SLM-1Q_2015_10-Q



 
 
 
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, 2015
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, 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
  þ
 
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  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, 2015
Common Stock, $0.20 par value
425,180,591 shares
 
 






SLM CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS
INDEX
 

Part I. Financial Information
 
 

Item 1.
Financial Statements
 
2

Item 1.
Notes to the Financial Statements
 
8

Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
 
32

Item 3.
Quantitative and Qualitative Disclosures about Market Risk
 
53

Item 4.
Controls and Procedures
 
56

PART II. Other Information
 
 
Item 1.
Legal Proceedings
 
57

Item 1A.
Risk Factors
 
58

Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
 
58

Item 3.
Defaults Upon Senior Securities
 
58

Item 4.
Mine Safety Disclosures
 
58

Item 5.
Other Information
 
58

Item 6.
Exhibits
 
59




1


SLM CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
 
 
 
March 31,
 
December 31,
 
 
2015
 
2014
Assets
 
 
 
 
Cash and cash equivalents
 
$
875,622

 
$
2,359,780

Available-for-sale investments at fair value (cost of $168,964 and $167,740, respectively)
 
170,831

 
168,934

Loans held for investment (net of allowance for losses of $89,805 and $83,842, respectively)
 
10,909,014

 
9,509,786

Other interest-earning assets
 
62,383

 
77,283

Accrued interest receivable
 
541,355

 
469,697

Premises and equipment, net
 
79,822

 
78,470

Acquired intangible assets, net
 
2,855

 
3,225

Tax indemnification receivable
 
227,157

 
240,311

Other assets
 
64,485

 
64,757

Total assets
 
$
12,933,524

 
$
12,972,243

 
 
 
 
 
Liabilities
 
 
 
 
Deposits
 
$
10,467,753

 
$
10,540,555

Income taxes payable, net
 
194,345

 
191,499

Upromise related liabilities
 
285,104

 
293,004

Other liabilities
 
120,409

 
117,227

Total liabilities
 
11,067,611

 
11,142,285

 
 
 
 
 
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
 
165,000

 
165,000

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: 428 million and 425 million shares issued, respectively
 
85,587

 
84,961

Additional paid-in capital
 
1,106,415

 
1,090,511

Accumulated other comprehensive loss (net of tax benefit of $13,012 and $7,186, respectively)
 
(20,584
)
 
(11,393
)
Retained earnings
 
154,824

 
113,066

Total SLM Corporation stockholders' equity before treasury stock
 
1,891,242

 
1,842,145

Less: Common stock held in treasury at cost: 3 million and 1 million shares, respectively
 
(25,329
)
 
(12,187
)
Total equity
 
1,865,913

 
1,829,958

Total liabilities and equity
 
$
12,933,524

 
$
12,972,243


See accompanying notes to consolidated financial statements.

2


SLM CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
 
 
 
Three Months Ended
 
 
March 31,
 
 
2015
 
2014
Interest income:
 
 
 
 
Loans
 
$
197,856

 
$
160,035

Investments
 
2,720

 
968

Cash and cash equivalents
 
780

 
866

Total interest income
 
201,356

 
161,869

Interest expense:
 
 
 
 
Deposits
 
29,570

 
22,591

Other interest expense
 
832

 
40

Total interest expense
 
30,402

 
22,631

Net interest income
 
170,954

 
139,238

Less: provisions for loan losses
 
16,618

 
39,159

Net interest income after provisions for loan losses
 
154,336

 
100,079

Noninterest income:
 
 
 
 
Gains on sales of loans, net
 
—

 
33,888

Gains (losses) on derivatives and hedging activities, net
 
3,292

 
(764
)
Other
 
8,007

 
8,136

Total noninterest income
 
11,299

 
41,260

Expenses:
 
 
 
 
Compensation and benefits
 
41,203

 
29,667

Other operating expenses
 
39,984

 
34,004

Total operating expenses
 
81,187

 
63,671

Acquired intangible asset amortization expense
 
370

 
1,767

Restructuring and other reorganization expenses
 
4,657

 
229

Total expenses
 
86,214

 
65,667

Income before income tax expense
 
79,421

 
75,672

Income tax expense
 
31,722

 
28,658

Net income
 
47,699

 
47,014

Less: net loss attributable to noncontrolling interest
 
—

 
(434
)
Net income attributable to SLM Corporation
 
47,699

 
47,448

Preferred stock dividends
 
4,823

 
—

Net income attributable to SLM Corporation common stock
 
$
42,876

 
$
47,448

 
 
 
 
 
Basic earnings per common share attributable to SLM Corporation
 
$
0.10

 
$
0.11

Average common shares outstanding
 
424,428

 
426,717

Diluted earnings per common share attributable to SLM Corporation
 
$
0.10

 
$
0.11

Average common and common equivalent shares outstanding
 
432,302

 
434,650



See accompanying notes to consolidated financial statements.

3


SLM CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
 
 
 
Three Months Ended
 
 
March 31,  
 
 
2015
 
2014
Net income
 
$
47,699

 
$
47,014

Other comprehensive income (loss):
 
 
 
 
Unrealized gains on investments
 
673

 
1,406

Unrealized losses on cash flow hedges
 
(15,689
)
 
—

Total unrealized gains (losses)
 
(15,016
)
 
1,406

Income tax (expense) benefit
 
5,825

 
(534
)
Other comprehensive income (loss), net of tax benefit (expense)
 
(9,191
)
 
872

Comprehensive income
 
38,508

 
47,886

Less: comprehensive loss attributable to noncontrolling interest
 
—

 
(434
)
Total comprehensive income attributable to SLM Corporation
 
$
38,508

 
$
48,320


















See accompanying notes to consolidated financial statements.

4


SLM CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In thousands, except share and per share amounts)
(Unaudited)
 



 
 
Navient's Subsidiary Investment
 
Accumulated
Other
Comprehensive
Income (Loss)
 
 
Total SLM Corporation Equity
 
Non-controlling interest
 
Total Equity
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2013
 
$
1,164,495

 
$
(3,024
)
 
 
$
1,161,471

 
$
4,672

 
$
1,166,143

Net income (loss)
 
47,448

 
—

 
 
47,448

 
(434
)
 
47,014

Other comprehensive income, net of tax
 
—

 
872

 
 
872

 
—

 
872

Total comprehensive income (loss)
 
—

 
—

 
 
48,320

 
(434
)
 
47,886

Net transfers from affiliate
 
17,244

 
—

 
 
17,244

 
—

 
17,244

Balance at March 31, 2014
 
$
1,229,187

 
$
(2,152
)
 
 
$
1,227,035

 
$
4,238

 
$
1,231,273
























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
Income (Loss)
 
Retained Earnings
 
Treasury Stock
 
Total SLM Corporation Equity
Balance at December 31, 2014
 
7,300,000

 
424,804,125

 
(1,365,277
)
 
423,438,848

 
$
565,000

 
$
84,961

 
$
1,090,511

 
$
(11,393
)
 
$
113,066

 
$
(12,187
)
 
$
1,829,958

Net income
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
47,699

 
—

 
47,699

Other comprehensive loss, net of tax
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(9,191
)
 
—

 
—

 
(9,191
)
Total comprehensive income
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
38,508

Cash dividends:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Preferred Stock, series A ($.87 per share)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(2,875
)
 
—

 
(2,875
)
Preferred Stock, series B ($.49 per share)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(1,948
)
 
—

 
(1,948
)
Dividend equivalent units related to employee stock-based compensation plans
 
—

 
—

 
—

 
—

 
—

 
—

 
1,118

 
—

 
(1,118
)
 
—

 
—

Issuance of common shares
 
—

 
3,130,839

 

 
3,130,839

 
—

 
626

 
4,050

 
—

 
—

 
—

 
4,676

Tax benefit related to employee stock-based compensation
 
—

 
—

 
—

 
—

 
—

 
—

 
4,596

 
—

 
—

 
—

 
4,596

Stock-based compensation expense
 
—

 
—

 
—

 
—

 
—

 
—

 
6,140

 
—

 
—

 
—

 
6,140

Shares repurchased related to employee stock-based compensation plans
 
—

 
—

 
(1,389,096
)
 
(1,389,096
)
 
—

 
—

 
—

 
—

 
—

 
(13,142
)
 
(13,142
)
Balance at March 31, 2015
 
7,300,000

 
427,934,964

 
(2,754,373
)
 
425,180,591

 
$
565,000

 
$
85,587

 
$
1,106,415

 
$
(20,584
)
 
$
154,824

 
$
(25,329
)
 
$
1,865,913

See accompanying notes to consolidated financial statements.




6


SLM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
 
Three Months Ended
 
 
March, 31
 
 
2015
 
2014
Operating activities
 
 
 
 
Net income
 
$
47,699

 
$
47,014

Adjustments to reconcile net income to net cash used in operating activities:
 
 
 
 
Provision for loan losses
 
16,618

 
39,159

Tax provision
 
31,722

 
28,658

Amortization of brokered deposit placement fee
 
2,695

 
2,750

Amortization of deferred loan origination costs and fees, net
 
641

 
298

Net amortization of discount on investments
 
324

 
88

Depreciation of premises and equipment
 
1,659

 
1,182

Amortization and impairment of acquired intangibles
 
370

 
1,767

Stock-based compensation expense
 
6,140

 
7,248

Unrealized (gains)/losses on derivative and hedging activities, net
 
(2,417
)
 
1,107

Gains on sale of loans, net
 
—

 
(33,888
)
Changes in operating assets and liabilities:
 
 
 
 
Net decrease in loans held for sale
 
55

 
5,426

Origination of loans held for sale
 
(55
)
 
(5,426
)
Increase in accrued interest receivable
 
(121,815
)
 
(76,069
)
Decrease (increase) in other interest-earning assets
 
14,900

 
(21,257
)
Decrease in tax indemnification receivable
 
13,154

 
—

(Increase) decrease in other assets
 
(2,079
)
 
3,999

Decrease in income tax payable, net
 
(23,049
)
 
(122,829
)
Increase in accrued interest payable
 
6,541

 
3,907

Decrease in payable due to entity that is a subsidiary of Navient
 
(1,655
)
 
—

(Decrease) increase in other liabilities
 
(10,629
)
 
(1,381
)
Total adjustments
 
(66,880
)
 
(165,261
)
Total net cash used in operating activities
 
(19,181
)
 
(118,247
)
Investing activities
 
 
 
 
Loans acquired and originated
 
(1,663,149
)
 
(1,524,455
)
Net proceeds from sales of loans held for investment
 
6,387

 
679,023

Proceeds from claim payments
 
46,442

 
27,303

Net decrease in loans held for investment
 
243,990

 
183,590

Purchases of available-for-sale securities
 
(8,178
)
 
(25,190
)
Proceeds from sales and maturities of available-for-sale securities
 
6,630

 
1,510

Total net cash used in investing activities
 
(1,367,878
)
 
(658,219
)
Financing activities
 
 
 
 
Net decrease in certificates of deposit
 
(74,457
)
 
(324,487
)
Net (decrease) increase in other deposits
 
(22,415
)
 
135,628

Net decrease in deposits with entity that is a subsidiary of Navient
 
—

 
(3,631
)
Net capital contributions from entity that is a subsidiary of Navient
 
—

 
21,230

Excess tax benefit from the exercise of stock-based awards
 
4,596

 
—

Preferred stock dividends paid
 
(4,823
)
 
—

Net cash provided by financing activities
 
(97,099
)
 
(171,260
)
Net decrease in cash and cash equivalents
 
(1,484,158
)
 
(947,726
)
Cash and cash equivalents at beginning of period
 
2,359,780

 
2,182,865

Cash and cash equivalents at end of period
 
$
875,622

 
$
1,235,139

Cash disbursements made for:
 
 
 
 
Interest
 
$
25,368

 
$
16,180

Income taxes paid
 
$
17,811

 
$
99,267

See accompanying notes to consolidated financial statements.

7

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 (“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 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, 2015 are not necessarily indicative of the results for the year ending December 31, 2015 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, 2014 (the “2014 Form 10-K”).
On April 30, 2014, we completed our plan to legally separate into two distinct publicly traded entities - an education loan management, servicing and asset recovery business, Navient Corporation (“Navient”), and a consumer banking business, SLM Corporation. The separation of Navient from SLM Corporation (the “Spin-Off”) was preceded by an internal corporate reorganization, which was the first step to separate the education loan management, servicing and asset recovery business from the consumer banking business.
For periods before the Spin-Off, the financial statements are presented on a basis of accounting that reflects a change in reporting entity and have been adjusted for the effects of the Spin-Off. These carve-out financial statements and selected financial information represent only those operations, assets, liabilities and equity that form Sallie Mae on a stand-alone basis. Because the Spin-Off occurred on April 30, 2014, the balances as of and for the three months ending March 31, 2014 include the carved out financial results.
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.
Recently Issued Accounting Pronouncements
On February 18, 2015, the FASB issued Accounting Standards Update (“ASU”) No. 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis,” which amends the current consolidation guidance. The amendments reduce the number of consolidation models through the elimination of the indefinite deferral of ASC 810 and place more emphasis on risk of loss when determining a controlling financial interest.  The standard is effective for fiscal periods beginning after December 15, 2015. We do not expect this new guidance to have a material impact to our financial results.




8

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

2. Loans Held for Investment
Loans Held for Investment consist of Private Education Loans and FFELP Loans.
"Private Education Loans" are education loans to students or their families that are not issued, insured or guaranteed by any state or federal government. 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 or customers’ resources. Private Education Loans bear the full credit risk of the borrower and any cosigners. We manage this risk through risk-performance underwriting strategies and the addition of qualified cosigners. Our Private Education Loans generally carry a variable interest rate indexed to LIBOR. As of March 31, 2015, 82 percent of all Private Education Loans were indexed to LIBOR. We provide incentives for customers to include a cosigner on our Private Education Loans, and the vast majority of Private Education Loans in our portfolio are cosigned. We also encourage our Private Education Loan customers to make payments while in school.
FFELP Loans are insured by the federal government 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.
Loans held for investment are summarized as follows:
 
 
March 31,
 
December 31,
 
 
2015
 
2014
Private Education Loans
 
$
9,768,761

 
$
8,311,376

Deferred origination costs
 
17,627

 
13,845

Allowance for loan losses
 
(85,236
)
 
(78,574
)
Total Private Education Loans, net
 
9,701,152

 
8,246,647

 
 
 
 
 
FFELP Loans
 
1,208,977

 
1,264,807

Unamortized acquisition costs, net
 
3,454

 
3,600

Allowance for loan losses
 
(4,569
)
 
(5,268
)
Total FFELP Loans, net
 
1,207,862

 
1,263,139

 
 
 
 
 
Loans held for investment, net
 
$
10,909,014

 
$
9,509,786


 
The estimated weighted average life of education loans in our portfolio was approximately 6.4 years and 6.2 years at March 31, 2015 and December 31, 2014, respectively.

9

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


The average balance and the respective weighted average interest rates are summarized as follows:


 
 
Three Months Ended
 
 
March 31,
 
 
2015
 
2014
 
 
Average Balance
 
Weighted Average Interest Rate
 
Average Balance
 
Weighted Average Interest Rate
Private Education Loans
 
$
9,454,579

 
8.07
%
 
$
7,419,714

 
8.14
%
FFELP Loans
 
1,234,682

 
3.19

 
1,404,595

 
3.19

Total portfolio
 
$
10,689,261

 
 
 
$
8,824,309

 
 



10

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

3. Allowance for Loan Losses
Our provision for loan 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, 2015
 
 
FFELP Loans
 
Private Education
Loans
 
Total
Allowance for Loan Losses
 
 
 
 
 
 
Beginning balance
 
$
5,268

 
$
78,574

 
$
83,842

Total provision
 
435

 
16,183

 
16,618

Net charge-offs:
 
 
 
 
 
 
Charge-offs
 
(1,134
)
 
(8,727
)
 
(9,861
)
Recoveries
 
—

 
1,387

 
1,387

Net charge-offs
 
(1,134
)
 
(7,340
)
 
(8,474
)
Loan sales(1)
 
—

 
(2,181
)
 
(2,181
)
Ending Balance
 
$
4,569

 
$
85,236

 
$
89,805

Allowance:
 
 
 
 
 
 
Ending balance: individually evaluated for impairment
 
$
—

 
$
20,105

 
$
20,105

Ending balance: collectively evaluated for impairment
 
$
4,569

 
$
65,131

 
$
69,700

Loans:
 
 
 
 
 
 
Ending balance: individually evaluated for impairment
 
$
—

 
$
122,120

 
$
122,120

Ending balance: collectively evaluated for impairment
 
$
1,208,977

 
$
9,646,641

 
$
10,855,618

Net charge-offs as a percentage of average loans in repayment (annualized)(2)
 
0.50
%
 
0.51
%
 
 
Allowance as a percentage of the ending total loan balance
 
0.38
%
 
0.87
%
 
 
Allowance as a percentage of the ending loans in repayment(2)
 
0.52
%
 
1.42
%
 
 
Allowance coverage of net charge-offs (annualized)
 
1.01

 
2.90

 
 
Ending total loans, gross
 
$
1,208,977

 
$
9,768,761

 
 
Average loans in repayment(2)
 
$
898,360

 
$
5,705,067

 
 
Ending loans in repayment(2)
 
$
872,579

 
$
5,995,121

 
 
____________
(1) Represents fair value write-downs on loans sold.
(2) Loans in repayment includes in-school loans making interest only and fixed payments as well as loans that have entered full principal and interest repayment status after any applicable grace period.


11

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, 2014
 
 
FFELP Loans
 
Private Education
Loans
 
Total
Allowance for Loan Losses
 
 
 
 
 
 
Beginning balance
 
$
6,318

 
$
61,763

 
$
68,081

Total provision
 
506

 
38,653

 
39,159

Charge-offs(1)
 
(643
)
 
—

 
(643
)
Loan sales(2)
 
—

 
(28,963
)
 
(28,963
)
Ending Balance
 
$
6,181

 
$
71,453

 
$
77,634

Allowance:
 
 
 
 
 
 
Ending balance: individually evaluated for impairment
 
$
—

 
$
—

 
$
—

Ending balance: collectively evaluated for impairment
 
$
6,181

 
$
71,453

 
$
77,634

Loans:
 
 
 
 
 
 
Ending balance: individually evaluated for impairment
 
$
—

 
$
—

 
$
—

Ending balance: collectively evaluated for impairment
 
$
1,396,776

 
$
7,274,718

 
$
8,671,494

Charge-offs as a percentage of average loans in repayment (annualized)(3)
 
0.25
%
 
—
%
 
 
Allowance as a percentage of the ending total loan balance
 
0.44
%
 
0.98
%
 
 
Allowance as a percentage of the ending loans in repayment(3)
 
0.62
%
 
1.67
%
 
 
Allowance coverage of charge-offs (annualized)
 
2.40

 
—

 
 
Ending total loans, gross
 
$
1,396,776

 
$
7,274,718

 
 
Average loans in repayment(3)
 
$
1,023,329

 
$
4,329,157

 
 
Ending loans in repayment(3)
 
$
997,538

 
$
4,278,969

 
 
____________
    
(1) Prior to the Spin-Off, Private Education Loans were sold to an entity that is now a subsidiary of Navient prior to being charged-off.
(2) Represents fair value write-downs on loans sold.
(3) Loans in repayment includes in-school loans making interest only and fixed payments as well as loans that have entered full principal and interest repayment status after any applicable grace period.

     

12

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. Prior to the Spin-Off, we did not have TDR loans because the loans generally were sold to a now unrelated affiliate in the same month that the terms were restructured. Subsequent to May 1, 2014, we have individually assessed $122.1 million of Private Education Loans as TDRs. When these TDR loans are determined to be impaired, we provide for an allowance for losses sufficient to cover life-of-loan expected losses through an impairment calculation based on the difference between the loan's basis and the present value of expected future cash flows discounted at the loan's original effective interest rate.
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 standpoint at any point in their life cycle prior to claim payment, and we continue to accrue interest on those loans through the date of claim.
At March 31, 2015 and December 31, 2014, 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.
 
 
Recorded Investment
 
Unpaid Principal Balance
 
Allowance
 
 
 
 
 
 
 
March 31, 2015
 
 
 
 
 
 
TDR Loans
 
$
123,702

 
$
122,120

 
$
20,105

 
 
 
 
 
 
 
December 31, 2014
 
 
 
 
 
 
TDR Loans
 
$
60,278

 
$
59,402

 
$
9,815


The following table provides the average recorded investment and interest income recognized for our TDR loans.
 
 
Three Months Ended
 
 
March 31, 2015
 
 
Average Recorded Investment
 
Interest Income Recognized
 
 
 
 
 
TDR Loans
 
$
88,120

 
$
2,396




13

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 TDR loans and the aging of TDR loans that are past due.

 
 
March 31,
 
December 31,
 
 
2015
 
2014
 
 
Balance
 
%
 
Balance
 
%
TDR loans in in-school/grace/deferment(1)
 
$
1,481

 
 
 
$
2,915

 
 
TDR loans in forbearance(2)
 
40,128

 
 
 
18,620

 
 
TDR loans in repayment and percentage of each status:
 
 
 
 
 
 
 
 
Loans current
 
73,944

 
91.8
%
 
34,554

 
91.2
%
Loans delinquent 31-60 days(3)
 
3,921

 
4.9

 
1,953

 
5.2

Loans delinquent 61-90 days(3)
 
1,873

 
2.3

 
983

 
2.6

Loans delinquent greater than 90 days(3)
 
773

 
1.0

 
377

 
1.0

Total TDR loans in repayment
 
80,511

 
100.0
%
 
37,867

 
100.0
%
Total TDR loans, gross
 
$
122,120

 
 
 
$
59,402

 
 
_____
(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.

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 and within 12 months of the loan first being designated as a TDR. We define payment default as 60 day 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, 2015
 
 
Modified Loans
 
Charge-offs
 
Payment-Default
 
 
 
 
 
 
 
TDR Loans
 
$
122,120

 
$
930

 
$
4,785




14

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



Key Credit Quality Indicators
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 origination and maintained 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, 2015
 
December 31, 2014
Credit Quality Indicators:
 
Balance(1)
 
% of Balance
 
Balance(1)
 
% of Balance
 
 
 
 
 
 
 
 
 
Cosigners:
 
 
 
 
 
 
 
 
With cosigner
 
$
8,804,812

 
90
%
 
$
7,465,339

 
90
%
Without cosigner
 
963,949

 
10

 
846,037

 
10

Total
 
$
9,768,761

 
100
%
 
$
8,311,376

 
100
%
 
 
 
 
 
 
 
 
 
FICO at Origination:
 
 
 
 
 
 
 
 
Less than 670
 
$
638,195

 
6
%
 
$
558,801

 
7
%
670-699
 
1,431,436

 
15

 
1,227,860

 
15

700-749
 
3,103,824

 
32

 
2,626,238

 
32

Greater than or equal to 750
 
4,595,306

 
47

 
3,898,477

 
46

Total
 
$
9,768,761

 
100
%
 
$
8,311,376

 
100
%
 
 
 
 
 
 
 
 
 
Seasoning(2):
 
 
 
 
 
 
 
 
1-12 payments
 
$
3,031,655

 
31
%
 
$
2,373,117

 
29
%
13-24 payments
 
1,650,103

 
17

 
1,532,042

 
18

25-36 payments
 
812,674

 
8

 
755,143

 
9

37-48 payments
 
412,865

 
4

 
411,493

 
5

More than 48 payments
 
257,986

 
3

 
212,438

 
3

Not yet in repayment
 
3,603,478

 
37

 
3,027,143

 
36

Total
 
$
9,768,761

 
100
%
 
$
8,311,376

 
100
%
(1) 
Balance represents gross Private Education Loans.
(2) 
Number of months in active repayment for which a scheduled payment was due.
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. Included within our FFELP portfolio as of March 31, 2015 are $741 million of FFELP rehabilitation loans. These loans have previously defaulted but have subsequently been brought current according to a loan rehabilitation agreement. The credit performance on rehabilitation loans is worse than the remainder of our FFELP portfolio. At March 31, 2015 and December 31, 2014, 61.3 percent and 62.1 percent, respectively, of our FFELP portfolio consisted of rehabilitation loans.


15

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


 The following tables provide information regarding the loan status of our Private Education Loans and the aging of our past due Private Education Loans. Loans in repayment includes in-school loans making interest only and 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,
 
 
 
2015
 
2014
 
 
 
Balance
 
%
 
Balance
 
%
 
Loans in-school/grace/deferment(1)
 
$
3,603,478

 
 
 
$
3,027,143

 
 
 
Loans in forbearance(2)
 
170,162

 
 
 
135,018

 
 
 
Loans in repayment and percentage of each status:
 
 
 
 
 
 
 
 
 
Loans current
 
5,896,132

 
98.4
%
 
5,045,600

 
98.0
%
 
Loans delinquent 31-60 days(3)
 
54,883

 
0.9

 
63,873

 
1.2

 
Loans delinquent 61-90 days(3)
 
31,202

 
0.5

 
29,041

 
0.6

 
Loans delinquent greater than 90 days(3)
 
12,904

 
0.2

 
10,701

 
0.2

 
Total loans in repayment
 
5,995,121

 
100.0
%
 
5,149,215

 
100.0
%
 
Total loans, gross
 
9,768,761

 
 
 
8,311,376

 
 
 
Deferred origination costs
 
17,627

 
 
 
13,845

 
 
 
Total loans
 
9,786,388

 
 
 
8,325,221

 
 
 
Allowance for loan losses
 
(85,236
)
 
 
 
(78,574
)
 
 
 
Total loans, net
 
$
9,701,152

 
 
 
$
8,246,647

 
 
 
Percentage of loans in repayment
 
 
 
61.4
%
 
 
 
62.0
%
 
Delinquencies as a percentage of loans in repayment
 
 
 
1.7
%
 
 
 
2.0
%
 
Loans in forbearance as a percentage of loans in repayment and forbearance
 
 
 
2.8
%
 
 
 
2.6
%
 
(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.
 




16

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 portfolio for all periods presented.
 
 
Private Education Loan
 
 
Accrued Interest Receivable
 
 
Total Interest Receivable
 
Greater than 90 days Past Due
 
Allowance for Uncollectible Interest
 
 
 
 
 
 
 
March 31, 2015
 
$
512,501

 
$
473

 
$
2,634

December 31, 2014
 
$
445,710

 
$
443

 
$
3,517



17

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, 2015 and December 31, 2014.
 
 
March 31,
 
December 31,
 
 
 
2015
 
2014
 
Deposits - interest bearing
 
$
10,466,838

 
$
10,539,953

 
Deposits - non-interest bearing
 
915

 
602

 
Total deposits
 
$
10,467,753

 
$
10,540,555

 
Interest Bearing
Interest bearing deposits as of March 31, 2015 and December 31, 2014 consisted of non-maturity savings and money market deposits, brokered and retail certificates of deposit, and brokered money market deposits. These deposit products are serviced by third party providers. Placement fees associated with the brokered certificates of deposit are amortized into interest expense using the effective interest rate method. We recognized placement fee expense of $2,695 and $2,750 for the three months ended March 31, 2015 and 2014, respectively. No fees were paid to third party brokers related to these certificates of deposit during the three months ended March 31, 2015 and 2014, respectively.
Interest bearing deposits at March 31, 2015 and December 31, 2014 are summarized as follows:
 
 
 
March 31, 2015
 
December 31, 2014
 
 
 
Amount
 
Qtr.-End Weighted Average Stated Rate
 
Amount
 
Year-End Weighted Average Stated Rate
 
 
 
 
 
 
 
 
 
 
 
Money market
 
$
4,512,730

 
1.14
%
 
$
4,527,448

 
1.15
%
 
Savings
 
695,675

 
0.81

 
703,687

 
0.81

 
Certificates of deposit
 
5,258,433

 
1.02

 
5,308,818

 
1.00

 
Deposits - interest bearing
 
$
10,466,838

 
 
 
$
10,539,953

 


 

 As of March 31, 2015 and December 31, 2014, there were $224,182 and $253,953, respectively, of deposits exceeding Federal Deposit Insurance Corporation (“FDIC”) insurance limits. Accrued interest on deposits was $22,624 and $16,082 at March 31, 2015 and December 31, 2014, respectively.


Non Interest Bearing

Non interest bearing deposits were $915 and $602 as of March 31, 2015 and December 31, 2014, respectively. For both periods these were comprised of money market accounts related to our Employee Stock Purchase Plan account.



18

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

5. Borrowed Funds

We maintain discretionary uncommitted Federal Funds lines of credit with various correspondent banks, which totaled $100,000 at March 31, 2015. The interest rate we are charged on these lines of credit is priced at Fed Funds plus a spread at the time of borrowing, and is payable daily. We did not utilize these lines of credit in the three months ended March 31, 2015 and 2014.
We established an account at the Federal Reserve Bank (“FRB”) to meet eligibility requirements for access to the Primary Credit borrowing facility at the FRB’s Discount Window (“Window”). The Primary Credit borrowing facility is a lending program available to depository institutions that are in generally sound financial condition. All borrowings at the Window must be fully collateralized. We can pledge asset-backed and mortgage-backed securities, as well as FFELP Loans and Private Education Loans, to the FRB as collateral for borrowings at the Window. Generally, collateral value is assigned based on the estimated fair value of the pledged assets. At March 31, 2015 and December 31, 2014, the value of our pledged collateral at the FRB totaled $1,361,879 and $1,398,286, respectively. The interest rate charged to us is the discount rate set by the FRB. We did not utilize this facility in the three months ended March 31, 2015 and 2014.

6. Derivative Financial Instruments

We maintain an overall interest rate risk management strategy that incorporates the use of derivative instruments to minimize the economic effect of interest rate changes. Our goal is to manage interest rate sensitivity by modifying the repricing frequency and underlying index characteristics of certain balance sheet assets and liabilities so the net interest margin is not, on a material basis, adversely affected by movements in interest rates. We do not use derivative instruments to hedge credit risk associated with debt we issued. As a result of interest rate fluctuations, hedged assets and liabilities will appreciate or depreciate in market value. Income or loss on the derivative instruments that are linked to the hedged assets and liabilities will generally offset the effect of this unrealized appreciation or depreciation for the period the item is being hedged. We view this strategy as a prudent management of interest rate sensitivity. Please refer to “Note 11 - Derivative Financial Instruments” in our 2014 Form 10-K for a full discussion of our risk management strategy.
Although we use derivatives to offset (or minimize) the risk of interest rate changes, the use of derivatives does expose us to both market and credit risk. Market risk is the chance of financial loss resulting from changes in interest rates, foreign exchange rates and market liquidity. Credit risk is the risk that a counterparty will not perform its obligations under a contract and it is limited to the loss of the fair value gain in a derivative that the counterparty owes us. When the fair value of a derivative contract is negative, we owe the counterparty and, therefore, have no credit risk exposure to the counterparty; however, the counterparty has exposure to us. We minimize the credit risk in derivative instruments by entering into transactions with highly rated counterparties that are reviewed regularly by our Credit Department. We also maintain a policy of requiring that all derivative contracts be governed by an International Swaps and Derivative Association Master Agreement. Depending on the nature of the derivative transaction, bilateral collateral arrangements generally are required as well. When we have more than one outstanding derivative transaction with the counterparty, and there exists legally enforceable netting provisions with the counterparty (i.e., a legal right to offset receivable and payable derivative contracts), the “net” mark-to-market exposure, less collateral the counterparty has posted to us, represents exposure with the counterparty. When there is a net negative exposure, we consider our exposure to the counterparty to be zero. At March 31, 2015 and December 31, 2014, we had a net positive exposure (derivative gain positions to us less collateral which has been posted by counterparties to us) related to derivatives of $60,826 and $60,784, respectively.




19

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
6.
Derivative Financial Instruments (Continued)
 


Summary of Derivative Financial Statement Impact
The following tables summarize the fair values and notional amounts of all derivative instruments at March 31, 2015 and December 31, 2014, and their impact on earnings and other comprehensive income for the three months ended March 31, 2015 and 2014.

Impact of Derivatives on the Consolidated Balance Sheet
 
 
 
Cash Flow Hedges
 
Fair Value Hedges
 
Trading
 
Total
 
 
 
March 31,
 
December 31,
 
March 31,
 
December 31,
 
March 31,
 
December 31,
 
March 31,
 
December 31,
 
 
 
2015
 
2014
 
2015
 
2014
 
2015
 
2014
 
2015
 
2014
Fair Values(1)
Hedged Risk Exposure
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative Assets:(2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
Interest rate
 
$
—

 
$
—

 
$
24,377

 
$
5,012

 
$
1,033

 
$
226

 
$
25,410

 
$
5,238

Derivative Liabilities:(2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
Interest rate
 
(37,295
)
 
(21,435
)
 
(738
)
 
(5,883
)
 
(30
)
 
(1,370
)
 
(38,063
)
 
(28,688
)
Total net derivatives
 
 
$
(37,295
)
 
$
(21,435
)
 
$
23,639

 
$
(871
)
 
$
1,003

 
$
(1,144
)
 
$
(12,653
)
 
$
(23,450
)
     ___________
(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)
The following table reconciles gross positions with the impact of master netting agreements to the balance sheet classification:
    
 
 
Other Assets
 
Other Liabilities
 
 
March 31,
 
December 31,
 
March 31,
 
December 31,
 
 
2015
 
2014
 
2015
 
2014
Gross position
 
$
25,410

 
$
5,238

 
$
(38,063
)
 
$
(28,688
)
Impact of master netting agreement
 
(11,003
)
 
(4,045
)
 
11,003

 
4,045

Derivative values with impact of master netting agreements (as carried on balance sheet)
 
14,407

 
1,193

 
(27,060
)
 
(24,643
)
Cash collateral (held) pledged(1)
 
(3,283
)
 
(900
)
 
58,625

 
72,478

Net position
 
$
11,124

 
$
293

 
$
31,565

 
$
47,835


(1)
Cash collateral amount calculations include outstanding accrued interest payable/receivable.


20

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
6.
Derivative Financial Instruments (Continued)
 


 
 
 
Cash Flow
 
Fair Value
 
Trading
 
Total
 
 
 
March 31,
 
December 31,
 
March 31,
 
December 31,
 
March 31,
 
December 31,
 
March 31,
 
December 31,
 
 
 
2015
 
2014
 
2015
 
2014
 
2015
 
2014
 
2015
 
2014
Notional Values
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
 
$
1,110,072

 
$
1,106,920

 
$
2,992,821

 
$
3,044,492

 
$
973,539

 
$
973,539

 
$
5,076,432

 
$
5,124,951



Impact of Derivatives on the Consolidated Statements of Income

 
 
Three Months Ended
 
 
March 31,
 
 
2015
 
2014
 
 
 
 
 
Fair Value Hedges
 
 
 
 
Interest rate swaps:
 
 
 
 
Hedge ineffectiveness gains (losses) recorded in earnings
 
$
427

 
$
(122
)
Realized gains recorded in interest expense
 
7,491

 
5,672

Total
 
$
7,918

 
$
5,550

 
 
 
 
 
Cash Flow Hedges
 
 
 
 
Interest rate swaps:
 
 
 
 
Hedge ineffectiveness losses recorded in earnings
 
(304
)
 
—

Realized losses recorded in interest expense
 
(5,353
)
 
—

Total
 
$
(5,657
)
 
$
—

 
 
 
 
 
Trading
 
 
 
 
Interest rate swaps:
 
 
 
 
Interest reclassification
 
$
1,023

 
$
459

Change in fair value of future interest payments recorded in earnings
 
2,146

 
(1,101
)
Total(1) 
 
3,169

 
(642
)
Total
 
$
5,430

 
$
4,908

________
(1)
Amounts included in "gains (losses) on derivatives and hedging activities, net. in the consolidated statements of income".


21

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
6.
Derivative Financial Instruments (Continued)
 


Impact of Derivatives on the Statements of Changes in Stockholders' Equity
 
 
Three Months Ended
 
 
March 31,
 
 
2015
 
2014
Amount of loss recognized in other comprehensive income
 
$
(21,042
)
 
$
—

Amount of loss reclassified in interest expense(1)
 
(5,353
)
 
—

Total change in other comprehensive income for unrealized losses on derivatives
 
$
(15,689
)
 
$
—

___________
(1) Amounts included in “realized gains (losses) recorded in interest expense” in the “Impact of Derivatives on the Consolidated Statements of Income” table.
Cash Collateral
Cash collateral held related to derivative exposure between us and our derivatives counterparties was $3,283 and $900 at March 31, 2015 and December 31, 2014, respectively. Collateral held is recorded in “Other Liabilities.” Cash collateral pledged related to derivative exposure between us and our derivatives counterparties was $58,625 and $72,478 at March 31, 2015 and December 31, 2014, respectively.

22

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

7. Stockholders' Equity

The following table summarizes our common share repurchases and issuances.
 
 
 
Three Months Ended March 31,
(Shares and per share amounts in actuals)
 
2015
 
2014
Shares repurchased related to employee stock-based compensation plans(1)
 
1,389,096

 
2,115,470

Average purchase price per share
 
$
9.46

 
$
23.56

Common shares issued(2)
 
3,130,839

 
4,238,182

             
__________________
(1) 
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.
(2) 
Common shares issued under our various compensation and benefit plans.
 
The closing price of our common stock on March 31, 2015 was $9.28.


Investment with entities that are now subsidiaries of Navient

Prior to the Spin-Off, there were transactions between us and affiliates of pre-Spin-Off SLM that are now subsidiaries of Navient. As part of the carve-out, expenses of those transactions were included in our results even though the actual payments for the expenses were paid by the aforementioned affiliates. As such, amounts equal to these payments have been treated as equity contributions in the table below. Certain payments made by us to these affiliates prior to the Spin-Off transaction were treated as dividends.

Net transfers (to)/from the entity that is now a subsidiary of Navient are included within Navient's subsidiary investment on the consolidated statements of changes in equity. There were no transfers (to)/from the entity that is now a subsidiary of Navient during the three months ended March 31, 2015. The components of the net transfers (to)/from the entity that is now a subsidiary of Navient for the three months ended March 31, 2014 are summarized below:
 
 
Three Months Ended
 
 
March 31,
 
 
2014
Capital contributions:
 
 
Loan origination activities
 
$
25,268

Loan sales
 
45

Corporate overhead activities
 
17,755

Other
 
432

Total capital contributions
 
43,500

Corporate push-down
 
5,738

Net change in income tax accounts
 
15,659

Net change in receivable/payable
 
(47,622
)
Other
 
(31
)
Total net transfers from the entity that is now a subsidiary of Navient
 
$
17,244



23

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
7.
Stockholders' Equity (Continued)
 


Capital Contributions

During the first four months of 2014, pre-Spin-Off SLM contributed capital to the Bank by funding loan origination activities, purchases of loans in excess of the loans' fair values, providing corporate overhead functions and other activities.
    
Capital contributed for loan origination activities reflects the fact that loan origination functions were conducted by a subsidiary of pre-Spin-Off SLM (now a subsidiary of Navient). The Bank did not pay for the costs incurred by pre-Spin-Off SLM in connection with these functions. The costs eligible to be capitalized are recorded on the respective balance sheets and the costs not eligible for capitalization have been recognized as expenses in the respective statements of income.

Certain general corporate overhead expenses of the Bank were incurred and paid for by pre-Spin-Off SLM.

Corporate Push-Down

The consolidated balance sheet of the Company includes certain assets and liabilities that historically were held at pre-Spin-Off SLM but which are specifically identifiable or otherwise allocable to the Company. The cash and cash equivalents held by pre-Spin-Off SLM at the corporate level were not allocated to the Bank for any of the periods presented.

Receivable/Payable with Affiliate

All significant intercompany payable/receivable balances between the Bank and pre-Spin-Off SLM are considered to be effectively settled for cash in the combined financial statements at the time the transaction is recorded.


24

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

8. 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. The determination of the weighted-average shares and diluted potential common shares for the March 31, 2014 period is based on the activity at pre-Spin-Off SLM. A reconciliation of the numerators and denominators of the basic and diluted EPS calculations follows.
 
 
Three Months Ended
 
 
March 31,
(In thousands, except per share data)
 
2015
 
2014
Numerator:
 
 
 
 
Net income attributable to SLM Corporation
 
$
47,699

 
$
47,448

Preferred stock dividends
 
4,823

 
—

Net income attributable to SLM Corporation common stock
 
$
42,876