	
 	
Total operating expenses	 	92,864	
 	 	72,079	
 	 	263,850	
 	 	196,157	
 	
Acquired intangible asset amortization expense	 	370	
 	 	1,150	
 	 	1,110	
 	 	4,145	
 	
Restructuring and other reorganization expenses	 	910	
 	 	14,079	
 	 	6,311	
 	 	27,828	
 	
Total expenses	 	94,144	
 	 	87,308	
 	 	271,271	
 	 	228,130	
 	
Income before income tax expense	 	63,709	
 	 	137,829	
 	 	294,304	
 	 	289,570	
 	
Income tax expense	 	17,985	
 	 	54,903	
 	 	109,865	
 	 	115,502	
 	
Net income	 	45,724	
 	 	82,926	
 	 	184,439	
 	 	174,068	
 	
Less: net loss attributable to noncontrolling interest	 	—	
 	 	—	
 	 	—	
 	 	(434	)	
Net income attributable to SLM Corporation	 	45,724	
 	 	82,926	
 	 	184,439	
 	 	174,502	
 	
Preferred stock dividends	 	4,913	
 	 	4,850	
 	 	14,606	
 	 	8,078	
 	
Net income attributable to SLM Corporation common stock	 	$	40,811	
 	 	$	78,076	
 	 	$	169,833	
 	 	$	166,424	

Basic earnings per common share attributable to SLM Corporation	 	$	0.10	
 	 	$	0.18	
 	 	$	0.40	
 	 	$	0.39	
 	
Average common shares outstanding	 	426,019	
 	 	423,079	
 	 	425,384	
 	 	424,187	
 	
Diluted earnings per common share attributable to SLM Corporation	 	$	0.09	
 	 	$	0.18	
 	 	$	0.39	
 	 	$	0.38	
 	
Average common and common equivalent shares outstanding	 	432,547	
 	 	431,604	
 	 	432,531	
 	 	432,324	

See accompanying notes to consolidated financial statements.

3

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

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	 	Nine Months Ended	
 	 	September 30,	 	September 30,	
 	 	2015	 	2014	 	2015	 	2014	
Net income	 	$	45,724	
 	 	$	82,926	
 	 	$	184,439	
 	 	$	174,068	
 	
Other comprehensive income (loss):	 	 	 	 	 	 	 	 	
Unrealized gains (losses) on investments	 	2,008	
 	 	(525	)	 	(499	)	 	3,629	
 	
Unrealized losses on cash flow hedges	 	(21,751	)	 	(1,883	)	 	(19,284	)	 	(1,883	)	
Total unrealized (losses) gains	 	(19,743	)	 	(2,408	)	 	(19,783	)	 	1,746	
 	
Income tax benefit (expense)	 	7,676	
 	 	921	
 	 	7,661	
 	 	(574	)	
Other comprehensive (loss) income, net of tax benefit (expense)	 	(12,067	)	 	(1,487	)	 	(12,122	)	 	1,172	
 	
Comprehensive income	 	33,657	
 	 	81,439	
 	 	172,317	
 	 	175,240	
 	
Less: comprehensive loss attributable to noncontrolling interest	 	—	
 	 	—	
 	 	—	
 	 	(434	)	
Total comprehensive income attributable to SLM Corporation	 	$	33,657	
 	 	$	81,439	
 	 	$	172,317	
 	 	$	175,674	

See accompanying notes to consolidated financial statements.

4

SLM CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In thousands, except share and per share amounts)
(Unaudited)

 	 	 	 	Common Stock Shares	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Preferred Stock Shares	 	Issued	 	Treasury	 	Outstanding	 	Preferred Stock	 	Common Stock	 	Additional Paid-In Capital	 	Navient's Subsidiary Investment	 	Accumulated
Other
Comprehensive
Income (Loss)	 	Retained Earnings	 	Treasury Stock	 	Total SLM Corporation Equity	 	Non-controlling interest	 	Total Equity	
Balance at December 31, 2013	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	$	—	
 	 	$	—	
 	 	$	—	
 	 	$	1,164,495	
 	 	$	(3,024	)	 	$	—	
 	 	$	—	
 	 	$	1,161,471	
 	 	$	4,672	
 	 	$	1,166,143	
 	
Net income (loss)	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	68,173	
 	 	—	
 	 	106,329	
 	 	—	
 	 	174,502	
 	 	(434	)	 	174,068	
 	
Other comprehensive income, net of tax	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	1,172	
 	 	—	
 	 	—	
 	 	1,172	
 	 	—	
 	 	1,172	
 	
Total comprehensive income (loss)	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	175,674	
 	 	(434	)	 	175,240	
 	
Net transfers from affiliate	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	479,409	
 	 	—	
 	 	—	
 	 	—	
 	 	479,409	
 	 	—	
 	 	479,409	
 	
Separation adjustments related to Spin-Off of Navient Corporation	 	7,300,000	
 	 	422,790,320	
 	 	—	
 	 	422,790,320	
 	 	565,000	
 	 	84,558	
 	 	1,062,519	
 	 	(1,712,077	)	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	
Sale of non-controlling interest	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	(4,238	)	 	(4,238	)	
Cash dividends:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Preferred Stock, series A ($.87 per share)	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	(4,792	)	 	—	
 	 	(4,792	)	 	—	
 	 	(4,792	)	
Preferred Stock, series B  ($.49 per share)	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	(3,286	)	 	—	
 	 	(3,286	)	 	—	
 	 	(3,286	)	
Dividend equivalent units related to employee stock-based compensation plans	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	41	
 	 	—	
 	 	—	
 	 	(41	)	 	 	 	—	
 	 	—	
 	 	—	
 	
Issuance of common shares	 	—	
 	 	1,089,716	
 	 	—	
 	 	1,089,716	
 	 	—	
 	 	219	
 	 	4,391	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	4,610	
 	 	—	
 	 	4,610	
 	
Stock-based compensation expense	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	11,550	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	11,550	
 	 	—	
 	 	11,550	
 	
Shares repurchased related to employee stock-based compensation plans	 	—	
 	 	—	
 	 	(715,393	)	 	(715,393	)	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	(6,208	)	 	(6,208	)	 	—	
 	 	(6,208	)	
Balance at September 30, 2014	 	7,300,000	
 	 	423,880,036	
 	 	(715,393	)	 	423,164,643	
 	 	$	565,000	
 	 	$	84,777	
 	 	$	1,078,501	
 	 	$	—	
 	 	$	(1,852	)	 	$	98,210	
 	 	$	(6,208	)	 	$	1,818,428	
 	 	$	—	
 	 	$	1,818,428	
 	
See accompanying notes to consolidated financial statements.

5

SLM CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In thousands, except share and per share amounts)
(Unaudited)

 

 	 	 	 	Common Stock Shares	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Preferred Stock Shares	 	Issued	 	Treasury	 	Outstanding	 	Preferred Stock	 	Common Stock	 	Additional Paid-In Capital	 	Accumulated
Other
Comprehensive
Income (Loss)	 	Retained Earnings	 	Treasury Stock	 	Total SLM Corporation Equity	
Balance at December 31, 2014	 	7,300,000	
 	 	424,804,125	
 	 	(1,365,277	)	 	423,438,848	
 	 	$	565,000	
 	 	$	84,961	
 	 	$	1,090,511	
 	 	$	(11,393	)	 	$	113,066	
 	 	$	(12,187	)	 	$	1,829,958	
 	
Net income	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	184,439	
 	 	—	
 	 	184,439	
 	
Other comprehensive loss, net of tax	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	(12,122	)	 	—	
 	 	—	
 	 	(12,122	)	
Total comprehensive income	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	172,317	
 	
Cash dividends:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Preferred Stock, series A ($.87 per share)	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	(8,625	)	 	—	
 	 	(8,625	)	
Preferred Stock, series B  ($.51 per share)	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	(5,981	)	 	—	
 	 	(5,981	)	
Dividend equivalent units related to employee stock-based compensation plans	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	1,138	
 	 	—	
 	 	(1,138	)	 	—	
 	 	—	
 	
Issuance of common shares	 	—	
 	 	5,569,853	
 	 	
 	 	5,569,853	
 	 	—	
 	 	1,114	
 	 	14,329	
 	 	—	
 	 	—	
 	 	—	
 	 	15,443	
 	
Tax benefit related to employee stock-based compensation	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	6,093	
 	 	—	
 	 	—	
 	 	—	
 	 	6,093	
 	
Stock-based compensation expense	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	16,423	
 	 	—	
 	 	—	
 	 	—	
 	 	16,423	
 	
Shares repurchased related to employee stock-based compensation plans	 	—	
 	 	—	
 	 	(2,900,266	)	 	(2,900,266	)	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	(28,294	)	 	(28,294	)	
Balance at September 30, 2015	 	7,300,000	
 	 	430,373,978	
 	 	(4,265,543	)	 	426,108,435	
 	 	$	565,000	
 	 	$	86,075	
 	 	$	1,128,494	
 	 	$	(23,515	)	 	$	281,761	
 	 	$	(40,481	)	 	$	1,997,334	

See accompanying notes to consolidated financial statements.

6

SLM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

 	
 	 	 	 	 	 	 	 	 	
 	 	Nine Months Ended	
 	 	September	
 	 	2015	 	2014	
Operating activities	 	 	 	 	
Net income	 	$	184,439	
 	 	$	174,068	
 	
Adjustments to reconcile net income to net cash used in operating activities:	 	 	 	 	
Provisions for loan losses	 	59,673	
 	 	55,071	
 	
Income tax expense	 	109,865	
 	 	115,502	
 	
Amortization of brokered deposit placement fee	 	8,006	
 	 	7,548	
 	
Amortization of asset-backed commercial paper upfront fee	 	1,790	
 	 	—	
 	
Amortization of deferred loan origination costs and fees, net	 	2,563	
 	 	1,446	
 	
Net accretion of discount on borrowings	 	108	
 	 	—	
 	
Net accretion of underwriter fees on borrowings	 	108	
 	 	—	
 	
Net amortization of discount on investments	 	1,332	
 	 	433	
 	
Depreciation of premises and equipment	 	5,427	
 	 	4,289	
 	
Amortization of acquired intangibles	 	1,110	
 	 	2,783	
 	
Stock-based compensation expense	 	16,423	
 	 	20,127	
 	
Unrealized (gains)/losses on derivative and hedging activities, net	 	(1,985	)	 	1,307	
 	
Gains on sale of loans, net	 	(76,874	)	 	(120,963	)	
Changes in operating assets and liabilities:	 	 	 	 	
Net decrease in loans held for sale	 	55	
 	 	6,448	
 	
Origination of loans held for sale	 	(55	)	 	(6,448	)	
Increase in accrued interest receivable	 	(316,263	)	 	(220,273	)	
Increase in restricted cash and investments - other	 	(2,596	)	 	(1,503	)	
Decrease (increase) in other interest-earning assets	 	24,875	
 	 	(46,333	)	
Decrease in tax indemnification receivable	 	39,607	
 	 	29,816	
 	
Increase in other assets	 	(18,022	)	 	(18,918	)	
Decrease in income tax payable, net	 	(176,172	)	 	(294,116	)	
Increase in accrued interest payable	 	7,227	
 	 	2,639	
 	
(Decrease) increase in payable due to entity that is a subsidiary of Navient	 	(5,368	)	 	18,114	
 	
Increase in other liabilities	 	5,895	
 	 	30,741	
 	
Total adjustments	 	(313,271	)	 	(412,290	)	
Total net cash used in operating activities	 	(128,832	)	 	(238,222	)	
Investing activities	 	 	 	 	
Loans acquired and originated	 	(3,786,946	)	 	(3,535,740	)	
Net proceeds from sales of loans held for investment	 	790,094	
 	 	1,994,017	
 	
Proceeds from claim payments	 	91,000	
 	 	88,251	
 	
Net decrease (increase) in loans held for investment	 	672,665	
 	 	476,955	
 	
Increase in restricted cash and investments - variable interest entities	 	(18,205	)	 	—	
 	
Purchases of available-for-sale securities	 	(50,062	)	 	(55,928	)	
Proceeds from sales and maturities of available-for-sale securities	 	26,222	
 	 	7,337	
 	
Total net cash used in investing activities	 	(2,275,232	)	 	(1,025,108	)	
Financing activities	 	 	 	 	
Brokered deposit placement fee	 	(477	)	 	(5,533	)	
Net increase (decrease) in certificates of deposit	 	161,096	
 	 	(614,953	)	
Net (decrease) increase in other deposits	 	(129,412	)	 	804,874	
 	
Borrowings collateralized by loans in securitization trusts - issued	 	620,681	
 	 	—	
 	
Borrowings collateralized by loans in securitization trusts - repaid	 	(27,195	)	 	—	
 	
Borrowings under ABCP facility	 	713,746	
 	 	—	

7

 	
 	 	 	 	 	 	 	 	 	
Repayment of borrowings under ABCP facility	 	(3,741	)	 	—	
 	
Fees paid on ABCP facility	 	(104	)	 	—	
 	
Net decrease in deposits with entity that is a subsidiary of Navient	 	—	
 	 	(5,633	)	
Special cash contribution from Navient	 	—	
 	 	472,718	
 	
Net capital contributions from entity that is a subsidiary of Navient	 	—	
 	 	7,448	
 	
Excess tax benefit from the exercise of stock-based awards	 	6,093	
 	 	—	
 	
Preferred stock dividends paid	 	(14,606	)	 	(8,078	)	
Net cash provided by financing activities	 	1,326,081	
 	 	650,843	
 	
Net decrease in cash and cash equivalents	 	(1,077,983	)	 	(612,487	)	
Cash and cash equivalents at beginning of period	 	2,359,780	
 	 	2,182,865	
 	
Cash and cash equivalents at end of period	 	$	1,281,797	
 	 	$	1,570,378	
 	
Cash disbursements made for:	 	 	 	 	
Interest	 	$	79,917	
 	 	$	64,987	
 	
Income taxes paid	 	$	171,114	
 	 	$	294,116	
 	
See accompanying notes to consolidated financial statements.

8

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, unless otherwise noted)

 	 	 	

1. Significant Accounting Policies

Basis of Presentation
The accompanying unaudited, consolidated financial statements of SLM Corporation (“we,” “us,” “our,” “Sallie Mae,” or the “Company”) 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 nine months ended September 30, 2015 are not necessarily indicative of the results for the year ending December 31, 2015 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, 2014 (the “2014 Form 10-K”).
On April 30, 2014, we completed our plan to legally separate into two distinct publicly traded entities - an education loan management, servicing and asset recovery business, Navient Corporation (“Navient”), and a consumer banking business, SLM Corporation. The separation of Navient from SLM Corporation (the “Spin-Off”) was preceded by an internal corporate reorganization, which was the first step to separate the education loan management, servicing and asset recovery business from the consumer banking business.
For periods before the Spin-Off, the financial statements are presented on a basis of accounting that reflects a change in reporting entity and have been adjusted for the effects of the Spin-Off. These carved-out financial statements and selected financial information represent only those operations, assets, liabilities and equity that form Sallie Mae on a stand-alone basis. Because the Spin-Off occurred on April 30, 2014, the balances before that date include the carved-out financial results.
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.
Restricted Cash and Investments
Restricted cash and investments primarily includes amounts held in student loan securitization trusts and other secured borrowings. This cash must be used to make payments related to trust obligations. Amounts on deposit in these accounts are primarily the result of timing differences between when principal and interest is collected on the trust assets and when principal and interest is paid on trust liabilities.
Recently Issued Accounting Pronouncements
On February 18, 2015, the FASB issued Accounting Standards Update (“ASU”) No. 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis,” which amends the current consolidation guidance. The amendments reduce the number of consolidation models through the elimination of the indefinite deferral of ASC 810 and place more emphasis on risk of loss when determining a controlling financial interest.  The standard is effective January 1, 2016, with early adoption permitted during an interim period in fiscal year 2015. In the third quarter of 2015, we elected to early adopt the new accounting guidance retrospectively to July 1, 2015. The early adoption of this standard had no impact on our consolidated financial statements.

9

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

2. Loans Held for Investment
Loans Held for Investment consist of Private Education Loans and FFELP Loans.
“Private Education Loans” are education loans to students or their families that are not issued, insured, or guaranteed by any state or federal government. 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, or customers’ resources. Private Education Loans bear the full credit risk of the borrower and any cosigners. We manage this risk through risk-performance underwriting strategies and the addition of qualified cosigners. Our Private Education Loans generally carry a variable interest rate indexed to LIBOR. As of September 30, 2015, 82 percent of all Private Education Loans were indexed to LIBOR. We provide incentives for customers to include a cosigner on our Private Education Loans, and the vast majority of Private Education Loans in our portfolio are cosigned. We also encourage our Private Education Loan customers to make payments while in school.
FFELP Loans are insured by the federal government 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.
Loans held for investment are summarized as follows:

 	 	September 30,	 	December 31,	
 	 	2015	 	2014	
Private Education Loans	 	$	10,840,261	
 	 	$	8,311,376	
 	
Deferred origination costs	 	26,283	
 	 	13,845	
 	
Allowance for loan losses	 	(100,033	)	 	(78,574	)	
Total Private Education Loans, net	 	10,766,511	
 	 	8,246,647	

FFELP Loans	 	1,143,595	
 	 	1,264,807	
 	
Unamortized acquisition costs, net	 	3,212	
 	 	3,600	
 	
Allowance for loan losses	 	(4,170	)	 	(5,268	)	
Total FFELP Loans, net	 	1,142,637	
 	 	1,263,139	

Loans held for investment, net	 	$	11,909,148	
 	 	$	9,509,786	

 
The estimated weighted average life of education loans in our portfolio was approximately 6.3 years and 6.2 years at September 30, 2015 and December 31, 2014, respectively.

10

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

2.	Loans Held for Investment (Continued)	 	

The average balance and the respective weighted average interest rates of education loans in our portfolio are summarized as follows:

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	 	Nine Months Ended	
 	 	September 30,	 	September 30,	
 	 	2015	 	2014	 	2015	 	2014	
 	 	Average Balance	 	Weighted Average Interest Rate	 	Average Balance	 	Weighted Average Interest Rate	 	Average Balance	 	Weighted Average Interest Rate	 	Average Balance	 	Weighted Average Interest Rate	
Private Education Loans	 	$	9,869,025	
 	 	7.87	%	 	$	7,407,774	
 	 	8.20	%	 	$	9,563,290	
 	 	7.96	%	 	$	7,394,985	
 	 	8.19	%	
FFELP Loans	 	1,161,288	
 	 	3.27	
 	 	1,339,748	
 	 	3.23	
 	 	1,196,491	
 	 	3.22	
 	 	1,373,945	
 	 	3.25	
 	
Total portfolio	 	$	11,030,313	
 	 	 	 	$	8,747,522	
 	 	 	 	$	10,759,781	
 	 	 	 	$	8,768,930	

11

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

3. Allowance for Loan Losses
Our provision for loan losses represents the periodic expense of maintaining an allowance sufficient to absorb incurred probable losses in the held-for-investment loan portfolios. The evaluation of the allowance for loan losses is inherently subjective, as it requires material estimates that may be susceptible to significant changes. We believe the allowance for loan losses is appropriate to cover probable losses incurred in the loan portfolios.

Allowance for Loan Losses Metrics

 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Allowance for Loan Losses	
 	 	Three Months Ended September 30, 2015	
 	 	FFELP Loans	 	Private Education
Loans	 	Total	
Allowance for Loan Losses	 	 	 	 	 	 	
Beginning balance	 	$	4,556	
 	 	$	87,310	
 	 	$	91,866	
 	
Total provision	 	143	
 	 	27,354	
 	 	27,497	
 	
Net charge-offs:	 	 	 	 	 	 	
Charge-offs	 	(529	)	 	(14,121	)	 	(14,650	)	
Recoveries	 	—	
 	 	1,361	
 	 	1,361	
 	
Net charge-offs	 	(529	)	 	(12,760	)	 	(13,289	)	
Loan sales(1)	 	—	
 	 	(1,871	)	 	(1,871	)	
Ending Balance	 	$	4,170	
 	 	$	100,033	
 	 	$	104,203	
 	
Allowance:	 	 	 	 	 	 	
Ending balance: individually evaluated for impairment	 	$	—	
 	 	$	43,001	
 	 	$	43,001	
 	
Ending balance: collectively evaluated for impairment	 	$	4,170	
 	 	$	57,032	
 	 	$	61,202	
 	
Loans:	 	 	 	 	 	 	
Ending balance: individually evaluated for impairment	 	$	—	
 	 	$	231,286	
 	 	$	231,286	
 	
Ending balance: collectively evaluated for impairment	 	$	1,143,595	
 	 	$	10,608,975	
 	 	$	11,752,570	
 	
Net charge-offs as a percentage of average loans in repayment (annualized) (2)	 	0.25	%	 	0.83	%	 	 	
Allowance as a percentage of the ending total loan balance	 	0.36	%	 	0.92	%	 	 	
Allowance as a percentage of the ending loans in repayment (2)	 	0.50	%	 	1.50	%	 	 	
Allowance coverage of net charge-offs (annualized)	 	1.97	
 	 	1.96	
 	 	 	
Ending total loans, gross	 	$	1,143,595	
 	 	$	10,840,261	
 	 	 	
Average loans in repayment(2)	 	$	839,090	
 	 	$	6,118,678	
 	 	 	
Ending loans in repayment(2)	 	$	836,585	
 	 	$	6,657,228	

____________
(1)  Represents fair value write-downs on loans sold.
(2)  Loans in repayment include loans making interest only and fixed payments as well as loans that have entered full principal and interest repayment status.

12

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

3.	Allowance for Loan Losses (Continued)	 	

     

 	 	Allowance for Loan Losses	
 	 	Three Months Ended September 30, 2014	
 	 	FFELP Loans	 	Private Education
Loans	 	Total	
Allowance for Loan Losses	 	 	 	 	 	 	
Beginning balance	 	$	6,212	
 	 	$	54,315	
 	 	$	60,527	
 	
Total provision	 	291	
 	 	14,607	
 	 	14,898	
 	
Net charge-offs:	 	 	 	 	 	 	
Charge-offs	 	(761	)	 	(4,378	)	 	(5,139	)	
Recoveries	 	—	
 	 	—	
 	 	—	
 	
Net charge-offs	 	(761	)	 	(4,378	)	 	(5,139	)	
Loan sales(1)	 	—	
 	 	(4,571	)	 	(4,571	)	
Ending Balance	 	$	5,742	
 	 	$	59,973	
 	 	$	65,715	
 	
Allowance:	 	 	 	 	 	 	
Ending balance: individually evaluated for impairment	 	$	—	
 	 	$	2,966	
 	 	$	2,966	
 	
Ending balance: collectively evaluated for impairment	 	$	5,742	
 	 	$	57,007	
 	 	$	62,749	
 	
Loans:	 	 	 	 	 	 	
Ending balance: individually evaluated for impairment	 	$	—	
 	 	$	13,115	
 	 	$	13,115	
 	
Ending balance: collectively evaluated for impairment	 	$	1,317,963	
 	 	$	7,816,305	
 	 	$	9,134,268	
 	
Net charge-offs as a percentage of average loans in repayment (annualized) (2)	 	0.32	%	 	0.39	%	 	 	
Allowance as a percentage of the ending total loan balance	 	0.44	%	 	0.77	%	 	 	
Allowance as a percentage of the ending loans in repayment (2)	 	0.61	%	 	1.31	%	 	 	
Allowance coverage of net charge-offs (annualized)	 	1.89	
 	 	3.42	
 	 	 	
Ending total loans, gross	 	$	1,317,963	
 	 	$	7,829,420	
 	 	 	
Average loans in repayment(2)	 	$	953,620	
 	 	$	4,453,775	
 	 	 	
Ending loans in repayment(2)	 	$	945,230	
 	 	$	4,575,143	
 	 	 	
____________
    
(1)  Represents fair value write-downs on loans sold.
(2)  Loans in repayment include loans making interest only and fixed payments as well as loans that have entered full principal and interest repayment status.

13

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

3.	Allowance for Loan Losses (Continued)	 	

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Allowance for Loan Losses	
 	 	Nine Months Ended September 30, 2015	
 	 	FFELP Loans	 	Private Education
Loans	 	Total	
Allowance for Loan Losses	 	 	 	 	 	 	
Beginning balance	 	$	5,268	
 	 	$	78,574	
 	 	$	83,842	
 	
Total provision	 	1,044	
 	 	58,629	
 	 	59,673	
 	
Net charge-offs:	 	 	 	 	 	 	
Charge-offs	 	(2,142	)	 	(36,127	)	 	(38,269	)	
Recoveries	 	—	
 	 	4,529	
 	 	4,529	
 	
Net charge-offs	 	(2,142	)	 	(31,598	)	 	(33,740	)	
Loan sales(1)	 	—	
 	 	(5,572	)	 	(5,572	)	
Ending Balance	 	$	4,170	
 	 	$	100,033	
 	 	$	104,203	
 	
Allowance:	 	 	 	 	 	 	
Ending balance: individually evaluated for impairment	 	$	—	
 	 	$	43,001	
 	 	$	43,001	
 	
Ending balance: collectively evaluated for impairment	 	$	4,170	
 	 	$	57,032	
 	 	$	61,202	
 	
Loans:	 	 	 	 	 	 	
Ending balance: individually evaluated for impairment	 	$	—	
 	 	$	231,286	
 	 	$	231,286	
 	
Ending balance: collectively evaluated for impairment	 	$	1,143,595	
 	 	$	10,608,975	
 	 	$	11,752,570	
 	
Net charge-offs as a percentage of average loans in repayment (annualized) (2)	 	0.33	%	 	0.72	%	 	 	
Allowance as a percentage of the ending total loan balance	 	0.36	%	 	0.92	%	 	 	
Allowance as a percentage of the ending loans in repayment (2)	 	0.50	%	 	1.50	%	 	 	
Allowance coverage of net charge-offs (annualized)	 	1.46	
 	 	2.37	
 	 	 	
Ending total loans, gross	 	$	1,143,595	
 	 	$	10,840,261	
 	 	 	
Average loans in repayment(2)	 	$	868,649	
 	 	$	5,848,345	
 	 	 	
Ending loans in repayment(2)	 	$	836,585	
 	 	$	6,657,228	
 	 	 	
____________
(1)  Represents fair value write-downs on loans sold.
(2)  Loans in repayment include loans making interest only and fixed payments as well as loans that have entered full principal and interest repayment status.

14

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

3.	Allowance for Loan Losses (Continued)	 	

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Allowance for Loan Losses	
 	 	Nine Months Ended September 30, 2014	
 	 	FFELP Loans	 	Private Education
Loans	 	Total	
Allowance for Loan Losses	 	 	 	 	 	 	
Beginning balance	 	$	6,318	
 	 	$	61,763	
 	 	$	68,081	
 	
Total provision	 	1,482	
 	 	53,589	
 	 	55,071	
 	
Charge-offs	 	(2,058	)	 	(4,378	)	 	(6,436	)	
Loan sales(1)	 	—	
 	 	(51,001	)	 	(51,001	)	
Ending Balance	 	$	5,742	
 	 	$	59,973	
 	 	$	65,715	
 	
Allowance:	 	 	 	 	 	 	
Ending balance: individually evaluated for impairment	 	$	—	
 	 	$	2,966	
 	 	$	2,966	
 	
Ending balance: collectively evaluated for impairment	 	$	5,742	
 	 	$	57,007	
 	 	$	62,749	
 	
Loans:	 	 	 	 	 	 	
Ending balance: individually evaluated for impairment	 	$	—	
 	 	$	13,115	
 	 	$	13,115	
 	
Ending balance: collectively evaluated for impairment	 	$	1,317,963	
 	 	$	7,816,305	
 	 	$	9,134,268	
 	
Charge-offs as a percentage of average loans in repayment (annualized) (2)	 	0.28	%	 	0.13	%	 	 	
Allowance as a percentage of the ending total loan balance	 	0.44	%	 	0.77	%	 	 	
Allowance as a percentage of the ending loans in repayment (2)	 	0.61	%	 	1.31	%	 	 	
Allowance coverage of charge-offs (annualized)	 	2.09	
 	 	10.27	
 	 	 	
Ending total loans, gross	 	$	1,317,963	
 	 	$	7,829,420	
 	 	 	
Average loans in repayment(2)	 	$	980,733	
 	 	$	4,408,852	
 	 	 	
Ending loans in repayment(3)	 	$	945,230	
 	 	$	4,575,143	
 	 	 	
____________
    
(1)  Represents fair value write-downs on loans sold.
(2)  Loans in repayment include loans making interest only and fixed payments as well as loans that have entered full principal and interest repayment status.

15

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

3.	Allowance for Loan Losses (Continued)	 	

Troubled Debt Restructurings (“TDRs”)
All of our loans are collectively assessed for impairment, except for loans classified as TDRs (where we conduct individual assessments of impairment). We modify the terms of loans for certain borrowers when we believe such modifications may increase the ability and willingness of a borrower to make payments and thus increase the ultimate overall amount collected on a loan. These modifications generally take the form of a forbearance, a temporary interest rate reduction or an extended repayment plan. In the first nine months after a loan enters full principal and interest repayment, the loan may be in forbearance for up to six months without it being classified as a TDR. Once the initial nine-month period described above is over, however, any loan that receives more than three months of forbearance in a twenty-four month period is classified as a TDR. Also, a loan becomes a TDR when it is modified to reduce the interest rate on the loan (regardless of when such modification occurs and/or whether such interest rate reduction is temporary). The majority of our loans that are considered TDRs involve a temporary forbearance of payments and do not change the contractual interest rate of the loan. Approximately 22 percent and 10 percent of the loans granted forbearance as of September 30, 2015 and December 31, 2014, respectively, have been classified as TDRs due to their forbearance status.
Prior to the Spin-Off, we did not have TDR loans because the loans generally were sold to a now unrelated affiliate in the same month that the terms were restructured. Subsequent to May 1, 2014, we have individually assessed $251 million of Private Education Loans as TDRs. When these TDR loans are determined to be impaired, we provide for an allowance for losses sufficient to cover life-of-loan expected losses through an impairment calculation based on the difference between the loan's basis and the present value of expected future cash flows (which would include life-of-loan default and recovery assumptions) discounted at the loan's original effective interest rate.
Within the Private Education Loan portfolio, loans greater than 90 days past due are considered to be nonperforming. FFELP Loans are at least 97 percent guaranteed as to their principal and accrued interest by the federal government in the event of default, and therefore, we do not deem FFELP Loans as nonperforming from a credit risk perspective at any point in their life cycle prior to claim payment, and we continue to accrue interest on those loans through the date of claim.
At September 30, 2015 and December 31, 2014, all our TDR loans had a related allowance recorded. The following table provides the recorded investment, unpaid principal balance and related allowance for our TDR loans.

 	 	Recorded Investment	 	Unpaid Principal Balance	 	Allowance	
 	 	 	 	 	 	 	
September 30, 2015	 	 	 	 	 	 	
TDR Loans	 	$	234,360	
 	 	$	231,286	
 	 	$	43,001	

December 31, 2014	 	 	 	 	 	 	
TDR Loans	 	$	60,278	
 	 	$	59,402	
 	 	$	9,815	

The following table provides the average recorded investment and interest income recognized for our TDR loans.

 	 	Three Months Ended	 	Three Months Ended	
 	 	September 30, 2015	 	September 30, 2014	
 	 	Average
Recorded
Investment	 	Interest
Income
Recognized	 	Average
Recorded
Investment	 	Interest
Income
Recognized	
 	 	 	 	 	 	 	 	 	
TDR Loans	 	$	210,039	
 	 	$	4,198	
 	 	$	8,740	
 	 	$	129	

16

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

3.	Allowance for Loan Losses (Continued)	 	

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Nine Months Ended	 	Nine Months Ended	
 	 	September 30, 2015	 	September 30, 2014	
 	 	Average
Recorded
Investment	 	Interest
Income
Recognized	 	Average
Recorded
Investment	 	Interest
Income
Recognized	
 	 	 	 	 	 	 	 	 	
TDR Loans	 	$	150,240	
 	 	$	9,314	
 	 	$	3,958	
 	 	$	160	

The following table provides information regarding the loan status of TDR loans and the aging of TDR loans that are past due.

 	 	September 30,	 	December 31,	
 	 	2015	 	2014	
 	 	Balance	 	%	 	Balance	 	%	
TDR loans in in-school/grace/deferment(1)	 	$	4,940	
 	 	 	 	$	2,915	
 	 	 	
TDR loans in forbearance(2)	 	50,878	
 	 	 	 	18,620	
 	 	 	
TDR loans in repayment and percentage of each status:	 	 	 	 	 	 	 	 	
Loans current	 	154,984	
 	 	88.3	%	 	34,554	
 	 	91.2	%	
Loans delinquent 31-60 days(3)	 	11,042	
 	 	6.3	
 	 	1,953	
 	 	5.2	
 	
Loans delinquent 61-90 days(3)	 	6,336	
 	 	3.6	
 	 	983	
 	 	2.6	
 	
Loans delinquent greater than 90 days(3)	 	3,106	
 	 	1.8	
 	 	377	
 	 	1.0	
 	
Total TDR loans in repayment	 	175,468	
 	 	100.0	%	 	37,867	
 	 	100.0	%	
Total TDR loans, gross	 	$	231,286	
 	 	 	 	$	59,402	
 	 	 	
_____
 	 	
(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.	

17

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

3.	Allowance for Loan Losses (Continued)	 	

The following tables provides the amount of modified loans (which includes forbearance and reductions in interest rates) that became TDRs in the periods presented. Additionally, for the periods presented, the table summarizes charge-offs occurring in the TDR portfolio, as well as TDRs for which a payment default occurred in the relevant period presented and within 12 months of the loan first being designated as a TDR. We define payment default as 60 days past due for this disclosure.

 	 	Three Months Ended	 	Three Months Ended	
 	 	September 30, 2015	 	September 30, 2014	
 	 	Modified Loans (1)	 	Charge-offs	 	Payment-
Default	 	Modified Loans (1)	 	Charge-offs	 	Payment-
Default	
 	 	 	 	 	 	 	 	 	 	 	 	 	
TDR Loans	 	$	49,975	
 	 	$	3,456	
 	 	$	16,719	
 	 	$	7,840	
 	 	$	87	
 	 	$	252	

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Nine Months Ended	 	Nine Months Ended	
 	 	September 30, 2015	 	September 30, 2014	
 	 	Modified Loans (1)	 	Charge-offs	 	Payment-
Default	 	Modified Loans (1)	 	Charge-offs	 	Payment-
Default	
 	 	 	 	 	 	 	 	 	 	 	 	 	
TDR Loans	 	$	189,066	
 	 	$	5,845	
 	 	$	29,895	
 	 	$	14,880	
 	 	$	87	
 	 	$	320	
 	
_____
 	 	
(1) 	Represents the principal balance of loans that have been modified during the period and resulted in a TDR.	

18

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

3.	Allowance for Loan Losses (Continued)	 	

Key Credit Quality Indicators
For Private Education Loans, the key credit quality indicators are FICO scores, the existence of a cosigner, loan status, and loan seasoning. The FICO scores are assessed at origination and periodically refreshed/updated through the loan's term. The following table highlights the gross principal balance of our Private Education Loan portfolio stratified by key credit quality indicators.

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Private Education Loans	
 	 	Credit Quality Indicators	
 	 	September 30, 2015	 	December 31, 2014	
Credit Quality Indicators:	 	Balance(1)	 	% of Balance	 	Balance(1)	 	% of Balance	
 	 	 	 	 	 	 	 	 	
Cosigners:	 	 	 	 	 	 	 	 	
With cosigner	 	$	9,748,371	
 	 	90	%	 	$	7,465,339	
 	 	90	%	
Without cosigner	 	1,091,890	
 	 	10	
 	 	846,037	
 	 	10	
 	
Total	 	$	10,840,261	
 	 	100	%	 	$	8,311,376	
 	 	100	%	
 	 	 	 	 	 	 	 	 	
FICO at Origination:	 	 	 	 	 	 	 	 	
Less than 670	 	$	706,688	
 	 	6	%	 	$	558,801	
 	 	7	%	
670-699	 	1,582,381	
 	 	15	
 	 	1,227,860	
 	 	15	
 	
700-749	 	3,470,300	
 	 	32	
 	 	2,626,238	
 	 	32	
 	
Greater than or equal to 750	 	5,080,892	
 	 	47	
 	 	3,898,477	
 	 	46	
 	
Total	 	$	10,840,261	
 	 	100	%	 	$	8,311,376	
 	 	100	%	
 	 	 	 	 	 	 	 	 	
Seasoning(2):	 	 	 	 	 	 	 	 	
1-12 payments	 	$	3,575,055	
 	 	33	%	 	$	2,373,117	
 	 	29	%	
13-24 payments	 	1,729,120	
 	 	16	
 	 	1,532,042	
 	 	18	
 	
25-36 payments	 	871,590	
 	 	8	
 	 	755,143	
 	 	9	
 	
37-48 payments	 	411,596	
 	 	4	
 	 	411,493	
 	 	5	
 	
More than 48 payments	 	281,508	
 	 	2	
 	 	212,438	
 	 	3	
 	
Not yet in repayment	 	3,971,392	
 	 	37	
 	 	3,027,143	
 	 	36	
 	
Total	 	$	10,840,261	
 	 	100	%	 	$	8,311,376	
 	 	100	%	
 	 	
(1) 	Balance represents gross Private Education Loans.	
 	 	
(2) 	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.	
FFELP Loans are at least 97 percent insured and guaranteed as to their principal and accrued interest in the event of default; therefore, there are no key credit quality indicators associated with FFELP Loans. Included within our FFELP portfolio as of September 30, 2015 are $700 million of FFELP rehabilitation loans. These loans have previously defaulted but have subsequently been brought current according to a loan rehabilitation agreement. The credit performance on rehabilitation loans is worse than the remainder of our FFELP portfolio. At September 30, 2015 and December 31, 2014, 61 percent and 62 percent, respectively, of our FFELP portfolio consisted of rehabilitation loans.

19

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

3.	Allowance for Loan Losses (Continued)	 	

 The following tables provide information regarding the loan status of our Private Education Loans and the aging of our past due Private Education Loans. Loans in repayment include loans making interest only and fixed payments as well as loans that have entered full principal and interest repayment status.

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Private Education Loans	 	
 	 	September 30,	 	December 31,	 	
 	 	2015	 	2014	 	
 	 	Balance	 	%	 	Balance	 	%	 	
Loans in-school/grace/deferment(1)	 	$	3,971,392	
 	 	 	 	$	3,027,143	
 	 	 	 	
Loans in forbearance(2)	 	211,641	
 	 	 	 	135,018	
 	 	 	 	
Loans in repayment and percentage of each status:	 	 	 	 	 	 	 	 	 	
Loans current	 	6,529,855	
 	 	98.1	%	 	5,045,600	
 	 	98.0	%	 	
Loans delinquent 31-60 days(3)	 	79,794	
 	 	1.2	
 	 	63,873	
 	 	1.2	
 	 	
Loans delinquent 61-90 days(3)	 	34,743	
 	 	0.5	
 	 	29,041	
 	 	0.6	
 	 	
Loans delinquent greater than 90 days(3)	 	12,836	
 	 	0.2	
 	 	10,701	
 	 	0.2	
 	 	
Total loans in repayment	 	6,657,228	
 	 	100.0	%	 	5,149,215	
 	 	100.0	%	 	
Total loans, gross	 	10,840,261	
 	 	 	 	8,311,376	
 	 	 	 	
Deferred origination costs	 	26,283	
 	 	 	 	13,845	
 	 	 	 	
Total loans	 	10,866,544	
 	 	 	 	8,325,221	
 	 	 	 	
Allowance for loan losses	 	(100,033	)	 	 	 	(78,574	)	 	 	 	
Total loans, net	 	$	10,766,511	
 	 	 	 	$	8,246,647	
 	 	 	 	
Percentage of loans in repayment	 	 	 	61.4	%	 	 	 	62.0	%	 	
Delinquencies as a percentage of loans in repayment	 	 	 	1.9	%	 	 	 	2.0	%	 	
Loans in forbearance as a percentage of loans in repayment and forbearance	 	 	 	3.1	%	 	 	 	2.6	%	 	
 	 	
(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.	

20

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

3.	Allowance for Loan Losses (Continued)	 	

 
Accrued Interest Receivable
The following table provides information regarding accrued interest receivable on our Private Education Loans. The table also discloses the amount of accrued interest on loans greater than 90 days past due as compared to our allowance for uncollectible interest. The allowance for uncollectible interest exceeds the amount of accrued interest on our 90 days past due portfolio for all periods presented.

 	 	Private Education Loan	
 	 	Accrued Interest Receivable	
 	 	Total Interest Receivable	 	Greater Than 90 Days Past Due	 	Allowance for Uncollectible Interest	
 	 	 	 	 	 	 	
September 30, 2015	 	$	606,218	
 	 	$	489	
 	 	$	2,979	
 	
December 31, 2014	 	$	445,710	
 	 	$	443	
 	 	$	3,517	

21

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

4. Deposits

The following table summarizes total deposits at September 30, 2015 and December 31, 2014.

 	 	September 30,	 	December 31,	 	
 	 	2015	 	2014	 	
Deposits - interest bearing	 	$	10,610,592	
 	 	$	10,539,953	
 	 	
Deposits - non interest bearing	 	287	
 	 	602	
 	 	
Total deposits	 	$	10,610,879	
 	 	$	10,540,555	
 	 	
Interest Bearing
Interest bearing deposits as of September 30, 2015 and December 31, 2014 consisted of retail non-maturity savings and money market deposits, brokered and retail certificates of deposit, and brokered money market deposits. These deposit products are serviced by third party providers. Placement fees associated with the brokered certificates of deposit are amortized into interest expense using the effective interest rate method.
Interest bearing deposits at September 30, 2015 and December 31, 2014 are summarized as follows:

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	September 30, 2015	 	December 31, 2014	 	
 	 	Amount	 	Qtr.-End Weighted Average Stated Rate (1)	 	Amount	 	Year-End Weighted Average Stated Rate (1)	 	
 	 	 	 	 	 	 	 	 	 	
Money market	 	$	4,436,095	
 	 	1.18	%	 	$	4,527,448	
 	 	1.15	%	 	
Savings	 	665,941	
 	 	0.82	
 	 	703,687	
 	 	0.81	
 	 	
Certificates of deposit	 	5,508,556	
 	 	0.99	
 	 	5,308,818	
 	 	1.00	
 	 	
Deposits - interest bearing	 	$	10,610,592	
 	 	 	 	$	10,539,953	

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

 As of September 30, 2015 and December 31, 2014, there were $194,714 and $253,953, respectively, of deposits exceeding Federal Deposit Insurance Corporation (“FDIC”) insurance limits. Accrued interest on deposits was $22,637 and $16,082 at September 30, 2015 and December 31, 2014, respectively.

Non Interest Bearing

Non interest bearing deposits were $287 and $602 as of September 30, 2015 and December 31, 2014, respectively. For both periods, these were comprised of money market accounts related to our Employee Stock Purchase Plan account.

22

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

5. Borrowings

Outstanding borrowings consist of secured borrowings issued through our term asset backed securitization (“ABS”) program and our asset backed commercial paper (“ABCP”) funding facility. The following table summarizes our secured borrowings at September 30, 2015. We had no secured borrowings outstanding at December 31, 2014.

 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	September 30, 2015	
 	 	Short-Term	 	Long-Term	 	Total	
Secured borrowings:	 	 	 	 	 	 	
Private Education Loan term securitization	 	$	—	
 	 	$	593,687	
 	 	$	593,687	
 	
ABCP borrowings	 	710,005	
 	 	—	
 	 	710,005	
 	
Total	 	$	710,005	
 	 	$	593,687	
 	 	$	1,303,692	

On July 30, 2015, we executed our $714 million SMB Private Education Loan Trust 2015-B term ABS transaction, which was accounted for as an on-balance sheet secured financing. We retained a 5 percent or $33 million interest in the Class A and B notes, a 100 percent or $50 million interest in the Class C notes and 100 percent of the residual certificates issued in the securitization. $631 million of notes from the securitization were sold to third parties, raising $623 million of gross proceeds. The Class A and B notes had a weighted average life of 4.8 years and priced at a weighted average LIBOR equivalent cost of 1 month LIBOR plus 1.53 percent. At September 30, 2015, $692 million of our Private Education Loans were encumbered as a result of this transaction. 

On-Balance Sheet Term Securitizations

Issue	 	Date Issued	 	Total Issued To Third Parties	 	Weighted Average Cost of Funds(1)	 	Weighted Average Life	
 	 	 	 	 	 	 	 	 	
Private Education:	 	 	 	 	 	 	
2015-B	 	July 2015	 	$	630,800	
 	 	1 month LIBOR plus 1.53%	 	4.82	
Total notes issued in 2015	 	$	630,800	

Total loan amount securitized in on-balance sheet term securitizations in 2015	 	$	745,580	

____________
(1) Represents LIBOR equivalent cost of funds for floating and fixed rate bonds, excluding issuance costs.

23

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

 	 	
5.	Borrowings (Continued)	

Asset-Backed Commercial Paper Funding Facility
    
On December 19, 2014, we closed on a $750 million ABCP Private Education Loan funding facility. Pursuant to FDIC safe harbor guidelines, we retained a 5 percent or $37.5 million ownership interest in the ABCP facility, resulting in $712.5 million of funds being available for us to draw under the facility. We incur financing costs under the ABCP facility of approximately 0.40 percent on unused borrowing capacity and approximately 3 month LIBOR plus 0.80 percent on outstandings under the facility. At September 30, 2015, $710 million had been drawn and remained outstanding under the facility, net of our 5 percent retention. At September 30, 2015, $902 million of our Private Education Loans were encumbered as a result of this transaction.

We consolidate our financing entities that are variable interest entities (“VIEs”) as a result of our being the entities’ primary beneficiary. As a result, these financing VIEs are accounted for as secured borrowings. We consolidate the following financing VIEs as of September 30, 2015:

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	September 30, 2015	
 	 	Debt Outstanding	 	Carrying Amount of Assets Securing Debt Outstanding	
 	 	Short-Term	 	Long-Term	 	Total	 	Loans	 	Restricted Cash	 	Other Assets	 	Total	
Secured borrowings:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Private Education Loan term securitization	 	$	—	
 	 	$	593,687	
 	 	$	593,687	
 	 	$	692,379	
 	 	$	8,135	
 	 	$	49,717	
 	 	$	750,231	
 	
ABCP borrowings	 	710,005	
 	 	—	
 	 	710,005	
 	 	901,515	
 	 	10,070	
 	 	54,297	
 	 	965,882	
 	
Total	 	$	710,005	
 	 	$	593,687	
 	 	$	1,303,692	
 	 	$	1,593,894	
 	 	$	18,205	
 	 	$	104,014	
 	 	$	1,716,113	

    
Other Borrowing Sources
We maintain discretionary uncommitted Federal Funds lines of credit with various correspondent banks, which totaled $100,000 at September 30, 2015. The interest rate we are charged on these lines of credit is priced at Fed Funds plus a spread at the time of borrowing, and is payable daily. We did not utilize these lines of credit in the three and nine months ended September 30, 2015 and September 30, 2014.
We established an account at the Federal Reserve Bank (“FRB”) to meet eligibility requirements for access to the Primary Credit borrowing facility at the FRB’s Discount Window (“Window”). The Primary Credit borrowing facility is a lending program available to depository institutions that are in generally sound financial condition. All borrowings at the Window must be fully collateralized. We can pledge asset-backed and mortgage-backed securities, as well as FFELP Loans and Private Education Loans, to the FRB as collateral for borrowings at the Window. Generally, collateral value is assigned based on the estimated fair value of the pledged assets. At September 30, 2015 and December 31, 2014, the value of our pledged collateral at the FRB totaled $1.5 billion and $1.4 billion, respectively. The interest rate charged to us is the discount rate set by the FRB. We did not utilize this facility in the three and nine months ended September 30, 2015 and September 30, 2014.

24

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

6. Private Education Loan Term Securitizations

We securitize Private Education Loan assets by selling these assets to securitization trusts. If a transfer of loans qualifies as a sale, we derecognize the loan and recognize a gain or loss as the difference between compensation received and the carrying basis of the loans sold and liabilities retained. We recognize the results of a transfer of loans based upon the settlement date of the transaction. If we have a variable interest in a VIE (e.g., a securitization trust) and have determined that we are the primary beneficiary, then we will consolidate the VIE and the transfer is accounted for as a financing as opposed to a sale.
On July 30, 2015, we executed a $714 million Private Education Loan term ABS transaction that was accounted for as an on-balance sheet secured financing. We retained a 5 percent interest in the Class A and B notes, a 100 percent interest in the Class C notes and 100 percent of the residual certificates issued in the securitization. $631 million of notes were sold to third parties, raising $623 million of gross proceeeds. At September 30, 2015, $692 million of our Private Education Loans are encumbered as a result of this transaction. 
On April 23, 2015, we sold $738 million of Private Education Loans through a securitization transaction to qualified institutional buyers. The transaction qualified for sale treatment and removed the principal balance of the loans backing the securitization trust from our balance sheet on the settlement date. We continue to service the loans in the trust. In the second quarter of 2015, we recorded a pre-tax gain of $77 million on the sale, net of closing adjustments and transaction costs, a 10.4 percent premium.

25

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

7. Derivative Financial Instruments

We maintain an overall interest rate risk management strategy that incorporates the use of derivative instruments to minimize the economic effect of interest rate changes. Our goal is to manage interest rate sensitivity by modifying the repricing frequency and underlying index characteristics of certain balance sheet assets and liabilities so the net interest margin is not, on a material basis, adversely affected by movements in interest rates. We do not use derivative instruments to hedge credit risk. As a result of interest rate fluctuations, hedged assets and liabilities will appreciate or depreciate in market value. Income or loss on the derivative instruments linked to the hedged assets and liabilities will generally offset the effect of this unrealized appreciation or depreciation for the period the item is being hedged. We view this strategy as a prudent management of interest rate sensitivity. Please refer to “Note 11 - Derivative Financial Instruments” in our 2014 Form 10-K for a full discussion of our risk management strategy.
Although we use derivatives to offset (or minimize) the risk of interest rate changes, the use of derivatives does expose us to both market and credit risk. Market risk is the chance of financial loss resulting from changes in interest rates, foreign exchange rates, and market liquidity. Credit risk is the risk a counterparty will not perform its obligations under a contract and it is limited to the loss of the fair value gain in a derivative the counterparty owes us. When the fair value of a derivative contract is negative, we owe the counterparty and, therefore, have no credit risk exposure to the counterparty; however, the counterparty has exposure to us. We minimize the credit risk in derivative instruments by entering into transactions with highly rated counterparties that are reviewed regularly by our Credit Department.
Related to derivative transactions, protection against counterparty risk is generally provided by International Swaps and Derivatives Association, Inc. (“ISDA”) Credit Support Annexes (“CSAs”), or clearinghouses for Over the Counter (“OTC”) derivatives. CSAs require a counterparty to post collateral if a potential default would expose the other party to a loss. All derivative contracts entered into by the Bank are covered under such agreements and require collateral to be exchanged based on the net fair value of derivatives with each counterparty. Our exposure is limited to the value of the derivative contracts in a gain position less any collateral held or plus any collateral posted.
Title VII of the Dodd-Frank Act requires all standardized derivatives, including most interest rate swaps, to be submitted for clearing to central counterparties to reduce counterparty risk. As of September 30, 2015, $4.0 billion notional of our derivative contracts were cleared on the Chicago Mercantile Exchange and the London Clearing House. All derivative contracts cleared through an exchange require collateral to be exchanged based on the fair value of the derivative. Our exposure is limited to the value of the derivative contracts in a gain position less any collateral held or plus any collateral posted. When there is a net negative exposure, we consider our exposure to the counterparty to be zero. At September 30, 2015 and December 31, 2014, we had a net positive exposure (derivative gain positions to us less collateral which has been posted by counterparties to us) related to derivatives of $48.9 million and $60.8 million, respectively.

26

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

7.	Derivative Financial Instruments (Continued)	 	

Summary of Derivative Financial Statement Impact
The following tables summarize the fair values and notional amounts of all derivative instruments at September 30, 2015 and December 31, 2014, and their impact on earnings and other comprehensive income for the three and nine months ended September 30, 2015 and 2014.

Impact of Derivatives on the Consolidated Balance Sheet

 	 	 	Cash Flow Hedges	 	Fair Value Hedges	 	Trading	 	Total	
 	 	 	September
30,	 	December
31,	 	September
30,	 	December
31,	 	September
30,	 	December
31,	 	September
30,	 	December
31,	
 	 	 	2015	 	2014	 	2015	 	2014	 	2015	 	2014	 	2015	 	2014	
Fair Values (1)	Hedged Risk Exposure	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Derivative Assets: (2)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest rate swaps	Interest rate	 	$	—	
 	 	$	—	
 	 	$	36,919	
 	 	$	5,012	
 	 	$	1,827	
 	 	$	226	
 	 	$	38,746	
 	 	$	5,238	
 	
Derivative Liabilities: (2)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest rate swaps	Interest rate	 	(40,855	)	 	(21,435	)	 	—	
 	 	(5,883	)	 	—	
 	 	(1,370	)	 	(40,855	)	 	(28,688	)	
Total net derivatives	 	 	$	(40,855	)	 	$	(21,435	)	 	$	36,919	
 	 	$	(871	)	 	$	1,827	
 	 	$	(1,144	)	 	$	(2,109	)	 	$	(23,450	)	
     ___________
 	 	
(1)	Fair values reported are exclusive of collateral held and pledged and accrued interest. Assets and liabilities are presented without consideration of master netting agreements. Derivatives are carried on the balance sheet based on net position by counterparty under master netting agreements, and classified in other assets or other liabilities depending on whether in a net positive or negative position.	

(2)	The following table reconciles gross positions with the impact of master netting agreements to the balance sheet classification:	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Other Assets	 	Other Liabilities	
 	 	September 30,	 	December 31,	 	September 30,	 	December 31,	
 	 	2015	 	2014	 	2015	 	2014	
Gross position	 	$	38,746	
 	 	$	5,238	
 	 	$	(40,855	)	 	$	(28,688	)	
Impact of master netting agreement	 	(11,253	)	 	(4,045	)	 	11,253	
 	 	4,045	
 	
Derivative values with impact of master netting agreements (as carried on balance sheet)	 	27,493	
 	 	1,193	
 	 	(29,602	)	 	(24,643	)	
Cash collateral (held) pledged (1)	 	(14,617	)	 	(900	)	 	47,604	
 	 	72,478	
 	
Net position	 	$	12,876	
 	 	$	293	
 	 	$	18,002	
 	 	$	47,835	

 	 	
(1)	Cash collateral amount calculations include outstanding accrued interest payable/receivable.	

27

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

7.	Derivative Financial Instruments (Continued)	 	

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	Cash Flow	 	Fair Value	 	Trading	 	Total	
 	 	 	September
30,	 	December
31,	 	September
30,	 	December
31,	 	September
30,	 	December
31,	 	September
30,	 	December
31,	
 	 	 	2015	 	2014	 	2015	 	2014	 	2015	 	2014	 	2015	 	2014	
Notional Values	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest rate swaps	 	 	$	1,110,549	
 	 	$	1,106,920	
 	 	$	2,957,443	
 	 	$	3,044,492	
 	 	$	836,512	
 	 	$	973,539	
 	 	$	4,904,504	
 	 	$	5,124,951	

Impact of Derivatives on the Consolidated Statements of Income

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	 	Nine Months Ended	
 	 	September 30,	 	September 30,	
 	 	2015	 	2014	 	2015	 	2014	
 	 	 	 	 	 	 	 	 	
Fair Value Hedges	 	 	 	 	 	 	 	 	
Interest rate swaps:	 	 	 	 	 	 	 	 	
Hedge ineffectiveness gains (losses) recorded in earnings (1)	 	$	(1,843	)	 	$	1,238	
 	 	$	(929	)	 	$	1,488	
 	
Realized gains recorded in interest expense	 	7,531	
 	 	3,835	
 	 	22,512	
 	 	14,081	
 	
Total	 	$	5,688	
 	 	$	5,073	
 	 	$	21,583	
 	 	$	15,569	

Cash Flow Hedges	 	 	 	 	 	 	 	 	
Interest rate swaps:	 	 	 	 	 	 	 	 	
Hedge ineffectiveness gains (losses) recorded in earnings (1)	 	$	(273	)	 	$	(303	)	 	$	(542	)	 	$	(303	)	
Realized losses recorded in interest expense	 	(5,411	)	 	(3,587	)	 	(16,157	)	 	(3,587	)	
Total	 	$	(5,684	)	 	$	(3,890	)	 	$	(16,699	)	 	$	(3,890	)	
 	 	 	 	 	 	 	 	 	
Trading	 	 	 	 	 	 	 	 	
Interest rate swaps:	 	 	 	 	 	 	 	 	
Interest reclassification	 	$	853	
 	 	$	(1,170	)	 	$	2,846	
 	 	$	(3,137	)	
Change in fair value of future interest payments recorded in earnings	 	716	
 	 	5,636	
 	 	2,972	
 	 	(2,870	)	
Total(1) 	 	1,569	
 	 	4,466	
 	 	5,818	
 	 	(6,007	)	
Total	 	$	1,573	
 	 	$	5,649	
 	 	$	10,702	
 	 	$	5,672	

________
 	 	
(1)	Amounts included in “(losses) gains on derivatives and hedging activities, net” in the consolidated statements of income.	

28

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

7.	Derivative Financial Instruments (Continued)	 	

Impact of Derivatives on the Statements of Changes in Stockholders' Equity

 	 	Three Months Ended	 	Nine Months Ended	
 	 	September 30,	 	September 30,	
 	 	2015	 	2014	 	2015	 	2014	
Amount of loss recognized in other comprehensive income	 	$	(27,162	)	 	$	(5,470	)	 	$	(35,441	)	 	$	(5,470	)	
Less: amount of loss reclassified in interest expense (1)	 	5,411	
 	 	3,587	
 	 	16,157	
 	 	3,587	
 	
Total change in other comprehensive income for unrealized losses on derivatives	 	$	(21,751	)	 	$	(1,883	)	 	$	(19,284	)	 	$	(1,883	)	
___________
(1)   Amounts included in “realized gains (losses) recorded in interest expense” in the “Impact of Derivatives on the Consolidated Statements of Income” table.
Cash Collateral
Cash collateral held related to derivative exposure between us and our derivatives counterparties was $14.6 million and $0.9 million at September 30, 2015 and December 31, 2014, respectively. Collateral held is recorded in “Other Liabilities.” Cash collateral pledged related to derivative exposure between us and our derivatives counterparties was $47.6 million and $72.5 million at September 30, 2015 and December 31, 2014, respectively. Collateral pledged is recorded in “Other Assets.”

29

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

8. Stockholders' Equity

The following table summarizes our common share repurchases and issuances.

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended
September 30,	 	Nine Months Ended
September 30,	
(Shares and per share amounts in actuals)	 	2015	 	2014	 	2015	 	2014	
Shares repurchased related to employee stock-based compensation plans (1)(2)	 	136,173	
 	 	356,622	
 	 	2,900,266	
 	 	715,393	
 	
Average purchase price per share	 	$	8.88	
 	 	$	8.68	
 	 	$	9.76	
 	 	$	8.68	
 	
Common shares issued(3)	 	361,779	
 	 	584,787	
 	 	5,569,853	
 	 	1,089,716	

__________________
 	 	
(1) 	Comprises shares withheld from stock option exercises and vesting of restricted stock for employees’ tax withholding obligations and shares tendered by employees to satisfy option exercise costs.	
 	 	
(2) 	At the present time, we do not have a publicly announced repurchase plan or program.	
 	 	
(3) 	Common shares issued under our various compensation and benefit plans.	
 
The closing price of our common stock on September 30, 2015 was $7.40.

Investment with entities that are now subsidiaries of Navient

Prior to the Spin-Off, there were transactions between us and affiliates of pre-Spin-Off SLM that are now subsidiaries of Navient. As part of the carve-out, expenses of those transactions were included in our results even though the actual payments for the expenses were paid by the aforementioned affiliates. As such, amounts equal to these payments have been treated as equity contributions in the table below. Certain payments made by us to these affiliates prior to the Spin-Off transaction were treated as dividends.

Net transfers (to)/from the entity that is now a subsidiary of Navient are included within Navient's subsidiary investment on the consolidated statements of changes in equity. There were no transfers (to)/from the entity that is now a subsidiary of Navient during the three or nine months ended September 30, 2015 and during the three months ended September 30, 2014. The components of the net transfers (to)/from the entity that is now a subsidiary of Navient for the nine months ended September 30, 2014 are summarized below:

30

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

8.	Stockholders' Equity (Continued)	 	

 	
 	 	 	 	 	
 	 	Nine
Months
Ended	
 	 	September 30,	
 	 	2014	
Capital contributions:	 	 	
Loan origination activities	 	$	32,452	
 	
Loan sales	 	45	
 	
Corporate overhead activities	 	21,216	
 	
Other	 	492,368	
 	
Total capital contributions	 	546,081	
 	
Corporate push-down	 	4,977	
 	
Net change in income tax accounts	 	15,659	
 	
Net change in receivable/payable	 	(87,277	)	
Other	 	(31	)	
Total net transfers from the entity that is now a subsidiary of Navient	 	$	479,409	

Capital Contributions

During the first four months of 2014, pre-Spin-Off SLM contributed capital to Sallie Mae Bank (the “Bank”) by funding loan origination activities, purchases of loans in excess of the loans’ fair values, providing corporate overhead functions and other activities.
    
Capital contributed for loan origination activities reflects the fact that loan origination functions were conducted by a subsidiary of pre-Spin-Off SLM (now a subsidiary of Navient). The Bank did not pay for the costs incurred by pre-Spin-Off SLM in connection with these functions. The costs eligible to be capitalized are recorded on the respective balance sheets and the costs not eligible for capitalization have been recognized as expenses in the respective statements of income.

Certain general corporate overhead expenses of the Bank were incurred and paid for by pre-Spin-Off SLM.

Corporate Push-Down

The consolidated balance sheet of the Company includes certain assets and liabilities that historically were held at pre-Spin-Off SLM but which are specifically identifiable or otherwise allocable to the Company. The cash and cash equivalents held by pre-Spin-Off SLM at the corporate level were not allocated to the Bank for any of the periods presented.

Receivable/Payable with Affiliate

All significant intercompany payable/receivable balances between the Bank and pre-Spin-Off SLM are considered to be effectively settled for cash in the combined financial statements at the time the transaction is recorded.

31

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

9. 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.

 	 	Three Months Ended	 	Nine Months Ended	
 	 	September 30,	 	September 30,	
(In thousands, except per share data)	 	2015	 	2014	 	2015	 	2014	
Numerator:	 	 	 	 	 	 	 	 	
Net income attributable to SLM Corporation	 	$	45,724	
 	 	$	82,926	
 	 	$	184,439	
 	 	$	174,502	
 	
Preferred stock dividends	 	4,913	
 	 	4,850	
 	 	14,606	
 	 	8,078	
 	
Net income attributable to SLM Corporation common stock	 	$	40,811	
 	 	$	78,076	
 	 	$	169,833	
 	 	$	166,424	
 	
Denominator:	 	 	 	 	 	 	 	 	
Weighted average shares used to compute basic EPS	 	426,019	
 	 	423,079	
 	 	425,384	
 	 	424,187	
 	
Effect of dilutive securities:	 	 	 	 	 	 	 	 	
Dilutive effect of stock options, restricted stock and restricted stock units and Employee Stock Purchase Plan ("ESPP")  (1)(2)	 	6,528	
 	 	8,525	
 	 	7,147	
 	 	8,137	
 	
Weighted average shares used to compute diluted EPS	 	432,547	
 	 	431,604	
 	 	432,531	
 	 	432,324	

Basic earnings per common share attributable to SLM Corporation	 	$	0.10	
 	 	$	0.18	
 	 	$	0.40	
 	 	$	0.39	

Diluted earnings per common share attributable to SLM Corporation	 	$	0.09	
 	 	$	0.18	
 	 	$	0.39	
 	 	$	0.38	

         _________________             
 	 	
(1) 	Includes the potential dilutive effect of additional common shares that are issuable upon exercise of outstanding stock options, restricted stock, restricted stock units, and the outstanding commitment to issue shares under the ESPP, determined by the treasury stock method.	
 	 	
(2) 	For the three months ended September 30, 2015 and 2014, securities covering approximately 2 million and 3 million shares, respectively, and for the nine months ended September 30, 2015 and 2014, securities covering approximately 2 million and 3 million shares, respectively, were outstanding but not included in the computation of diluted earnings per share because they were anti-dilutive.	

32

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

10. Fair Value Measurements

We use estimates of fair value in applying various accounting standards for our financial statements.

We categorize our fair value estimates based on a hierarchical framework associated with three levels of price transparency utilized in measuring financial instruments at fair value. For additional information regarding our policies for determining fair value and the hierarchical framework, see Note 2, “Significant Accounting Policies - Fair Value Measurement” in our 2014 Form 10-K.

During the nine months ended September 30, 2015, there were no significant transfers of financial instruments between levels or changes in our methodology or assumptions used to value our financial instruments.

The following table summarizes the valuation of our financial instruments that are marked to fair value on a recurring basis.

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Fair Value Measurements on a Recurring Basis	
 	 	September 30, 2015	 	December 31, 2014	
 	 	Level 1 	 	Level 2 	 	Level 3 	 	Total 	 	Level 1 	 	Level 2 	 	Level 3 	 	Total 	
Assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Mortgage-backed securities	 	$	—	
 	 	$	190,944	
 	 	$	—	
 	 	$	190,944	
 	 	$	—	
 	 	$	168,934	
 	 	$	—	
 	 	$	168,934	
 	
Derivative instruments	 	—	
 	 	38,746	
 	 	—	
 	 	38,746	
 	 	—	
 	 	5,238	
 	 	—	
 	 	5,238	
 	
Total	 	$	—	
 	 	$	229,690	
 	 	$	—	
 	 	$	229,690	
 	 	$	—	
 	 	$	174,172	
 	 	$	—	
 	 	$	174,172	

Liabilities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Derivative instruments	 	$	—	
 	 	$	(40,855	)	 	$	—	
 	 	$	(40,855	)	 	$	—	
 	 	$	(28,688	)	 	$	—	
 	 	$	(28,688	)	
Total	 	$	—	
 	 	$	(40,855	)	 	$	—	
 	 	$	(40,855	)	 	$	—	
 	 	$	(28,688	)	 	$	—	
 	 	$	(28,688	)	

 

33

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

10.	Fair Value Measurements (Continued)	 	

The following table summarizes the fair values of our financial assets and liabilities, including derivative financial instruments.

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	September 30, 2015	 	December 31, 2014	
 	 	Fair
Value	 	Carrying
Value	 	Difference	 	Fair
Value	 	Carrying
Value	 	Difference	
Earning assets	 	 	 	 	 	 	 	 	 	 	 	 	
Loans held for investment, net	 	$	12,837,892	
 	 	$	11,909,148	
 	 	$	928,744	
 	 	$	10,228,399	
 	 	$	9,509,786	
 	 	$	718,613	
 	
Cash and cash equivalents	 	1,281,797	
 	 	1,281,797	
 	 	—	
 	 	2,359,780	
 	 	2,359,780	
 	 	—	
 	
Available-for-sale investments	 	190,944	
 	 	190,944	
 	 	—	
 	 	168,934	
 	 	168,934	
 	 	—	
 	
Accrued interest receivable	 	634,423	
 	 	634,423	
 	 	—	
 	 	469,697	
 	 	469,697	
 	 	—	
 	
Tax indemnification receivable	 	200,704	
 	 	200,704	
 	 	—	
 	 	240,311	
 	 	240,311	
 	 	—	
 	
Derivative instruments	 	38,746	
 	 	38,746	
 	 	—	
 	 	5,238	
 	 	5,238	
 	 	—	
 	
Total earning assets	 	$	15,184,506	
 	 	$	14,255,762	
 	 	$	928,744	
 	 	$	13,472,359	
 	 	$	12,753,746	
 	 	$	718,613	
 	
Interest-bearing liabilities	 	 	 	 	 	 	 	 	 	 	 	 	
Money-market and savings accounts	 	$	5,102,323	
 	 	$	5,102,323	
 	 	$	—	
 	 	$	5,231,736	
 	 	$	5,231,736	
 	 	$	—	
 	
Certificates of deposit	 	5,487,525	
 	 	5,508,556	
 	 	21,031	
 	 	5,313,645	
 	 	5,308,818	
 	 	(4,827	)	
Short-term borrowings	 	710,005	
 	 	710,005	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	
Long-term borrowings	 	583,314	
 	 	593,687	
 	 	10,373	
 	 	—	
 	 	—	
 	 	—	
 	
Accrued interest payable	 	23,309	
 	 	23,309	
 	 	—	
 	 	16,082	
 	 	16,082	
 	 	—	
 	
Derivative instruments	 	40,855	
 	 	40,855	
 	 	—	
 	 	28,688	
 	 	28,688	
 	 	—	
 	
Total interest-bearing liabilities	 	$	11,947,331	
 	 	$	11,978,735	
 	 	$	31,404	
 	 	$	10,590,151	
 	 	$	10,585,324	
 	 	$	(4,827	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Excess of net asset fair value over carrying value	 	 	 	 	 	$	960,148	
 	 	 	 	 	 	$	713,786	

Borrowings are accounted for at cost in the financial statements. The carrying value of short-term borrowings approximated fair value for disclosure purposes, due to the short-term nature of those borrowings. This is a level 1 valuation. The fair value of long-term borrowings is estimated using current market prices. This is a level 2 valuation. Please refer to “Note 15 - Fair Value Measurements” in our 2014 Form 10-K for a full discussion of the methods and assumptions used to estimate the fair value of each class of financial instruments.

34

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

11. Arrangements with Navient Corporation

In connection with the Spin-Off, we entered into a separation and distribution agreement and other ancillary agreements with Navient. Please refer to “Note 16 - Arrangements with Navient Corporation” in our 2014 Form 10-K for a full discussion of these agreements.

Amended Loan Participation and Purchase Agreement
Prior to the Spin-Off, the Bank sold substantially all its Private Education Loans to several former affiliates, now subsidiaries of Navient (collectively, the “Purchasers”), pursuant to a Loan Participation and Purchase Agreement. This agreement predated the Spin-Off, but was significantly amended and reduced in scope in connection with the Spin-Off. Post-Spin-Off, the Bank retains only the right to require the Purchasers to purchase loans (at fair value) for which the borrower also has a separate lending relationship with Navient (“Split Loans”) when the Split Loans either (1) are more than 90 days past due; (2) have been restructured; (3) have been granted a hardship forbearance or more than 6 months of administrative forbearance; or (4) have a borrower or cosigner who has filed for bankruptcy. At September 30, 2015, we held approximately $96.1 million of Split Loans.

During the three months ended September 30, 2015, the Bank sold loans to the Purchasers in the amount of $6,552 in principal and $153 in accrued interest income. During the three months ended September 30, 2014, the Bank sold loans to the Purchasers in the amount of $28,871 in principal and $542 in accrued interest income.

During the nine months ended September 30, 2015, the Bank sold loans to the Purchasers in the amount of $21,109 in principal and $438 in accrued interest income. During the nine months ended September 30, 2014, the Bank sold loans to the Purchasers in the amount of $794,870 in principal and $26,339 in accrued interest income.

There was no gain as a result of the loans sold to the Purchasers in the three months ended September 30, 2015 and September 30, 2014. Total write-downs to fair value for loans sold with a fair value lower than par totaled $1,871 and $4,571 in the three months ended September 30, 2015 and 2014, respectively. There was no gain as a result of the loans sold in the nine months ended September 30, 2015. The gain resulting from loans sold was $35,848 in the nine months ended September 30, 2014. Total write-downs to fair value for loans sold with a fair value lower than par totaled $5,573 and $51,001 in the nine months ended September 30, 2015 and September 30, 2014, respectively. Navient is the servicer for all of these loans.

35

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

12. Regulatory Capital
    
The Bank is subject to various regulatory capital requirements administered by federal banking authorities. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material adverse effect on our financial condition. Under the regulatory framework for prompt corrective action, we must meet specific capital guidelines that involve quantitative measures of our assets, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk-weightings, and other factors.
    
As of the first quarter 2015, the Bank was required by federal banking authorities to report regulatory capital and ratios based on the U.S. Basel III rule. U.S. Basel III implemented changes to capital, risk-weighted assets, and “well capitalized” definitions and added a reporting requirement of Common Equity Tier 1 Capital (to risk-weighted assets). Regulatory capital reported as of December 31, 2014 was calculated according to regulatory guidelines in effect at that date.

“Well capitalized” regulatory requirements are the quantitative measures established by regulation to ensure capital adequacy. The Bank is required to maintain minimum amounts and ratios (set forth in the table below) of Total and Tier I Capital to risk-weighted assets, Common Equity Tier I Capital to risk-weighted assets, and Tier I Capital to average assets, as defined by the regulation. The following amounts and ratios are based upon the Bank's assets.

 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	Well Capitalized Regulatory Requirements	
 	 	Amount	Ratio	 	Amount	 	Ratio	
As of September 30, 2015:	 	 	 	 	 	 	 	
Tier I Capital (to Average Assets)	 	$	1,639,235	
 	12.2	%	 	$	674,490	
 	>	5.0	%	
Tier I Capital (to Risk-Weighted Assets)	 	$	1,639,235	
 	13.3	%	 	$	989,333	
 	>	8.0	%	
Total Capital (to Risk-Weighted Assets)	 	$	1,743,438	
 	14.1	%	 	$	1,236,667	
 	>	10.0	%	
Common Equity Tier I Capital (to Risk-Weighted Assets)	 	$	1,639,235	
 	13.3	%	 	$	803,833	
 	>	6.5	%	
As of December 31, 2014:	 	 	 	 	 	 	 	
Tier I Capital (to Average Assets)	 	$	1,413,988	
 	11.5	%	 	$	614,709	
 	>	5.0	%	
Tier I Capital (to Risk-Weighted Assets)	 	$	1,413,988	
 	15.0	%	 	$	565,148	
 	>	6.0	%	
Total Capital (to Risk-Weighted Assets)	 	$	1,497,830	
 	15.9	%	 	$	941,913	
 	>	10.0	%	
 
Bank Dividends

The Bank is chartered under the laws of the State of Utah and its deposits are insured by the Federal Deposit Insurance Corporation (“FDIC”). The Bank’s ability to pay dividends is subject to the laws of Utah and the regulations of the FDIC. Generally, under Utah’s industrial bank laws and regulations as well as FDIC regulations, the Bank may pay dividends from its net profits without regulatory approval if, following the payment of the dividends, the Bank’s capital and surplus would not be impaired. The Bank paid no dividends for the three and nine months ended September 30, 2015 and September 30, 2014.

36

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

13. Commitments, Contingencies and Guarantees

Commitments
When we approve a Private Education Loan at the beginning of an academic year, that approval may cover the borrowing for the entire academic year. As such, we do not always disburse the full amount of the loan at the time of origination but instead have a commitment to fund a portion of the loan at a later date (usually at the start of the second semester or subsequent trimesters). At September 30, 2015, we had $1.7 billion of outstanding contractual loan commitments which we expect to fund during the remainder of the 2015/2016 academic year.  
Regulatory Matters
At the time of this filing, the Bank remains subject to the consent order (the “2014 FDIC Order”) relating to the settlement of previously disclosed regulatory matters with the FDIC. Specifically, on May 13, 2014, the Bank reached settlements with the FDIC and the Department of Justice (“DOJ”) regarding disclosures and assessments of certain late fees, as well as compliance with the Servicemembers’ Civil Relief Act (“SCRA”). The order issued by the DOJ (the “DOJ Order”) was approved by the U.S. District Court for the District of Delaware on September 29, 2014. Under the 2014 FDIC Order, the Bank agreed to pay $3.3 million in fines and oversee the refund of up to $30 million in late fees assessed on loans owned or originated by the Bank since its inception in November 2005.
As required by the 2014 FDIC Order and the DOJ Order, the Bank has now implemented new SCRA policies, procedures and training, has updated billing statement disclosures, and is taking additional steps to ensure its third-party service providers are also fully compliant in these areas. In 2014, we engaged a third-party firm to conduct independent audits of certain key consumer protection processes and procedures, including our compliance management system. To date, we have received no high-risk findings. In 2015, the third-party firm is continuing to conduct additional independent audits over the remainder of those processes and procedures.
Required restitution activities under the 2014 FDIC and DOJ Orders are well under way. Applicable late fees were credited to eligible customers with open accounts in October 2014 and the mailing of restitution checks to all other eligible customers is ongoing. Checks for payment of SCRA benefits and related compensation, as determined by the DOJ, began mailing in June 2015. Under the terms of the Separation and Distribution Agreement, Navient remains responsible for funding all liabilities under the regulatory orders, other than fines directly levied against the Bank in connection with these matters. Under the DOJ Order, Navient is solely responsible for reimbursing SCRA benefits and related compensation on behalf of both its subsidiary, Navient Solutions, Inc., and the Bank.
Contingencies
In the ordinary course of business, we and our subsidiaries are routinely defendants in or parties to pending and threatened legal actions and proceedings, including actions brought on behalf of various classes of claimants. These actions and proceedings may be based on alleged violations of consumer protection, securities, employment and other laws. In certain of these actions and proceedings, claims for substantial monetary damage may be asserted against us and our subsidiaries.
We and our subsidiaries and affiliates are subject to various claims, lawsuits and other actions that arise in the ordinary course of business. In addition, it is common for the Company, our subsidiaries and affiliates to receive information and document requests and investigative demands from state attorneys general, legislative committees, and administrative agencies. These requests may be for informational or regulatory purposes and may relate to our business practices, the industries in which we operate, or other companies with whom we conduct business. Our practice has been and continues to be to cooperate with these bodies and be responsive to any such requests.

37

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

13.	Commitments, Contingencies and Guarantees (Continued)	 	

In view of the inherent difficulty of predicting the outcome of litigation, regulatory and investigative actions, we cannot predict what the eventual outcome of the pending matters will be, what the timing or the ultimate resolution of these matters will be, or what the eventual loss, fines or penalties, if any, related to each pending matter may be.
We are required to establish reserves for litigation and regulatory matters where those matters present loss contingencies that are both probable and estimable. When loss contingencies are not both probable and estimable, we do not establish reserves.
Based on current knowledge, management does not believe there are loss contingencies, if any, arising from pending investigations, litigation or regulatory matters that could have a material adverse effect on our consolidated financial position, liquidity, results of operations or cash flows.

14. Subsequent Event

On October 21, 2015, we announced plans to sell approximately $750 million of Private Education Loans through a term ABS transaction to qualified institutional buyers. The transaction will remove the principal balance of the loans backing the securitization trust from our balance sheet on the settlement date. We will continue to service the loans after they are transferred to the securitization trust. We expect to sell these loans at an approximate 8 percent premium and we expect to record a pre-tax gain of approximately $59 million on the sale, net of estimated closing adjustments and transaction costs. The transaction is expected to settle on or about October 27, 2015, and will be reflected in our fourth quarter 2015 results.

38

 	 	
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	

The following information is current as of October 21, 2015 (unless otherwise noted) and should be read in connection with SLM Corporation’s Annual Report on Form 10-K for the year ended December 31, 2014 (filed with the SEC on February 26, 2015) (the “2014 Form 10-K”), and subsequent reports filed with the Securities and Exchange Commission (the “SEC”). Definitions for capitalized terms in this report not defined herein can be found in the 2014 Form 10-K.

References in this Form 10-Q to “we,” “us,” “our,” “Sallie Mae” and the “Company” refer to SLM Corporation and its subsidiaries, except as otherwise indicated or unless the context otherwise requires.

On April 30, 2014, we completed our plan to legally separate into two distinct publicly-traded entities - an education loan management, servicing and asset recovery business, Navient Corporation (“Navient”), and a consumer banking business, SLM Corporation. The separation of Navient from SLM Corporation (the “Spin-Off”) was preceded by an internal corporate reorganization, which was the first step to separate the education loan management, servicing and asset recovery business from the consumer banking business. For a more detailed discussion of the Spin-Off, please see our 2014 Form 10-K.  
    
This report contains forward-looking statements and information based on management’s current expectations as of the date of this report. Statements that are not historical facts, including statements about the Company’s beliefs, opinions or expectations and statements that assume or are dependent upon future events, are forward-looking statements. Forward-looking statements are subject to risks, uncertainties, assumptions and other factors that may cause actual results to be materially different from those reflected in such forward-looking statements. These factors include, among others, the risks and uncertainties set forth in Item 1A “Risk Factors” and elsewhere in the Company’s 2014 Form 10-K and subsequent filings with the SEC; increases in financing costs; limits on liquidity; increases in costs associated with compliance with laws and regulations; changes in accounting standards and the impact of related changes in significant accounting estimates; any adverse outcomes in any significant litigation to which the Company is a party; credit risk associated with the Company’s exposure to third parties, including counterparties to the Company’s derivative transactions; and changes in the terms of education loans and the educational credit marketplace (including changes resulting from new laws and the implementation of existing laws). The Company could also be affected by, among other things: changes in our funding costs and availability; reductions to our credit ratings, failures or breaches of our operating systems or infrastructure, including those of third-party vendors; damage to our reputation; failures or breaches to successfully implement cost-cutting and restructuring initiatives and adverse effects of such initiatives on the Company's business; risks associated with restructuring initiatives; changes in the demand for educational financing or in financing preferences of lenders, educational institutions, students and their families; changes in law and regulations with respect to the student lending business and financial institutions generally; increased competition from banks and other consumer lenders; the creditworthiness of 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 we make; changes in general economic conditions and the Company's ability to successfully effectuate any acquisitions; and other strategic initiatives. The preparation of the Company’s consolidated financial statements also requires management to make certain estimates and assumptions, including estimates and assumptions about future events. These estimates or assumptions may prove to be incorrect. All forward-looking statements contained in this Quarterly Report on Form 10-Q are qualified by these cautionary statements and are made only as of the date of this report. The Company does not undertake any obligation to update or revise these forward-looking statements to conform such statements to actual results or changes in our expectations.

The Company reports financial results on a GAAP basis and also provides certain core earnings performance measures. The difference between the Company’s “Core Earnings” and GAAP results for the periods presented were the unrealized, mark-to-market gains/losses on derivative contracts (excluding current period accruals on the derivative instruments), net of tax. These are recognized in GAAP, but not in “Core Earnings” results. The Company provides “Core Earnings” measures because this is what management uses when making management decisions regarding the Company’s performance and the allocation of corporate resources. The Company’s “Core Earnings” are not defined terms within GAAP and may not be comparable to similarly titled measures reported by other companies. For additional information, see “Key Financial Measures” and “GAAP Consolidated Earnings Summary - 'Core Earnings' ” in this Form 10-Q for the quarter ended September 30, 2015 for a further discussion and a complete reconciliation between GAAP net income and “Core Earnings.”

39

Through this discussion and analysis, we intend to provide the reader with some narrative context for how our management views our consolidated financial statements, additional context within which to assess our operating results, and information on the quality and variability of our earnings, liquidity and cash flows.

Selected Financial Information and Ratios

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended September 30,	 	Nine Months Ended September 30,	
(In millions, except per share data and percentages)  	 	2015	 	2014	 	2015	 	2014	
 	 	 	 	 	 	 	 	 	
Net income attributable to SLM Corporation common stock	 	$	41	
 	 	$	78	
 	 	$	170	
 	 	$	166	
 	
Diluted earnings per common share attributable to SLM Corporation	 	$	0.09	
 	 	$	0.18	
 	 	$	0.39	
 	 	$	0.38	
 	
Weighted average shares used to compute diluted earnings per share	 	433	
 	 	432	
 	 	433	
 	 	432	
 	
Return on assets	 	1.3	%	 	2.9	%	 	1.9	%	 	2.1	%	
Operating efficiency ratio(1)	 	59.1	%	 	32.5	%	 	46.8	%	 	38.7	%	
 	 	 	 	 	 	 	 	 	
Other Operating Statistics	 	 	 	 	 	 	 	 	
Ending Private Education Loans, net	 	$	10,766	
 	 	$	7,779	
 	 	$	10,766	
 	 	$	7,779	
 	
Ending FFELP Loans, net	 	1,143	
 	 	1,316	
 	 	1,143	
 	 	1,316	
 	
Ending total education loans, net	 	$	11,909	
 	 	$	9,095	
 	 	$	11,909	
 	 	$	9,095	

Average education loans	 	$	11,030	
 	 	$	8,748	
 	 	$	10,760	
 	 	$	8,769	

(1) Our efficiency ratio is calculated as operating expense, excluding restructuring and other reorganization expenses, divided by net interest income (after provisions for loan losses) and other income.	
 
Recent Development
On October 21, 2015, we announced plans to sell approximately $750 million of Private Education Loans through a term ABS transaction to qualified institutional buyers. The transaction will remove the principal balance of the loans backing the securitization trust from our balance sheet on the settlement date. We will continue to service the loans after they are transferred to the securitization trust. We expect to sell these loans at an approximate 8 percent premium and we expect to record a pre-tax gain of approximately $59 million on the sale, net of estimated closing adjustments and transaction costs. The transaction is expected to settle on or about October 27, 2015, and will be reflected in our fourth quarter 2015 results.
Overview
The following discussion and analysis presents a review of our business and operations as of and for the three and nine months ended September 30, 2015.

40

Key Financial Measures
Our operating results are primarily driven by net interest income from our Private Education Loan portfolio (which includes financing costs), provisions for loan losses, gains and losses on loan sales, and operating expenses. The growth of our business and the strength of our financial condition are primarily driven by our ability to achieve our annual Private Education Loan origination goals while sustaining credit quality and maintaining diversified, cost-efficient funding sources to support our originations. A brief summary of our key financial measures (net interest income; gains on sale of loans, net; allowance for loan losses; charge-offs and delinquencies; operating expenses; and “Core Earnings”) can be found in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2014 Form 10-K.
2015 Management Objectives
For 2015, we have again set out five major goals to create shareholder value. They are: (1) prudently grow our Private Education Loan assets and revenues; (2) maintain our strong capital position; (3) complete the necessary steps to permit the Bank to independently originate Private Education Loans; (4) continue to expand the Bank's capabilities and enhance risk oversight and internal controls; and (5) manage operating expenses while improving efficiency and customer experience. Here is how we are progressing against these objectives:
Prudently Grow Private Education Loan Assets and Revenues
We will continue to pursue managed growth in our Private Education Loan portfolio in 2015 by leveraging our Sallie Mae and Upromise brands and our relationship with more than two thousand colleges and universities. We recently expanded our campus-focused sales force to provide deeper support for universities in all regions of the United States and, as a result, we expect to be able to demonstrate increased 2015 originations through this effort. We are determined to maintain the average FICO scores and cosigner rates on our originations at levels similar to those at which we ended 2014. We will also increase our efforts to help our customers manage their borrowings and succeed in making their payments, which we expect will result in lower charge-offs and provisions for loan losses. Originations were 6 percent higher in the first nine months of 2015 compared with the year-ago period. The FICO scores and cosigner rates for originations in the nine months ended September 30, 2015 were 749 and 90 percent, unchanged from 749 and 90 percent in the nine months ended September 30, 2014, respectively.
Maintain Our Strong Capital Position
The Bank is required by its prudential regulators, the Utah Department of Financial Institutions (“UDFI”) and the FDIC, to comply with mandated capital ratios. We intend to maintain levels of capital at the Bank that significantly exceed those necessary to be considered “well capitalized” by the FDIC. For additional information, see “Liquidity and Capital Resources — Regulatory Capital” in this Form 10-Q for the quarter ended September 30, 2015, for a further discussion of regulatory capital requirements. The Company is a source of strength for the Bank and will provide additional capital as, and if, necessary to the Bank. As of September 30, 2015, the Bank had a Tier 1 leverage ratio of 12.2 percent, a common equity Tier 1 risk-based capital ratio of 13.3 percent, a Tier 1 risk-based capital ratio of 13.3 percent, and a total risk-based capital ratio of 14.1 percent, all exceeding the current regulatory guidelines for well capitalized institutions by a significant amount. We do not intend to initiate any share repurchase program to return capital to shareholders. We only expect to repurchase common stock acquired in connection with taxes withheld associated with award exercises and vesting under our employee stock-based compensation plans. Our Board of Directors will periodically reconsider these matters.
We have been active in the capital markets in 2015. We have sold Private Education Loans through securitization transactions and have used the ABS market to complement our deposit funding by raising term funding using our loan portfolio. On July 30, 2015, we executed our $714 million SMB Private Education Loan Trust 2015-B term ABS transaction, which was accounted for as an on-balance sheet secured financing. At September 30, 2015, $692 million of our Private Education Loans were encumbered as a result of this transaction. 
Complete Necessary Steps to Permit the Bank to Independently Originate Private Education Loans
In June 2015, we implemented the final phase of the Bank's new loan origination platform and are currently processing all of our new loan originations through this platform. At the time of this filing, the Bank continues to rely on Navient for limited loan origination capabilities provided under a transition services agreement entered into with Navient in connection with the Spin-Off. The Bank, nonetheless, continues to have access under the transition services agreement to Navient originations applications through at least 2016.

41

Continue to Expand the Bank’s Capabilities and Enhance Risk Oversight and Internal Controls
During 2015, we have undertaken significant work to establish that all functions, policies and procedures transferred to the Bank in the Spin-Off are sufficient to meet applicable bank and consumer protection regulatory standards. We are designated as a “large bank,” and continue to work toward a risk and control capability that is suitable for a large institution and compliant with attendant regulatory expectations. For 2015, the following key initiatives remain to be completed or are underway:
 	 	
•	In 2015, we will further enhance our internal controls over financial reporting through adoption of the COSO 2013 framework.	
 	 	
•	Over the course of 2015, progress has been realized on key programs, including the build-out of our Enterprise Risk Management (“ERM”) program and establishing the foundation for our 2016 Dodd-Frank Act Stress Testing (“DFAST”) submission. Additionally, during 2015, we have embedded a new enterprise-wide governance framework and launched a manager’s risk and control self-assessment methodology. For the balance of 2015, emphasis will be placed on the model risk management discipline in support of our 2016 DFAST report.	
 	 	
•	Continue to strengthen our Internal Audit function, which will provide the Bank with confidence in its overall control environment and ensure the sustainability of the strong risk culture. During the first nine months of 2015, the Internal Audit function implemented several new automated systems, added five additional professional staff, and significantly increased relevant certifications of its staff to enhance overall quality.  In 2015, the Bank also engaged an independent accounting firm to conduct an external quality assessment of the Internal Audit function, in accordance with industry standards, which recently concluded with a favorable opinion.	
 	 	
•	Continue to make changes and enhancements to our compliance management system and program and related consumer protection processes and procedures. Our redesigned SCRA processes and procedures have now received the approval of the DOJ. In 2014, we engaged a third-party firm to conduct independent audits of certain key consumer protection processes and procedures, including our compliance management system. To-date, we have received no high-risk findings. In 2015, the third-party firm will continue to conduct additional independent audits over the remainder of those processes and procedures.	
Manage Operating Expenses While Improving Efficiency and Customer Experience
We will continue to measure our effectiveness in managing operating expenses by monitoring our efficiency ratio. Our efficiency ratio is calculated as operating expense, excluding restructuring and reorganization expenses, divided by net interest income (after provisions for loans losses) and other income. This ratio was 46.8 percent for the first nine months of 2015, compared to 38.7 percent for the first nine months of 2014. Gains on sales of loans, net, decreased $44 million as there were fewer sales in the first nine months of 2015. Operating expenses were $265 million for the nine months ended September 30, 2015, compared with $200 million in the year-ago period. These two factors account for the higher efficiency ratio through the first nine months of 2015.
We expect the annual efficiency ratio to decline steadily over the next several years as the number of loans we service grows to a level commensurate with our loan origination platform and we control the growth of our expense base. We intend for the Bank to retain servicing of all Private Education Loans we originate, regardless of whether we hold them in our portfolio or sell all or portions of these Private Education Loans through loan sales and ABS transactions.
In 2015, we will focus on further enhancing a culture that values customer satisfaction and the efficient delivery of our products and services. We understand the challenges of simplifying and carefully considering our customers’ requests, personal circumstances and requirements. As of April 2015, all customer service for our Private Education Loan portfolio has been moved to the United States. The decision to on-shore all Private Education Loan customer service represents a significant piece of our investment to enhance the overall customer experience this year. In the second quarter of 2015, we also unveiled upgrades and improvements to our mobile and loan management capabilities to deliver to our customers the access they expect from their financial service providers. We expect these investments to result in increased customer satisfaction, higher loan originations and a more efficient operation.

42

GAAP Results of Operations
We present the results of operations below first on a consolidated basis in accordance with GAAP.
 
GAAP Statements of Income (Unaudited)

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended September 30,	 	Increase
(Decrease) 	 	Nine Months Ended September 30,	 	Increase
(Decrease) 	
(In millions, except per share data)	 	2015	 	2014	 	$	 	%	 	2015	 	2014	 	$	 	%	
Interest income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loans	 	$	205	
 	 	$	164	
 	 	$	41	
 	 	25	 %	 	$	598	
 	 	$	487	
 	 	$	111	
 	 	23	 %	
Investments	 	3	
 	 	3	
 	 	—	
 	 	—	
 	 	8	
 	 	6	
 	 	2	
 	 	33	
 	
Cash and cash equivalents	 	1	
 	 	1	
 	 	—	
 	 	—	
 	 	3	
 	 	3	
 	 	—	
 	 	—	
 	
Total interest income	 	209	
 	 	168	
 	 	41	
 	 	24	
 	 	609	
 	 	496	
 	 	113	
 	 	23	
 	
Total interest expense	 	34	
 	 	24	
 	 	10	
 	 	42	
 	 	94	
 	 	68	
 	 	26	
 	 	38	
 	
Net interest income	 	175	
 	 	144	
 	 	31	
 	 	22	
 	 	515	
 	 	428	
 	 	87	
 	 	20	
 	
Less: provisions for loan losses	 	27	
 	 	15	
 	 	12	
 	 	80	
 	 	60	
 	 	55	
 	 	5	
 	 	9	
 	
Net interest income after provisions for loan losses	 	148	
 	 	129	
 	 	19	
 	 	15	
 	 	455	
 	 	373	
 	 	82	
 	 	22	
 	
Noninterest income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gains on sales of loans, net	 	—	
 	 	85	
 	 	(85	)	 	(100	)	 	77	
 	 	121	
 	 	(44	)	 	(36	)	
(Losses) gains on derivatives and hedging activities, net	 	(1	)	 	5	
 	 	(6	)	 	(120	)	 	4	
 	 	(5	)	 	9	
 	 	(180	)	
Other income	 	11	
 	 	6	
 	 	5	
 	 	83	
 	 	30	
 	 	29	
 	 	1	
 	 	3	
 	
Total noninterest income	 	10	
 	 	96	
 	 	(86	)	 	(90	)	 	111	
 	 	145	
 	 	(34	)	 	(23	)	
Expenses:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating expenses	 	93	
 	 	72	
 	 	21	
 	 	29	
 	 	264	
 	 	196	
 	 	68	
 	 	35	
 	
Acquired intangible asset amortization expense	 	—	
 	 	1	
 	 	(1	)	 	(100	)	 	1	
 	 	4	
 	 	(3	)	 	(75	)	
Restructuring and other reorganization expenses	 	1	
 	 	14	
 	 	(13	)	 	(93	)	 	6	
 	 	28	
 	 	(22	)	 	(79	)	
Total expenses	 	94	
 	 	87	
 	 	7	
 	 	8	
 	 	271	
 	 	228	
 	 	43	
 	 	19	

Income before income tax expense	 	64	
 	 	138	
 	 	(74	)	 	(54	)	 	295	
 	 	290	
 	 	5	
 	 	2	
 	
Income tax expense	 	18	
 	 	55	
 	 	(37	)	 	(67	)	 	110	
 	 	116	
 	 	(6	)	 	(5	)	
Net income	 	46	
 	 	83	
 	 	(37	)	 	(45	)	 	185	
 	 	174	
 	 	11	
 	 	6	
 	
Preferred stock dividends	 	5	
 	 	5	
 	 	—	
 	 	—	
 	 	15	
 	 	8	
 	 	7	
 	 	88	
 	
Net income attributable to SLM Corporation common stock	 	$	41	
 	 	$	78	
 	 	$	(37	)	 	(47	)%	 	$	170	
 	 	$	166	
 	 	$	4	
 	 	2	 %	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic earnings per common share attributable to SLM Corporation	 	$	0.10	
 	 	$	0.18	
 	 	$	(0.08	)	 	(44	)%	 	$	0.40	
 	 	$	0.39	
 	 	$	0.01	
 	 	3	 %	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted earnings per common share attributable to SLM Corporation	 	$	0.09	
 	 	$	0.18	
 	 	$	(0.09	)	 	(50	)%	 	$	0.39	
 	 	$	0.38	
 	 	$	0.01	
 	 	3	 %	

43

 GAAP Consolidated Earnings Summary
Three Months Ended September 30, 2015 Compared with Three Months Ended September 30, 2014
For the three months ended September 30, 2015, net income was $46 million, or $.09 diluted earnings per common share, compared with net income of $83 million, or $.18 diluted earnings per common share, for the three months ended September 30, 2014. Net income was affected by an $85 million decrease in gains on sales of loans, a $7 million increase in total expenses and a $12 million increase in provisions for loan losses, which were offset by a $31 million increase in net interest income and a $37 million decrease in income tax expense.
The primary contributors to each of the identified drivers of changes in net income for the current quarter compared with the year-ago quarter are as follows:
 	 	
•	Net interest income increased by $31 million in the quarter compared with the year-ago quarter primarily due to a $2.5 billion increase in average Private Education Loans outstanding and an 11 basis point increase in net interest margin. Net interest margin increased primarily as a result of an increase in the ratio of higher yielding Private Education Loans relative to our other interest earning assets, which more than offset a 13 basis point increase in our cost of funds. Cost of funds increased primarily as a result the higher funding costs associated with the use of our ABCP funding facility and the issuance of $631 million in term ABS financing to third parties in July 2015 (which term ABS financing has a significantly longer average life and higher cost than deposit funding), as well as increased costs associated with interest rate swaps hedging our fixed-rate loan portfolio that were ineffective until August 2014 and not included in our cost of funds.	
 	 	
•	Provisions for loan losses increased $12 million compared with the year-ago quarter. This increase was primarily the result of an $841 million increase in loans in repayment and a $36 million increase in loans classified as TDRs for which we hold a life of loan allowance.	
 	 	
•	Gains on sales of loans, net, decreased $85 million as there were no loan sales in the third quarter of 2015. In the year-ago quarter, we recorded an $85 million gain from the sale of $1.2 billion of loans through loan sales and a securitization transaction with third parties.	
 	 	
•	Gains (losses) on derivatives and hedging activities, net, resulted in a net loss of $1 million in the third quarter 2015 compared with a net gain of $5 million in the year-ago quarter. The primary factors affecting the change were interest rates and whether the derivatives qualified for hedge accounting treatment. In third quarter 2015, fewer derivatives that were used to economically hedge risk qualified for hedge accounting treatment than in the year-ago quarter.	
 	 	
•	Other income increased $5 million in third quarter 2015 compared with the year-ago quarter because in third quarter 2014 we recorded a $3 million decrease in the tax indemnity receivable from Navient. Excluding that item, other income increased $2 million, primarily as a result of servicing revenue we earned related to loans sold in the latter half of 2014 and the first half of 2015 for which we retained servicing rights.	
 	 	
•	Third-quarter 2015 operating expenses (including acquired intangible asset amortization expense) were $93 million compared with $73 million in the year-ago quarter. The increase is primarily due to the higher costs of establishing a stand alone company, servicing of higher loan volumes and peak origination season processing costs. We also continue to make investments in our servicing platform to improve customer service, such as expanding weekend service hours and improving response times.	
 	 	
•	Third-quarter 2015 restructuring and other reorganization expenses were $1 million compared with $14 million in the year-ago quarter. The decrease is the result of the wind-down of our separation efforts related to the Spin-Off.	
 	 	
•	The effective income tax rate decreased to 28.2 percent in third-quarter 2015 from 39.8 percent in the year-ago quarter. The decrease was attributed to a release of reserves for uncertain tax positions and lower state tax rates as a result of the favorable outcome of several state tax matters.	

44

Nine Months Ended September 30, 2015 Compared with Nine Months Ended September 30, 2014
For the nine months ended September 30, 2015, net income was $185 million, or $.39 diluted earnings per common share, compared with net income of $174 million, or $.38 diluted earnings per common share, for the nine months ended September 30, 2014. Net income was affected by a $44 million decrease in gains on sales of loans, a $43 million increase in total expenses and a $5 million increase in provisions for loan losses, which were offset by an $87 million increase in net interest income and a $6 million decrease in income tax expense.
The primary contributors to each of the identified drivers of changes in net income for the first nine months of 2015 compared with the year-ago period are as follows:
 	 	
•	Net interest income increased by $87 million in the first nine months of 2015 compared with the year-ago period primarily due to a $2.2 billion increase in average Private Education Loans outstanding and a 13 basis point increase in net interest margin. Net interest margin increased primarily as a result of an increase in the ratio of higher yielding Private Education Loans relative to our other interest earning assets, which more than offset a 17 basis point increase in our cost of funds. Cost of funds increased primarily as a result of the use of our ABCP funding facility and the issuance of $631 million in term ABS financing to third parties in July 2015 (which term ABS financing has a significantly longer average life and higher cost than deposit funding), as well as additional costs associated with interest rate swaps hedging our fixed-rate loan portfolio that were not in place in the first seven months of 2014.	
 	 	
•	Provisions for loan losses increased $5 million compared with the year-ago period. This increase was primarily the result of a $905 million increase in loans in repayment and a $159 million increase in loans classified as TDRs for which we hold a life of loan allowance, which was partially offset by a $301 million reduction in credit impaired loan sales and a $14 million benefit recorded in 2014 as a result of the change in our charge-off policy.	
 	 	
•	Gains on sales of loans, net, decreased $44 million, as there were fewer loan sales in the first nine months of 2015.	
 	 	
•	Gains (losses) on derivatives and hedging activities, net, resulted in a net gain of $4 million in the first nine months of 2015 compared with a net loss of $5 million in the year-ago period. The primary factors affecting the change were interest rates and whether the derivatives qualified for hedge accounting treatment. In the first nine months of 2015, more derivatives used to economically hedge risk qualified for hedge accounting treatment than in the year-ago period.	
 	 	
•	Operating expenses (including acquired intangible asset amortization expense) were $265 million compared with $200 million in the year-ago period. The increase is primarily due to the higher costs of establishing a stand alone company, servicing of higher loan volumes and peak origination season processing costs. We also continue to make investments in our servicing platform to improve customer service, such as expanding weekend service hours and improving response times.	
 	 	
•	Restructuring and other reorganization expenses were $6 million compared with $28 million in the year-ago period. The decrease is primarily the result of the wind-down of our separation efforts related to the Spin-Off.	
 	 	
•	The effective income tax rate decreased to 37.3 percent in the nine months ended September 30, 2015 from 39.9 percent in the year-ago period. The decrease was attributed to a release of reserves for uncertain tax positions and lower state tax rates as a result of the favorable outcome of several state tax matters.	
 “Core Earnings”
We prepare financial statements in accordance with GAAP. However, we also produce and report our after-tax earnings on a separate basis that we refer to as “Core Earnings.” While pre-Spin-Off SLM also reported a metric by that name, what we now report and what we describe below is significantly different and should not be compared to any Core Earnings reported by pre-Spin-Off SLM.
“Core Earnings” recognizes the difference in accounting treatment for derivatives based upon whether the derivative qualifies for hedge accounting treatment and eliminates the earnings impact associated with hedge ineffectiveness and derivatives we use as an economic hedge but which do not qualify for hedge accounting treatment. We enter into derivatives instruments to economically hedge interest rate and cash flow risk associated with our portfolio. We believe that our derivatives are effective economic hedges, and as such, are a critical element of our interest rate risk management strategy. Those derivative instruments that qualify for hedge accounting treatment have their related cash flows recorded in interest income or interest expense along with the hedged item. Hedge ineffectiveness related to these derivatives is recorded in “(Losses) gains on derivatives and hedging activities, net.” Some of our derivatives do not qualify for hedge accounting treatment and the stand-alone derivative must be marked to fair value in the income statement with no consideration for the corresponding change in fair value of the hedged item. These gains and losses, recorded in “(Losses) gains on derivatives and hedging activities, net”,

45

are primarily caused by interest rate volatility and changing credit spreads during the period as well as the volume and term of derivatives not receiving hedge accounting treatment. Cash flows on derivative instruments that do not qualify for hedge accounting treatment are not recorded in interest income and interest expense; they are recorded in non-interest income: “(Losses) gains on derivatives and hedging activities, net.”
The adjustments required to reconcile from our “Core Earnings” results to our GAAP results of operations, net of tax, relate to differing treatments for our use of derivatives instruments to hedge our economic risks that do not qualify for hedge accounting treatment or do qualify for hedge accounting treatment but result in ineffectiveness, net of tax. The amount recorded in “(Losses) gains on derivatives and hedging activities, net” includes the accrual of the current payment on the interest rate swaps that do not qualify for hedge accounting treatment as well as the change in fair values related to future expected cash flows for those derivatives and accounting hedges. For purposes of “Core Earnings,” we are including in GAAP earnings the current period accrual amounts (interest reclassification) on the swaps and exclude the remaining ineffectiveness. “Core Earnings” is meant to represent what earnings would have been had these derivatives qualified for hedge accounting and there was no ineffectiveness.
“Core Earnings” are not a substitute for reported results under GAAP. We provide “Core Earnings” basis of presentation because (i) earnings per share computed on a “Core Earnings” basis is one of several measures we utilize in establishing management incentive compensation and (ii) we believe it better reflects the financial results for derivatives that are economic hedges of interest rate risk but which do not qualify for hedge accounting treatment.
GAAP provides a uniform, comprehensive basis of accounting. Our “Core Earnings” basis of presentation differs from GAAP in the way it treats ineffective hedges as described above.
The following table shows the amount in “(Losses) gains on derivatives and hedging activities, net” that relates to the interest reclassification on the derivative contracts.

 	 	Three Months Ended	 	Nine Months Ended	
 	 	September 30,	 	September 30,	
(Dollars in thousands)	 	2015	 	2014	 	2015	 	2014	
 	 	 	 	 	 	 	 	 	
Hedge ineffectiveness (losses) gains	 	$	(2,116	)	 	$	935	
 	 	$	(1,471	)	 	$	1,186	
 	
Unrealized gains (losses) on instruments not in a hedging relationship	 	716	
 	 	5,636	
 	 	2,972	
 	 	(2,870	)	
Interest reclassification	 	853	
 	 	(1,170	)	 	2,846	
 	 	(3,137	)	
(Losses) gains on derivatives and hedging activities, net	 	$	(547	)	 	$	5,401	
 	 	$	4,347	
 	 	$	(4,821	)	

46

The following table reflects adjustments associated with our derivative activities.

 	 	Three Months Ended	 	Nine Months Ended	
 	 	September 30,	 	September 30,	
(Dollars in thousands, except per share amounts)	 	2015	 	2014	 	2015	 	2014	
 	 	 	 	 	 	 	 	 	
“Core Earnings” adjustments to GAAP:	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
GAAP net income attributable to SLM Corporation	 	$	45,724	
 	 	$	82,926	
 	 	$	184,439	
 	 	$	174,502	
 	
Preferred stock dividends	 	4,913	
 	 	4,850	
 	 	14,606	
 	 	8,078	
 	
GAAP net income attributable to SLM Corporation common stock	 	$	40,811	
 	 	$	78,076	
 	 	$	169,833	
 	 	$	166,424	

Adjustments:	 	 	 	 	 	 	 	 	
Net impact of derivative accounting(1)	 	1,400	
 	 	(6,571	)	 	(1,501	)	 	1,684	
 	
Net tax effect(2)	 	(397	)	 	2,528	
 	 	560	
 	 	(636	)	
Total “Core Earnings” adjustments to GAAP	 	1,003	
 	 	(4,043	)	 	(941	)	 	1,048	

“Core Earnings” attributable to SLM Corporation common stock	 	$	41,814	
 	 	$	74,033	
 	 	$	168,892	
 	 	$	167,472	

GAAP diluted earnings per common share	 	$	0.09	
 	 	$	0.18	
 	 	$	0.39	
 	 	$	0.38	
 	
Derivative adjustments, net of tax	 	0.01	
 	 	(0.01	)	 	0.00	
 	 	0.01	
 	
“Core Earnings” diluted earnings per common share	 	$	0.10	
 	 	$	0.17	
 	 	$	0.39	
 	 	$	0.39	
 	
______
(1) Derivative Accounting: “Core Earnings” exclude periodic unrealized gains and losses caused by the mark-to-market valuations on derivatives that do not qualify for hedge accounting treatment under GAAP, as well as the periodic unrealized gains and losses that are a result of ineffectiveness recognized related to effective hedges under GAAP. 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 the Bank where the derivative instruments are held.

47

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.   

 	 	Three Months Ended September 30, 	 	Nine Months Ended September 30, 	
 	 	2015	 	2014	 	2015	 	2014	
(Dollars in thousands)	 	Balance 
 	 	Rate 
 	 	Balance 
 	 	Rate 
 	 	Balance 
 	 	Rate 
 	 	Balance 
 	 	Rate 
 	
Average Assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Private Education Loans	 	$	9,869,025	
 	 	7.87	%	 	$	7,407,774	
 	 	8.20	%	 	$	9,563,290	
 	 	7.96	%	 	$	7,394,985	
 	 	8.19	%	
FFELP Loans	 	1,161,288	
 	 	3.27	
 	 	1,339,748	
 	 	3.23	
 	 	1,196,491	
 	 	3.22	
 	 	1,373,945	
 	 	3.25	
 	
Other investments	 	388,539	
 	 	2.70	
 	 	418,524	
 	 	2.77	
 	 	397,610	
 	 	2.60	
 	 	305,891	
 	 	2.66	
 	
Cash and other short-term investments	 	1,567,539	
 	 	0.25	
 	 	1,723,668	
 	 	0.27	
 	 	1,396,408	
 	 	0.25	
 	 	1,607,913	
 	 	0.26	

Total interest-earning assets	 	12,986,391	
 	 	6.38	%	 	10,889,714	
 	 	6.13	%	 	12,553,799	
 	 	6.48	%	 	10,682,734	
 	 	6.20	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-interest-earning assets	 	723,860	
 	 	 	 	630,974	
 	 	 	 	648,148	
 	 	 	 	527,377	

Total assets	 	$	13,710,251	
 	 	 	 	$	11,520,688	
 	 	 	 	$	13,201,947	
 	 	 	 	$	11,210,111	

Average Liabilities and Equity	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Brokered deposits	 	$	6,554,349	
 	 	1.20	%	 	$	5,092,606	
 	 	1.20	%	 	$	6,598,090	
 	 	1.20	%	 	$	5,392,194	
 	 	1.08	%	
Retail and other deposits	 	3,848,364	
 	 	0.95	
 	 	3,816,636	
 	 	0.92	
 	 	3,828,770	
 	 	0.95	
 	 	3,521,175	
 	 	0.92	
 	
Other interest-bearing liabilities (1)	 	672,024	
 	 	2.63	
 	 	22,675	
 	 	0.01	
 	 	228,903	
 	 	4.57	
 	 	30,072	
 	 	0.21	
 	
Total interest-bearing liabilities	 	11,074,737	
 	 	1.20	%	 	8,931,917	
 	 	1.07	%	 	10,655,763	
 	 	1.18	%	 	8,943,441	
 	 	1.01	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-interest-bearing liabilities	 	660,067	
 	 	 	 	811,369	
 	 	 	 	628,542	
 	 	 	 	730,987	
 	 	 	
Equity	 	1,975,447	
 	 	 	 	1,777,402	
 	 	 	 	1,917,642	
 	 	 	 	1,535,683	

Total liabilities and equity	 	$	13,710,251	
 	 	 	 	$	11,520,688	
 	 	 	 	$	13,201,947	
 	 	 	 	$	11,210,111	

Net interest margin	 	 	 	5.36	%	 	 	 	5.25	%	 	 	 	5.48	%	 	 	 	5.35	%	

_________________
 	 	
(1) 	For the three and nine months ended September 30, 2015, includes the average balance of our secured borrowings and amortization expense of transaction costs related to our asset-backed commercial paper education loan funding facility.	

The decline in the yield on the Private Education Loan portfolio for the three and nine month periods of 2015 compared with the prior year periods is primarily because of lower yields on new loan originations.

48

Rate/Volume Analysis - GAAP

The following rate/volume analysis shows the relative contribution of changes in interest rates and asset volumes.

 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(Dollars in thousands)	 	Increase
(Decrease)	 	Change Due To(1)	 	
 	 	 	 	Rate 	 	Volume	 	 	 	 	 	
Three Months Ended September 30, 2015 vs. 2014	 	 	 	 	 	 	 	 	 	 	 	
Interest income	 	$	40,698	
 	 	$	7,207	
 	 	$	33,473	
 	 	 	 	 	 	
Interest expense	 	9,282	
 	 	3,228	
 	 	6,242	
 	 	 	 	 	 	
Net interest income	 	$	31,416	
 	 	$	3,059	
 	 	$	28,261	

Nine Months Ended September 30, 2015 vs. 2014	 	 	 	 	 	 	 	 	 	 	 	
Interest income	 	$	113,086	
 	 	$	23,163	
 	 	$	89,927	
 	 	 	 	 	 	
Interest expense	 	26,236	
 	 	11,977	
 	 	14,143	
 	 	 	 	 	 	
Net interest income	 	$	86,850	
 	 	$	10,210	
 	 	$	76,500	

_________________
 	 	
(1) 	Changes in income and expense due to both rate and volume have been allocated in proportion to the relationship of the absolute dollar amounts of the change in each. The changes in income and expense are calculated independently for each line in the table. The totals for the rate and volume columns are not the sum of the individual lines.	
Summary of Our Education Loan Portfolio
Ending Education Loan Balances, net

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	September 30, 2015	 	December 31, 2014	
(Dollars in thousands)	 	Private
Education
Loans 	 	FFELP
Loans	 	Total Portfolio	 	Private
Education
Loans	 	FFELP
Loans	 	Total
Portfolio	
Total education loan portfolio:	 	 	 	 	 	 	 	 	 	 	 	 	
In-school(1)	 	$	2,898,443	
 	 	$	687	
 	 	$	2,899,130	
 	 	$	2,548,721	
 	 	$	1,185	
 	 	$	2,549,906	
 	
Grace, repayment and other (2)	 	7,941,818	
 	 	1,142,908	
 	 	9,084,726	
 	 	5,762,655	
 	 	1,263,622	
 	 	7,026,277	
 	
Total, gross	 	10,840,261	
 	 	1,143,595	
 	 	11,983,856	
 	 	8,311,376	
 	 	1,264,807	
 	 	9,576,183	
 	
Deferred origination costs and unamortized premium	 	26,283	
 	 	3,212	
 	 	29,495	
 	 	13,845	
 	 	3,600	
 	 	17,445	
 	
Allowance for loan losses	 	(100,033	)	 	(4,170	)	 	(104,203	)	 	(78,574	)	 	(5,268	)	 	(83,842	)	
Total education loan portfolio	 	$	10,766,511	
 	 	$	1,142,637	
 	 	$	11,909,148	
 	 	$	8,246,647	
 	 	$	1,263,139	
 	 	$	9,509,786	

% of total	 	90	%	 	10	%	 	100	%	 	87	%	 	13	%	 	100	%	
____________ 
(1)  Loans for customers still attending school and who are not yet required to make payments on the loan.
(2)  Includes loans in deferment or forbearance.

49

Average Education Loan Balances (net of unamortized premium/discount)

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(Dollars in thousands)	 	Three Months Ended
September 30, 2015	 	Three Months Ended
September 30, 2014	 	Nine Months Ended
September 30, 2015	 	Nine Months Ended
September 30, 2014	
Private Education Loans	 	$	9,869,025	
 	 	89	%	 	$	7,407,774	
 	 	85	%	 	$	9,563,290	
 	 	89	%	 	$	7,394,985	
 	 	84	%	
FFELP Loans	 	1,161,288	
 	 	11	
 	 	1,339,748	
 	 	15	
 	 	1,196,491	
 	 	11	
 	 	1,373,945	
 	 	16	
 	
Total portfolio	 	$	11,030,313	
 	 	100	%	 	$	8,747,522	
 	 	100	%	 	$	10,759,781	
 	 	100	%	 	$	8,768,930	
 	 	100	%	

Education Loan Activity

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended September 30, 2015 
 	 	Three Months Ended September 30, 2014
 	
(Dollars in thousands)	 	 Private
Education
Loans	 	FFELP
Loans	 	Total
Portfolio	 	Private
Education
Loans	 	FFELP
Loans	 	Total
Portfolio	
Beginning balance	 	$	9,245,259	
 	 	$	1,177,649	
 	 	$	10,422,908	
 	 	$	7,436,225	
 	 	$	1,357,746	
 	 	$	8,793,971	
 	
Acquisitions and originations	 	1,716,574	
 	 	—	
 	 	1,716,574	
 	 	1,614,350	
 	 	—	
 	 	1,614,350	
 	
Capitalized interest and deferred origination cost premium amortization	 	42,866	
 	 	9,194	
 	 	52,060	
 	 	33,034	
 	 	10,699	
 	 	43,733	
 	
Sales	 	(4,613	)	 	—	
 	 	(4,613	)	 	(1,153,156	)	 	—	
 	 	(1,153,156	)	
Loan consolidation to third parties	 	(20,376	)	 	(12,459	)	 	(32,835	)	 	(3,549	)	 	(10,475	)	 	(14,024	)	
Repayments and other	 	(213,199	)	 	(31,747	)	 	(244,946	)	 	(147,482	)	 	(42,019	)	 	(189,501	)	
Ending balance	 	$	10,766,511	
 	 	$	1,142,637	
 	 	$	11,909,148	
 	 	$	7,779,422	
 	 	$	1,315,951	
 	 	$	9,095,373	

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Nine Months Ended September 30, 2015 
 	 	Nine Months Ended September 30, 2014 
 	
(Dollars in thousands)	 	Private
Education
Loans	 	FFELP
Loans	 	Total
Portfolio	 	Private
Education
Loans	 	FFELP
Loans	 	Total
Portfolio	
Beginning balance	 	$	8,246,647	
 	 	$	1,263,139	
 	 	$	9,509,786	
 	 	$	6,506,642	
 	 	$	1,424,735	
 	 	$	7,931,377	
 	
Acquisitions and originations	 	3,786,946	
 	 	—	
 	 	3,786,946	
 	 	3,528,277	
 	 	7,470	
 	 	3,535,747	
 	
Capitalized interest and deferred origination cost premium amortization	 	118,653	
 	 	30,316	
 	 	148,969	
 	 	86,230	
 	 	36,161	
 	 	122,391	
 	
Sales	 	(713,220	)	 	—	
 	 	(713,220	)	 	(1,866,202	)	 	(7,654	)	 	(1,873,856	)	
Loan consolidation to third parties	 	(41,858	)	 	(34,263	)	 	(76,121	)	 	(13,069	)	 	(28,563	)	 	(41,632	)	
Repayments and other	 	(630,657	)	 	(116,555	)	 	(747,212	)	 	(462,456	)	 	(116,198	)	 	(578,654	)	
Ending balance	 	$	10,766,511	
 	 	$	1,142,637	
 	 	$	11,909,148	
 	 	$	7,779,422	
 	 	$	1,315,951	
 	 	$	9,095,373	

50

Private Education Loan Originations
The following table summarizes our Private Education Loan originations.

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	 	Nine Months Ended	
 	 	September 30,	 	September 30,	
(Dollars in thousands)	 	2015	 	%	 	2014	 	%	 	2015	 	%	 	2014	 	%	
Smart Option - interest only (1)	 	$	425,903	
 	 	25	%	 	$	400,923	
 	 	25	%	 	$	933,029	
 	 	25	%	 	$	860,421	
 	 	24	%	
Smart Option - fixed pay (1)	 	545,089	
 	 	32	
 	 	501,551	
 	 	31	
 	 	1,164,326	
 	 	31	
 	 	1,087,931	
 	 	31	
 	
Smart Option - deferred (1)	 	737,574	
 	 	43	
 	 	714,596	
 	 	44	
 	 	1,656,859	
 	 	44	
 	 	1,569,566	
 	 	45	
 	
Smart Option - principal and interest	 	410	
 	 	—	
 	 	350	
 	 	—	
 	 	1,344	
 	 	—	
 	 	1,287	
 	 	—	
 	
Total Private Education Loan originations	 	$	1,708,976	
 	 	100	%	 	$	1,617,420	
 	 	100	%	 	$	3,755,558	
 	 	100	%	 	$	3,519,205	
 	 	100	%	
     _____________
(1) Interest only, fixed pay and deferred describe the payment option while in school or in grace period.

51

Allowance for Loan Losses

Education Loan Allowance for Loan Losses Activity

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended September 30,	
 	 	2015	 	2014	
(Dollars in thousands)	 	Private
Education
Loans	 	FFELP
Loans	 	Total
Portfolio	 	Private
Education
Loans	 	FFELP
Loans	 	Total
Portfolio	
Beginning balance	 	$	87,310	
 	 	$	4,556	
 	 	$	91,866	
 	 	$	54,315	
 	 	$	6,212	
 	 	$	60,527	
 	
Less:	 	 	 	 	 	 	 	 	 	 	 	 	
Charge-offs	 	(14,121	)	 	(529	)	 	(14,650	)	 	(4,378	)	 	(761	)	 	(5,139	)	
Loan sales	 	(1,871	)	 	—	
 	 	(1,871	)	 	(4,571	)	 	—	
 	 	(4,571	)	
Plus:	 	 	 	 	 	 	 	 	 	 	 	 	
Recoveries	 	1,361	
 	 	—	
 	 	1,361	
 	 	—	
 	 	—	
 	 	—	
 	
Provision for loan losses	 	27,354	
 	 	143	
 	 	27,497	
 	 	14,607	
 	 	291	
 	 	14,898	
 	
Ending balance	 	$	100,033	
 	 	$	4,170	
 	 	$	104,203	
 	 	$	59,973	
 	 	$	5,742	
 	 	$	65,715	

Troubled debt restructurings (1)	 	$	231,286	
 	 	$	—	
 	 	$	231,286	
 	 	$	13,115	
 	 	$	—	
 	 	$	13,115	

 

 	 	Nine Months Ended September 30,	
 	 	2015	 	2014	
(Dollars in thousands)	 	Private
Education
Loans	 	FFELP
Loans	 	Total
Portfolio	 	Private
Education
Loans	 	FFELP
Loans	 	Total
Portfolio	
Beginning balance	 	$	78,574	
 	 	$	5,268	
 	 	$	83,842	
 	 	$	61,763	
 	 	$	6,318	
 	 	$	68,081	
 	
Less:	 	 	 	 	 	 	 	 	 	 	 	 	
Charge-offs	 	(36,127	)	 	(2,142	)	 	(38,269	)	 	(4,378	)	 	(2,058	)	 	(6,436	)	
Loan sales	 	(5,572	)	 	—	
 	 	(5,572	)	 	(51,001	)	 	—	
 	 	(51,001	)	
Plus:	 	 	 	 	 	 	 	 	 	 	 	 	
Recoveries	 	4,529	
 	 	—	
 	 	4,529	
 	 	—	
 	 	—	
 	 	—	
 	
Provision for loan losses	 	58,629	
 	 	1,044	
 	 	59,673	
 	 	53,589	
 	 	1,482	
 	 	55,071	
 	
Ending balance	 	$	100,033	
 	 	$	4,170	
 	 	$	104,203	
 	 	$	59,973	
 	 	$	5,742	
 	 	$	65,715	

Troubled debt restructurings (1)	 	$	231,286	
 	 	$	—	
 	 	$	231,286	
 	 	$	13,115	
 	 	$	—	
 	 	$	13,115	

_________
 	 	
(1) 	Represents the unpaid principal balance of loans classified as troubled debt restructurings.	

52

Private Education Loan Allowance for Loan Losses
In establishing the allowance for Private Education Loan losses as of September 30, 2015, we considered several factors with respect to our Private Education Loan portfolio: in particular, credit quality, delinquency, forbearance and charge-off trends in connection with the portfolio.
Private Education Loan provision for loan losses in the quarter ending September 30, 2015 increased $12 million compared with the year-ago period, primarily due to an $841 million increase in loans in repayment, and a $36 million increase in loans classified as TDRs for which we hold a life of loan allowance. When loans are sold at a gain, we reverse the allowance for loan losses related to these loans by recording a negative provision. When we sell credit impaired loans at a loss, we write down the loan to fair value with the additional write-down recorded as charge-off.
In the nine months ended September 30, 2015, we had a $5 million increase in the Private Education Loan provision for loan losses compared to the year-ago period. This increase was primarily the result of a $905 million increase in loans in repayment and a $159 million increase in loans classified as TDRs for which we hold a life of loan allowance, which was partially offset by a $301 million reduction in credit impaired loan sales and a $14 million benefit recorded in 2014 as a result of the change in our charge-off policy. When we sell credit impaired loans at a loss, we write down the loan to fair value with the additional write-down recorded as charge-off. For the first four months of 2014, we did not have troubled debt restructurings, loans in forbearance or a significant amount of loans that were more than 90 days past due because we typically sold loans to an affiliate prior to any restructuring and when they became 90 days delinquent. As a result of this past practice, there were no charge-off or recoveries of defaulted loans prior to April 30, 2014.
Total loans delinquent (as a percentage of loans in repayment) have increased to 1.9 percent from 1.3 percent in the year-ago period. Loans in forbearance (as a percentage of loans in repayment and forbearance) have increased to 3.1 percent from 1.6 percent in the year-ago period. The increase in the delinquency rate and loans in forbearance was because for the first four months of 2014, the Bank typically sold loans to an entity that is now a subsidiary of Navient in the same month they went 90 days delinquent or when a forbearance was offered to a borrower. Post-Spin-Off, the Bank now retains these loans.
For a more detailed discussion of our policy for determining the collectibility of Private Education Loans and maintaining our allowance for Private Education Loan losses, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates - Allowance for Loan Losses” in our 2014 Form 10-K.
Our default aversion strategies are focused on the final stages of delinquency. Pre-Spin-Off, these final stages were from 150 days to 212 days delinquent. As a result of changing our corporate charge-off policy and greatly reducing the number of potentially delinquent loans we sell to Navient, the final stages of delinquency and our default aversion strategies now focus more on loans 30 to 120 days delinquent. This change has the effect of accelerating the recognition of losses due to the shorter charge-off period. In addition, we changed our loss confirmation period from two years to one year to reflect the shorter charge-off policy and our revised servicing practices. To date, we have not experienced an increase in losses as a result of the shortened charge-off period. A loss confirmation period represents the expected period between a loss event and when management considers the debt to be uncollectible, taking into consideration account management practices that affect the timing of a loss, such as the usage of forbearance.
In connection with the Spin-Off, the agreement under which the Bank previously made loan sales was amended so the Bank now only has the right to require Navient to purchase loans (at fair value) where (a) the borrower has a lending relationship with both the Bank and Navient (“Split Loans”) and (b) the Split Loans either (1) are more than 90 days past due; (2) have been restructured; (3) have been granted a hardship forbearance or more than six months of administrative forbearance; or (4) have a borrower or cosigner who has filed for bankruptcy. At September 30, 2015, we held approximately $96 million of Split Loans.
For the reasons described above, many of our historical credit indicators and period-over-period trends are not indicative of future performance. The following results have not been adjusted to reflect what the delinquencies, charge-offs and recoveries would have been had we not sold these loans. Because we now retain more delinquent loans, we believe it could take up to two years after the date of the Spin-Off transaction before our credit performance indicators provide meaningful period-over-period comparisons.

53

The table below presents our Private Education Loan delinquency trends. Loans in repayment include loans making interest only and fixed payments, as well as loans that have entered full principal and interest repayment status.

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Private Education Loans	
 	 	September 30,	
 	 	2015	 	2014	
(Dollars in thousands)	 	Balance	 	%	 	Balance	 	%	
Loans in-school/grace/deferment(1)	 	$	3,971,392	
 	 	 	 	$	3,178,495	
 	 	 	
Loans in forbearance(2)	 	211,641	
 	 	 	 	75,782	
 	 	 	
Loans in repayment and percentage of each status:	 	 	 	 	 	 	 	 	
Loans current	 	6,529,855	
 	 	98.1	%	 	4,515,313	
 	 	98.7	%	
Loans delinquent 31-60 days(3)	 	79,794	
 	 	1.2	
 	 	44,082	
 	 	1.0	
 	
Loans delinquent 61-90 days(3)	 	34,743	
 	 	0.5	
 	 	12,415	
 	 	0.3	
 	
Loans delinquent greater than 90 days(3)	 	12,836	
 	 	0.2	
 	 	3,333	
 	 	—	
 	
Total loans in repayment	 	6,657,228	
 	 	100.0	%	 	4,575,143	
 	 	100.0	%	
Total loans, gross	 	10,840,261	
 	 	 	 	7,829,420	
 	 	 	
Deferred origination costs	 	26,283	
 	 	 	 	9,975	
 	 	 	
Total loans	 	10,866,544	
 	 	 	 	7,839,395	
 	 	 	
Allowance for loan losses	 	(100,033	)	 	 	 	(59,973	)	 	 	
Total Private Education Loans, net	 	$	10,766,511	
 	 	 	 	$	7,779,422	

Percentage of loans in repayment	 	 	 	61.4	%	 	 	 	58.4	%	
 	 	 	 	 	 	 	 	 	
Delinquencies as a percentage of loans in repayment	 	 	 	1.9	%	 	 	 	1.3	%	
 	 	 	 	 	 	 	 	 	
Loans in forbearance as a percentage of loans in repayment and forbearance	 	 	 	3.1	%	 	 	 	1.6	%	
________
 	 	
(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.	

At September 30, 2015 and December 31, 2014, 26 percent and 28 percent, respectively, of our portfolio of Private Education Loans have entered full principal and interest repayment status after any applicable grace periods.

 

54

Allowance for Private Education Loan Losses
The following table summarizes changes in the allowance for Private Education Loan losses.

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended September 30,	 	Nine Months Ended September 30,	
(Dollars in thousands)	 	2015	 	2014	 	2015	 	2014	
Allowance at beginning of period	 	$	87,310	
 	 	$	54,315	
 	 	$	78,574	
 	 	$	61,763	
 	
Provision for Private Education Loan losses	 	27,354	
 	 	14,607	
 	 	58,629	
 	 	53,589	

Charge-offs(1)	 	(14,121	)	 	(4,378	)	 	(36,127	)	 	(4,378	)	
Recoveries	 	1,361	
 	 	—	
 	 	4,529	
 	 	—	
 	
Net charge-offs	 	(12,760	)	 	(4,378	)	 	(31,598	)	 	(4,378	)	
Loan sales(2)	 	(1,871	)	 	(4,571	)	 	(5,572	)	 	(51,001	)	
Allowance at end of period	 	$	100,033	
 	 	$	59,973	
 	 	$	100,033	
 	 	$	59,973	

Allowance as a percentage of ending total loans	 	0.92	%	 	0.77	%	 	0.92	%	 	0.77	%	
Allowance as a percentage of ending loans in repayment	 	1.50	%	 	1.31	%	 	1.50	%	 	1.31	%	
Allowance coverage of net charge-offs (annualized)	 	1.96	
 	 	3.42	
 	 	2.37	
 	 	10.27	
 	
Net charge-offs as a percentage of average loans in repayment (annualized)	 	0.83	%	 	0.39	%	 	0.72	%	 	0.13	%	
Delinquencies as a percentage of loans in repayment	 	1.91	%	 	1.31	%	 	1.91	%	 	1.31	%	
Loans in forbearance as a percentage of loans in repayment and forbearance	 	3.09	%	 	1.63	%	 	3.09	%	 	1.63	%	
Percentage of loans with a cosigner	 	89.9	%	 	89.8	%	 	89.9	%	 	89.8	%	
Average FICO at origination	 	749	
 	 	750	
 	 	749	
 	 	749	
 	
Ending total loans(3)	 	$	10,840,261	
 	 	$	7,829,420	
 	 	$	10,840,261	
 	 	$	7,829,420	
 	
Average loans in repayment	 	$	6,118,678	
 	 	$	4,453,775	
 	 	$	5,848,345	
 	 	$	4,408,852	
 	
Ending loans in repayment	 	$	6,657,228	
 	 	$	4,575,143	
 	 	$	6,657,228	
 	 	$	4,575,143	
 	
     ________
 	 	
(1) 	Prior to the Spin-Off, Private Education Loans were sold to an entity that is now a subsidiary of Navient, prior to being charged off. Therefore, many of our historical credit indicators and period-over-period trends are not indicative of future performance. Because we now retain more delinquent loans, we believe it could take up to two years from the date of the Spin-Off before our credit performance indicators provide meaningful period-over-period comparisons.	
 	 	
(2) 	Represents fair value write-downs on loans sold.	
 	 	
(3) 	Ending total loans represents gross Private Education Loans.	
 
As part of concluding on the adequacy of the allowance for loan losses, we review key allowance and loan metrics. The most significant of these metrics considered are the allowance coverage of charge-offs ratio; the allowance as a percentage of total loans and of loans in repayment; and delinquency and forbearance percentages. The allowance as a percentage of ending total loans and ending loans in repayment increased at September 30, 2015 compared with September 30, 2014 because of an increase in the relative size of the loan portfolio, an increase in our TDRs (for which we hold a life of loan allowance) and an increase in the percentage of loans in full principal and interest repayment.
Use of Forbearance as a Private Education Loan Collection Tool
Forbearance involves granting the customer a temporary cessation of payments (or temporary acceptance of smaller than scheduled payments) for a specified period of time. Using forbearance extends the original term of the loan. Forbearance does not grant any reduction in the total repayment obligation (principal or interest). While in forbearance status, interest continues to accrue and is capitalized to principal when the loan re-enters repayment status. Our forbearance policies include limits on the number of forbearance months granted consecutively and the total number of forbearance months granted over the life of the loan. In some instances, we require good-faith payments before granting forbearance. Exceptions to forbearance policies are permitted when such exceptions are judged to increase the likelihood of collection of the loan. Forbearance as a collection tool is used most effectively when applied based on a customer’s unique situation, including historical information and judgments.

55

We leverage updated customer information and other decision support tools to best determine who will be granted forbearance based on our expectations as to a customer’s ability and willingness to repay their obligation. This strategy is aimed at mitigating the overall risk of the portfolio as well as encouraging cash resolution of delinquent loans.
Forbearance may be granted to customers who are exiting their grace period to provide additional time to obtain employment and income to support their obligations, or to current customers who are faced with a hardship and request forbearance time to provide temporary payment relief. In these circumstances, a customer’s loan is placed into a forbearance status in limited monthly increments and is reflected in the forbearance status at month-end during this time. At the end of their granted forbearance period, the customer will enter repayment status as current and is expected to begin making scheduled monthly payments on a go-forward basis.
Forbearance may also be granted to customers who are delinquent in their payments. In these circumstances, the forbearance cures the delinquency and the customer is returned to a current repayment status and is expected to begin making scheduled monthly payments on a go-forward basis. In more limited instances, delinquent customers will also be granted additional forbearance time.
Prior to the Spin-Off, the Bank sold Private Education Loans that were delinquent more than 90 days or were granted a hardship forbearance to an entity that is now a subsidiary of Navient. As such, the Bank did not hold many loans in forbearance. Because of this past business practice, we do not yet have meaningful comparative historic forbearance data with respect to our Private Education Loan portfolio. Subsequent to the Spin-Off, however, we began using forbearance as part of our loss mitigation efforts. Nonetheless, the historic default experience on loans put into forbearance that Navient (pre-Spin-Off SLM) experienced prior to the Spin-Off is still considered in the determination of our allowance for loan losses.
The tables below show the composition and status of the Private Education Loan portfolio aged by number of months in active repayment status (months for which a scheduled monthly payment was due). Active repayment status includes loans making interest only and fixed payments as well as loans that have entered full principal and interest repayment status. Our experience shows the percentage of loans in forbearance status decreases the longer the loans have been in active repayment status. At September 30, 2015, loans in forbearance status as a percentage of loans in repayment and forbearance were 3.1 percent for loans that have been in active repayment status for fewer than 25 months. Approximately 77 percent of our Private Education Loans in forbearance status have been in active repayment status fewer than 25 months.

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(Dollars in millions)                                   September 30, 2015	 	Monthly Scheduled Payments Due	 	Not Yet in
Repayment	 	Total	 	
 	 	0 to 12	 	13 to 24	 	25 to 36	 	37 to 48	 	More than 48	 	 	 	 	 	
Loans in-school/grace/deferment	 	$	—	
 	 	$	—	
 	 	$	—	
 	 	$	—	
 	 	$	—	
 	 	$	3,971	
 	 	$	3,971	
 	 	
Loans in forbearance	 	129	
 	 	35	
 	 	24	
 	 	15	
 	 	9	
 	 	—	
 	 	212	
 	 	
Loans in repayment - current	 	3,374	
 	 	1,669	
 	 	832	
 	 	388	
 	 	265	
 	 	—	
 	 	6,528	
 	 	
Loans in repayment - delinquent 31-60 days	 	44	
 	 	16	
 	 	10	
 	 	6	
 	 	5	
 	 	—	
 	 	81	
 	 	
Loans in repayment - delinquent 61-90 days	 	20	
 	 	7	
 	 	4	
 	 	2	
 	 	2	
 	 	—	
 	 	35	
 	 	
Loans in repayment - delinquent greater than 90 days	 	7	
 	 	2	
 	 	2	
 	 	1	
 	 	1	
 	 	—	
 	 	13	
 	 	
Total	 	$	3,574	
 	 	$	1,729	
 	 	$	872	
 	 	$	412	
 	 	$	282	
 	 	$	3,971	
 	 	10,840	
 	 	
Deferred origination costs	 	 	 	 	 	 	 	 	 	 	 	 	 	27	
 	 	
Allowance for loan losses	 	 	 	 	 	 	 	 	 	 	 	 	 	(100	)	 	
Total Private Education Loans, net	 	 	 	 	 	 	 	 	 	 	 	 	 	$	10,767	

Loans in forbearance as a percentage of loans in repayment and forbearance	 	3.61	%	 	2.02	%	 	2.75	%	 	3.64	%	 	3.19	%	 	—	%	 	3.09	%	 	

56

 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(Dollars in millions)

September 30, 2014	 	Monthly Scheduled Payments Due	 	Not Yet in
Repayment	 	Total	 	
 	 	0 to 12	 	13 to 24	 	25 to 36	 	37 to 48	 	More than 48	 	 	 	 	 	
Loans in-school/grace/deferment	 	$	—	
 	 	$	—	
 	 	$	—	
 	 	$	—	
 	 	$	—	
 	 	$	3,178	
 	 	$	3,178	
 	 	
Loans in forbearance	 	47	
 	 	15	
 	 	8	
 	 	5	
 	 	1	
 	 	—	
 	 	76	
 	 	
Loans in repayment - current	 	2,597	
 	 	1,060	
 	 	503	
 	 	298	
 	 	57	
 	 	—	
 	 	4,515	
 	 	
Loans in repayment - delinquent 31-60 days	 	29	
 	 	7	
 	 	4	
 	 	4	
 	 	—	
 	 	—	
 	 	44	
 	 	
Loans in repayment - delinquent 61-90 days	 	9	
 	 	2	
 	 	1	
 	 	1	
 	 	—	
 	 	—	
 	 	13	
 	 	
Loans in repayment - delinquent greater than 90 days	 	2	
 	 	1	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	3	
 	 	
Total	 	$	2,684	
 	 	$	1,085	
 	 	$	516	
 	 	$	308	
 	 	$	58	
 	 	$	3,178	
 	 	7,829	
 	 	
Unamortized discount	 	 	 	 	 	 	 	 	 	 	 	 	 	10	
 	 	
Allowance for loan losses	 	 	 	 	 	 	 	 	 	 	 	 	 	(60	)	 	
Total Private Education Loans, net	 	 	 	 	 	 	 	 	 	 	 	 	 	$	7,779	

 	

 	 	

 	 	
 	 	
Loans in forbearance as a percentage of loans in repayment and forbearance	 	1.75	%	 	1.38	%	 	1.55	%	 	1.62	%	 	1.72	%	 	—	%	 	1.63	%	 	

Private Education Loan Repayment Options
The following table provides information regarding the repayment balance by loan type at September 30, 2015.

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(Dollars in thousands)	 	Signature and
Other	 	Smart Option	 	Career
Training	 	Total	
$ in repayment	 	$	142,401	
 	 	$	6,498,913	
 	 	$	15,914	
 	 	$	6,657,228	
 	
$ in total	 	$	300,283	
 	 	$	10,523,660	
 	 	$	16,318	
 	 	$	10,840,261	

 
Accrued Interest Receivable
The following table provides information regarding accrued interest receivable on our Private Education Loans. The table also discloses the amount of accrued interest on loans greater than 90 days past due as compared to our allowance for uncollectible interest. The allowance for uncollectible interest exceeds the amount of accrued interest on our 90 days past due portfolio for all periods presented.

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Accrued Interest Receivable 	
(Dollars in thousands)	 	Total Interest Receivable	 	Greater Than
90 Days
Past Due	 	Allowance for
Uncollectible
Interest	
September 30, 2015	 	$	606,218	
 	 	$	489	
 	 	$	2,979	
 	
December 31, 2014	 	$	445,710	
 	 	$	443	
 	 	$	3,517	
 	
September 30, 2014	 	$	430,299	
 	 	$	142	
 	 	$	3,250	

57

Liquidity and Capital Resources
Funding and Liquidity Risk Management
Our four primary liquidity needs include our ongoing ability to fund our businesses throughout market cycles (including during periods of financial stress), our ongoing ability to fund originations of Private Education Loans, servicing our bank deposits, and payment of required dividends on our preferred stock. To achieve these objectives, we analyze and monitor our liquidity needs, maintain excess liquidity and access diverse funding sources, such as deposits at the Bank, issuance of secured debt primarily through asset-backed securitizations and other financing facilities and through whole loan sales. It is our policy to manage operations so liquidity needs are fully satisfied through normal operations to avoid unplanned asset sales under emergency conditions. Our liquidity management is governed by policies approved by our Board of Directors. Oversight of these policies is performed in the Asset and Liability Committee, a management-level committee.
These policies take into account the volatility of cash flow forecasts, expected maturities, anticipated loan demand and a variety of other factors to establish minimum liquidity guidelines.
Key risks associated with our liquidity relate to our ability to access the capital markets and the markets for bank deposits at reasonable rates. This ability may be affected by our performance and the macroeconomic environment and the impact they have on the availability of funding sources in the marketplace.
Sources of Liquidity and Available Capacity
Ending Balances

 	 	 	 	 	 	 	 	 	
(Dollars in thousands)	 	September 30, 2015	 	December 31, 2014	
Sources of primary liquidity:	 	 	 	 	
Unrestricted cash and liquid investments:	 	 	 	 	
Holding Company and other non-bank subsidiaries	 	$	18,700	
 	 	$	7,677	
 	
Sallie Mae Bank(1)	 	1,263,097	
 	 	2,352,103	
 	
Available-for-sale investments	 	190,944	
 	 	168,934	
 	
Total unrestricted cash and liquid investments	 	$	1,472,741	
 	 	$	2,528,714	
 	
____
(1) This amount will be used primarily to originate Private Education Loans at the Bank.

Average Balances

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended
September 30,	 	Nine Months Ended
September 30,	
(Dollars in thousands)	 	2015	 	2014	 	2015	 	2014	
Sources of primary liquidity:	 	 	 	 	 	 	 	 	
Unrestricted cash and liquid investments:	 	 	 	 	 	 	 	 	
Holding Company and other non-bank subsidiaries	 	$	20,088	
 	 	$	12,216	
 	 	$	16,336	
 	 	$	8,410	
 	
Sallie Mae Bank(1)	 	1,537,203	
 	 	1,805,101	
 	 	1,347,228	
 	 	1,656,915	
 	
Available-for-sale investments	 	172,566	
 	 	151,646	
 	 	170,870	
 	 	127,999	
 	
Total unrestricted cash and liquid investments	 	$	1,729,857	
 	 	$	1,968,963	
 	 	$	1,534,434	
 	 	$	1,793,324	
 	
      ____
(1) This amount will be used primarily to originate Private Education Loans at the Bank.

58

Deposits

The following table summarizes total deposits.

 	 	September 30,	 	December 31,	 	
(Dollars in thousands)	 	2015	 	2014	 	
Deposits - interest bearing	 	$	10,610,592	
 	 	$	10,539,953	
 	 	
Deposits - non interest bearing	 	287	
 	 	602	
 	 	
Total deposits	 	$	10,610,879	
 	 	$	10,540,555	

Interest Bearing
Interest bearing deposits as of September 30, 2015 and December 31, 2014 consisted of retail non-maturity savings and money market deposits, brokered and retail certificates of deposit, and brokered money market deposits. These deposit products are serviced by third party providers. Placement fees associated with the brokered certificates of deposit are amortized into interest expense using the effective interest rate method.
Interest bearing deposits at September 30, 2015 and December 31, 2014 are summarized as follows:

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	September 30, 2015	 	December 31, 2014	 	
(Dollars in thousands)	 	Amount	 	Qtr.-End Weighted Average Stated Rate (1)	 	Amount	 	Year-End Weighted Average Stated Rate (1)	 	
 	 	 	 	 	 	 	 	 	 	
Money market	 	$	4,436,095	
 	 	1.18	%	 	$	4,527,448	
 	 	1.15	%	 	
Savings	 	665,941	
 	 	0.82	
 	 	703,687	
 	 	0.81	
 	 	
Certificates of deposit	 	5,508,556	
 	 	0.99	
 	 	5,308,818	
 	 	1.00	
 	 	
Deposits - interest bearing	 	$	10,610,592	
 	 	 	 	$	10,539,953	

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

 As of September 30, 2015 and December 31, 2014, there were $195 million and $254 million, respectively, of deposits exceeding FDIC insurance limits. Accrued interest on deposits was $23 million and $16 million at September 30, 2015 and December 31, 2014, respectively.

Non Interest Bearing

Non interest bearing deposits were $0.3 million and $0.6 million as of September 30, 2015 and December 31, 2014, respectively. For both periods, these were comprised of money market accounts related to our Employee Stock Purchase Plan account.
Commitments
When we approve a Private Education Loan at the beginning of an academic year, that approval may cover the borrowing for the entire academic year. As such, we do not always disburse the full amount of the loan at the time of origination but instead have a commitment to fund a portion of the loan at a later date (usually at the start of the second semester or subsequent trimesters). At September 30, 2015, we had $1.7 billion of outstanding contractual loan commitments which we expect to fund during the remainder of the 2015/2016 academic year.

59

Borrowings

Outstanding borrowings consist of secured borrowings executed through our term ABS program and our ABCP funding facility. The issuing entities for those secured borrowings are VIEs and are consolidated for accounting purposes. The following table summarizes our secured borrowings at September 30, 2015. We did not have outstanding secured borrowings at December 31, 2014.

 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	September 30, 2015	
 	 	Short-Term	 	Long-Term	 	Total	
Secured borrowings:	 	 	 	 	 	 	
Private Education Loan term securitization	 	$	—	
 	 	$	593,687	
 	 	$	593,687	
 	
ABCP borrowings	 	710,005	
 	 	—	
 	 	710,005	
 	
Total	 	$	710,005	
 	 	$	593,687	
 	 	$	1,303,692	

    
2015 Financing Transactions
    
On July 30, 2015, we executed our $714 million SMB Private Education Loan Trust 2015-B term ABS transaction, which was accounted for as an on-balance sheet secured financing. We retained a 5 percent or $33 million interest in the Class A and B notes, a 100 percent or $50 million interest in the Class C notes and 100 percent of the residual certificates issued in the securitization. $631 million of notes from the securitization were sold to third parties, raising $623 million of gross proceeds. The Class A and B notes had a weighted average life of 4.8 years and priced at a weighted average LIBOR equivalent cost of 1 month LIBOR plus 1.53 percent. At September 30, 2015, $692 million of our Private Education Loans were encumbered as a result of this transaction. 

On December 19, 2014, we closed on a $750 million ABCP Private Education Loan funding facility. Pursuant to FDIC safe harbor guidelines, we retained a 5 percent or $37.5 million ownership interest in the ABCP facility, resulting in $712.5 million of funds being available for us to draw under the facility. We incur financing costs under the ABCP facility of approximately 0.40 percent on unused borrowing capacity and approximately 3 month LIBOR plus 0.80 percent on outstandings under the facility. At September 30, 2015, $710 million had been drawn and remained outstanding under the facility, net of our 5 percent retention. At September 30, 2015, $902 million of our Private Education Loans were encumbered as a result of this transaction.
Counterparty Exposure
Counterparty exposure related to financial instruments arises from the risk that a lending, investment or derivative counterparty will not be able to meet its obligations to us.
Excess cash is generally invested with the FRB on an overnight basis or in the FRB’s Term Deposit Facility, minimizing counterparty exposure on cash balances.
Our investment portfolio includes a small portfolio of mortgage-backed securities issued by government agencies and government-sponsored enterprises that are purchased to meet Community Reinvestment Act targets. Additionally, our investing activity is governed by Board-approved limits on the amount that is allowed to be invested with any one issuer based on the credit rating of the issuer, further minimizing our counterparty exposure. Counterparty credit risk is considered when valuing investments and considering impairment.
Related to derivative transactions, protection against counterparty risk is generally provided by ISDA CSAs or clearinghouses for OTC derivatives. CSAs require a counterparty to post collateral if a potential default would expose the other party to a loss. All derivative contracts entered into by the Bank are covered under such agreements and require collateral to be exchanged based on the net fair value of derivatives with each counterparty. Our exposure is limited to the value of the derivative contracts in a gain position less any collateral held or plus any collateral posted.

60

Title VII of the Dodd-Frank Act requires all standardized derivatives, including most interest rate swaps, to be submitted for clearing to central counterparties to reduce counterparty risk. As of September 30, 2015, $4.0 billion notional of our derivative contracts were cleared on the Chicago Mercantile Exchange and the London Clearing House. All derivative contracts cleared through an exchange require collateral to be exchanged based on the fair value of the derivative. Our exposure is limited to the value of the derivative contracts in a gain position less any collateral held or plus any collateral posted.
We have liquidity exposure related to collateral movements between us and our derivative counterparties. Movements in the value of the derivatives, which are primarily affected by changes in interest rates, may require us to return cash collateral held or may require us to access primary liquidity to post collateral to counterparties.
The table below highlights exposure related to our derivative counterparties as of September 30, 2015.

(Dollars in thousands)	 	SLM Corporation
and Sallie Mae Bank
Contracts	
Exposure, net of collateral	 	$	48,920	
 	
Percent of exposure to counterparties with credit ratings below S&P AA- or Moody’s Aa3	 	50	%	
Percent of exposure to counterparties with credit ratings below S&P A- or Moody’s A3	 	—	%	

Regulatory Capital
The Bank is subject to various regulatory capital requirements administered by federal banking authorities. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material adverse effect on our financial statements. Under the regulatory framework for prompt corrective action, we must meet specific capital guidelines that involve quantitative measures of our assets and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk-weightings and other factors.
As of the first quarter 2015, the Bank was required by federal banking authorities to report regulatory capital and ratios based on the U.S. Basel III rule. U.S. Basel III implemented changes to capital, risk-weighted assets, and “well capitalized” definitions and added a reporting requirement of Common Equity Tier I Capital (to risk-weighted assets). Regulatory capital reported as of December 31, 2014 was calculated according to regulatory guidelines in effect at that date.
“Well capitalized” regulatory requirements are the quantitative measures established by regulation to ensure capital adequacy. The Bank is required to maintain minimum amounts and ratios (set forth in the table below) of Total and Tier I Capital to risk-weighted assets, Common Equity Tier I Capital to risk-weighted assets, and Tier I Capital to average assets, as defined by the regulation. The following amounts and ratios are based upon the Bank's assets.

 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Actuals	 	Well Capitalized Regulatory Requirements	
(Dollars in thousands)	 	Amount	Ratio	 	Amount	 	Ratio	
As of September 30, 2015:	 	 	 	 	 	 	 	
Tier I Capital (to Average Assets)	 	$	1,639,235	
 	12.2	%	 	$	674,490	
 	>	5.0	%	
Tier I Capital (to Risk-Weighted Assets)	 	$	1,639,235	
 	13.3	%	 	$	989,333	
 	>	8.0	%	
Total Capital (to Risk-Weighted Assets)	 	$	1,743,438	
 	14.1	%	 	$	1,236,667	
 	>	10.0	%	
Common Equity Tier I Capital (to Risk-Weighted Assets)	 	$	1,639,235	
 	13.3	%	 	$	803,833	
 	>	6.5	%	
As of December 31, 2014:	 	 	 	 	 	 	 	
Tier I Capital (to Average Assets)	 	$	1,413,988	
 	11.5	%	 	$	614,709	
 	>	5.0	%	
Tier I Capital (to Risk-Weighted Assets)	 	$	1,413,988	
 	15.0	%	 	$	565,148	
 	>	6.0	%	
Total Capital (to Risk-Weighted Assets)	 	$	1,497,830	
 	15.9	%	 	$	941,913	
 	>	10.0	%	

61

 Capital Management
The Bank seeks to remain well capitalized at all times with sufficient capital to support asset growth, operating needs, unexpected credit risks and to protect the interests of depositors and the FDIC deposit insurance fund. The Bank is required by its prudential regulators, the UDFI and the FDIC, to comply with mandated capital ratios. We intend to maintain levels of capital at the Bank that significantly exceed the levels of capital necessary to be considered “well capitalized” by the FDIC. The Company is a source of strength for the Bank and will provide additional capital if necessary. We do not plan to pay dividends on our common stock. We do not intend to initiate any share repurchase program to return capital to shareholders. We only expect to repurchase common stock acquired in connection with taxes withheld associated with award exercises and vesting under our employee stock-based compensation plans. Our Board of Directors will periodically reconsider these matters.
On July 9, 2013, the FDIC Board of Directors approved an interim final rule to implement new U.S. Basel III guidelines related to regulatory capital measurement and reporting. The interim final rule became effective January 2015. It strengthens both the quantity and quality of banks’ risk-based capital, placing greater emphasis on Common Equity Tier 1 capital. The Bank’s Capital Policy requires management to monitor the new capital standards. The Basel III capital rule requires banks to maintain a minimum common equity Tier 1 risk-based capital ratio of 4.5 percent, a Tier 1 risk-based capital ratio of 6.0 percent, a total risk-based capital ratio of 8.0 percent, and a Tier 1 leverage ratio of 4 percent. In addition, when the rule is fully phased in by 2019, banks will also be subject to a greater than 2.5 percent common equity Tier 1 capital conservation buffer, under which they must maintain a common equity Tier 1 risk-based capital ratio greater than 7.0 percent, a Tier 1 risk-based capital ratio greater than 8.5 percent, and a total risk-based capital ratio greater than 10.5 percent. Failure to maintain the buffer will result in restrictions on the banks’ ability to make dividend payments, repurchase shares and pay discretionary bonuses.
The rule also revises the capital thresholds for the prompt corrective action framework for banks. Effective January 1, 2015, in order to qualify as well capitalized, a bank must maintain a minimum Tier 1 leverage ratio of 5 percent, a minimum common equity Tier 1 risk-based capital ratio of 6.5 percent, a minimum Tier 1 risk-based capital ratio of 8 percent and a minimum total risk-based capital ratio of 10 percent.
As of September 30, 2015, the Bank had a Tier 1 leverage ratio of 12.2 percent, a common equity Tier 1 risk-based capital ratio of 13.3 percent, a Tier 1 risk-based capital ratio of 13.3 percent, and a total risk-based capital ratio of 14.1 percent, exceeding the current guidelines by a significant amount. Our ratios would also exceed the future guidelines if we calculated them today based on the new definitions of capital and risk-weighted assets.
Dividends
The Bank is chartered under the laws of the State of Utah and its deposits are insured by the FDIC. The Bank’s ability to pay dividends is subject to the laws of Utah and the regulations of the FDIC. Generally, under Utah’s industrial bank laws and regulations as well as FDIC regulations, the Bank may pay dividends from its net profits without regulatory approval if, following the payment of the dividend, the Bank’s capital and surplus would not be impaired. The Bank paid no dividends for the three and nine months ended September 30, 2015 and September 30, 2014.
Borrowed Funds
The Bank maintains discretionary uncommitted Federal Funds lines of credit with various correspondent banks, which totaled $100 million at September 30, 2015. The interest rate charged to the Bank on these lines of credit is priced at Fed Funds plus a spread at the time of borrowing, and is payable daily. The Bank did not utilize these lines of credit in the three and nine months ended September 30, 2015 and September 30, 2014.
The Bank established an account at the FRB to meet eligibility requirements for access to the Primary Credit borrowing facility at the FRB’s Window. The Primary Credit borrowing facility is a lending program available to depository institutions that are in generally sound financial condition. All borrowings at the Window must be fully collateralized. We can pledge asset-backed and mortgage-backed securities, as well as FFELP consolidation and Private Education Loans to the FRB as collateral for borrowings at the Window. Generally, collateral value is assigned based on the estimated fair value of the pledged assets. At September 30, 2015 and December 31, 2014, the value of our pledged collateral at the FRB totaled $1.5 billion and $1.4 billion, respectively. The interest rate charged to us is the discount rate set by the FRB. We did not utilize this facility in the three and nine months ended September 30, 2015 and September 30, 2014.

62

 Critical Accounting Policies and Estimates
Management’s Discussion and Analysis of Financial Condition and Results of Operations addresses our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America. A discussion of our critical accounting policies, which include allowance for loan losses, fair value measurement, transfers of financial assets and the VIE consolidation model and derivative accounting, can be found in our 2014 Form 10-K. There were no significant changes to these critical accounting policies during the third quarter of 2015.

63

 	 	
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	
Interest Rate Sensitivity Analysis
Our interest rate risk management program seeks to manage and control interest rate risk, thereby reducing our exposure to fluctuations in interest rates and achieving consistent and acceptable levels of profit in any rate environment, and sustainable growth in net interest income over the long term. We evaluate and monitor interest rate risk through two primary methods:
 	 	
•	Earnings at Risk (“EAR”), which measures the impact of hypothetical changes in interest rates on net interest income; and	
 	 	
•	Economic Value of Equity (“EVE”), which measures the sensitivity or change in the economic value of equity to changes in interest rates.	
A number of potential interest rate scenarios are simulated using our asset liability management system. The Bank is the primary source of interest rate risk within the Company. The majority of the Bank’s assets are priced off of 1-month LIBOR. Therefore, 1-month LIBOR is considered a core rate in our interest rate risk analysis with many interest rate changes correlated to this rate for analytic purposes. In addition, each rate is modeled with a floor, which indicates how low each specific rate is likely to move in practice. Rates are adjusted up or down via a set of scenarios that includes both shocks and ramps. Shocks represent an immediate and sustained change in the market rate associated with each asset or liability, effective upon its next repricing date. Ramps represent a linear increase in the market interest rates applicable to each asset or liability over the course of 12 months, which take effect at the next repricing date.
The following tables summarize the potential effect on earnings over the next 24 months and the potential effect on fair values of balance sheet assets and liabilities at September 30, 2015 and September 30, 2014, based upon a sensitivity analysis performed by management assuming a hypothetical increase in market interest rates of 100 basis points and 300 basis points. The EVE sensitivity is applied only to financial assets and liabilities, including hedging instruments that existed at the balance sheet date, and does not take into account new assets, liabilities or hedging instruments that may arise in the future.

 	 	 	 	 	 	 	 	
 	September 30,	
 	2015	 	2014	
 	+300 Basis
Points	 	+100 Basis
Points	 	+300 Basis
Points	 	+100 Basis
Points	
 	 	 	 	 	 	 	 	
EAR - Shock	+5.6%	 	+1.8%	 	+12.0%	 	+3.8%	
EAR - Ramp	+4.6%	 	+1.4%	 	+9.3%	 	+2.7%	
EVE	-1.2%	 	-0.9%	 	-1.5%	 	-1.2%	
            
A primary objective in our funding is to minimize our sensitivity to changing interest rates by generally funding our assets with liabilities of similar interest rate repricing characteristics. This funding objective is frequently obtained through the use of derivatives. Uncertainty in loan repayment cash flows and the pricing behavior of our non-maturity retail deposits pose challenges in achieving our interest rate risk objectives. In addition to these considerations, we can have a mismatch in the index (including the frequency of reset) of floating rate debt versus floating rate assets.
As part of its suite of financial products, the Bank offers fixed-rate Private Education Loans. As with other Private Education Loans, the term to maturity is lengthy, and the customer has the option to repay the loan faster than the promissory note requires. A portion of the fixed-rate loans have been hedged with derivatives, which have been used to convert a portion of variable rate funding to fixed-rate to match the anticipated cash flows of these loans. Any unhedged position arising from the fixed-rate loan portfolio is monitored and modeled to ensure that the interest rate risk does not cause the organization to exceed its policy limits for earnings at risk or for the value of equity at risk.
In the preceding tables, the interest rate sensitivity analysis reflects the heavy balance sheet mix of fully variable LIBOR-based loans, which exceeds the mix of fully variable funding. The mix of fully variable funding includes brokered CDs that have been converted to LIBOR through derivative transactions. The analysis does not anticipate that retail MMDA or retail

64

savings balances, while relatively sensitive to interest rate changes, will reprice to the full extent of interest rate shocks or ramps. Partially offsetting this asset sensitive position, is (i) the impact of FFELP loans, which receive floor income in low interest rate environments, and will therefore not reprice fully with interest rate shocks and (ii) the impact of a portion of our fixed-rate loans that have not been fully match-funded through derivative transactions. Based on the assumptions used in this analysis, the overall asset-sensitive position will generally cause net interest income to increase when interest rates rise over the near-term horizon. The long-term perspective offered by the EVE analysis indicates a fairly balanced position with modest sensitivity over the life of existing interest sensitive assets and liabilities.     
Although we believe that these measurements provide an estimate of our interest rate sensitivity, they do not account for potential changes in credit quality and size or composition of our balance sheet. They also do not account for other business developments that could affect net income, or for management actions that could affect net income or be taken to change our risk profile. Accordingly, we can give no assurance that actual results would not differ materially from the estimated outcomes of our simulations. Further, such simulations do not represent our current view of expected future interest rate movements.
 
Asset and Liability Funding Gap
The tables below present our assets and liabilities (funding) arranged by underlying indices as of September 30, 2015. In the following GAAP presentation, the funding gap only includes derivatives that qualify as effective hedges (those derivatives which are reflected in net interest margin, as opposed to those reflected in the “Gains (losses) on derivatives and hedging activities, net” line on the consolidated statements of income). The difference between the asset and the funding is the funding gap for the specified index. This represents our exposure to interest rate risk in the form of basis risk and repricing risk, which is the risk that the different indices may reset at different frequencies or may not move in the same direction or at the same magnitude. (Note that all fixed-rate assets and liabilities are aggregated into one line item, which does not capture the differences in time due to maturity.)

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(Dollars in billions)
Index	 	Frequency of
Variable
Resets	 	Assets	 	Funding (1) 	 	Funding
Gap	
3-month Treasury bill	 	weekly	 	$	0.2	
 	 	$	—	
 	 	$	0.2	
 	
3-month LIBOR	 	quarterly	 	—	
 	 	0.7	
 	 	(0.7	)	
1-month LIBOR	 	monthly	 	8.8	
 	 	5.5	
 	 	3.3	
 	
1-month LIBOR	 	daily	 	1.0	
 	 	—	
 	 	1.0	
 	
Non-Discrete reset(2)	 	daily/weekly	 	1.3	
 	 	2.5	
 	 	(1.2	)	
Fixed Rate(3)	 	 	 	3.2	
 	 	5.8	
 	 	(2.6	)	
Total	 	 	 	$	14.5	
 	 	$	14.5	
 	 	$	—	
 	
          ______________________
 	 	
(1) 	Funding (by index) includes all derivatives that qualify as hedges.	
 	 	
(2) 	Assets include restricted and unrestricted cash equivalents and other overnight type instruments. Funding includes liquid retail deposits and the obligation to return cash collateral held related to derivatives exposures.	
 	 	
(3) 	Assets include receivables and other assets (including premiums and reserves). Funding includes unswapped time deposits, liquid MMDA's swapped to fixed rates and stockholders' equity.	
The “Funding Gap” in the above table shows primarily mismatches in the 1-month LIBOR assets with fixed-rate and Non-Discrete funding. We consider the risk to be moderate since the funding in the Non-Discrete bucket is our liquid retail portfolio, which we have significant flexibility to reprice at any time. The funding in the fixed bucket includes $2.0 billion of equity and $0.6 billion of non-interest bearing liabilities.
We use interest rate swaps and other derivatives to achieve our risk management objectives. Our asset liability management strategy is to match assets with debt (in combination with derivatives) that have the same underlying index and reset frequency or have interest rate characteristics we believe are highly correlated. The use of funding with index types and reset frequencies that are different from our assets exposes us to interest rate risk in the form of basis and repricing risk. This could result in our cost of funds not moving in the same direction or with the same magnitude as the yield on our assets. While we believe repricing risk is low, as all of these indices are short-term, with historical rate movements that are highly correlated

65

over a long period of time, market disruptions (which have occurred in recent years) can lead to a temporary divergence between indices and result in a negative impact to our earnings.
Weighted Average Life

The following table reflects the weighted average lives of our earning assets and liabilities at September 30, 2015.

 	 	 	
 	Weighted	
 	Average	
(Averages in Years)	Life	
Earning assets	 	
Education loans	6.28	
 	
Cash and investments	0.75	
 	
Total earning assets	5.65	

Deposits	 	
Short-term deposits	0.05	
 	
Long-term deposits	2.54	
 	
Total deposits	0.87	

Borrowings	 	
Short-term borrowings	0.22	
 	
Long-term borrowings	4.98	
 	
Total borrowings	2.41	

66

 	 	
Item 4.	Controls and Procedures	

Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of September 30, 2015. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of September 30, 2015, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (a) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (b) accumulated and communicated to our management, including our principal executive officer and principal financial officer as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended September 30, 2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

67

PART II. OTHER INFORMATION
 	 	
Item 1.	Legal Proceedings	

Legal Proceedings

We and our subsidiaries and affiliates are subject to various claims, lawsuits and other actions that arise in the normal course of business. We believe that these claims, lawsuits and other actions will not, individually or in the aggregate, have a material adverse effect on our business, financial condition or results of operations. In the ordinary course of business, it is common for the Company, our subsidiaries and affiliates to receive information and document requests and investigative demands from state attorneys general, legislative committees and administrative agencies. These requests may be for informational or regulatory purposes and may relate to our business practices, the industries in which we operate, or other companies with whom we conduct business. Our practice has been and continues to be to cooperate with these bodies and be responsive to any such requests.
Pursuant to the terms of the Spin-Off and applicable law, Navient assumed responsibility for all liabilities (whether accrued, contingent or otherwise and whether known or unknown) arising out of or resulting from the conduct of pre-Spin-Off SLM and its subsidiaries’ businesses prior to the Spin-Off, other than certain specifically identified liabilities relating to the conduct of our consumer banking business. Nonetheless, given the prior usage of the Sallie Mae and SLM names by entities now owned by Navient, we and our subsidiaries may from time to time be improperly named as defendants in legal proceedings where the allegations at issue are the legal responsibility of Navient. Most of these legal proceedings involve matters that arose in the ordinary course of business of pre-Spin-Off SLM and we will not be providing information on these proceedings unless there are material issues of fact or disagreement with Navient as to the bases of the proceedings or responsibility therefor that we believe could have a material, adverse impact on our business, assets, financial condition, liquidity or outlook if not resolved in our favor.

For a description of these and other litigation or regulatory proceedings to which we are a party, and for which we have no current updates, see our 2014 Form 10-K.
Regulatory Update
    
At the time of this filing, the Bank remains subject to the 2014 FDIC Order. Specifically, on May 13, 2014, the Bank reached settlements with the FDIC and the DOJ regarding disclosures and assessments of certain late fees, as well as compliance with the SCRA.  The DOJ Order was approved by the U.S. District Court for the District of Delaware on September 29, 2014. Under the 2014 FDIC Order, the Bank agreed to pay $3.3 million in fines and oversee the refund of up to $30 million in late fees assessed on loans owned or originated by the Bank since its inception in November 2005.

As required by the 2014 FDIC Order and the DOJ Order, the Bank has now implemented new SCRA policies, procedures and training, has updated billing statement disclosures, and is taking additional steps to ensure its third-party service providers are also fully compliant in these areas. In 2014, we engaged a third-party firm to conduct independent audits of certain key consumer protection processes and procedures, including our compliance management system. To date, we have received no high-risk findings. In 2015, the third-party firm is continuing to conduct additional independent audits over the remainder of those processes and procedures.

Required restitution activities under the 2014 FDIC and DOJ Orders are well under way. Applicable late fees were credited to eligible customers with open accounts in October 2014 and the mailing of restitution checks to all other eligible customers is ongoing. Checks for payment of SCRA benefits and related compensation, as determined by the DOJ, began mailing in June 2015. Under the terms of the Separation and Distribution Agreement, Navient remains responsible for funding all liabilities under the regulatory orders, other than fines directly levied against the Bank in connection with these matters. Under the DOJ Order, Navient is solely responsible for reimbursing SCRA benefits and related compensation on behalf of both its subsidiary, Navient Solutions, Inc., and the Bank.

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Item 1A. Risk Factors
Our business activities involve a variety of risks. Readers should carefully consider the risk factors disclosed in Item 1A., Risk Factors of our 2014 Form 10-K.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
Share Repurchases
The following table provides information relating to our purchase of shares of our common stock in the three months ended September 30, 2015.

 	 	 	 	 	 	 	 	 	 	 	 	 	
(In thousands, except per share data)	Total Number
of Shares
Purchased(1)	 	Average Price
Paid per
Share 	 	Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs(2)  	 	Approximate Dollar
Value
of Shares That
May Yet Be
Purchased  Under
Publicly Announced
Plans or
Programs(2)	
Period:	 	 	 	 	 	 	 	
July 1 - July 31, 2015	20	
 	 	$	9.79	
 	 	—	
 	 	—	
 	
August 1 - August 31, 2015	109	
 	 	$	8.77	
 	 	—	
 	 	—	
 	
September 1 - September 30, 2015	7	
 	 	$	7.88	
 	 	—	
 	 	—	
 	
Total third-quarter 2015	136	
 	 	$	8.88	
 	 	—	
 	 	 	
_________
 	 	
(1) 	All shares purchased are the shares of our common stock tendered to us to satisfy the exercise price in connection with cashless exercises of stock options, and tax withholding obligations in connection with exercises of stock options and vesting of restricted stock and restricted stock units.	
 	 	
(2) 	At the present time, the Company does not have a publicly announced share repurchase plan or program.	
The closing price of our common stock on the NASDAQ Global Select Market on September 30, 2015 was $7.40.
 	 	
Item 3.	Defaults Upon Senior Securities	
Nothing to report.
 	 	
Item 4.	Mine Safety Disclosures	
Not applicable.
 	 	
Item 5.	Other Information	
Nothing to report.

69

 
 	 	
Item 6.	Exhibits	
The following exhibits are furnished or filed, as applicable:

12.1	Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends.	
 	 	
31.1	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
 	 	
31.2	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
 	 	
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
 	 	
32.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
 	 	
101.INS	XBRL Instance Document.	
 	 	
101.SCH	XBRL Taxonomy Extension Schema Document.	
 	 	
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.	
 	 	
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.	
 	 	
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.	
 	 	
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.	

70

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

 	 	 	 	
 	 	
SLM CORPORATION
(Registrant)	
 	 	
By:	/S/ STEVEN J. MCGARRY	
 	Steven J. McGarry
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)	 	
Date: October 21, 2015

71

Exhibit 12.1
SLM CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(Dollars in thousands)

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Years Ended December 31,	 	Nine Months Ended September 30,	
'	 	2010	 	2011	 	2012	 	2013	 	2014	 	2014	 	2015	
Income (loss) before income tax expense (benefit)	 	$	(122,669	)	 	$	87,848	
 	 	$	341,871	
 	 	$	416,528	
 	 	$	333,752	
 	 	$	289,570	
 	 	$	294,304	
 	
Add: Fixed charges	 	146,256	
 	 	107,896	
 	 	84,708	
 	 	91,182	
 	 	98,404	
 	 	68,406	
 	 	96,661	

Total earnings	 	$	23,587	
 	 	$	195,744	
 	 	$	426,579	
 	 	$	507,710	
 	 	$	432,156	
 	 	$	357,976	
 	 	$	390,965	

Interest expense	 	$	143,927	
 	 	$	105,385	
 	 	$	82,911	
 	 	$	89,085	
 	 	$	95,815	
 	 	$	67,842	
 	 	$	94,078	
 	
Rental expense, net of income	 	2,329	
 	 	2,511	
 	 	1,797	
 	 	2,097	
 	 	2,589	
 	 	564	
 	 	2,583	

Total fixed charges	 	146,256	
 	 	107,896	
 	 	$	84,708	
 	 	91,182	
 	 	98,404	
 	 	68,406	
 	 	96,661	

Preferred stock dividends	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	12,933	
 	 	8,078	
 	 	14,606	
 	
Total fixed charges and preferred stock dividends	 	$	146,256	
 	 	$	107,896	
 	 	$	84,708	
 	 	$	91,182	
 	 	$	111,337	
 	 	$	76,484	
 	 	$	111,267	
 	
Ratio of earnings to fixed charges (1) (2)	 	—	
 	 	1.81	
 	 	5.04	
 	 	5.57	
 	 	4.39	
 	 	5.23	
 	 	4.04	

 	 	 	

 	 	 	
 	 	 	 	 	
Ratio of earnings to fixed charges and preferred stock dividends (1) (2)	 	—	
 	 	1.81	
 	 	5.04	
 	 	5.57	
 	 	3.88	
 	 	4.68	
 	 	3.51	

 	 	
(1)	For purposes of computing these ratios, earnings represent income (loss) before income tax expense plus fixed charges. Fixed charges represent interest expensed and capitalized plus one-third (the proportion deemed representative of the interest factor) of rents, net of income from subleases.	
 	 	
(2)	
Due to a pre-tax loss from operations of $122,669 for the year ended December 31, 2010, the ratio coverage was less than 1:1. We would have needed to generate $122,669 million of additional earnings in the year ended December 31, 2010 for the ratio coverage to equal 1:1.	

Exhibit 31.1

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Raymond J. Quinlan, certify that:
 	 	
1.	I have reviewed this quarterly report on Form 10-Q of SLM Corporation;	

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	

4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	

b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	

c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	

d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	

b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	

 	
 	
/s/ RAYMOND J. QUINLAN	
Raymond J. Quinlan	
Executive Chairman and Chief Executive Officer	
(Principal Executive Officer)	
October 21, 2015	

Exhibit 31.2

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Steven J. McGarry, certify that:
 	 	
1.	I have reviewed this quarterly report on Form 10-Q of SLM Corporation;	

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	

4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	

b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	

c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	

d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	

b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	

 	
 	
/s/ STEVEN J. MCGARRY	
Steven J. McGarry	
Executive Vice President and Chief Financial Officer	
(Principal Financial Officer)	
October 21, 2015	

Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of SLM Corporation (the “Company”) on Form 10-Q for the quarter ended September 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Raymond J. Quinlan, Executive Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
 	 	
(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and	

(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.	

 	
 	
/s/ RAYMOND J. QUINLAN	
Raymond J. Quinlan	
Executive Chairman and Chief Executive Officer	
(Principal Executive Officer)	
October 21, 2015	

    
    
Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of SLM Corporation (the “Company”) on Form 10-Q for the quarter ended September 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steven J. McGarry, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
 	 	
(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and	

(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.	

 	
 	
/s/ STEVEN J. MCGARRY	
Steven J. McGarry	
Executive Vice President and Chief Financial Officer	
(Principal Financial Officer)	
October 21, 2015