Attached files

file filename
EX-31.1 - EXHIBIT 31.1 - SLM Corpslm20180331ex311.htm
EX-32.2 - EXHIBIT 32.2 - SLM Corpslm20180331ex322.htm
EX-32.1 - EXHIBIT 32.1 - SLM Corpslm20180331ex321.htm
EX-31.2 - EXHIBIT 31.2 - SLM Corpslm20180331ex312.htm
EX-12.1 - EXHIBIT 12.1 - SLM Corpslm20180331ex121.htm
EX-10.4 - EXHIBIT 10.4 - SLM Corpslm20180331ex104.htm
EX-10.3 - EXHIBIT 10.3 - SLM Corpslm20180331ex103.htm
EX-10.2 - EXHIBIT 10.2 - SLM Corpslm20180331ex102.htm
EX-10.1 - EXHIBIT 10.1 - SLM Corpslm20180331ex101.htm



 
 
 
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 March 31, 2018
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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
  þ
 
Accelerated filer
  ¨ 
Non-accelerated filer
  ¨
(Do not check if a smaller reporting company)
Smaller reporting company
  ¨
Emerging growth company
  ¨
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨
Indicate by check mark whether the registrant 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 March 31, 2018
Common Stock, $0.20 par value
435,196,223 shares
 
 






SLM CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS
INDEX





2



SLM CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
 
 
 
March 31,
 
December 31,
 
 
2018
 
2017
Assets
 
 
 
 
Cash and cash equivalents
 
$
1,435,649

 
$
1,534,339

Available-for-sale investments at fair value (cost of $236,761 and $247,607, respectively)
 
229,114

 
244,088

Loans held for investment (net of allowance for losses of $272,123 and $251,475, respectively)
 
20,166,604

 
18,567,641

Restricted cash
 
120,084

 
101,836

Other interest-earning assets
 
31,637

 
21,586

Accrued interest receivable
 
1,063,449

 
967,482

Premises and equipment, net
 
97,211

 
89,748

Tax indemnification receivable
 
169,242

 
168,011

Other assets
 
93,332

 
84,853

Total assets
 
$
23,406,322

 
$
21,779,584

 
 
 
 
 
Liabilities
 
 
 
 
Deposits
 
$
16,498,646

 
$
15,505,383

Long-term borrowings
 
3,744,345

 
3,275,270

Income taxes payable, net
 
145,167

 
102,285

Upromise member accounts
 
233,015

 
243,080

Other liabilities
 
175,316

 
179,310

Total liabilities
 
20,796,489

 
19,305,328

 
 
 
 
 
Commitments and contingencies
 

 

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

 
400,000

Common stock, par value $0.20 per share, 1.125 billion shares authorized: 449.0 million and 443.5 million shares issued, respectively
 
89,805

 
88,693

Additional paid-in capital
 
1,252,609

 
1,222,277

Accumulated other comprehensive income (net of tax expense of $5,005 and $1,696, respectively)
 
15,601

 
2,748

Retained earnings
 
990,447

 
868,182

Total SLM Corporation stockholders’ equity before treasury stock
 
2,748,462

 
2,581,900

Less: Common stock held in treasury at cost: 13.8 million and 11.1 million shares, respectively
 
(138,629
)
 
(107,644
)
Total equity
 
2,609,833

 
2,474,256

Total liabilities and equity
 
$
23,406,322

 
$
21,779,584


See accompanying notes to consolidated financial statements.

3



SLM CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
 
 
 
Three Months Ended
 
 
 
March 31,
 
 
 
2018
 
2017
 
Interest income:
 
 
 
 
 
Loans
 
$
430,048

 
$
324,757

 
Investments
 
1,947

 
2,143

 
Cash and cash equivalents
 
5,236

 
2,588

 
Total interest income
 
437,231

 
329,488

 
Interest expense:
 
 
 
 
 
Deposits
 
77,456

 
44,853

 
Interest expense on short-term borrowings
 
2,393

 
1,236

 
Interest expense on long-term borrowings
 
24,768

 
15,323

 
Total interest expense
 
104,617

 
61,412

 
Net interest income
 
332,614

 
268,076

 
Less: provisions for credit losses
 
53,931

 
25,296

 
Net interest income after provisions for credit losses
 
278,683

 
242,780

 
Non-interest income:
 
 
 
 
 
Gains (losses) on derivatives and hedging activities, net
 
3,892

 
(5,378
)
 
Other income
 
9,642

 
11,346

 
Total non-interest income
 
13,534

 
5,968

 
Non-interest expenses:
 
 
 
 
 
Compensation and benefits
 
68,317

 
55,464

 
FDIC assessment fees
 
8,796

 
7,229

 
Other operating expenses
 
47,761

 
39,984

 
Total operating expenses
 
124,874

 
102,677

 
Acquired intangible asset amortization expense
 
92

 
117

 
Total non-interest expenses
 
124,966

 
102,794

 
Income before income tax expense
 
167,251

 
145,954

 
Income tax expense
 
40,997

 
51,011

 
Net income
 
126,254

 
94,943

 
Preferred stock dividends
 
3,397

 
5,575

 
Net income attributable to SLM Corporation common stock
 
$
122,857

 
$
89,368

 
Basic earnings per common share attributable to SLM Corporation
 
$
0.28

 
$
0.21

 
Average common shares outstanding
 
433,952

 
429,891

 
Diluted earnings per common share attributable to SLM Corporation
 
$
0.28

 
$
0.20

 
Average common and common equivalent shares outstanding
 
438,977

 
438,735

 




See accompanying notes to consolidated financial statements.

4



SLM CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
 
 
 
Three Months Ended
 
 
March 31,
 
 
2018
 
2017
Net income
 
$
126,254

 
$
94,943

Other comprehensive income (loss):
 
 
 
 
Unrealized losses on investments
 
(4,127
)
 
(1,567
)
Unrealized gains on cash flow hedges
 
20,290

 
4,779

Total unrealized gains
 
16,163

 
3,212

Income tax expense
 
(3,902
)
 
(1,232
)
Other comprehensive income, net of tax expense
 
12,261

 
1,980

Total comprehensive income
 
$
138,515

 
$
96,923


















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
Loss
 
Retained Earnings
 
Treasury Stock
 
Total Equity
Balance at December 31, 2016
 
7,300,000

 
436,632,479

 
(7,728,920
)
 
428,903,559

 
$
565,000

 
$
87,327

 
$
1,175,564

 
$
(8,671
)
 
$
595,322

 
$
(67,484
)
 
$
2,347,058

Net income
 

 

 

 

 

 

 

 

 
94,943

 

 
94,943

Other comprehensive income, net of tax
 

 

 

 

 

 

 

 
1,980

 

 

 
1,980

Total comprehensive income
 

 

 

 

 

 

 

 

 

 

 
96,923

Cumulative effect of the adoption of the new stock compensation standard amendment
 

 

 

 

 

 

 
594

 

 
(429
)
 

 
165

Cash dividends:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Preferred Stock, Series A ($0.87 per share)
 

 

 

 

 

 

 

 

 
(2,875
)
 

 
(2,875
)
Preferred Stock, Series B ($0.67 per share)
 

 

 

 

 

 

 

 

 
(2,700
)
 

 
(2,700
)
Dividend equivalent units related to employee stock-based compensation plans
 

 

 

 

 

 

 
96

 

 
(96
)
 

 

Issuance of common shares
 

 
3,738,717

 

 
3,738,717

 

 
748

 
5,787

 

 

 

 
6,535

Tax benefit related to employee stock-based compensation
 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense
 

 

 

 

 

 

 
9,425

 

 

 

 
9,425

Shares repurchased related to employee stock-based compensation plans
 

 

 
(1,603,487
)
 
(1,603,487
)
 

 

 

 

 

 
(19,175
)
 
(19,175
)
Balance at March 31, 2017
 
7,300,000

 
440,371,196

 
(9,332,407
)
 
431,038,789

 
$
565,000

 
$
88,075

 
$
1,191,466

 
$
(6,691
)
 
$
684,165

 
$
(86,659
)
 
$
2,435,356









See accompanying notes to consolidated financial statements.

6




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
 
Retained Earnings
 
Treasury Stock
 
Total Equity
Balance at December 31, 2017
 
4,000,000

 
443,463,587

 
(11,087,337
)
 
432,376,250

 
$
400,000

 
$
88,693

 
$
1,222,277

 
$
2,748

 
$
868,182

 
$
(107,644
)
 
$
2,474,256

Net income
 

 

 

 

 

 

 

 

 
126,254

 

 
126,254

Other comprehensive income, net of tax
 

 

 

 

 

 

 

 
12,261

 

 

 
12,261

Total comprehensive income
 

 

 

 

 

 

 

 

 

 

 
138,515

Reclassification resulting from the adoption of ASU No. 2018-02
 

 

 

 

 

 

 

 
592

 
(592
)
 

 

Cash dividends:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Preferred Stock, Series B ($0.83 per share)
 

 

 

 

 

 

 

 

 
(3,397
)
 

 
(3,397
)
Issuance of common shares
 

 
5,559,991

 

 
5,559,991

 

 
1,112

 
15,587

 

 

 

 
16,699

Stock-based compensation expense
 

 

 

 

 

 

 
14,745

 

 

 

 
14,745

Shares repurchased related to employee stock-based compensation plans
 

 

 
(2,740,018
)
 
(2,740,018
)
 

 

 

 

 

 
(30,985
)
 
(30,985
)
Balance at March 31, 2018
 
4,000,000

 
449,023,578

 
(13,827,355
)
 
435,196,223

 
$
400,000

 
$
89,805

 
$
1,252,609

 
$
15,601

 
$
990,447

 
$
(138,629
)
 
$
2,609,833
















See accompanying notes to consolidated financial statements.

7



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

 
 
Three Months Ended
 
 
March 31,
 
 
2018
 
2017
Operating activities
 
 
 
 
Net income
 
$
126,254

 
$
94,943

Adjustments to reconcile net income to net cash (used in) provided by operating activities:
 
 
 
 
Provisions for credit losses
 
53,931

 
25,296

Income tax expense
 
40,997

 
51,011

Amortization of brokered deposit placement fee
 
2,789

 
2,130

Amortization of ABCP Facility upfront fee
 
301

 
352

Amortization of deferred loan origination costs and loan premium/(discounts), net
 
2,607

 
1,777

Net amortization of discount on investments
 
475

 
452

Income on tax indemnification receivable
 
(1,231
)
 
(1,501
)
Depreciation of premises and equipment
 
3,117

 
2,585

Amortization of acquired intangibles
 
92

 
117

Stock-based compensation expense
 
14,745

 
9,425

Unrealized (gains) losses on derivatives and hedging activities, net
 
(3,879
)
 
5,364

Other adjustments to net income, net
 
1,763

 
1,258

Changes in operating assets and liabilities:
 
 
 
 
Increase in accrued interest receivable
 
(201,776
)
 
(153,055
)
Increase in other interest-earning assets
 
(10,051
)
 
(1,228
)
Increase in other assets
 
(35,716
)
 
(13,435
)
Decrease in income taxes payable, net
 
(1,159
)
 
(1,689
)
Increase in accrued interest payable
 
11,034

 
6,146

Increase in payable due to entity that is a subsidiary of Navient
 
422

 
227

Decrease in other liabilities
 
(18,873
)
 
(39,424
)
Total adjustments
 
(140,412
)
 
(104,192
)
Total net cash used in operating activities
 
(14,158
)
 
(9,249
)
Investing activities
 
 
 
 
Loans acquired and originated
 
(2,300,135
)
 
(1,892,697
)
Net proceeds from sales of loans held for investment
 
820

 
1,972

Proceeds from claim payments
 
12,084

 
11,932

Net decrease in loans held for investment
 
735,894

 
506,637

Purchases of available-for-sale securities
 

 
(18,481
)
Proceeds from sales and maturities of available-for-sale securities
 
10,371

 
8,170

Total net cash used in investing activities
 
(1,540,966
)
 
(1,382,467
)
Financing activities
 
 
 
 
Brokered deposit placement fee
 
(7,055
)
 
(2,084
)
Net increase (decrease) in certificates of deposit
 
694,982

 
(151,003
)
Net increase in other deposits
 
323,614

 
83,018

Borrowings collateralized by loans in securitization trusts - issued
 
667,848

 
767,994

Borrowings collateralized by loans in securitization trusts - repaid
 
(200,247
)
 
(99,884
)
Issuance costs for unsecured debt offering
 

 
(23
)
Borrowings under ABCP Facility
 
300,000

 

Repayment of borrowings under ABCP Facility
 
(300,000
)
 

Fees paid on ABCP Facility
 
(1,063
)
 
(1,515
)
Preferred stock dividends paid
 
(3,397
)
 
(5,575
)
Net cash provided by financing activities
 
1,474,682

 
590,928

Net decrease in cash, cash equivalents and restricted cash
 
(80,442
)
 
(800,788
)
Cash, cash equivalents and restricted cash at beginning of period
 
1,636,175

 
1,972,510


8



Cash, cash equivalents and restricted cash at end of period
 
$
1,555,733

 
$
1,171,722

Cash disbursements made for:
 
 
 
 
Interest
 
$
94,737

 
$
54,648

Income taxes paid
 
$
1,894

 
$
1,426

Income taxes refunded
 
$
(990
)
 
$
(32
)
Reconciliation of the Consolidated Statements of Cash Flows to the Consolidated Balance Sheets
 
 
 
 
Cash and cash equivalents
 
$
1,435,649

 
$
1,077,576

Restricted cash
 
120,084

 
94,146

Total cash, cash equivalents and restricted cash
 
$
1,555,733

 
$
1,171,722

See accompanying notes to consolidated financial statements.

9




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 (“Sallie Mae,” “SLM,” the “Company,” “we,” or “us”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information. Accordingly, they do not include all the information and footnotes required by GAAP for complete consolidated financial statements. The consolidated financial statements include the accounts of SLM Corporation and its majority-owned and controlled subsidiaries after eliminating the effects of intercompany accounts and transactions. In the opinion of management, all adjustments considered necessary for a fair statement of the results for the interim periods have been included. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Operating results for the three months ended March 31, 2018 are not necessarily indicative of the results for the year ending December 31, 2018 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, 2017 (the “2017 Form 10-K”).
Consolidation
The consolidated financial statements include the accounts of the Company and its majority-owned and controlled subsidiaries after eliminating the effects of intercompany accounts and transactions.
We consolidate any variable interest entity (“VIE”) where we have determined we are the primary beneficiary. The primary beneficiary is the entity which has both: (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (2) the obligation to absorb losses or receive benefits of the entity that could potentially be significant to the VIE.
Recently Issued and Adopted Accounting Pronouncements
In November 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash.” Whereas restricted cash balances have traditionally been excluded from the statement of cash flows, this ASU requires restricted cash and restricted cash equivalents to be included within the beginning and ending totals of cash, cash equivalents and restricted cash presented on the statement of cash flows for all periods presented. Restricted cash and restricted cash equivalent inflows and outflows with external parties are required to be classified within the operating, investing, and/or financing activity sections of the statement of cash flows, whereas transfers between cash and cash equivalents and restricted cash and restricted cash equivalents should no longer be presented on the statement of cash flows. ASU No. 2016-18 also requires (a) the nature of the restrictions to be disclosed to help provide information about the sources and uses of these balances during a reporting period and (b) a reconciliation of the cash, cash equivalents and restricted cash totals on the statement of cash flows to the related balance sheet line items when cash, cash equivalents, and restricted cash are presented in more than one line item on the balance sheet. The reconciliation can be presented either on the face of the statement of cash flows or in the notes to the financial statements and must be provided for each period that a balance sheet is presented. We adopted the new accounting pronouncement on January 1, 2018, and the adoption did not have a material impact to our statement of cash flows.
In February 2018, the FASB issued ASU No. 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the tax law and tax rate changes under the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) enacted on December 22, 2017. Under the Tax Act, deferred taxes were adjusted to reflect the reduction of the historical corporate income tax rate to the newly enacted corporate income tax rate, which left the tax effects on items within accumulated other comprehensive income stranded at an

10




SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
1.
Significant Accounting Policies (Continued)
 


inappropriate tax rate. This guidance is effective for fiscal years beginning after December 15, 2018, and for interim periods within those fiscal years, with early adoption permitted. We adopted this standard effective January 1, 2018 and recorded a $0.6 million reclass from accumulated other comprehensive income to retained earnings in the first quarter of 2018.

2. Loans Held for Investment
Loans held for investment consist of Private Education Loans, FFELP Loans and Personal Loans. We use “Private Education Loans” to mean education loans to students or their families that are not made, insured or guaranteed by any state or federal government. Private Education Loans do not include loans insured or guaranteed under the previously existing Federal Family Education Loan Program (“FFELP”). We use “Personal Loans” to mean those unsecured loans to individuals that may be used for non-educational purposes. We began to opportunistically acquire Personal Loans in the fourth quarter of 2016.
Our Private Education Loans are made largely to bridge the gap between the cost of higher education and the amount funded through financial aid, government loans and customers’ resources. Private Education Loans bear the full credit risk of the customer. We manage this risk through risk-performance underwriting strategies and qualified cosigners. Private Education Loans may be fixed rate or may carry a variable interest rate indexed to LIBOR. As of March 31, 2018 and December 31, 2017, 74 percent and 77 percent, respectively, of all of our Private Education Loans were indexed to LIBOR. We provide incentives for customers to include a cosigner on the loan, and the vast majority of loans in our portfolio are cosigned. We also encourage customers to make payments while in school.
FFELP Loans are insured as to their principal and accrued interest in the event of default, subject to a risk-sharing level based on the date of loan disbursement. These insurance obligations are supported by contractual rights against the United States. For loans disbursed on or after July 1, 2006, we receive 97 percent reimbursement on all qualifying claims. For loans disbursed after October 1, 1993, and before July 1, 2006, we receive 98 percent reimbursement on all qualifying claims. For loans disbursed prior to October 1, 1993, we receive 100 percent reimbursement on all qualifying claims.

11




SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
2.
Loans Held for Investment (Continued)
 

Loans held for investment are summarized as follows:
 
 
March 31,
 
December 31,
 
 
2018
 
2017
Private Education Loans
 
$
18,794,012

 
$
17,432,167

Deferred origination costs and unamortized premium/(discount)
 
58,814

 
56,378

Allowance for loan losses
 
(252,103
)
 
(243,715
)
Total Private Education Loans, net
 
18,600,723

 
17,244,830

 
 
 
 
 
FFELP Loans
 
907,842

 
927,660

Deferred origination costs and unamortized premium/(discount)
 
2,566

 
2,631

Allowance for loan losses
 
(1,113
)
 
(1,132
)
Total FFELP Loans, net
 
909,295

 
929,159

 
 
 
 
 
Personal Loans
 
675,656

 
400,280

Deferred origination costs and unamortized premium/(discount)
 
(163
)
 

Allowance for loan losses
 
(18,907
)
 
(6,628
)
Total Personal Loans, net
 
656,586

 
393,652

 
 
 
 
 
Loans held for investment, net
 
$
20,166,604

 
$
18,567,641


 
The estimated weighted average life of education loans in our portfolio was approximately 5.4 years and 5.5 years at March 31, 2018 and December 31, 2017, respectively.

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


 
 
Three Months Ended
 
 
March 31,
 
 
2018
 
2017
 
 
Average Balance
 
Weighted Average Interest Rate
 
Average Balance
 
Weighted Average Interest Rate
Private Education Loans
 
$
18,659,717

 
8.84
%
 
$
15,449,555

 
8.26
%
FFELP Loans
 
919,717

 
4.25

 
1,003,128

 
3.69

Personal Loans
 
528,644

 
10.64

 
35,830

 
9.16

Total portfolio
 
$
20,108,078

 
 
 
$
16,488,513

 
 

12




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

3. Allowance for Loan Losses
Our provision for credit 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 March 31, 2018
 
 
FFELP
Loans
 
Private Education
Loans
 
Personal
Loans
 
Total
Allowance for Loan Losses
 
 
 
 
 
 
 
 
Beginning balance
 
$
1,132

 
$
243,715

 
$
6,628

 
$
251,475

Total provision
 
231

 
41,870

 
13,448

 
55,549

Net charge-offs:
 


 


 


 


Charge-offs
 
(250
)
 
(37,353
)
 
(1,200
)
 
(38,803
)
Recoveries
 

 
5,087

 
31

 
5,118

Net charge-offs
 
(250
)
 
(32,266
)
 
(1,169
)
 
(33,685
)
Loan sales(1)
 

 
(1,216
)
 

 
(1,216
)
Ending Balance
 
$
1,113

 
$
252,103

 
$
18,907

 
$
272,123

Allowance:
 

 

 

 

Ending balance: individually evaluated for impairment
 
$

 
$
101,824

 
$

 
$
101,824

Ending balance: collectively evaluated for impairment
 
$
1,113

 
$
150,279

 
$
18,907

 
$
170,299

Loans:
 

 

 

 

Ending balance: individually evaluated for impairment
 
$

 
$
1,043,103

 
$

 
$
1,043,103

Ending balance: collectively evaluated for impairment
 
$
907,842

 
$
17,750,909

 
$
675,656

 
$
19,334,407

Net charge-offs as a percentage of average loans in repayment (annualized)(2)
 
0.14
%
 
1.01
%
 
0.88
%
 

Allowance as a percentage of the ending total loan balance
 
0.12
%
 
1.34
%
 
2.80
%
 

Allowance as a percentage of the ending loans in repayment(2)
 
0.16
%
 
1.95
%
 
2.80
%
 

Allowance coverage of net charge-offs (annualized)
 
1.11

 
1.95

 
4.04

 

Ending total loans, gross
 
$
907,842

 
$
18,794,012

 
$
675,656

 

Average loans in repayment(2)
 
$
718,311

 
$
12,747,929

 
$
531,889

 

Ending loans in repayment(2)
 
$
702,965

 
$
12,958,742

 
$
675,656

 

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

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
 
 
Three Months Ended March 31, 2017
 
 
FFELP
Loans
 
Private Education
Loans
 
Personal
Loans
 
Total
Allowance for Loan Losses
 
 
 
 
 
 
 
 
Beginning balance
 
$
2,171

 
$
182,472

 
$
58

 
$
184,701

Total provision
 
(316
)
 
26,820

 
288

 
26,792

Net charge-offs:
 
 
 
 
 
 
 
 
Charge-offs
 
(218
)
 
(26,227
)
 

 
(26,445
)
Recoveries
 

 
3,259

 

 
3,259

Net charge-offs
 
(218
)
 
(22,968
)
 

 
(23,186
)
Loan sales(1)
 

 
(1,221
)
 

 
(1,221
)
Ending Balance
 
$
1,637

 
$
185,103

 
$
346

 
$
187,086

Allowance:
 
 
 
 
 
 
 
 
Ending balance: individually evaluated for impairment
 
$

 
$
87,150

 
$

 
$
87,150

Ending balance: collectively evaluated for impairment
 
$
1,637

 
$
97,953

 
$
346

 
$
99,936

Loans:
 
 
 
 
 
 
 
 
Ending balance: individually evaluated for impairment
 
$

 
$
701,860

 
$

 
$
701,860

Ending balance: collectively evaluated for impairment
 
$
989,393

 
$
14,952,994

 
$
55,502

 
$
15,997,889

Net charge-offs as a percentage of average loans in repayment (annualized)(2)
 
0.11
%
 
0.89
%
 
%
 
 
Allowance as a percentage of the ending total loan balance
 
0.17
%
 
1.18
%
 
0.62
%
 
 
Allowance as a percentage of the ending loans in repayment(2)
 
0.22
%
 
1.76
%
 
0.62
%
 
 
Allowance coverage of net charge-offs (annualized)
 
1.88

 
2.01

 

 
 
Ending total loans, gross
 
$
989,393

 
$
15,654,854

 
$
55,502

 
 
Average loans in repayment(2)
 
$
771,435

 
$
10,265,530

 
$
35,830

 
 
Ending loans in repayment(2)
 
$
757,052

 
$
10,526,782

 
$
55,502

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

    

14




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. 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. Once a loan qualifies for TDR status, it remains a TDR for allowance purposes for the remainder of its life. As of March 31, 2018 and December 31, 2017, approximately 62 percent and 66 percent, respectively, of TDRs were classified as such due to their forbearance status. For additional information, see Note 6, “Allowance for Loan Losses” in our 2017 Form 10-K.
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 continue to accrue interest on those loans through the date of claim.
At March 31, 2018 and December 31, 2017, all 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
 
 
 
 
 
 
 
March 31, 2018
 
 
 
 
 
 
TDR Loans
 
$
1,061,046

 
$
1,043,103

 
$
101,824

 
 
 
 
 
 
 
December 31, 2017
 
 
 
 
 
 
TDR Loans
 
$
1,007,141

 
$
990,351

 
$
94,682


The following table provides the average recorded investment and interest income recognized for our TDR loans.
 
 
Three Months Ended 
 March 31,
 
 
2018
 
2017
 
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
 
 
 
 
 
 
 
 
TDR Loans
 
$
1,032,232

 
$
17,847

 
$
669,606

 
$
12,257


    






15




SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
3.
Allowance for Loan Losses (Continued)
 

The following table provides information regarding the loan status and aging of TDR loans.

 
 
March 31,
 
December 31,
 
 
2018
 
2017
 
 
Balance
 
%
 
Balance
 
%
TDR loans in in-school/grace/deferment(1)
 
$
58,939

 
 
 
$
51,745

 
 
TDR loans in forbearance(2)
 
65,036

 
 
 
69,652

 
 
TDR loans in repayment(3) and percentage of each status:
 
 
 
 
 
 
 
 
Loans current
 
823,813

 
89.7
%
 
774,222

 
89.1
%
Loans delinquent 31-60 days(4)
 
47,127

 
5.1

 
48,377

 
5.6

Loans delinquent 61-90 days(4)
 
31,463

 
3.4

 
28,778

 
3.3

Loans delinquent greater than 90 days(4)
 
16,725

 
1.8

 
17,577

 
2.0

Total TDR loans in repayment
 
919,128

 
100.0
%
 
868,954

 
100.0
%
Total TDR loans, gross
 
$
1,043,103

 
 
 
$
990,351

 
 
_____
(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) 
Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period.
(4) 
The period of delinquency is based on the number of days scheduled payments are contractually past due.


16




SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
3.
Allowance for Loan Losses (Continued)
 


The following table provides the amount of modified loans (which include 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 more than 60 days past due for this disclosure.

 
 
Three Months Ended 
 March 31, 2018
 
Three Months Ended 
 March 31, 2017
 
 
Modified Loans(1)
 
Charge-offs
 
Payment-
Default
 
Modified Loans(1)
 
Charge-offs
 
Payment-
Default
 
 
 
 
 
 
 
 
 
 
 
 
 
TDR Loans
 
$
84,174

 
$
15,460

 
$
29,757

 
$
112,206

 
$
10,523

 
$
25,526


_____
(1) 
Represents the principal balance of loans that have been modified during the period and resulted in a TDR.



17




SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
3.
Allowance for Loan Losses (Continued)
 


Private Education Loan Key Credit Quality Indicators
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.
For Private Education Loans, the key credit quality indicators are FICO scores, the existence of a cosigner, the loan status and loan seasoning. The FICO scores are assessed at original approval 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
 
 
March 31, 2018
 
December 31, 2017
Credit Quality Indicators:
 
Balance(1)
 
% of Balance
 
Balance(1)
 
% of Balance
 
 
 
 
 
 
 
 
 
Cosigners:
 
 
 
 
 
 
 
 
With cosigner
 
$
16,889,477

 
90
%
 
$
15,658,539

 
90
%
Without cosigner
 
1,904,535

 
10

 
1,773,628

 
10

Total
 
$
18,794,012

 
100
%
 
$
17,432,167

 
100
%
 
 
 
 
 
 
 
 
 
FICO at Original Approval(2):
 
 
 
 
 
 
 
 
Less than 670
 
$
1,257,596

 
6
%
 
$
1,153,591

 
6
%
670-699
 
2,810,526

 
15

 
2,596,959

 
15

700-749
 
6,168,342

 
33

 
5,714,554

 
33

Greater than or equal to 750
 
8,557,548

 
46

 
7,967,063

 
46

Total
 
$
18,794,012

 
100
%
 
$
17,432,167

 
100
%
 
 
 
 
 
 
 
 
 
Seasoning(3):
 
 
 
 
 
 
 
 
1-12 payments
 
$
4,754,416

 
25
%
 
$
4,256,592

 
24
%
13-24 payments
 
3,256,637

 
17

 
3,229,465

 
19

25-36 payments
 
2,492,490

 
13

 
2,429,238

 
14

37-48 payments
 
1,583,375

 
9

 
1,502,327

 
9

More than 48 payments
 
1,337,110

 
7

 
1,256,813

 
7

Not yet in repayment
 
5,369,984

 
29

 
4,757,732

 
27

Total
 
$
18,794,012

 
100
%
 
$
17,432,167

 
100
%
(1) 
Balance represents gross Private Education Loans.
(2) 
Represents the higher credit score of the cosigner or the borrower.
(3) 
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.

18




SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
3.
Allowance for Loan Losses (Continued)
 


 The following table provides information regarding the loan status of our Private Education Loans. Loans in repayment include loans making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period.

 
 
Private Education Loans
 
 
March 31,
 
December 31,
 
 
2018
 
2017
 
 
Balance
 
%
 
Balance
 
%
Loans in-school/grace/deferment(1)
 
$
5,369,984

 
 
 
$
4,757,732

 
 
Loans in forbearance(2)
 
465,286

 
 
 
468,402

 
 
Loans in repayment and percentage of each status:
 
 
 
 
 
 
 
 
Loans current
 
12,635,627

 
97.5
%
 
11,911,128

 
97.6
%
Loans delinquent 31-60 days(3)
 
179,989

 
1.4

 
179,002

 
1.5

Loans delinquent 61-90 days(3)
 
95,974

 
0.7

 
78,292

 
0.6

Loans delinquent greater than 90 days(3)
 
47,152

 
0.4

 
37,611

 
0.3

Total Private Education Loans in repayment
 
12,958,742

 
100.0
%
 
12,206,033

 
100.0
%
Total Private Education Loans, gross
 
18,794,012

 
 
 
17,432,167

 
 
Private Education Loans deferred origination costs and unamortized premium/(discount)
 
58,814

 
 
 
56,378

 
 
Total Private Education Loans
 
18,852,826

 
 
 
17,488,545

 
 
Private Education Loans allowance for losses
 
(252,103
)
 
 
 
(243,715
)
 
 
Private Education Loans, net
 
$
18,600,723

 
 
 
$
17,244,830

 
 
Percentage of Private Education Loans in repayment
 
 
 
69.0
%
 
 
 
70.0
%
Delinquencies as a percentage of Private Education Loans in repayment
 
 
 
2.5
%
 
 
 
2.4
%
Loans in forbearance as a percentage of Private Education Loans in repayment and forbearance
 
 
 
3.5
%
 
 
 
3.7
%
(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.


19




SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
3.
Allowance for Loan Losses (Continued)
 

Personal Loan Key Credit Quality Indicators
For Personal Loans, the key credit quality indicators are FICO scores and loan seasoning. The FICO scores are assessed at original approval and periodically refreshed/updated through the loan’s term. The following table highlights the gross principal balance of our Personal Loan portfolio stratified by key credit quality indicators.

 
 
Personal Loans
 
 
Credit Quality Indicators
 
 
March 31, 2018
 
December 31, 2017
Credit Quality Indicators:
 
Balance(1)
 
% of Balance
 
Balance(1)
 
% of Balance
 
 
 
 
 
 
 
 
 
FICO at Original Approval:
 
 
 
 
 
 
 
 
Less than 670
 
$
52,417

 
8
%
 
$
32,156

 
8
%
670-699
 
193,246

 
29

 
114,731

 
29

700-749
 
307,539

 
45

 
182,025

 
45

Greater than or equal to 750
 
122,454

 
18

 
71,368

 
18

Total
 
$
675,656

 
100
%
 
$
400,280

 
100
%
 
 
 
 
 
 
 
 
 
Seasoning(2):
 
 
 
 
 
 
 
 
0-12 payments
 
$
649,996

 
96
%
 
$
400,280

 
100
%
13-24 payments
 
25,660

 
4

 

 

25-36 payments
 

 

 

 

37-48 payments
 

 

 

 

More than 48 payments
 

 

 

 

Total
 
$
675,656

 
100
%
 
$
400,280

 
100
%
(1) 
Balance represents gross Personal Loans.
(2) 
Number of months in active repayment for which a scheduled payment was 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 Private Education Loan portfolio for all periods presented.
 
 
Private Education Loans
 
 
Accrued Interest Receivable
 
 
Total Interest Receivable
 
Greater Than 90 Days Past Due
 
Allowance for Uncollectible Interest
 
 
 
 
 
 
 
March 31, 2018
 
$
1,045,577

 
$
1,783

 
$
4,694

December 31, 2017
 
$
951,138

 
$
1,372

 
$
4,664




 



21




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

4. Deposits

The following table summarizes total deposits at March 31, 2018 and December 31, 2017.
 
 
March 31,
 
December 31,