Read the transcript from the Earnings Conference Call (PDF, 80KB)

RESTON, Va., April 22, 2009—SLM Corporation (NYSE: SLM), commonly known as Sallie Mae, reported net income on a core earnings basis of $14 million for the first quarter ended March 31, 2009. After payment of dividends to holders of the company's preferred stock, the company reported a core earnings diluted loss per common share of $.03. The loss was the direct result of ongoing dislocation in the commercial paper (CP) market and a feature of the U.S. Department of Education (ED) participation program. These two items reduced core earnings by $.24 per diluted share.

The majority of the company's federal student loan portfolio earns interest based on CP rates and is funded with borrowings based on LIBOR. Dislocations in the capital markets continued to distort CP rates in the quarter so that the company's asset yield was 42 basis points lower than normal. This reduced net interest income by $139 million, or $.19 per diluted share. In the fourth-quarter 2008, ED made an adjustment to mitigate the dislocation in the CP market and to better match money-market conditions. ED did not make a similar adjustment for the first-quarter 2009.

Additionally, although the liability rate for loans funded through ED's participation program is based on the prior quarter's CP rates, the yield on the student loan is based on current quarter CP rates. The sharp decline in CP rates reduced net interest income by $40 million in the first quarter, or $.05 per diluted share.

"Ironically, positive action taken by the federal government to stabilize the commercial paper markets is adversely impacting student loans and student-loan backed securities. The inordinately low CP rate also undermines the $400 billion student loan ABS market the U.S. Treasury and the Federal Reserve have been working to stabilize. We do not believe this result was intended and are working with Members of Congress to resolve the issue. We are also working with Congress and the Administration to help put in place a federal student loan infrastructure consistent with President Obama's proposal to vastly expand Pell Grants," said Albert L. Lord, vice chairman and CEO.

During the first quarter, new extensions of credit remained strong. The company originated a record $6.6 billion of FFELP loans, compared to $6.0 billion in the year-ago quarter. "Our ability to continue to meet students' needs in this environment is the direct result of the ECASLA legislation championed by Chairmen Miller and Kennedy," Mr. Lord said.

Private education loan originations were $1.5 billion, compared to $2.5 billion in the year-ago quarter. The decrease in private credit loan originations was due to a tightening of underwriting standards and the elimination of non-traditional private loan originations.

The company provided $297 million for managed private education loan losses in the first quarter due in part to growth in loans in repayment status and higher delinquencies resulting from a continued weakening in the overall economy and a managed reduction of loans in forbearance status. The company charged off $202 million of managed private education loans during the quarter, an increase from $159 million in the prior quarter.

Core earnings fee income, which consists primarily of fees earned from guarantor servicing and collection activity, was $239 million in the quarter, compared to $200 million in the prior quarter, and included a $74 million impairment in the purchased mortgage portfolio, due to continued weakening of the real estate market.

Operating expenses were $296 million in the quarter, including $5 million in restructuring charges, compared to $360 million, including $21 million in restructuring charges, in the year-ago quarter.

In addition to presenting certain core earnings performance measures, Sallie Mae reports financial results on a GAAP basis. The company's management, equity investors, credit rating agencies and debt capital providers use 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 found here, click on the First Quarter 2009 Supplemental Earnings Disclosure.

Sallie Mae reported a first-quarter 2009 GAAP net loss of $21 million, or $.10 diluted loss per share. These results include the impact of the CP-related issues discussed above. The company provided $203 million for private education loan losses and charged off $139 million of private education loans during the quarter.

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The company will host earnings conference call tomorrow, April 23 at 8 a.m. EDT. Sallie Mae executives will be on hand to discuss various highlights of the quarter and to answer questions related to the company's performance. Individuals interested in participating should call the following number tomorrow, April 23, 2009, starting at 7:45 a.m. EDT: (877) 356-5689 (USA and Canada) or (706) 679-0623 (International) and use access code 91859703. The conference call will be replayed continuously beginning at 11 a.m. EDT on Thursday, April 23, 2009, and concluding at midnight on May 7, 2009. To access the replay, please dial (800) 642-1687 (USA and Canada) or dial (706) 645-9291 (International) and use access code 91859703. In addition, there will be a live audio Web cast of the conference call, which may be accessed at www.salliemae.com.

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, general economic conditions, 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 First Quarter 2009. All information in this release is as of March 31, 2009. 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 (investors)
Joe Fisher (703) 984-5755 (investors)