Campus-Based Sales Model Helps to Drive Company's Continued Strong Performance
RESTON, Va., April 18, 2002—SLM Corporation (NYSE: SLM ), commonly known as Sallie Mae and the nation's leading provider of higher education funding, today reported that its first-quarter 2002 "core cash basis" earnings were $170 million, a 17-percent increase over the year-ago quarter of $145 million. "Core cash basis" earnings per diluted share were $1.05, a 25-percent increase over $.84 per diluted share in the same quarter last year.
Sallie Mae cited a number of factors driving this performance, including the continued success of the company's sales model, the need on campuses for its specific suite of products and services, and the increasing demand for education credit. The company also singled out its guarantor-servicing operations as a notable source of fee income.
"Our sales effort, in an environment of growing opportunity for the private sector, has strengthened demand for what we can bring to schools, students and parents," said Albert L. Lord, vice chairman and chief executive officer. "Add to that our newer fee-income businesses, and we feel very positive about delivering even more to our customers and our shareholders."
"Core cash basis" net interest income was $334 million for the quarter, a 13-percent increase from the year-ago quarter. The growth was driven by both an increase in average managed assets and an increase in the student loan spread as the company took advantage of favorable interest rates to lower its cost of borrowing. Sallie Mae acquired $4.5 billion of student loans during the 2002 first quarter compared to $3.8 billion in the first quarter of 2001, an 18-percent increase.
"Core cash basis" other income for the 2002 first quarter grew to $121 million from $112 million for the year-ago quarter and $111 million for the prior quarter, each attributable to guarantor-servicing and collection fee growth.
Sallie Mae's preferred channel loan origination activity (loans originated by Sallie Mae and its partners) grew 23 percent to $3.8 billion from $3.1 billion a year ago. At the same time, the company's "core cash basis" operating expenses this quarter totaled $161 million, versus $159 million in the year-ago quarter and $170 million in fourth quarter 2001.
In addition to GAAP results, Sallie Mae reports "core cash basis" results, which management believes are another important performance measure of the company's operating results. Accordingly, securitization transactions are treated as financings, not sales, and as a result, gains on such sales are eliminated. In addition, the amortization of goodwill and acquired intangibles and non-recurring items such as floor income, and certain gains and losses on sales of investment securities and student loans are not included. Similarly, in order to preserve consistency in "core cash basis" reporting, the non-cash, mark-to-market effects of Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"), which became effective as of Jan. 1, 2001, also are excluded, and the economic hedge effects of derivative instruments are recognized.
On a GAAP basis, the company earned net income of $422 million or $2.63 per diluted share, compared to $30 million or $.16 per diluted share in the first quarter of 2001. Included in these results is an SFAS 133 mark-to-market gain of $288 million in the first quarter of 2002, compared to a mark-to-market loss of $168 million in the first quarter of 2001. In addition, servicing and securitization revenue was $195 million in the first quarter of 2002, a 62-percent increase over the year-ago quarter. A detailed reconciliation of "core cash basis" earnings to GAAP earnings is provided in the "Supplemental Financial Information," which can be accessed on our Web site, http://www.salliemae.com .
The company will host its regular earnings conference call today at noon. Sallie Mae executives will discuss various highlights of the quarter and answer questions related to the company's first-quarter performance. Individuals interested in participating should call the following number today, April 18, 2002, starting at 11:45 a.m. EDT: 877-356-5689 (USA and Canada) or 706-679-0623 (International). The conference call will be replayed continuously beginning Thursday, April 18, at 3:30 p.m. EDT and concluding at 11:59 p.m. EDT on Thursday, April 25. Please dial 800-642-1687 (USA and Canada) or dial 706-645-9291 (International) and use access code 3756187. In addition, there will be a live audio webcast of the conference call, which may be accessed at http://www.salliemae.com. A replay will be available 30-45 minutes after the live broadcast.
Statements in this release referring to expectations as to future market share, the successful consummation of any business acquisitions and other future developments are forward-looking statements, which involve risks, uncertainties and other factors that may cause the actual results to differ materially from such forward-looking statements. Such factors 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.
Sallie Mae (NYSE: SLM ) is the nation's leading provider of education funding, managing nearly $73 billion in student loans for more than seven million borrowers. The company primarily provides federally guaranteed student loans originated under the Federal Family Education Loan Program (FFELP), and offers comprehensive information and resources to guide students, parents and guidance professionals through the financial aid process. Founded in 1972 as a government-sponsored enterprise (GSE), the Student Loan Marketing Association, the company began the privatization process in 1997. Since then, Sallie Mae's parent company name has changed, most recently to SLM Corporation (effective May 17, 2002). Through its specialized subsidiaries and divisions, the company also provides an array of consumer credit loans, including those for lifelong learning and K-12 education, and business and technical outsourcing services for colleges and universities. More information is available at http://www.salliemae.com . USA Education, Inc. (effective May 17, 2002, known as SLM Corporation) and its subsidiaries, other than the Student Loan Marketing Association, are not sponsored by or agencies of the United States.
Supplemental Earnings Disclosure