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 March 31, 2019


¨	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 has submitted electronically every Interactive Data File required to be submitted 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 such files). 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 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, 2019
Common Stock, $0.20 par value	432,427,285 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	39
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	63
Item 4.	Controls and Procedures	67
PART II. Other Information
Item 1.	Legal Proceedings	68
Item 1A.	Risk Factors	68
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	68
Item 3.	Defaults Upon Senior Securities	68
Item 4.	Mine Safety Disclosures	68
Item 5.	Other Information	69
Item 6.	Exhibits	69

SLM CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

(Unaudited)



	March 31,			December 31,
	2019			2018
Assets
Cash and cash equivalents	$	2,156,257		$	2,559,106
Available-for-sale investments at fair value (cost of $211,049 and $182,325, respectively)	207,907			176,245
Loans held for investment (net of allowance for losses of $358,325 and $341,121, respectively)	23,498,386			22,270,919
Restricted cash	153,552			122,789
Other interest-earning assets	31,921			27,157
Accrued interest receivable	1,299,496			1,191,981
Premises and equipment, net	130,536			105,504
Income taxes receivable, net	—			41,570
Tax indemnification receivable	43,124			39,207
Other assets	92,446			103,695
Total assets	$	27,613,625		$	26,638,173

Liabilities
Deposits	$	19,663,986		$	18,943,158
Long-term borrowings	4,476,406			4,284,304
Income taxes payable, net	7,011			—
Upromise member accounts	203,780			213,104
Other liabilities	214,908			224,951
Total liabilities	24,566,091			23,665,517

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: 453.3 million and 449.9 million shares issued, respectively	90,666			89,972
Additional paid-in capital	1,290,683			1,274,635
Accumulated other comprehensive income (net of tax expense of $704 and $3,436, respectively)	2,177			10,623
Retained earnings	1,480,718			1,340,017
Total SLM Corporation stockholders’ equity before treasury stock	3,264,244			3,115,247
Less: Common stock held in treasury at cost: 20.9 million and 14.2 million shares, respectively	(216,710		)	(142,591		)
Total equity	3,047,534			2,972,656
Total liabilities and equity	$	27,613,625		$	26,638,173

See accompanying notes to consolidated financial statements.

SLM CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)



	Three Months Ended
	March 31,
	2019		2018
Interest income:
Loans	$	553,479	$	430,048
Investments	1,421		1,947
Cash and cash equivalents	11,553		5,236
Total interest income	566,453		437,231
Interest expense:
Deposits	125,987		77,456
Interest expense on short-term borrowings	1,165		2,393
Interest expense on long-term borrowings	37,020		24,768
Total interest expense	164,172		104,617
Net interest income	402,281		332,614
Less: provisions for credit losses	63,790		53,931
Net interest income after provisions for credit losses	338,491		278,683
Non-interest income:
Gains on derivatives and hedging activities, net	2,763		3,892
Other income	13,378		9,642
Total non-interest income	16,141		13,534
Non-interest expenses:
Compensation and benefits	78,738		68,317
FDIC assessment fees	7,618		8,796
Other operating expenses	53,791		47,853
Total non-interest expenses	140,147		124,966
Income before income tax expense	214,485		167,251
Income tax expense	56,296		40,997
Net income	158,189		126,254
Preferred stock dividends	4,468		3,397
Net income attributable to SLM Corporation common stock	$	153,721	$	122,857
Basic earnings per common share attributable to SLM Corporation	$	0.35	$	0.28
Average common shares outstanding	434,574		433,952
Diluted earnings per common share attributable to SLM Corporation	$	0.35	$	0.28
Average common and common equivalent shares outstanding	438,248		438,977
Dividends per common share attributable to SLM Corporation	$	0.03	$	—

See accompanying notes to consolidated financial statements.

SLM CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)



	Three Months Ended
	March 31,
	2019			2018
Net income	$	158,189		$	126,254
Other comprehensive income (loss):
Unrealized gains (losses) on investments	2,938			(4,127		)
Unrealized gains (losses) on cash flow hedges	(14,117		)	20,290
Total unrealized gains (losses)	(11,179		)	16,163
Income tax benefit (expense)	2,733			(3,902		)
Other comprehensive income (loss), net of tax benefit (expense)	(8,446		)	12,261
Total comprehensive income	$	149,743		$	138,515

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	—	—	—		—		—		—		—		—		126,254			—			126,254
Other comprehensive income, net of tax	—	—	—		—		—		—		—		12,261		—			—			12,261
Total comprehensive income	—	—	—		—		—		—		—		—		—			—			138,515
Reclassification resulting from the adoption of ASU No. 2018-02	—	—	—		—		—		—		—		592		(592		)	—			—
Cash dividends:
Preferred Stock, Series B ($0.83 per share)	—	—	—		—		—		—		—		—		(3,397		)	—			(3,397		)
Issuance of common shares	—	5,559,991	—		5,559,991		—		1,112		15,587		—		—			—			16,699
Stock-based compensation expense	—	—	—		—		—		—		14,745		—		—			—			14,745
Shares repurchased related to employee stock-based compensation plans	—	—	(2,740,018	)	(2,740,018	)	—		—		—		—		—			(30,985		)	(30,985		)
Balance at March 31, 2018	4,000,000	449,023,578	(13,827,355	)	435,196,223		$	400,000	$	89,805	$	1,252,609	$	15,601	$	990,447		$	(138,629	)	$	2,609,833

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, 2018	4,000,000	449,856,221	(14,174,733	)	435,681,488		$	400,000	$	89,972	$	1,274,635	$	10,623		$	1,340,017		$	(142,591	)	$	2,972,656
Net income	—	—	—		—		—		—		—		—			158,189			—			158,189
Other comprehensive loss, net of tax	—	—	—		—		—		—		—		(8,446		)	—			—			(8,446		)
Total comprehensive income	—	—	—		—		—		—		—		—			—			—			149,743
Cash dividends:
Common Stock ($0.03 per share)	—	—	—		—		—		—		—		—			(13,020		)	—			(13,020		)
Preferred Stock, Series B ($1.12 per share)	—	—	—		—		—		—		—		—			(4,468		)	—			(4,468		)
Issuance of common shares	—	3,470,664			3,470,664		—		694		2,157		—			—			—			2,851
Stock-based compensation expense	—	—	—		—		—		—		13,891		—			—			—			13,891
Common stock repurchased	—	—	(5,435,476	)	(5,435,476	)	—		—		—		—			—			(60,000		)	(60,000		)
Shares repurchased related to employee stock-based compensation plans	—	—	(1,289,391	)	(1,289,391	)	—		—		—		—			—			(14,119		)	(14,119		)
Balance at March 31, 2019	4,000,000	453,326,885	(20,899,600	)	432,427,285		$	400,000	$	90,666	$	1,290,683	$	2,177		$	1,480,718		$	(216,710	)	$	3,047,534

See accompanying notes to consolidated financial statements.

SLM CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



	Three Months Ended
	March 31,
	2019			2018
Operating activities
Net income	$	158,189		$	126,254
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provisions for credit losses	63,790			53,931
Income tax expense	56,296			40,997
Amortization of brokered deposit placement fee	3,555			2,789
Amortization of Secured Borrowing Facility upfront fee	277			301
Amortization of deferred loan origination costs and loan premium/(discounts), net	3,184			2,607
Net amortization of discount on investments	189			475
Increase in tax indemnification receivable	(3,917		)	(1,231		)
Depreciation of premises and equipment	3,586			3,117
Stock-based compensation expense	13,891			14,745
Unrealized gains on derivatives and hedging activities, net	(4,027		)	(3,879		)
Other adjustments to net income, net	1,918			1,855
Changes in operating assets and liabilities:
Increase in accrued interest receivable	(239,180		)	(201,776		)
Increase in other interest-earning assets	(4,764		)	(10,051		)
Increase in other assets	(681		)	(35,858		)
Decrease in income taxes payable, net	(3,947		)	(1,159		)
Increase in accrued interest payable	7,405			11,034
Decrease in other liabilities	(39,049		)	(18,309		)
Total adjustments	(141,474		)	(140,412		)
Total net cash provided by (used in) operating activities	16,715			(14,158		)
Investing activities
Loans acquired and originated	(2,253,624		)	(2,300,135		)
Net proceeds from sales of loans held for investment	—			820
Proceeds from claim payments	11,587			12,084
Net decrease in loans held for investment	1,077,273			735,894
Purchases of available-for-sale securities	(33,483		)	—
Proceeds from sales and maturities of available-for-sale securities	4,570			10,371
Total net cash used in investing activities	(1,193,677		)	(1,540,966		)
Financing activities
Brokered deposit placement fee	(1,498		)	(7,055		)
Net increase in certificates of deposit	404,121			694,982
Net increase in other deposits	290,631			323,614
Borrowings collateralized by loans in securitization trusts - issued	451,128			667,848
Borrowings collateralized by loans in securitization trusts - repaid	(260,953		)	(200,247		)
Borrowings under Secured Borrowing Facility	—			300,000
Repayment of borrowings under Secured Borrowing Facility	—			(300,000		)
Fees paid on Secured Borrowing Facility	(1,065		)	(1,063		)
Common stock dividends paid	(13,020		)	—
Preferred stock dividends paid	(4,468		)	(3,397		)
Common stock repurchased	(60,000		)	—
Net cash provided by financing activities	804,876			1,474,682
Net decrease in cash, cash equivalents and restricted cash	(372,086		)	(80,442		)
Cash, cash equivalents and restricted cash at beginning of period	2,681,895			1,636,175
Cash, cash equivalents and restricted cash at end of period	$	2,309,809		$	1,555,733



Cash disbursements made for:
Interest	$	147,235		$	94,737
Income taxes paid	$	3,700		$	1,894
Income taxes refunded	$	(41	)	$	(990	)
Reconciliation of the Consolidated Statements of Cash Flows to the Consolidated Balance Sheets:
Cash and cash equivalents	$	2,156,257		$	1,435,649
Restricted cash	153,552			120,084
Total cash, cash equivalents and restricted cash	$	2,309,809		$	1,555,733

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 months ended March 31, 2019 are not necessarily indicative of the results for the year ending December 31, 2019 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, 2018 (the “2018 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.

Reclassifications

Certain reclassifications have been made to the balances for the three months ended March 31, 2018, to be consistent with classifications adopted in 2019, which had no effect on net income, total assets or total liabilities.

Recently Issued and Adopted Accounting Pronouncements

ASU No. 2016-02, “Leases”

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases,” a comprehensive new lease standard which supersedes previous lease guidance. The standard requires a lessee to recognize in its balance sheet assets and liabilities related to long-term leases that were classified as operating leases under previous guidance. An asset will be recognized related to the right to use the underlying asset and a liability will be recognized related to the obligation to make lease payments over the term of the lease. The standard also requires expanded disclosures surrounding leases. The standard is effective for fiscal periods beginning after December 15, 2018, and requires modified retrospective adoption, with early adoption permitted. We adopted this guidance on January 1, 2019. In doing so, we identified and evaluated the related lease contracts and revised our controls and processes to address the lease standard. The adoption of this guidance resulted in the recognition of less than $34 million of right of use asset and lease liability, which did not have a material impact on our consolidated financial statements.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)



1.	Significant Accounting Policies (Continued)

Recently Issued but Not Yet Adopted Accounting Pronouncements

ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This ASU eliminates the incurred loss threshold for initial recognition of credit impairment in current GAAP and replaces it with the expected loss concept. For all loans carried at amortized cost, we will be required to measure our allowance for loan losses based on our current estimate of all expected credit losses (“CECL”) over the remaining contractual term of the assets. Because it eliminates the incurred loss trigger, the new accounting guidance will require us, upon the origination of a loan, to record an estimate of all expected credit losses on that loan through an immediate charge to earnings. Updates to that estimate each period will be recorded through provision expense. The estimate of loan losses must be based on historical experience, current conditions and reasonable and supportable forecasts. The ASU does not mandate the use of any specific method for estimating credit loss, permitting companies to use judgment in selecting the approach that is most appropriate in their circumstances. The standard will become effective for us on January 1, 2020, with early adoption permitted no sooner than January 1, 2019. Upon adoption, a cumulative effect adjustment to retained earnings will be recorded as of the beginning of the first reporting period in which the guidance is effective in an amount necessary to adjust the allowance for loan losses to equal the current estimate of expected losses on financial assets held at that date.

We have evaluated the standard and initiated implementation efforts. We have identified the loss forecasting approach and have built the loss models for our Private Education Loans and our Personal Loans acquired from third-parties. During the remainder of 2019, we plan to complete our loss models for Personal Loans we originate and credit card receivables and complete the testing and validation for all the models to be used to implement CECL. During the second quarter of 2019, we also plan to run our CECL solution in parallel for our Private Education Loan and purchased Personal Loan portfolios to test the implementation of the new solution.

Adoption of the standard will have a material impact on how we record and report our financial condition and results of operations, and on regulatory capital. The extent of the impact upon adoption will likely depend on the characteristics of our loan portfolio and economic conditions at that date, as well as forecasted conditions thereafter.

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, FFELP Loans and Personal Loans. We use “Private Education Loans” to mean education loans to students or their families that are not made, insured or guaranteed by any state or federal government. Private Education Loans do not include loans insured or guaranteed under the previously existing Federal Family Education Loan Program (“FFELP”). We use “Personal Loans” to mean those unsecured loans to individuals that may be used for non-educational purposes.

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 and customers’ resources. Private Education Loans bear the full credit risk of the customer. We manage this risk through risk-performance underwriting strategies and qualified cosigners. Private Education Loans may be fixed rate or may carry a variable interest rate indexed to LIBOR. As of March 31, 2019, and December 31, 2018, 63 percent and 67 percent, respectively, of all of our Private Education Loans were indexed to LIBOR. We provide incentives for customers to include a cosigner on the loan, and the vast majority of loans in our portfolio are cosigned. We also encourage customers to make payments while in school.

FFELP Loans are insured 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.

In 2016, we began to acquire Personal Loans from a marketplace lender, but discontinued those purchases in July 2018. In 2018, we began to originate and service Personal Loans.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)



2.	Loans Held for Investment (Continued)

Loans held for investment are summarized as follows:



	March 31,			December 31,
	2019			2018
Private Education Loans:
Fixed-rate	$	8,025,846		$	6,759,019
Variable-rate	13,765,776			13,745,446
Total Private Education Loans, gross	21,791,622			20,504,465
Deferred origination costs and unamortized premium/(discount)	70,858			68,321
Allowance for loan losses	(285,946		)	(277,943		)
Total Private Education Loans, net	21,576,534			20,294,843

FFELP Loans	828,640			846,487
Deferred origination costs and unamortized premium/(discount)	2,323			2,379
Allowance for loan losses	(1,760		)	(977		)
Total FFELP Loans, net	829,203			847,889

Personal Loans (fixed-rate)	1,162,874			1,190,091
Deferred origination costs and unamortized premium/(discount)	394			297
Allowance for loan losses	(70,619		)	(62,201		)
Total Personal Loans, net	1,092,649			1,128,187

Loans held for investment, net	$	23,498,386		$	22,270,919

The estimated weighted average life of education loans in our portfolio was approximately 5.4 years at both March 31, 2019 and December 31, 2018, respectively.

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 of loans in our portfolio are summarized as follows:



	Three Months Ended
	March 31,
	2019				2018
	Average Balance		Weighted Average Interest Rate		Average Balance		Weighted Average Interest Rate
Private Education Loans	$	21,732,826	9.50	%	$	18,659,717	8.84	%
FFELP Loans	837,950		4.94		919,717		4.25
Personal Loans	1,176,466		11.81		528,644		10.64
Total portfolio	$	23,747,242			$	20,108,078

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

3. Allowance for Loan Losses

Our provision for credit 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, 2019
	FFELP Loans			Private Education Loans			Personal Loans			Total
Allowance for Loan Losses
Beginning balance	$	977		$	277,943		$	62,201		$	341,121
Total provision	1,017			41,883			22,760			65,660
Net charge-offs:
Charge-offs	(234		)	(39,577		)	(15,251		)	(55,062		)
Recoveries	—			5,697			909			6,606
Net charge-offs	(234		)	(33,880		)	(14,342		)	(48,456		)
Ending Balance	$	1,760		$	285,946		$	70,619		$	358,325
Allowance:
Ending balance: individually evaluated for impairment	$	—		$	132,442		$	—		$	132,442
Ending balance: collectively evaluated for impairment	$	1,760		$	153,504		$	70,619		$	225,883
Loans:
Ending balance: individually evaluated for impairment	$	—		$	1,327,668		$	—		$	1,327,668
Ending balance: collectively evaluated for impairment	$	828,640		$	20,463,954		$	1,162,874		$	22,455,468
Net charge-offs as a percentage of average loans in repayment (annualized)⁽¹⁾	0.14		%	0.89		%	4.88		%
Allowance as a percentage of the ending total loan balance	0.21		%	1.31		%	6.07		%
Allowance as a percentage of the ending loans in repayment⁽¹⁾	0.27		%	1.87		%	6.07		%
Allowance coverage of net charge-offs (annualized)	1.88			2.11			1.23
Ending total loans, gross	$	828,640		$	21,791,622		$	1,162,874
Average loans in repayment⁽¹⁾	$	650,196		$	15,165,072		$	1,175,356
Ending loans in repayment⁽¹⁾	$	641,658		$	15,310,560		$	1,162,874

____________

⁽¹⁾ Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period.

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, 2018
	FFELP Loans			Private Education Loans			Personal Loans			Total
Allowance for Loan Losses
Beginning balance	$	1,132		$	243,715		$	6,628		$	251,475
Total provision	231			41,870			13,448			55,549
Net charge-offs:
Charge-offs	(250		)	(37,353		)	(1,200		)	(38,803		)
Recoveries	—			5,087			31			5,118
Net charge-offs	(250		)	(32,266		)	(1,169		)	(33,685		)
Loan sales⁽¹⁾	—			(1,216		)	—			(1,216		)
Ending Balance	$	1,113		$	252,103		$	18,907		$	272,123
Allowance:
Ending balance: individually evaluated for impairment	$	—		$	101,824		$	—		$	101,824
Ending balance: collectively evaluated for impairment	$	1,113		$	150,279		$	18,907		$	170,299
Loans:
Ending balance: individually evaluated for impairment	$	—		$	1,043,103		$	—		$	1,043,103
Ending balance: collectively evaluated for impairment	$	907,842		$	17,750,909		$	675,656		$	19,334,407
Net charge-offs as a percentage of average loans in repayment (annualized)⁽²⁾	0.14		%	1.01		%	0.88		%
Allowance as a percentage of the ending total loan balance	0.12		%	1.34		%	2.80		%
Allowance as a percentage of the ending loans in repayment⁽²⁾	0.16		%	1.95		%	2.80		%
Allowance coverage of net charge-offs (annualized)	1.11			1.95			4.04
Ending total loans, gross	$	907,842		$	18,794,012		$	675,656
Average loans in repayment⁽²⁾	$	718,311		$	12,747,929		$	531,889
Ending loans in repayment⁽²⁾	$	702,965		$	12,958,742		$	675,656

____________

⁽¹⁾ Represents fair value adjustments on loans sold.

⁽²⁾ Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period.

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 (where we conduct individual assessments of impairment). We modify the terms of loans for certain borrowers when we believe such modifications may increase the collectability of the loan. These modifications generally take the form of a forbearance, a temporary interest rate reduction or an extended repayment plan. 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. When we give a borrower facing financial difficulty an interest rate reduction, we temporarily reduce the rate to 2.0 percent for a two-year period and, in the vast majority of cases, permanently extend the final maturity of the loan. The combination of these two loan term changes helps reduce the monthly payment due from the borrower and increases the likelihood the borrower will remain current during the interest rate modification period as well as when the loan returns to its original contractual interest rate. At March 31, 2019 and March 31, 2018, 7.2 percent and 5.7 percent, respectively, of our loans then currently in full principal and interest repayment status were subject to interest rate reductions made under our rate modification program. Once a loan qualifies for TDR status, it remains a TDR for allowance purposes for the remainder of its life. As of March 31, 2019 and December 31, 2018, approximately 55 percent and 57 percent, respectively, of TDRs were classified as such due to their forbearance status. For additional information, see Note 2, “Significant Accounting Policies —Allowance for Loan Losses,” and Note 6, “Allowance for Loan Losses” in our 2018 Form 10-K.

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 perspective at any point in their life cycle prior to claim payment and continue to accrue interest on those loans through the date of claim.

At March 31, 2019 and December 31, 2018, 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, 2019
TDR Loans	$	1,352,673	$	1,327,668	$	132,442

December 31, 2018
TDR Loans	$	1,280,713	$	1,257,856	$	120,110

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



	Three Months Ended March 31,
	2019				2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized

TDR Loans	$	1,312,729	$	21,566	$	1,032,232	$	17,847

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 and aging of TDR loans.



	March 31,				December 31,
	2019				2018
	Balance		%		Balance		%
TDR loans in in-school/grace/deferment⁽¹⁾	$	77,327			$	69,212
TDR loans in forbearance⁽²⁾	79,410				69,796
TDR loans in repayment⁽³⁾ and percentage of each status:
Loans current	1,044,676		89.2	%	994,411		88.9	%
Loans delinquent 31-60 days⁽⁴⁾	61,698		5.3		63,074		5.6
Loans delinquent 61-90 days⁽⁴⁾	39,349		3.4		36,804		3.3
Loans delinquent greater than 90 days⁽⁴⁾	25,208		2.1		24,559		2.2
Total TDR loans in repayment	1,170,931		100.0	%	1,118,848		100.0	%
Total TDR loans, gross	$	1,327,668			$	1,257,856

_____


⁽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⁾	Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period.


⁽⁴⁾	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)

(Dollars in thousands, unless otherwise noted)



3.	Allowance for Loan Losses (Continued)

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



	Three Months Ended March 31, 2019						Three Months Ended March 31, 2018
	Modified Loans⁽¹⁾		Charge-offs		Payment- Default		Modified Loans⁽¹⁾		Charge-offs		Payment- Default

TDR Loans	$	111,208	$	16,005	$	25,462	$	84,174	$	15,460	$	29,757

_____


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

Private Education Loan Key Credit Quality Indicators

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.

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 original approval and periodically refreshed/updated 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.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)



3.	Allowance for Loan Losses (Continued)



	Private Education Loans
	Credit Quality Indicators
	March 31, 2019				December 31, 2018
Credit Quality Indicators:	Balance⁽¹⁾		% of Balance		Balance⁽¹⁾		% of Balance

Cosigners:
With cosigner	$	19,531,175	90	%	$	18,378,398	90	%
Without cosigner	2,260,447		10		2,126,067		10
Total	$	21,791,622	100	%	$	20,504,465	100	%

FICO at Original Approval⁽²⁾:
Less than 670	$	1,517,014	7	%	$	1,409,789	7	%
670-699	3,306,017		15		3,106,983		15
700-749	7,186,454		33		6,759,721		33
Greater than or equal to 750	9,782,137		45		9,227,972		45
Total	$	21,791,622	100	%	$	20,504,465	100	%

FICO-Refreshed⁽²⁾⁽³⁾:
Less than 670	$	2,720,777	12	%	$	2,416,979	12	%
670-699	2,721,243		13		2,504,467		12
700-749	6,462,874		30		6,144,489		30
Greater than or equal to 750	9,886,728		45		9,438,530		46
Total	$	21,791,622	100	%	$	20,504,465	100	%

Seasoning⁽⁴⁾:
1-12 payments	$	5,451,167	25	%	$	4,969,334	24	%
13-24 payments	3,543,836		16		3,481,235		17
25-36 payments	2,729,369		13		2,741,954		13
37-48 payments	2,017,498		9		1,990,049		10
More than 48 payments	2,178,899		10		2,061,448		10
Not yet in repayment	5,870,853		27		5,260,445		26
Total	$	21,791,622	100	%	$	20,504,465	100	%

______


⁽¹⁾	Balance represents gross Private Education Loans.


⁽²⁾	Represents the higher credit score of the cosigner or the borrower.


⁽³⁾	Represents the FICO score updated as of the first-quarter 2019.


⁽⁴⁾	Number of months in active repayment (whether interest only payment, fixed payment, or full principal and interest payment status) for which a scheduled payment was due.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)



3.	Allowance for Loan Losses (Continued)

Private Education Loan Delinquencies

The following table provides information regarding the loan status of our Private Education Loans. Loans in repayment include loans making interest only or 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,
	2019					2018
	Balance			%		Balance			%
Loans in-school/grace/deferment⁽¹⁾	$	5,870,853				$	5,260,445
Loans in forbearance⁽²⁾	610,209					577,164
Loans in repayment and percentage of each status:
Loans current	14,927,591			97.5	%	14,289,705			97.4	%
Loans delinquent 31-60 days⁽³⁾	216,295			1.4		231,216			1.6
Loans delinquent 61-90 days⁽³⁾	104,199			0.7		95,105			0.7
Loans delinquent greater than 90 days⁽³⁾	62,475			0.4		50,830			0.3
Total Private Education Loans in repayment	15,310,560			100.0	%	14,666,856			100.0	%
Total Private Education Loans, gross	21,791,622					20,504,465
Private Education Loans deferred origination costs and unamortized premium/(discount)	70,858					68,321
Total Private Education Loans	21,862,480					20,572,786
Private Education Loans allowance for losses	(285,946		)			(277,943		)
Private Education Loans, net	$	21,576,534				$	20,294,843
Percentage of Private Education Loans in repayment				70.3	%				71.5	%
Delinquencies as a percentage of Private Education Loans in repayment				2.5	%				2.6	%
Loans in forbearance as a percentage of Private Education Loans in repayment and forbearance				3.8	%				3.8	%

_______


⁽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.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)



3.	Allowance for Loan Losses (Continued)

Personal Loan Key Credit Quality Indicators

For Personal Loans, the key credit quality indicators are FICO scores, loan seasoning and loan status. The FICO scores are assessed at original approval and periodically refreshed/updated through the loan’s term. The following table highlights the gross principal balance of our Personal Loan portfolio stratified by key credit quality indicators.



	Personal Loans
	Credit Quality Indicators
	March 31, 2019				December 31, 2018
Credit Quality Indicators:	Balance⁽¹⁾		% of Balance		Balance⁽¹⁾		% of Balance

FICO at Original Approval:
Less than 670	$	71,340	6	%	$	77,702	7	%
670-699	324,934		28		339,053		28
700-749	551,904		47		554,700		47
Greater than or equal to 750	214,696		19		218,636		18
Total	$	1,162,874	100	%	$	1,190,091	100	%

Seasoning⁽²⁾:
0-12 payments	$	832,583	72	%	$	1,008,758	85	%
13-24 payments	320,058		27		181,333		15
25-36 payments	10,233		1		—		—
37-48 payments	—		—		—		—
More than 48 payments	—		—		—		—
Total	$	1,162,874	100	%	$	1,190,091	100	%

______


⁽¹⁾	Balance represents gross Personal Loans.


⁽²⁾	Number of months in active repayment for which a scheduled payment was due.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)



3.	Allowance for Loan Losses (Continued)

Personal Loan Delinquencies

The following table provides information regarding the loan status of our Personal Loans.



	Personal Loans
	March 31,					December 31,
	2019					2018
	Balance			%		Balance			%
Loans in repayment and percentage of each status:
Loans current	$	1,141,664		98.2	%	$	1,172,776		98.5	%
Loans delinquent 31-60 days⁽¹⁾	9,224			0.8		6,722			0.6
Loans delinquent 61-90 days⁽¹⁾	5,991			0.5		5,416			0.5
Loans delinquent greater than 90 days⁽¹⁾	5,995			0.5		5,177			0.4
Total Personal Loans in repayment	1,162,874			100.0	%	1,190,091			100.0	%
Total Personal Loans, gross	1,162,874					1,190,091
Personal Loans deferred origination costs and unamortized premium/(discount)	394					297
Total Personal Loans	1,163,268					1,190,388
Personal Loans allowance for losses	(70,619		)			(62,201		)
Personal Loans, net	$	1,092,649				$	1,128,187
Delinquencies as a percentage of Personal Loans in repayment				1.8	%				1.5	%

_______


⁽¹⁾	The period of delinquency is based on the number of days scheduled payments are contractually past due.

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 Private Education Loan portfolio for all periods presented.

Private Education Loans