RESTON, Va., July 17, 2007—SLM Corporation (NYSE: SLM), commonly known as Sallie Mae, today reported second-quarter 2007 earnings and performance results that include an 18-percent increase in managed student loans from the year-ago quarter, with the company’s portfolio topping $153 billion. Second-quarter 2007 preferred-channel loan originations were $3.6 billion, and loans originated through the company's internal brands, a segment of total preferred-channel loan originations, grew 39 percent from the year-ago period to $2.4 billion.
Preferred-channel loan originations include loans originated by the company’s internal lending brands and external lending partners. Preferred-channel originations in the first half of 2007 were $11.6 billion, and internal brands originated $7.2 billion, or 62 percent, of the total.
“Our loan portfolio continues to register strong growth, and our internal brands are outpacing the market,” said C.E. Andrews, chief executive officer. “We are delivering best-in-class products and services to schools, students and families to help them access higher education.”
The company purchased $20.9 billion in education loans in the first half of 2007, a 27-percent increase from the same period last year. In the second-quarter 2007, loan purchases were $8.4 billion.
Sallie Mae 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.
Sallie Mae reported second-quarter 2007 GAAP net income of $966 million, or $1.03 per diluted share, compared to $724 million, or $1.52 per diluted share, in the year-ago period. Included in these GAAP results are pre-tax gains on derivative and hedging activities of $822 million in the second-quarter 2007, compared to $123 million in the year-ago quarter, and a decrease of $671 million in gains on student loan securitizations. Second-quarter 2007 GAAP diluted earnings per share were reduced by $1.21 due to the reversal of unrealized gains on dilutive outstanding equity-forward contracts as required by the GAAP diluted earnings per share calculation.
“Core earnings” net income for the second-quarter 2007 was $189 million, or $.43 per diluted share, down from $320 million, or $.72 per diluted share, in the year-ago quarter. These second-quarter 2007 results include a provision for losses of $247 million and $51 million in expenses related to the company’s previously announced acquisition. Annualized net charge-offs as a percentage of average private education loans in repayment were 3.5 percent in the second-quarter 2007, compared to 3.4 percent in the prior quarter. For the first half of 2007, “core earnings” net income was $440 million, compared to $607 million in the first half of 2006.
“Core earnings” net interest income was $635 million for the 2007 second quarter, up from the year-ago quarter’s $602 million. “Core earnings” other income, which consists primarily of fees earned from guarantor servicing and collection activity, was $296 million in the second–quarter 2007 and $583 million year-to-date, up 11 percent and 14 percent, respectively, from the year-ago periods. “Core earnings” operating expenses were $382 million in the second-quarter 2007, and $715 million for the first half of 2007.
Both a description of the “core earnings” treatment and a full reconciliation to the GAAP income statement can be found here, click on the Second Quarter 2007 Supplemental Earnings Disclosure.
Total equity for the company at June 30, 2007, was $5.3 billion, up from $4.4 billion a year ago. The company’s tangible capital at June 30, 2007, was 2.28 percent of managed assets, compared to 2.19 percent at the same time last year. The “core earnings” student loan spread was 1.79 percent in the second-quarter 2007, excluding financing fees related to the acquisition transaction.
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This press release contains “forward-looking statements” including expectations as to future market share, the success of preferred channel originations and future results. 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, changes in the demand for educational financing or in financing preferences of educational institutions, students and their families, 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 Second Quarter 2007.
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For more information contact:
Tom Joyce (703) 984-5610 (media)
Martha Holler (703) 984-5178 (media)
Steve McGarry (703) 984-6746 (investor)
Joe Fisher (703) 984-5755 (investor)
SLM Corporation (NYSE:
SLM), commonly known as Sallie Mae, is the nation’s leading provider of saving- and paying-for-college programs. The company manages nearly $178 billion in education loans and serves 10 million student and parent customers. Through its Upromise affiliates, the company also manages more than $19 billion in 529 college-savings plans, and is a major, private source of college funding contributions in America with 9.4 million members and $450 million in member rewards. Sallie Mae and its subsidiaries offer debt management services as well as business and technical products to a range of business clients, including higher education institutions, 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.