Edgar Filing: SLM CORP

FORM 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2013

¨	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) 283-8000

(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 x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer	x		Accelerated filer	¨

Non-accelerated filer	¨	(Do not check if a smaller reporting company)	Smaller reporting company	¨

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 x No ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

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, 2013
Common Stock, $0.20 par value		444,210,360 shares

SLM CORPORATION

Table of Contents


Part I. Financial Information
Item 1.	Financial Statements	2
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	77
Item 4.	Controls and Procedures	82
PART II. Other Information
Item 1.	Legal Proceedings	83
Item 1A.	Risk Factors	83
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	83
Item 3.	Defaults Upon Senior Securities	84
Item 4.	Mine Safety Disclosures	84
Item 5.	Other Information	84
Item 6.	Exhibits	84

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

SLM CORPORATION

CONSOLIDATED BALANCE SHEETS

(In millions, except share and per share amounts)

(Unaudited)


	March 31, 2013			December 31, 2012
Assets
FFELP Loans (net of allowance for losses of $147 and $159, respectively)	$	119,195		$	125,612
Private Education Loans (net of allowance for losses of $2,170 and $2,171 respectively)		37,465			36,934
Investments
Available-for-sale		77			72
Other		929			1,010

Total investments		1,006			1,082
Cash and cash equivalents		3,685			3,900
Restricted cash and investments		4,828			5,011
Goodwill and acquired intangible assets, net		444			448
Other assets		7,463			8,273

Total assets	$	174,086		$	181,260

Liabilities
Short-term borrowings	$	17,254		$	19,856
Long-term borrowings		147,887			152,401
Other liabilities		3,791			3,937

Total liabilities		168,932			176,194

Commitments and contingencies
Equity
Preferred stock, par value $0.20 per share, 20 million shares authorized
Series A: 3.3 million and 3.3 million shares issued, respectively, at stated value of $50 per share		165			165
Series B: 4 million and 4 million shares issued, respectively, at stated value of $100 per share		400			400
Common stock, par value $0.20 per share, 1.125 billion shares authorized: 540 million and 536 million shares issued, respectively		108			107
Additional paid-in capital		4,291			4,237
Accumulated other comprehensive loss (net of tax benefit of $2 and $3, respectively)		(4	)		(6	)
Retained earnings		1,723			1,451

Total SLM Corporation stockholders’ equity before treasury stock		6,683			6,354
Less: Common stock held in treasury at cost: 95 million and 83 million shares, respectively		(1,535	)		(1,294	)

Total SLM Corporation stockholders’ equity		5,148			5,060
Noncontrolling interest		6			6

Total equity		5,154			5,066

Total liabilities and equity	$	174,086		$	181,260

Supplemental information — assets and liabilities of consolidated variable interest entities:


	March 31, 2013		December 31, 2012
FFELP Loans	$	114,621	$	121,059
Private Education Loans		26,310		26,072
Restricted cash and investments		4,648		4,826
Other assets		1,726		2,312
Short-term borrowings		7,506		9,551
Long-term borrowings		126,697		131,518

Net assets of consolidated variable interest entities	$	13,102	$	13,200

See accompanying notes to consolidated financial statements.

SLM CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per share amounts)

(Unaudited)


	Three Months Ended March 31,
	2013			2012
Interest income:
FFELP Loans	$	735		$	842
Private Education Loans		623			625
Other loans		3			5
Cash and investments		5			5

Total interest income		1,366			1,477
Total interest expense		571			666

Net interest income		795			811
Less: provisions for loan losses		241			253

Net interest income after provisions for loan losses		554			558

Other income (loss):
Losses on derivative and hedging activities, net		(31	)		(372	)
Servicing revenue		96			97
Contingency revenue		99			90
Gains on debt repurchases		23			37
Other		90			40

Total other income (loss)		277			(108	)

Expenses:
Salaries and benefits		138			127
Other operating expenses		132			135

Total operating expenses		270			262
Goodwill and acquired intangible assets impairment and amortization expense		4			5
Restructuring expenses		—			5

Total expenses		274			272

Income before income tax expense		557			178
Income tax expense		211			67

Net income		346			111
Less: net loss attributable to noncontrolling interest		—			(1	)

Net income attributable to SLM Corporation		346			112
Preferred stock dividends		5			5

Net income attributable to SLM Corporation common stock	$	341		$	107

Basic earnings per common share attributable to SLM Corporation	$	.76		$	.21

Average common shares outstanding		451			503

Diluted earnings per common share attributable to SLM Corporation	$	.74		$	.21

Average common and common equivalent shares outstanding		458			510

Dividends per common share attributable to SLM Corporation	$	.15		$	.125

See accompanying notes to consolidated financial statements.

SLM CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)


	Three Months Ended March 31,
	2013			2012
Net income	$	346		$	111
Other comprehensive income (loss):
Unrealized gains (losses) on derivatives:
Unrealized hedging gains (losses) on derivatives		1			(2	)
Reclassification adjustments for derivative losses included in net income (interest expense)		3			10

Total unrealized gains on derivatives		4			8
Unrealized losses on investments		(1	)		—
Income tax expense		(1	)		(3	)

Other comprehensive income, net of tax		2			5

Comprehensive income		348			116
Less: comprehensive loss attributable to noncontrolling interest		—			(1	)

Total comprehensive income attributable to SLM Corporation	$	348		$	117

See accompanying notes to consolidated financial statements.

SLM CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Dollars in millions, except share and per share amounts)

(Unaudited)


	Preferred Stock Shares		Common Stock Shares								Preferred Stock		Common Stock		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Treasury Stock			Total Stockholders’ Equity			Noncontrolling Interest			Total Equity
	Preferred Stock Shares		Issued		Treasury			Outstanding			Preferred Stock		Common Stock		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Treasury Stock			Total Stockholders’ Equity			Noncontrolling Interest			Total Equity
Balance at December 31, 2011		7,300,000		529,075,322		(20,323,997	)		508,751,325		$	565	$	106	$	4,136		$	(14	)	$	770		$	(320	)	$	5,243		$	8		$	5,251
Comprehensive income:
Net income (loss)																						112						112			(1	)		111
Other comprehensive income, net of tax																			5									5						5

Total comprehensive income																												117			(1	)		116
Cash dividends:
Common stock ($0.125 per share)																						(63	)					(63	)					(63	)
Preferred stock, series A ($0.87 per share)																						(3	)					(3	)					(3	)
Preferred stock, series B ($0.57 per share)																						(2	)					(2	)					(2	)
Issuance of common shares				3,171,484					3,171,484							27												27						27
Tax benefit related to employee stock-based compensation plans																(3	)											(3	)					(3	)
Stock-based compensation expense																22												22						22
Common stock repurchased						(16,703,182	)		(16,703,182	)															(268	)		(268	)					(268	)
Shares repurchased related to employee stock-based compensation plans						(2,056,977	)		(2,056,977	)															(32	)		(32	)					(32	)

Balance at March 31, 2012		7,300,000		532,246,806		(39,084,156	)		493,162,650		$	565	$	106	$	4,182		$	(9	)	$	814		$	(620	)	$	5,038		$	7		$	5,045

Balance at December 31, 2012		7,300,000		535,507,965		(82,910,021	)		452,597,944		$	565	$	107	$	4,237		$	(6	)	$	1,451		$	(1,294	)	$	5,060		$	6		$	5,066
Comprehensive income:
Net income																						346						346						346
Other comprehensive income, net of tax																			2									2						2

Total comprehensive income																												348						348
Cash dividends:
Common stock ($0.15 per share)																						(68	)					(68	)					(68	)
Preferred stock, series A ($0.87 per share)																						(3	)					(3	)					(3	)
Preferred stock, series B ($0.49 per share)																						(2	)					(2	)					(2	)
Dividend equivalent units related to employee stock-based compensation plans																						(1	)					(1	)					(1	)
Issuance of common shares				4,157,795					4,157,795					1		33												34						34
Tax benefit related to employee stock-based compensation plans																2												2						2
Stock-based compensation expense																19												19						19
Common stock repurchased						(10,220,804	)		(10,220,804	)															(199	)		(199	)					(199	)
Shares repurchased related to employee stock-based compensation plans						(2,324,575	)		(2,324,575	)															(42	)		(42	)					(42	)

Balance at March 31, 2013		7,300,000		539,665,760		(95,455,400	)		444,210,360		$	565	$	108	$	4,291		$	(4	)	$	1,723		$	(1,535	)	$	5,148		$	6		$	5,154

See accompanying notes to consolidated financial statements.

SLM CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in millions)

(Unaudited)


	Three Months Ended March 31,
	2013			2012
Operating activities
Net income	$	346		$	111
Adjustments to reconcile net income to net cash provided by operating activities:
Gains on debt repurchases and loan sales		(78	)		(37	)
Goodwill and acquired intangible assets impairment and amortization expense		4			5
Stock-based compensation expense		19			22
Unrealized (gains) losses on derivative and hedging activities		(138	)		193
Provisions for loan losses		241			253
(Increase) decrease in restricted cash — other		(3	)		29
Decrease in accrued interest receivable		19			5
Increase in accrued interest payable		2			39
Decrease in other assets		292			109
Decrease in other liabilities		(175	)		(138	)

Total adjustments		183			480

Total net cash provided by operating activities		529			591

Investing activities
Student loans acquired and originated		(1,559	)		(1,658	)
Reduction of student loans:
Installment payments, claims and other		3,349			3,391
Proceeds from sales of student loans		226			135
Other investing activities, net		65			121
Purchases of available-for-sale securities		(14	)		(14	)
Proceeds from maturities of available-for-sale securities		9			12
Purchases of other securities		(93	)		(80	)
Proceeds from maturities of other securities		94			78
Decrease (increase) in restricted cash – variable interest entities		107			(44	)

Total net cash provided by investing activities		2,184			1,941

Financing activities
Borrowings collateralized by loans in trust — issued		2,588			2,115
Borrowings collateralized by loans in trust — repaid		(3,182	)		(3,817	)
Asset-backed commercial paper conduits, net		427			1,728
ED Conduit Program facility, net		(2,583	)		(3,198	)
Other short-term borrowings issued		—			23
Other short-term borrowings repaid		(114	)		(23	)
Other long-term borrowings issued		1,489			1,584
Other long-term borrowings repaid		(1,319	)		(454	)
Other financing activities, net		(358	)		(93	)
Retail and other deposits, net		396			188
Common stock repurchased		(199	)		(268	)
Common stock dividends paid		(68	)		(63	)
Preferred stock dividends paid		(5	)		(5	)

Net cash used in financing activities		(2,928	)		(2,283	)

Net (decrease) increase in cash and cash equivalents		(215	)		249
Cash and cash equivalents at beginning of period		3,900			2,794

Cash and cash equivalents at end of period	$	3,685		$	3,043

Supplemental disclosures of cash flow information:
Cash disbursements made (refunds received) for:
Interest	$	568		$	632

Income taxes paid	$	15		$	46

Income taxes received	$	(1	)	$	(5	)

Noncash activity:
Investing activity — Student loans and other assets acquired	$	—		$	402

Student loans and other assets removed related to sale of Residual Interest in securitization	$	(3,665	)	$	—

Financing activity — Borrowings assumed in acquisition of student loans and other assets	$	—		$	425

Borrowings removed related to sale of Residual Interest in securitization	$	(3,681	)	$	—

See accompanying notes to consolidated financial statements.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information at March 31, 2013 and for the three months ended

March 31, 2013 and 2012 is unaudited)

1.	Significant Accounting Policies

Basis of Presentation

The accompanying unaudited, consolidated financial statements of SLM Corporation (“we,” “us,” “our,” or the “Company”) 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 of 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 and those Variable Interest Entities (“VIEs”) for which we are the primary beneficiary, 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, 2013 are not necessarily indicative of the results for the year ending December 31, 2013 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, 2012 (the “2012 Form 10-K”).

Consolidation

In first-quarter 2013 we sold the Residual Interest in a FFELP Loan securitization trust to a third party. We will continue to service the student loans in the trust under existing agreements. Prior to the sale of the Residual Interest we had consolidated the trust as a VIE because we had met the two criteria for consolidation of a VIE. We had determined we were the primary beneficiary because (1) as servicer to the trust we had the power to direct the activities of the VIE that most significantly affected its economic performance and (2) as the residual holder of the trust we had an obligation to absorb losses or receive benefits of the trust that could potentially be significant. Upon the sale of the Residual Interest we are no longer the residual holder, thus we determined we no longer met criterion (2) above and deconsolidated the trust. As a result of this transaction we removed trust assets of $3.8 billion and the related liabilities of $3.7 billion from the balance sheet and recorded a $55 million gain as part of “other income.”

Reclassifications

Certain reclassifications have been made to the balances as of and for the three months ended March 31, 2012 to be consistent with classifications adopted for 2013, and had no effect on net income, total assets, or total liabilities.

Recently Adopted Accounting Standards

Accumulated Other Comprehensive Income

On January 1, 2013, we adopted Accounting Standards Update No. 2013-02, Comprehensive Income (Topic 220), “Reporting Amounts Reclassified out of Accumulated Other Comprehensive Income.” The objective of this new guidance is to improve the reporting of reclassifications out of accumulated other comprehensive income. The impact of adopting this new guidance was immaterial and there was no impact on our results of operations.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.	Allowance for Loan Losses

Our provisions for loan losses represent the periodic expense of maintaining an allowance sufficient to absorb incurred probable losses, net of expected recoveries, in the held-for-investment loan portfolios. The evaluation of the provisions for loan losses is inherently subjective as it requires material estimates that may be susceptible to significant changes. We believe that the allowance for loan losses is appropriate to cover probable losses incurred in the loan portfolios. We segregate our Private Education Loan portfolio into two classes of loans — traditional and non-traditional. Non-traditional loans are loans to (i) customers attending for-profit schools with an original Fair Isaac and Company (“FICO”) score of less than 670 and (ii) customers attending not-for-profit schools with an original FICO score of less than 640. The FICO score used in determining whether a loan is non-traditional is the greater of the customer or cosigner FICO score at origination. Traditional loans are defined as all other Private Education Loans that are not classified as non-traditional.

Allowance for Loan Losses Metrics


	Allowance for Loan Losses
	Three Months Ended March 31, 2013
(Dollars in millions)	FFELP Loans			Private Education Loans			Other Loans			Total
Allowance for Loan Losses
Beginning balance	$	159		$	2,171		$	47		$	2,377
Total provision		16			225			—			241
Charge-offs⁽¹⁾		(22	)		(232	)		(5	)		(259	)
Student loan sales		(6	)		—			—			(6	)
Reclassification of interest reserve⁽²⁾		—			6			—			6

Ending balance	$	147		$	2,170		$	42		$	2,359

Allowance:
Ending balance: individually evaluated for impairment	$	—		$	1,157		$	31		$	1,188
Ending balance: collectively evaluated for impairment	$	147		$	1,013		$	11		$	1,171
Loans:
Ending balance: individually evaluated for impairment	$	—		$	8,018		$	65		$	8,083
Ending balance: collectively evaluated for impairment	$	118,058		$	32,389		$	106		$	150,553
Charge-offs as a percentage of average loans in repayment (annualized)		.10	%		2.97	%		10.95	%
Charge-offs as a percentage of average loans in repayment and forbearance (annualized)		.09	%		2.87	%		10.95	%
Allowance as a percentage of the ending total loan balance		.12	%		5.37	%		24.55	%
Allowance as a percentage of the ending loans in repayment		.17	%		6.88	%		24.55	%
Allowance coverage of charge-offs (annualized)		1.6			2.3			2.1
Ending total loans⁽³⁾	$	118,058		$	40,407		$	171
Average loans in repayment	$	87,256		$	31,645		$	179
Ending loans in repayment	$	85,304		$	31,533		$	171

⁽¹⁾

Charge-offs are reported net of expected recoveries. For Private Education Loans, the expected recovery amount is transferred to the receivable for partially charged-off loan balance. Charge-offs include charge-offs against the receivable for partially charged-off loans which represents the difference between what was expected to be collected and any shortfalls in what was actually collected in the period. See “Receivable for Partially Charged-Off Private Education Loans” for further discussion.

⁽²⁾

Represents the additional allowance related to the amount of uncollectible interest reserved within interest income that is transferred in the period to the allowance for loan losses when interest is capitalized to a loan’s principal balance.

⁽³⁾

Ending total loans for Private Education Loans includes the receivable for partially charged-off loans.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.	Allowance for Loan Losses (continued)


	Allowance for Loan Losses
	Three Months Ended March 31, 2012
(Dollars in millions)	FFELP Loans			Private Education Loans			Other Loans			Total
Allowance for Loan Losses
Beginning balance	$	187		$	2,171		$	69		$	2,427
Total provision		18			235			—			253
Charge-offs⁽¹⁾		(23	)		(224	)		(5	)		(252	)
Student loan sales		(2	)		—			—			(2	)
Reclassification of interest reserve⁽²⁾		—			8			—			8

Ending balance	$	180		$	2,190		$	64		$	2,434

Allowance:
Ending balance: individually evaluated for impairment	$	—		$	853		$	48		$	901
Ending balance: collectively evaluated for impairment	$	180		$	1,337		$	16		$	1,533
Loans:
Ending balance: individually evaluated for impairment	$	—		$	6,030		$	88		$	6,118
Ending balance: collectively evaluated for impairment	$	134,490		$	33,745		$	160		$	168,395
Charge-offs as a percentage of average loans in repayment (annualized)		.10	%		2.96	%		7.17	%
Charge-offs as a percentage of average loans in repayment and forbearance (annualized)		.08	%		2.84	%		7.17	%
Allowance as a percentage of the ending total loan balance		.13	%		5.51	%		26.0	%
Allowance as a percentage of the ending loans in repayment		.20	%		7.24	%		26.0	%
Allowance coverage of charge-offs (annualized)		2.0			2.4			3.6
Ending total loans⁽³⁾	$	134,490		$	39,775		$	248
Average loans in repayment	$	93,150		$	30,378		$	252
Ending loans in repayment	$	92,224		$	30,236		$	248

⁽¹⁾

⁽²⁾

⁽³⁾

Ending total loans for Private Education Loans includes the receivable for partially charged-off loans.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.	Allowance for Loan Losses (continued)

Key Credit Quality Indicators

FFELP Loans are substantially insured and guaranteed as to their principal and accrued interest in the event of default; therefore, the key credit quality indicator for this portfolio is loan status. The impact of changes in loan status is incorporated quarterly into the allowance for loan losses calculation.

For Private Education Loans, the key credit quality indicators are school type, FICO scores, the existence of a cosigner, the loan status and loan seasoning. The school type/FICO score are assessed at origination and maintained through the traditional/non-traditional loan designation. The other Private Education Loan key quality indicators can change and are incorporated quarterly into the allowance for loan losses calculation. The following table highlights the principal balance (excluding the receivable for partially charged-off loans) of our Private Education Loan portfolio stratified by the key credit quality indicators.


	Private Education Loans Credit Quality Indicators
	March 31, 2013					December 31, 2012
(Dollars in millions)	Balance⁽³⁾		% of Balance			Balance⁽³⁾		% of Balance
Credit Quality Indicators
School Type/FICO Scores:
Traditional	$	35,947		92	%	$	35,347		92	%
Non-Traditional⁽¹⁾		3,121		8			3,207		8

Total	$	39,068		100	%	$	38,554		100	%

Cosigners:
With cosigner	$	25,646		66	%	$	24,907		65	%
Without cosigner		13,422		34			13,647		35

Total	$	39,068		100	%	$	38,554		100	%

Seasoning⁽²⁾:
1-12 payments	$	7,186		19	%	$	7,371		19	%
13-24 payments		5,834		15			6,137		16
25-36 payments		5,908		15			6,037		16
37-48 payments		4,838		12			4,780		12
More than 48 payments		8,868		23			8,325		22
Not yet in repayment		6,434		16			5,904		15

Total	$	39,068		100	%	$	38,554		100	%

⁽¹⁾

Defined as loans to customers attending for-profit schools (with a FICO score of less than 670 at origination) and customers attending not-for-profit schools (with a FICO score of less than 640 at origination).

⁽²⁾

Number of months in active repayment for which a scheduled payment was due.

⁽³⁾

Balance represents gross Private Education Loans.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.	Allowance for Loan Losses (continued)

The following tables provide information regarding the loan status and aging of past due loans.


	FFELP Loan Delinquencies
	March 31, 2013						December 31, 2012
(Dollars in millions)	Balance			%			Balance			%
Loans in-school/grace/deferment⁽¹⁾	$	17,324					$	17,702
Loans in forbearance⁽²⁾		15,430						15,902
Loans in repayment and percentage of each status:
Loans current		71,792			84.2	%		75,499			83.2	%
Loans delinquent 31-60 days⁽³⁾		4,186			4.9			4,710			5.2
Loans delinquent 61-90 days⁽³⁾		2,441			2.9			2,788			3.1
Loans delinquent greater than 90 days⁽³⁾		6,885			8.0			7,734			8.5

Total FFELP Loans in repayment		85,304			100	%		90,731			100	%

Total FFELP Loans, gross		118,058						124,335
FFELP Loan unamortized premium		1,284						1,436

Total FFELP Loans		119,342						125,771
FFELP Loan allowance for losses		(147	)					(159	)

FFELP Loans, net	$	119,195					$	125,612

Percentage of FFELP Loans in repayment					72.3	%					73.0	%

Delinquencies as a percentage of FFELP Loans in repayment					15.8	%					16.8	%

FFELP Loans in forbearance as a percentage of loans in repayment and forbearance					15.3	%					14.9	%

⁽¹⁾

Loans for customers who may still be attending school or engaging in other permitted educational activities and are not yet required to make payments on their loans, e.g., residency periods for medical students or a grace period for bar exam preparation, as well as loans for customers who have requested and qualify for other permitted program deferments such as military, unemployment, or economic hardships.

⁽²⁾

Loans for customers who have used their allowable deferment time or do not qualify for deferment, that need additional time to obtain employment or who have temporarily ceased making full payments due to hardship or other factors.

⁽³⁾

The period of delinquency is based on the number of days scheduled payments are contractually past due.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.	Allowance for Loan Losses (continued)


	Private Education Traditional Loan Delinquencies
	March 31, 2013						December 31, 2012
(Dollars in millions)	Balance			%			Balance			%
Loans in-school/grace/deferment⁽¹⁾	$	5,959					$	5,421
Loans in forbearance⁽²⁾		966						996
Loans in repayment and percentage of each status:
Loans current		27,072			93.2	%		26,597			91.9	%
Loans delinquent 31-60 days⁽³⁾		597			2.1			837			2.9
Loans delinquent 61-90 days⁽³⁾		393			1.4			375			1.3
Loans delinquent greater than 90 days⁽³⁾		960			3.3			1,121			3.9

Total traditional loans in repayment		29,022			100	%		28,930			100	%

Total traditional loans, gross		35,947						35,347
Traditional loans unamortized discount		(691	)					(713	)

Total traditional loans		35,256						34,634
Traditional loans receivable for partially charged-off loans		799						797
Traditional loans allowance for losses		(1,643	)					(1,637	)

Traditional loans, net	$	34,412					$	33,794

Percentage of traditional loans in repayment					80.7	%					81.9	%

Delinquencies as a percentage of traditional loans in repayment					6.7	%					8.1	%

Loans in forbearance as a percentage of loans in repayment and forbearance					3.2	%					3.3	%

⁽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 their 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.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.	Allowance for Loan Losses (continued)


	Private Education Non-Traditional Loan Delinquencies
	March 31, 2013						December 31, 2012
(Dollars in millions)	Balance			%			Balance			%
Loans in-school/grace/deferment⁽¹⁾	$	475					$	483
Loans in forbearance⁽²⁾		135						140
Loans in repayment and percentage of each status:
Loans current		1,997			79.6	%		1,978			76.5	%
Loans delinquent 31-60 days⁽³⁾		134			5.3			175			6.8
Loans delinquent 61-90 days⁽³⁾		98			3.9			106			4.1
Loans delinquent greater than 90 days⁽³⁾		282			11.2			325			12.6

Total non-traditional loans in repayment		2,511			100	%		2,584			100	%

Total non-traditional loans, gross		3,121						3,207
Non-traditional loans unamortized discount		(81	)					(83	)

Total non-traditional loans		3,040						3,124
Non-traditional loans receivable for partially charged-off loans		540						550
Non-traditional loans allowance for losses		(527	)					(534	)

Non-traditional loans, net	$	3,053					$	3,140

Percentage of non-traditional loans in repayment					80.4	%					80.6	%

Delinquencies as a percentage of non-traditional loans in repayment					20.5	%					23.4	%

Loans in forbearance as a percentage of loans in repayment and forbearance					5.1	%					5.1	%

⁽¹⁾

⁽²⁾

⁽³⁾

The period of delinquency is based on the number of days scheduled payments are contractually past due.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.	Allowance for Loan Losses (continued)

Receivable for Partially Charged-Off Private Education Loans

At the end of each month, for loans that are 212 days past due, we charge off the estimated loss of a defaulted loan balance. Actual recoveries are applied against the remaining loan balance that was not charged off. We refer to this remaining loan balance as the “receivable for partially charged-off loans.” If actual periodic recoveries are less than expected, the difference is immediately charged off through the allowance for loan losses with an offsetting reduction in the receivable for partially charged-off Private Education Loans. If actual periodic recoveries are greater than expected, they will be reflected as a recovery through the allowance for Private Education Loan losses once the cumulative recovery amount exceeds the cumulative amount originally expected to be recovered. Private Education Loans which defaulted between 2008 and 2012 for which we have previously charged off estimated losses have, to varying degrees, not met our post-default recovery expectations to date and may continue not to do so. According to our policy, we have been charging off these periodic shortfalls in expected recoveries against our allowance for Private Education Loan losses and the related receivable for partially charged-off Private Education Loans and we will continue to do so. There was $209 million and $151 million in allowance for Private Education Loan losses at March 31, 2013 and 2012, respectively, providing for possible additional future charge-offs related to the receivable for partially charged-off Private Education Loans.

The following table summarizes the activity in the receivable for partially charged-off loans.


	Three Months Ended March 31,
(Dollars in millions)	2013			2012
Receivable at beginning of period	$	1,347		$	1,241
Expected future recoveries of current period defaults⁽¹⁾		78			69
Recoveries⁽²⁾		(68	)		(50	)
Charge-offs⁽³⁾		(18	)		(10	)

Receivable at end of period		1,339			1,250
Allowance for estimated recovery shortfalls⁽⁴⁾		(209	)		(151	)

Net receivable at end of period	$	1,130		$	1,099

⁽¹⁾

Represents the difference between the loan balance and our estimate of the amount to be collected in the future.

⁽²⁾

Current period cash collections.

⁽³⁾

Represents the current period recovery shortfall — the difference between what was expected to be collected and what was actually collected. These amounts are included in the Private Education Loan total charge-offs as reported in the “Allowance for Loan Losses Metrics” tables.

⁽⁴⁾

The allowance for estimated recovery shortfalls of the receivable for partially charged-off Private Education Loans is a component of the $2.2 billion overall allowance for Private Education Loan losses as of March 31, 2013 and 2012, respectively.

Troubled Debt Restructurings (“TDRs”)

We modify the terms of loans for certain customers when we believe such modifications may increase the ability and willingness of a customer 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. For customers experiencing financial difficulty, certain Private Education Loans for

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.	Allowance for Loan Losses (continued)

which we have granted either cumulative forbearance of greater than three months, an interest rate reduction or an extended repayment plan are classified as TDRs. Forbearance provides customers the ability to defer payments for a period of time, but does not result in the forgiveness of any principal or interest. While in forbearance status, interest continues to accrue and is capitalized to principal when the loan re-enters repayment status. The recorded investment of loans granted a forbearance that were classified as TDRs was $6.8 billion and $6.4 billion at March 31, 2013 and December 31, 2012, respectively. The recorded investment for TDRs from loans granted interest rate reductions or extended repayment plans was $0.9 billion at both March 31, 2013 and December 31, 2012. At March 31, 2013 and December 31, 2012, the percentage of loans granted forbearance that have migrated to a TDR classification due to the extension of the original forbearance period was 45 percent and 43 percent, respectively.

At March 31, 2013 and December 31, 2012, all of our TDR loans had a related allowance recorded. The following table provides the recorded investment, unpaid principal balance and related allowance for our TDR loans.


	TDR Loans
(Dollars in millions)	Recorded Investment⁽¹⁾		Unpaid Principal Balance		Related Allowance
March 31, 2013
Private Education Loans — Traditional	$	6,379	$	6,460	$	874
Private Education Loans — Non-Traditional		1,335		1,345		283

Total	$	7,714	$	7,805	$	1,157

December 31, 2012
Private Education Loans — Traditional	$	5,999	$	6,074	$	844
Private Education Loans — Non-Traditional		1,295		1,303		282

Total	$	7,294	$	7,377	$	1,126

⁽¹⁾

The recorded investment is equal to the unpaid principal balance and accrued interest receivable net of unamortized deferred fees and costs.

The following table provides the average recorded investment and interest income recognized for our troubled debt restructuring loans.


	Three Months Ended March 31,
	2013				2012
(Dollars in millions)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Private Education Loans — Traditional	$	6,328	$	96	$	4,507	$	73
Private Education Loans — Non-Traditional		1,370		27		1,110		25

Total	$	7,698	$	123	$	5,617	$	98

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.	Allowance for Loan Losses (continued)

The following tables provide information regarding the loan status and aging of TDR loans that are past due.


	TDR Loan Delinquencies
	March 31, 2013					December 31, 2012
(Dollars in millions)	Balance		%			Balance		%
Loans in deferment⁽¹⁾	$	687				$	574
Loans in forbearance⁽²⁾		565					544
Loans in repayment and percentage of each status:
Loans current		5,073		77.4	%		4,619		73.8	%
Loans delinquent 31-60 days⁽³⁾		397		6.1			478		7.6
Loans delinquent 61-90 days⁽³⁾		293		4.5			254		4.1
Loans delinquent greater than 90 days⁽³⁾		790		12.0			908		14.5

Total TDR loans in repayment		6,553		100	%		6,259		100	%

Total TDR loans, gross	$	7,805				$	7,377

⁽¹⁾

Loans for customers who have requested and qualify for permitted program deferments such as military, unemployment, or economic hardships.

⁽²⁾

⁽³⁾

The period of delinquency is based on the number of days scheduled payments are contractually past due.

The following table provides the amount of modified loans that resulted in a TDR in the periods presented. Additionally, the table summarizes charge-offs occurring in the TDR portfolio, as well as TDRs for which a payment default occurred in the current period within 12 months of the loan first being designated as a TDR. We define payment default as 60 days past due for this disclosure. 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.


	Three Months Ended March 31,
	2013						2012
(Dollars in millions)	Modified Loans⁽¹⁾		Charge- Offs⁽²⁾		Payment Default		Modified Loans⁽¹⁾		Charge- Offs⁽²⁾		Payment Default
Private Education Loans — Traditional	$	545	$	97	$	216	$	657	$	65	$	404
Private Education Loans — Non-Traditional		90		34		57		140		29		128

Total	$	635	$	131	$	273	$	797	$	94	$	532

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

⁽²⁾	Represents loans that charged off that were classified as TDRs.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.	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 portfolio for all periods presented.


	Accrued Interest Receivable
(Dollars in millions)	Total		Greater Than 90 Days Past Due		Allowance for Uncollectible Interest
March 31, 2013
Private Education Loans — Traditional	$	822	$	34	$	47
Private Education Loans — Non-Traditional		96		14		21

Total	$	918	$	48	$	68

December 31, 2012
Private Education Loans — Traditional	$	798	$	39	$	45
Private Education Loans — Non-Traditional		106		16		22

Total	$	904	$	55	$	67

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3.	Borrowings

The following table summarizes our borrowings.


	March 31, 2013						December 31, 2012
(Dollars in millions)	Short Term		Long Term		Total		Short Term		Long Term		Total
Unsecured borrowings:
Senior unsecured debt	$	2,778	$	15,167	$	17,945	$	2,319	$	15,446	$	17,765
Brokered deposits		1,170		2,782		3,952		979		3,088		4,067
Retail and other deposits		3,643		—		3,643		3,247		—		3,247
Other⁽¹⁾		1,240		—		1,240		1,609		—		1,609

Total unsecured borrowings		8,831		17,949		26,780		8,154		18,534		26,688

Secured borrowings:
FFELP Loan securitizations		—		100,750		100,750		—		105,525		105,525
Private Education Loan securitizations		—		20,252		20,252		—		19,656		19,656
ED Conduit Program Facility		6,967		—		6,967		9,551		—		9,551
FFELP ABCP Facility		—		5,114		5,114		—		4,154		4,154
Private Education Loan ABCP Facility		539		—		539		—		1,070		1,070
Acquisition financing⁽²⁾		—		576		576		—		673		673
FHLB-DM Facility		880		1,220		2,100		2,100		—		2,100

Total secured borrowings		8,386		127,912		136,298		11,651		131,078		142,729

Total before hedge accounting adjustments		17,217		145,861		163,078		19,805		149,612		169,417
Hedge accounting adjustments		37		2,026		2,063		51		2,789		2,840

Total	$	17,254	$	147,887	$	165,141	$	19,856	$	152,401	$	172,257

⁽¹⁾	“Other” primarily consists of the obligation to return cash collateral held related to derivative exposures.

⁽²⁾	Relates to the acquisition of $25 billion of student loans at the end of 2010.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3.	Borrowings (continued)

Secured Borrowings

The tables below summarize all of our financing entities that are VIEs which we consolidate as a result of being the entities’ primary beneficiary. As such, these financing VIEs are accounted for as secured borrowings. We consolidate the following financing VIEs:


	March 31, 2013
	Debt Outstanding						Carrying Amount of Assets Securing Debt Outstanding
(Dollars in millions)	Short Term		Long Term		Total		Loans		Cash		Other Assets		Total
Secured Borrowings — VIEs:
ED Conduit Program Facility	$	6,967	$	—	$	6,967	$	7,056	$	295	$	99	$	7,450
FFELP ABCP Facility		—		5,114		5,114		5,430		108		76		5,614
Private Education Loan ABCP Facility		539		—		539		989		173		21		1,183
Securitizations — FFELP Loans		—		100,750		100,750		102,135		3,618		575		106,328
Securitizations — Private Education Loans		—		20,252		20,252		25,321		454		550		26,325

Total before hedge accounting adjustments		7,506		126,116		133,622		140,931		4,648		1,321		146,900
Hedge accounting adjustments		—		581		581		—		—		405		405

Total	$	7,506	$	126,697	$	134,203	$	140,931	$	4,648	$	1,726	$	147,305


	December 31, 2012
	Debt Outstanding						Carrying Amount of Assets Securing Debt Outstanding
(Dollars in millions)	Short Term		Long Term		Total		Loans		Cash		Other Assets		Total
Secured Borrowings — VIEs:
ED Conduit Program Facility	$	9,551	$	—	$	9,551	$	9,645	$	410	$	134	$	10,189
FFELP ABCP Facility		—		4,154		4,154		4,405		77		63		4,545
Private Education Loan ABCP Facility		—		1,070		1,070		1,454		302		33		1,789
Securitizations — FFELP Loans		—		105,525		105,525		107,009		3,652		608		111,269
Securitizations — Private Education Loans		—		19,656		19,656		24,618		385		545		25,548

Total before hedge accounting adjustments		9,551		130,405		139,956		147,131		4,826		1,383		153,340
Hedge accounting adjustments		—		1,113		1,113		—		—		929		929

Total	$	9,551	$	131,518	$	141,069	$	147,131	$	4,826	$	2,312	$	154,269

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3.	Borrowings (continued)

Securitizations

The following table summarizes the securitization transactions that occurred during the year ended December 31, 2012 and the three months ended March 31, 2013.

(Dollars in millions)

AAA-rated bonds

Issue

Date Issued

Total
Issued

Weighted Average
Interest Rate

Weighted
Average
Life

FFELP:

2012-1

January 2012

765

1 month LIBOR plus 0.91%

4.6 years

2012-2

March 2012

824

1 month LIBOR plus 0.70%

4.7 years

2012-3

May 2012

1,252

1 month LIBOR plus 0.65%

4.6 years

2012-4

June 2012

1,491

⁽¹⁾

1 month LIBOR plus 1.10%

8.2 years

2011-3

July 2012

N/A (Retained B Notes sold)

2012-4

July 2012

N/A (Retained B Notes sold)

2012-5

July 2012

1,252

1 month LIBOR plus 0.67%

4.5 years

2012-6

September 2012

1,249

1 month LIBOR plus 0.62%

4.6 years

2012-7

November 2012

1,251

1 month LIBOR plus 0.55%

4.5 years

2012-8

December 2012

1,527

1 month LIBOR plus 0.90%

7.8 years

Total bonds issued in 2012

9,680

Total loan amount securitized in 2012

9,565

2013-1

February 2013

1,249

1 month LIBOR plus 0.46%

4.3 years

Total bonds issued in first-quarter 2013

1,249

Total loan amount securitized in first-quarter 2013

1,250

Private Education:

2012-A

February 2012

547

1 month LIBOR plus 2.17%

3.0 years

2012-B

April 2012

891

1 month LIBOR plus 2.12%

2.9 years

2012-C

May 2012

1,135

1 month LIBOR plus 1.77%

2.6 years

2012-D

July 2012

640

1 month LIBOR plus 1.69%

2.5 years

2012-E

October 2012

976

1 month LIBOR plus 1.22%

2.6 years

Total bonds issued in 2012

4,189

Total loan amount securitized in 2012

5,557

2013-R1

January 2013

254

1 month LIBOR plus 1.75%

6.3 years

2013-A

March 2013

1,108

1 month LIBOR plus 0.81%

2.6 years

Total bonds issued in first-quarter 2013

1,362

Total loan amount securitized in first-quarter 2013

1,307

⁽¹⁾	Total size excludes subordinated tranche that was retained at issuance totaling $45 million.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3.	Borrowings (continued)

2013 Sale of FFELP Securitization Trust Residual Interest

On February 13, 2013, we sold the Residual Interest in a FFELP Loan securitization trust to a third party. We will continue to service the student loans in the trust under existing agreements. The sale removed student loan assets of $3.8 billion and related liabilities of $3.7 billion from our balance sheet.

Additional, Recent Borrowing-Related Transactions

Senior Unsecured Debt

On January 28, 2013, we issued $1.5 billion of senior unsecured bonds.

4.	Derivative Financial Instruments

Our risk management strategy and use of and accounting for derivatives have not materially changed from that discussed in our 2012 Form 10-K. Please refer to “Note 7 — Derivative Financial Instruments” in our 2012 Form 10-K for a full discussion.

Summary of Derivative Financial Statement Impact

The following tables summarize the fair values and notional amounts of all derivative instruments at March 31, 2013 and December 31, 2012, and their impact on other comprehensive income and earnings for the three months ended March 31, 2013 and 2012.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4.	Derivative Financial Instruments (continued)

Impact of Derivatives on Consolidated Balance Sheet


		Cash Flow						Fair Value						Trading						Total
(Dollars in millions)	Hedged Risk Exposure	Mar. 31, 2013			Dec. 31, 2012			Mar. 31, 2013			Dec. 31, 2012			Mar. 31, 2013			Dec. 31, 2012			Mar. 31, 2013			Dec. 31, 2012
Fair Values⁽¹⁾
Derivative Assets:
Interest rate swaps	Interest rate	$	1		$	—		$	1,237		$	1,396		$	127		$	150		$	1,365		$	1,546
Cross-currency interest rate swaps	Foreign currency & interest rate		—			—			731			1,165			23			70			754			1,235
Other⁽²⁾	Interest rate		—			—			—			—			—			4			—			4

Total derivative assets⁽³⁾			1			—			1,968			2,561			150			224			2,119			2,785
Derivative Liabilities:
Interest rate swaps	Interest rate		(8	)		(11	)		(14	)		(1	)		(193	)		(197	)		(215	)		(209	)
Floor Income Contracts	Interest rate		—			—			—			—			(1,969	)		(2,154	)		(1,969	)		(2,154	)
Cross-currency interest rate swaps	Foreign currency & interest rate		—			—			(258	)		(136	)		—			—			(258	)		(136	)

Total derivative liabilities⁽³⁾			(8	)		(11	)		(272	)		(137	)		(2,162	)		(2,351	)		(2,442	)		(2,499	)

Net total derivatives		$	(7	)	$	(11	)	$	1,696		$	2,424		$	(2,012	)	$	(2,127	)	$	(323	)	$	286

⁽¹⁾

Fair values reported are exclusive of collateral held and pledged and accrued interest. Assets and liabilities are presented without consideration of master netting agreements. Derivatives are carried on the balance sheet based on net position by counterparty under master netting agreements, and classified in other assets or other liabilities depending on whether in a net positive or negative position.

⁽²⁾	“Other” includes embedded derivatives bifurcated from securitization debt as well as derivatives related to our Total Return Swap Facility.

⁽³⁾	The following table reconciles gross positions with the impact of master netting agreements to the balance sheet classification:


	Other Assets						Other Liabilities
(Dollar in millions)	March 31, 2013			December 31, 2012			March 31, 2013			December 31, 2012
Gross position	$	2,119		$	2,785		$	(2,442	)	$	(2,499	)
Impact of master netting agreements		(435	)		(544	)		435			544

Derivative values with impact of master netting agreements (as carried on balance sheet)		1,684			2,241			(2,007	)		(1,955	)
Cash collateral (held) pledged		(1,239	)		(1,423	)		893			973

Net position	$	445		$	818		$	(1,114	)	$	(982	)

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4.	Derivative Financial Instruments (continued)

The above fair values include adjustments for counterparty credit risk both for when we are exposed to the counterparty, net of collateral postings, and when the counterparty is exposed to us, net of collateral postings. The net adjustments decreased the overall net asset positions at March 31, 2013 and December 31, 2012 by $71 million and $111 million, respectively. In addition, the above fair values reflect adjustments for illiquid derivatives as indicated by a wide bid/ask spread in the interest rate indices to which the derivatives are indexed. These adjustments decreased the overall net asset positions at March 31, 2013 and December 31, 2012 by $102 million and $107 million, respectively.


	Cash Flow				Fair Value				Trading				Total
(Dollars in billions)	Mar. 31, 2013		Dec. 31, 2012		Mar. 31, 2013		Dec. 31, 2012		Mar. 31, 2013		Dec. 31, 2012		Mar. 31, 2013		Dec. 31, 2012
Notional Values:
Interest rate swaps	$	0.7	$	0.7	$	15.8	$	15.8	$	55.5	$	56.9	$	72.0	$	73.4
Floor Income Contracts		—		—		—		—		36.8		51.6		36.8		51.6
Cross-currency interest rate swaps		—		—		12.5		13.7		.3		0.3		12.8		14.0
Other⁽¹⁾		—		—		—		—		1.2		1.4		1.2		1.4

Total derivatives	$	0.7	$	0.7	$	28.3	$	29.5	$	93.8	$	110.2	$	122.8	$	140.4

⁽¹⁾	“Other” includes embedded derivatives bifurcated from securitization debt, as well as derivatives related to our Total Return Swap Facility.

Impact of Derivatives on Consolidated Statements of Income


	Three Months Ended March 31,
	Unrealized Gain (Loss) on Derivatives⁽¹⁾⁽²⁾						Realized Gain (Loss) on Derivatives⁽³⁾						Unrealized Gain (Loss) on Hedged Item⁽¹⁾					Total Gain (Loss)
(Dollars in millions)	2013			2012			2013			2012			2013		2012			2013			2012
Fair Value Hedges:
Interest rate swaps	$	(172	)	$	(148	)	$	109		$	113		$	195	$	156		$	132		$	121
Cross-currency interest rate swaps		(556	)		192			21			61			552		(453	)		17			(200	)

Total fair value derivatives		(728	)		44			130			174			747		(297	)		149			(79	)
Cash Flow Hedges:
Interest rate swaps		—			—			(3	)		(7	)		—		—			(3	)		(7	)

Total cash flow derivatives		—			—			(3	)		(7	)		—		—			(3	)		(7	)
Trading:
Interest rate swaps		(19	)		(39	)		24			35			—		—			5			(4	)
Floor Income Contracts		189			136			(213	)		(215	)		—		—			(24	)		(79	)
Cross-currency interest rate swaps		(47	)		(33	)		20			2			—		—			(27	)		(31	)
Other		(4	)		(4	)		—			(1	)		—		—			(4	)		(5	)

Total trading derivatives		119			60			(169	)		(179	)		—		—			(50	)		(119	)

Total		(609	)		104			(42	)		(12	)		747		(297	)		96			(205	)
Less: realized gains (losses) recorded in interest expense		—			—			127			167			—		—			127			167

Gains (losses) on derivative and hedging activities, net	$	(609	)	$	104		$	(169	)	$	(179	)	$	747	$	(297	)	$	(31	)	$	(372	)

⁽¹⁾	Recorded in “Gains (losses) on derivative and hedging activities, net” in the consolidated statements of income.

⁽²⁾	Represents ineffectiveness related to cash flow hedges.

⁽³⁾	For fair value and cash flow hedges, recorded in interest expense. For trading derivatives, recorded in “Gains (losses) on derivative and hedging activities, net.”

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4.	Derivative Financial Instruments (continued)

Collateral

Collateral held and pledged related to derivative exposures between us and our derivative counterparties are detailed in the following table:


(Dollars in millions)	March 31, 2013		December 31, 2012
Collateral held:
Cash (obligation to return cash collateral is recorded in short-term borrowings)⁽¹⁾	$	1,239	$	1,423
Securities at fair value — on-balance sheet securitization derivatives (not recorded in financial statements)⁽²⁾		488		613

Total collateral held	$	1,727	$	2,036

Derivative asset at fair value including accrued interest	$	1,972	$	2,570

Collateral pledged to others:
Cash (right to receive return of cash collateral is recorded in investments)	$	893	$	973

Total collateral pledged	$	893	$	973

Derivative liability at fair value including accrued interest and premium receivable	$	1,231	$	1,204

⁽¹⁾	At March 31, 2013 and December 31, 2012, $0 and $9 million, respectively, were held in restricted cash accounts.

⁽²⁾	The trusts do not have the ability to sell or re-pledge securities they hold as collateral.

Our corporate derivatives contain credit contingent features. At our current unsecured credit rating, we have fully collateralized our corporate derivative liability position (including accrued interest and net of premiums receivable) of $940 million with our counterparties. Further downgrades would not result in any additional collateral requirements, except to increase the frequency of collateral calls. Two counterparties have the right to terminate the contracts with further downgrades. We currently have a liability position with these derivative counterparties (including accrued interest and net of premiums receivable) of $254 million and have posted $251 million of collateral to these counterparties. If the credit contingent feature was triggered for these two counterparties and the counterparties exercised their right to terminate, we would be required to deliver additional assets of $3 million to settle the contracts. Trust related derivatives do not contain credit contingent features related to our or the trusts’ credit ratings.

5.	Other Assets

The following table provides the detail of our other assets.


	March 31, 2013					December 31, 2012
(Dollars in millions)	Ending Balance		% of Balance			Ending Balance		% of Balance
Accrued interest receivable, net	$	2,129		29	%	$	2,147		26	%
Derivatives at fair value		1,684		23			2,241		27
Income tax asset, net current and deferred		1,280		17			1,478		18
Accounts receivable		1,099		15			1,111		13
Benefit and insurance-related investments		475		6			474		6
Fixed assets, net		226		3			215		3
Other loans, net		129		2			137		2
Other		441		5			470		5

Total	$	7,463		100	%	$	8,273		100	%

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The “Derivatives at fair value” line in the above table represents the fair value of our derivatives in a gain position by counterparty, exclusive of accrued interest and collateral. At March 31, 2013 and December 31, 2012, these balances included $1.7 billion and $2.4 billion, respectively, of cross-currency interest rate swaps and interest rate swaps designated as fair value hedges that were offset by an increase in interest-bearing liabilities related to the hedged debt. As of March 31, 2013 and December 31, 2012, the cumulative mark-to-market adjustment to the hedged debt was $(2.1) billion and $(2.8) billion, respectively.

6.	Stockholders’ Equity

The following table summarizes our common share repurchases and issuances.


	Three Months Ended March 31,
	2013		2012
Common shares repurchased⁽¹⁾		10,220,804		16,703,182
Average purchase price per share⁽²⁾	$	19.49	$	16.04

Shares repurchased related to employee stock-based compensation plans⁽³⁾		2,324,575		2,056,977
Average purchase price per share	$	18.11	$	15.33

Common shares issued⁽⁴⁾		4,157,795		3,171,484

⁽¹⁾

Common shares purchased under our share repurchase program, of which $201 million remains available as of March 31, 2013.

⁽²⁾

Average purchase price per share includes purchase commission costs.

⁽³⁾

Comprises shares withheld from stock option exercises and vesting of restricted stock for employees’ tax withholding obligations and shares tendered by employees to satisfy option exercise costs.

⁽⁴⁾

Common shares issued under our various compensation and benefit plans.

The closing price of our common stock on March 28, 2013 was $20.50.

Dividend and Share Repurchase Program

In the first-quarter 2013, we paid a common stock dividend of $0.15 per common share, up from $0.125 per common share in the prior year.

For the first-quarter 2013, we repurchased 10 million shares of common stock for $199 million. The shares were repurchased under the Company’s February 2013 share repurchase program that authorizes up to $400 million of share repurchases.

In 2012, we authorized the repurchase of up to $900 million of outstanding common stock in open market transactions and we repurchased 58 million shares for an aggregate purchase price of $900 million.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7.	Earnings per Common Share

Basic earnings per common share (“EPS”) are calculated using the weighted average number of shares of common stock outstanding during each period. A reconciliation of the numerators and denominators of the basic and diluted EPS calculations follows.


	Three Months Ended March 31,
(In millions, except per share data)	2013		2012
Numerator:
Net income attributable to SLM Corporation	$	346	$	112
Preferred stock dividends		5		5

Net income attributable to SLM Corporation common stock	$	341	$	107

Denominator:
Weighted average shares used to compute basic EPS		451		503
Effect of dilutive securities:
Dilutive effect of stock options, non-vested deferred compensation and restricted stock, restricted stock units and Employee Stock Purchase Plan (“ESPP”)⁽¹⁾		7		7

Dilutive potential common shares⁽²⁾		7		7

Weighted average shares used to compute diluted EPS		458		510

Basic earnings per common share attributable to SLM Corporation	$	.76	$	.21

Diluted earnings per common share attributable to SLM Corporation	$	.74	$	.21

⁽¹⁾

Includes the potential dilutive effect of additional common shares that are issuable upon exercise of outstanding stock options, non-vested deferred compensation and restricted stock, restricted stock units, and the outstanding commitment to issue shares under the ESPP, determined by the treasury stock method.

⁽²⁾

For the three months ended March 31, 2013 and 2012, securities covering approximately 5 million and 12 million shares, respectively, were outstanding but not included in the computation of diluted earnings per share because they were anti-dilutive.

8.	Fair Value Measurements

We use estimates of fair value in applying various accounting standards in our financial statements.

We categorize our fair value estimates based on a hierarchical framework associated with three levels of price transparency utilized in measuring financial instruments at fair value. Please refer to “Note 13 — Fair Value Measurements” in our 2012 Form 10-K for a full discussion.

During the three months ended March 31, 2013, there were no significant transfers of financial instruments between levels, or changes in our methodology or assumptions used to value our financial instruments.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8.	Fair Value Measurements (continued)

The following table summarizes the valuation of our financial instruments that are marked-to-market on a recurring basis.


	Fair Value Measurements on a Recurring Basis
	March 31, 2013											December 31, 2012
(Dollars in millions)	Level 1		Level 2			Level 3			Total			Level 1		Level 2			Level 3			Total
Assets
Available-for-sale investments:
Agency residential mortgage-backed securities	$	—	$	67		$	—		$	67		$	—	$	63		$	—		$	63
Guaranteed investment contracts		—		8			—			8			—		9			—			9
Other		—		10			—			10			—		9			—			9

Total available-for-sale investments		—		85			—			85			—		81			—			81
Derivative instruments:⁽¹⁾
Interest rate swaps		—		1,275			90			1,365			—		1,444			102			1,546
Cross-currency interest rate swaps		—		26			728			754			—		48			1,187			1,235
Other		—		—			—			—			—		—			4			4

Total derivative assets⁽³⁾		—		1,301			818			2,119			—		1,492			1,293			2,785

Total	$	—	$	1,386		$	818		$	2,204		$	—	$	1,573		$	1,293		$	2,866

Liabilities⁽²⁾
Derivative instruments⁽¹⁾
Interest rate swaps	$	—	$	(49	)	$	(166	)	$	(215	)	$	—	$	(34	)	$	(175	)	$	(209	)
Floor Income Contracts		—		(1,969	)		—			(1,969