NEWARK, Del., Oct. 17, 2012-Sallie Mae (NASDAQ: SLM),
formally SLM Corporation, today released
third-quarter 2012 financial results that included
increased private education loan originations and lower
operating expenses compared with the year-ago quarter.
"The quarter further confirms the rebound of our private
credit business," said Albert L. Lord, vice chairman and
CEO. "While our balance sheet and earnings quality grow, so
do our future prospects."
For the third-quarter 2012, GAAP net income was $188
million ($.39 diluted earnings per share), compared with
net loss of $47 million ($.10 diluted loss per share) for
the year-ago quarter.
Core earnings for the quarter were $277 million ($.58
diluted earnings per share), compared with $188 million
($.36 diluted earnings per share) in the year-ago quarter.
Earnings improvement was primarily due to a $139 million
lower loan loss provision largely attributable to the
adoption of new accounting guidance for troubled debt
restructurings (TDRs) in the year-ago quarter. Also, debt
repurchase gains were $44 million higher and operating
expenses were $41 million lower. Net interest income was
$40 million lower primarily due to higher funding costs
which were partly due to refinancing debt into longer-term
liabilities and lower federally guaranteed student loan
Sallie Mae provides results on a core earnings basis
because management utilizes this information in making
management decisions. The changes in GAAP net income are
driven by the same core earnings items discussed above as
well as changes in mark-to-market unrealized gains and
losses on derivative contracts and amortization and
impairment of goodwill and intangible assets that are
recognized in GAAP, but not in core earnings, results.
Third-quarter 2012 and 2011 GAAP results included losses of
$140 million and $371 million, respectively, resulting from
derivative accounting treatment which is excluded from core
In the consumer lending segment, Sallie Mae originates,
finances and services private education loans.
Quarterly core earnings improved to $63 million from a loss
of $27 million in 2011, driven primarily by lower loan loss
Private education loan portfolio results vs. third-quarter
Loan originations of $1.3 billion, up 25 percent.
Provision for private education loan losses of $252
million, down from $384 million, primarily due to an
additional $124 million of provision attributable to
last year's adoption of new accounting guidance for
Delinquencies of 90 days or more of 5.3 percent, up
from 5.0 percent of loans in repayment.
Loans in forbearance of 3.2 percent, down from 4.5
percent of loans in repayment and forbearance.
Annualized charge-off rate of 3.23 percent, down from
3.74 percent of loans in repayment.
Core net interest margin, before loan loss provision,
of 4.05 percent, up from 4.03 percent.
The portfolio balance, net of loan loss allowance, grew
to $37 billion from $36 billion.
Sallie Mae's business services segment includes fees from
servicing, collections and college savings businesses.
Business services core earnings were $131 million in
third-quarter 2012, compared with $139 million in the
Federally Guaranteed Student Loans (FFELP)
This segment represents earnings from Sallie Mae's
amortizing portfolio of federally guaranteed student
Core earnings for the segment were $94 million in
third-quarter 2012, compared with the year-ago quarter's
$107 million. The decrease was primarily due to lower net
interest income in the current quarter resulting from
higher funding costs and the declining balance of the FFELP
Year-to-date Sept. 30, 2012, the company acquired $3.1
billion of FFELP loans. At Sept. 30, 2012, the company held
$128 billion of FFELP loans compared with $141 billion at
Sept. 30, 2011.
Third-quarter operating expenses were $244 million in 2012,
down from $285 million in the year-ago quarter.
Funding and Liquidity
During third-quarter 2012, the company issued $2.6 billion
in FFELP asset-backed securities (ABS), $640 million in
private education loan ABS, and $800 million of unsecured
In third-quarter 2012, Sallie Mae paid a common stock
dividend of $0.125 per share and repurchased 7.6 million
shares of common stock for $121 million. Year-to-date Sept.
30, 2012, Sallie Mae has repurchased 48.2 million common
shares for $730 million. At Sept. 30, 2012, $170 million
was available for additional common share repurchases.
The company expects 2012 results to be as follows:
Full-year 2012 private education loan originations of
at least $3.2 billion.
Fully diluted 2012 core earnings per share of
Sallie Mae 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 and the
goodwill and acquired intangible asset amortization and
impairment. These items 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. In addition, the
company's equity investors, credit rating agencies and debt
capital providers use these core earnings measures to
monitor the company's business performance. See "Core
Earnings - Definition and Limitations" for a further
discussion and a complete reconciliation between GAAP net
income and core earnings. Given the significant variability
of valuations of derivative instruments on expected GAAP
net income, the company does not provide a GAAP equivalent
for its core earnings per share guidance.
Definitions for capitalized terms in this document can be
found in the company's Annual Report on Form 10-K for the
year ended Dec. 31, 2011 (filed with the SEC on Feb. 27,
2012). Certain reclassifications have been made to the
balances as of and for the three and nine months ended
Sept. 30, 2011, to be consistent with classifications
adopted for 2012, and had no effect on net income, total
assets or total liabilities.
The company will host an earnings conference call tomorrow,
Oct. 18, at 8 a.m. EDT. 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 in the call should
dial (877) 356-5689 (USA and Canada) or dial (706) 679-0623
(international) and use access code 34705817 starting at
7:45 a.m. EDT. A live audio webcast of the conference call
may be accessed at www.SallieMae.com/investors.
A replay of the conference call via the company's website
will be available within two hours after the call's
conclusion. A telephone replay may be accessed two hours
after the call's conclusion through Nov. 1, by dialing
(855) 859-2056 (USA and Canada) or (404) 537-3406
(international) with access code 34705817.
Presentation slides for the conference call, as well as
additional information about the company's loan portfolios,
operating segments, and other details, may be accessed at
the webcasts tab.
This press release contains "forward-looking statements"
and information based on management's current expectations
as of the date of this release. Statements that are not
historical facts, including statements about the company's
beliefs 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 Annual Report on Form 10-K for the year ended
Dec. 31, 2011, first-quarter and second-quarter Forms 10-Q
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
student 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 its funding
costs and availability; reductions to its credit ratings or
the credit ratings of the United States of America;
failures of its operating systems or infrastructure,
including those of third-party vendors; damage to its
reputation; failures to successfully implement cost-cutting
and restructuring initiatives and adverse effects of such
initiatives on its business; changes in the demand for
educational financing or in financing preferences of
lenders, educational institutions, students and their
families; changes in law and regulations with respect to
the student lending business and financial institutions
generally; increased competition from banks and other
consumer lenders; the creditworthiness of its customers;
changes in the general interest rate environment, including
the rate relationships among relevant money-market
instruments and those of its earning assets vs. its funding
arrangements; changes in general economic conditions; and
changes in the demand for debt management services. 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 release are qualified by these
cautionary statements and are made only as of the date of
this release. 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 its
Sallie Mae (NASDAQ: SLM) is the nation's No. 1 financial
services company specializing in education. Whether college
is a long way off or just around the corner, Sallie Mae
turns education dreams into reality for its 25 million
customers. With products and services that include 529
college savings plans, Upromise rewards, scholarship search
tools, education loans, insurance, and online banking,
Sallie Mae offers solutions that help families save, plan,
and pay for college. Sallie Mae also provides financial
services to hundreds of college campuses as well as to
federal and state governments. Learn more at SallieMae.com.
Commonly known as Sallie Mae, SLM Corporation and its
subsidiaries are not sponsored by or agencies of the United
States of America.