Attached files
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| 8-K - 8-K - SLM Corp | slm012220208ki.htm |
Exhibit 99.1
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News Release | ||
For Immediate Release | ||
SALLIE MAE REPORTS FOURTH-QUARTER AND FULL-YEAR 2019 FINANCIAL RESULTS
Fourth-Quarter GAAP Net Income Attributable to Common Stock of $137 Million, $0.32 Per Diluted Share; Full-Year 2019 GAAP Net Income Attributable to Common Stock of $561 Million, $1.30 Per Diluted Share Which Is an Increase of 21% Compared to Year-Ago Period
Fourth-Quarter “Core Earnings” Net Income Attributable to Common Stock of $142 Million, $0.33 Per Diluted Share; Full-Year 2019 “Core Earnings” Net Income Attributable to Common Stock of $547 Million, $1.27 Per Diluted Share Which Is an Increase of 19% Compared to Year-Ago Period
Private Education Loan Portfolio Totals $22.9 Billion, Up 13% From Year-Ago Quarter
Company Plans $3 Billion of Private Education Loan Sales to Fund Expected $600 Million in Share Repurchases in 2020
NEWARK, Del., Jan. 22, 2020 - Sallie Mae (Nasdaq: SLM), formally SLM Corporation, today released fourth-quarter and full-year 2019 financial results. Highlights of those results are included in the attached supplement. Complete financial results are available at www.SallieMae.com/investors.
Sallie Mae will host an earnings conference call tomorrow, Jan. 23, 2020, at 8 a.m. EST. Executives will be on hand to discuss various highlights of the quarter and to answer questions related to Sallie Mae’s performance. To participate, dial 877-356-5689 (USA and Canada) or 706-679-0623 (international) and use access code 6334858 starting at 7:45 a.m. EST. A replay of the conference call will be available approximately two hours after the call’s conclusion and will remain available through Feb. 6, 2020, by dialing 855-859-2056 (USA and Canada) or 404-537-3406 (international) with access code 6334858.
A live audio webcast of the conference call, presentation slides and an infographic may be accessed at www.SallieMae.com/investors.
Sallie Mae (Nasdaq: SLM) believes education and life-long learning, in all forms, help people achieve great things. As the leader in private student lending, we provide financing and know-how to support access to college and offer products and resources to help customers make new goals and experiences, beyond college, happen. Learn more at SallieMae.com. Commonly known as Sallie Mae, SLM Corporation and its subsidiaries are not sponsored by or agencies of the United States of America.
Contacts:
Media
Rick Castellano, 302-451-2541, rick.castellano@SallieMae.com
Investors
Brian Cronin, 302-451-0304, brian.cronin@SallieMae.com
Sallie Mae Reports Fourth-Quarter and Full-Year 2019 Financial Results
Fourth-Quarter GAAP Net Income Attributable to Common Stock of $137 Million, $0.32 Per Diluted Share; Full-Year 2019 GAAP Net Income Attributable to Common Stock of $561 Million, $1.30 Per Diluted Share Which Is an Increase of 21% Compared to Year-Ago Period
Fourth-Quarter “Core Earnings” Net Income Attributable to Common Stock of $142 Million, $0.33 Per Diluted Share; Full-Year 2019 “Core Earnings” Net Income Attributable to Common Stock of $547 Million, $1.27 Per Diluted Share Which Is an Increase of 19% Compared to Year-Ago Period
Private Education Loan Portfolio Totals $22.9 Billion, Up 13% From Year-Ago Quarter
Company Plans $3 Billion of Private Education Loan Sales to Fund Expected $600 Million in Share Repurchases in 2020
“We continue to help families establish a foundation for success through higher education and are taking tangible actions to position the franchise for long-term success. To ensure we are well positioned to invest in our customers and deliver shareholder value, we will focus our resources on key growth opportunities, providing high-quality private student loans and competitive financing for grad school.” “Our 2020 outlook reflects continued momentum across our business and strong operational execution. In addition, our new share repurchase program underscores the Board and management’s confidence in the continued strength of the company. With an anticipated $3 billion in loan sales during the year, we will have ample capital to return capital to shareholders and invest in our business to drive growth.” |
Raymond J. Quinlan, Chairman and CEO, Sallie Mae |
Fourth-Quarter 2019 Highlights vs. Fourth-Quarter 2018 Highlights
• | Net interest income of $419 million, up 9%. |
• | Private education loan originations of $717 million, down 2%. |
• | Average private education loans outstanding of $23.2 billion, up 13.8%. |
• | Average yield on the private education loan portfolio was 9.12%, down 22 basis points. |
• | Private education loan provision for loan losses was $82 million, up from $39 million. |
• | Private education loans in forbearance were 4.1% of private education loans in repayment and forbearance, up from 3.8%. |
• | Private education loan delinquencies as a percentage of private education loans in repayment were 2.8%, up from 2.6%. |
• | Personal loans outstanding of $984 million, down 12.8% from prior year. |
• | Average yield on the personal loan portfolio was 12.39%, up 79 basis points. |
• | Paid fourth-quarter common stock dividend of $0.03 per share and repurchased $9.6 million of common stock under the 2019 share repurchase program at an average price of $8.73 per share. |
GAAP Diluted EPS | Non-GAAP “Core Earnings” Diluted EPS(1) | Private Education Loan Originations | Non-GAAP Operating Efficiency Ratio(2) | Total Education Loan Assets | Common Equity Tier 1 Risk-Based Capital Ratio | |||||
4Q19: $0.32 2019: $1.30 | 4Q19: $0.33 2019: $1.27 | 4Q19: $717 million 2019: $5.6 billion | 4Q19: 33.6% 2019: 34.7% | Dec. 31, 2019: $23.7 billion | Dec. 31, 2019: 12.2% | |||||
Investor Contact: Brian Cronin, 302-451-0304 brian.cronin@SallieMae.com | Media Contact: Rick Castellano, 302-451-2541 rick.castellano@SallieMae.com | |||
The following are significant items or events that will affect the company’s performance in 2020.
2020 Share Repurchase Program* |
The company has been authorized to repurchase up to $600 million in common stock in 2020, under a new share repurchase program, which is effective immediately and expires on Jan. 21, 2022. Repurchases may occur from time to time and through a variety of methods, including open market repurchases, repurchases effected through Rule 10b5-1 trading plans, negotiated block purchases, accelerated share repurchase programs, tender offers or other similar transactions. |
Loan Sales* |
The company expects to sell approximately $3 billion in loans in 2020, dependent upon market conditions. The company expects to remain well capitalized during the phase-in of regulatory capital following the implementation of CECL (as defined below). Loan sales will allow the company to return excess capital to shareholders through share repurchases. |
Adoption of CECL* |
On Jan. 1, 2020, the company adopted the Financial Accounting Standards Board’s Accounting Standards Update No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“CECL”). CECL requires the company to measure its allowance for losses based upon the estimate of current expected credit losses, and will have a significant impact on diluted GAAP earnings per share and diluted “Core Earnings” per share as adjustments are made to the allowance for loan losses in future periods to reflect life-of-loan expected losses. CECL will have a material impact on how the company records and reports its financial condition and results of operations and on regulatory capital. The company’s first-quarter 2020 financial results will reflect a transition adjustment that is currently estimated to increase the allowance for loan losses by approximately $1.1 billion, increase the liability representing its off-balance sheet exposure for unfunded commitments by approximately $115 million, and increase the deferred tax asset by approximately $300 million, resulting in a cumulative effect adjustment currently estimated to reduce retained earnings by approximately $950 million. The Private Education Loan allowance for losses as a percentage of ending total Private Education Loan balance after the adoption of CECL is estimated to initially be approximately 6.7 percent. These adjustments will be refined and reflected in the company’s first-quarter 2020 financial results. The company has elected the three-year phase in for the initial impact of adopting CECL for regulatory capital adequacy purposes. |
Discontinuation of Personal Loan Originations* |
The company discontinued new Personal Loan originations in the fourth quarter of 2019 to focus resources on core business strategic priorities and drive shareholder value and does not expect to originate or purchase Personal Loans in 2020. The company processed completed Personal Loan applications received by Dec. 15, 2019 and continues to provide Personal Loan customers with the high-quality service they have come to expect. At Dec. 31, 2019, the company held $1.0 billion in total originated and purchased Personal Loans. |
Guidance* |
For 2020, the company expects the following, which includes the expected CECL impact on the provisions for credit losses: • Full-year diluted “Core Earnings” per share of $1.85 - $1.91.**• Full-year provisions for credit losses of $285 million - $305 million.• Full-year total portfolio net charge-offs of $275 million - $285 million.• Full-year Private Education Loan originations year-over-year growth of 6%.• Full-year non-interest expenses of $570 million - $580 million.• Full-year loan sales of approximately $3 billion to fund up to $600 million of share repurchases. Beginning in 2020, the company plans to evaluate management’s performance internally using a measure that starts with “Core Earnings” attributable to SLM Corporation common stock for a period, and further adjusting it by increasing it by the impact of the GAAP provisions for credit losses and decreasing it by the total portfolio net charge-offs recorded in that period, net of the tax impact of these adjustments. |
* See page 5 for a cautionary note regarding forward-looking statements.
** See “Core Earnings” to GAAP Reconciliation on page 9 for a description of non-GAAP “Core Earnings”. GAAP net income attributable to SLM Corporation common stock is the most directly comparable GAAP measure. However, this GAAP measure is not accessible on a forward-looking basis because the company is unable to estimate the net impact of derivative accounting and the associated net tax expense (benefit) for future periods.
Quarterly and Full Year Financial Highlights |
4Q 2019 | 3Q 2019 | 4Q 2018 | 2019 | 2018 | |
Income Statement ($ millions) | |||||
Total interest income | $600 | $590 | $538 | $2,331 | $1,935 |
Total interest expense | 181 | 185 | 155 | 708 | 522 |
Net interest income | 419 | 405 | 383 | 1,623 | 1,413 |
Less: provisions for credit losses | 98 | 99 | 58 | 354 | 245 |
Total non-interest income (loss) | (4) | 17 | 13 | 49 | (52) |
Total non-interest expenses | 142 | 154 | 146 | 574 | 557 |
Income tax expense | 35 | 41 | 44 | 165 | 72 |
Net income | 141 | 128 | 148 | 578 | 487 |
Preferred stock dividends | 4 | 4 | 4 | 17 | 16 |
Net income attributable to common stock | 137 | 124 | 143 | 561 | 472 |
“Core Earnings” adjustments to GAAP(1) | 4 | (2) | (5) | (15) | (1) |
Non-GAAP “Core Earnings” net income attributable to common stock(1) | 142 | 122 | 138 | 547 | 471 |
Ending Balances ($ millions) | |||||
Private Education Loans, net | $22,897 | $22,856 | $20,295 | $22,897 | $20,295 |
FFELP Loans, net | 784 | 799 | 848 | 784 | 848 |
Personal Loans, net | 984 | 1,062 | 1,128 | 984 | 1,128 |
Credit Cards, net | 4 | — | — | 4 | — |
Deposits | 24,284 | 22,629 | 18,943 | 24,284 | 18,943 |
-Brokered | 13,809 | 12,542 | 10,295 | 13,809 | 10,295 |
-Retail and other | 10,475 | 10,086 | 8,648 | 10,475 | 8,648 |
Key Performance Metrics | |||||
Net interest margin | 5.41% | 5.55% | 6.11% | 5.76% | 6.10% |
Yield - Total interest-earning assets | 7.75% | 8.09% | 8.59% | 8.27% | 8.36% |
-Private Education Loans | 9.12% | 9.30% | 9.34% | 9.32% | 9.10% |
-Personal Loans | 12.39% | 12.16% | 11.60% | 12.09% | 11.08% |
Cost of Funds | 2.52% | 2.75% | 2.71% | 2.72% | 2.47% |
Non-GAAP Operating Efficiency Ratio(2) | 33.6% | 36.6% | 37.6% | 34.7% | 41.0% |
Return on Assets (“ROA”)(3) | 1.8% | 1.7% | 2.3% | 2.0% | 2.0% |
Non-GAAP “Core Earnings” ROA(4) | 1.8% | 1.7% | 2.2% | 1.9% | 2.0% |
Return on Common Equity (“ROCE”)(5) | 19.2% | 18.0% | 22.6% | 20.7% | 20.3% |
Non-GAAP “Core Earnings” ROCE(6) | 19.8% | 17.7% | 21.8% | 20.1% | 20.2% |
Per Common Share | |||||
GAAP diluted earnings per common share | $0.32 | $0.29 | $0.33 | $1.30 | $1.07 |
Non-GAAP “Core Earnings” diluted earnings per common share(1) | $0.33 | $0.29 | $0.31 | $1.27 | $1.07 |
Average common and common equivalent shares outstanding (millions) | 425 | 427 | 440 | 431 | 440 |
3
Footnotes:
(1) Sallie Mae provides “Core Earnings” because it is one of several measures management uses to evaluate management performance and allocate corporate resources. The difference between “Core Earnings” and GAAP net income is driven by mark-to-fair value unrealized gains and losses on derivative contracts recognized in GAAP, but not in “Core Earnings” results. See the “Core Earnings” to GAAP Reconciliation in this press release for a full reconciliation of GAAP and “Core Earnings.” “Core Earnings” exclude periodic unrealized gains and losses caused by the mark-to-fair value valuations on derivatives that do not qualify for hedge accounting treatment under GAAP, but include current period accruals on the derivative instruments. For periods prior to July 1, 2018, “Core Earnings” also exclude the periodic unrealized gains and losses that are a result of ineffectiveness recognized related to effective hedges under GAAP, net of tax. Under GAAP, for our derivatives held to maturity, the cumulative net unrealized gain or loss over the life of the contract will equal $0. Management believes the company’s derivatives are effective economic hedges, and, as such, they are a critical element of the company’s interest rate risk management strategy. Our “Core Earnings” are not defined terms within GAAP and may not be comparable to similarly titled measures reported by other companies.
(2) We calculate and report our non-GAAP operating efficiency ratio as the ratio of (a) the total non-interest expense numerator to (b) the net revenue denominator (which consists of the sum of net interest income, before provision for credit losses, and non-interest income, excluding any gains and losses on sales of loans and securities, net and the net impact of derivative accounting as defined in the “‘Core Earnings’ to GAAP Reconciliation” table in this press release). This ratio provides useful information to investors because it is a measure used by our management team to monitor our effectiveness in managing operating expenses. Other companies may use similarly titled non-GAAP financial measures that are calculated differently from our ratio. Accordingly, our non-GAAP operating efficiency ratio may not be comparable to similar measures used by other companies.
(3) We calculate and report our Return on Assets (“ROA”) as the ratio of (a) GAAP net income numerator (annualized) to (b) the GAAP total average assets denominator.
(4) We calculate and report our non-GAAP “Core Earnings” Return on Assets (“Core Earnings ROA”) as the ratio of (a) “Core Earnings” net income numerator (annualized) to (b) the GAAP total average assets denominator.
(5) We calculate and report our Return on Common Equity (“ROCE”) as the ratio of (a) GAAP net income attributable to common stock numerator (annualized) to (b) the net denominator, which consists of GAAP total average equity less total average preferred stock.
(6) We calculate and report our non-GAAP “Core Earnings” Return on Common Equity (“Core Earnings ROCE”) as the ratio of (a) “Core Earnings” net income attributable to common stock numerator (annualized) to (b) the net denominator, which consists of GAAP total average equity less total average preferred stock.
***
4
This press release contains “forward-looking statements” and information based on management’s current expectations as of the date of this release. Statements that are not historical facts, including statements about our beliefs, opinions or expectations and statements that assume or are dependent upon future events, are forward-looking statements. This includes, but is not limited to: the company’s expectation and ability to pay a quarterly cash dividend on its common stock in the future, subject to the determination by the company’s Board of Directors, and based on an evaluation of the company’s earnings, financial condition and requirements, business conditions, capital allocation determinations, and other factors, risks and uncertainties; the company’s 2020 guidance; the company’s three-year horizon outlook; the company’s expectation and ability to execute loan sales and share repurchases; the company’s projections for originations and earnings growth and balance sheet position; and any estimates related to accounting standard changes. Forward-looking statements are subject to risks, uncertainties, assumptions and other factors that may cause actual results to be materially different from those reflected in such forward-looking statements. These factors include, among others, the risks and uncertainties set forth in Item 1A. “Risk Factors” and elsewhere in the company’s Annual Report on Form 10-K for the year ended Dec. 31, 2018 (filed with the Securities and Exchange Commission (“SEC”) on Feb. 28, 2019) and subsequent filings with the SEC; increases in financing costs; limits on liquidity; increases in costs associated with compliance with laws and regulations; failure to comply with consumer protection, banking and other laws; changes in accounting standards and the impact of related changes in significant accounting estimates, including any regarding the measurement of our allowance for loan losses and the related provision expense; any adverse outcomes in any significant litigation to which the company is a party; credit risk associated with the company’s exposure to third parties, including counterparties to the company’s derivative transactions; and changes in the terms of education loans and the educational credit marketplace (including changes resulting from new laws and the implementation of existing laws). We could also be affected by, among other things: changes in our funding costs and availability; reductions to our credit ratings; cybersecurity incidents, cyberattacks and other failures or breaches of our operating systems or infrastructure, including those of third-party vendors; damage to our reputation; risks associated with restructuring initiatives, including failures to successfully implement cost-cutting programs and the adverse effects of such initiatives on our business; changes in the demand for educational financing or in financing preferences of lenders, educational institutions, students and their families; changes in law and regulations with respect to the student lending business and financial institutions generally; changes in banking rules and regulations, including increased capital requirements; increased competition from banks and other consumer lenders; the creditworthiness of our customers; changes in the general interest rate environment, including the rate relationships among relevant money-market instruments and those of our earning assets versus our funding arrangements; rates of prepayments on the loans that we own; changes in general economic conditions and our ability to successfully effectuate any acquisitions; and other strategic initiatives. The preparation of our consolidated financial statements also requires us to make certain estimates and assumptions, including estimates and assumptions about future events. These estimates or assumptions may prove to be incorrect. All forward-looking statements contained in this release are qualified by these cautionary statements and are made only as of the date of this release. We do not undertake any obligation to update or revise these forward-looking statements to conform such statements to actual results or changes in our expectations.
5
SLM CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
December 31, | December 31, | |||||||
2019 | 2018 | |||||||
Assets | ||||||||
Cash and cash equivalents | $ | 5,563,877 | $ | 2,559,106 | ||||
Investments: | ||||||||
Available-for-sale investments at fair value (cost of $485,756 and $182,325, respectively) | 487,669 | 176,245 | ||||||
Other investments | 84,420 | 55,554 | ||||||
Total investments | 572,089 | 231,799 | ||||||
Loans held for investment (net of allowance for losses of $441,912 and $341,121, respectively) | 24,667,792 | 22,270,919 | ||||||
Restricted cash | 156,883 | 122,789 | ||||||
Other interest-earning assets | 52,564 | 27,157 | ||||||
Accrued interest receivable | 1,392,725 | 1,191,981 | ||||||
Premises and equipment, net | 134,749 | 105,504 | ||||||
Income taxes receivable, net | 88,844 | 41,570 | ||||||
Tax indemnification receivable | 27,558 | 39,207 | ||||||
Other assets | 29,398 | 48,141 | ||||||
Total assets | $ | 32,686,479 | $ | 26,638,173 | ||||
Liabilities | ||||||||
Deposits | $ | 24,283,983 | $ | 18,943,158 | ||||
Short-term borrowings | 289,230 | — | ||||||
Long-term borrowings | 4,354,037 | 4,284,304 | ||||||
Upromise member accounts | 192,662 | 213,104 | ||||||
Other liabilities | 254,731 | 224,951 | ||||||
Total liabilities | 29,374,643 | 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: 453.6 million and 449.9 million shares issued, respectively | 90,720 | 89,972 | ||||||
Additional paid-in capital | 1,307,630 | 1,274,635 | ||||||
Accumulated other comprehensive income (loss) (net of tax expense (benefit) of ($3,995) and $3,436, respectively) | (12,367 | ) | 10,623 | |||||
Retained earnings | 1,850,512 | 1,340,017 | ||||||
Total SLM Corporation stockholders’ equity before treasury stock | 3,636,495 | 3,115,247 | ||||||
Less: Common stock held in treasury at cost: 32.5 million and 14.2 million shares, respectively | (324,659 | ) | (142,591 | ) | ||||
Total equity | 3,311,836 | 2,972,656 | ||||||
Total liabilities and equity | $ | 32,686,479 | $ | 26,638,173 | ||||
6
SLM CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Quarters Ended | Years Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Interest income: | ||||||||||||||||
Loans | $ | 577,087 | $ | 524,597 | $ | 2,249,169 | $ | 1,894,687 | ||||||||
Investments | 2,335 | 1,181 | 7,607 | 6,162 | ||||||||||||
Cash and cash equivalents | 21,044 | 12,435 | 74,256 | 34,503 | ||||||||||||
Total interest income | 600,466 | 538,213 | 2,331,032 | 1,935,352 | ||||||||||||
Interest expense: | ||||||||||||||||
Deposits | 141,769 | 116,195 | 547,746 | 389,349 | ||||||||||||
Interest expense on short-term borrowings | 2,493 | 1,156 | 6,193 | 5,833 | ||||||||||||
Interest expense on long-term borrowings | 37,103 | 37,995 | 153,778 | 127,106 | ||||||||||||
Total interest expense | 181,365 | 155,346 | 707,717 | 522,288 | ||||||||||||
Net interest income | 419,101 | 382,867 | 1,623,315 | 1,413,064 | ||||||||||||
Less: provisions for credit losses | 97,558 | 57,619 | 354,249 | 244,864 | ||||||||||||
Net interest income after provisions for credit losses | 321,543 | 325,248 | 1,269,066 | 1,168,200 | ||||||||||||
Non-interest income (loss): | ||||||||||||||||
Gains on sales of loans, net | — | — | — | 2,060 | ||||||||||||
Losses on sales of securities, net | — | — | — | (1,549 | ) | |||||||||||
Gains (losses) on derivatives and hedging activities, net | (3,635 | ) | 6,238 | 17,825 | (87 | ) | ||||||||||
Other income (loss) | (211 | ) | 6,446 | 31,102 | (52,319 | ) | ||||||||||
Total non-interest income (loss) | (3,846 | ) | 12,684 | 48,927 | (51,895 | ) | ||||||||||
Non-interest expenses: | ||||||||||||||||
Compensation and benefits | 68,016 | 61,524 | 278,229 | 252,346 | ||||||||||||
FDIC assessment fees | 9,064 | 6,853 | 32,852 | 32,786 | ||||||||||||
Other operating expenses | 64,599 | 77,594 | 263,172 | 271,844 | ||||||||||||
Total non-interest expenses | 141,679 | 145,971 | 574,253 | 556,976 | ||||||||||||
Income before income tax expense | 176,018 | 191,961 | 743,740 | 559,329 | ||||||||||||
Income tax expense | 34,666 | 44,449 | 165,464 | 71,853 | ||||||||||||
Net income | 141,352 | 147,512 | 578,276 | 487,476 | ||||||||||||
Preferred stock dividends | 3,885 | 4,199 | 16,837 | 15,640 | ||||||||||||
Net income attributable to SLM Corporation common stock | $ | 137,467 | $ | 143,313 | $ | 561,439 | $ | 471,836 | ||||||||
Basic earnings per common share attributable to SLM Corporation | $ | 0.33 | $ | 0.33 | $ | 1.31 | $ | 1.08 | ||||||||
Average common shares outstanding | 421,346 | 435,586 | 427,292 | 435,054 | ||||||||||||
Diluted earnings per common share attributable to SLM Corporation | $ | 0.32 | $ | 0.33 | $ | 1.30 | $ | 1.07 | ||||||||
Average common and common equivalent shares outstanding | 425,042 | 440,264 | 430,674 | 439,681 | ||||||||||||
Declared dividends per common share attributable to SLM Corporation | $ | 0.03 | $ | — | $ | 0.12 | $ | — | ||||||||
7
SLM CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
Quarters Ended | Years Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Net income | $ | 141,352 | $ | 147,512 | $ | 578,276 | $ | 487,476 | ||||||||
Other comprehensive income (loss): | ||||||||||||||||
Unrealized gains (losses) on investments | 547 | 3,335 | 7,993 | (2,561 | ) | |||||||||||
Unrealized gains (losses) on cash flow hedges | 9,799 | (24,953 | ) | (38,414 | ) | 11,907 | ||||||||||
Total unrealized gains (losses) | 10,346 | (21,618 | ) | (30,421 | ) | 9,346 | ||||||||||
Income tax (expense) benefit | (2,530 | ) | 5,229 | 7,431 | (2,333 | ) | ||||||||||
Other comprehensive income (loss), net of tax (expense) benefit | 7,816 | (16,389 | ) | (22,990 | ) | 7,013 | ||||||||||
Total comprehensive income | $ | 149,168 | $ | 131,123 | $ | 555,286 | $ | 494,489 | ||||||||
8
“Core Earnings” to GAAP Reconciliation
The following table reflects adjustments associated with our derivative activities.
Quarters Ended | Years Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
(Dollars in thousands, except per share amounts) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
“Core Earnings” adjustments to GAAP: | ||||||||||||||||
GAAP net income | $ | 141,352 | $ | 147,512 | $ | 578,276 | $ | 487,476 | ||||||||
Preferred stock dividends | 3,885 | 4,199 | 16,837 | 15,640 | ||||||||||||
GAAP net income attributable to SLM Corporation common stock | $ | 137,467 | $ | 143,313 | $ | 561,439 | $ | 471,836 | ||||||||
Adjustments: | ||||||||||||||||
Net impact of derivative accounting(1) | 5,818 | (7,092 | ) | (19,469 | ) | (1,284 | ) | |||||||||
Net tax expense (benefit)(2) | 1,422 | (1,722 | ) | (4,758 | ) | (312 | ) | |||||||||
Total “Core Earnings” adjustments to GAAP | 4,396 | (5,370 | ) | (14,711 | ) | (972 | ) | |||||||||
“Core Earnings” attributable to SLM Corporation common stock | $ | 141,863 | $ | 137,943 | $ | 546,728 | $ | 470,864 | ||||||||
GAAP diluted earnings per common share | $ | 0.32 | $ | 0.33 | $ | 1.30 | $ | 1.07 | ||||||||
Derivative adjustments, net of tax | 0.01 | (0.02 | ) | (0.03 | ) | — | ||||||||||
“Core Earnings” diluted earnings per common share | $ | 0.33 | $ | 0.31 | $ | 1.27 | $ | 1.07 | ||||||||
______
(1) Derivative Accounting: “Core Earnings” exclude periodic unrealized gains and losses caused by the mark-to-fair value valuations on derivatives that do not qualify for hedge accounting treatment under GAAP, but include current period accruals on the derivative instruments. For periods prior to July 1, 2018, “Core Earnings” also exclude the periodic unrealized gains and losses that are a result of ineffectiveness recognized related to effective hedges under GAAP, net of tax. Under GAAP, for our derivatives held to maturity, the cumulative net unrealized gain or loss over the life of the contract will equal $0.
(2) “Core Earnings” tax rate is based on the effective tax rate at Sallie Mae Bank, where the derivative instruments are held.
The following table reflects our provisions for credit losses and total portfolio net charge-offs:
Quarters Ended | Years Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
(Dollars in thousands) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Provisions for credit losses | $ | 97,558 | $ | 57,619 | $ | 354,249 | $ | 244,864 | ||||||||
Total portfolio net charge-offs | (69,539 | ) | (45,098 | ) | (253,143 | ) | (153,722 | ) | ||||||||
Beginning in 2020, we plan to evaluate management’s performance internally using a measure that starts with “Core Earnings” net income as disclosed above for a period, and further adjusting it by increasing it by the impact of GAAP provisions for credit losses and decreasing it by the total portfolio net charge-offs recorded in that period, net of the tax impact of these adjustments.
9
Average Balance Sheets - GAAP
The following table reflects the rates earned on interest-earning assets and paid on interest-bearing liabilities and reflects our net interest margin on a consolidated basis.
Quarters Ended December 31, | Years Ended December 31, | |||||||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||||||||||||||
(Dollars in thousands) | Balance | Rate | Balance | Rate | Balance | Rate | Balance | Rate | ||||||||||||||||||||
Average Assets | ||||||||||||||||||||||||||||
Private Education Loans | $ | 23,202,502 | 9.12 | % | $ | 20,391,032 | 9.34 | % | $ | 22,225,473 | 9.32 | % | $ | 19,282,500 | 9.10 | % | ||||||||||||
FFELP Loans | 791,430 | 4.64 | 858,903 | 4.90 | 814,198 | 4.79 | 888,301 | 4.57 | ||||||||||||||||||||
Personal Loans | 1,108,960 | 12.39 | 1,165,432 | 11.60 | 1,141,503 | 12.09 | 900,152 | 11.08 | ||||||||||||||||||||
Taxable securities | 456,106 | 2.06 | 182,652 | 2.56 | 324,849 | 2.35 | 235,700 | 2.61 | ||||||||||||||||||||
Cash and other short-term investments | 5,191,653 | 1.61 | 2,254,767 | 2.19 | 3,693,245 | 2.01 | 1,844,404 | 1.88 | ||||||||||||||||||||
Total interest-earning assets | 30,750,651 | 7.75 | % | 24,852,786 | 8.59 | % | 28,199,268 | 8.27 | % | 23,151,057 | 8.36 | % | ||||||||||||||||
Non-interest-earning assets | 1,371,139 | 1,169,125 | 1,318,290 | 1,157,628 | ||||||||||||||||||||||||
Total assets | $ | 32,121,790 | $ | 26,021,911 | $ | 29,517,558 | $ | 24,308,685 | ||||||||||||||||||||
Average Liabilities and Equity | ||||||||||||||||||||||||||||
Brokered deposits | $ | 13,331,782 | 2.48 | % | $ | 9,777,361 | 2.66 | % | $ | 11,760,646 | 2.66 | % | $ | 9,028,589 | 2.43 | % | ||||||||||||
Retail and other deposits | 10,315,056 | 2.25 | 8,532,952 | 2.36 | 9,588,747 | 2.44 | 8,142,449 | 2.08 | ||||||||||||||||||||
Other interest-bearing liabilities(1) | 4,877,868 | 3.22 | 4,419,040 | 3.52 | 4,658,075 | 3.43 | 3,948,001 | 3.37 | ||||||||||||||||||||
Total interest-bearing liabilities | 28,524,706 | 2.52 | % | 22,729,353 | 2.71 | % | 26,007,468 | 2.72 | % | 21,119,039 | 2.47 | % | ||||||||||||||||
Non-interest-bearing liabilities | 355,351 | 379,361 | 392,173 | 461,327 | ||||||||||||||||||||||||
Equity | 3,241,733 | 2,913,197 | 3,117,917 | 2,728,319 | ||||||||||||||||||||||||
Total liabilities and equity | $ | 32,121,790 | $ | 26,021,911 | $ | 29,517,558 | $ | 24,308,685 | ||||||||||||||||||||
Net interest margin | 5.41 | % | 6.11 | % | 5.76 | % | 6.10 | % | ||||||||||||||||||||
______
(1) | Includes the average balance of our unsecured borrowing, as well as secured borrowings and amortization expense of transaction costs related to our term asset-backed securitizations and our Secured Borrowing Facility. |
10
Earnings per Common Share
Basic earnings per common share (“EPS”) are calculated using the weighted average number of shares of common stock outstanding during each period. A reconciliation of the numerators and denominators of the basic and diluted EPS calculations follows.
Quarters Ended | Years Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
(In thousands, except per share data) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Numerator: | ||||||||||||||||
Net income | $ | 141,352 | $ | 147,512 | $ | 578,276 | $ | 487,476 | ||||||||
Preferred stock dividends | 3,885 | 4,199 | 16,837 | 15,640 | ||||||||||||
Net income attributable to SLM Corporation common stock | $ | 137,467 | $ | 143,313 | $ | 561,439 | $ | 471,836 | ||||||||
Denominator: | ||||||||||||||||
Weighted average shares used to compute basic EPS | 421,346 | 435,586 | 427,292 | 435,054 | ||||||||||||
Effect of dilutive securities: | ||||||||||||||||
Dilutive effect of stock options, restricted stock, restricted stock units, performance stock units and Employee Stock Purchase Plan (“ESPP”) (1)(2) | 3,696 | 4,678 | 3,382 | 4,627 | ||||||||||||
Weighted average shares used to compute diluted EPS | 425,042 | 440,264 | 430,674 | 439,681 | ||||||||||||
Basic earnings per common share attributable to SLM Corporation | $ | 0.33 | $ | 0.33 | $ | 1.31 | $ | 1.08 | ||||||||
Diluted earnings per common share attributable to SLM Corporation | $ | 0.32 | $ | 0.33 | $ | 1.30 | $ | 1.07 | ||||||||
__________
(1) | Includes the potential dilutive effect of additional common shares that are issuable upon exercise of outstanding stock options, restricted stock, restricted stock units, performance stock units and the outstanding commitment to issue shares under the ESPP, determined by the treasury stock method. |
(2) For the quarters ended December 31, 2019 and 2018, securities covering no shares and less than 1 million shares, respectively, and for years ended December 31, 2019 and 2018, securities covering no shares and less than 1 million shares, respectively, were outstanding but not included in the computation of diluted earnings per share because they were anti-dilutive.
11
Allowance for Loan Losses Metrics
Allowance for Loan Losses | ||||||||||||||||||||
Quarter Ended December 31, 2019 | ||||||||||||||||||||
(Dollars in thousands) | FFELP Loans | Private Education Loans | Personal Loans | Credit Cards | Total | |||||||||||||||
Allowance for Loan Losses | ||||||||||||||||||||
Beginning balance | $ | 1,689 | $ | 342,544 | $ | 70,173 | $ | — | $ | 414,406 | ||||||||||
Total provision | 158 | 82,281 | 14,503 | 103 | 97,045 | |||||||||||||||
Net charge-offs: | ||||||||||||||||||||
Charge-offs | (214 | ) | (57,621 | ) | (20,362 | ) | (1 | ) | (78,198 | ) | ||||||||||
Recoveries | — | 7,096 | 1,563 | — | 8,659 | |||||||||||||||
Net charge-offs | (214 | ) | (50,525 | ) | (18,799 | ) | (1 | ) | (69,539 | ) | ||||||||||
Ending Balance | $ | 1,633 | $ | 374,300 | $ | 65,877 | $ | 102 | $ | 441,912 | ||||||||||
Allowance: | ||||||||||||||||||||
Ending balance: individually evaluated for impairment | $ | — | $ | 186,697 | $ | — | $ | — | $ | 186,697 | ||||||||||
Ending balance: collectively evaluated for impairment | $ | 1,633 | $ | 187,603 | $ | 65,877 | $ | 102 | $ | 255,215 | ||||||||||
Loans: | ||||||||||||||||||||
Ending balance: individually evaluated for impairment | $ | — | $ | 1,581,966 | $ | — | $ | — | $ | 1,581,966 | ||||||||||
Ending balance: collectively evaluated for impairment | $ | 783,306 | $ | 21,607,625 | $ | 1,049,007 | $ | 3,884 | $ | 23,443,822 | ||||||||||
Net charge-offs as a percentage of average loans in repayment (annualized)(1) | 0.14 | % | 1.24 | % | 6.82 | % | 0.17 | % | ||||||||||||
Allowance as a percentage of the ending total loan balance | 0.21 | % | 1.61 | % | 6.28 | % | 2.63 | % | ||||||||||||
Allowance as a percentage of the ending loans in repayment(1) | 0.26 | % | 2.23 | % | 6.28 | % | 2.63 | % | ||||||||||||
Allowance coverage of net charge-offs (annualized) | 1.91 | 1.85 | 0.88 | 25.50 | ||||||||||||||||
Ending total loans, gross | $ | 783,306 | $ | 23,189,591 | $ | 1,049,007 | $ | 3,884 | ||||||||||||
Average loans in repayment(1) | $ | 617,406 | $ | 16,359,538 | $ | 1,102,953 | $ | 2,373 | ||||||||||||
Ending loans in repayment(1) | $ | 617,646 | $ | 16,787,670 | $ | 1,049,007 | $ | 3,884 | ||||||||||||
____________
(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.
12
Allowance for Loan Losses | ||||||||||||||||
Quarter Ended December 31, 2018 | ||||||||||||||||
(Dollars in thousands) | FFELP Loans | Private Education Loans | Personal Loans | Total | ||||||||||||
Allowance for Loan Losses | ||||||||||||||||
Beginning balance | $ | 1,080 | $ | 274,684 | $ | 53,210 | $ | 328,974 | ||||||||
Total provision | 238 | 38,671 | 18,336 | 57,245 | ||||||||||||
Net charge-offs: | ||||||||||||||||
Charge-offs | (341 | ) | (40,849 | ) | (9,878 | ) | (51,068 | ) | ||||||||
Recoveries | — | 5,437 | 533 | 5,970 | ||||||||||||
Net charge-offs | (341 | ) | (35,412 | ) | (9,345 | ) | (45,098 | ) | ||||||||
Ending Balance | $ | 977 | $ | 277,943 | $ | 62,201 | $ | 341,121 | ||||||||
Allowance: | ||||||||||||||||
Ending balance: individually evaluated for impairment | $ | — | $ | 120,110 | $ | — | $ | 120,110 | ||||||||
Ending balance: collectively evaluated for impairment | $ | 977 | $ | 157,833 | $ | 62,201 | $ | 221,011 | ||||||||
Loans: | ||||||||||||||||
Ending balance: individually evaluated for impairment | $ | — | $ | 1,257,856 | $ | — | $ | 1,257,856 | ||||||||
Ending balance: collectively evaluated for impairment | $ | 846,487 | $ | 19,246,609 | $ | 1,190,091 | $ | 21,283,187 | ||||||||
Net charge-offs as a percentage of average loans in repayment (annualized)(1) | 0.21 | % | 1.00 | % | 3.21 | % | ||||||||||
Allowance as a percentage of the ending total loan balance | 0.12 | % | 1.36 | % | 5.23 | % | ||||||||||
Allowance as a percentage of the ending loans in repayment(1) | 0.15 | % | 1.90 | % | 5.23 | % | ||||||||||
Allowance coverage of net charge-offs (annualized) | 0.72 | 1.96 | 1.66 | |||||||||||||
Ending total loans, gross | $ | 846,487 | $ | 20,504,465 | $ | 1,190,091 | ||||||||||
Average loans in repayment(1) | $ | 665,151 | $ | 14,166,945 | $ | 1,163,782 | ||||||||||
Ending loans in repayment(1) | $ | 665,807 | $ | 14,666,856 | $ | 1,190,091 | ||||||||||
____________
(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.
13
Allowance for Loan Losses | ||||||||||||||||||||
Year Ended December 31, 2019 | ||||||||||||||||||||
(Dollars in thousands) | FFELP Loans | Private Education Loans | Personal Loans | Credit Cards | Total | |||||||||||||||
Allowance for Loan Losses | ||||||||||||||||||||
Beginning balance | $ | 977 | $ | 277,943 | $ | 62,201 | $ | — | $ | 341,121 | ||||||||||
Total provision | 1,478 | 279,570 | 72,783 | 103 | 353,934 | |||||||||||||||
Net charge-offs: | ||||||||||||||||||||
Charge-offs | (822 | ) | (208,978 | ) | (74,313 | ) | (1 | ) | (284,114 | ) | ||||||||||
Recoveries | — | 25,765 | 5,206 | — | 30,971 | |||||||||||||||
Net charge-offs | (822 | ) | (183,213 | ) | (69,107 | ) | (1 | ) | (253,143 | ) | ||||||||||
Ending Balance | $ | 1,633 | $ | 374,300 | $ | 65,877 | $ | 102 | $ | 441,912 | ||||||||||
Allowance: | ||||||||||||||||||||
Ending balance: individually evaluated for impairment | $ | — | $ | 186,697 | $ | — | $ | — | $ | 186,697 | ||||||||||
Ending balance: collectively evaluated for impairment | $ | 1,633 | $ | 187,603 | $ | 65,877 | $ | 102 | $ | 255,215 | ||||||||||
Loans: | ||||||||||||||||||||
Ending balance: individually evaluated for impairment | $ | — | $ | 1,581,966 | $ | — | $ | — | $ | 1,581,966 | ||||||||||
Ending balance: collectively evaluated for impairment | $ | 783,306 | $ | 21,607,625 | $ | 1,049,007 | $ | 3,884 | $ | 23,443,822 | ||||||||||
Net charge-offs as a percentage of average loans in repayment(1) | 0.13 | % | 1.17 | % | 6.07 | % | 0.13 | % | ||||||||||||
Allowance as a percentage of the ending total loan balance | 0.21 | % | 1.61 | % | 6.28 | % | 2.63 | % | ||||||||||||
Allowance as a percentage of the ending loans in repayment(1) | 0.26 | % | 2.23 | % | 6.28 | % | 2.63 | % | ||||||||||||
Allowance coverage of net charge-offs | 1.99 | 2.04 | 0.95 | 102.00 | ||||||||||||||||
Ending total loans, gross | $ | 783,306 | $ | 23,189,591 | $ | 1,049,007 | $ | 3,884 | ||||||||||||
Average loans in repayment(1) | $ | 631,029 | $ | 15,605,927 | $ | 1,138,887 | $ | 786 | ||||||||||||
Ending loans in repayment(1) | $ | 617,646 | $ | 16,787,670 | $ | 1,049,007 | $ | 3,884 | ||||||||||||
____________
(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.
14
Allowance for Loan Losses | ||||||||||||||||
Year Ended December 31, 2018 | ||||||||||||||||
(Dollars in thousands) | FFELP Loans | Private Education Loans | Personal Loans | Total | ||||||||||||
Allowance for Loan Losses | ||||||||||||||||
Beginning balance | $ | 1,132 | $ | 243,715 | $ | 6,628 | $ | 251,475 | ||||||||
Total provision | 980 | 169,287 | 74,317 | 244,584 | ||||||||||||
Net charge-offs: | ||||||||||||||||
Charge-offs | (1,135 | ) | (154,701 | ) | (19,690 | ) | (175,526 | ) | ||||||||
Recoveries | — | 20,858 | 946 | 21,804 | ||||||||||||
Net charge-offs | (1,135 | ) | (133,843 | ) | (18,744 | ) | (153,722 | ) | ||||||||
Loan sales(1) | — | (1,216 | ) | — | (1,216 | ) | ||||||||||
Ending Balance | $ | 977 | $ | 277,943 | $ | 62,201 | $ | 341,121 | ||||||||
Allowance: | ||||||||||||||||
Ending balance: individually evaluated for impairment | $ | — | $ | 120,110 | $ | — | $ | 120,110 | ||||||||
Ending balance: collectively evaluated for impairment | $ | 977 | $ | 157,833 | $ | 62,201 | $ | 221,011 | ||||||||
Loans: | ||||||||||||||||
Ending balance: individually evaluated for impairment | $ | — | $ | 1,257,856 | $ | — | $ | 1,257,856 | ||||||||
Ending balance: collectively evaluated for impairment | $ | 846,487 | $ | 19,246,609 | $ | 1,190,091 | $ | 21,283,187 | ||||||||
Net charge-offs as a percentage of average loans in repayment(2) | 0.16 | % | 1.01 | % | 2.11 | % | ||||||||||
Allowance as a percentage of the ending total loan balance | 0.12 | % | 1.36 | % | 5.23 | % | ||||||||||
Allowance as a percentage of the ending loans in repayment(2) | 0.15 | % | 1.90 | % | 5.23 | % | ||||||||||
Allowance coverage of net charge-offs | 0.86 | 2.08 | 3.32 | |||||||||||||
Ending total loans, gross | $ | 846,487 | $ | 20,504,465 | $ | 1,190,091 | ||||||||||
Average loans in repayment(2) | $ | 691,406 | $ | 13,303,801 | $ | 889,348 | ||||||||||
Ending loans in repayment(2) | $ | 665,807 | $ | 14,666,856 | $ | 1,190,091 | ||||||||||
________
(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. |
15
Private Education Loan Key Credit Quality Indicators
Private Education Loans | ||||||||||||||
Credit Quality Indicators | ||||||||||||||
December 31, 2019 | December 31, 2018 | |||||||||||||
(Dollars in thousands) | Balance(1) | % of Balance | Balance(1) | % of Balance | ||||||||||
Cosigners: | ||||||||||||||
With cosigner | $ | 20,709,636 | 89 | % | $ | 18,378,398 | 90 | % | ||||||
Without cosigner | 2,479,955 | 11 | 2,126,067 | 10 | ||||||||||
Total | $ | 23,189,591 | 100 | % | $ | 20,504,465 | 100 | % | ||||||
FICO at Original Approval(2): | ||||||||||||||
Less than 670 | $ | 1,665,589 | 7 | % | $ | 1,409,789 | 7 | % | ||||||
670-699 | 3,570,025 | 16 | 3,106,983 | 15 | ||||||||||
700-749 | 7,670,748 | 33 | 6,759,721 | 33 | ||||||||||
Greater than or equal to 750 | 10,283,229 | 44 | 9,227,972 | 45 | ||||||||||
Total | $ | 23,189,591 | 100 | % | $ | 20,504,465 | 100 | % | ||||||
FICO-Refreshed(2)(3): | ||||||||||||||
Less than 670 | $ | 2,979,437 | 13 | % | $ | 2,416,979 | 12 | % | ||||||
670-699 | 2,883,122 | 13 | 2,504,467 | 12 | ||||||||||
700-749 | 6,806,602 | 29 | 6,144,489 | 30 | ||||||||||
Greater than or equal to 750 | 10,520,430 | 45 | 9,438,530 | 46 | ||||||||||
Total | $ | 23,189,591 | 100 | % | $ | 20,504,465 | 100 | % | ||||||
Seasoning(4): | ||||||||||||||
1-12 payments | $ | 5,351,702 | 23 | % | $ | 4,969,334 | 24 | % | ||||||
13-24 payments | 4,004,151 | 17 | 3,481,235 | 17 | ||||||||||
25-36 payments | 2,902,365 | 12 | 2,741,954 | 13 | ||||||||||
37-48 payments | 2,213,944 | 10 | 1,990,049 | 10 | ||||||||||
More than 48 payments | 3,030,024 | 13 | 2,061,448 | 10 | ||||||||||
Not yet in repayment | 5,687,405 | 25 | 5,260,445 | 26 | ||||||||||
Total | $ | 23,189,591 | 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 fourth-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. |
16
Personal Loan Key Credit Quality Indicators
Personal Loans | ||||||||||||||
Credit Quality Indicators | ||||||||||||||
December 31, 2019 | December 31, 2018 | |||||||||||||
(Dollars in thousands) | Balance(1) | % of Balance | Balance(1) | % of Balance | ||||||||||
FICO at Original Approval: | ||||||||||||||
Less than 670 | $ | 47,367 | 4 | % | $ | 77,702 | 7 | % | ||||||
670-699 | 259,098 | 25 | 339,053 | 28 | ||||||||||
700-749 | 521,856 | 50 | 554,700 | 47 | ||||||||||
Greater than or equal to 750 | 220,686 | 21 | 218,636 | 18 | ||||||||||
Total | $ | 1,049,007 | 100 | % | $ | 1,190,091 | 100 | % | ||||||
Seasoning(2): | ||||||||||||||
0-12 payments | $ | 469,940 | 45 | % | $ | 1,008,758 | 85 | % | ||||||
13-24 payments | 505,318 | 48 | 181,333 | 15 | ||||||||||
25-36 payments | 73,749 | 7 | — | — | ||||||||||
37-48 payments | — | — | — | — | ||||||||||
More than 48 payments | — | — | — | — | ||||||||||
Total | $ | 1,049,007 | 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. |
17
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 | ||||||||||||||
December 31, | December 31, | |||||||||||||
2019 | 2018 | |||||||||||||
(Dollars in thousands) | Balance | % | Balance | % | ||||||||||
Loans in-school/grace/deferment(1) | $ | 5,687,405 | $ | 5,260,445 | ||||||||||
Loans in forbearance(2) | 714,516 | 577,164 | ||||||||||||
Loans in repayment and percentage of each status: | ||||||||||||||
Loans current | 16,315,651 | 97.2 | % | 14,289,705 | 97.4 | % | ||||||||
Loans delinquent 31-60 days(3) | 288,051 | 1.7 | 231,216 | 1.6 | ||||||||||
Loans delinquent 61-90 days(3) | 121,302 | 0.7 | 95,105 | 0.7 | ||||||||||
Loans delinquent greater than 90 days(3) | 62,666 | 0.4 | 50,830 | 0.3 | ||||||||||
Total Private Education Loans in repayment | 16,787,670 | 100.0 | % | 14,666,856 | 100.0 | % | ||||||||
Total Private Education Loans, gross | 23,189,591 | 20,504,465 | ||||||||||||
Private Education Loans deferred origination costs and unamortized premium/(discount) | 81,224 | 68,321 | ||||||||||||
Total Private Education Loans | 23,270,815 | 20,572,786 | ||||||||||||
Private Education Loans allowance for losses | (374,300 | ) | (277,943 | ) | ||||||||||
Private Education Loans, net | $ | 22,896,515 | $ | 20,294,843 | ||||||||||
Percentage of Private Education Loans in repayment | 72.4 | % | 71.5 | % | ||||||||||
Delinquencies as a percentage of Private Education Loans in repayment | 2.8 | % | 2.6 | % | ||||||||||
Loans in forbearance as a percentage of Private Education Loans in repayment and forbearance | 4.1 | % | 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. |
18
Personal Loan Delinquencies
The following table provides information regarding the loan status of our Personal Loans.
Personal Loans | ||||||||||||||
December 31, | December 31, | |||||||||||||
2019 | 2018 | |||||||||||||
(Dollars in thousands) | Balance | % | Balance | % | ||||||||||
Loans in repayment and percentage of each status: | ||||||||||||||
Loans current | $ | 1,023,517 | 97.6 | % | $ | 1,172,776 | 98.5 | % | ||||||
Loans delinquent 31-60 days(1) | 9,435 | 0.9 | 6,722 | 0.6 | ||||||||||
Loans delinquent 61-90 days(1) | 7,172 | 0.7 | 5,416 | 0.5 | ||||||||||
Loans delinquent greater than 90 days(1) | 8,883 | 0.8 | 5,177 | 0.4 | ||||||||||
Total Personal Loans in repayment | 1,049,007 | 100.0 | % | 1,190,091 | 100.0 | % | ||||||||
Total Personal Loans, gross | 1,049,007 | 1,190,091 | ||||||||||||
Personal Loans deferred origination costs and unamortized premium/(discount) | 513 | 297 | ||||||||||||
Total Personal Loans | 1,049,520 | 1,190,388 | ||||||||||||
Personal Loans allowance for losses | (65,877 | ) | (62,201 | ) | ||||||||||
Personal Loans, net | $ | 983,643 | $ | 1,128,187 | ||||||||||
Delinquencies as a percentage of Personal Loans in repayment | 2.4 | % | 1.5 | % | ||||||||||
_______
(1) | The period of delinquency is based on the number of days scheduled payments are contractually past due. |
Summary of Our Loan Portfolio
Ending Loan Balances, net
December 31, 2019 | ||||||||||||||||||||
(Dollars in thousands) | Private Education Loans | FFELP Loans | Personal Loans | Credit Cards | Total Portfolio | |||||||||||||||
Total loan portfolio: | ||||||||||||||||||||
In-school(1) | $ | 4,288,239 | $ | 81 | $ | — | $ | — | $ | 4,288,320 | ||||||||||
Grace, repayment and other(2) | 18,901,352 | 783,225 | 1,049,007 | 3,884 | 20,737,468 | |||||||||||||||
Total, gross | 23,189,591 | 783,306 | 1,049,007 | 3,884 | 25,025,788 | |||||||||||||||
Deferred origination costs and unamortized premium/(discount) | 81,224 | 2,143 | 513 | 36 | 83,916 | |||||||||||||||
Allowance for loan losses | (374,300 | ) | (1,633 | ) | (65,877 | ) | (102 | ) | (441,912 | ) | ||||||||||
Total loan portfolio, net | $ | 22,896,515 | $ | 783,816 | $ | 983,643 | $ | 3,818 | $ | 24,667,792 | ||||||||||
% of total | 93 | % | 3 | % | 4 | % | — | % | 100 | % | ||||||||||
_______
(1) Loans for customers still attending school and who are not yet required to make payments on the loans.
(2) Includes loans in deferment or forbearance. 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.
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December 31, 2018 | ||||||||||||||||
(Dollars in thousands) | Private Education Loans | FFELP Loans | Personal Loans | Total Portfolio | ||||||||||||
Total loan portfolio: | ||||||||||||||||
In-school(1) | $ | 4,037,125 | $ | 163 | $ | — | $ | 4,037,288 | ||||||||
Grace, repayment and other(2) | 16,467,340 | 846,324 | 1,190,091 | 18,503,755 | ||||||||||||
Total, gross | 20,504,465 | 846,487 | 1,190,091 | 22,541,043 | ||||||||||||
Deferred origination costs and unamortized premium/(discount) | 68,321 | 2,379 | 297 | 70,997 | ||||||||||||
Allowance for loan losses | (277,943 | ) | (977 | ) | (62,201 | ) | (341,121 | ) | ||||||||
Total loan portfolio, net | $ | 20,294,843 | $ | 847,889 | $ | 1,128,187 | $ | 22,270,919 | ||||||||
% of total | 91 | % | 4 | % | 5 | % | 100 | % | ||||||||
_______
(1) Loans for customers still attending school and who are not yet required to make payments on the loans.
(2) Includes loans in deferment or forbearance. 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.
Average Loan Balances (net of unamortized premium/discount)
Quarters Ended December 31, | Years Ended December 31, | |||||||||||||||||||||||||||
(Dollars in thousands) | 2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||||||
Private Education Loans | $ | 23,202,502 | 93 | % | $ | 20,391,032 | 91 | % | $ | 22,225,473 | 92 | % | $ | 19,282,500 | 92 | % | ||||||||||||
FFELP Loans | 791,430 | 3 | 858,903 | 4 | 814,198 | 3 | 888,301 | 4 | ||||||||||||||||||||
Personal Loans | 1,108,960 | 4 | 1,165,432 | 5 | 1,141,503 | 5 | 900,152 | 4 | ||||||||||||||||||||
Total portfolio | $ | 25,102,892 | 100 | % | $ | 22,415,367 | 100 | % | $ | 24,181,174 | 100 | % | $ | 21,070,953 | 100 | % | ||||||||||||
Loan Activity
Quarter Ended December 31, 2019 | ||||||||||||||||||||
(Dollars in thousands) | Private Education Loans | FFELP Loans | Personal Loans | Credit Cards | Total Portfolio | |||||||||||||||
Beginning balance | $ | 22,855,728 | $ | 798,682 | $ | 1,062,254 | $ | 1,143 | $ | 24,717,807 | ||||||||||
Acquisitions and originations: | ||||||||||||||||||||
Fixed-rate | 449,271 | — | 73,601 | — | 522,872 | |||||||||||||||
Variable-rate | 273,315 | — | — | 4,407 | 277,722 | |||||||||||||||
Total acquisitions and originations | 722,586 | — | 73,601 | 4,407 | 800,594 | |||||||||||||||
Capitalized interest and deferred origination cost premium amortization | 352,034 | 6,832 | (102 | ) | — | 358,764 | ||||||||||||||
Sales | — | — | — | — | — | |||||||||||||||
Loan consolidations to third-parties | (466,152 | ) | (5,519 | ) | — | — | (471,671 | ) | ||||||||||||
Allowance | (31,756 | ) | 56 | 4,296 | (102 | ) | (27,506 | ) | ||||||||||||
Repayments and other | (535,925 | ) | (16,235 | ) | (156,406 | ) | (1,630 | ) | (710,196 | ) | ||||||||||
Ending balance | $ | 22,896,515 | $ | 783,816 | $ | 983,643 | $ | 3,818 | $ | 24,667,792 | ||||||||||
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Quarter Ended December 31, 2018 | ||||||||||||||||
(Dollars in thousands) | Private Education Loans | FFELP Loans | Personal Loans | Total Portfolio | ||||||||||||
Beginning balance | $ | 20,030,806 | $ | 868,138 | $ | 1,079,959 | $ | 21,978,903 | ||||||||
Acquisitions and originations: | ||||||||||||||||
Fixed-rate | 479,469 | — | 184,752 | 664,221 | ||||||||||||
Variable-rate | 258,951 | — | — | 258,951 | ||||||||||||
Total acquisitions and originations | 738,420 | — | 184,752 | 923,172 | ||||||||||||
Capitalized interest and deferred origination cost premium amortization | 302,969 | 7,767 | (55 | ) | 310,681 | |||||||||||
Sales | — | — | — | — | ||||||||||||
Loan consolidations to third-parties | (317,513 | ) | (6,264 | ) | — | (323,777 | ) | |||||||||
Allowance | (3,259 | ) | 103 | (8,991 | ) | (12,147 | ) | |||||||||
Repayments and other | (456,580 | ) | (21,855 | ) | (127,478 | ) | (605,913 | ) | ||||||||
Ending balance | $ | 20,294,843 | $ | 847,889 | $ | 1,128,187 | $ | 22,270,919 | ||||||||
Year Ended December 31, 2019 | ||||||||||||||||||||
(Dollars in thousands) | Private Education Loans | FFELP Loans | Personal Loans | Credit Cards | Total Portfolio | |||||||||||||||
Beginning balance | $ | 20,294,843 | $ | 847,889 | $ | 1,128,187 | $ | — | $ | 22,270,919 | ||||||||||
Acquisitions and originations: | ||||||||||||||||||||
Fixed-rate | 3,784,860 | — | 480,398 | — | 4,265,258 | |||||||||||||||
Variable-rate | 1,866,914 | — | — | 5,933 | 1,872,847 | |||||||||||||||
Total acquisitions and originations | 5,651,774 | — | 480,398 | 5,933 | 6,138,105 | |||||||||||||||
Capitalized interest and deferred origination cost premium amortization | 722,153 | 28,258 | (323 | ) | — | 750,088 | ||||||||||||||
Sales | — | — | — | — | — | |||||||||||||||
Loan consolidations to third-parties | (1,512,279 | ) | (27,461 | ) | — | — | (1,539,740 | ) | ||||||||||||
Allowance | (96,357 | ) | (656 | ) | (3,676 | ) | (102 | ) | (100,791 | ) | ||||||||||
Repayments and other | (2,163,619 | ) | (64,214 | ) | (620,943 | ) | (2,013 | ) | (2,850,789 | ) | ||||||||||
Ending balance | $ | 22,896,515 | $ | 783,816 | $ | 983,643 | $ | 3,818 | $ | 24,667,792 | ||||||||||
Year Ended December 31, 2018 | ||||||||||||||||
(Dollars in thousands) | Private Education Loans | FFELP Loans | Personal Loans | Total Portfolio | ||||||||||||
Beginning balance | $ | 17,244,830 | $ | 929,159 | $ | 393,652 | $ | 18,567,641 | ||||||||
Acquisitions and originations: | ||||||||||||||||
Fixed-rate | 3,082,544 | — | 1,157,875 | 4,240,419 | ||||||||||||
Variable-rate | 2,252,948 | — | — | 2,252,948 | ||||||||||||
Total acquisitions and originations | 5,335,492 | — | 1,157,875 | 6,493,367 | ||||||||||||
Capitalized interest and deferred origination cost premium amortization | 597,997 | 31,093 | (71 | ) | 629,019 | |||||||||||
Sales | (43,988 | ) | — | — | (43,988 | ) | ||||||||||
Loan consolidations to third-parties | (991,044 | ) | (30,076 | ) | — | (1,021,120 | ) | |||||||||
Allowance | (34,228 | ) | 155 | (55,573 | ) | (89,646 | ) | |||||||||
Repayments and other | (1,814,216 | ) | (82,442 | ) | (367,696 | ) | (2,264,354 | ) | ||||||||
Ending balance | $ | 20,294,843 | $ | 847,889 | $ | 1,128,187 | $ | 22,270,919 | ||||||||
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Private Education Loan Originations
The following table summarizes our Private Education Loan originations. Originations represent loans that were funded or acquired during the period presented.
Quarters Ended December 31, | ||||||||||||||
(Dollars in thousands) | 2019 | % | 2018 | % | ||||||||||
Smart Option - interest only(1) | $ | 158,611 | 22 | % | $ | 155,471 | 21 | % | ||||||
Smart Option - fixed pay(1) | 193,667 | 27 | 195,438 | 27 | ||||||||||
Smart Option - deferred(1) | 244,555 | 34 | 258,087 | 35 | ||||||||||
Smart Option - principal and interest | 1,325 | — | 1,618 | — | ||||||||||
Graduate Loan | 106,233 | 15 | 107,903 | 15 | ||||||||||
Parent Loan | 12,180 | 2 | 14,960 | 2 | ||||||||||
Total Private Education Loan originations | $ | 716,571 | 100 | % | $ | 733,477 | 100 | % | ||||||
Percentage of loans with a cosigner | 83.2 | % | 85.2 | % | ||||||||||
Average FICO at approval(2) | 745 | 746 | ||||||||||||
Years Ended December 31, | ||||||||||||||
(Dollars in thousands) | 2019 | % | 2018 | % | ||||||||||
Smart Option - interest only(1) | $ | 1,234,246 | 22 | % | $ | 1,164,229 | 22 | % | ||||||
Smart Option - fixed pay(1) | 1,560,496 | 28 | 1,410,124 | 27 | ||||||||||
Smart Option - deferred(1) | 2,082,147 | 37 | 2,017,927 | 38 | ||||||||||
Smart Option - principal and interest | 9,806 | — | 8,450 | — | ||||||||||
Graduate Loan | 622,181 | 11 | 609,742 | 11 | ||||||||||
Parent Loan | 115,910 | 2 | 104,771 | 2 | ||||||||||
Total Private Education Loan originations | $ | 5,624,786 | 100 | % | $ | 5,315,243 | 100 | % | ||||||
Percentage of loans with a cosigner | 86.6 | % | 87.2 | % | ||||||||||
Average FICO at approval(2) | 746 | 746 | ||||||||||||
_______
(1) | Interest only, fixed pay and deferred describe the payment option while in school or in grace period. |
(2) | Represents the higher credit score of the cosigner or the borrower. |
Deposits
Interest bearing deposits are summarized as follows:
December 31, 2019 | December 31, 2018 | ||||||||||||||
(Dollars in thousands) | Amount | Year-End Weighted Average Stated Rate(1) | Amount | Year-End Weighted Average Stated Rate(1) | |||||||||||
Money market | $ | 9,616,547 | 2.04 | % | $ | 8,687,766 | 2.46 | % | |||||||
Savings | 718,616 | 1.71 | 702,342 | 2.00 | |||||||||||
Certificates of deposit | 13,947,743 | 2.44 | 9,551,974 | 2.74 | |||||||||||
Deposits - interest bearing | $ | 24,282,906 | $ | 18,942,082 | |||||||||||
_____
(1) Includes the effect of interest rate swaps in effective hedge relationships.
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Regulatory Capital
Salle Mae Bank’s required and actual regulatory capital amounts and ratios under U.S. Basel III are shown in the following table.
Actual | U.S. Basel III Regulatory Requirements(1) | ||||||||||||
(Dollars in thousands) | Amount | Ratio | Amount | Ratio | |||||||||
As of December 31, 2019: | |||||||||||||
Common Equity Tier 1 Capital (to Risk-Weighted Assets) | $ | 3,264,309 | 12.2 | % | $ | 1,876,050 | > | 7.0 | % | ||||
Tier 1 Capital (to Risk-Weighted Assets) | $ | 3,264,309 | 12.2 | % | $ | 2,278,060 | > | 8.5 | % | ||||
Total Capital (to Risk-Weighted Assets) | $ | 3,600,668 | 13.4 | % | $ | 2,814,074 | > | 10.5 | % | ||||
Tier 1 Capital (to Average Assets) | $ | 3,264,309 | 10.2 | % | (2) | $ | 1,282,642 | > | 4.0 | % | |||
As of December 31, 2018: | |||||||||||||
Common Equity Tier 1 Capital (to Risk-Weighted Assets) | $ | 2,896,091 | 12.1 | % | $ | 1,528,209 | > | 6.375 | % | ||||
Tier 1 Capital (to Risk-Weighted Assets) | $ | 2,896,091 | 12.1 | % | $ | 1,887,787 | > | 7.875 | % | ||||
Total Capital (to Risk-Weighted Assets) | $ | 3,196,279 | 13.3 | % | $ | 2,367,226 | > | 9.875 | % | ||||
Tier 1 Capital (to Average Assets) | $ | 2,896,091 | 11.1 | % | $ | 1,039,226 | > | 4.0 | % | ||||
________________
(1) | Required risk-based capital ratios include the capital conservation buffer. |
(2) | The Bank’s Tier 1 leverage ratio exceeds the 5 percent well-capitalized standard for the Tier 1 leverage ratio under the prompt corrective action framework. |
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