Sallie Mae reports second-quarter 2010 results

RESTON, Va., July 20, 2010—SLM Corporation (NYSE: SLM), commonly known as Sallie Mae, reported core earnings net income of $209 million ($.39 per diluted share) for the second quarter 2010, which included an after-tax gain of $57 million ($.11 per diluted share) from $1.4 billion of unsecured debt repurchases.

These results compare to core earnings net income of $170 million ($.31 per diluted share) in the second quarter 2009. On a GAAP basis, net income was $338 million ($.63 per diluted share) in the second-quarter 2010, vs. a net loss of $123 million ($.32 per diluted share) in the year-ago period.

Core earnings net interest income after provision for loan losses was $377 million in the second quarter, compared to $343 million in the prior quarter and $55 million in the year-ago quarter.

CEO Albert Lord said, “Second quarter earnings were much improved from one year ago. On the credit front, it is quite evident that economic conditions continue to weigh heavily on our out-of-school customers, almost 20 percent of whom entered repayment in the last 8 months. We will continue to concentrate on service, quality private loan growth and new businesses that help families invest in college.”

Lord continued, “Management is intensely focused on refitting the company to its changed circumstances and enhancing value for our shareholders.”

Loan Originations

The company originated $3.1 billion in federal student loans in the 2010 second quarter, compared to $3.7 billion in the year-ago period. The decrease was the result of the termination of the guaranteed loan program effective June 30 and institutions’ transition to the government’s loan program.

During the second-quarter 2010, the company originated $219 million of private student loans, compared to $387 million in the year-ago period. Private student loan originations continue to be affected by increased federal student loan availability and more students’ enrollment at lower-cost institutions.

Private Education Loan Portfolio Quality

Managed private education loan charge-offs were $336 million in the second quarter compared to $284 million in the previous quarter and $355 million in the year-ago quarter. Delinquencies as a percentage of private education loans in repayment declined to 11.9 percent from the previous quarter’s 12.2 percent. The core earnings provision for private education loan losses was $349 million in the second quarter, compared to $325 million in the first quarter.

Funding and Liquidity

The company completed a $1.2 billion long-term federal student loan securitization during the quarter and had $11.8 billion of primary liquidity at June 30, 2010.

Other Income and Operating Expenses

Core earnings fee income, which includes the gain on debt repurchases, was $308 million in the second quarter, compared to the year-ago quarter’s $528 million.

Core earnings operating expenses excluding restructuring and related asset impairments were $331 million for the quarter, compared to $298 million in the year-ago quarter. With the passage of legislation that ended federal loan originations, the company accelerated the strategic restructuring of its business and initiated several investments to improve future operating efficiencies and position the company for additional growth. Restructuring ($24 million) and other litigation expenses totaled $43 million in the quarter.

GAAP

Sallie Mae officially reports financial results on a GAAP basis and also presents certain core earnings performance measures. The company’s management, equity investors, credit rating agencies and debt capital providers use these core earnings measures to monitor the company’s business performance. Both a description of the core earnings treatment and a full reconciliation to the GAAP income statement can be foundhere, click on the Second Quarter 2010 Supplemental Earnings Disclosure.

The company adopted Financial Accounting Standards Board updates as of Jan. 1, 2010, and as a result, the company’s GAAP and core earnings presentations for securitization accounting are the same, and managed and on-balance sheet (GAAP) student loan portfolios are now the same size.

The primary difference between the company’s second-quarter 2010 core earnings and GAAP results is the impact of derivative and hedge accounting. Second-quarter 2010 GAAP results include the net impact of a $301 million unrealized, mark-to-market, pre-tax gain on certain derivative contracts that are recognized in GAAP, but not in core earnings, results.

Presentation slides for the conference call discussed below may be accessedhere.

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The company will host an earnings conference call tomorrow, July 21, 2010, at 8 a.m. EDT. Sallie Mae executives will discuss various highlights of the quarter and answer questions related to the company’s performance. Individuals interested in participating should call the following number tomorrow, July 21, starting at 7:45 a.m. EDT: (877) 356-5689 (USA and Canada) or (706) 679-0623 (International) and use access code 83583661. The conference call will be replayed continuously beginning at 11:30 a.m. EDT on July 21, 2010, and concluding at midnight EDT on Aug. 4, 2010. To access the replay, please dial (800) 642-1687 (USA and Canada) or dial (706) 645-9291 (International) and use access code 83583661. In addition, there will be a live audio Web cast of the conference call, which may be accessed atwww.SallieMae.com. A replay will be available 30 to 45 minutes after the live broadcast.

This press release contains “forward-looking statements” based on management’s current expectations as of the date of this release. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Because such statements inherently involve risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks include, among others, changes in the terms of student loans and the educational credit marketplace arising from the implementation of applicable laws and regulations, and from changes in such laws and regulations, adverse results in legal disputes, changes in the demand for educational financing or in financing preferences of educational institutions, students and their families, limited liquidity, increased financing costs and changes in the general interest rate environment. For more information, see the company's filings with the Securities and Exchange Commission, including the forward-looking statements contained in the company’s Supplemental Financial Information Second Quarter 2010. All information in this release is as of July 20, 2010. The Company does not undertake any obligation to update or revise these forward-looking statements to conform the statement to actual results or changes in the Company’s expectations.

For more information contact:

Martha Holler(703) 984-5178 (media)

Steve McGarry(703) 984-6746 (investor)

Joe Fisher(703) 984-5755 (investor)

SLM Corporation(NYSE:SLM), commonly known as Sallie Mae, is the nation’s leading saving, planning and paying for education company. Sallie Mae’s saving programs, planning resources and financing options have helped more than 31 million people make the investment in higher education. Through its subsidiaries, the company manages $182 billion in education loans and serves 10 million student and parent customers. In addition, the company’s Upromise program has enabled 12 million members to earn more than $525 million in rewards to help pay for college. Its Upromise affiliates also manage more than $25 billion in 529 college-savings plans. Sallie Mae offers services to a range of institutional clients, including colleges and universities, student loan guarantors and state and federal agencies. More information is available atwww.SallieMae.com. SLM Corporation and its subsidiaries are not sponsored by or agencies of the United States of America.

News Source : Sallie Mae reports second-quarter 2010 results