Sallie Mae Reports Fourth-Quarter and Full-Year 2015 Financial Results

Diluted Earnings Per Share Up 40 Percent Year-over-Year

Full-Year Private Education Loan Originations of $4.3 Billion

Private Education Loan Portfolio Grows to $10.5 Billion, Up 28 Percent Year-over-Year

NEWARK, Del.--()--Sallie Mae (NASDAQ: SLM), formally SLM Corporation, today released fourth-quarter 2015 and full-year 2015 financial results. In 2015, the company increased diluted earnings per share 40 percent year-over-year to $.59 (including $.20 attributable to gains on sales of loans), grew private education loan originations 6 percent to $4.3 billion, and expanded its private education loan portfolio size 28 percent to $10.5 billion, all compared to 2014.

“We met or exceeded all of our goals in 2015, our first full year of operation. Even more gratifying, we helped 333,000 students make college happen. With infrastructure investments and service enhancements in place to improve our customers’ experience, we are better positioned than ever to serve families as they save, plan, and pay for college, and remain on an upward growth trajectory,” said Raymond Quinlan, chairman and CEO. “Concerns about capital market conditions and regulatory issues continue to weigh on our market valuation. We strongly believe those concerns are exaggerated and will clear up over the course of 2016.”

For the fourth-quarter 2015, GAAP net income was $90 million, up from $20 million in the year-ago quarter. GAAP net income attributable to the company's common stock was $85 million ($.20 diluted earnings per share) in the fourth-quarter 2015, up from $15 million ($.03 diluted earnings per share) in the year-ago quarter. The year-over-year increase was primarily attributable to a $37-million increase in net interest income, a $58-million increase in gains on sales of loans, and a $4-million decrease in total expenses, which were offset by a $30-million increase in income tax expense.

For 2015, GAAP net income was $274 million, up from $194 million in 2014. GAAP net income attributable to the company's common stock was $255 million ($.59 diluted earnings per share) in 2015, up from $181 million ($.42 diluted earnings per share) in 2014.

Fourth-quarter 2015 results vs. fourth-quarter 2014 included:

  • Private education loan originations of $575 million, up 3 percent.
  • Net interest income of $188 million, up 25 percent.
  • Net interest margin of 5.48 percent, up 47 basis points.
  • Average private education loans outstanding of $10.6 billion, up 31 percent.
  • Average yield on the private education loan portfolio was 7.84 percent, down 23 basis points.
  • Private education loan provision for loan losses was $29 million, down from $30 million.
  • Loans in forbearance were 3.4 percent of private education loans in repayment and forbearance.
  • Delinquencies as a percentage of private education loans in repayment were 2.2 percent.

In connection with the Navient Corporation spin-off, the company changed its policy to charge off loans after 120 days of delinquency and changed its loss emergence period from two years to one year to reflect both the shorter charge-off policy and its related servicing practices. Consequently, many of the pre-spin-off, historical credit indicators and period-over-period trends are not comparable and may not be indicative of future performance.

Core earnings for the fourth-quarter 2015 were $90 million, up from $20 million in the year-ago quarter. Core earnings attributable to the company's common stock were $85 million ($.20 diluted earnings per share) in the fourth-quarter 2015, up from $15 million ($.03 diluted earnings per share) in the year-ago quarter.

Core earnings for 2015 were $273 million, up from $195 million for 2014. Core earnings attributable to the company's common stock were $254 million ($.59 diluted earnings per share) for 2015, up from $182 million ($.42 diluted earnings per share) for 2014.

Sallie Mae provides core earnings because it is one of several measures used to evaluate management performance and allocate corporate resources. The difference between core earnings and GAAP net income is driven by mark-to-market unrealized gains and losses on derivative contracts recognized in GAAP, but not in core earnings results. Management believes its derivatives are effective economic hedges, and, as such, they are a critical element of the company's interest rate risk management strategy. Fourth-quarter 2015 and full-year 2015 GAAP results included $348 thousand and $1.8 million, respectively, of pre-tax gains from derivative accounting treatment that are excluded from core earnings results, vs. pre-tax losses of $62 thousand and $1.7 million, respectively, in the year-ago periods.

Total Expenses

Total expenses were $85 million in fourth-quarter 2015 (reflecting a $1 million credit to reorganization expenses), compared with $88 million in the year-ago quarter (which included $10 million of reorganization expenses).

Total expenses were $356 million for the full-year 2015 (including $5 million of reorganization expenses), compared with $316 million in 2014 (which included $38 million of reorganization expenses). The year-over-year increase in total expenses was primarily the result of increased personnel costs related to being a stand-alone company and an increase in loans serviced for the company and third parties. In addition, the company made investments in its servicing operation to improve customer service, such as expanding weekend service hours and improving response times.

Income Tax Expense

The effective income tax rate decreased to 37.9 percent in fourth-quarter 2015 from 55.4 percent in the year-ago quarter. In fourth-quarter 2014, the company recorded a net reserve of $7 million for uncertain historical tax positions, which contributed to an increase in the effective tax rate to 55.4 percent. Absent these adjustments, the company’s effective tax rate would have been approximately 39 percent in fourth-quarter 2014. The additional decline in the effective tax rate for the fourth-quarter 2015 was the result of lower effective state tax rates in fourth-quarter 2015.

The company’s effective tax rate decreased to 37.5 percent in 2015 from 41.9 percent in 2014. The decrease in the effective tax rate for 2015 was primarily the result of the additional reserves recorded in fourth-quarter 2014 related to uncertain historical tax positions and lower effective state tax rates in fourth-quarter 2015.

Capital

The regulatory capital ratios of the company’s Sallie Mae Bank subsidiary continue to exceed guidelines for institutions considered “well capitalized.” At Dec. 31, 2015, Sallie Mae Bank’s regulatory capital ratios were as follows:

   

Dec. 31, 2015

Well Capitalized Regulatory Requirements

Tier 1 leverage 12.3 percent 5.0 percent
Tier 1 risk-based capital 14.4 percent 8.0 percent
Total risk-based capital 15.4 percent 10.0 percent
Common equity Tier 1 risk-based capital 14.4 percent 6.5 percent
 

Deposits

Deposits at the company totaled $11.5 billion ($7.3 billion in brokered deposits and $4.2 billion in retail and other deposits) at Dec. 31, 2015, compared to $10.5 billion ($6.7 billion in brokered deposits and $3.8 billion in retail and other deposits) at Dec. 31, 2014. The increase was primarily driven by growth in brokered and other money market deposits and brokered CDs.

Guidance

The company expects 2016 results to be as follows:

  • Full-year diluted core earnings per share between $.49 and $.51.
  • Full-year private education loan originations of $4.6 billion.
  • Full-year operating efficiency ratio improvement of 8-10 percent.

***

Sallie Mae will host an earnings conference call tomorrow, Jan. 21, 2016, at 8 a.m. EST. Sallie Mae executives will be on hand to discuss various highlights of the quarter and to answer questions related to Sallie Mae’s performance. Individuals interested in participating in the call should dial 877-356-5689 (USA and Canada) or dial 706-679-0623 (international) and use access code 3903581 starting at 7:45 a.m. EST. A live audio webcast of the conference call may be accessed at www.SallieMae.com/investors. A replay of the conference call will be available approximately two hours after the call’s conclusion and will remain available through Feb. 3, 2016, by dialing 855-859-2056 (USA and Canada) or 404-537-3406 (international) with access code 3903581.

Presentation slides for the conference call may be accessed at www.SallieMae.com/investors under the webcasts tab.

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 the company’s beliefs, opinions or expectations and statements that assume or are dependent upon future events, are forward-looking statements. 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, 2014 (filed with the Securities and Exchange Commission (“SEC”) on Feb. 26, 2015) and subsequent filings with the SEC; increases in financing costs; limits on liquidity; increases in costs associated with compliance with laws and regulations; changes in accounting standards and the impact of related changes in significant accounting estimates; 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). The company could also be affected by, among other things: changes in its funding costs and availability; reductions to its credit ratings; failures or breaches of its operating systems or infrastructure, including those of third-party vendors; damage to its reputation; failures to successfully implement cost-cutting and restructuring initiatives and adverse effects of such initiatives on the company's business; risks associated with restructuring initiatives; 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 its customers; changes in the general interest rate environment, including the rate relationships among relevant money-market instruments and those of its earning assets versus its funding arrangements; rates of prepayments on the loans made by the company and its subsidiaries; changes in general economic conditions and the company's ability to successfully effectuate any acquisitions; and other strategic initiatives. The preparation of the company’s consolidated financial statements also requires management 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. The company does not undertake any obligation to update or revise these forward-looking statements to conform such statements to actual results or changes in its expectations.

The company reports financial results on a GAAP basis and also provides certain “Core Earnings” performance measures. The difference between the company’s “Core Earnings” and GAAP results for the periods presented were the unrealized, mark-to-market gains/losses on derivative contracts. These are recognized in GAAP, but not in “Core Earnings” results. The company provides “Core Earnings” measures because this is what management uses when making management decisions regarding the company’s performance and the allocation of corporate resources. The company’s “Core Earnings” are not defined terms within GAAP and may not be comparable to similarly titled measures reported by other companies.

For additional information, see “Management's Discussion and Analysis of Financial Condition and Results of Operations — GAAP Consolidated Earnings Summary -‘Core Earnings’” in the company’s Form 10-Q for the quarter ended September 30, 2015 for a further discussion and the “‘Core Earnings’ to GAAP Reconciliation” table in this press release for a complete reconciliation between GAAP net income and “Core Earnings.”

Year-over-year private education loan portfolio performance continues to be affected by changes in the company’s business practices undertaken in connection with the Navient Corporation spin-off. Most notably, the company changed its policy to charge off loans after 120 days of delinquency and changed its loss emergence period from two years to one year to reflect both the shorter charge-off policy and its related servicing practices. A loss emergence period represents the expected period between the first occurrence of an event likely to cause a loss on a loan and the date the loan is expected to be charged off, taking into consideration account management practices that affect the timing of a loss, such as the usage of forbearance. Prior to the spin-off, Sallie Mae Bank also sold all loans past 90 days delinquent to an entity that is now a subsidiary of Navient Corporation. Consequently, many of the pre-spin-off, historical credit indicators and period-over-period trends are not comparable and may not be indicative of future performance.

***

Sallie Mae (NASDAQ: SLM) is the nation’s saving, planning, and paying for college company. Whether college is a long way off or just around the corner, Sallie Mae offers products that promote responsible personal finance, including private education loans, Upromise rewards, scholarship search, college financial planning tools, and online retail banking. 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.

   
Selected Financial Information and Ratios
(Unaudited)
 
Quarters Ended Years Ended
December 31, December 31,

(In thousands, except per share data and percentages)

2015   2014 2015   2014
 
Net income attributable to SLM Corporation common stock $ 84,856 $ 14,862 $ 254,689 $ 181,286
Diluted earnings per common share attributable to SLM Corporation $ 0.20 $ 0.03 $ 0.59 $ 0.42
Weighted average shares used to compute diluted earnings per share 431,531 432,108 432,234 432,269
Return on assets 2.49 % 0.62 % 2.04 % 1.68 %
Operating efficiency ratio - old method(1) 37 % 59 % 44 % 43 %
Operating efficiency ratio - new method(2) 43 % 48 % 47 % 45 %
 
Other Operating Statistics
Ending Private Education Loans, net $ 10,515,505 $ 8,246,647 $ 10,515,505 $ 8,246,647
Ending FFELP Loans, net 1,115,086   1,263,139   1,115,086   1,263,139  
Ending total education loans, net $ 11,630,591   $ 9,509,786   $ 11,630,591   $ 9,509,786  
 
Average education loans $ 11,707,966 $ 9,355,797 $ 10,998,776 $ 8,916,853

_________

(1) Operating efficiency ratio is calculated as total expenses, excluding restructuring costs, divided by net interest income (after provision for credit losses) and other income.
(2) As shown here, in 2016 the company will change its calculation of operating efficiency ratio in future disclosures to investors to better reflect the ongoing efficiency of the company, as well as to be more consistent with the calculation used by our peers. The revised calculation is total expenses, excluding restructuring costs, divided by net interest income (before provision for credit losses) and other income, excluding gains on sales of loans.
   
SLM CORPORATION
 
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
 
December 31, December 31,
2015 2014
Assets
Cash and cash equivalents $ 2,416,219 $ 2,359,780
Available-for-sale investments at fair value (cost of $196,402 and $167,740, respectively) 195,391 168,934
Loans held for investment (net of allowance for losses of $112,507 and $83,842, respectively) 11,630,591 9,509,786
Restricted cash and investments 27,980 4,804
Other interest-earning assets 54,845 72,479
Accrued interest receivable 564,496 469,697
Premises and equipment, net 81,273 78,470
Acquired intangible assets, net 1,745 3,225
Tax indemnification receivable 186,076 240,311
Other assets 55,482   64,757  
Total assets $ 15,214,098   $ 12,972,243  
 
Liabilities
Deposits $ 11,487,707 $ 10,540,555
Short-term borrowings 500,175
Long-term borrowings 579,101
Income taxes payable, net 166,662 191,499
Upromise related liabilities 275,384 293,004
Other liabilities 108,746   117,227  
Total liabilities 13,117,775   11,142,285  
 
Commitments and contingencies
 
Equity
Preferred stock, par value $0.20 per share, 20 million shares authorized:
Series A: 3.3 million and 3.3 million shares issued, respectively, at stated value of $50 per share 165,000 165,000
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: 430.7 million and 424.8 million shares issued, respectively 86,136 84,961
Additional paid-in capital 1,135,860 1,090,511
Accumulated other comprehensive loss (net of tax benefit of $9,949 and $7,186, respectively) (16,059 ) (11,393 )
Retained earnings 366,609   113,066  
Total SLM Corporation stockholders' equity before treasury stock 2,137,546 1,842,145
Less: Common stock held in treasury at cost: 4.4 million and 1.4 million shares, respectively (41,223 ) (12,187 )
Total equity 2,096,323   1,829,958  
Total liabilities and equity $ 15,214,098   $ 12,972,243  
   
SLM CORPORATION
 
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
 
Quarters Ended Years Ended
December 31, December 31,
2015   2014 2015   2014
Interest income:
Loans $ 218,703 $ 174,413 $ 817,120 $ 660,792
Investments 2,501 2,792 10,247 8,913
Cash and cash equivalents 1,183   1,444   3,751   4,589  
Total interest income 222,387 178,649 831,118 674,294
Interest expense:
Deposits 29,428 27,973 116,386 95,774
Interest expense on short-term borrowings 1,771 6,490
Interest expense on long-term borrowings 3,340 5,738
Other interest expense 2     5   41  
Total interest expense 34,541   27,973   128,619   95,815  
Net interest income 187,846 150,676 702,499 578,479
Less: provisions for credit losses 30,382   30,458   90,055   85,529  
Net interest income after provisions for credit losses 157,464   120,218   612,444   492,950  
Noninterest income:
Gains on sales of loans, net 58,484 396 135,358 121,359
Gains (losses) on derivatives and hedging activities, net 953 825 5,300 (3,996 )
Other 12,561   11,095   41,935   39,921  
Total noninterest income 71,998   12,316   182,593   157,284  
Expenses:
Compensation and benefits 39,896 36,778 158,975 129,709
Other operating expenses 45,349   41,946   190,120   145,172  
Total operating expenses 85,245 78,724 349,095 274,881
Acquired intangible asset impairment and amortization expense 370 (855 ) 1,480 3,290
Restructuring and other reorganization expenses (913 ) 10,483   5,398   38,311  
Total expenses 84,702   88,352   355,973   316,482  
Income before income tax expense 144,760 44,182 439,064 333,752
Income tax expense 54,915   24,465   164,780   139,967  
Net income 89,845 19,717 274,284 193,785
Less: net loss attributable to noncontrolling interest       (434 )
Net income attributable to SLM Corporation 89,845 19,717 274,284 194,219
Preferred stock dividends 4,989   4,855   19,595   12,933  
Net income attributable to SLM Corporation common stock $ 84,856   $ 14,862   $ 254,689   $ 181,286  
Basic earnings per common share attributable to SLM Corporation $ 0.20   $ 0.04   $ 0.60   $ 0.43  
Average common shares outstanding 426,137   423,325   425,574   423,970  
Diluted earnings per common share attributable to SLM Corporation $ 0.20   $ 0.03   $ 0.59   $ 0.42  
Average common and common equivalent shares outstanding 431,531   432,108   432,234   432,269  
   
SLM CORPORATION
 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
 
Quarters Ended Years Ended
December 31, December 31,
2015   2014 2015   2014
Net income $ 89,845 $ 19,717 $ 274,284 $ 193,785
Other comprehensive income (loss):
Unrealized (losses) gains on investments (1,706 ) 2,437 (2,205 ) 6,066
Unrealized gains (losses) on cash flow hedges 14,060   (17,889 ) (5,224 ) (19,772 )
Total unrealized gains (losses) 12,354 (15,452 ) (7,429 ) (13,706 )
Income tax (expense) benefit (4,898 ) 5,911   2,763   5,337  
Other comprehensive gains (losses), net of tax (expense) benefit 7,456   (9,541 ) (4,666 ) (8,369 )
Comprehensive income 97,301 10,176 269,618 185,416
Less: comprehensive loss attributable to noncontrolling interest       (434 )
Total comprehensive income attributable to SLM Corporation $ 97,301   $ 10,176   $ 269,618   $ 185,850  
 

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)

2015   2014 2015   2014
 
“Core Earnings” adjustments to GAAP:
GAAP net income attributable to SLM Corporation $ 89,845 $ 19,717 $ 274,284 $ 194,219
Preferred stock dividends 4,989   4,855   19,595   12,933
GAAP net income attributable to SLM Corporation common stock $ 84,856   $ 14,862   $ 254,689   $ 181,286
 
Adjustments:
Net impact of derivative accounting(1) (348 ) 62 (1,849 ) 1,746
Net tax effect(2) (124 ) 24   (711 ) 659
Total “Core Earnings” adjustments to GAAP (224 ) 38   (1,138 ) 1,087
 
“Core Earnings” attributable to SLM Corporation common stock $ 84,632   $ 14,900   $ 253,551   $ 182,373
 
GAAP diluted earnings per common share $ 0.20 $ 0.03 $ 0.59 $ 0.42
Derivative adjustments, net of tax      
“Core Earnings” diluted earnings per common share $ 0.20   $ 0.03   $ 0.59   $ 0.42
 
______
(1)   Derivative Accounting: “Core Earnings” exclude periodic unrealized gains and losses caused by the mark-to-market valuations on derivatives that do not qualify for hedge accounting treatment under GAAP, as well as the periodic unrealized gains and losses that are a result of ineffectiveness recognized related to effective hedges under GAAP. 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 the Bank where the derivative instruments are held.
 
 

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 Years Ended
December 31, December 31,
2015   2014 2015   2014

(Dollars in thousands)

Balance   Rate Balance   Rate Balance   Rate Balance   Rate
Average Assets
Private Education Loans $ 10,578,001 7.84 % $ 8,062,977 8.07 % $ 9,819,053 7.93 % $ 7,563,356 8.16 %
FFELP Loans 1,129,965 3.35 1,292,820 3.21 1,179,723 3.26 1,353,497 3.24
Taxable securities 390,110 2.54 407,408 2.72 395,720 2.59 331,479 2.68
Cash and other short-term investments 1,502,267   0.31   2,159,088   0.27   1,423,090   0.26   1,746,839   0.26  
Total interest-earning assets 13,600,343 6.49 % 11,922,293 5.94 % 12,817,586 6.48 % 10,995,171 6.13 %
 
Non-interest-earning assets 697,638   614,105   660,621   549,237  
 
Total assets $ 14,297,981   $ 12,536,398   $ 13,478,207   $ 11,544,408  
 
Average Liabilities and Equity
Brokered deposits $ 6,764,673 1.16 % $ 6,171,293 1.22 % $ 6,640,078 1.19 % $ 5,588,569 1.12 %
Retail and other deposits 3,964,095 0.96 3,809,375 0.93 3,862,879 0.95 3,593,817 0.92
Other interest-bearing liabilities 907,342   2.29   17,068   2.72   399,907   3.27   26,794   0.91  
Total interest-bearing liabilities 11,636,110 1.18 % 9,997,736 1.11 % 10,902,864 1.18 % 9,209,180 1.04 %
 
Non-interest-bearing liabilities 606,490 718,365 622,983 727,806
Equity 2,055,381   1,820,297   1,952,360   1,607,422  
Total liabilities and equity $ 14,297,981   $ 12,536,398   $ 13,478,207   $ 11,544,408  
 
Net interest margin 5.48 % 5.01 % 5.48 % 5.26 %
 
 

Earnings per Common Share

   
Quarters Ended Years Ended
December 31, December 31,

(In thousands, except per share data)

2015   2014 2015   2014
Numerator:
Net income attributable to SLM Corporation $ 89,845 $ 19,717 $ 274,284 $ 194,219
Preferred stock dividends 4,989   4,855   19,595   12,933
Net income attributable to SLM Corporation common stock $ 84,856   $ 14,862   $ 254,689   $ 181,286
Denominator:
Weighted average shares used to compute basic EPS 426,137 423,325 425,574 423,970
Effect of dilutive securities:
Dilutive effect of stock options, restricted stock, restricted stock units and Employee Stock Purchase Plan 5,214   8,783   6,660   8,299
Weighted average shares used to compute diluted EPS 431,351   432,108   432,234   432,269
 
Basic earnings per common share attributable to SLM Corporation: $ 0.20   $ 0.04   $ 0.60   $ 0.43
 
Diluted earnings per common share attributable to SLM Corporation: $ 0.20   $ 0.03   $ 0.59   $ 0.42
 
 

Allowance for Loan Losses Metrics

  Quarters Ended
December 31,
2015   2014
  Private Education     Private Education  

(Dollars in thousands)

FFELP Loans Loans Total FFELP Loans Loans Total
Allowance for Loan Losses:
Beginning balance $ 4,170 $ 100,033 $ 104,203 $ 5,742 $ 59,973 $ 65,715
Total provision (39 ) 28,715 28,676 464 29,994 30,458
Net charge-offs:
Charge-offs (440 ) (19,231 ) (19,671 ) (938 ) (10,056 ) (10,994 )
Recoveries   1,291   1,291     1,147   1,147  
Net charge-offs (440 ) (17,940 ) (18,380 ) (938 ) (8,909 ) (9,847 )
Loan sales(1)   (1,992 ) (1,992 )   (2,484 ) (2,484 )
Ending Balance $ 3,691   $ 108,816   $ 112,507   $ 5,268   $ 78,574   $ 83,842  
Allowance:
Ending balance: individually evaluated for impairment $ $ 43,480 $ 43,480 $ $ 9,815 $ 9,815
Ending balance: collectively evaluated for impairment $ 3,691 $ 65,336 $ 69,027 $ 5,268 $ 68,759 $ 74,027
Loans:
Ending balance: individually evaluated for impairment $ $ 265,831 $ 265,831 $ $ 59,402 $ 59,402
Ending balance: collectively evaluated for impairment $ 1,115,663 $ 10,330,606 $ 11,446,269 $ 1,264,807 $ 8,251,974 $ 9,516,781
Net charge-offs as a percentage of average loans in repayment (annualized)(2) 0.21 % 1.08 % 0.40 % 0.72 %
Allowance as a percentage of the ending total loan balance 0.33 % 1.03 % 0.42 % 0.95 %
Allowance as a percentage of the ending loans in repayment 0.45 % 1.57 % 0.57 % 1.53 %
Allowance coverage of net charge-offs (annualized) 2.10 1.52 1.40 2.20
Ending total loans, gross $ 1,115,663 $ 10,596,437 $ 1,264,807 $ 8,311,376
Average loans in repayment(2) $ 823,940 $ 6,646,604 $ 930,336 $ 4,930,742
Ending loans in repayment(2) $ 813,815 $ 6,927,266 $ 926,891 $ 5,149,215
 

 ________

(1)

  Represents fair value adjustments on loans sold.
 

(2)

Loans in repayment include loans making interest only and fixed payments as well as loans that have entered full principal and interest repayment status.
 
 
Years Ended
December 31,
2015   2014
  Private Education     Private Education  

(Dollars in thousands)

FFELP Loans Loans Total FFELP Loans Loans Total
Allowance for Loan Losses:
Beginning balance $ 5,268 $ 78,574 $ 83,842 $ 6,318 $ 61,763 $ 68,081
Total provision 1,005 87,344 88,349 1,946 83,583 85,529
Net charge-offs:
Charge-offs(1) (2,582 ) (55,357 ) (57,939 ) (2,996 ) (14,442 ) (17,438 )
Recoveries   5,820   5,820     1,155   1,155  
Net charge-offs (2,582 ) (49,537 ) (52,119 ) (2,996 ) (13,287 ) (16,283 )
Loan sales(2)   (7,565 ) (7,565 )   (53,485 ) (53,485 )
Ending Balance $ 3,691   $ 108,816   $ 112,507   $ 5,268   $ 78,574  

 

$ 83,842  
Allowance:
Ending balance: individually evaluated for impairment $ $ 43,480 $ 43,480 $ $ 9,815 $ 9,815
Ending balance: collectively evaluated for impairment $ 3,691 $ 65,336 $ 69,027 $ 5,268 $ 68,759 $ 74,027
Loans:
Ending balance: individually evaluated for impairment $ $ 265,831 $ 265,831 $ $ 59,402 $ 59,402
Ending balance: collectively evaluated for impairment $ 1,115,663 $ 10,330,606 $ 11,446,269 $ 1,264,807 $ 8,251,974 $ 9,516,781
Net charge-offs as a percentage of average loans in repayment(3) 0.30 % 0.82 % 0.31 % 0.30 %
Allowance as a percentage of the ending total loan balance 0.33 % 1.03 % 0.42 % 0.95 %
Allowance as a percentage of the ending loans in repayment 0.45 % 1.57 % 0.57 % 1.53 %
Allowance coverage of net charge-offs 1.43 2.20 1.76 5.91
Ending total loans, gross $ 1,115,663 $ 10,596,437 $ 1,264,807 $ 8,311,376
Average loans in repayment(3) $ 857,359 $ 6,031,741 $ 972,390 $ 4,495,709
Ending loans in repayment(3) $ 813,815 $ 6,927,266 $ 926,891 $ 5,149,215
 

______

(1)

  Prior to the spin-off, the company sold all loans greater than 90 days delinquent to an entity that is now a subsidiary of Navient Corporation, prior to being charged-off. Consequently, many of the pre-spin-off, historical credit indicators and period-over-period trends are not comparable and may not be indicative of future performance.
 

(2)

Represents fair value adjustments on loans sold.
 

(3)

Loans in repayment include loans making interest only and fixed payments as well as loans that have entered full principal and interest repayment status.
 
 

Private Education Loan Key Credit Quality Indicators

  December 31,
2015   2014

(Dollars in thousands)

Balance(1)   % of Balance Balance(1)   % of Balance
 
Cosigners:
With cosigner $ 9,515,136 90

%

$ 7,465,339 90 %
Without cosigner 1,081,301   10   846,037   10  
Total $ 10,596,437   100

%

$ 8,311,376   100 %
 
FICO at Origination(2):
Less than 670 $ 700,779 7 % $ 558,801 7 %

   670-699

1,554,959 15 1,227,860 15

   700-749

3,403,823 32 2,626,238 32
Greater than or equal to 750 4,936,876   46   3,898,477   46  
Total $ 10,596,437   100 % $ 8,311,376   100 %
 
Seasoning(3):
1-12 payments $ 3,059,901 29 % $ 2,373,117 29 %
13-24 payments 2,096,412 20 1,532,042 18
25-36 payments 1,084,818 10 755,143 9
37-48 payments 513,125 5 411,493 5
More than 48 payments 414,217 4 212,438 3
Not yet in repayment 3,427,964   32   3,027,143   36  
Total $ 10,596,437   100

%

$ 8,311,376   100 %
 

______

(1)

  Balance represents gross Private Education Loans.
 

(2)

Average FICO at origination was 744 and 748 for the quarters ended December 31, 2015 and 2014, respectively, and 748 and 749 for the years ended December 31, 2015 and 2014, respectively.
 

(3)

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.
 
 

Private Education Loan Delinquencies

 
The following table provides information regarding the loan status of our Private Education Loans and the aging of our past due Private Education Loans. Loans in repayment include loans making interest only and fixed payments as well as loans that have entered full principal and interest repayment status.
 
               
Private Education Loans
December 31,
2015 2014

(Dollars in thousands)

Balance % Balance %
Loans in-school/grace/deferment(1) $ 3,427,964 $ 3,027,143
Loans in forbearance(2) 241,207 135,018
Loans in repayment and percentage of each status:
Loans current 6,773,095 97.8 % 5,045,600 98.0 %
Loans delinquent 31-60 days(3) 91,129 1.3 63,873 1.2
Loans delinquent 61-90 days(3) 42,048 0.6 29,041 0.6
Loans delinquent greater than 90 days(3)   20,994   0.3     10,701   0.2  
Total loans in repayment   6,927,266   100.0 %   5,149,215   100.0 %
Total loans, gross 10,596,437 8,311,376
Deferred origination costs   27,884     13,845  
Total loans 10,624,321 8,325,221
Allowance for losses   (108,816 )   (78,574 )
Total loans, net $ 10,515,505   $ 8,246,647  
Percentage of loans in repayment 65.4 % 62.0 %
Delinquencies as a percentage of loans in repayment 2.2 % 2.0 %
Loans in forbearance as a percentage of loans in repayment and forbearance 3.4 % 2.6 %
 
_______

(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.
 
At December 31, 2015 and 2014, 35 percent and 28 percent, respectively, of our portfolio of Private Education Loans had entered full principal and interest repayment status after any applicable grace periods.
 
   

Summary of Our Education Loan Portfolio

Ending Education Loan Balances, net

 
 
December 31,
2015     2014

(Dollars in thousands)

Private

Education

Loans

    FFELP

Loans

    Total

Portfolio

Private

Education

Loans

    FFELP

Loans

    Total

Portfolio

Total education loan portfolio:
In-school(1) $ 2,823,035 $ 582 $ 2,823,617 $ 2,548,721 $ 1,185 $ 2,549,906
Grace, repayment and other(2)   7,773,402     1,115,081     8,888,483     5,762,655     1,263,622     7,026,277  
Total, gross 10,596,437 1,115,663 11,712,100 8,311,376 1,264,807 9,576,183
Deferred origination costs and unamortized premium 27,884 3,114 30,998 13,845 3,600 17,445
Allowance for loan losses   (108,816 )   (3,691 )   (112,507 )   (78,574 )   (5,268 )   (83,842 )
Total education loan portfolio $ 10,515,505   $ 1,115,086   $ 11,630,591   $ 8,246,647   $ 1,263,139   $ 9,509,786  
 
% of total 90 % 10 % 100 % 87 % 13 % 100 %
 

(1)

  Loans for customers still attending school and who are not yet required to make payments on the loan.

(2)

Includes loans in deferment or forbearance.
 
       

Average Education Loan Balances (net of unamortized premium/discount)

 
 
Quarters Ended

December 31,

Years Ended

December 31,

(Dollars in thousands)

2015     2014 2015     2014
Private Education Loans $ 10,578,001     90 % $ 8,062,977     86 % $ 9,819,053     89 % 7,563,356     85 %
FFELP Loans 1,129,965 10   1,292,820 14   1,179,723 11   1,353,497 15  
Total portfolio $ 11,707,966 100 % $ 9,355,797 100 % $ 10,998,776 100 % 8,916,853 100 %
 
 

Education Loan Activity

 
 
    Quarters Ended
December 31,
2015     2014

(Dollars in thousands)

Private

Education

Loans

    FFELP

Loans

    Total

Portfolio

Private
Education
Loans
    FFELP
Loans
    Total
Portfolio
Beginning balance $ 10,766,511 $ 1,142,637 $ 11,909,148 $ 7,779,422 $ 1,315,951 $ 9,095,373
Acquisitions and originations 579,705 579,705 559,043 559,043
Capitalized interest and deferred origination cost premium amortization 120,676 9,420 130,096 84,076 9,932 94,008
Sales (698,795 ) (698,795 ) (7,212 ) (7,212 )
Loan consolidation to third parties (33,511 ) (8,824 ) (42,335 ) (1,742 ) (13,197 ) (14,939 )
Repayments and other   (219,081 )   (28,147 )   (247,228 )   (166,940 )   (49,547 )   (216,487 )
Ending balance $ 10,515,505   $ 1,115,086   $ 11,630,591   $ 8,246,647   $ 1,263,139   $ 9,509,786  
 
 
 
Years Ended
December 31,
2015 2014

(Dollars in thousands)

Private

Education

Loans

FFELP

Loans

Total

Portfolio

Private
Education
Loans
FFELP
Loans
Total
Portfolio
Beginning balance $ 8,246,647 $ 1,263,139 $ 9,509,786 $ 6,506,642 $ 1,424,735 $ 7,931,377
Acquisitions and originations 4,366,651 4,366,651 4,087,320 7,470 4,094,790
Capitalized interest and deferred origination cost premium amortization 239,330 39,743 279,073 170,306 46,093 216,399
Sales (1,412,015 ) (1,412,015 ) (1,873,414 ) (7,654 ) (1,881,068 )
Loan consolidation to third parties (75,369 ) (43,087 ) (118,456 ) (14,811 ) (41,760 ) (56,571 )
Repayments and other   (849,739 )   (144,709 )   (994,448 )   (629,396 )   (165,745 )   (795,141 )
Ending balance $ 10,515,505   $ 1,115,086   $ 11,630,591   $ 8,246,647   $ 1,263,139   $ 9,509,786  
 
                               

Private Education Loan Originations

 
The following table summarizes our Private Education Loan originations.
 
 
Quarters Ended

December 31,

Years Ended

December 31,

(Dollars in thousands)

2015 % 2014 % 2015 % 2014 %
Smart Option - interest only(1) $ 142,231 25 % $ 138,141 25 % $ 1,075,260 25 % $ 998,612 25 %
Smart Option - fixed pay(1) 186,354 32 169,048 30 1,350,680 31 1,256,978 31
Smart Option - deferred(1) 245,869 43 247,444 45 1,902,729 44 1,817,011 44
Smart Option - principal and interest   383     2,059     1,727     3,347  
Total Private Education Loan originations $ 574,837 100 % $ 556,692 100 % $ 4,330,396 100 %   4,075,948 100 %
 

(1)

  Interest only, fixed pay and deferred describe the payment option while in school or in grace period.
 
   

Deposits

 

Interest bearing deposits are summarized as follows:

 
 
December 31,
2015     2014

(Dollars in thousands)

Amount    

Year-End

Weighted

Average

Stated Rate(1)

Amount    

Year-End

Weighted

Average

Stated Rate(1)

 
Money market $ 4,886,299 1.19 % $ 4,527,448 1.15 %
Savings 669,254 0.82 % 703,687 0.81 %
Certificates of deposit   5,931,453 0.98 %   5,308,818 1.00 %
Deposits - interest bearing $ 11,487,006 $ 10,539,953
 
_____

(1)

  Includes the effect of interest rate swaps in effective hedge relationships.
 
               

Regulatory Capital

 
 
           

Well Capitalized

Regulatory Requirements

(Dollars in thousands)

Amount     Ratio Amount Ratio
As of December 31, 2015:
Tier I Capital (to Average Assets) $ 1,734,314 12.3 % $ 704,978 5.0 %
Tier I Capital (to Risk-Weighted Assets) $ 1,734,314 14.4 % $ 962,016 8.0 %
Total Capital (to Risk-Weighted Assets) $ 1,846,821 15.4 % $ 1,202,520 10.0 %
Common Equity Tier I Capital (to Risk-Weighted Assets) 1,734,314 14.4 % 781,638 6.5 %
 
As of December 31, 2014:
Tier I Capital (to Average Assets) $ 1,413,988 11.5 % $ 614,709 5.0 %
Tier I Capital (to Risk-Weighted Assets) $ 1,413,988 15.0 % $ 565,148 6.0 %
Total Capital (to Risk-Weighted Assets) $ 1,497,830 15.9 % $ 941,913 10.0 %
 

Contacts

Sallie Mae
Media:
Martha Holler, 302-451-4900
martha.holler@salliemae.com
or
Rick Castellano, 302-451-2541
rick.castellano@salliemae.com
or
Investors:
Brian Cronin, 302-451-0304
brian.cronin@salliemae.com

Contacts

Sallie Mae
Media:
Martha Holler, 302-451-4900
martha.holler@salliemae.com
or
Rick Castellano, 302-451-2541
rick.castellano@salliemae.com
or
Investors:
Brian Cronin, 302-451-0304
brian.cronin@salliemae.com