SLM Corp - FORM 8-K - EX-99.1 - EXHIBIT 99.1

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8-K - FORM 8-K - SLM Corp	w77008e8vk.htm

Exhibit 99.1



	Media Contact: Martha Holler 703/984-5178	Investor Contacts: Steve McGarry 703/984-6746 Joe Fisher 703/984-5755

SALLIE MAE REPORTS FOURTH-QUARTER AND FULL-YEAR 2009 RESULTS

RESTON, Va., Jan. 20, 2010 — SLM Corporation (NYSE: SLM), commonly known as Sallie Mae, reported net income on a core earnings basis of $249 million ($.41 per diluted share) for the fourth quarter ended Dec. 31, 2009, compared to $65 million ($.08 per diluted share) for the year-ago quarter.

These results were reduced in part by a $98 million ($.19 per diluted share) loss from the sale of the company’s mortgage purchased paper business, a $34 million ($.07 per diluted share) charge against its purchased consumer receivables, both after tax, and a $33 million ($.06 per diluted share) charge for the early conversion of a portion of the company’s Series C Preferred Stock into common stock. Offsetting these losses was a $46 million ($.09 per diluted share) after-tax gain from debt repurchases.

For the full-year 2009, core earnings net income was $597 million ($.96 per diluted share), compared to $526 million ($.89 per diluted share) in 2008.

“The economy presented capital market challenges this year,” said Albert L. Lord, vice chairman & CEO. “We enter 2010 with stronger capital, asset quality and liquidity. We will continue to build balance sheet strength in this difficult economy as we begin to grow our earnings again.”

Lending Business

Core net interest income after provision for loan losses was $320 million in the fourth quarter, compared to $242 million in the prior quarter and $161 million in the year-ago quarter. During the fourth quarter, the company sold $17.6 billion of federal loans originated under U.S. Department of Education's (ED) loan participation program and received $271 million.

The company originated $4.5 billion in federal student loans in the fourth quarter, up 14 percent from the year-ago quarter. Federal student loan originations were $21.7 billion in 2009, a 21-percent increase from 2008.

Private education loan originations were down for both the quarter and the year, reflecting tightened underwriting and the effect of increased federal student loan limits. Private education loan originations were $381 million in the fourth quarter. The company originated $3.2 billion of private education loans in 2009.

Sallie Mae

•

12061 Bluemont Way

•

Reston, Va 20190

•

www.salliemae.com

Private Education Loan Portfolio Quality

Managed private education loan charge-offs declined to $298 million in the fourth quarter from $443 million in the previous quarter. Managed delinquencies as a percentage of private education loans in repayment decreased during the quarter to 12.1 percent, from 12.6 percent in the previous quarter. Core provision for private education loan losses was $327 million in the fourth quarter, down from $413 million in the third quarter.

During 2009, the company introduced a new private education loan, the Smart Option Student Loan, that reduces customers’ total cost and repayment period by requiring interest payments during in-school periods. Private student loans disbursed during the difficult economy of 2008 and 2009 have been underwritten to have significantly higher credit scores and cosigner rates.

In the quarter, the company improved its balance sheet strength by:

	•		Completing $600 million in private education loan securitizations and $840 million in consolidation loan securitizations, which provided life-of-loan funding;

	•		Funding $350 million in federal student loans through the Straight A conduit program sponsored by ED; and

	•		Repurchasing $741 million in unsecured debt, which generated a $46 million after-tax gain.

Subsequent to year end, the company entered into a new multi-year ABCP facility at substantially reduced costs, and entered into an agreement with the Federal Home Loan Bank in Des Moines (FHLB) to provide funding backed by eligible collateral including federally-guaranteed student loans.

Other Income and Operating Expenses

Core fee income, which includes the gain on debt repurchases, was $503 million in the fourth quarter, compared to the year-ago quarter’s core fee income of $237 million.

Core operating expenses were $293 million for the quarter, compared to $260 million in the year-ago quarter. For the full-year, operating expenses were $1.18 billion, compared to $1.23 billion in 2008.

GAAP

Sallie Mae officially reports financial results on a GAAP basis and also presents certain core earnings performance measures. The company’s management, equity investors, credit rating agencies and debt capital providers use these core earnings measures to monitor the company’s business performance. Both a description of the core earnings treatment and a full reconciliation to the GAAP income statement can be found at: http://www.salliemae.com/about/investors/stockholderinfo/earningsinfo/, click on the Fourth Quarter 2009 Supplemental Earnings Disclosure.

Sallie Mae

•

12061 Bluemont Way

•

Reston, Va 20190

•

www.salliemae.com

Sallie Mae reported fourth-quarter 2009 GAAP net income of $309 million ($.52 diluted earnings per share), compared to a net loss of $216 million ($.52 diluted loss per share) in the year-ago quarter.

Fourth-quarter 2009 results include the net impact of a $167 million unrealized, mark-to-market, pre-tax gain on certain derivative contracts that are recognized in GAAP, but not in core earnings, results. Net interest income after provisions for loan losses increased from $(42) million in the year-ago quarter to $329 million in the current quarter.

Presentation slides for the conference call discussed below may be accessed on www.salliemae.com/about/investors/stockholderinfo/webcast.

***

The company will host an earnings conference call tomorrow, Jan. 21 at 8 a.m. EST. Sallie Mae executives will be on hand to discuss various highlights of the quarter and to answer questions related to the company’s performance. Individuals interested in participating should call the following number tomorrow, Jan. 21, 2010, starting at 7:45 a.m. EST: (877) 356-5689 (USA and Canada) or (706) 679-0623 (International) and use access code 49855409. The conference call will be replayed continuously beginning at 11 a.m. EST on Jan. 21, 2010, and concluding at midnight on Feb. 4, 2010 EST. To access the replay, please dial (800) 642-1687 (USA and Canada) or dial (706) 645-9291 (International) and use access code 49855409. In addition, there will be a live audio Web cast of the conference call, which may be accessed at www.salliemae.com. A replay will be available 30 to 45 minutes after the live broadcast.

This press release contains “forward-looking statements” based on management’s current expectations as of the date of this release. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Because such statements inherently involve risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks include, among others, changes in the terms of student loans and the educational credit marketplace arising from the implementation of applicable laws and regulations, and from changes in such laws and regulations, adverse results in legal disputes, changes in the demand for educational financing or in financing preferences of educational institutions, students and their families, limited liquidity, increased financing costs and changes in the general interest rate environment. For more information, see the company’s filings with the Securities and Exchange Commission, including the forward-looking statements contained in the company’s Supplemental Financial Information Fourth Quarter 2009. All information in this release is as of Jan. 20, 2010. The Company does not undertake any obligation to update or revise these forward-looking statements to conform the statement to actual results or changes in the Company’s expectations.

***

SLM Corporation (NYSE: SLM), commonly known as Sallie Mae, is the nation's leading saving, planning and paying for education company. Sallie Mae’s saving programs, planning resources and financing options have helped more than 31 million people make the investment in higher education. Through its subsidiaries, the company manages $176 billion in education loans and serves 10 million student and parent customers. In addition, the company’s Upromise program has enabled 11 million members to earn more than $525 million in rewards to help pay for college. Its Upromise affiliates also manage more than $23 billion in 529 college-savings plans. Sallie Mae offers services to a range of institutional clients, including colleges and universities, student loan guarantors and state and federal agencies. More information is available at www.SallieMae.com. SLM Corporation and its subsidiaries are not sponsored by or agencies of the United States of America.

###

Sallie Mae

•

12061 Bluemont Way

•

Reston, Va 20190

•

www.salliemae.com

SLM CORPORATION

Supplemental Earnings Disclosure

December 31, 2009

(In millions, except per share amounts)


	Quarters ended									Years ended
	December 31,			September 30,			December 31,			December 31,			December 31,
	2009			2009			2008			2009			2008
	(unaudited)			(unaudited)			(unaudited)			(unaudited)			(unaudited)

SELECTED FINANCIAL INFORMATION AND RATIOS
GAAP Basis⁽¹⁾
Net income (loss) attributable to SLM Corporation	$	309		$	159		$	(216	)	$	324		$	(213	)
Diluted earnings (loss) per common share attributable to SLM Corporation common shareholders	$	.52		$	.25		$	(.52	)	$	.38		$	(.69	)
Return on assets		.77	%		.37	%		(.56	)%		.20	%		(.14	)%
“Core Earnings” Basis^(1)(2)(3)
“Core Earnings” net income attributable to SLM Corporation	$	249		$	164		$	65		$	597		$	526
“Core Earnings” diluted earnings per common share attributable to SLM Corporation common shareholders	$	.41		$	.26		$	.08		$	.96		$	.89
“Core Earnings” return on assets		.51	%		.31	%		.14	%		.30	%		.28	%
OTHER OPERATING STATISTICS
Average on-balance sheet student loans	$	145,964		$	157,530		$	144,826		$	151,692		$	136,658
Average off-balance sheet student loans		33,277			33,929			36,164			34,413			37,586

Average Managed student loans	$	179,241		$	191,459		$	180,990		$	186,105		$	174,244

Ending on-balance sheet student loans, net	$	143,807		$	158,846		$	144,802
Ending off-balance sheet student loans, net		32,638			33,335			35,591

Ending Managed student loans, net	$	176,445		$	192,181		$	180,393

Ending Managed FFELP Stafford and Other Student Loans, net	$	58,174		$	73,040		$	59,619
Ending Managed FFELP Consolidation Loans, net		83,176			84,235			87,275
Ending Managed Private Education Loans, net		35,095			34,906			33,499

Ending Managed student loans, net	$	176,445		$	192,181		$	180,393


⁽¹⁾		Diluted earnings per common share attributable to SLM Corporation common shareholders from continuing and discontinued operations on both a GAAP basis and “Core Earnings” basis for the three months ended December 31, 2009, September 30, 2009, and December 31, 2008 and the years ended December 31, 2009 and 2008 was:


	Quarters ended									Years ended
	December 31,			September 30,			December 31,			December 31,			December 31,
	2009			2009			2008			2009			2008
	(unaudited)			(unaudited)			(unaudited)			(unaudited)			(unaudited)
GAAP Basis
Diluted earnings (loss) per common share attributable to SLM Corporation common shareholders:
Continuing operations	$	.71		$	.26		$	(.47	)	$	.71		$	(.39	)

Discontinued operations	$	(.19	)	$	(.01	)	$	(.05	)	$	(.33	)	$	(.30	)

Total	$	.52		$	.25		$	(.52	)	$	.38		$	(.69	)

“Core Earnings” Basis⁽²⁾⁽³⁾
Diluted earnings (loss) per common share attributable to SLM Corporation common shareholders:
Continuing operations	$	.60		$	.27		$	.13		$	1.29		$	1.19

Discontinued operations	$	(.19	)	$	(.01	)	$	(.05	)	$	(.33	)	$	(.30	)

Total	$	.41		$	.26		$	.08		$	.96		$	.89


⁽²⁾		See explanation of “Core Earnings” performance measures under “Reconciliation of ‘Core Earnings’ Net Income to GAAP Net Income.”

⁽³⁾		“Core Earnings” does not include Floor Income unless it is Fixed Rate Floor Income that is economically hedged. The amount of this Economic Floor Income (net of tax) excluded from “Core Earnings” for the three months ended December 31, 2009, September 30, 2009, and December 31, 2008 and the years ended December 31, 2009 and 2008 was:


	Quarters ended						Years ended
	December 31,		September 30,		December 31,		December 31,		December 31,
	2009		2009		2008		2009		2008
	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)

Total Economic Floor Income earned on Managed loans, not included in “Core Earnings” (net of tax)	$	14	$	23	$	6	$	205	$	55

Total Economic Floor Income earned, not included in “Core Earnings” (net of tax) per common share attributable to SLM Corporation common shareholders	$	.03	$	.05	$	.01	$	.43	$	.12

SLM CORPORATION

Consolidated Balance Sheets

(In thousands, except per share amounts)


	December 31,			September 30,			December 31,
	2009			2009			2008
	(unaudited)			(unaudited)			(unaudited)

Assets
FFELP Stafford and Other Student Loans (net of allowance for losses of $104,219; $101,343; and $90,906, respectively)	$	42,978,874		$	43,257,743		$	44,025,361
FFELP Stafford Loans Held-for-Sale		9,695,714			23,846,566			8,450,976
FFELP Consolidation Loans (net of allowance for losses of $56,949; $54,384; and $46,637, respectively)		68,378,560			69,246,231			71,743,435
Private Education Loans (net of allowance for losses of $1,443,440; $1,401,496; and $1,308,043, respectively)		22,753,462			22,494,955			20,582,298
Other loans (net of allowance for losses of $73,985; $74,057; and $58,395, respectively)		420,233			454,557			729,380
Cash and investments		8,083,841			7,021,808			5,111,407
Restricted cash and investments		5,168,871			5,760,583			3,535,286
Retained Interest in off-balance sheet securitized loans		1,828,075			1,838,203			2,200,298
Goodwill and acquired intangible assets, net		1,177,310			1,224,272			1,249,219
Other assets		9,500,358			11,299,006			11,140,777

Total assets	$	169,985,298		$	186,443,924		$	168,768,437

Liabilities
Short-term borrowings	$	39,698,227		$	53,406,554		$	41,933,043
Long-term borrowings		121,744,857			124,647,818			118,224,794
Other liabilities		3,263,592			3,400,527			3,604,260

Total liabilities		164,706,676			181,454,899			163,762,097

Commitments and contingencies
Equity
Preferred stock, par value $.20 per share, 20,000 shares authorized:
Series A: 3,300; 3,300; and 3,300 shares, respectively, issued at stated value of $50 per share		165,000			165,000			165,000
Series B: 4,000; 4,000; and 4,000 shares, respectively, issued at stated value of $100 per share		400,000			400,000			400,000
Series C: 7.25% mandatory convertible preferred stock: 810; 1,012; and 1,150 shares, respectively, issued at liquidation preference of $1,000 per share		810,370			1,012,370			1,149,770
Common stock, par value $.20 per share, 1,125,000 shares authorized:
552,220; 541,849; and 534,411 shares, respectively, issued		110,444			108,362			106,883
Additional paid-in capital		5,090,891			4,862,071			4,684,112
Accumulated other comprehensive loss, net of tax benefit		(40,825	)		(44,143	)		(76,476	)
Retained earnings		604,467			346,347			426,175

Total SLM Corporation stockholders’ equity before treasury stock		7,140,347			6,850,007			6,855,464
Common stock held in treasury: 67,222; 67,159; and 66,958 shares, respectively		1,861,738			1,860,989			1,856,394

Total SLM Corporation stockholders’ equity		5,278,609			4,989,018			4,999,070
Noncontrolling interest		13			7			7,270

Total equity		5,278,622			4,989,025			5,006,340

Total liabilities and equity	$	169,985,298		$	186,443,924		$	168,768,437

SLM CORPORATION

Consolidated Statements of Income

(In thousands, except per share amounts)


	Quarters ended									Years ended
	December 31,			September 30,			December 31,			December 31,			December 31,
	2009			2009			2008			2009			2008
	(unaudited)			(unaudited)			(unaudited)			(unaudited)			(unaudited)

Interest income:
FFELP Stafford and Other Student Loans	$	241,640		$	303,192		$	516,204		$	1,211,587		$	1,994,394
FFELP Consolidation Loans		450,551			481,592			741,806			1,882,195			3,178,692
Private Education Loans		406,115			396,339			439,137			1,582,514			1,737,554
Other loans		10,075			11,042			18,161			56,005			82,734
Cash and investments		6,168			6,881			24,773			26,064			276,264

Total interest income		1,114,549			1,199,046			1,740,081			4,758,365			7,269,638
Total interest expense		515,763			673,870			1,529,522			3,035,639			5,905,418

Net interest income		598,786			525,176			210,559			1,722,726			1,364,220
Less: provisions for loan losses		269,442			321,127			252,415			1,118,960			719,650

Net interest income (loss) after provisions for loan losses		329,344			204,049			(41,856	)		603,766			644,570

Other income (loss):
Servicing and securitization revenue		148,049			155,065			87,557			295,297			261,819
Gains (losses) on sales of loans and securities, net		271,084			12,452			(64,007	)		283,836			(186,155	)
Gains (losses) on derivative and hedging activities, net		(35,209	)		(111,556	)		(292,903	)		(604,535	)		(445,413	)
Contingency fee revenue		65,500			82,200			81,626			295,883			340,140
Collections revenue (loss)		(37,678	)		21,241			59,828			51,152			127,823
Guarantor servicing fees		28,695			48,087			26,199			135,562			121,363
Other		187,922			150,006			96,719			929,151			392,076

Total other income (loss)		628,363			357,495			(4,981	)		1,386,346			611,653

Expenses:
Restructuring expenses		4,169			2,492			5,748			13,767			83,516
Operating expenses		339,122			312,904			270,864			1,255,306			1,314,951

Total expenses		343,291			315,396			276,612			1,269,073			1,398,467

Income (loss) from continuing operations, before income tax expense (benefit)		614,416			246,148			(323,449	)		721,039			(142,244	)
Income tax expense (benefit)		206,568			80,423			(132,263	)		238,364			(76,769	)

Net income (loss) from continuing operations		407,848			165,725			(191,186	)		482,675			(65,475	)
Loss from discontinued operations, net of tax		(98,557	)		(6,417	)		(24,304	)		(157,690	)		(143,219	)

Net income (loss)		309,291			159,308			(215,490	)		324,985			(208,694	)
Less: net income attributable to noncontrolling interest		157			198			527			847			3,932

Net income (loss) attributable to SLM Corporation		309,134			159,110			(216,017	)		324,138			(212,626	)
Preferred stock dividends		51,014			42,627			27,316			145,836			111,206

Net income (loss) attributable to SLM Corporation common stock	$	258,120		$	116,483		$	(243,333	)	$	178,302		$	(323,832	)




Net income (loss) attributable to SLM Corporation:
Continuing operations, net of tax	$	407,691		$	165,527		$	(191,713	)	$	481,828		$	(69,407	)
Discontinued operations, net of tax		(98,557	)		(6,417	)		(24,304	)		(157,690	)		(143,219	)

Net income (loss) attributable to SLM Corporation	$	309,134		$	159,110		$	(216,017	)	$	324,138		$	(212,626	)

Basic earnings (loss) per common share attributable to SLM Corporation common shareholders:
Continuing operations	$	.74		$	.26		$	(.47	)	$	.71		$	(.39	)

Discontinued operations	$	(.20	)	$	(.01	)	$	(.05	)	$	(.33	)	$	(.30	)

Total	$	.54		$	.25		$	(.52	)	$	.38		$	(.69	)

Average common shares outstanding		479,459			470,280			466,692			470,858			466,642

Diluted earnings (loss) per common share attributable to SLM Corporation common shareholders:
Continuing operations	$	.71		$	.26		$	(.47	)	$	.71		$	(.39	)

Discontinued operations	$	(.19	)	$	(.01	)	$	(.05	)	$	(.33	)	$	(.30	)

Total	$	.52		$	.25		$	(.52	)	$	.38		$	(.69	)

Average common and common equivalent shares outstanding		521,740			471,058			466,692			471,584			466,642

Dividends per common share attributable to SLM Corporation common shareholders	$	—		$	—		$	—		$	—		$	—

SLM CORPORATION

Segment and “Core Earnings”

Consolidated Statements of Income

(In thousands)


	Quarter ended December 31, 2009
			Asset
			Performance			Corporate		Total “Core						Total
	Lending		Group			and Other		Earnings”			Adjustments			GAAP
	(unaudited)


Interest income:
FFELP Stafford and Other Student Loans	$	269,297	$	—		$	—	$	269,297		$	(27,657	)	$	241,640
FFELP Consolidation Loans		382,681		—			—		382,681			67,870			450,551
Private Education Loans		571,423		—			—		571,423			(165,308	)		406,115
Other loans		10,075		—			—		10,075			—			10,075
Cash and investments		1,052		—			5,477		6,529			(361	)		6,168

Total interest income		1,234,528		—			5,477		1,240,005			(125,456	)		1,114,549
Total interest expense		546,343		4,576			3,542		554,461			(38,698	)		515,763

Net interest income (loss)		688,185		(4,576	)		1,935		685,544			(86,758	)		598,786
Less: provisions for loan losses		365,211		—			—		365,211			(95,769	)		269,442

Net interest income (loss) after provisions for loan losses		322,974		(4,576	)		1,935		320,333			9,011			329,344

Contingency fee revenue		—		65,500			—		65,500			—			65,500
Collections revenue (loss)		—		(37,678	)		—		(37,678	)		—			(37,678	)
Guarantor servicing fees		—		—			28,695		28,695			—			28,695
Other income		383,093		—			63,017		446,110			125,736			571,846

Total other income		383,093		27,822			91,712		502,627			125,736			628,363

Restructuring expenses		3,334		331			504		4,169			—			4,169
Operating expenses		151,726		74,661			66,263		292,650			46,472			339,122

Total expenses		155,060		74,992			66,767		296,819			46,472			343,291

Income (loss) from continuing operations, before income tax expense (benefit)		551,007		(51,746	)		26,880		526,141			88,275			614,416
Income tax expense (benefit)⁽¹⁾		187,550		(17,237	)		8,638		178,951			27,617			206,568

Net income (loss) from continuing operations		363,457		(34,509	)		18,242		347,190			60,658			407,848
Loss from discontinued operations, net of tax		—		(98,250	)		—		(98,250	)		(307	)		(98,557	)

Net income (loss)		363,457		(132,759	)		18,242		248,940			60,351			309,291
Less: net income attributable to noncontrolling interest		—		157			—		157			—			157

Net income (loss) attributable to SLM Corporation	$	363,457	$	(132,916	)	$	18,242	$	248,783		$	60,351		$	309,134

Economic Floor Income (net of tax) not included in “Core Earnings”	$	14,111	$	—		$	—	$	14,111


⁽¹⁾		Income taxes are based on a percentage of net income before tax for the individual reportable segment.


Net income (loss) attributable to SLM Corporation:
Continuing operations, net of tax	$	363,457	$	(34,666	)	$	18,242	$	347,033		$	60,658		$	407,691
Discontinued operations, net of tax		—		(98,250	)		—		(98,250	)		(307	)		(98,557	)

Net income (loss) attributable to SLM Corporation	$	363,457	$	(132,916	)	$	18,242	$	248,783		$	60,351		$	309,134

SLM CORPORATION

Segment and “Core Earnings”

Consolidated Statements of Income

(In thousands)


	Quarter ended September 30, 2009
			Asset
			Performance			Corporate		Total “Core						Total
	Lending		Group			and Other		Earnings”			Adjustments			GAAP
	(unaudited)


Interest income:
FFELP Stafford and Other Student Loans	$	340,652	$	—		$	—	$	340,652		$	(37,460	)	$	303,192
FFELP Consolidation Loans		429,617		—			—		429,617			51,975			481,592
Private Education Loans		560,791		—			—		560,791			(164,452	)		396,339
Other loans		11,042		—			—		11,042			—			11,042
Cash and investments		2,337		—			5,156		7,493			(612	)		6,881

Total interest income		1,344,439		—			5,156		1,349,595			(150,549	)		1,199,046
Total interest expense		652,017		4,584			3,370		659,971			13,899			673,870

Net interest income (loss)		692,422		(4,584	)		1,786		689,624			(164,448	)		525,176
Less: provisions for loan losses		447,963		—			—		447,963			(126,836	)		321,127

Net interest income (loss) after provisions for loan losses		244,459		(4,584	)		1,786		241,661			(37,612	)		204,049

Contingency fee revenue		—		82,200			—		82,200			—			82,200
Collections revenue		—		21,241			—		21,241			—			21,241
Guarantor servicing fees		—		—			48,087		48,087			—			48,087
Other income		129,286		—			55,821		185,107			20,860			205,967

Total other income		129,286		103,441			103,908		336,635			20,860			357,495

Restructuring expenses		1,399		340			753		2,492			—			2,492
Operating expenses		154,165		74,309			74,739		303,213			9,691			312,904

Total expenses		155,564		74,649			75,492		305,705			9,691			315,396

Income (loss) from continuing operations, before income tax expense (benefit)		218,181		24,208			30,202		272,591			(26,443	)		246,148
Income tax expense (benefit)⁽¹⁾		80,514		10,423			11,161		102,098			(21,675	)		80,423

Net income from continuing operations		137,667		13,785			19,041		170,493			(4,768	)		165,725
Loss from discontinued operations, net of tax		—		(6,353	)		—		(6,353	)		(64	)		(6,417	)

Net income		137,667		7,432			19,041		164,140			(4,832	)		159,308
Less: net income attributable to noncontrolling interest		—		198			—		198			—			198

Net income attributable to SLM Corporation	$	137,667	$	7,234		$	19,041	$	163,942		$	(4,832	)	$	159,110

Economic Floor Income (net of tax) not included in “Core Earnings”	$	22,607	$	—		$	—	$	22,607


⁽¹⁾		Income taxes are based on a percentage of net income before tax for the individual reportable segment.


Net income attributable to SLM Corporation:
Continuing operations, net of tax	$	137,667	$	13,587		$	19,041	$	170,295		$	(4,768	)	$	165,527
Discontinued operations, net of tax		—		(6,353	)		—		(6,353	)		(64	)		(6,417	)

Net income attributable to SLM Corporation	$	137,667	$	7,234		$	19,041	$	163,942		$	(4,832	)	$	159,110

SLM CORPORATION

Segment and “Core Earnings”

Consolidated Statements of Income

(In thousands)


	Quarter ended December 31, 2008
			Asset
			Performance			Corporate		Total “Core						Total
	Lending		Group			and Other		Earnings”			Adjustments			GAAP
	(unaudited)


Interest income:
FFELP Stafford and Other Student Loans	$	586,206	$	—		$	—	$	586,206		$	(70,002	)	$	516,204
FFELP Consolidation Loans		856,267		—			—		856,267			(114,461	)		741,806
Private Education Loans		659,057		—			—		659,057			(219,920	)		439,137
Other loans		18,161		—			—		18,161			—			18,161
Cash and investments		20,606		—			7,032		27,638			(2,865	)		24,773

Total interest income		2,140,297		—			7,032		2,147,329			(407,248	)		1,740,081
Total interest expense		1,584,442		5,628			4,296		1,594,366			(64,844	)		1,529,522

Net interest income (loss)		555,855		(5,628	)		2,736		552,963			(342,404	)		210,559
Less: provisions for loan losses		392,211		—			—		392,211			(139,796	)		252,415

Net interest income (loss) after provisions for loan losses		163,644		(5,628	)		2,736		160,752			(202,608	)		(41,856	)
Contingency fee revenue		—		81,626			—		81,626			—			81,626
Collections revenue		—		58,607			—		58,607			1,221			59,828
Guarantor servicing fees		—		—			26,199		26,199			—			26,199
Other income (loss)		18,563		—			52,042		70,605			(243,239	)		(172,634	)

Total other income (loss)		18,563		140,233			78,241		237,037			(242,018	)		(4,981	)
Restructuring expenses		2,881		1,670			1,197		5,748			—			5,748
Operating expenses		123,355		93,602			43,232		260,189			10,675			270,864

Total expenses		126,236		95,272			44,429		265,937			10,675			276,612

Income (loss) from continuing operations, before income tax expense (benefit)		55,971		39,333			36,548		131,852			(455,301	)		(323,449	)
Income tax expense (benefit)⁽¹⁾		7,350		22,077			12,592		42,019			(174,282	)		(132,263	)

Net income (loss) from continuing operations		48,621		17,256			23,956		89,833			(281,019	)		(191,186	)
Loss from discontinued operations, net of tax		—		(24,294	)		—		(24,294	)		(10	)		(24,304	)

Net income (loss)		48,621		(7,038	)		23,956		65,539			(281,029	)		(215,490	)
Less: net income attributable to noncontrolling interest		—		527			—		527			—			527

Net income (loss) attributable to SLM Corporation	$	48,621	$	(7,565	)	$	23,956	$	65,012		$	(281,029	)	$	(216,017	)

Economic Floor Income (net of tax) not included in “Core Earnings”	$	5,502	$	—		$	—	$	5,502


⁽¹⁾		Income taxes are based on a percentage of net income before tax for the individual reportable segment.


Net income (loss) attributable to SLM Corporation
Continuing operations, net of tax	$	48,621	$	16,729		$	23,956	$	89,306		$	(281,019	)	$	(191,713	)
Discontinued operations, net of tax		—		(24,294	)		—		(24,294	)		(10	)		(24,304	)

Net income (loss) attributable to SLM Corporation	$	48,621	$	(7,565	)	$	23,956	$	65,012		$	(281,029	)	$	(216,017	)

SLM CORPORATION

Segment and “Core Earnings”

Consolidated Statements of Income

(In thousands)


	Year ended December 31, 2009
			Asset
			Performance			Corporate		Total “Core						Total
	Lending		Group			and Other		Earnings”			Adjustments			GAAP
	(unaudited)


Interest income:
FFELP Stafford and Other Student Loans	$	1,281,421	$	—		$	—	$	1,281,421		$	(69,834	)	$	1,211,587
FFELP Consolidation Loans		1,645,482		—			—		1,645,482			236,713			1,882,195
Private Education Loans		2,254,163		—			—		2,254,163			(671,649	)		1,582,514
Other loans		56,005		—			—		56,005			—			56,005
Cash and investments		9,251		—			20,080		29,331			(3,267	)		26,064

Total interest income		5,246,322		—			20,080		5,266,402			(508,037	)		4,758,365
Total interest expense		2,970,916		19,653			14,772		3,005,341			30,298			3,035,639

Net interest income (loss)		2,275,406		(19,653	)		5,308		2,261,061			(538,335	)		1,722,726
Less: provisions for loan losses		1,564,050		—			—		1,564,050			(445,090	)		1,118,960

Net interest income (loss) after provisions for loan losses		711,356		(19,653	)		5,308		697,011			(93,245	)		603,766

Contingency fee revenue		—		295,883			—		295,883			—			295,883
Collections revenue		—		50,463			—		50,463			689			51,152
Guarantor servicing fees		—		—			135,562		135,562			—			135,562
Other income		974,110		—			214,892		1,189,002			(285,253	)		903,749

Total other income		974,110		346,346			350,454		1,670,910			(284,564	)		1,386,346

Restructuring expenses		10,010		597			3,160		13,767			—			13,767
Operating expenses		581,239		315,292			283,167		1,179,698			75,608			1,255,306

Total expenses		591,249		315,889			286,327		1,193,465			75,608			1,269,073

Income (loss) from continuing operations, before income tax expense (benefit)		1,094,217		10,804			69,435		1,174,456			(453,417	)		721,039
Income tax expense (benefit)⁽¹⁾		388,228		6,504			24,635		419,367			(181,003	)		238,364

Net income (loss) from continuing operations		705,989		4,300			44,800		755,089			(272,414	)		482,675
Loss from discontinued operations, net of tax		—		(157,189	)		—		(157,189	)		(501	)		(157,690	)

Net income (loss)		705,989		(152,889	)		44,800		597,900			(272,915	)		324,985
Less: net income attributable to noncontrolling interest		—		847			—		847			—			847

Net income (loss) attributable to SLM Corporation	$	705,989	$	(153,736	)	$	44,800	$	597,053		$	(272,915	)	$	324,138

Economic Floor Income (net of tax) not included in “Core Earnings”	$	205,005	$	—		$	—	$	205,005


⁽¹⁾		Income taxes are based on a percentage of net income before tax for the individual reportable segment.


Net income (loss) attributable to SLM Corporation:
Continuing operations, net of tax	$	705,989	$	3,453		$	44,800	$	754,242		$	(272,414	)	$	481,828
Discontinued operations, net of tax		—		(157,189	)		—		(157,189	)		(501	)		(157,690	)

Net income (loss) attributable to SLM Corporation	$	705,989	$	(153,736	)	$	44,800	$	597,053		$	(272,915	)	$	324,138

SLM CORPORATION

Segment and “Core Earnings”

Consolidated Statements of Income

(In thousands)


	Year ended December 31, 2008
			Asset
			Performance			Corporate		Total “Core						Total
	Lending		Group			and Other		Earnings”			Adjustments			GAAP
	(unaudited)


Interest income:
FFELP Stafford and Other Student Loans	$	2,216,396	$	—		$	—	$	2,216,396		$	(222,002	)	$	1,994,394
FFELP Consolidation Loans		3,747,524		—			—		3,747,524			(568,832	)		3,178,692
Private Education Loans		2,752,123		—			—		2,752,123			(1,014,569	)		1,737,554
Other loans		82,734		—			—		82,734			—			82,734
Cash and investments		304,684		—			25,030		329,714			(53,450	)		276,264

Total interest income		9,103,461		—			25,030		9,128,491			(1,858,853	)		7,269,638
Total interest expense		6,664,856		25,385			19,044		6,709,285			(803,867	)		5,905,418

Net interest income (loss)		2,438,605		(25,385	)		5,986		2,419,206			(1,054,986	)		1,364,220
Less: provisions for loan losses		1,028,732		—			—		1,028,732			(309,082	)		719,650

Net interest income (loss) after provisions for loan losses		1,409,873		(25,385	)		5,986		1,390,474			(745,904	)		644,570
Contingency fee revenue		—		340,140			—		340,140			—			340,140
Collections revenue		—		128,879			—		128,879			(1,056	)		127,823
Guarantor servicing fees		—		—			121,363		121,363			—			121,363
Other income		180,121		—			198,931		379,052			(356,725	)		22,327

Total other income		180,121		469,019			320,294		969,434			(357,781	)		611,653
Restructuring expenses		49,142		11,297			23,077		83,516			—			83,516
Operating expenses		582,781		388,778			256,431		1,227,990			86,961			1,314,951

Total expenses		631,923		400,075			279,508		1,311,506			86,961			1,398,467

Income (loss) from continuing operations, before income tax expense (benefit)		958,071		43,559			46,772		1,048,402			(1,190,646	)		(142,244	)
Income tax expense (benefit)⁽¹⁾		338,774		23,280			16,538		378,592			(455,361	)		(76,769	)

Net income (loss) from continuing operations		619,297		20,279			30,234		669,810			(735,285	)		(65,475	)
Loss from discontinued operations, net of tax		—		(139,928	)		—		(139,928	)		(3,291	)		(143,219	)

Net income (loss)		619,297		(119,649	)		30,234		529,882			(738,576	)		(208,694	)
Less: net income attributable to noncontrolling interest		—		3,932			—		3,932			—			3,932

Net income (loss) attributable to SLM Corporation	$	619,297	$	(123,581	)	$	30,234	$	525,950		$	(738,576	)	$	(212,626	)

Economic Floor Income (net of tax) not included in “Core Earnings”	$	55,483	$	—		$	—	$	55,483


⁽¹⁾		Income taxes are based on a percentage of net income before tax for the individual reportable segment.


Net income (loss) attributable to SLM Corporation:
Continuing operations, net of tax	$	619,297	$	16,347		$	30,234	$	665,878		$	(735,285	)	$	(69,407	)
Discontinued operations, net of tax		—		(139,928	)		—		(139,928	)		(3,291	)		(143,219	)

Net income (loss) attributable to SLM Corporation	$	619,297	$	(123,581	)	$	30,234	$	525,950		$	(738,576	)	$	(212,626	)

SLM CORPORATION

Reconciliation of “Core Earnings” Net Income to GAAP Net Income

(In thousands, except per share amounts)


	Quarters ended									Years ended
	December 31,			September 30,			December 31,			December 31,			December 31,
	2009			2009			2008			2009			2008
	(unaudited)			(unaudited)			(unaudited)			(unaudited)			(unaudited)

“Core Earnings” net income attributable to SLM Corporation⁽¹⁾⁽²⁾	$	248,783		$	163,942		$	65,012		$	597,053		$	525,950
“Core Earnings” adjustments:
Net impact of securitization accounting		(4,094	)		27,885			31,583			(200,660	)		(442,190	)
Net impact of derivative accounting		171,068			(36,598	)		(441,631	)		(306,101	)		(560,381	)
Net impact of Floor Income		(32,222	)		(8,020	)		(34,949	)		128,803			(102,056	)
Net impact of acquired intangibles		(46,784	)		(9,774	)		(10,314	)		(75,960	)		(89,310	)

Total “Core Earnings” adjustments before income tax effect		87,968			(26,507	)		(455,311	)		(453,918	)		(1,193,937	)
Net tax effect		(27,617	)		21,675			174,282			181,003			455,361

Total “Core Earnings” adjustments		60,351			(4,832	)		(281,029	)		(272,915	)		(738,576	)

GAAP net income (loss) attributable to SLM Corporation	$	309,134		$	159,110		$	(216,017	)	$	324,138		$	(212,626	)

GAAP diluted earnings (loss) per common share attributable to SLM Corporation common shareholders	$	.52		$	.25		$	(.52	)	$	.38		$	(.69	)



⁽¹⁾ “Core Earnings” diluted earnings per common share attributable to SLM Corporation common shareholders	$	.41		$	.26		$	.08		$	.96		$	.89

⁽²⁾ Total Economic Floor Income earned on Managed loans, not included in “Core Earnings” (net of tax)	$	14,111		$	22,607		$	5,502		$	205,005		$	55,483

Total Economic Floor Income earned, not included in “Core Earnings” (net of tax) per common share attributable to SLM Corporation common shareholders	$	.03		$	.05		$	.01		$	.43		$	.12

FASB Accounting Standards Codification

The Company adopted, as of July 1, 2009, the Financial Accounting Standards Board’s (“FASB’s”) Accounting Standards Codification (“ASC”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with generally accepted accounting principles in the United States of America (“GAAP”). The ASC does not change authoritative guidance. Accordingly, implementing the ASC did not change any of the Company’s accounting, and therefore, did not have an impact on the consolidated results of the Company. References to authoritative GAAP literature have been updated accordingly.

“Core Earnings”

In accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”), we prepare financial statements in accordance with GAAP. In addition to evaluating the Company’s GAAP-based financial information, management evaluates the Company’s business segments on a basis that, as allowed under ASC 280, “Segment Reporting,” differs from GAAP. We refer to management’s basis of evaluating our segment results as “Core Earnings” presentations for each business segment and we refer to this information in

our presentations with credit rating agencies and lenders. While “Core Earnings” are not a substitute for reported results under GAAP, we rely on “Core Earnings” to manage each operating segment because we believe these measures provide additional information regarding the operational and performance indicators that are most closely assessed by management.

Our “Core Earnings” are not defined terms within GAAP and may not be comparable to similarly titled measures reported by other companies. “Core Earnings” net income reflects only current period adjustments to GAAP net income as described below. Unlike financial accounting, there is no comprehensive, authoritative guidance for management reporting and as a result, our management reporting is not necessarily comparable with similar information for any other financial institution. Our operating segments are defined by products and services or by types of customers, and reflect the manner in which financial information is currently evaluated by management. Intersegment revenues and expenses are netted within the appropriate financial statement line items consistent with the income statement presentation provided to management. Changes in management structure or allocation methodologies and procedures may result in changes in reported segment financial information.

Limitations of “Core Earnings”

While GAAP provides a uniform, comprehensive basis of accounting, for the reasons described above, management believes that “Core Earnings” are an important additional tool for providing a more complete understanding of the Company’s results of operations. Nevertheless, “Core Earnings” are subject to certain general and specific limitations that investors should carefully consider. For example, as stated above, unlike financial accounting, there is no comprehensive, authoritative guidance for management reporting. Our “Core Earnings” are not defined terms within GAAP and may not be comparable to similarly titled measures reported by other companies. Unlike GAAP, “Core Earnings” reflect only current period adjustments to GAAP. Accordingly, the Company’s “Core Earnings” presentation does not represent a comprehensive basis of accounting. Investors, therefore, may not compare our Company’s performance with that of other financial services companies based upon “Core Earnings.” “Core Earnings” results are only meant to supplement GAAP results by providing additional information regarding the operational and performance indicators that are most closely used by management, the Company’s board of directors, rating agencies and lenders to assess performance.

Other limitations arise from the specific adjustments that management makes to GAAP results to derive “Core Earnings” results. For example, in reversing the unrealized gains and losses that result from ASC 815, “Derivatives and Hedging,” on derivatives that do not qualify for “hedge treatment,” as well as on derivatives that do qualify but are in part ineffective because they are not perfect hedges, we focus on the long-term economic effectiveness of those instruments relative to the underlying hedged item and isolate the effects of interest rate volatility and changing credit spreads on the fair value of such instruments during the period. Under GAAP, the effects of these factors on the fair value of the derivative instruments (but not on the underlying hedged item) tend to show more volatility in the short term. While our presentation of our results on a “Core Earnings” basis provides important information regarding the performance of our Managed portfolio, a limitation of this presentation is that we are presenting the ongoing spread income on loans that have been sold to a trust managed by us. While we believe that our “Core Earnings” presentation presents the economic substance of our Managed loan portfolio, it understates earnings volatility from securitization gains. Our “Core Earnings” results exclude certain Floor Income, which is real cash income, from our reported results and therefore may understate earnings in certain periods. Management’s financial planning and valuation of operating results, however, does not take into account Floor Income because of its inherent uncertainty, except when it is Fixed Rate Floor Income that is economically hedged through Floor Income Contracts.

Pre-Tax Differences between “Core Earnings” and GAAP

Our “Core Earnings” are the primary financial performance measures used by management to evaluate performance and to allocate resources. Accordingly, financial information is reported to management on a “Core Earnings” basis by reportable segment, as these are the measures used regularly by our chief operating

decision makers. Our “Core Earnings” are used in developing our financial plans and tracking results, and also in establishing corporate performance targets and incentive compensation. Management believes this information provides additional insight into the financial performance of the Company’s core business activities. “Core Earnings” net income reflects only current period adjustments to GAAP net income, as described in the more detailed discussion of the differences between “Core Earnings” and GAAP that follows, which includes further detail on each specific adjustment required to reconcile our “Core Earnings” segment presentation to our GAAP earnings.


	1)	Securitization Accounting: Under GAAP, certain securitization transactions in our Lending operating segment are accounted for as sales of assets. Under “Core Earnings” for the Lending operating segment, we present all securitization transactions on a “Core Earnings” basis as long-term non-recourse financings. The upfront “gains” on sale from securitization transactions, as well as ongoing “servicing and securitization revenue” presented in accordance with GAAP, are excluded from “Core Earnings” and are replaced by interest income, provisions for loan losses, and interest expense as earned or incurred on the securitization loans. We also exclude transactions with our off-balance sheet trusts from “Core Earnings” as they are considered intercompany transactions on a “Core Earnings” basis.

	2)	Derivative Accounting: “Core Earnings” exclude periodic unrealized gains and losses that are caused primarily by the mark-to-market derivative valuations prescribed by ASC 815 on derivatives that do not qualify for “hedge treatment” under GAAP. These unrealized gains and losses occur in our Lending operating segment. In our “Core Earnings” presentation, we recognize the economic effect of these hedges, which generally results in any cash paid or received being recognized ratably as an expense or revenue over the hedged item’s life.

	3)	Floor Income: The timing and amount (if any) of Floor Income earned in our Lending operating segment is uncertain and in excess of expected spreads. Therefore, we only include such income in “Core Earnings” when it is Fixed Rate Floor Income that is economically hedged. We employ derivatives, primarily Floor Income Contracts and futures, to economically hedge Floor Income. As discussed above in “Derivative Accounting,” these derivatives do not qualify as effective accounting hedges, and therefore, under GAAP, they are marked-to-market through the “gains (losses) on derivative and hedging activities, net” line in the consolidated statement of income with no offsetting gain or loss recorded for the economically hedged items. For “Core Earnings,” we reverse the fair value adjustments on the Floor Income Contracts and futures economically hedging Floor Income and include in income the amortization of net premiums received on contracts economically hedging Fixed Rate Floor Income.

	4)	Acquired Intangibles: Our “Core Earnings” exclude goodwill and intangible impairment and the amortization of acquired intangibles.

Attached files

SLM Corp Reports

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