Edgar Filing: SLM Corp

Document

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 September 30, 2018


¨	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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	þ		Accelerated filer	¨
Non-accelerated filer	¨	(Do not check if a smaller reporting company)	Smaller reporting company	¨
Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

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 September 30, 2018
Common Stock, $0.20 par value	435,661,454 shares

SLM CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

INDEX



Part I. Financial Information
Item 1.	Financial Statements	3
Item 1.	Notes to the Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	48
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	79
Item 4.	Controls and Procedures	83
PART II. Other Information
Item 1.	Legal Proceedings	84
Item 1A.	Risk Factors	85
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	86
Item 3.	Defaults Upon Senior Securities	86
Item 4.	Mine Safety Disclosures	86
Item 5.	Other Information	86
Item 6.	Exhibits	87

SLM CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

(Unaudited)



	September 30,			December 31,
	2018			2017
Assets
Cash and cash equivalents	$	1,839,054		$	1,534,339
Available-for-sale investments at fair value (cost of $181,785 and $247,607, respectively)	172,370			244,088
Loans held for investment (net of allowance for losses of $328,974 and $251,475, respectively)	21,978,903			18,567,641
Restricted cash	115,658			101,836
Other interest-earning assets	32,071			21,586
Accrued interest receivable	1,270,026			967,482
Premises and equipment, net	105,058			89,748
Income taxes receivable, net	22,102			—
Tax indemnification receivable	54,941			168,011
Other assets	101,000			84,853
Total assets	$	25,691,183		$	21,779,584

Liabilities
Deposits	$	17,873,293		$	15,505,383
Long-term borrowings	4,532,221			3,275,270
Income taxes payable, net	—			102,285
Upromise member accounts	226,176			243,080
Other liabilities	219,158			179,310
Total liabilities	22,850,848			19,305,328

Commitments and contingencies

Equity
Preferred stock, par value $0.20 per share, 20 million shares authorized:
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: 449.8 million and 443.5 million shares issued, respectively	89,962			88,693
Additional paid-in capital	1,268,763			1,222,277
Accumulated other comprehensive income (net of tax expense of $8,666 and $1,696, respectively)	27,012			2,748
Retained earnings	1,196,895			868,182
Total SLM Corporation stockholders’ equity before treasury stock	2,982,632			2,581,900
Less: Common stock held in treasury at cost: 14.1 million and 11.1 million shares, respectively	(142,297		)	(107,644		)
Total equity	2,840,335			2,474,256
Total liabilities and equity	$	25,691,183		$	21,779,584

See accompanying notes to consolidated financial statements.

SLM CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)



	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2018			2017		2018			2017
Interest income:
Loans	$	485,997		$	359,610	$	1,370,090		$	1,021,106
Investments	1,340			1,928		4,981			6,272
Cash and cash equivalents	10,260			4,686		22,068			10,429
Total interest income	497,597			366,224		1,397,139			1,037,807
Interest expense:
Deposits	105,093			61,890		273,154			157,473
Interest expense on short-term borrowings	1,156			1,804		4,677			4,234
Interest expense on long-term borrowings	34,715			20,469		89,111			56,070
Total interest expense	140,964			84,163		366,942			217,777
Net interest income	356,633			282,061		1,030,197			820,030
Less: provisions for credit losses	70,047			54,930		187,245			130,441
Net interest income after provisions for credit losses	286,586			227,131		842,952			689,589
Non-interest (loss) income:
Gains on sales of loans, net	—			—		2,060			—
Losses on sales of securities, net	—			—		(1,549		)	—
(Losses) gains on derivatives and hedging activities, net	(4,949		)	1,661		(6,325		)	(7,326		)
Other (loss) income	(80,702		)	4,455		(58,765		)	26,430
Total non-interest (loss) income	(85,651		)	6,116		(64,579		)	19,104
Non-interest expenses:
Compensation and benefits	62,260			51,052		190,822			157,523
FDIC assessment fees	9,136			7,626		25,933			21,477
Other operating expenses	79,236			57,464		193,974			151,070
Total operating expenses	150,632			116,142		410,729			330,070
Acquired intangible asset amortization expense	92			117		276			351
Total non-interest expenses	150,724			116,259		411,005			330,421
Income before income tax (benefit) expense	50,211			116,988		367,368			378,272
Income tax (benefit) expense	(53,667		)	40,617		27,404			136,341
Net income	103,878			76,371		339,964			241,931
Preferred stock dividends	4,124			3,028		11,441			12,577
Net income attributable to SLM Corporation common stock	$	99,754		$	73,343	$	328,523		$	229,354
Basic earnings per common share attributable to SLM Corporation	$	0.23		$	0.17	$	0.76		$	0.53
Average common shares outstanding	435,468			431,718		434,875			430,958
Diluted earnings per common share attributable to SLM Corporation	$	0.23		$	0.17	$	0.75		$	0.52
Average common and common equivalent shares outstanding	440,019			438,419		439,484			438,422

See accompanying notes to consolidated financial statements.

SLM CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2018			2017			2018			2017
Net income	$	103,878		$	76,371		$	339,964		$	241,931
Other comprehensive income (loss):
Unrealized (losses) gains on investments	(1,811		)	734			(5,896		)	(666		)
Unrealized gains on cash flow hedges	6,556			4,814			36,860			7,564
Total unrealized gains	4,745			5,548			30,964			6,898
Income tax expense	(1,219		)	(2,113		)	(7,562		)	(2,644		)
Other comprehensive income, net of tax expense	3,526			3,435			23,402			4,254
Total comprehensive income	$	107,404		$	79,806		$	363,366		$	246,185

See accompanying notes to consolidated financial statements.

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 Equity
Balance at December 31, 2016	7,300,000		436,632,479	(7,728,920	)	428,903,559		$	565,000		$	87,327	$	1,175,564	$	(8,671	)	$	595,322		$	(67,484	)	$	2,347,058
Net income	—		—	—		—		—			—		—		—			241,931			—			241,931
Other comprehensive income, net of tax	—		—	—		—		—			—		—		4,254			—			—			4,254
Total comprehensive income	—		—	—		—		—			—		—		—			—			—			246,185
Cumulative effect of the adoption of the stock compensation standard amendment	—		—	—		—		—			—		429		—			(264		)	—			165
Cash dividends:
Preferred Stock, Series A ($1.74 per share)	—		—	—		—		—			—		—		—			(3,961		)	—			(3,961		)
Preferred Stock, Series B ($2.15 per share)	—		—	—		—		—			—		—		—			(8,616		)	—			(8,616		)
Redemption of Series A Preferred Stock	(3,300,000	)	—	—		—		(165,000		)	—		—		—			—			—			(165,000		)
Dividend equivalent units related to employee stock-based compensation plans	—		—	—		—		—			—		96		—			(96		)	—			—
Issuance of common shares	—		5,652,886	—		5,652,886		—			1,131		15,336		—			—			—			16,467
Stock-based compensation expense	—		—	—		—		—			—		21,773		—			—			—			21,773
Shares repurchased related to employee stock-based compensation plans	—		—	(2,666,781	)	(2,666,781	)	—			—		—		—			—			(32,231		)	(32,231		)
Balance at September 30, 2017	4,000,000		442,285,365	(10,395,701	)	431,889,664		$	400,000		$	88,458	$	1,213,198	$	(4,417	)	$	824,316		$	(99,715	)	$	2,421,840

See accompanying notes to consolidated financial statements.

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		Retained Earnings			Treasury Stock			Total Equity
Balance at December 31, 2017	4,000,000	443,463,587	(11,087,337	)	432,376,250		$	400,000	$	88,693	$	1,222,277	$	2,748	$	868,182		$	(107,644	)	$	2,474,256
Net income	—	—	—		—		—		—		—		—		339,964			—			339,964
Other comprehensive income, net of tax	—	—	—		—		—		—		—		23,402		—			—			23,402
Total comprehensive income	—	—	—		—		—		—		—		—		—			—			363,366
Reclassification resulting from the adoption of ASU No. 2018-02	—	—	—		—		—		—		—		592		(592		)	—			—
Reclassification resulting from the adoption of the ASU No. 2017-12	—	—	—		—		—		—		—		270		782			—			1,052
Cash dividends:
Preferred Stock, Series B ($2.86 per share)	—	—	—		—		—		—		—		—		(11,441		)	—			(11,441		)
Issuance of common shares	—	6,341,950			6,341,950		—		1,269		20,658		—		—			—			21,927
Stock-based compensation expense	—	—	—		—		—		—		25,828		—		—			—			25,828
Shares repurchased related to employee stock-based compensation plans	—	—	(3,056,746	)	(3,056,746	)	—		—		—		—		—			(34,653		)	(34,653		)
Balance at September 30, 2018	4,000,000	449,805,537	(14,144,083	)	435,661,454		$	400,000	$	89,962	$	1,268,763	$	27,012	$	1,196,895		$	(142,297	)	$	2,840,335

See accompanying notes to consolidated financial statements.

SLM CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



	Nine Months Ended
	September 30,
	2018			2017
Operating activities
Net income	$	339,964		$	241,931
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Provisions for credit losses	187,245			130,441
Income tax expense	27,404			136,341
Amortization of brokered deposit placement fee	9,378			6,831
Amortization of ABCP Facility upfront fee	851			995
Amortization of deferred loan origination costs and loan premium/(discounts), net	8,039			6,122
Net amortization of discount on investments	1,344			1,504
Reduction of tax indemnification receivable	86,079			311
Depreciation of premises and equipment	9,977			8,194
Amortization of acquired intangibles	276			351
Stock-based compensation expense	25,828			21,773
Unrealized losses on derivatives and hedging activities, net	6,065			6,931
Gains on sales of loans, net	(2,060		)	—
Losses on sales of securities, net	1,549			—
Other adjustments to net income, net	5,428			4,601
Changes in operating assets and liabilities:
Increase in accrued interest receivable	(628,959		)	(506,451		)
(Increase) decrease in other interest-earning assets	(10,485		)	17,811
Decrease in tax indemnification receivable	26,991			44,725
Increase in other assets	(60,903		)	(53,275		)
Decrease in income taxes payable, net	(156,502		)	(217,235		)
Increase in accrued interest payable	27,265			15,240
Decrease in payable due to entity that is a subsidiary of Navient	(676		)	(305		)
Increase in other liabilities	3,502			6,143
Total adjustments	(432,364		)	(368,952		)
Total net cash used in operating activities	(92,400		)	(127,021		)
Investing activities
Loans acquired and originated	(5,570,195		)	(4,314,711		)
Net proceeds from sales of loans held for investment	44,832			5,497
Proceeds from claim payments	38,492			34,759
Net decrease in loans held for investment	2,208,681			1,488,087
Purchases of available-for-sale securities	(7,914		)	(55,569		)
Proceeds from sales and maturities of available-for-sale securities	70,843			29,452
Total net cash used in investing activities	(3,215,261		)	(2,812,485		)
Financing activities
Brokered deposit placement fee	(25,104		)	(9,668		)
Net increase in certificates of deposit	1,953,644			1,087,486
Net increase in other deposits	458,472			516,343
Borrowings collateralized by loans in securitization trusts - issued	1,890,912			767,245
Borrowings collateralized by loans in securitization trusts - repaid	(639,190		)	(397,106		)
Issuance costs for unsecured debt offering	—			(1,057		)
Unsecured debt issued	—			197,000
Borrowings under ABCP Facility	300,000			300,000
Repayment of borrowings under ABCP Facility	(300,000		)	—
Fees paid on ABCP Facility	(1,095		)	(1,281		)



Redemption of Preferred Stock Series A	—			(165,000		)
Preferred stock dividends paid	(11,441		)	(12,577		)
Net cash provided by financing activities	3,626,198			2,281,385
Net increase (decrease) in cash, cash equivalents and restricted cash	318,537			(658,121		)
Cash, cash equivalents and restricted cash at beginning of period	1,636,175			1,972,510
Cash, cash equivalents and restricted cash at end of period	$	1,954,712		$	1,314,389
Cash disbursements made for:
Interest	$	327,798		$	191,488
Income taxes paid	$	161,248		$	216,321
Income taxes refunded	$	(5,174	)	$	(986	)
Reconciliation of the Consolidated Statements of Cash Flows to the Consolidated Balance Sheets:
Cash and cash equivalents	$	1,839,054		$	1,247,764
Restricted cash	115,658			66,625
Total cash, cash equivalents and restricted cash	$	1,954,712		$	1,314,389

See accompanying notes to consolidated financial statements.

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 (“Sallie Mae,” “SLM,” the “Company,” “we,” or “us”) 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 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 and nine months ended September 30, 2018 are not necessarily indicative of the results for the year ending December 31, 2018 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, 2017 (the “2017 Form 10-K”).

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.

We consolidate any variable interest entity (“VIE”) where we have determined we are the primary beneficiary. The primary beneficiary is the entity which has both: (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (2) the obligation to absorb losses or receive benefits of the entity that could potentially be significant to the VIE.

Recently Issued and Adopted Accounting Pronouncements

ASU No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash”

In November 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash.” Whereas restricted cash balances have traditionally been excluded from the statement of cash flows, this ASU requires restricted cash and restricted cash equivalents to be included within the beginning and ending totals of cash, cash equivalents and restricted cash presented on the statement of cash flows for all periods presented. Restricted cash and restricted cash equivalent inflows and outflows with external parties are required to be classified within the operating, investing, and/or financing activity sections of the statement of cash flows, whereas transfers between cash and cash equivalents and restricted cash and restricted cash equivalents should no longer be presented on the statement of cash flows. ASU No. 2016-18 also requires (a) the nature of the restrictions to be disclosed to help provide information about the sources and uses of these balances during a reporting period and (b) a reconciliation of the cash, cash equivalents and restricted cash totals on the statement of cash flows to the related balance sheet line items when cash, cash equivalents, and restricted cash are presented in more than one line item on the balance sheet. The reconciliation can be presented either on the face of the statement of cash flows or in the notes to the financial statements and must be provided for each period that a balance sheet is presented. We adopted the new accounting pronouncement on January 1, 2018, and the adoption did not have a material impact to our statement of cash flows.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)



1.	Significant Accounting Policies (Continued)

ASU No. 2017-12, “Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities”

On August 28, 2017, the FASB issued ASU No. 2017-12, “Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities,” which (a) improves the financial reporting of hedging relationships to better portray the economic results of an entity's risk management activities in its financial statements and (b) makes certain targeted improvements to simplify the application of the hedge accounting guidance. The effective date for the standard is January 1, 2019, with early adoption permitted. We elected to early adopt the standard effective July 1, 2018. One of the key changes is that the standard eliminates the separate measurement and reporting of hedge ineffectiveness. In accordance with the new standard, certain provisions were required to be applied on a modified retrospective basis, which requires a cumulative effect adjustment to accumulated other comprehensive income with a corresponding adjustment to retained earnings as of the beginning of the fiscal year of adoption, or January 1, 2018 in our case.

The accounting for derivative instruments requires that every derivative instrument, including certain derivative instruments embedded in other contracts, be recorded on the balance sheet as either an asset or liability measured at fair value. Our derivative instruments are classified and accounted for by us as fair value hedges, cash flow hedges, or trading hedges.

Fair Value Hedges

We generally use fair value hedges to offset the exposure to changes in fair value of a recognized fixed-rate liability. We enter into interest rate swaps to economically convert fixed-rate liabilities into variable-rate liabilities. For fair value hedges, we generally consider all components of the derivative’s gain and/or loss when assessing hedge effectiveness and generally hedge changes in fair values due to interest rates. Under the new standard, for fair value hedges, the entire change in the fair value of the hedging instrument included in the assessment of hedge effectiveness is recorded in the same line item in the consolidated statements of income that is used to present the earnings effect of the hedged component of the hedged item. The timing of recognition of the change in fair value of a hedging instrument included in the assessment of hedge effectiveness is the same as prior to the adoption of ASU No. 2017-12.

Cash Flow Hedges

We use cash flow hedges to hedge the exposure to variability in cash flows of floating-rate liabilities. This strategy is used primarily to minimize the exposure to volatility in cash flows from future changes in interest rates. In assessing hedge effectiveness, generally all components of each derivative’s gains or losses are included in the assessment. We hedge exposure to changes in cash flows due to changes in interest rates or total changes in cash flow. Under the new standard, for cash flow hedges, the entire change in the fair value of the hedging instrument included in the assessment of hedge effectiveness is recorded in other comprehensive income (loss). Those amounts are subsequently reclassified to earnings, in the same line item in the consolidated statements of income as impacted by the hedged item, when the hedged item affects earnings.

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on our variable-rate deposits. During the next twelve months, we estimate that $7 million will be reclassified as an increase to interest expense.

Trading Activities

When derivative instruments do not qualify for hedge accounting treatment, they are accounted for at fair value with all changes in fair value recorded through earnings. All of our derivative instruments with maturities of less than 3 years are economically hedging risk, but do not receive hedge accounting treatment. Trading derivatives also include any hedges that originally received hedge accounting treatment, but lost hedge accounting treatment due to failed effectiveness testing, as well as the activity of certain derivatives prior to those derivatives receiving hedge accounting treatment.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)



1.	Significant Accounting Policies (Continued)

Cumulative effect of applying the new standard

As a result of the cumulative effect of applying the new hedging standard to our fair value hedges on July 1, 2018, we recorded a $2.0 million basis increase to our hedged deposit balances with a corresponding increase to retained earnings of approximately $1.0 million and a $3.0 million loss to “gains (losses) on derivatives and hedging activities, net” in our consolidated statements of income to adjust the life-to-date ineffectiveness. To reflect the adoption of the new hedging standard on our cash flow hedging relationships at July 1, 2018, we recorded a $0.3 million decrease to retained earnings and a corresponding $0.3 million increase to accumulated other comprehensive income.

The new standard also requires modifications to existing presentation and disclosure requirements. We did not apply adjustments to our prior period consolidated balance sheets or consolidated statements of income as a result of adopting the new hedging standard. However, certain disclosures within the notes to the financial statements set forth in this report, regarding the three and nine month periods ended September 30, 2017, conform to the disclosure requirements of ASU No. 2017-12. For further details, refer to Note 7, “Derivative Financial Instruments.”

ASU No. 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”

In February 2018, the FASB issued ASU No. 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the tax law and tax rate changes under the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) enacted on December 22, 2017. Under the Tax Act, deferred taxes were adjusted to reflect the reduction of the historical corporate income tax rate to the newly enacted corporate income tax rate, which left the tax effects on items within accumulated other comprehensive income stranded at an inappropriate tax rate. This guidance is effective for fiscal years beginning after December 15, 2018, and for interim periods within those fiscal years, with early adoption permitted. We adopted this standard effective January 1, 2018 and recorded a $0.6 million reclass from accumulated other comprehensive income to retained earnings in the first quarter of 2018.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

2. Investments

The amortized cost and fair value of securities available for sale are as follows:



	September 30, 2018
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Available for sale:
Mortgage-backed securities	$	159,397	$	92	$	(8,046	)	$	151,443
Utah Housing Corporation bonds	22,388		—		(1,461		)	20,927
Total	$	181,785	$	92	$	(9,507	)	$	172,370

	December 31, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Available for sale:
Mortgage-backed securities	$	227,607	$	650	$	(3,210	)	$	225,047
Utah Housing Corporation bonds	20,000		—		(959		)	19,041
Total	$	247,607	$	650	$	(4,169	)	$	244,088

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)



2.	Investments (Continued)

The following table summarizes the amount of gross unrealized losses for our mortgage-backed securities and Utah Housing Corporation bonds and the estimated fair value for securities having gross unrealized losses, categorized by length of time the securities have been in an unrealized loss position:

Less than 12 months

12 months or more

Total

Gross Unrealized Losses

Estimated Fair Value

Gross Unrealized Losses

Estimated Fair Value

Gross Unrealized Losses

Estimated Fair Value

As of September 30, 2018:

Mortgage-backed securities

(1,768