(Mark One) | ||
þ
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended December 31, 2010 or | ||
o
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TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to |
Delaware | 52-2013874 | |
(State of Other Jurisdiction
of
Incorporation or Organization) |
(I.R.S. Employer
Identification No.) |
|
12061 Bluemont Way, Reston, Virginia | 20190 | |
(Address of Principal Executive Offices) | (Zip Code) |
Large accelerated filer
þ
|
Accelerated filer o |
Non-accelerated filer
o
(Do not check if a smaller reporting company) |
Smaller reporting company o |
1
Item 1.
Business
2
3
4
(in millions)
Cumulative % Increase from AY
2000-2001
(1)
Cost of attendance is in current
dollars and includes tuition, fees and on-campus room and board.
5
6
7
8
9
the
Truth-In-Lending
Act;
the Fair Credit Reporting Act;
the Equal Credit Opportunity Act;
the Gramm-Leach-Bliley Act; and
the U.S. Bankruptcy Code.
10
Item 1A.
Risk
Factors
11
12
13
14
15
Item 1B.
Unresolved
Staff Comments
16
Item 2.
Properties
Approximate
Location
Function
Business Segment(s)
Square Feet
Loan Servicing and Data Center
FFELP Loans; Consumer Lending; Business Services
450,000
Credit and Collections Center
Consumer Lending; Business Services
160,000
Loan Servicing Center
FFELP Loans; Consumer Lending; Business Services
133,000
Loan Servicing Center
Business Services
100,000
GRC Collections Center
Business Services
60,000
Pioneer Credit Recovery Collections Center
Business Services
46,000
Pioneer Credit Recovery Collections Center
Business Services
45,000
AMS Headquarters
Business Services
36,000
(1)
In the first quarter of 2003, we
entered into a ten year lease with the Wyoming County Industrial
Development Authority with a right of reversion to us for the
Arcade and Perry, New York facilities.
Approximate
Location
Function
Business Segment(s)
Square Feet
Headquarters
FFELP Loans; Consumer Lending; Business Services; Other
240,000
Administrative Offices
FFELP Loans; Consumer Lending; Business Services; Other
90,000
Sallie Mae Operations Center
Consumer Lending; Business Services; Other
86,000
Collections Center
Other
84,000
Upromise
Business Services
78,000
GRC Headquarters and Collections Center
Business Services
59,000
Collections Center
Consumer Lending; Business Services
54,000
Pioneer Credit Recovery Collections Center
Business Services
30,000
N/A
N/A
26,000
Upromise and Campus Payment Solutions
Business Services
21,000
N/A
N/A
16,000
NELA
Business Services
10,000
(1)
Space vacated in December 2009; we
are actively searching for subtenants.
(2)
Space vacated in September 2010; we
are actively searching for subtenants or tenants.
17
Item 3.
Legal
Proceedings
18
Item 4.
Submission
of Matters to a Vote of Security Holders
19
37
38
56
59
60
63
64
67
68
73
91
Item 5.
Market
for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
High
$
13.32
$
13.96
$
12.40
$
13.14
Low
10.01
9.85
10.05
10.92
High
$
12.43
$
10.47
$
10.39
$
12.11
Low
3.11
4.02
8.12
8.01
Maximum Number
Total Number of
of Shares that
Shares Purchased
May Yet Be
Total Number
Average Price
as Part of Publicly
Purchased Under
of Shares
Paid per
Announced Plans
the Plans or
Purchased
Share
or Programs
Programs
(Common shares in millions)
$
38.8
.1
12.17
38.8
.2
12.58
38.8
.3
$
12.46
38.8
20
Company/Index
12/31/05
12/31/06
12/31/07
12/31/08
12/31/09
12/31/10
$
100.0
$
90.3
$
37.7
$
16.7
$
21.1
$
23.6
100.0
118.9
97.3
44.6
52.0
58.3
100.0
115.6
121.9
77.4
97.4
111.9
21
Item 6.
Selected
Financial Data
(Dollars in millions, except per share amounts)
2010
2009
2008
2007
2006
$
3,479
$
1,723
$
1,365
$
1,588
$
1,454
$
597
$
544
$
2
$
(938
)
$
1,103
(67
)
(220
)
(215
)
42
54
$
530
$
324
$
(213
)
$
(896
)
$
1,157
$
1.08
$
.85
$
(.23
)
$
(2.36
)
$
2.60
(.14
)
(.47
)
(.46
)
.10
.13
$
.94
$
.38
$
(.69
)
$
(2.26
)
$
2.73
$
1.08
$
.85
$
(.23
)
$
(2.36
)
$
2.51
(.14
)
(.47
)
(.46
)
.10
.12
$
.94
$
.38
$
(.69
)
$
(2.26
)
$
2.63
$
$
$
$
.25
$
.97
13
%
5
%
(9
)%
(22
)%
32
%
1.82
1.05
.93
1.26
1.54
.28
.20
(.14
)
(.71
)
1.22
(11
)
37
2.47
2.96
3.45
3.51
3.98
$
184,305
$
143,807
$
144,802
$
124,153
$
95,920
205,307
169,985
168,768
155,565
116,136
197,159
161,443
160,158
147,046
108,087
5,012
5,279
4,999
5,224
4,360
8.44
8.05
7.03
7.84
9.24
$
$
32,638
$
35,591
$
39,423
$
46,172
22
Item 7.
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
23
Business Lines/Activities
New Business Segment
Prior Business Segment
FFELP Loans
Lending
Consumer Lending
Lending
Consumer Lending
Lending
Business Services
Lending
Business Services
APG
Business Services
APG
Business Services
Other
Business Services
APG
Business Services
Other
Business Services
Other
Business Services
Other
Business Services
Other
Other
APG
Other
APG
Other
Lending
Other
Lending
Other
Lending
Other
Lending, APG and Other
We refer to the spread between the Federal Reserves
3-month financial commercial paper index (CP) and
3-month LIBOR as the CP/LIBOR spread. Interest
earned on our FFELP Loan assets are indexed primarily to CP and
interest paid on their related funding liabilities are primarily
indexed to
3-month
LIBOR. Movements in the CP and
3-month
LIBOR rates expand or contract the CP/LIBOR spread and our net
interest income decreases or increases as a result. During the
capital markets turmoil of recent years, the CP/LIBOR spread has
suffered dramatic fluctuations that have negatively affected net
interest income significantly. For 2010, the average CP/LIBOR
spread returned to historical levels.
Pursuant to the terms of the FFELP, certain FFELP Loans, in
certain situations, continue to earn interest at the stated
fixed rate of interest even if underlying debt costs decrease.
We refer to this additional spread
24
income as Floor Income. This Floor Income can be
volatile as rates on underlying debt move up and down. We will
generally hedge this risk by selling Floor Income Contracts
which lock in the value of the Floor Income over the term of the
contract.
25
26
At the end of the year, our FFELP Loan portfolio was
93 percent funded to term with long-term liabilities
including the ED-sponsored Straight A conduit. We also completed
$2 billion of FFELP Loan asset-backed securitization
transactions in 2010. The net interest margin in our FFELP Loans
segment improved to 93 basis points in 2010 from
67 basis points in 2009 as the CP/LIBOR spread returned to
historical levels. In addition, we sold $20.4 billion of
loans to ED in 2010 resulting in gains of $321 million.
In our Private Education Loan portfolio, delinquencies greater
than 90 days trended lower throughout the year to
5.3 percent of loans in repayment at year-end compared to
6.4 percent of loans in repayment at the end of the first
quarter of the year. The quarterly provision for loan losses
ended the year at $294 million, down from the
second-quarter 2010 peak of $349 million. Private Education
Loan originations improved over the course of 2010 as well.
After falling more than 40 percent in each of the first two
quarters of the year compared with the year-ago quarters they
fell just 6 percent in the third quarter and increased
8 percent in the fourth quarter. We completed
$4.1 billion of Private Education Loan asset-backed
securitization transactions in 2010. The Consumer Lending
segment returned to profitability in 2010 after posting a loss
in the prior year.
27
28
29
Increase (Decrease)
Years Ended December 31,
2010 vs. 2009
2009 vs. 2008
(Dollars in millions)
2010
2009
2008
$
%
$
%
$
3,345
$
3,094
$
5,173
$
251
8
%
$
(2,079
)
(40
)%
2,353
1,582
1,738
771
49
(156
)
(9
)
30
56
83
(26
)
(46
)
(27
)
(33
)
26
26
276
(250
)
(91
)
5,754
4,758
7,270
996
21
(2,512
)
(35
)
2,275
3,035
5,905
(760
)
(25
)
(2,870
)
(49
)
3,479
1,723
1,365
1,756
102
358
26
1,419
1,119
720
300
27
399
55
2,060
604
645
1,456
241
(41
)
(6
)
295
262
(295
)
(100
)
33
13
325
284
(186
)
41
14
470
253
(361
)
(604
)
(445
)
243
(40
)
(159
)
36
405
440
408
(35
)
(8
)
32
8
330
294
330
36
12
(36
)
(11
)
317
536
64
(219
)
(41
)
472
738
6
88
39
(82
)
(93
)
49
126
1,022
1,333
472
(311
)
(23
)
861
182
1,208
1,043
1,029
165
16
14
1
699
76
50
623
820
26
52
85
10
72
75
750
(62
)
(86
)
1,992
1,129
1,151
863
76
(22
)
(2
)
1,090
808
(34
)
282
35
842
2,476
493
264
(36
)
229
87
300
833
597
544
2
53
10
542
27,100
(67
)
(220
)
(215
)
153
(70
)
(5
)
2
530
324
(213
)
206
64
537
252
72
146
111
(74
)
(51
)
35
32
$
458
$
178
$
(324
)
$
280
157
%
$
502
155
%
$
1.08
$
.85
$
(.23
)
$
.23
27
%
$
1.08
470
%
$
(.14
)
$
(.47
)
$
(.46
)
$
.33
(70
)%
$
(.01
)
2
%
$
.94
$
.38
$
(.69
)
$
.56
147
%
$
1.07
155
%
$
1.08
$
.85
$
(.23
)
$
.23
27
%
$
1.08
470
%
$
(.14
)
$
(.47
)
$
(.46
)
$
.33
(70
)%
$
(.01
)
2
%
$
.94
$
.38
$
(.69
)
$
.56
147
%
$
1.07
155
%
$
$
$
$
%
$
%
30
Net interest income after provisions for loan losses increased
by $1.5 billion in the year ended December 31, 2010
from the year ended December 31, 2009. The increase in net
interest income and provisions for loan losses was partially due
to the adoption as of January 1, 2010 of the new
consolidation accounting guidance which resulted in the
consolidation of $35.0 billion of assets and
$34.4 billion of liabilities in certain securitizations
trusts. (See Note 2 Significant
Accounting Policies for a further discussion of the effect
of adopting the new consolidation accounting guidance). The
consolidation of these securitization trusts as of
January 1, 2010 resulted in $998 million of additional
net interest income and $355 million of additional
provisions for loan losses for the year ended December 31,
2010. Excluding the effect of the trusts being consolidated as
of January 1, 2010, net interest income increased
$758 million from the year ended 2009 and provisions for
loan losses decreased $55 million from the year ended 2009.
The increase in net interest income, excluding the effect of the
new consolidation accounting guidance, was primarily the result
of an increase in the FFELP Loans net interest margin primarily
due to an improvement in our funding costs, a 24 basis
point tightening of the CP/LIBOR spread and the effect of not
receiving hedge accounting treatment for derivatives used to
economically hedge risk affecting net interest income. The
decrease in the provisions for loan losses relates to the
Private Education Loan loss provision, which decreased as a
result of the improving performance of the portfolio.
Securitization servicing and Residual Interest revenue was no
longer recorded in fiscal year 2010 due to the adoption of the
new consolidation accounting guidance; however, we recognized
$295 million in the prior year.
Gains on sales of loans and securities increased
$41 million from the prior year primarily related to the
gains on sales of additional FFELP Loans to ED as part of
EDs Loan Purchase Commitment Program (the Purchase
Program). These gains will not occur in the future as the
Purchase Program ended in 2010.
Losses on derivatives and hedging activities, net, declined by
$243 million in 2010 compared with 2009. The primary factor
affecting the change in losses in 2010 was interest rates.
Valuations of derivative instruments vary based upon many
factors including changes in interest rates, credit risk,
foreign currency fluctuations and other market factors. As a
result, we expect gains and (losses) on derivatives and hedging
activities, net, to vary significantly in future periods.
31
Servicing revenue decreased by $35 million primarily due to
HCERA becoming effective as of July 1, 2010, thereby
eliminating our ability to earn additional guarantor issuance
fees on new FFELP Loans, as well as to a decline in outstanding
FFELP Loans for which we were earning additional fees.
Contingency revenue increased $36 million primarily from
increased collections on defaulted FFELP Loans.
Gains on debt repurchases decreased $219 million
year-over-year
while the principal amount of debt repurchased increased to
$4.9 billion, as compared with the $3.4 billion
repurchased in fiscal year 2009. We expect to continue to
repurchase debt in the future and the amount of gains in the
future will be dependent on market conditions and available
liquidity.
Other income declined by $82 million primarily due to a
$71 million decrease in foreign currency translation gains.
The foreign currency translation gains relate to a portion of
our foreign currency denominated debt that does not receive
hedge accounting treatment. These gains were partially offset by
the losses on derivative and hedging activities, net
line item on the income statement related to the derivatives
used to economically hedge these debt instruments.
Operating expenses, excluding restructuring-related asset
impairments of $19 million in 2010, increased
$146 million
year-over-year
primarily due to an increase in legal contingency expense, costs
related to the ED Servicing Contract, higher collection and
servicing costs from a higher number of loans in repayment and
in delinquent status, and higher marketing and technology
enhancement costs related to Private Education Loans.
Goodwill and intangible asset impairment and amortization
increased $623 million for the year ended December 31,
2010, primarily due to the $660 million of impairment
recognized as a result of the passage of HCERA and its negative
effects on the anticipated cash flows for certain of our
reporting units and the reduced market values of these units.
The amortization of acquired intangibles for continuing
operations and for discontinued operations each remained
relatively unchanged for the years ended December 31, 2010
and 2009, respectively. For additional discussion regarding the
impairment of goodwill and intangible assets see
Note 6 Goodwill and Acquired Intangible
Assets.
Restructuring expenses increased $69 million in the year
ended December 31, 2010, which is a result of a
$75 million increase in restructuring expenses in
continuing operations partially offset by a $6 million
decrease in restructuring expenses attributable to discontinued
operations. The following details our ongoing restructuring
efforts:
On March 30, 2010, President Obama signed into law H.R.
4872, HCERA, which included the SAFRA Act. Effective
July 1, 2010, this legislation eliminated FFELP and
requires all new federal loans to be made through the DSLP.
Restructuring our operations in response to this change in law
requires a significant reduction of operating costs from the
elimination of positions and facilities associated with the
origination of FFELP Loans. Expenses associated with continuing
operations under this restructuring plan were $83 million
in fiscal year 2010. We are currently finalizing this
restructuring plan and expect to incur an estimated
$11 million of additional restructuring costs in 2011. The
majority of these expenses are severance costs related to the
partially completed and planned elimination of approximately
2,500 positions, approximately 30 percent of our workforce
that existed as of the first quarter 2010.
In response to the College Cost Reduction and Access Act of 2007
(CCRAA) and challenges in the capital markets, we
also initiated a restructuring plan in the fourth quarter of
2007. Under this ongoing plan, restructuring expenses associated
with continuing operations of $2 million and
$10 million were recognized in the years ended
December 31, 2010 and 2009, respectively. The majority of
these restructuring expenses were also severance costs related
to the elimination of approximately 3,000 positions, or
approximately 25 percent of our workforce that existed as
of the fourth quarter 2007.
32
Income tax expense from continuing operations increased
$229 million for the year ended December 31, 2010 as
compared with the prior year. The effective tax rates for fiscal
years 2010 and 2009 were 45 percent and 33 percent,
respectively. The change in the effective tax rate for the year
ended December 31, 2010 was primarily driven by the impact
of non-deductible goodwill impairments recorded in 2010 and
state tax rate changes recorded in both periods.
Net interest income after provisions for loan losses decreased
by $41 million in the year ended December 31, 2009
from the prior year. This decrease was due to a
$399 million increase in provisions for loan losses
partially offset by a $358 million increase in net interest
income. The increase in net interest income was primarily due to
an increase in the FFELP Loans net interest margin primarily due
to an increase in Gross Floor Income and the impact of
derivative accounting and a $15 billion increase in the
average balance of GAAP-basis student loans. The increase in
provisions for loan losses related primarily to increases in
charge-off expectations on Private Education Loans primarily as
a result of the continued weakening of the U.S. economy.
Securitization servicing and Residual Interest revenue increased
by $33 million from the prior year primarily due to a
$95 million decrease in the current-year unrealized
mark-to-market
loss on our Residual Interests compared with the prior year,
partially offset by a decrease in net Embedded Floor value.
33
Gains on sales of loans and securities increased
$470 million from the prior year. The increase is primarily
attributable to a $284 million gain on our sale of
approximately $18.5 billion of FFELP Loans to ED as part of
the ED Purchase Program and the $186 million loss incurred
in fiscal year 2008. The 2008 loss resulted from our repurchase
of delinquent Private Education Loans from our off-balance sheet
securitization trusts and the sale of approximately
$1.0 billion FFELP Loans to the ED under ECASLA, which
resulted in a $53 million loss.
Losses on derivatives and hedging activities, net, increased by
$159 million in 2009 compared with 2008. The primary
factors affecting the change in losses in 2009 were interest
rates and foreign currency exchange rates. Valuations of
derivative instruments vary based upon many factors, including
changes in interest rates, credit risk, foreign currency
fluctuations and other market factors. As a result, we expect
gains and (losses) on derivatives and hedging activities, net,
to vary significantly in future periods.
Servicing Revenue increased $32 million when compared with
the prior year. This increase was primarily due to the
initiation of Direct Lending servicing in 2009.
Contingency revenue decreased $36 million when compared
with the prior year primarily as a result of less Guarantor
collections revenue from rehabilitating delinquent FFELP Loans.
Gains on debt repurchases increased $472 million when
compared with the prior year. We repurchased $3.4 billion
of our unsecured corporate debt as compared with
$1.9 billion in the prior year.
Other income increased by $49 million primarily due to a
$54 million increase in foreign currency translation gains.
These gains were partially offset by the losses on
derivative and hedging activities, net line item on the
income statement related to the derivatives used to economically
hedge these debt instruments.
For the years ended December 31, 2009 and 2008, operating
expenses, excluding restructuring-related asset impairments of
$0 and $6 million, respectively, were $1,043 million
compared with $1,023 million, respectively. The
$20 million increase from the prior year relates to
increased marketing expense related to our direct to consumer
marketing activities, increased technology costs as well as
increased collections costs.
Goodwill and intangible asset impairment for continuing
operations increased by $35 million in 2009 and the
goodwill and intangible asset impairment for discontinued
operations decreased by like amount as compared with the prior
year. For additional discussion regarding the impairment of
goodwill and intangible assets see Note 6
Goodwill and Acquired Intangible Assets. The amortization
of acquired intangibles for continuing operations totaled
$38 million and $48 million for the years ended
December 31, 2009 and 2008, respectively, and the
amortization of acquired intangibles for discontinued operations
totaled $1 million and $6 million for the years ended
December 31, 2009 and 2008, respectively.
Restructuring expenses of $22 million and $84 million
were recognized in the years ended December 31, 2009 and
2008, respectively, of which $10 million and
$72 million were in continuing operations and
$12 million and $12 million were in discontinued
operations, respectively.
Income tax expense from continuing operations was
$264 million in 2009 compared with an income tax benefit of
$36 million in 2008, resulting in effective tax rates of
33 percent and 106 percent, respectively. The movement
in the effective tax rate in 2009 compared with the prior year
was primarily driven by the reduction of tax and interest on
U.S. federal and state uncertain tax positions in both
periods, as well as the permanent tax impact of deducting
Proposed Merger-related transaction costs in 2008. Also
contributing to the higher effective tax rate in 2008 was the
effect of significantly higher reported pre-tax income in 2009
and the resulting changes in the proportion of income subject to
federal and state taxes. For additional information, see
Note 18 Income Taxes.
34
35
Year Ended December 31, 2010
FFELP
Consumer
Business
Total Core
Total
(Dollars in millions)
Loans
Lending
Services
Other
Eliminations
(1)
Earnings
Adjustments
(2)
GAAP
$
2,766
$
2,353
$
$
$
$
5,119
$
579
$
5,698
30
30
30
9
14
17
3
(17
)
26
26
2,775
2,367
17
33
(17
)
5,175
579
5,754
1,407
758
45
(17
)
2,193
82
2,275
1,368
1,609
17
(12
)
2,982
497
3,479
98
1,298
23
1,419
1,419
1,270
311
17
(35
)
1,563
497
2,060
68
72
912
1
(648
)
405
405
330
330
330
317
317
317
320
51
13
384
(414
)
(30
)
388
72
1,293
331
(648
)
1,436
(414
)
1,022
736
350
500
12
(648
)
950
950
258
258
258
736
350
500
270
(648
)
1,208
1,208
699
699
54
12
7
12
85
85
790
362
507
282
(648
)
1,293
699
1,992
868
21
803
14
1,706
(616
)
1,090
311
8
288
4
611
(118
)
493
557
13
515
10
1,095
(498
)
597
(67
)
(67
)
(67
)
$
557
$
13
$
515
$
(57
)
$
$
1,028
$
(498
)
$
530
(1)
The eliminations in servicing
revenue and direct operating expense represent the elimination
of intercompany servicing revenue where the Business Services
segment performs the loan servicing function for the FFELP Loans
segment.
(2)
Core Earnings
adjustments to GAAP:
Year Ended December 31, 2010
Net Impact of
Net Impact of
Goodwill and
Derivative
Acquired
(Dollars in millions)
Accounting
Intangibles
Total
$
497
$
$
497
(414
)
(414
)
699
699
$
83
$
(699
)
(616
)
(118
)
$
(498
)
(3)
Income taxes are based on a
percentage of net income before tax for the individual
reportable segment.
36
Year Ended December 31, 2009
FFELP
Consumer
Business
Total Core
Total
(Dollars in millions)
Loans
Lending
Services
Other
Eliminations
(1)
Earnings
Adjustments
(2)
GAAP
$
3,252
$
2,254
$
$
$
$
5,506
$
(830
)
$
4,676
56
56
56
26
13
20
(10
)
(20
)
29
(3
)
26
3,278
2,267
20
46
(20
)
5,591
(833
)
4,758
2,238
721
66
(20
)
3,005
30
3,035
1,040
1,546
20
(20
)
2,586
(863
)
1,723
119
1,399
46
1,564
(445
)
1,119
921
147
20
(66
)
1,022
(418
)
604
75
70
954
(659
)
440
440
294
294
294
536
536
536
292
55
1
348
(285
)
63
367
70
1,303
537
(659
)
1,618
(285
)
1,333
754
265
440
6
(659
)
806
806
237
237
237
754
265
440
243
(659
)
1,043
1,043
76
76
8
2
2
(2
)
10
10
762
267
442
241
(659
)
1,053
76
1,129
526
(50
)
881
230
1,587
(779
)
808
186
(18
)
311
81
560
(296
)
264
340
(32
)
570
149
1,027
(483
)
544
(220
)
(220
)
(220
)
$
340
$
(32
)
$
570
$
(71
)
$
$
807
$
(483
)
$
324
(1)
The eliminations in servicing
revenue and direct operating expense represent the elimination
of intercompany servicing revenue where the Business Services
segment performs the loan servicing function for the FFELP Loans
segment.
(2)
Core Earnings
adjustments to GAAP:
Year Ended December 31, 2009
Net Impact of
Net Impact of
Net Impact of
Goodwill and
Securitization
Derivative
Acquired
(Dollars in millions)
Accounting
Accounting
Intangibles
Total
$
(941
)
$
78
$
$
(863
)
(445
)
(445
)
(496
)
78
(418
)
295
(580
)
(285
)
76
76
$
(201
)
$
(502
)
$
(76
)
(779
)
(296
)
$
(483
)
(3)
Income taxes are based on a
percentage of net income before tax for the individual
reportable segment.
Year Ended December 31, 2008
FFELP
Consumer
Business
Total Core
Total
(Dollars in millions)
Loans
Lending
Services
Other
Eliminations
(1)
Earnings
Adjustments
(2)
GAAP
$
6,052
$
2,752
$
$
$
$
8,804
$
(1,893
)
$
6,911
83
83
83
156
79
26
95
(26
)
330
(54
)
276
6,208
2,831
26
178
(26
)
9,217
(1,947
)
7,270
5,294
1,280
161
(26
)
6,709
(804
)
5,905
914
1,551
26
17
2,508
(1,143
)
1,365
127
874
28
1,029
(309
)
720
787
677
26
(11
)
1,479
(834
)
645
77
65
897
1
(632
)
408
408
330
330
330
64
64
64
(42
)
1
52
14
25
(355
)
(330
)
35
66
1,279
79
(632
)
827
(355
)
472
745
201
462
17
(632
)
793
793
236
236
236
745
201
462
253
(632
)
1,029
1,029
50
50
42
25
10
(5
)
72
72
787
226
472
248
(632
)
1,101
50
1,151
35
517
833
(180
)
1,205
(1,239
)
(34
)
13
186
300
(65
)
434
(470
)
(36
)
22
331
533
(115
)
771
(769
)
2
(188
)
(188
)
(27
)
(215
)
$
22
$
331
$
533
$
(303
)
$
$
583
$
(796
)
$
(213
)
(1)
The eliminations in servicing
revenue and direct operating expense represent the elimination
of intercompany servicing revenue where the Business Services
segment performs the loan servicing function for the FFELP Loans
segment.
(2)
Core Earnings
adjustments to GAAP:
Year Ended December 31, 2008
Net Impact of
Net Impact of
Net Impact of
Goodwill and
Securitization
Derivative
Acquired
(Dollars in millions)
Accounting
Accounting
Intangibles
Total
$
(872
)
$
(271
)
$
$
(1,143
)
(309
)
(309
)
(563
)
(271
)
(834
)
121
(476
)
(355
)
50
50
(442
)
(747
)
(50
)
(1,239
)
(4
)
(23
)
(27
)
$
(442
)
$
(751
)
$
(73
)
(1,266
)
(470
)
$
(796
)
(3)
Income taxes are based on a
percentage of net income before tax for the individual
reportable segment.
Years Ended December 31,
(Dollars in millions)
2010
2009
2008
$
1,028
$
807
$
583
83
(502
)
(751
)
(699
)
(76
)
(73
)
(201
)
(442
)
(616
)
(779
)
(1,266
)
118
296
470
(498
)
(483
)
(796
)
$
530
$
324
$
(213
)
39
Years Ended December 31,
(Dollars in millions)
2010
2009
2008
$
(361
)
$
(604
)
$
(445
)
815
322
(107
)
454
(282
)
(552
)
(317
)
(197
)
(191
)
(54
)
(23
)
(8
)
$
83
$
(502
)
$
(751
)
(1)
See
Reclassification of
Realized Gains (Losses) on Derivative and Hedging
Activities
below for a detailed breakdown of the
components of realized losses on derivative and hedging
activities.
(2)
Negative amounts are subtracted
from Core Earnings to arrive at GAAP net income and
positive amounts are added to Core Earnings to
arrive at GAAP net income.
Years Ended December 31,
(Dollars in millions)
2010
2009
2008
$
(888
)
$
(717
)
$
(488
)
69
412
563
(15
)
11
4
(2
)
21
(815
)
(322
)
107
454
(282
)
(552
)
$
(361
)
$
(604
)
$
(445
)
40
(1)
Unrealized gains (losses) on
derivative and hedging activities, net comprises the
following unrealized
mark-to-market
gains (losses):
Years Ended December 31,
(Dollars in millions)
2010
2009
2008
$
156
$
483
$
(529
)
341
(413
)
(239
)
(83
)
(255
)
328
40
(97
)
(112
)
$
454
$
(282
)
$
(552
)
Years Ended December 31,
(Dollars in millions)
2010
2009
2008
$
(660
)
$
(36
)
$
(1
)
(1
)
(20
)
(39
)
(38
)
(48
)
(1
)
(4
)
$
(699
)
$
(76
)
$
(73
)
(1)
Negative amounts are subtracted
from Core Earnings to arrive at GAAP net income and
positive amounts are added to Core Earnings to
arrive at GAAP net income.
41
Years Ended December 31,
(Dollars in millions)
2009
2008
$
(942
)
$
(872
)
445
309
(497
)
(563
)
1
(141
)
(496
)
(704
)
295
262
$
(201
)
$
(442
)
(1)
Negative amounts are subtracted
from Core Earnings to arrive at GAAP net income and
positive amounts are added to Core Earnings to
arrive at GAAP net income.
The operating expenses reported for each segment are directly
attributable to the generation of revenues by that segment. We
have included corporate overhead and certain information
technology costs (together referred to as Overhead)
in our Other segment rather than allocate those expenses by
segment.
The creation of the FFELP Loans and Business Services segments
has resulted in our accounting for the significant servicing
revenue we earn on FFELP Loans we own in the Business Services
segment. This bifurcates the FFELP interest income between the
FFELP Loans and Business Services segment, with an intercompany
servicing fee charge from the Business Services segment. The
intercompany amounts are the contractual rates for encumbered
loans within a financing facility or a similar market rate if
the loan is not in a financing facility and accordingly exceed
our costs.
In our GAAP-basis financial presentation we allocated existing
goodwill to the new reporting units within the reportable
segments based upon relative fair value. During the fourth
quarter 2010, we also evaluated our goodwill for impairment
using both the old reporting and new reporting unit framework
and there was no impairment under either analysis.
Similar to prior periods, capital is assigned to each segment
based on internally determined
risk-adjusted
weightings for the assets in each segment. These weightings have
been updated and differ depending on the relative risk of each
asset type and represent managements view of the level of
capital needed to support different assets. Unsecured debt is
allocated based on the remaining funding needed for each segment
after direct funding and the capital allocation has been
considered.
42
Years Ended December 31,
% Increase (Decrease)
(Dollars in millions)
2010
2009
2008
2010 vs. 2009
2009 vs. 2008
$
2,766
$
3,252
$
6,052
(15
)%
(46
)%
9
26
156
(65
)
(83
)
2,775
3,278
6,208
(15
)
(47
)
1,407
2,238
5,294
(37
)
(58
)
1,368
1,040
914
32
14
98
119
127
(18
)
(6
)
1,270
921
787
38
17
68
75
77
(9
)
(3
)
320
292
(42
)
10
795
388
367
35
6
949
23
56
57
(59
)
(2
)
679
691
662
(2
)
4
3
7
23
(57
)
(70
)
31
3
100
(100
)
736
754
745
(2
)
1
54
8
42
575
(81
)
790
762
787
4
(3
)
868
526
35
65
1,403
311
186
13
67
1,331
$
557
$
340
$
22
64
%
1,445
%
43
Years Ended December 31,
2010
2009
2008
2.57
%
2.68
%
5.09
%
.23
.14
.15
.02
.22
.06
(.59
)
(.59
)
(.65
)
(.10
)
(.11
)
(.13
)
(.18
)
(.17
)
(.25
)
1.95
2.17
4.27
(.93
)
(1.44
)
(3.59
)
1.02
.73
.68
(.09
)
(.06
)
(.06
)
.93
%
.67
%
.62
%
.93
%
.67
%
.62
%
.33
(.08
)
(.28
)
1.26
%
.59
%
.34
%
(1)
The average balances of our FFELP
Core Earnings basis interest-earning assets for the
respective periods are:
(Dollars in millions)
$
142,043
$
150,059
$
141,647
5,562
5,126
5,501
$
147,605
$
155,185
$
147,148
44
December 31, 2010
December 31, 2009
Fixed
Variable
Fixed
Variable
Borrower
Borrower
Borrower
Borrower
(Dollars in billions)
Rate
Rate
Total
Rate
Rate
Total
$
123.6
$
21.9
$
145.5
$
103.3
$
14.9
$
118.2
14.3
5.4
19.7
123.6
21.9
145.5
117.6
20.3
137.9
(65.2
)
(2.3
)
(67.5
)
(64.9
)
(1.2
)
(66.1
)
(39.2
)
(39.2
)
(39.6
)
(39.6
)
$
19.2
$
19.6
$
38.8
$
13.1
$
19.1
$
32.2
$
18.0
$
1.2
$
19.2
$
13.1
$
3.0
$
16.1
Years Ended December 31,
(Dollars in billions)
2011
2012
2013
2014
$
28.8
$
20.6
$
5.6
$
.2
Years Ended December 31,
(Dollars in millions)
2010
2009
2008
$
98
$
106
$
106
98
119
127
$
87
$
79
$
58
87
94
79
45
Years Ended December 31,
(Dollars in millions)
2010
2009
2008
$
68
$
75
$
77
325
284
(51
)
(5
)
8
9
$
388
$
367
$
35
46
Years Ended December 31,
% Increase (Decrease)
(Dollars in millions)
2010
2009
2008
2010 vs. 2009
2009 vs. 2008
$
2,353
$
2,254
$
2,752
4
%
(18
)%
14
13
79
8
(84
)
2,367
2,267
2,831
4
(20
)
758
721
1,280
5
(44
)
1,609
1,546
1,551
4
1,298
1,399
874
(7
)
60
311
147
677
112
(78
)
72
70
65
3
8
1
(100
)
125
81
67
54
21
60
47
36
28
31
94
90
67
4
34
68
52
23
31
126
3
(5
)
8
160
(163
)
350
265
201
32
32
12
2
25
500
(92
)
362
267
226
36
18
21
(50
)
517
142
(110
)
8
(18
)
186
144
(110
)
$
13
$
(32
)
$
331
(141
)%
(110
)%
47
Years Ended December 31,
2010
2009
2008
6.15
%
5.99
%
8.16
%
.29
.26
.28
6.44
6.25
8.44
(1.79
)
(1.78
)
(3.52
)
4.65
4.47
4.92
(.80
)
(.62
)
(.54
)
3.85
%
3.85
%
4.38
%
3.85
%
3.85
%
4.38
%
.02
(.16
)
(.02
)
3.87
%
3.69
%
4.36
%
(1)
The average balances of our
Consumer Lending Core Earnings basis
interest-earning assets for the respective periods are:
Years Ended December 31,
(Dollars in millions)
2010
2009
2008
$
1,298
$
967
$
586
1,298
1,399
874
$
1,291
$
876
$
320
1,291
1,299
473
48
49
Years Ended December 31,
% Increase (Decrease)
(Dollars in millions)
2010
2009
2008
2010 vs. 2009
2009 vs. 2008
$
17
$
20
$
26
(15
)%
(23
)%
648
659
632
(2
)
4
77
53
26
45
104
68
62
61
10
2
26
28
26
(7
)
8
93
152
152
(39
)
912
954
897
(4
)
6
330
294
330
12
(11
)
48
50
48
(4
)
4
3
5
4
(40
)
25
1,293
1,303
1,279
(1
)
2
22
36
47
(39
)
(23
)
191
162
158
18
3
183
157
197
17
(20
)
81
85
60
(5
)
42
23
100
500
440
462
14
(5
)
7
2
10
250
(80
)
507
442
472
15
(6
)
803
881
833
(9
)
6
288
311
300
(7
)
4
$
515
$
570
$
533
(10
)%
7
%
50
As of December 31,
(Dollars in millions)
2010
2009
2008
$
10,362
$
8,762
$
9,852
1,730
1,262
1,726
$
12,092
$
10,024
$
11,578
51
Years Ended
December 31,
% Increase (Decrease)
(Dollars in millions)
2010
2009
2008
2010 vs. 2009
2009 vs. 2008
$
(35
)
$
(66
)
$
(11
)
(47
)%
500
%
317
536
64
(41
)
738
14
1
15
1,300
(93
)
331
537
79
(38
)
580
9
6
17
50
(65
)
3
100
12
6
17
100
(65
)
128
138
150
(7
)
(8
)
130
99
86
31
15
258
237
236
9
270
243
253
11
(4
)
12
(2
)
(5
)
700
60
282
241
248
17
(3
)
14
230
(180
)
(94
)
228
4
81
(65
)
(95
)
225
10
149
(115
)
(93
)
230
(67
)
(220
)
(188
)
(70
)
17
$
(57
)
$
(71
)
$
(303
)
(20
)%
(77
)%
December 31,
December 31,
December 31,
(Dollars in millions)
2010
2009
2008
$
95
$
285
$
544
52
53
Years Ended December 31,
2010
2009
2008
(Dollars in millions)
Balance
Rate
Balance
Rate
Balance
Rate
$
142,043
2.36
%
$
128,538
2.41
%
$
117,382
4.41
%
36,534
6.44
23,154
6.83
19,276
9.01
323
9.20
561
9.98
955
8.66
12,729
.20
11,046
.24
9,279
2.98
191,629
3.00
%
163,299
2.91
%
146,892
4.95
%
5,931
8,693
9,999
$
197,560
$
171,992
$
156,891
$
38,634
.86
%
$
44,485
1.84
%
$
36,059
4.73
%
150,768
1.29
118,699
1.87
111,625
3.76
189,402
1.20
%
163,184
1.86
%
147,684
4.00
%
3,280
3,719
3,797
4,878
5,089
5,410
$
197,560
$
171,992
$
156,891
1.82
%
1.05
%
.93
%
54
Increase
Change Due
To
(1)
(Dollars in millions)
(Decrease)
Rate
Volume
$
996
$
149
$
847
(760
)
(1,194
)
434
$
1,756
$
1,416
$
340
$
(2,512
)
$
(3,252
)
$
740
(2,870
)
(3,435
)
565
$
358
$
197
$
161
(1)
Changes in income and expense due
to both rate and volume have been allocated in proportion to the
relationship of the absolute dollar amounts of the change in
each. The changes in income and expense are calculated
independently for each line in the table. The totals for the
rate and volume columns are not the sum of the individual lines.
December 31, 2010
FFELP
FFELP
Private
Stafford and
Consolidation
Total
Education
(Dollars in millions)
Other
Loans
FFELP
Loans
Total
$
6,333
$
$
6,333
$
3,752
$
10,085
49,068
91,537
140,605
33,780
174,385
55,401
91,537
146,938
37,532
184,470
971
929
1,900
(894
)
1,006
1,039
1,039
(120
)
(69
)
(189
)
(2,021
)
(2,210
)
$
56,252
$
92,397
$
148,649
$
35,656
$
184,305
38
%
62
%
100
%
31
%
50
%
81
%
19
%
100
%
(1)
Upon the adoption of the new
consolidation accounting on January 1, 2010, we
consolidated all of our off-balance sheet securitization trusts.
55
December 31, 2009
FFELP
FFELP
Private
Stafford and
Consolidation
Total
Education
(Dollars in millions)
Other
Loans
FFELP
Loans
Total
$
15,250
$
$
15,250
$
6,058
$
21,308
36,543
67,235
103,778
18,198
121,976
51,793
67,235
119,028
24,256
143,284
986
1,201
2,187
(559
)
1,628
499
499
(104
)
(57
)
(161
)
(1,443
)
(1,604
)
52,675
68,379
121,054
22,753
143,807
232
232
773
1,005
5,143
14,369
19,512
12,213
31,725
5,375
14,369
19,744
12,986
32,730
139
438
577
(349
)
228
229
229
(15
)
(10
)
(25
)
(524
)
(549
)
5,499
14,797
20,296
12,342
32,638
$
58,174
$
83,176
$
141,350
$
35,095
$
176,445
44
%
56
%
100
%
41
%
59
%
100
%
33
%
47
%
80
%
20
%
100
%
Year Ended December 31, 2010
FFELP
FFELP
Private
Stafford and
Consolidation
Education
(Dollars in millions)
Other
Loans
Total FFELP
Loans
Total
$
61,034
$
81,009
$
142,043
$
36,534
$
178,577
43
%
57
%
100
%
34
%
46
%
80
%
20
%
100
%
Year Ended December 31, 2009
FFELP
FFELP
Private
Stafford and
Consolidation
Education
(Dollars in millions)
Other
Loans
Total FFELP
Loans
Total
$
58,492
$
70,046
$
128,538
$
23,154
$
151,692
6,365
15,156
21,521
12,892
34,413
$
64,857
$
85,202
$
150,059
$
36,046
$
186,105
46
%
54
%
100
%
43
%
57
%
100
%
35
%
46
%
81
%
19
%
100
%
Year Ended December 31, 2008
FFELP
FFELP
Private
Stafford and
Consolidation
Education
(Dollars in millions)
Other
Loans
Total FFELP
Loans
Total
$
44,291
$
73,091
$
117,382
$
19,276
$
136,658
8,299
15,966
24,265
13,321
37,586
$
52,590
$
89,057
$
141,647
$
32,597
$
174,244
38
%
62
%
100
%
37
%
63
%
100
%
30
%
51
%
81
%
19
%
100
%
(1)
Upon the adoption of the new
consolidation accounting guidance, we consolidated all of our
off-balance sheet securitization trusts.
57
GAAP-Basis
Year Ended December 31, 2010
FFELP
FFELP
Total Private
Total On-
Stafford and
Consolidation
Total
Education
Balance Sheet
(Dollars in millions)
Other
Loans
FFELP
Loans
Portfolio
$
52,675
$
68,379
$
121,054
$
22,753
$
143,807
(2,092
)
(793
)
(2,885
)
(46
)
(2,931
)
15,672
1,434
17,106
3,896
21,002
11,237
13,652
24,889
24,889
24,817
14,293
39,110
3,850
42,960
5,500
14,797
20,297
12,341
32,638
(21,054
)
(71
)
(21,125
)
(21,125
)
(5,686
)
(5,001
)
(10,687
)
(3,288
)
(13,975
)
$
56,252
$
92,397
$
148,649
$
35,656
$
184,305
Off-Balance Sheet
Year Ended December 31, 2010
FFELP
FFELP
Total Private
Total Off-
Stafford and
Consolidation
Total
Education
Balance Sheet
Other
Loans
FFELP
Loans
Portfolio
$
5,500
$
14,797
$
20,297
$
12,341
$
32,638
(5,500
)
(14,797
)
(20,297
)
(12,341
)
(32,638
)
$
$
$
$
$
GAAP-Basis/Core Earnings basis Portfolio
Year Ended December 31, 2010
FFELP
FFELP
Total Private
Total Core
Stafford and
Consolidation
Total
Education
Earnings Basis
Other
Loans
FFELP
Loans
Portfolio
$
58,175
$
83,176
$
141,351
$
35,094
$
176,445
(2,092
)
(793
)
(2,885
)
(46
)
(2,931
)
15,672
1,434
17,106
3,896
21,002
11,237
13,652
24,889
24,889
24,817
14,293
39,110
3,850
42,960
(21,054
)
(71
)
(21,125
)
(21,125
)
(5,686
)
(5,001
)
(10,687
)
(3,288
)
(13,975
)
$
56,252
$
92,397
$
148,649
$
35,656
$
184,305
(1)
Includes accrued interest
receivable capitalized to principal during the period.
(2)
Represents loans within
securitization trusts that we are required to consolidate under
GAAP upon the adoption of the new consolidation accounting
guidance on January 1, 2010.
58
GAAP-Basis
Year Ended December 31, 2009
FFELP
FFELP
Total Private
Total On-
Stafford and
Consolidation
Total
Education
Balance Sheet
(Dollars in millions)
Other
Loans
FFELP
Loans
Portfolio
$
52,476
$
71,744
$
124,220
$
20,582
$
144,802
(1,113
)
(518
)
(1,631
)
(8
)
(1,639
)
25,677
1,150
26,827
4,343
31,170
24,564
632
25,196
4,335
29,531
645
645
645
(19,300
)
(19,300
)
(19,300
)
(5,710
)
(3,997
)
(9,707
)
(2,164
)
(11,871
)
$
52,675
$
68,379
$
121,054
$
22,753
$
143,807
Off-Balance Sheet
Year Ended December 31, 2009
FFELP
FFELP
Total Private
Total Off-
Stafford and
Consolidation
Total
Education
Balance Sheet
Other
Loans
FFELP
Loans
Portfolio
$
7,143
$
15,531
$
22,674
$
12,917
$
35,591
(413
)
(138
)
(551
)
(18
)
(569
)
135
208
343
498
841
(278
)
70
(208
)
480
272
(645
)
(645
)
(645
)
(720
)
(804
)
(1,524
)
(1,056
)
(2,580
)
$
5,500
$
14,797
$
20,297
$
12,341
$
32,638
Core Earnings Basis Portfolio
Year Ended December 31, 2009
FFELP
FFELP
Total Private
Total Core
Stafford and
Consolidation
Total
Education
Earnings Basis
Other
Loans
FFELP
Loans
Portfolio
$
59,619
$
87,275
$
146,894
$
33,499
$
180,393
(1,526
)
(656
)
(2,182
)
(26
)
(2,208
)
25,812
1,358
27,170
4,841
32,011
24,286
702
24,988
4,815
29,803
(19,300
)
(19,300
)
(19,300
)
(6,430
)
(4,801
)
(11,231
)
(3,220
)
(14,451
)
$
58,175
$
83,176
$
141,351
$
35,094
$
176,445
(1)
Includes accrued interest
receivable capitalized to principal during the period.
(2)
Represents loans within
securitization trusts that we are required to consolidate under
GAAP once the trusts loan balances are below the
clean-up
call threshold.
GAAP-Basis
Year Ended December 31, 2008
FFELP
FFELP
Total Private
Total On-
Stafford and
Consolidation
Total
Education
Balance Sheet
(Dollars in millions)
Other
Loans
FFELP
Loans
Portfolio
$
35,726
$
73,609
$
109,335
$
14,818
$
124,153
462
462
149
611
(703
)
(392
)
(1,095
)
(41
)
(1,136
)
(703
)
70
(633
)
108
(525
)
21,889
1,358
23,247
7,357
30,604
21,186
1,428
22,614
7,465
30,079
(409
)
529
120
228
348
(522
)
(26
)
(548
)
(548
)
(3,505
)
(3,796
)
(7,301
)
(1,929
)
(9,230
)
$
52,476
$
71,744
$
124,220
$
20,582
$
144,802
Off-Balance Sheet
Year Ended December 31, 2008
FFELP
FFELP
Total Private
Total Off-
Stafford and
Consolidation
Total
Education
Balance Sheet
Other
Loans
FFELP
Loans
Portfolio
$
9,472
$
16,441
$
25,913
$
13,510
$
39,423
(311
)
(83
)
(394
)
(57
)
(451
)
(311
)
(83
)
(394
)
(57
)
(451
)
246
211
457
742
1,199
(65
)
128
63
685
748
(84
)
(36
)
(120
)
(228
)
(348
)
(2,180
)
(1,002
)
(3,182
)
(1,050
)
(4,232
)
$
7,143
$
15,531
$
22,674
$
12,917
$
35,591
Core Earnings Basis Portfolio
Year Ended December 31, 2008
FFELP
FFELP
Total Private
Total Core
Stafford and
Consolidation
Total
Education
Earnings Basis
Other
Loans
FFELP
Loans
Portfolio
$
45,198
$
90,050
$
135,248
$
28,328
$
163,576
462
462
149
611
(1,014
)
(475
)
(1,489
)
(98
)
(1,587
)
(1,014
)
(13
)
(1,027
)
51
(976
)
22,135
1,569
23,704
8,099
31,803
21,121
1,556
22,677
8,150
30,827
(493
)
493
(522
)
(26
)
(548
)
(548
)
(5,685
)
(4,798
)
(10,483
)
(2,979
)
(13,462
)
$
59,619
$
87,275
$
146,894
$
33,499
$
180,393
(1)
Includes accrued interest
receivable capitalized to principal during the period.
(2)
Represents borrowers consolidating
their loans into a new Consolidation Loan. Loans in our
off-balance sheet securitization trusts that are consolidated
are bought out of the trusts and included in GAAP-basis.
Years Ended December 31
(Dollars in millions)
2010
2009
2008
$
12,282
$
22,375
$
19,894
24,889
2,516
1,870
907
462
3,376
986
2,309
2,583
2,446
41,996
30,204
24,695
(3,376
)
(986
)
342
457
$
41,996
$
27,170
$
24,166
Years Ended December 31,
(Dollars in millions)
2010
2009
2008
$
11,720
$
21,746
$
17,907
Years Ended December 31
(Dollars in millions)
2010
2009
2008
$
2,510
$
3,394
$
6,437
149
797
280
1,386
949
921
3,896
5,140
7,787
(797
)
(280
)
498
741
$
3,896
$
4,841
$
8,248
61
Years Ended December 31,
(Dollars in millions)
2010
2009
2008
$
2,307
$
3,176
$
6,336
GAAP-Basis FFELP
Loan Delinquencies
December 31,
2010
2009
2008
(Dollars in millions)
Balance
%
Balance
%
Balance
%
$
28,214
$
35,079
$
39,270
22,028
14,121
12,483
80,026
82.8
%
57,528
82.4
%
58,811
83.8
%
5,500
5.7
4,250
6.1
4,044
5.8
3,178
3.3
2,205
3.1
2,064
2.9
7,992
8.2
5,844
8.4
5,255
7.5
96,696
100
%
69,827
100
%
70,174
100
%
146,938
119,027
121,927
1,900
2,187
2,431
148,838
121,214
124,358
(189
)
(161
)
(138
)
$
148,649
$
121,053
$
124,220
65.8
%
58.7
%
57.6
%
17.2
%
17.6
%
16.2
%
18.6
%
16.8
%
15.1
%
(1)
Loans for borrowers who may still
be attending school or engaging 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, as well as loans for borrowers
who have requested extension of grace period during employment
transition or who have temporarily ceased making full payments
due to hardship or other factors.
(2)
Loans for borrowers who have used
their allowable deferment time or do not qualify for deferment,
that need additional time to obtain employment or who have
temporarily ceased making full payments due to hardship or other
factors.
(3)
The period of delinquency is based
on the number of days scheduled payments are contractually past
due.
62
Off-Balance Sheet FFELP
Loan
Delinquencies
(4)
December 31,
2009
2008
(Dollars in millions)
Balance
%
Balance
%
$
3,312
$
4,115
2,726
2,821
11,304
82.5
%
12,441
81.9
%
804
5.9
881
5.8
439
3.2
484
3.2
1,160
8.4
1,392
9.1
13,707
100
%
15,198
100
%
19,745
22,134
577
567
20,322
22,701
(25
)
(27
)
$
20,297
$
22,674
69.4
%
68.7
%
17.5
%
18.1
%
16.6
%
15.7
%
(1)
Loans for borrowers who may still
be attending school or engaging 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, as well as loans for borrowers
who have requested extension of grace period during employment
transition or who have temporarily ceased making full payments
due to hardship or other factors.
(2)
Loans for borrowers who have used
their allowable deferment time or do not qualify for deferment,
that need additional time to obtain employment or who have
temporarily ceased making full payments due to hardship or other
factors.
(3)
The period of delinquency is based
on the number of days scheduled payments are contractually past
due.
(4)
On January 1, 2010, upon the
adoption of the new consolidation accounting guidance, all
off-balance sheet loans are included in GAAP-basis.
Core Earnings Basis FFELP
Loan Delinquencies
December 31,
2010
2009
2008
(Dollars in millions)
Balance
%
Balance
%
Balance
%
$
28,214
$
38,391
$
43,385
22,028
16,847
15,304
80,026
82.8
%
68,832
82.4
%
71,252
83.5
%
5,500
5.7
5,054
6.0
4,925
5.8
3,178
3.3
2,644
3.2
2,548
2.9
7,992
8.2
7,004
8.4
6,647
7.8
96,696
100
%
83,534
100
%
85,372
100
%
146,938
138,772
144,061
1,900
2,764
2,998
148,838
141,536
147,059
(189
)
(186
)
(165
)
$
148,649
$
141,350
$
146,894
65.8
%
60.2
%
59.3
%
17.2
%
17.6
%
16.5
%
18.6
%
16.8
%
15.2
%
(1)
Loans for borrowers who may still
be attending school or engaging 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, as well as loans for borrowers
who have requested extension of grace period during employment
transition or who have temporarily ceased making full payments
due to hardship or other factors.
(2)
Loans for borrowers who have used
their allowable deferment time or do not qualify for deferment,
that need additional time to obtain employment or who have
temporarily ceased making full payments due to hardship or other
factors.
(3)
The period of delinquency is based
on the number of days scheduled payments are contractually past
due.
Activity in Allowance for FFELP Loans
GAAP-Basis
Off-Balance Sheet
Core Earnings Basis
Years Ended December 31,
Years Ended December 31,
Years Ended December 31,
(Dollars in millions)
2010
2009
2008
2010
(1)
2009
2008
2010
2009
2008
$
161
$
138
$
89
$
25
$
27
$
29
$
186
$
165
$
118
98
106
106
13
21
98
119
127
(87
)
(79
)
(58
)
(15
)
(21
)
(87
)
(94
)
(79
)
(8
)
(4
)
1
(2
)
(8
)
(4
)
(1
)
25
(25
)
$
189
$
161
$
138
$
$
25
$
27
$
189
$
186
$
165
.11
%
.11
%
.09
%
%
.10
%
.13
%
.11
%
.11
%
.10
%
.09
%
.10
%
.07
%
%
.09
%
.11
%
.09
%
.09
%
.08
%
.13
%
.14
%
.11
%
%
.13
%
.12
%
.13
%
.13
%
.11
%
.20
%
.23
%
.20
%
%
.18
%
.18
%
.20
%
.22
%
.19
%
2.2
2.0
2.4
1.7
1.3
2.2
2.0
2.1
$
146,938
$
119,027
$
121,927
$
$
19,745
$
22,134
$
146,938
$
138,772
$
144,061
$
82,255
$
69,020
$
66,392
$
$
14,293
$
16,086
$
82,255
$
83,313
$
82,478
$
96,696
$
69,827
$
70,174
$
$
13,707
$
15,198
$
96,696
$
83,534
$
85,372
(1)
Upon the adoption of the new
consolidation accounting guidance on January 1, 2010, we
consolidated all of our off-balance sheet securitization trusts.
65
GAAP-Basis Private Education
Loan Delinquencies
December 31,
December 31,
December 31,
2010
2009
2008
(Dollars in millions)
Balance
%
Balance
%
Balance
%
$
8,340
$
8,910
$
10,159
1,340
967
862
24,888
89.4
%
12,421
86.4
%
9,748
87.2
%
1,011
3.6
647
4.5
551
4.9
471
1.7
340
2.4
296
2.6
1,482
5.3
971
6.7
587
5.3
27,852
100
%
14,379
100
%
11,182
100
%
37,532
24,256
22,203
(894
)
(559
)
(535
)
36,638
23,697
21,668
1,039
499
222
(2,021
)
(1,443
)
(1,308
)
$
35,656
$
22,753
$
20,582
74.2
%
59.3
%
50.4
%
10.6
%
13.6
%
12.8
%
4.6
%
6.3
%
7.2
%
(1)
Loans for borrowers who may still
be attending school or engaging 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 borrowers 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.
66
Off-Balance Sheet Private Education
Loan
Delinquencies
(4)
December 31,
December 31,
2009
2008
(Dollars in millions)
Balance
%
Balance
%
$
2,546
$
3,461
453
700
8,987
90.0
%
8,843
92.8
%
332
3.3
315
3.3
151
1.5
121
1.3
517
5.2
251
2.6
9,987
100
%
9,530
100
%
12,986
13,691
(349
)
(361
)
12,637
13,330
229
92
(524
)
(505
)
$
12,342
$
12,917
76.9
%
69.6
%
10.0
%
7.2
%
4.3
%
6.8
%
(1)
Loans for borrowers who may still
be attending school or engaging 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 borrowers 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.
(4)
On January 1, 2010, upon
adoption of the new consolidation accounting guidance, all
off-balance sheet loans are included in GAAP-basis.
Core Earnings Basis Private Education
Loan Delinquencies
December 31,
December 31,
December 31,
2010
2009
2008
(Dollars in millions)
Balance
%
Balance
%
Balance
%
$
8,340
$
11,456
$
13,620
1,340
1,420
1,562
24,888
89.4
%
21,408
87.9
%
18,591
89.8
%
1,011
3.6
979
4.0
866
4.2
471
1.7
491
2.0
417
2.0
1,482
5.3
1,488
6.1
838
4.0
27,852
100
%
24,366
100
%
20,712
100
%
37,532
37,242
35,894
(894
)
(908
)
(896
)
36,638
36,334
34,998
1,039
728
314
(2,021
)
(1,967
)
(1,813
)
$
35,656
$
35,095
$
33,499
74.2
%
65.4
%
57.7
%
10.6
%
12.1
%
10.2
%
4.6
%
5.5
%
7.0
%
(1)
Loans for borrowers who may still
be attending school or engaging 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 borrowers 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.
Activity in Allowance for Private Education Loans
GAAP-Basis
Off-Balance Sheet
Core Earnings Basis
Years Ended December 31,
Years Ended December 31,
Years Ended December 31,
(Dollars in millions)
2010
2009
2008
2010
(1)
2009
2008
2010
2009
2008
$
1,443
$
1,308
$
1,004
$
524
$
505
$
362
$
1,967
$
1,813
$
1,366
1,298
967
586
432
288
1,298
1,399
874
(1,291
)
(876
)
(320
)
(423
)
(153
)
(1,291
)
(1,299
)
(473
)
47
44
38
10
8
47
54
46
524
(524
)
$
2,021
$
1,443
$
1,308
$
$
524
$
505
$
2,021
$
1,967
$
1,813
5.0
%
7.2
%
3.8
%
%
4.4
%
1.9
%
5.0
%
6.0
%
2.9
%
4.8
%
6.7
%
3.3
%
%
4.2
%
1.6
%
4.8
%
5.6
%
2.5
%
5.2
%
5.8
%
5.8
%
%
4.0
%
3.7
%
5.2
%
5.2
%
5.0
%
7.3
%
10.0
%
11.7
%
%
5.2
%
5.3
%
7.3
%
8.1
%
8.8
%
1.6
1.6
4.1
1.2
3.3
1.6
1.5
3.8
$
38,572
$
24,755
$
22,426
$
$
13,215
$
13,782
$
38,572
$
37,970
$
36,208
$
25,596
$
12,137
$
8,533
$
$
9,597
$
8,088
$
25,596
$
21,734
$
16,621
$
27,852
$
14,379
$
11,182
$
$
9,987
$
9,530
$
27,852
$
24,366
$
20,712
(1)
Upon the adoption of the new
consolidation accounting guidance on January 1, 2010, we
consolidated all of our off-balance sheet securitization trusts.
(2)
Represents the additional allowance
related to the amount of uncollectible interest reserved within
interest income that is transferred in the period to the
allowance for loan losses when interest is capitalized to a
loans principal balance. Prior to 2008, the interest
provision was reversed in interest income and then provided for
through provision within the allowance for loan loss.
(3)
Ending total loans represents gross
Private Education Loans, plus the receivable for partially
charged-off loans.
69
December 31, 2010
December 31, 2009
December 31, 2008
Non-
Non-
Non-
(Dollars in millions)
Traditional
Traditional
Total
Traditional
Traditional
Total
Traditional
Traditional
Total
$
34,177
$
4,395
$
38,572
$
33,223
$
4,747
$
37,970
$
31,101
$
5,107
$
36,208
25,043
2,809
27,852
21,453
2,913
24,366
17,715
2,997
20,712
1,231
790
2,021
1,056
911
1,967
859
954
1,813
3.6
%
16.8
%
5.0
%
3.6
%
21.4
%
6.0
%
1.4
%
11.1
%
2.9
%
3.6
%
18.0
%
5.2
%
3.2
%
19.2
%
5.2
%
2.8
%
18.7
%
5.0
%
4.9
%
28.2
%
7.3
%
4.9
%
31.3
%
8.1
%
4.8
%
31.8
%
8.8
%
1.5
1.7
1.6
1.6
1.5
1.5
4.2
3.5
3.8
8.8
%
27.4
%
10.6
%
9.5
%
31.4
%
12.1
%
7.1
%
28.9
%
10.2
%
4.2
%
15.0
%
5.3
%
4.6
%
17.5
%
6.1
%
2.6
%
12.7
%
4.0
%
4.4
%
6.1
%
4.6
%
5.3
%
7.1
%
5.5
%
6.7
%
9.0
%
7.0
%
63
%
28
%
59
%
61
%
28
%
57
%
59
%
26
%
55
%
725
623
715
725
623
713
723
622
710
(1)
Ending total loans represents gross
Private Education Loans, plus the receivable for partially
charged-off loans.
70
71
(Dollars in millions)
Monthly Scheduled Payments Due
Not Yet in
December 31, 2010
1 to 12
13 to 24
25 to 36
37 to 48
More than 48
Repayment
Total
$
$
$
$
$
$
8,340
$
8,340
845
211
127
70
87
1,340
7,716
5,976
4,181
2,764
4,251
24,888
476
247
127
68
93
1,011
232
106
60
31
42
471
694
411
180
86
111
1,482
$
9,963
$
6,951
$
4,675
$
3,019
$
4,584
$
8,340
37,532
(894
)
1,039
(2,021
)
$
35,656
8.5
%
3.0
%
2.7
%
2.3
%
1.9
%
%
4.6
%
(Dollars in millions)
Monthly Scheduled Payments Due
Not Yet in
December 31, 2009
1 to 12
13 to 24
25 to 36
37 to 48
More than 48
Repayment
Total
$
$
$
$
$
$
11,456
$
11,456
1,041
183
92
44
60
1,420
8,153
4,969
3,235
1,959
3,092
21,408
584
195
91
44
65
979
284
102
46
25
34
491
879
331
130
63
85
1,488
$
10,941
$
5,780
$
3,594
$
2,135
$
3,336
$
11,456
37,242
(908
)
728
(1,967
)
$
35,095
9.5
%
3.2
%
2.6
%
2.1
%
1.8
%
%
5.5
%
72
(Dollars in millions)
Monthly Scheduled Payments Due
Not Yet in
December 31, 2008
1 to 12
13 to 24
25 to 36
37 to 48
More than 48
Repayment
Total
$
$
$
$
$
$
13,620
$
13,620
1,255
151
70
36
50
1,562
8,674
3,877
2,329
1,469
2,242
18,591
596
132
61
32
45
866
286
65
30
14
22
417
543
148
64
33
50
838
$
11,354
$
4,373
$
2,554
$
1,584
$
2,409
$
13,620
35,894
(896
)
314
(1,813
)
$
33,499
11.1
%
3.5
%
2.8
%
2.3
%
2.1
%
%
7.0
%
December 31,
December 31,
December 31,
2010
2009
2008
Forbearance
% of
Forbearance
% of
Forbearance
% of
(Dollars in millions)
Balance
Total
Balance
Total
Balance
Total
$
958
71
%
$
1,050
74
%
$
1,075
69
%
343
26
332
23
368
23
39
3
38
3
119
8
$
1,340
100
%
$
1,420
100
%
$
1,562
100
%
Activity in Receivable for Partially Charged-Off Loans
GAAP-Basis
Off-Balance Sheet
Core Earnings Basis
Years Ended
Years Ended
Years Ended
December 31,
December 31,
December 31,
(Dollars in millions)
2010
2009
2008
2010(2)
2009
2008
2010
2009
2008
$
499
$
222
$
118
$
229
$
92
$
28
$
728
$
314
$
146
415
320
140
154
72
415
474
212
(104
)
(43
)
(36
)
(17
)
(8
)
(104
)
(60
)
(44
)
229
(229
)
$
1,039
$
499
$
222
$
$
229
$
92
$
1,039
$
728
$
314
(1)
Net of any current period
recoveries that were less than expected.
(2)
Upon the adoption of the new
consolidation accounting guidance on January 1, 2010, we
consolidated all of our off-balance sheet securitization trusts.
Loan Program
Signature and
Career
(Dollars in millions)
Other
Smart Option
Training
Total
$23,179
$2,532
$2,141
$
27,852
32,779
2,536
2,217
37,532
Deferred
(1)
Interest-only or
fixed $25/month
Interest-only or
fixed $25/month
Level principal
and interest or
graduated
Level principal
and interest
Level principal
and interest
(1)
Deferred includes loans
for which no payments are required and interest charges are
capitalized into the loan balance.
74
75
December 31, 2010
December 31, 2009
(Dollars in millions)
Available Capacity
Available Capacity
$
4,342
$
6,070
1,150
85
131
4,427
7,351
3,485
3,937
1,703
8,664
$
17,028
$
12,539
(1)
At December 31, 2010 and 2009,
excludes $0 and $25 million, respectively, of investments
pledged as collateral related to certain derivative positions
and $872 million and $708 million, respectively, of
other non-liquid investments, classified as investments on our
balance sheet in accordance with GAAP.
(2)
At December 31, 2010 and 2009,
includes $684 million and $821 million, respectively,
of cash collateral pledged by derivative counterparties and held
in our unrestricted cash.
(3)
At December 31, 2010 and 2009,
includes $2.0 billion and $2.4 billion, respectively,
of cash and liquid investments at the Bank. This cash will be
used primarily to originate or acquire student loans.
(4)
On November 24, 2010, our
remaining bank line of credit was retired.
(5)
Borrowing capacity is subject to
availability of collateral. As of December 31, 2010 and
2009, we had $1.5 billion and $2.1 billion,
respectively, of outstanding unencumbered FFELP Loans, net,
available for use in either the FFELP ABCP facilities or
FHLB-DM
facility.
(6)
General corporate purposes
primarily include originating Private Education Loans and
repaying unsecured debt as it matures.
76
December 31,
December 31,
(Dollars in billions)
2010
2009
$
13.1
$
12.7
22.3
30.1
(26.9
)
(35.1
)
(1.4
)
(1.9
)
(2.6
)
(1.7
)
$
4.5
$
4.1
(1)
At December 31, 2010 and
December 31, 2009, there were $1.4 billion and
$1.9 billion, respectively, of net gains on derivatives
hedging this debt in unencumbered assets, which partially offset
these losses.
(2)
Excludes goodwill and acquired
intangible assets.
77
78
79
SLM Corporation
and Sallie Mae Bank
Securitization Trust
(Dollars in millions)
Contracts
Contracts
$
296
$
1,167
65
%
31
%
0
%
0
%
As of December 31,
2010
2009
2008
Ending Balance
Ending Balance
Ending Balance
Total
Total
Total
Core
Core
Core
Short
Long
Earnings
Short
Long
Earnings
Short
Long
Earnings
(Dollars in millions)
Term
Term
Basis
Term
Term
Basis
Term
Term
Basis
$
4,361
$
15,742
$
20,103
$
5,185
$
22,797
$
27,982
$
6,794
$
31,182
$
37,976
1,387
3,160
4,547
842
4,795
5,637
1,148
1,108
2,256
900
900
9,006
9,006
7,365
7,365
24,484
24,484
14,314
14,314
5,853
5,853
8,801
8,801
24,768
24,768
1,064
1,064
112,425
112,425
81,923
81,923
80,601
80,601
21,409
21,409
7,277
7,277
20,268
20,268
22,716
22,716
13,347
13,347
14,443
14,443
1,246
1,246
64
1,533
1,597
31
1,972
2,003
2,257
2,257
1,472
1,472
1,827
1,827
$
33,389
$
160,899
$
194,288
$
30,883
$
160,741
$
191,624
$
41,933
$
152,022
$
193,955
(1)
At December 31, 2010,
other primarily consisted of $0.9 billion of
cash collateral held related to derivative exposures that are
recorded as a short-term debt obligation, as well as
$1.4 billion of unsecured other bank deposits. At
December 31, 2009 and 2008, other primarily
consisted of cash collateral held related to derivative
exposures that are recorded as short-term debt obligations.
80
Years Ended December 31,
2010
2009
2008
Average
Average
Average
Average
Average
Average
(Dollars in millions)
Balance
Rate
Balance
Rate
Balance
Rate
$
24,480
2.15
%
$
31,863
1.93
%
$
39,794
3.65
%
5,123
2.65
4,754
3.50
854
4.07
403
.35
13,537
.81
14,174
1.43
1,727
3.43
15,096
.70
7,340
.75
6,623
1.24
16,239
2.93
24,855
5.27
120,880
1.00
85,612
1.38
76,028
3.26
35,377
.82
39,625
3.11
1,454
.69
1,811
1.07
2,363
3.90
1,806
.55
1,391
.31
2,063
2.35
$
189,402
1.16
%
$
198,561
1.51
%
$
187,309
3.58
%
(1)
Included the 2008 Asset-Backed Loan
Facility through April 2009.
1 Year
2 to 3
4 to 5
Over
(Dollars in millions)
or Less
Years
Years
5 Years
Total
$
$
4,137
$
4,552
$
7,053
$
15,742
2,290
811
59
3,160
16,255
25,818
19,100
80,824
141,997
$
16,255
$
32,245
$
24,463
$
87,936
$
160,899
(1)
Includes long-term beneficial
interests of $133.8 billion of notes issued by consolidated
VIEs in conjunction with our on-balance sheet securitization
transactions and included in long-term notes in the consolidated
balance sheet. Timing of obligations is estimated based on our
current projection of prepayment speeds of the securitized
assets.
(2)
The aggregate principal amount of
debt that matures in each period is $16.3 billion,
$32.4 billion, $24.6 billion and $88.7 billion,
respectively. Specifically excludes derivative market value
adjustments of $2.6 billion for long-term notes. Interest
obligations on notes are predominantly variable in nature,
resetting quarterly based on
3-month
LIBOR.
81
82
1.
Investments
Our investments primarily consist
of overnight/weekly maturity instruments with high credit
quality counterparties. However, we consider credit and
liquidity risk involving specific instruments in determining
their fair value and, when appropriate, have adjusted the fair
value of these instruments for the effect of credit and
liquidity risk. These assumptions have further been validated by
the successful maturity of these investments in the period
immediately following the end of the reporting period.
2.
Derivatives
When determining the fair value
of derivatives, we take into account counterparty credit risk
for positions where we are exposed to the counterparty on a net
basis by assessing exposure net of collateral held. The net
exposure for each counterparty is adjusted based on market
83
information available for that specific counterparty, including
spreads from credit default swaps. Additionally, when the
counterparty has exposure to us related to our derivatives, we
fully collateralize the exposure, minimizing the adjustment
necessary to the derivative valuations for our own credit risk.
Trusts that contain derivatives are not required to post
collateral to counterparties as the credit quality and
securitized nature of the trusts minimizes any adjustments for
the counterpartys exposure to the trusts. Adjustments
related to credit risk reduced the overall value of our
derivatives by $72 million as of December 31, 2010. We
also take into account changes in liquidity when determining the
fair value of derivative positions. We adjusted the fair value
of certain less liquid positions downward by approximately
$129 million to take into account a significant reduction
in liquidity as of December 31, 2010, related primarily to
basis swaps indexed to interest rate indices with inactive
markets. A major indicator of market inactivity is the widening
of the bid/ask spread in these markets. In general, the widening
of counterparty credit spreads and reduced liquidity for
derivative instruments as indicated by wider bid/ask spreads
will reduce the fair value of derivatives. In addition, certain
cross-currency interest rate swaps hedging foreign currency
denominated reset rate and amortizing notes in our on-balance
sheet trusts contain extension features that coincide with the
remarketing dates of the notes. The valuation of the extension
feature requires significant judgment based on internally
developed inputs.
3.
Student Loans
Our FFELP Loans and Private
Education Loans are accounted for at cost or at the lower of
cost or fair value if the loan is
held-for-sale.
The fair values of our student loans are disclosed in
Note 15 Fair Value
Measurements. For both FFELP Loans and Private Education
Loans accounted for at cost, fair value is determined by
modeling loan level cash flows using stated terms of the assets
and internally-developed assumptions to determine aggregate
portfolio yield, net present value and average life. The
significant assumptions used to project cash flows are
prepayment speeds, default rates, cost of funds, and required
return on equity. In addition, the Floor Income component of our
FFELP Loan portfolio is valued through discounted cash flow and
option models using both observable market inputs and internally
developed inputs. Significant inputs into the models are not
generally market observable. They are either derived internally
through a combination of historical experience and
managements qualitative expectation of future performance
(in the case of prepayment speeds, default rates, and capital
assumptions) or are obtained through external broker quotes (as
in the case of cost of funds). When possible, market
transactions are used to validate the model. In most cases,
these are either infrequent or not observable. For FFELP Loans
classified as
held-for-sale
and accounted for at the lower of cost or market, the fair value
is based on the committed sales price of the various loan
purchase programs established by ED.
84
85
86
87
88
Years Ended December 31,
(Shares in millions)
2010
2009
2008
1.1
.3
1.0
1.1
.3
1.0
$
13.44
$
20.29
$
24.51
1.8
17.8
1.9
38.8
38.8
38.8
(1)
Shares withheld from stock option
exercises and vesting of restricted stock for employees
tax withholding obligations and shares tendered by employees to
satisfy option exercise costs.
89
Item 7A.
Quantitative
and Qualitative Disclosures about Market Risk
Year Ended December 31, 2010
Asset
Interest Rates:
and Funding
Change from
Change from
Index
Increase of
Increase of
Mismatches
(1)
100 Basis
300 Basis
Increase of
Points
Points
25 Basis Points
(Dollars in millions, except per share amounts)
$
%
$
%
$
%
$
3
1
%
$
33
5
%
$
(372
)
(61
)%
131
27
82
17
(28
)
(6
)
$
134
12
%
$
115
11
%
$
(400
)
(37
)%
$
.270
29
%
$
.235
25
%
$
(.819
)
(87
)%
Year Ended December 31, 2009
Asset
Interest Rates:
and Funding
Change from
Change from
Index
Increase of
Increase of
Mismatches
(1)
100 Basis
300 Basis
Increase of
Points
Points
25 Basis Points
(Dollars in millions, except per share amounts)
$
%
$
%
$
%
$
(70
)
(7
)%
$
(31
)
(3
)%
$
(321
)
(31
)%
108
33
18
5
106
33
$
38
5
%
$
(13
)
(2
)%
$
(215
)
(30
)%
$
.080
21
%
$
(.027
)
(7
)%
$
(.456
)
(120
)%
(1)
If an asset is not funded with the
same index/frequency reset of the asset then it is assumed the
funding index increases 25 basis points while holding the
asset index constant.
90
At December 31, 2010
Interest Rates:
Change from
Change from
Increase of
Increase of
100 Basis
300 Basis
Points
Points
(Dollars in millions)
Fair Value
$
%
$
%
$
147,163
$
(649
)
%
$
(1,318
)
(1
)%
30,949
11,641
(1
)
(2
)
9,449
(565
)
(6
)
(996
)
(11
)%
$
199,202
$
(1,215
)
(1
)%
$
(2,316
)
(1
)%
$
187,959
$
(704
)
%
$
(1,938
)
(1
)%
3,136
(217
)
(7
)
257
8
$
191,095
$
(921
)
%
$
(1,681
)
(1
)%
At December 31, 2009
Interest Rates:
Change from
Change from
Increase of
Increase of
100 Basis
300 Basis
Points
Points
(Dollars in millions)
Fair Value
$
%
$
%
$
119,747
$
(470
)
%
$
(979
)
(1
)%
20,278
13,472
(4
)
(11
)
12,506
(690
)
(6
)
(1,266
)
(10
)
$
166,003
$
(1,164
)
(1
)%
$
(2,256
)
(1
)%
$
154,037
$
(852
)
(1
)%
$
(2,159
)
(1
)%
3,263
(21
)
(1
)
547
17
$
157,300
$
(873
)
(1
)%
$
(1,612
)
(1
)%
92
Frequency of
Index
Variable
Funding
(Dollars in billions)
Resets
Assets
Funding
(1)
Gap
daily
$
139.2
$
.1
$
139.1
weekly
8.2
8.2
annual
.8
.8
quarterly
5.4
5.4
monthly
23.1
23.1
daily
3.0
(3.0
)
annual
.5
.5
daily
quarterly
132.1
(132.1
)
monthly
7.3
15.3
(8.0
)
monthly/quarterly
2.0
(2.0
)
monthly
34.6
(34.6
)
daily/weekly
11.5
2.3
9.2
9.3
15.9
(6.6
)
$
205.3
$
205.3
$
(1)
Funding includes all derivatives
that qualify as hedges.
(2)
Funding consists of auction rate
securities, the ABCP Facilities and the ED Conduit Program
facility.
(3)
Assets include restricted and
unrestricted cash equivalents and other overnight type
instruments. Funding includes retail and other deposits and cash
collateral held related to derivatives exposures that are
recorded as a short-term debt obligation.
(4)
Assets include receivables and
other assets (including goodwill and acquired intangibles).
Funding includes other liabilities and stockholders equity
(excluding series B Preferred Stock).
93
Index
Frequency of
Funding
(Dollars in billions)
Variable Resets
Assets
Funding
(1)
Gap
daily
$
139.2
$
.1
$
139.1
weekly
8.2
2.0
6.2
annual
.8
.8
quarterly
5.4
1.5
3.9
monthly
23.1
8.6
14.5
daily
3.0
(3.0
)
annual
.5
.5
daily
55.5
(55.5
)
quarterly
54.6
(54.6
)
monthly
7.3
20.1
(12.8
)
daily
9.0
(9.0
)
monthly
34.6
(34.6
)
daily/weekly
11.5
2.3
9.2
6.6
11.3
(4.7
)
$
202.6
$
202.6
$
(1)
Funding includes all derivatives
that management considers economic hedges of interest rate risk
and reflects how we internally manage our interest rate exposure.
(2)
Funding consists of auction rate
securities, the ABCP Facilities and the ED Conduit Program
facility.
(3)
Assets include restricted and
unrestricted cash equivalents and other overnight type
instruments. Funding includes retail and other deposits and cash
collateral held related to derivatives exposures that are
recorded as a short-term debt obligation.
(4)
Assets include receivables and
other assets (including goodwill and acquired intangibles).
Funding includes other liabilities and stockholders equity
(excluding series B Preferred Stock).
94
Weighted Average
(Averages in Years)
Life
7.7
6.2
.1
7.3
.3
7.2
6.0
Item 8.
Financial
Statements and Supplementary Data
Item 9.
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure
Item 9A.
Controls
and Procedures
Item 9B.
Other
Information
95
Item 10.
Directors,
Executive Officers and Corporate Governance
Item 11.
Executive
Compensation
Item 12.
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
Item 13.
Certain
Relationships and Related Transactions, and Director
Independence
Item 14.
Principal
Accounting Fees and Services
96
98
99
100
Item 15.
Exhibits,
Financial Statement Schedules
(a)
1. Financial
Statements
F-2
F-3
F-4
F-5
F-6
F-9
F-10
2.
Financial
Statement Schedules
3.
Exhibits
4.
Appendices
(b)
Exhibits
Exhibit
Incorporated by Reference
Number
Exhibit Description
Form
Filing Date
3
.1
Amended and Restated Certificate of Incorporation of the Company
S-8
5/22/09
3
.2
By-Laws of the Company
8-K
8/6/08
10
.1
SLM Holding Corporation Directors Stock Plan
DEF14-A
4/10/98
10
.2
SLM Holding Corporation Management Incentive Plan
DEF14-A
4/10/98
10
.3
Stock Option Agreement, SLM Corporation Incentive Plan,
Incentive,
Price-Vested
with Replacement-2004
10-Q
11/9/04
10
.4
Stock Option Agreement, SLM Corporation Incentive Plan,
Non-Qualified, Price-Vested Options-2004
10-Q
11/9/04
10
.5
SLM Corporation Incentive Plan, Amended and Restated
May 19, 2005
8-K
5/25/05
10
.6
SLM Corporation Directors Stock Plan
8-K
5/25/05
10
.7
Stock Option Agreement SLM Corporation Incentive Plan
Net-Settled, Price-Vested Options 1 Year
Minimum 2006
10-K
3/9/06
10
.8
Retainer Agreement between Anthony P. Terracciano and the
Company
10-Q
5/9/08
97
Exhibit
Incorporated by Reference
Number
Exhibit Description
Form
Filing Date
10
.9
Employment Agreement between Albert L. Lord and the Company
10-Q
5/9/08
10
.10
Note Purchase and Security Agreement by and among Phoenix
Fundings I, Sallie Mae, Inc., The Bank of New York
Trust Company, N.A., Deutsche Bank Trust Company
Americas, UBS Real Estate Securities Inc., and UBS Securities LLC
10-Q
5/9/08
10
.11
Note Purchase and Security Agreement by and among Rendezvous
Funding I, Bank of America, N.A., JPMorgan Chase Bank,
N.A., Bank of America Securities LLC, J.P. Morgan
Securities Inc., Barclays Bank PLC, The Royal Bank of Scotland
PLC, Deutsche Bank Securities Inc., Credit Suisse New York
Branch, The Bank of New York Trust Company, N.A., Sallie
Mae, Inc. and certain other parties thereto
10-Q
5/9/08
10
.12
Note Purchase and Security Agreement by and among Bluemont
Funding I, Bank of America, N.A., JPMorgan Chase Bank,
N.A., Bank of America Securities LLC, J.P. Morgan
Securities Inc., Barclays Bank PLC, The Royal Bank of Scotland
PLC, Deutsche Bank Securities Inc., Credit Suisse New York
Branch, The Bank of New York Trust Company, N.A., Sallie,
Inc. and certain other parties thereto
10-Q
5/9/08
10
.13
Schedule of Contracts Substantially Identical to
Exhibit 10.34 of the Companys Quarterly Report on
Form 10-Q,
filed on May 9, 2008 in all Material Respects: between Town
Center Funding I and Town Hall Funding I
10-Q
5/9/08
10
.14
Employment Agreement between John F. Remondi and the Company as
amended as described in Form 8-K filed on 2/1/11
10-Q
8/7/08
10
.15
Sallie Mae Deferred Compensation Plan for Key Employees
Restatement Effective January 1, 2009
10-K
3/2/09
10
.16
Sallie Mae Supplemental 401(k) Savings Plan
10-K
3/2/09
10
.17
Sallie Mae Supplemental Cash Account Retirement Plan
10-K
3/2/09
10
.18
Amendment to the Note Purchase and Security Agreement by and
among Phoenix Fundings I, Sallie Mae, Inc., The Bank of New
York Trust Company, N.A., Deutsche Bank Trust Company
Americas, UBS Real Estate Securities Inc., and UBS Securities LLC
10-K
3/2/09
10
.19
Amendment to the Note Purchase and Security by and among
Rendezvous Funding I, Bank of America, N.A., JPMorgan Chase
Bank, N.A., Bank of America Securities LLC, J.P. Morgan
Securities Inc., Barclays Bank PLC, The Royal Bank of Scotland
PLC, Deutsche Bank Securities Inc., Credit Suisse New York
Branch, The Bank of New York Trust Company, N.A., Sallie
Mae, Inc. and certain other parties thereto
10-K
3/2/09
10
.20
Amendment to the Note of Purchase and Security Agreement by and
among Bluemont Funding I, Bank of America, N.A., JPMorgan
Chase Bank, N.A., Bank of America Securities LLC,
J.P. Morgan Securities Inc., Barclays Bank PLC, The Royal
Bank of Scotland PLC, Deutsche Bank Securities Inc., Credit
Suisse New York Branch, The Bank of New York Trust Company,
N.A., Sallie Mae, Inc. and certain other parties thereto
10-K
3/2/09
Exhibit
Incorporated by Reference
Number
Exhibit Description
Form
Filing Date
10
.21
Amendment to the Note Purchase Agreement by Town Hall
Funding I, Sallie Mae, Inc., the Bank of New York Mellon
Trust Company, National Association, JPMorgan Chase Bank,
N.A., Bank of America, NA, Barclays Bank PLC, The Royal Bank of
Scotland PLC, Deutsche Bank AG, New York Branch., Credit Suisse
New York Branch, Royal Bank of Canada, Lloyds TSB Bank plc,
Merrill Lynch Bank USA, DZ Bank AG Deutsche
Zentral-Genossenschaftsbank, Frankfurt Am Main, New York Branch,
Natixis Financial Products Inc., BNP Paribas, New York Branch,
Bank of America, N.A., and certain other parties thereto.
10-K
3/2/09
10
.22
SLM Corporation Incentive Stock Plan Stock Option Agreement,
Net-Settled,
Performance Vested Options, 2009
10-K
3/2/09
10
.23
SLM Corporation Incentive Plan Performance Stock Term Sheet,
Core Earnings Net Income Target-Sustained
Performance-2009
10-K
3/2/09
10
.24
SLM Corporation Directors Equity Plan
S-8
5/22/09
10
.25
SLM Corporation
2009-2012
Incentive Plan
S-8
5/22/09
10
.26
Confidential Agreement and Release of C.E. Andrews
10-Q
8/5/09
10
.27
Confidential Agreement and Release of Robert Autor
10-Q
8/5/09
10
.28
Amended and Restated Note Purchase and Security Agreement by and
among Bluemont Funding I, Bank of America, N.A., JPMorgan
Chase Bank, N.A., Banc of America Securities LLC,
J.P. Morgan Securities Inc.; The Bank of New York Mellon
Trust Company, National Association, Sallie Mae, Inc. and
certain other parties thereto
10-Q
8/5/09
10
.29
Schedule of Contracts Substantially Identical to
Exhibit 10.3 of the Companys Quarterly Report on
Form 10-Q,
filed on August 5, 2009 in all Material Respects: Town
Center Funding I LLC and Town Hall Funding I LLC
10-Q
8/5/09
10
.30
SLM Corporation Directors Equity Plan, Non-Employee Director
Restricted Stock Agreement 2009
10-Q
11/5/09
10
.31
SLM Corporation Directors Equity Plan, Non-Employee Director
Stock Option Agreement 2009
10-Q
11/5/09
10
.32
Confidential Agreement and Release of Barry Feierstein
10-K
2/26/10
10
.33
Amendment to Retainer Agreement Anthony Terracciano and SLM
Corporation
10-K
2/26/10
10
.34
Affiliate Collateral Pledge and Security Agreement by and among
SLM Education Credit Finance Corporation, HICA Education Loan
Corporation and the Federal Home Loan Bank of Des Moines
10-K
2/26/10
10
.35
Advances, Pledge and Security Agreement between HICA Education
Loan Corporation and the Federal Home Loan Bank of Des Moines
10-K
2/26/10
10
.36
Note Purchase and Security Agreement by and among Bluemont
Funding 1, Bank of America, N.A., JPMorgan Chase Bank, N.A.,
Banc of America Securities LLC, J.P. Morgan Securities
Inc., The Bank of New York Mellon Trust Company, National
Association and Sallie Mae, Inc. and certain other parties
thereto
10-K
2/26/10
10
.37
Schedule of Contracts Substantially Identical to
Exhibit 10.40 to the Companys Annual Report on
Form 10-K,
filed on February 26, 2010 in all Material Respects:
between Town Center Funding 1 LLC and Town Hall Funding I LLC
10-K
2/26/10
10
.38
SLM Corporation
2009-2012
Incentive Plan Stock Option Agreement
10-Q
5/6/10
10
.39
SLM Corporation
2009-2012
Incentive Plan Performance Stock Award Term Sheet
10-Q
5/6/10
Exhibit
Incorporated by Reference
Number
Exhibit Description
Form
Filing Date
10
.40
Employment Agreement between Joseph DePaulo and the Company
10-Q
5/6/10
10
.41
Offer to Exchange Certain Outstanding Stock Options for
Replacement Options
SC-TO-I
5/14/10
10
.42
Offer to Exchange Certain Outstanding Stock Options for
Replacement Options Final Amendments
SC-TO-I/A
6/10/10
10
.43
Asset Purchase Agreement by and among The Student Loan
Corporation; Citibank, N.A., Citibank (South Dakota) National
Association, SLC Student Loan Receivables I, Inc., SLM
Corporation, Bull Run 1 LLC, SLM Education Credit Finance
Corporation and Sallie Mae, Inc.
10-Q
11/8/10
10
.44
Amendment to Retainer Agreement between Anthony P. Terracciano
and the Company, dated September 29, 2010*
10
.45
SLM Corporation Executive Severance Plan for Senior
Officers*
10
.46
SLM Corporation Change in Control Severance Plan for Senior
Officers*
10
.47
Employment Agreement between Laurent C. Lutz and the
Company*
10
.48
Confidential Agreement and Release of John (Jack) Hewes*
10
.49
Amendment to Stock Option and Restricted/Performance Stock
Terms*
10
.50
SLM Corporation 20092012 Incentive Plan Stock Option
Agreement, Net Settled, Time Vested Options
2011*
10
.51
SLM Corporation 20092012 Incentive Plan Restricted Stock
and Restricted Stock Unit Term Sheet Time Vested
2011*
21
.1
List of Subsidiaries*
23
Consent of PricewaterhouseCoopers LLP*
31
.1
Certification Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2003*
31
.2
Certification Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2003*
32
.1
Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2003*
32
.2
Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2003*
101
.INS
XBRL Instance Document.
101
.SCH
XBRL Taxonomy Extension Schema Document.
101
.CAL
XBRL Taxonomy Extension Calculation Linkbase Document.
101
.DEF
XBRL Taxonomy Extension Definition Linkbase Document.
101
.LAB
XBRL Taxonomy Extension Label Linkbase Document.
101
.PRE
XBRL Taxonomy Extension Presentation Linkbase Document.
Management Contract or Compensatory Plan or Arrangement
*
Filed herewith
By:
Signature
Title
Date
Vice Chairman and Chief Executive Officer (Principal Executive
Officer)
February 28, 2011
Executive Vice President and Chief Financial Officer (Principal
Financial and Accounting Officer)
February 28, 2011
Chairman of the Board of Directors
February 28, 2011
Director
February 28, 2011
Director
February 28, 2011
Director
February 28, 2011
Director
February 28, 2011
Director
February 28, 2011
Director
February 28, 2011
Director
February 28, 2011
101
Signature
Title
Date
Director
February 28, 2011
Director
February 28, 2011
Director
February 28, 2011
Director
February 28, 2011
Director
February 28, 2011
Director
February 28, 2011
Director
February 28, 2011
102
INDEX
Page
F-2
F-3
F-4
F-5
F-6
F-9
F-10
F-1
F-2
F-3
December 31,
|
December 31,
|
|||||||
2010 | 2009 | |||||||
Assets
|
||||||||
FFELP Loans (net of allowance for losses of $188,858 and
$161,168, respectively)
|
$ | 148,649,400 | $ | 111,357,434 | ||||
FFELP Stafford Loans
Held-For-Sale
|
| 9,695,714 | ||||||
Private Education Loans (net of allowance for losses of
$2,021,580 and $1,443,440, respectively)
|
35,655,724 | 22,753,462 | ||||||
Investments
|
||||||||
Available-for-sale
|
83,048 | 1,273,275 | ||||||
Other
|
873,376 | 740,553 | ||||||
Total investments
|
956,424 | 2,013,828 | ||||||
Cash and cash equivalents
|
4,342,327 | 6,070,013 | ||||||
Restricted cash and investments
|
6,254,493 | 5,168,871 | ||||||
Retained Interest in off-balance sheet securitized loans
|
| 1,828,075 | ||||||
Goodwill and acquired intangible assets, net
|
478,409 | 1,177,310 | ||||||
Other assets
|
8,970,272 | 9,920,591 | ||||||
Total assets
|
$ | 205,307,049 | $ | 169,985,298 | ||||
Liabilities
|
||||||||
Short-term borrowings
|
$ | 33,615,856 | $ | 30,896,811 | ||||
Long-term borrowings
|
163,543,504 | 130,546,272 | ||||||
Other liabilities
|
3,136,111 | 3,263,593 | ||||||
Total liabilities
|
200,295,471 | 164,706,676 | ||||||
Commitments and contingencies
|
||||||||
Equity
|
||||||||
Preferred stock, par value $.20 per share, 20,000 shares
authorized
|
||||||||
Series A: 3,300 and 3,300 shares issued, respectively,
at stated value of $50 per share
|
165,000 | 165,000 | ||||||
Series B: 4,000 and 4,000 shares issued, respectively,
at stated value of $100 per share
|
400,000 | 400,000 | ||||||
Series C, 7.25% mandatory convertible preferred stock; 0
and 810 shares, respectively, issued at liquidation
preference of $1,000 per share
|
| 810,370 | ||||||
Common stock, par value $.20 per share, 1,125,000 shares
authorized: 595,263 and 552,220 shares issued, respectively
|
119,053 | 110,444 | ||||||
Additional paid-in capital
|
5,939,838 | 5,090,891 | ||||||
Accumulated other comprehensive loss (net of tax benefit of
$25,758 and $23,448, respectively)
|
(44,664 | ) | (40,825 | ) | ||||
Retained earnings
|
308,839 | 604,467 | ||||||
Total SLM Corporation stockholders equity before treasury
stock
|
6,888,066 | 7,140,347 | ||||||
Common stock held in treasury at cost: 68,320 and
67,222 shares, respectively
|
1,876,488 | 1,861,738 | ||||||
Total SLM Corporation stockholders equity
|
5,011,578 | 5,278,609 | ||||||
Noncontrolling interest
|
| 13 | ||||||
Total equity
|
5,011,578 | 5,278,622 | ||||||
Total liabilities and equity
|
$ | 205,307,049 | $ | 169,985,298 | ||||
December 31,
|
December 31,
|
|||||||
2010 | 2009 | |||||||
FFELP Loans
|
$ | 145,750,016 | $ | 118,731,699 | ||||
Private Education Loans
|
24,355,683 | 10,107,298 | ||||||
Restricted cash and investments
|
5,983,080 | 4,596,147 | ||||||
Other assets
|
3,705,716 | 3,639,918 | ||||||
Short-term borrowings
|
24,484,353 | 23,384,051 | ||||||
Long-term borrowings
|
142,243,771 | 101,012,628 | ||||||
Net assets of consolidated variable interest entities
|
$ | 13,066,371 | $ | 12,678,383 | ||||
F-4
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Interest income:
|
||||||||||||
FFELP Loans
|
$ | 3,345,175 | $ | 3,093,782 | $ | 5,173,086 | ||||||
Private Education Loans
|
2,353,134 | 1,582,514 | 1,737,554 | |||||||||
Other loans
|
29,707 | 56,005 | 82,734 | |||||||||
Cash and investments
|
25,899 | 26,064 | 276,264 | |||||||||
Total interest income
|
5,753,915 | 4,758,365 | 7,269,638 | |||||||||
Total interest expense
|
2,274,771 | 3,035,639 | 5,905,418 | |||||||||
Net interest income
|
3,479,144 | 1,722,726 | 1,364,220 | |||||||||
Less: provisions for loan losses
|
1,419,413 | 1,118,960 | 719,650 | |||||||||
Net interest income after provisions for loan losses
|
2,059,731 | 603,766 | 644,570 | |||||||||
Other income (loss):
|
||||||||||||
Securitization servicing and Residual Interest revenue
|
| 295,297 | 261,819 | |||||||||
Gains (losses) on sales of loans and securities, net
|
324,780 | 283,836 | (186,155 | ) | ||||||||
Losses on derivative and hedging activities, net
|
(360,999 | ) | (604,535 | ) | (445,413 | ) | ||||||
Servicing revenue
|
404,927 | 440,098 | 407,575 | |||||||||
Contingency revenue
|
330,390 | 294,177 | 329,745 | |||||||||
Gains on debt repurchases
|
316,941 | 536,190 | 64,477 | |||||||||
Other
|
6,369 | 88,016 | 39,979 | |||||||||
Total other income
|
1,022,408 | 1,333,079 | 472,027 | |||||||||
Expenses:
|
||||||||||||
Salaries and benefits
|
561,128 | 539,423 | 570,430 | |||||||||
Other operating expenses
|
646,574 | 503,013 | 459,047 | |||||||||
Total operating expenses
|
1,207,702 | 1,042,436 | 1,029,477 | |||||||||
Goodwill and acquired intangible assets impairment and
amortization expense
|
698,902 | 75,960 | 49,674 | |||||||||
Restructuring expenses
|
85,236 | 10,571 | 71,659 | |||||||||
Total expenses
|
1,991,840 | 1,128,967 | 1,150,810 | |||||||||
Income (loss) from continuing operations, before income tax
expense (benefit)
|
1,090,299 | 807,878 | (34,213 | ) | ||||||||
Income tax expense (benefit)
|
492,769 | 263,868 | (36,693 | ) | ||||||||
Net income from continuing operations
|
597,530 | 544,010 | 2,480 | |||||||||
Loss from discontinued operations, net of tax benefit
|
(67,148 | ) | (219,872 | ) | (215,106 | ) | ||||||
Net income (loss)
|
530,382 | 324,138 | (212,626 | ) | ||||||||
Preferred stock dividends
|
72,143 | 145,836 | 111,206 | |||||||||
Net income (loss) attributable to SLM Corporation common stock
|
$ | 458,239 | $ | 178,302 | $ | (323,832 | ) | |||||
Basic earnings (loss) per common share:
|
||||||||||||
Continuing operations
|
$ | 1.08 | $ | .85 | $ | (.23 | ) | |||||
Discontinued operations
|
$ | (.14 | ) | $ | (.47 | ) | $ | (.46 | ) | |||
Total
|
$ | .94 | $ | .38 | $ | (.69 | ) | |||||
Average common shares outstanding
|
486,673 | 470,858 | 466,642 | |||||||||
Diluted earnings (loss) per common share:
|
||||||||||||
Continuing operations
|
$ | 1.08 | $ | .85 | $ | (.23 | ) | |||||
Discontinued operations
|
$ | (.14 | ) | $ | (.47 | ) | $ | (.46 | ) | |||
Total
|
$ | .94 | $ | .38 | $ | (.69 | ) | |||||
Average common and common equivalent shares outstanding
|
488,485 | 471,584 | 466,642 | |||||||||
Dividends per common share
|
$ | | $ | | $ | | ||||||
F-5
Accumulated
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred
|
Additional
|
Other
|
Total
|
|||||||||||||||||||||||||||||||||||||||||||||||||
Stock
|
Common Stock Shares |
Preferred
|
Common
|
Paid-In
|
Comprehensive
|
Retained
|
Treasury
|
Stockholders
|
Noncontrolling
|
Total
|
||||||||||||||||||||||||||||||||||||||||||
Shares | Issued | Treasury | Outstanding | Stock | Stock | Capital | Income (Loss) | Earnings | Stock | Equity | Interest | Equity | ||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2007
|
8,300,000 | 532,493,081 | (65,951,394 | ) | 466,541,687 | $1,565,000 | $ | 106,499 | $ | 4,590,174 | $ | 236,364 | $ | 557,204 | $ | (1,831,706 | ) | $ | 5,223,535 | $ | 11,360 | $ | 5,234,895 | |||||||||||||||||||||||||||||
Comprehensive income:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss)
|
(212,626 | ) | (212,626 | ) | (212,626 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss), net of tax:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
Change in unrealized gains (losses) on investments, net of tax
|
(45,360 | ) | (45,360 | ) | (45,360 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Change in unrealized gains (losses) on derivatives, net of tax
|
(71,412 | ) | (71,412 | ) | (71,412 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Defined benefit pension plans adjustment
|
(1,413 | ) | (1,413 | ) | (1,413 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive income (loss)
|
(330,811 | ) | (330,811 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Cash dividends:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred stock, series A ($3.49 per share)
|
(11,501 | ) | (11,501 | ) | (11,501 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Preferred stock, series B ($4.09 per share)
|
(15,927 | ) | (15,927 | ) | (15,927 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Preferred stock, series C ($69.48 per share)
|
(83,128 | ) | (83,128 | ) | (83,128 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock dividend
|
(1,852 | ) | (1,852 | ) | (1,852 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common shares
|
1,908,595 | 3,667 | 1,912,262 | 382 | 38,575 | 79 | 39,036 | 39,036 | ||||||||||||||||||||||||||||||||||||||||||||
Issuance of preferred shares
|
150,000 | 150,000 | (4,655 | ) | 145,345 | 145,345 | ||||||||||||||||||||||||||||||||||||||||||||||
Preferred stock issuance costs and related amortization
|
650 | (650 | ) | | | |||||||||||||||||||||||||||||||||||||||||||||||
Conversion of preferred shares
|
(230 | ) | 9,595 | 9,595 | (230 | ) | 2 | 228 | | | ||||||||||||||||||||||||||||||||||||||||||
Tax benefit related to employee stock option and purchase plans
|
(16,981 | ) | (16,981 | ) | (16,981 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation cost
|
76,121 | 76,121 | 76,121 | |||||||||||||||||||||||||||||||||||||||||||||||||
Cumulative effect of accounting change
|
(194,655 | ) | 194,655 | | | |||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of common shares:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
Benefit plans
|
(1,010,673 | ) | (1,010,673 | ) | (24,767 | ) | (24,767 | ) | (24,767 | ) | ||||||||||||||||||||||||||||||||||||||||||
Acquisition of noncontrolling interest in Purchased Paper
business
|
| (4,355 | ) | (4,355 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Noncontrolling interest other
|
| 265 | 265 | |||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2008
|
8,449,770 | 534,411,271 | (66,958,400 | ) | 467,452,871 | $1,714,770 | $ | 106,883 | $ | 4,684,112 | $ | (76,476 | ) | $ | 426,175 | $ | (1,856,394 | ) | $ | 4,999,070 | $ | 7,270 | $ | 5,006,340 | ||||||||||||||||||||||||||||
F-6
Accumulated
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred
|
Additional
|
Other
|
Total
|
|||||||||||||||||||||||||||||||||||||||||||||||||
Stock
|
Common Stock Shares |
Preferred
|
Common
|
Paid-In
|
Comprehensive
|
Retained
|
Treasury
|
Stockholders
|
Noncontrolling
|
Total
|
||||||||||||||||||||||||||||||||||||||||||
Shares | Issued | Treasury | Outstanding | Stock | Stock | Capital | Income (Loss) | Earnings | Stock | Equity | Interest | Equity | ||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2008
|
8,449,770 | 534,411,271 | (66,958,400 | ) | 467,452,871 | $1,714,770 | $ | 106,883 | $ | 4,684,112 | $ | (76,476 | ) | $ | 426,175 | $ | (1,856,394 | ) | $ | 4,999,070 | $ | 7,270 | $ | 5,006,340 | ||||||||||||||||||||||||||||
Comprehensive income:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income
|
324,138 | 324,138 | 324,138 | |||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income, net of tax:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
Change in unrealized gains (losses) on investments, net of tax
|
2,872 | 2,872 | 2,872 | |||||||||||||||||||||||||||||||||||||||||||||||||
Change in unrealized gains (losses) on derivatives, net of tax
|
40,087 | 40,087 | 40,087 | |||||||||||||||||||||||||||||||||||||||||||||||||
Defined benefit pension plans adjustment
|
(7,308 | ) | (7,308 | ) | (7,308 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive income
|
359,789 | 359,789 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Cash dividends:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred stock, series A ($3.49 per share)
|
(11,500 | ) | (11,500 | ) | (11,500 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Preferred stock, series B ($1.76 per share)
|
(6,752 | ) | (6,752 | ) | (6,752 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Preferred stock, series C ($72.50 per share)
|
(97,523 | ) | (97,523 | ) | (97,523 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock dividend
|
(10 | ) | (10 | ) | (10 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common shares
|
536,036 | 98 | 536,134 | 107 | 3,186 | 5 | 3,298 | 3,298 | ||||||||||||||||||||||||||||||||||||||||||||
Preferred stock issuance costs and related amortization
|
650 | (650 | ) | | | |||||||||||||||||||||||||||||||||||||||||||||||
Conversion of preferred shares
|
(339,400 | ) | 17,272,269 | 17,272,269 | (339,400 | ) | 3,454 | 365,357 | (29,411 | ) | | | ||||||||||||||||||||||||||||||||||||||||
Tax benefit related to employee stock option and purchase plans
|
(9,710 | ) | (9,710 | ) | (9,710 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation cost
|
47,296 | 47,296 | 47,296 | |||||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of common shares:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
Benefit plans
|
(263,640 | ) | (263,640 | ) | (5,349 | ) | (5,349 | ) | (5,349 | ) | ||||||||||||||||||||||||||||||||||||||||||
Sale of international Purchased Paper Non-Mortgage
business
|
| (7,257 | ) | (7,257 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Noncontrolling interest other
|
| | | |||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2009
|
8,110,370 | 552,219,576 | (67,221,942 | ) | 484,997,634 | $1,375,370 | $ | 110,444 | $ | 5,090,891 | $ | (40,825 | ) | $ | 604,467 | $ | (1,861,738 | ) | $ | 5,278,609 | $ | 13 | $ | 5,278,622 | ||||||||||||||||||||||||||||
F-7
Accumulated
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred
|
Additional
|
Other
|
Total
|
|||||||||||||||||||||||||||||||||||||||||||||||||
Stock
|
Common Stock Shares |
Preferred
|
Common
|
Paid-In
|
Comprehensive
|
Retained
|
Treasury
|
Stockholders
|
Noncontrolling
|
Total
|
||||||||||||||||||||||||||||||||||||||||||
Shares | Issued | Treasury | Outstanding | Stock | Stock | Capital | Income (Loss) | Earnings | Stock | Equity | Interest | Equity | ||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2009
|
8,110,370 | 552,219,576 | (67,221,942 | ) | 484,997,634 | $1,375,370 | $ | 110,444 | $ | 5,090,891 | $ | (40,825 | ) | $ | 604,467 | $ | (1,861,738 | ) | $ | 5,278,609 | $ | 13 | $ | 5,278,622 | ||||||||||||||||||||||||||||
Comprehensive income:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income
|
530,382 | 530,382 | 530,382 | |||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income, net of tax:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
Change in unrealized gains (losses) on investments, net of tax
|
593 | 593 | 593 | |||||||||||||||||||||||||||||||||||||||||||||||||
Change in unrealized gains (losses) on derivatives, net of tax
|
5,110 | 5,110 | 5,110 | |||||||||||||||||||||||||||||||||||||||||||||||||
Defined benefit pension plans adjustment
|
(9,542 | ) | (9,542 | ) | (9,542 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive income
|
526,543 | 526,543 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Cash dividends:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred stock, series A ($3.49 per share)
|
(11,500 | ) | (11,500 | ) | (11,500 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Preferred stock, series B ($1.05 per share)
|
(4,208 | ) | (4,208 | ) | (4,208 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Preferred stock, series C ($72.50 per share)
|
(56,141 | ) | (56,141 | ) | (56,141 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock dividend
|
(11 | ) | (11 | ) | (11 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common shares
|
1,803,683 | 1,803,683 | 361 | 16,184 | 16,545 | 16,545 | ||||||||||||||||||||||||||||||||||||||||||||||
Preferred stock issuance costs and related amortization
|
294 | (294 | ) | | | |||||||||||||||||||||||||||||||||||||||||||||||
Conversion of preferred shares
|
(810,370 | ) | 41,240,215 | 41,240,215 | (810,370 | ) | 8,248 | 802,122 | | | ||||||||||||||||||||||||||||||||||||||||||
Tax benefit related to employee stock option and purchase plans
|
(9,145 | ) | (9,145 | ) | (9,145 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation cost
|
39,492 | 39,492 | 39,492 | |||||||||||||||||||||||||||||||||||||||||||||||||
Cumulative effect of accounting change
|
(753,856 | ) | (753,856 | ) | (753,856 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of common shares:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
Benefit plans
|
(1,097,647 | ) | (1,097,647 | ) | (14,750 | ) | (14,750 | ) | (14,750 | ) | ||||||||||||||||||||||||||||||||||||||||||
Noncontrolling interest other
|
| (13 | ) | (13 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2010
|
7,300,000 | 595,263,474 | (68,319,589 | ) | 526,943,885 | $565,000 | $ | 119,053 | $ | 5,939,838 | $ | (44,664 | ) | $ | 308,839 | $ | (1,876,488 | ) | $ | 5,011,578 | $ | | $ | 5,011,578 | ||||||||||||||||||||||||||||
F-8
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Operating activities
|
||||||||||||
Net income (loss)
|
$ | 530,382 | $ | 324,138 | $ | (212,626 | ) | |||||
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
|
||||||||||||
Loss from discontinued operations, net of tax
|
67,148 | 219,872 | 215,106 | |||||||||
(Gains) losses on loans and securities, net
|
(5,987 | ) | 580 | 186,155 | ||||||||
Goodwill and acquired intangible assets impairment and
amortization expense
|
698,902 | 75,960 | 49,674 | |||||||||
Stock-based compensation cost
|
39,750 | 51,065 | 86,271 | |||||||||
Unrealized (gains)/losses on derivative and hedging activities
|
(478,446 | ) | 324,443 | 559,895 | ||||||||
Provisions for loan losses
|
1,419,413 | 1,118,960 | 719,650 | |||||||||
Student loans originated for sale, net
|
(9,647,617 | ) | (19,099,583 | ) | (7,787,869 | ) | ||||||
(Increase) decrease in restricted cash other
|
(2,327 | ) | 40,051 | 96,617 | ||||||||
(Increase) decrease in accrued interest receivable
|
(3,928 | ) | 893,516 | (279,082 | ) | |||||||
(Decrease) in accrued interest payable
|
(77,180 | ) | (517,401 | ) | (200,501 | ) | ||||||
Adjustment for non-cash (income)/loss related to Retained
Interest
|
| 329,953 | 425,462 | |||||||||
Decrease (increase) in other assets
|
888,951 | (160,700 | ) | 304,038 | ||||||||
(Decrease) in other liabilities
|
(121,555 | ) | (29,276 | ) | (155,768 | ) | ||||||
Cash (used in) operating activities continuing
operations
|
(6,692,494 | ) | (16,428,422 | ) | (5,992,978 | ) | ||||||
Cash provided by operating activities discontinued
operations
|
| 514,713 | 301,234 | |||||||||
Total net cash (used in) operating activities
|
(6,692,494 | ) | (15,913,709 | ) | (5,691,744 | ) | ||||||
Investing activities
|
||||||||||||
Student loans acquired
|
(8,818,775 | ) | (9,403,093 | ) | (23,337,946 | ) | ||||||
Loans purchased from securitized trusts
|
| (5,978 | ) | (1,243,671 | ) | |||||||
Reduction of student loans:
|
||||||||||||
Installment payments, claims and other
|
14,019,904 | 10,749,227 | 10,333,901 | |||||||||
Proceeds from sales of student loans
|
587,540 | 788,221 | 496,183 | |||||||||
Other loans originated
|
(15 | ) | (2,823 | ) | (1,138,355 | ) | ||||||
Other loans repaid
|
131,991 | 261,491 | 1,542,307 | |||||||||
Other investing activities, net
|
(227,644 | ) | (703,758 | ) | (60,483 | ) | ||||||
Purchases of
available-for-sale
securities
|
(38,303,181 | ) | (128,478,198 | ) | (101,140,587 | ) | ||||||
Proceeds from sales of
available-for-sale
securities
|
| 100,056 | 328,530 | |||||||||
Proceeds from maturities of
available-for-sale
securities
|
39,465,282 | 127,951,879 | 102,436,912 | |||||||||
Purchases of
held-to-maturity
and other securities
|
(141,783 | ) | (889 | ) | (500,255 | ) | ||||||
Proceeds from maturities of
held-to-maturity
securities and other securities
|
135,936 | 79,171 | 407,180 | |||||||||
Decrease (increase) in restricted cash on-balance
sheet trusts
|
426,224 | (1,181,275 | ) | 918,403 | ||||||||
Return of investment from Retained Interest
|
| 26,513 | 403,020 | |||||||||
Purchase of subsidiaries, net of cash acquired
|
| | (37,868 | ) | ||||||||
Cash provided by (used in) investing activities
continuing operations
|
7,275,479 | 180,544 | (10,592,729 | ) | ||||||||
Cash provided by (used in) investing activities
discontinued operations
|
138,631 | 130,507 | (74,558 | ) | ||||||||
Total net cash provided by (used in) investing activities
|
7,414,110 | 311,051 | (10,667,287 | ) | ||||||||
Financing activities
|
||||||||||||
Borrowings collateralized by loans in trust issued
|
5,917,192 | 12,997,915 | 17,986,955 | |||||||||
Borrowings collateralized by loans in trust repaid
|
(10,635,667 | ) | (5,689,713 | ) | (6,299,483 | ) | ||||||
Asset-backed commercial paper conduits, net
|
(2,060,387 | ) | (16,138,186 | ) | (1,649,287 | ) | ||||||
ED Participation Program, net
|
11,251,560 | 19,301,929 | 7,364,969 | |||||||||
ED Conduit Program facility, net
|
663,707 | 14,313,837 | | |||||||||
Other short-term borrowings issued
|
| 298,294 | 2,592,429 | |||||||||
Other short-term borrowings repaid
|
(167,849 | ) | (1,434,538 | ) | (1,512,031 | ) | ||||||
Other long-term borrowings issued
|
1,463,549 | 4,333,181 | 3,563,003 | |||||||||
Other long-term borrowings repaid
|
(9,954,538 | ) | (9,504,267 | ) | (9,518,655 | ) | ||||||
Other financing activities, net
|
1,145,046 | (751,087 | ) | 284,659 | ||||||||
Excess tax benefit from the exercise of stock-based awards
|
373 | | 281 | |||||||||
Common stock issued
|
195 | 664 | 5,979 | |||||||||
Preferred stock issued
|
| | 145,345 | |||||||||
Preferred dividends paid
|
(71,849 | ) | (115,775 | ) | (110,556 | ) | ||||||
Noncontrolling interest, net
|
(634 | ) | (9,585 | ) | (6,606 | ) | ||||||
Net cash (used in) provided by financing activities
|
(2,449,302 | ) | 17,602,669 | 12,847,002 | ||||||||
Net (decrease) increase in cash and cash equivalents
|
(1,727,686 | ) | 2,000,011 | (3,512,029 | ) | |||||||
Cash and cash equivalents at beginning of year
|
6,070,013 | 4,070,002 | 7,582,031 | |||||||||
Cash and cash equivalents at end of year
|
$ | 4,342,327 | $ | 6,070,013 | $ | 4,070,002 | ||||||
Cash disbursements made (refunds received) for:
|
||||||||||||
Interest
|
$ | 2,372,182 | $ | 3,656,545 | $ | 6,157,096 | ||||||
Income taxes, net
|
$ | (428,200 | ) | $ | 298,285 | $ | 699,364 | |||||
Noncash activity:
|
||||||||||||
Investing activity Student loans acquired from the
Student Loan Corporation
|
$ | 25,638,570 | $ | | $ | | ||||||
Financing activity Borrowings assumed in acquisition
from the Student Loan Corporation
|
$ | 26,014,125 | $ | | $ | | ||||||
F-9
1. | Organization and Business |
2. | Significant Accounting Policies |
F-10
2. | Significant Accounting Policies (Continued) |
At January 1,
|
||||
(Dollars in millions) | 2010 | |||
FFELP Stafford Loans (net of allowance of $15)
|
$ | 5,500 | ||
FFELP Consolidation Loans (net of allowance of $10)
|
14,797 | |||
Private Education Loans (net of allowance of $524)
|
12,341 | |||
Total student loans
|
32,638 | |||
Restricted cash and investments
|
1,041 | |||
Other assets
|
1,370 | |||
Total assets consolidated
|
35,049 | |||
Long-term borrowings
|
34,403 | |||
Other liabilities
|
6 | |||
Total liabilities consolidated
|
34,409 | |||
Net assets consolidated on balance sheet
|
640 | |||
Less: Residual Interest removed from balance sheet
|
1,828 | |||
Cumulative effect of accounting change before taxes
|
(1,188 | ) | ||
Tax effect
|
434 | |||
Cumulative effect of accounting change after taxes recorded to
retained earnings
|
$ | (754 | ) | |
| In the consolidated balance sheet with changes in fair value recorded in the consolidated statement of income; | |
| In the consolidated balance sheet with changes in fair value recorded in the accumulated other comprehensive income section of the consolidated statement of changes in stockholders equity; |
F-11
2. | Significant Accounting Policies (Continued) |
| In the consolidated balance sheet for instruments carried at lower of cost or fair value with impairment charges recorded in the consolidated statement of income; and | |
| In the notes to the financial statements. |
| Level 1 Quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access at the measurement date. The types of financial instruments included in level 1 are highly liquid instruments with quoted prices. | |
| Level 2 Inputs from active markets, other than quoted prices for identical instruments, are used to determine fair value. Significant inputs are directly observable from active markets for substantially the full term of the asset or liability being valued. | |
| Level 3 Pricing inputs significant to the valuation are unobservable. Inputs are developed based on the best information available. However, significant judgment is required by us in developing the inputs. |
F-12
2. | Significant Accounting Policies (Continued) |
F-13
2. | Significant Accounting Policies (Continued) |
F-14
2. | Significant Accounting Policies (Continued) |
F-15
2. | Significant Accounting Policies (Continued) |
F-16
2. | Significant Accounting Policies (Continued) |
F-17
2. | Significant Accounting Policies (Continued) |
F-18
2. | Significant Accounting Policies (Continued) |
| Owning the equity certificates of certain trusts. | |
| The servicing of the student loan assets within the securitization trusts, on both a pre- and post-default basis. | |
| Our acting as administrator for the securitization transactions we sponsored, which includes remarketing certain bonds at future dates. | |
| Our responsibilities relative to representation and warranty violations and the reimbursement of borrower benefits. | |
| The reimbursement to the trust of borrower benefits afforded the borrowers of student loans that have been securitized. | |
| Certain back-to-back derivatives entered into by us contemporaneously with the execution of derivatives by certain Private Education Loan securitization trusts. | |
| The option held by us to buy certain delinquent loans from certain Private Education Loan securitization trusts. | |
| The option to exercise the clean-up call and purchase the student loans from the trust when the asset balance is 10 percent or less of the original loan balance. | |
| The option (in certain trusts) to call rate reset notes in instances where the remarketing process has failed. | |
| The option (in certain trusts that were TALF eligible in 2009) to call the outstanding bonds at a discount to par at a future date |
| representation and warranty violations requiring the buyback of loans; | |
| funding specific cash accounts within certain trusts related to the remarketing of certain bonds. |
F-19
2. | Significant Accounting Policies (Continued) |
F-20
2. | Significant Accounting Policies (Continued) |
F-21
2. | Significant Accounting Policies (Continued) |
F-22
2. | Significant Accounting Policies (Continued) |
F-23
2. | Significant Accounting Policies (Continued) |
F-24
2. | Significant Accounting Policies (Continued) |
3. | Student Loans |
F-25
3. | Student Loans (Continued) |
F-26
3. | Student Loans (Continued) |
Acquisition on
|
||||
December 31, 2010 | ||||
FFELP Stafford Loans
|
$ | 11,121,349 | ||
FFELP Consolidation Loans
|
14,261,989 | |||
Loan fair value discount
|
(493,907 | ) | ||
FFELP Loans
|
24,889,431 | |||
Restricted cash
|
749,139 | |||
Other assets
|
445,517 | |||
Total assets
|
$ | 26,084,087 | ||
Long-term borrowings FFELP trusts
|
$ | 25,608,941 | ||
Long-term borrowings acquisition financing
|
1,064,244 | |||
Long-term borrowings fair value discount
|
(659,060 | ) | ||
Long-term borrowings
|
26,014,125 | |||
Other liabilities
|
69,962 | |||
Total liabilities
|
$ | 26,084,087 | ||
F-27
3. | Student Loans (Continued) |
December 31,
|
Year Ended
|
|||||||||||||||
2010 | December 31, 2010 | |||||||||||||||
Average
|
||||||||||||||||
Effective
|
||||||||||||||||
Ending
|
% of
|
Average
|
Interest
|
|||||||||||||
Balance | Balance | Balance | Rate | |||||||||||||
FFELP Stafford and Other Student Loans,
net
(1)
|
$ | 56,252,860 | 31 | % | $ | 61,034,317 | 1.93 | % | ||||||||
FFELP Consolidation Loans, net
|
92,396,540 | 50 | 81,008,682 | 2.67 | ||||||||||||
Private Education Loans, net
|
35,655,724 | 19 | 36,534,158 | 6.44 | ||||||||||||
Total student loans,
net
(2)
|
$ | 184,305,124 | 100 | % | $ | 178,577,157 | 3.19 | % | ||||||||
F-28
3. | Student Loans (Continued) |
December 31,
|
Year Ended
|
|||||||||||||||
2009 | December 31, 2009 | |||||||||||||||
Average
|
||||||||||||||||
Effective
|
||||||||||||||||
Ending
|
% of
|
Average
|
Interest
|
|||||||||||||
Balance | Balance | Balance | Rate | |||||||||||||
FFELP Stafford and Other Student Loans,
net
(1)
|
$ | 52,674,588 | 37 | % | $ | 58,491,748 | 2.07 | % | ||||||||
FFELP Consolidation Loans, net
|
68,378,560 | 47 | 70,045,863 | 2.69 | ||||||||||||
Private Education Loans, net
|
22,753,462 | 16 | 23,153,975 | 6.83 | ||||||||||||
Total student loans,
net
(2)
|
$ | 143,806,610 | 100 | % | $ | 151,691,586 | 3.08 | % | ||||||||
(1) | The FFELP category is primarily Stafford Loans, but also includes federally guaranteed PLUS and HEAL Loans along with $9.7 billion of Stafford Loans held-for-sale at December 31, 2009. There were no Stafford Loans held-for-sale at December 31, 2010. | |
(2) | The total student loan ending balance includes net unamortized premiums of $1,006,039 and $1,628,693 as of December 31, 2010 and 2009, respectively. |
4. | Allowance for Loan Losses |
F-29
4. | Allowance for Loan Losses (Continued) |
Allowance for Loan Losses
|
||||||||||||||||
Year Ended December 31, 2010 | ||||||||||||||||
Private Education
|
Other
|
|||||||||||||||
FFELP Loans | Loans | Loans | Total | |||||||||||||
Allowance for Loan Losses
|
||||||||||||||||
Beginning balance
|
$ | 161,168 | $ | 1,443,440 | $ | 76,261 | $ | 1,680,869 | ||||||||
Total provision
|
98,507 | 1,298,018 | 22,888 | 1,419,413 | ||||||||||||
Charge-offs
|
(87,669 | ) | (1,291,181 | ) | (26,633 | ) | (1,405,483 | ) | ||||||||
Student loan sales
|
(8,297 | ) | | | (8,297 | ) | ||||||||||
Reclassification of interest
reserve
(1)
|
| 47,253 | | 47,253 | ||||||||||||
Consolidation of securitization
trusts
(2)
|
25,149 | 524,050 | | 549,199 | ||||||||||||
Ending Balance
|
$ | 188,858 | $ | 2,021,580 | $ | 72,516 | $ | 2,282,954 | ||||||||
Allowance:
|
||||||||||||||||
Ending balance: individually evaluated for impairment
|
$ | | $ | 55,626 | $ | 58,725 | $ | 114,351 | ||||||||
Ending balance: collectively evaluated for impairment
|
$ | 188,858 | $ | 1,965,954 | $ | 13,791 | $ | 2,168,603 | ||||||||
Ending balance: loans acquired with deteriorated credit quality
|
$ | | $ | | $ | | $ | | ||||||||
Loans:
|
||||||||||||||||
Ending balance: individually evaluated for impairment
|
$ | | $ | 257,140 | $ | 114,186 | $ | 371,326 | ||||||||
Ending balance: collectively evaluated for impairment
|
$ | 146,937,742 | $ | 38,314,641 | $ | 228,160 | $ | 185,480,543 | ||||||||
Ending balance: loans acquired with deteriorated credit quality
|
$ | | $ | | $ | | $ | | ||||||||
Charge-offs as a percentage of average loans in repayment and
forbearance
|
.11 | % | 5.0 | % | | % | ||||||||||
Allowance as a percentage of the ending total loan balance
|
.13 | % | 5.2 | % | 21.2 | % | ||||||||||
Allowance as a percentage of the ending loans in repayment
|
.20 | % | 7.3 | % | | % | ||||||||||
Allowance coverage of charge-offs
|
2.2 | 1.6 | 2.7 | |||||||||||||
Ending total
loans
(3)
|
$ | 146,937,742 | $ | 38,571,781 | $ | 342,346 | ||||||||||
Average loans in repayment
|
$ | 82,255,169 | $ | 25,595,600 | $ | | ||||||||||
Ending loans in repayment
|
$ | 96,695,618 | $ | 27,852,843 | $ | |
(1) | Represents the additional allowance related to the amount of uncollectible interest reserved within interest income that is transferred in the period to the allowance for loan losses when interest is capitalized to a loans principal balance. | |
(2) | Upon the adoption of the new consolidation accounting guidance on January 1, 2010, we consolidated all of our previously off-balance sheet securitization trusts. (See Note 2, Significant Accounting Policies Consolidation.) | |
(3) | Ending total loans for Private Education Loans includes the receivable for partially charged-off loans. |
F-30
4. | Allowance for Loan Losses (Continued) |
Allowance for Loan Losses
|
||||||||||||||||
Year Ended December 31, 2009 | ||||||||||||||||
Private Education
|
Other
|
|||||||||||||||
FFELP Loans | Loans | Loans | Total | |||||||||||||
Allowance for Loan Losses
|
||||||||||||||||
Beginning balance
|
$ | 137,543 | $ | 1,308,043 | $ | 61,325 | $ | 1,506,911 | ||||||||
Total provision
|
106,221 | 966,591 | 46,148 | 1,118,960 | ||||||||||||
Charge-offs
|
(78,861 | ) | (875,667 | ) | (31,212 | ) | (985,740 | ) | ||||||||
Student loan sales and securitization activity
|
(3,735 | ) | | | (3,735 | ) | ||||||||||
Reclassification of interest
reserve
(1)
|
| 44,473 | | 44,473 | ||||||||||||
Ending Balance
|
$ | 161,168 | $ | 1,443,440 | $ | 76,261 | $ | 1,680,869 | ||||||||
Allowance:
|
||||||||||||||||
Ending balance: individually evaluated for impairment
|
$ | | $ | 32,473 | $ | 56,760 | $ | 89,233 | ||||||||
Ending balance: collectively evaluated for impairment
|
$ | 161,168 | $ | 1,410,967 | $ | 19,501 | $ | 1,591,636 | ||||||||
Ending balance: loans acquired with deteriorated credit quality
|
$ | | $ | | $ | | $ | | ||||||||
Loans:
|
||||||||||||||||
Ending balance: individually evaluated for impairment
|
$ | | $ | 181,254 | $ | 128,080 | $ | 309,334 | ||||||||
Ending balance: collectively evaluated for impairment
|
$ | 119,026,931 | $ | 24,574,344 | $ | 310,176 | $ | 143,911,451 | ||||||||
Ending balance: loans acquired with deteriorated credit quality
|
$ | | $ | | $ | | $ | | ||||||||
Charge-offs as a percentage of average loans in repayment and
forbearance
|
.11 | % | 7.2 | % | | % | ||||||||||
Allowance as a percentage of the ending total loan balance
|
.14 | % | 5.8 | % | 17.4 | % | ||||||||||
Allowance as a percentage of the ending loans in repayment
|
.23 | % | 10.0 | % | | % | ||||||||||
Allowance coverage of charge-offs
|
2.0 | 1.6 | 2.4 | |||||||||||||
Ending total
loans
(2)
|
$ | 119,026,931 | $ | 24,755,598 | $ | 438,256 | ||||||||||
Average loans in repayment
|
$ | 69,020,295 | $ | 12,137,430 | $ | | ||||||||||
Ending loans in repayment
|
$ | 69,826,790 | $ | 14,379,102 | $ | |
(1) | Represents the additional allowance related to the amount of uncollectible interest reserved within interest income that is transferred in the period to the allowance for loan losses when interest is capitalized to a loans principal balance. | |
(2) | Ending total loans for Private Education Loans includes the receivable for partially charged-off loans. |
F-31
4. | Allowance for Loan Losses (Continued) |
Allowance for Loan Losses
|
||||||||||||||||
Year Ended December 31, 2008 | ||||||||||||||||
Private Education
|
Other
|
|||||||||||||||
FFELP Loans | Loans | Loans | Total | |||||||||||||
Allowance for Loan Losses
|
||||||||||||||||
Beginning balance
|
$ | 88,729 | $ | 1,003,963 | $ | 47,003 | $ | 1,139,695 | ||||||||
Total provision
|
105,568 | 586,169 | 27,913 | 719,650 | ||||||||||||
Charge-offs
|
(57,510 | ) | (320,240 | ) | (13,591 | ) | (391,341 | ) | ||||||||
Student loan sales and securitization activity
|
756 | | | 756 | ||||||||||||
Reclassification of interest
reserve
(1)
|
| 38,151 | | 38,151 | ||||||||||||
Ending Balance
|
$ | 137,543 | $ | 1,308,043 | $ | 61,325 | $ | 1,506,911 | ||||||||
Allowance:
|
||||||||||||||||
Ending balance: individually evaluated for impairment
|
$ | | $ | | $ | 35,981 | $ | 35,981 | ||||||||
Ending balance: collectively evaluated for impairment
|
$ | 137,543 | $ | 1,308,043 | $ | 25,344 | $ | 1,470,930 | ||||||||
Ending balance: loans acquired with deteriorated credit quality
|
$ | | $ | | $ | | $ | | ||||||||
Loans:
|
||||||||||||||||
Ending balance: individually evaluated for impairment
|
$ | | $ | | $ | 98,608 | $ | 98,608 | ||||||||
Ending balance: collectively evaluated for impairment
|
$ | 121,926,798 | $ | 22,425,640 | $ | 462,520 | $ | 144,814,958 | ||||||||
Ending balance: loans acquired with deteriorated credit quality
|
$ | | $ | | $ | | $ | | ||||||||
Charge-offs as a percentage of average loans in repayment and
forbearance
|
.09 | % | 3.8 | % | | % | ||||||||||
Allowance as a percentage of the ending total loan balance
|
.11 | % | 5.8 | % | 10.9 | % | ||||||||||
Allowance as a percentage of the ending loans in repayment
|
.20 | % | 11.7 | % | | % | ||||||||||
Allowance coverage of charge-offs
|
2.4 | 4.1 | 4.5 | |||||||||||||
Ending total
loans
(2)
|
$ | 121,926,798 | $ | 22,425,640 | $ | 561,128 | ||||||||||
Average loans in repayment
|
$ | 66,392,120 | $ | 8,533,356 | $ | | ||||||||||
Ending loans in repayment
|
$ | 70,174,192 | $ | 11,182,053 | $ | |
(1) | Represents the additional allowance related to the amount of uncollectible interest reserved within interest income that is transferred in the period to the allowance for loan losses when interest is capitalized to a loans principal balance. | |
(2) | Ending total loans for Private Education Loans includes the receivable for partially charged-off loans. |
F-32
4. | Allowance for Loan Losses (Continued) |
FFELP Loan Delinquencies | ||||||||||||||||||||||||
December 31, | ||||||||||||||||||||||||
2010 | 2009 | 2008 | ||||||||||||||||||||||
(Dollars in millions) | Balance | % | Balance | % | Balance | % | ||||||||||||||||||
Loans
in-school/grace/deferment
(1)
|
$ | 28,214 | $ | 35,079 | $ | 39,270 | ||||||||||||||||||
Loans in
forbearance
(2)
|
22,028 | 14,121 | 12,483 | |||||||||||||||||||||
Loans in repayment and percentage of each status:
|
||||||||||||||||||||||||
Loans current
|
80,026 | 82.8 | % | 57,528 | 82.4 | % | 58,811 | 83.8 | % | |||||||||||||||
Loans delinquent
31-60 days
(3)
|
5,500 | 5.7 | 4,250 | 6.1 | 4,044 | 5.8 | ||||||||||||||||||
Loans delinquent
61-90 days
(3)
|
3,178 | 3.3 | 2,205 | 3.1 | 2,064 | 2.9 | ||||||||||||||||||
Loans delinquent greater than
90 days
(3)
|
7,992 | 8.2 | 5,844 | 8.4 | 5,255 | 7.5 | ||||||||||||||||||
Total FFELP Loans in repayment
|
96,696 | 100 | % | 69,827 | 100 | % | 70,174 | 100 | % | |||||||||||||||
Total FFELP Loans, gross
|
146,938 | 119,027 | 121,927 | |||||||||||||||||||||
FFELP Loan unamortized premium
|
1,900 | 2,187 | 2,431 | |||||||||||||||||||||
Total FFELP Loans
|
148,838 | 121,214 | 124,358 | |||||||||||||||||||||
FFELP Loan allowance for losses
|
(189 | ) | (161 | ) | (138 | ) | ||||||||||||||||||
FFELP Loans, net
|
$ | 148,649 | $ | 121,053 | $ | 124,220 | ||||||||||||||||||
Percentage of FFELP Loans in repayment
|
65.8 | % | 58.7 | % | 57.6 | % | ||||||||||||||||||
Delinquencies as a percentage of FFELP Loans in repayment
|
17.2 | % | 17.6 | % | 16.2 | % | ||||||||||||||||||
FFELP Loans in forbearance as a percentage of loans in repayment
and forbearance
|
18.6 | % | 16.8 | % | 15.1 | % | ||||||||||||||||||
(1) | Loans for borrowers who may still be attending school or engaging 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, as well as loans for borrowers who have requested extension of grace period during employment transition. | |
(2) | Loans for borrowers who have used their allowable deferment time or do not qualify for deferment, that need additional time to obtain employment or who have temporarily ceased making full payments due to hardship or other factors. | |
(3) | The period of delinquency is based on the number of days scheduled payments are contractually past due. |
F-33
4. | Allowance for Loan Losses (Continued) |
Private Education Traditional Loan Delinquencies | ||||||||||||||||||||||||
December 31, | ||||||||||||||||||||||||
2010 | 2009 | 2008 | ||||||||||||||||||||||
(Dollars in millions) | Balance | % | Balance | % | Balance | % | ||||||||||||||||||
Loans
in-school/grace/deferment
(1)
|
$ | 7,419 | $ | 7,812 | $ | 8,694 | ||||||||||||||||||
Loans in
forbearance
(2)
|
1,156 | 784 | 625 | |||||||||||||||||||||
Loans in repayment and percentage of each status:
|
||||||||||||||||||||||||
Loans current
|
22,850 | 91.2 | % | 10,844 | 90.2 | % | 8,074 | 92.2 | % | |||||||||||||||
Loans delinquent
31-60 days
(3)
|
794 | 3.2 | 437 | 3.6 | 302 | 3.4 | ||||||||||||||||||
Loans delinquent
61-90 days
(3)
|
340 | 1.4 | 204 | 1.7 | 128 | 1.5 | ||||||||||||||||||
Loans delinquent greater than
90 days
(3)
|
1,060 | 4.2 | 543 | 4.5 | 257 | 2.9 | ||||||||||||||||||
Total traditional loans in repayment
|
25,044 | 100 | % | 12,028 | 100 | % | 8,761 | 100 | % | |||||||||||||||
Total traditional loans, gross
|
33,619 | 20,624 | 18,080 | |||||||||||||||||||||
Traditional loans unamortized discount
|
(801 | ) | (475 | ) | (436 | ) | ||||||||||||||||||
Total traditional loans
|
32,818 | 20,149 | 17,644 | |||||||||||||||||||||
Traditional loans receivable for partially charged-off loans
|
558 | 193 | 82 | |||||||||||||||||||||
Traditional loans allowance for losses
|
(1,231 | ) | (664 | ) | (485 | ) | ||||||||||||||||||
Traditional loans, net
|
$ | 32,145 | $ | 19,678 | $ | 17,241 | ||||||||||||||||||
Percentage of traditional loans in repayment
|
74.5 | % | 58.3 | % | 48.5 | % | ||||||||||||||||||
Delinquencies as a percentage of traditional loans in repayment
|
8.8 | % | 9.8 | % | 7.8 | % | ||||||||||||||||||
Loans in forbearance as a percentage of loans in repayment and
forbearance
|
4.4 | % | 6.1 | % | 6.7 | % | ||||||||||||||||||
(1) | Loans for borrowers who may still be attending school or engaging 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 borrowers 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. |
F-34
4. | Allowance for Loan Losses (Continued) |
Private Education Non-Traditional Loan Delinquencies | ||||||||||||||||||||||||
December 31, | ||||||||||||||||||||||||
2010 | 2009 | 2008 | ||||||||||||||||||||||
(Dollars in millions) | Balance | % | Balance | % | Balance | % | ||||||||||||||||||
Loans
in-school/grace/deferment
(1)
|
$ | 921 | $ | 1,097 | $ | 1,465 | ||||||||||||||||||
Loans in
forbearance
(2)
|
184 | 184 | 237 | |||||||||||||||||||||
Loans in repayment and percentage of each status:
|
||||||||||||||||||||||||
Loans current
|
2,038 | 72.6 | % | 1,578 | 67.1 | % | 1,673 | 69.1 | % | |||||||||||||||
Loans delinquent
31-60 days
(3)
|
217 | 7.7 | 209 | 8.9 | 250 | 10.3 | ||||||||||||||||||
Loans delinquent
61-90 days
(3)
|
131 | 4.7 | 136 | 5.8 | 168 | 6.9 | ||||||||||||||||||
Loans delinquent greater than
90 days
(3)
|
422 | 15.0 | 429 | 18.2 | 330 | 13.7 | ||||||||||||||||||
Total non-traditional loans in repayment
|
2,808 | 100 | % | 2,352 | 100 | % | 2,421 | 100 | % | |||||||||||||||
Total non-traditional loans, gross
|
3,913 | 3,633 | 4,123 | |||||||||||||||||||||
Non-traditional loans unamortized discount
|
(93 | ) | (84 | ) | (99 | ) | ||||||||||||||||||
Total non-traditional loans
|
3,820 | 3,549 | 4,024 | |||||||||||||||||||||
Non-traditional loans receivable for partially charged-off loans
|
482 | 306 | 141 | |||||||||||||||||||||
Non-traditional loans allowance for losses
|
(791 | ) | (779 | ) | (823 | ) | ||||||||||||||||||
Non-traditional loans, net
|
$ | 3,511 | $ | 3,076 | $ | 3,342 | ||||||||||||||||||
Percentage of non-traditional loans in repayment
|
71.8 | % | 64.7 | % | 58.7 | % | ||||||||||||||||||
Delinquencies as a percentage of non-traditional loans in
repayment
|
27.4 | % | 32.9 | % | 30.9 | % | ||||||||||||||||||
Loans in forbearance as a percentage of loans in repayment and
forbearance
|
6.1 | % | 7.3 | % | 8.9 | % | ||||||||||||||||||
(1) | Loans for borrowers who may still be attending school or engaging 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 borrowers 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. |
F-35
4. | Allowance for Loan Losses (Continued) |
Accrued Interest Receivable
|
||||||||||||
As of December 31, | ||||||||||||
Greater than
|
||||||||||||
90 days
|
Allowance for
|
|||||||||||
Total | Past Due | Uncollectible Interest | ||||||||||
2010
|
||||||||||||
Private Education Loans Traditional
|
$ | 1,062,289 | $ | 34,644 | $ | 56,755 | ||||||
Private Education Loans Non-Traditional
|
208,587 | 20,270 | 37,057 | |||||||||
Total
|
$ | 1,270,876 | $ | 54,914 | $ | 93,812 | ||||||
2009
|
||||||||||||
Private Education Loans Traditional
|
$ | 917,025 | $ | 19,272 | $ | 30,898 | ||||||
Private Education Loans Non-Traditional
|
247,924 | 22,293 | 64,939 | |||||||||
Total
|
$ | 1,164,949 | $ | 41,565 | $ | 95,837 | ||||||
2008
|
||||||||||||
Private Education Loans Traditional
|
$ | 836,736 | $ | 9,312 | $ | 25,655 | ||||||
Private Education Loans Non-Traditional
|
298,669 | 19,213 | 80,783 | |||||||||
Total
|
$ | 1,135,405 | $ | 28,525 | $ | 106,438 | ||||||
F-36
4. | Allowance for Loan Losses (Continued) |
Private Education Loans
|
||||||||||||
Credit Quality Indicators
|
||||||||||||
For The Years Ended December 31, | ||||||||||||
(Dollars in millions) | 2010 | 2009 | 2008 | |||||||||
Credit Quality Indicators
|
||||||||||||
School Type/FICO Scores:
|
||||||||||||
Traditional
|
$ | 33,619 | $ | 20,623 | $ | 18,080 | ||||||
Non-Traditional
(1)
|
3,913 | 3,633 | 4,123 | |||||||||
Total School Type/FICO Scores
|
$ | 37,532 | $ | 24,256 | $ | 22,203 | ||||||
Cosigners:
|
||||||||||||
With cosigner
|
$ | 22,259 | $ | 14,322 | $ | 12,334 | ||||||
Without cosigner
|
15,273 | 9,934 | 9,869 | |||||||||
Total
|
$ | 37,532 | $ | 24,256 | $ | 22,203 | ||||||
Seasoning
(2)
:
|
||||||||||||
1-12 payments
|
$ | 9,963 | $ | 6,596 | $ | 6,203 | ||||||
13-24
payments
|
6,951 | 3,423 | 2,350 | |||||||||
25-36
payments
|
4,675 | 2,116 | 1,365 | |||||||||
37-48
payments
|
3,019 | 1,254 | 844 | |||||||||
More than 48 payments
|
4,584 | 1,957 | 1,282 | |||||||||
Not yet in repayment
|
8,340 | 8,910 | 10,159 | |||||||||
Total
|
$ | 37,532 | $ | 24,256 | $ | 22,203 | ||||||
(1) | Defined as loans to borrowers attending for-profit schools (with a FICO score of less than 670 at origination) and borrowers attending not-for-profit schools (with a FICO score of less than 640 at origination). | |
(2) | Number of months in active repayment for which a scheduled payment was due. |
F-37
5. | Investments |
December 31, 2010 | ||||||||||||||||
Gross
|
Gross
|
|||||||||||||||
Amortized
|
Unrealized
|
Unrealized
|
Fair
|
|||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
Investments
|
||||||||||||||||
Available-for-sale
|
||||||||||||||||
U.S. Treasury securities and other U.S. government agency
obligations
|
$ | 2,595 | $ | | $ | | $ | 2,595 | ||||||||
Other securities:
|
||||||||||||||||
Asset-backed securities
|
66,952 | 903 | (47 | ) | 67,808 | |||||||||||
Municipal bonds
|
9,168 | 1,862 | | 11,030 | ||||||||||||
Other
|
1,630 | | (15 | ) | 1,615 | |||||||||||
Total investment securities
available-for-sale
|
$ | 80,345 | $ | 2,765 | $ | (62 | ) | $ | 83,048 | |||||||
Restricted Investments
|
||||||||||||||||
Available-for sale
|
||||||||||||||||
U.S. Treasury securities and other U.S. government agency
obligations
|
$ | 36,400 | $ | 1 | $ | | $ | 36,401 | ||||||||
Guaranteed investment contracts
|
19,946 | | | 19,946 | ||||||||||||
Total restricted investments
available-for-sale
|
$ | 56,346 | $ | 1 | $ | | $ | 56,347 | ||||||||
Held-to-maturity
|
||||||||||||||||
Guaranteed investment contracts
|
$ | 2,788 | $ | | $ | | $ | 2,788 | ||||||||
Total restricted investments
held-to-maturity
|
$ | 2,788 | $ | | $ | | $ | 2,788 | ||||||||
F-38
5. | Investments (Continued) |
December 31, 2009 | ||||||||||||||||
Gross
|
Gross
|
|||||||||||||||
Amortized
|
Unrealized
|
Unrealized
|
Fair
|
|||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
Investments
|
||||||||||||||||
Available-for-sale
|
||||||||||||||||
U.S. Treasury securities and other U.S. government agency
obligations
|
$ | 272 | $ | | $ | | $ | 272 | ||||||||
Other securities:
|
||||||||||||||||
Asset-backed securities
|
110,336 | 306 | (893 | ) | 109,749 | |||||||||||
Commercial paper and asset-backed commercial paper
|
1,149,981 | | | 1,149,981 | ||||||||||||
Municipal bonds
|
9,935 | 1,942 | | 11,877 | ||||||||||||
Other
|
1,550 | | (154 | ) | 1,396 | |||||||||||
Total investment securities
available-for-sale
|
$ | 1,272,074 | $ | 2,248 | $ | (1,047 | ) | $ | 1,273,275 | |||||||
Restricted Investments
|
||||||||||||||||
Available-for sale
|
||||||||||||||||
U.S. Treasury securities and other U.S. government agency
obligations
|
$ | 25,026 | $ | | $ | | $ | 25,026 | ||||||||
Guaranteed investment contracts
|
26,951 | | | 26,951 | ||||||||||||
Total restricted investments
available-for-sale
|
$ | 51,977 | $ | | $ | | $ | 51,977 | ||||||||
Held-to-maturity
|
||||||||||||||||
Guaranteed investment contracts
|
$ | 3,550 | $ | | $ | | $ | 3,550 | ||||||||
Other
|
215 | | | 215 | ||||||||||||
Total restricted investments
held-to-maturity
|
$ | 3,765 | $ | | $ | | $ | 3,765 | ||||||||
F-39
5. | Investments (Continued) |
December 31, 2010 | ||||||||||||
Held-to-
|
Available-for-
|
|||||||||||
Maturity | Sale (1) | Other | ||||||||||
Year of Maturity
|
||||||||||||
2011
|
$ | | $ | 40,611 | $ | 854,804 | ||||||
2012
|
| | | |||||||||
2013
|
| 479 | | |||||||||
2014
|
| | | |||||||||
2015
|
| | 23,655 | |||||||||
2016-2020
|
| 11,030 | 34,966 | |||||||||
After 2020
|
2,788 | 87,275 | 546 | |||||||||
Total
|
$ | 2,788 | $ | 139,395 | $ | 913,971 | ||||||
F-40
6. | Goodwill and Acquired Intangible Assets |
As of December 31, 2010 | As of December 31, 2009 | |||||||||||||||||||||||
Accumulated
|
Accumulated
|
|||||||||||||||||||||||
(Dollars in millions) | Gross | Impairments | Net | Gross | Impairments | Net | ||||||||||||||||||
Total FFELP Loans reportable segment
|
$ | 194 | $ | (4 | ) | $ | 190 | $ | 194 | $ | (4 | ) | $ | 190 | ||||||||||
Total Consumer Lending reportable segment
|
147 | | 147 | 147 | | 147 | ||||||||||||||||||
Business Services reportable segment
|
||||||||||||||||||||||||
Servicing
|
50 | | 50 | 50 | | 50 | ||||||||||||||||||
Contingency
|
129 | (129 | ) | | 129 | | 129 | |||||||||||||||||
Wind-down Guarantor Servicing
|
256 | (256 | ) | | 256 | | 256 | |||||||||||||||||
Upromise
|
140 | (140 | ) | | 140 | | 140 | |||||||||||||||||
Total Business Services reportable segment
|
575 | (525 | ) | 50 | 575 | | 575 | |||||||||||||||||
Other reportable segment
|
||||||||||||||||||||||||
Mortgage and Consumer Lending
|
20 | (20 | ) | | 20 | (20 | ) | | ||||||||||||||||
Purchased Paper
|
79 | (79 | ) | | 79 | | 79 | |||||||||||||||||
Other
|
1 | (1 | ) | | 1 | (1 | ) | | ||||||||||||||||
Total Other reportable segment
|
100 | (100 | ) | | 100 | (21 | ) | 79 | ||||||||||||||||
Total
|
$ | 1,016 | $ | (629 | ) | $ | 387 | $ | 1,016 | $ | (25 | ) | $ | 991 | ||||||||||
F-41
6. | Goodwill and Acquired Intangible Assets (Continued) |
Fourth Quarter 2010 | ||||||||
Discount Rate | Growth Rate | |||||||
FFELP
Loans
(1)
|
10 | % | 0 | % | ||||
Servicing
(2)
|
14 | % | 2.5 | % | ||||
Private Education
Loans
(1)
|
19 | % | 0.5 | % |
(1) | Assumes an equity sale; therefore, the discount rate is used to value the entire reporting unit. |
(2) | Assumes an asset sale; therefore, the discount rate is used to value the assets of the reporting unit. |
Carrying Value
|
Fair Value
|
|||||||||||||||
(Dollars in millions) | of Equity | of Equity | $ Difference | % Difference | ||||||||||||
FFELP Loans
|
$ | 1,777 | $ | 3,766 | $ | 1,989 | 112 | % | ||||||||
Servicing
|
123 | 1,290 | 1,167 | 949 | ||||||||||||
Private Education Loans
|
1,920 | 2,914 | 994 | 52 |
F-42
6. | Goodwill and Acquired Intangible Assets (Continued) |
As of September 30, 2010 | As of December 31, 2009 | |||||||||||||||||||||||
Accumulated
|
Accumulated
|
|||||||||||||||||||||||
(Dollars in millions) | Gross | Impairments | Net | Gross | Impairments | Net | ||||||||||||||||||
Total Lending reportable segment
|
$ | 411 | $ | (24 | ) | $ | 387 | $ | 411 | $ | (24 | ) | $ | 387 | ||||||||||
Total APG reportable segment
|
402 | (402 | ) | | 402 | | 402 | |||||||||||||||||
Other reportable segment
|
||||||||||||||||||||||||
Guarantor Servicing
|
62 | (62 | ) | | 62 | | 62 | |||||||||||||||||
Upromise
|
140 | (140 | ) | | 140 | | 140 | |||||||||||||||||
Other
|
1 | (1 | ) | | 1 | (1 | ) | | ||||||||||||||||
Total Other reportable segment
|
203 | (203 | ) | | 203 | (1 | ) | 202 | ||||||||||||||||
Total
|
$ | 1,016 | $ | (629 | ) | $ | 387 | $ | 1,016 | $ | (25 | ) | $ | 991 | ||||||||||
F-43
6. | Goodwill and Acquired Intangible Assets (Continued) |
| FFELP asset pricing information indicating market participants assume a greater uncertainty related to future cash flows and require a higher return on investment; | |
| market bids related to the sale of a non-affiliated Guarantor business indicated a higher discount rate and greater uncertainty of future cash flows assumed; | |
| the acquisition of FFELP assets by us indicated a higher discount rate applied to future cash flows than previously estimated; | |
| Upromise sale of a business line provided an indication of how market participants view risks associated with future cash flows; | |
| pricing pressures associated with new and existing business at the Upromise reporting unit; and | |
| uncertainties related to the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) legislation. |
F-44
6. | Goodwill and Acquired Intangible Assets (Continued) |
Third Quarter 2010 | Fourth Quarter 2009 | |||||||||||||||
Discount Rate | Growth Rate | Discount Rate | Growth Rate | |||||||||||||
Lending
(1)
|
13 | % | 0.5 | % | 11 | % | 3 | % | ||||||||
APG
(2)
|
14 | % | 2.5 | % | 10 | % | 4 | % | ||||||||
Guarantor
Servicing
(2)
|
13 | % | 0 | % | 10 | % | 0 | % | ||||||||
Upromise
(2)
|
17 | % | 2.5 | % | 15 | % | 4 | % |
(1) | Assumes an equity sale; therefore, the discount rate is used to value the entire reporting unit. |
(2) | Assumes an asset sale; therefore, the discount rate is used to value the assets of the reporting unit. |
Carrying Value
|
Fair Value
|
|||||||||||||||
(Dollars in millions) | of Equity | of Equity | $ Difference | % Difference | ||||||||||||
Lending
|
$ | 3,530 | $ | 6,201 | $ | 2,671 | 76 | % | ||||||||
APG
|
641 | 405 | (236 | ) | (36 | ) | ||||||||||
Guarantor Servicing
|
97 | 91 | (6 | ) | (6 | ) | ||||||||||
Upromise
|
221 | 110 | (111 | ) | (50 | ) |
F-45
6. | Goodwill and Acquired Intangible Assets (Continued) |
Carrying Value
|
Fair Value
|
|||||||||||||||
(Dollars in millions) | of Equity | of Equity | $ Difference | % Difference | ||||||||||||
Lending
|
$ | 1,474 | $ | 3,270 | $ | 1,796 | 122 | % | ||||||||
APG
|
1,390 | 1,690 | 300 | 22 | ||||||||||||
Guarantor Servicing
|
142 | 221 | 79 | 56 | ||||||||||||
Upromise
|
297 | 430 | 133 | 45 |
As of December 31, 2010 | ||||||||||||||||
Average
|
Accumulated
|
|||||||||||||||
Amortization
|
Cost
|
Impairment and
|
||||||||||||||
(Dollars in millions) | Period | Basis (1) | Amortization (1) | Net | ||||||||||||
Intangible assets subject to amortization:
|
||||||||||||||||
Customer, services and lending relationships
|
12 years | $ | 307 | $ | (240 | ) | $ | 67 | ||||||||
Software and technology
|
7 years | 93 | (91 | ) | 2 | |||||||||||
Total intangible assets subject to amortization
|
400 | (331 | ) | 69 | ||||||||||||
Intangible assets not subject to amortization:
|
||||||||||||||||
Trade names and trademarks
|
Indefinite | 23 | | 23 | ||||||||||||
Total acquired intangible assets
|
$ | 423 | $ | (331 | ) | $ | 92 | |||||||||
As of December 31, 2009 | ||||||||||||||||
Average
|
Accumulated
|
|||||||||||||||
Amortization
|
Cost
|
Impairment and
|
||||||||||||||
(Dollars in millions) | Period | Basis (1) | Amortization (1) | Net | ||||||||||||
Intangible assets subject to amortization:
|
||||||||||||||||
Customer, services, and lending relationships
|
12 years | $ | 332 | $ | (208 | ) | $ | 124 | ||||||||
Software and technology
|
7 years | 98 | (89 | ) | 9 | |||||||||||
Total intangible assets subject to amortization
|
430 | (297 | ) | 133 | ||||||||||||
Intangible assets not subject to amortization:
|
||||||||||||||||
Trade names and trademarks
|
Indefinite | 54 | | 54 | ||||||||||||
Total acquired intangible assets
|
$ | 484 | $ | (297 | ) | $ | 187 | |||||||||
(1) | Includes impairment amounts only if portion of the acquired intangible asset has been deemed impaired. When an acquired intangible asset is considered fully impaired, the cost basis and any accumulated amortization related to the asset is written off. |
F-46
6. | Goodwill and Acquired Intangible Assets (Continued) |
7. | Borrowings |
F-47
7. | Borrowings (Continued) |
December 31, 2010 | December 31, 2009 | |||||||||||||||||||||||
Short
|
Long
|
Short
|
Long
|
|||||||||||||||||||||
(Dollars in millions) | Term | Term | Total | Term | Term | Total | ||||||||||||||||||
Unsecured borrowings
|
$ | 4,361 | $ | 15,742 | $ | 20,103 | $ | 5,185 | $ | 22,797 | $ | 27,982 | ||||||||||||
Unsecured term bank deposits
|
1,387 | 3,160 | 4,547 | 842 | 4,795 | 5,637 | ||||||||||||||||||
FHLB-DM facility
|
900 | | 900 | | | | ||||||||||||||||||
ED Participation Program facility
|
| | | 9,006 | | 9,006 | ||||||||||||||||||
ED Conduit Program facility
|
24,484 | | 24,484 | 14,314 | | 14,314 | ||||||||||||||||||
ABCP borrowings
|
| 5,853 | 5,853 | | 8,801 | 8,801 | ||||||||||||||||||
SLC acquisition financing
|
| 1,064 | 1,064 | | | | ||||||||||||||||||
FFELP Loans securitizations
|
| 112,425 | 112,425 | | 81,923 | 81,923 | ||||||||||||||||||
Private Education Loans securitizations
|
| 21,409 | 21,409 | | 7,277 | 7,277 | ||||||||||||||||||
Indentured trusts
|
| 1,246 | 1,246 | 64 | 1,533 | 1,597 | ||||||||||||||||||
Other
(1)
|
2,257 | | 2,257 | 1,472 | | 1,472 | ||||||||||||||||||
Total before hedge accounting adjustments
|
33,389 | 160,899 | 194,288 | 30,883 | 127,126 | 158,009 | ||||||||||||||||||
Hedge accounting adjustments
|
227 | 2,644 | 2,871 | 14 | 3,420 | 3,434 | ||||||||||||||||||
Total
|
$ | 33,616 | $ | 163,543 | $ | 197,159 | $ | 30,897 | $ | 130,546 | $ | 161,443 | ||||||||||||
(1) | At December 31, 2010, other primarily consists of $0.9 billion of cash collateral held related to derivative exposures that are recorded as a short-term debt obligation, as well as $1.4 billion of unsecured other bank deposits. At December 31, 2009, other primarily consisted of cash collateral held related to derivative exposures that are recorded as short-term debt obligation. |
F-48
7. | Borrowings (Continued) |
December 31, 2010 | Year Ended December 31, 2010 | |||||||||||||||
Weighted Average
|
Weighted Average
|
|||||||||||||||
Ending Balance | Interest Rate | Average Balance | Interest Rate | |||||||||||||
Unsecured term bank deposits
|
$ | 1,387,360 | 2.57 | % | $ | 1,424,073 | 2.75 | % | ||||||||
FHLB-DM Facility
|
900,000 | .30 | 402,644 | .34 | ||||||||||||
ED Participation Program Facility
|
| | 13,536,795 | .80 | ||||||||||||
ED Conduit Program facility
|
24,484,353 | .55 | 15,095,905 | .67 | ||||||||||||
ABCP borrowings
|
| | 1,767,085 | .95 | ||||||||||||
Unsecured borrowings
|
4,585,120 | 2.28 | 4,603,252 | 2.76 | ||||||||||||
Other interest bearing liabilities
|
2,259,023 | .83 | 1,804,587 | .54 | ||||||||||||
Total short-term borrowings
|
$ | 33,615,856 | .88 | % | $ | 38,634,341 | 1.05 | % | ||||||||
Maximum outstanding at any month end
|
$ | 46,472,435 | ||||||||||||||
December 31, 2009 | Year Ended December 31, 2009 | |||||||||||||||
Weighted Average
|
Weighted Average
|
|||||||||||||||
Ending Balance | Interest Rate | Average Balance | Interest Rate | |||||||||||||
Unsecured term bank deposits
|
$ | 842,636 | 3.33 | % | $ | 929,442 | 3.23 | % | ||||||||
ED Participation Program Facility
|
9,006,053 | .79 | 14,174,433 | 1.42 | ||||||||||||
ED Conduit Program facility
|
14,313,837 | .59 | 7,339,592 | .72 | ||||||||||||
ABCP borrowings
|
| | 16,238,782 | 1.64 | ||||||||||||
Unsecured borrowings
|
5,259,278 | 2.58 | 4,408,990 | 2.05 | ||||||||||||
Other interest bearing liabilities
|
1,475,007 | .12 | 1,393,280 | .31 | ||||||||||||
Total short-term borrowings
|
$ | 30,896,811 | 1.04 | % | $ | 44,484,519 | 1.45 | % | ||||||||
Maximum outstanding at any month end
|
$ | 53,406,554 | ||||||||||||||
F-49
7. | Borrowings (Continued) |
December 31, 2010 |
Year Ended
|
|||||||||||
Weighted
|
December 31,
|
|||||||||||
Average
|
2010 | |||||||||||
Ending
|
Interest
|
Average
|
||||||||||
Balance (1) | Rate (2) | Balance | ||||||||||
Floating rate notes:
|
||||||||||||
U.S. dollar-denominated:
|
||||||||||||
Interest bearing, due
2012-2047
|
$ | 124,053,229 | 1.12 | % | $ | 112,909,791 | ||||||
Non-U.S.
dollar-denominated:
|
||||||||||||
Interest bearing, due
2012-2041
|
11,999,260 | 1.26 | 12,125,425 | |||||||||
Total floating rate notes
|
136,052,489 | 1.13 | 125,035,216 | |||||||||
Fixed rate notes:
|
||||||||||||
U.S. dollar-denominated:
|
||||||||||||
Interest bearing, due
2012-2043
|
11,873,404 | 5.87 | 10,917,945 | |||||||||
Non-U.S.-dollar
denominated:
|
||||||||||||
Interest bearing, due
2012-2039
|
5,484,681 | 3.35 | 6,256,958 | |||||||||
Total fixed rate notes
|
17,358,085 | 5.06 | 17,174,903 | |||||||||
Unsecured term bank deposits U.S.
dollar-denominated, due
2012-2019
|
3,216,165 | 3.40 | 3,698,888 | |||||||||
ABCP borrowings
|
5,852,521 | .81 | 4,855,478 | |||||||||
SLC acquisition financing
|
1,064,244 | 4.76 | 2,916 | |||||||||
Total long-term borrowings
|
$ | 163,543,504 | 1.60 | % | $ | 150,767,401 | ||||||
December 31, 2009 |
Year Ended
|
|||||||||||
Weighted
|
December 31,
|
|||||||||||
Average
|
2009 | |||||||||||
Ending
|
Interest
|
Average
|
||||||||||
Balance (1) | Rate (2) | Balance | ||||||||||
Floating rate notes:
|
||||||||||||
U.S. dollar-denominated:
|
||||||||||||
Interest bearing, due
2011-2047
|
$ | 84,849,160 | 1.20 | % | $ | 83,001,692 | ||||||
Non-U.S.
dollar-denominated:
|
||||||||||||
Interest bearing, due
2011-2041
|
9,368,402 | .96 | 10,589,114 | |||||||||
Total floating rate notes
|
94,217,562 | 1.17 | 93,590,806 | |||||||||
Fixed rate notes:
|
||||||||||||
U.S. dollar-denominated:
|
||||||||||||
Interest bearing, due
2011-2043
|
12,355,688 | 5.55 | 11,556,520 | |||||||||
Non-U.S.-dollar
denominated:
|
||||||||||||
Interest bearing, due
2011-2039
|
10,382,384 | 3.34 | 9,727,213 | |||||||||
Total fixed rate notes
|
22,738,072 | 4.51 | 21,283,733 | |||||||||
Unsecured term bank deposits U.S.
dollar-denominated, due
2011-2019
|
4,789,223 | 3.19 | 3,824,908 | |||||||||
ABCP borrowings
|
8,801,415 | 1.55 | | |||||||||
Total long-term borrowings
|
$ | 130,546,272 | 1.84 | % | $ | 118,699,447 | ||||||
(1) | Ending balance is expressed in U.S. dollars at December 31, 2010 and 2009, respectively, spot currency exchange rate. Includes fair value adjustments under ASC 815 for notes designated as the hedged item in a fair value hedge. |
(2) | Weighted average interest rate is stated rate relative to currency denomination of note. |
F-50
7. | Borrowings (Continued) |
December 31, 2010 | ||||||||||||||||||||||||||||||||
Stated Maturity (1) | Maturity to Call Date (1) | |||||||||||||||||||||||||||||||
Unsecured
|
Unsecured
|
|||||||||||||||||||||||||||||||
Unsecured
|
Term Bank
|
Secured
|
Unsecured
|
Term Bank
|
Secured
|
|||||||||||||||||||||||||||
Borrowings | Deposits | Borrowings | Total (2) | Borrowings | Deposits | Borrowings | Total | |||||||||||||||||||||||||
Year of Maturity
|
||||||||||||||||||||||||||||||||
2011
|
$ | | $ | | $ | 16,254,625 | $ | 16,254,625 | $ | 1,586,390 | $ | 58,728 | $ | 20,958,756 | $ | 22,603,874 | ||||||||||||||||
2012
|
1,801,338 | 1,531,860 | 13,614,267 | 16,947,465 | 1,846,786 | 1,531,860 | 11,450,578 | 14,829,224 | ||||||||||||||||||||||||
2013
|
2,335,616 | 758,730 | 12,203,644 | 15,297,990 | 2,309,194 | 758,730 | 11,015,375 | 14,083,299 | ||||||||||||||||||||||||
2014
|
3,841,274 | 810,807 | 9,893,645 | 14,545,726 | 3,938,632 | 810,807 | 9,680,796 | 14,430,235 | ||||||||||||||||||||||||
2015
|
710,418 | | 9,206,628 | 9,917,046 | 799,296 | | 8,993,780 | 9,793,076 | ||||||||||||||||||||||||
2016-2047
|
7,053,269 | 58,728 | 80,824,530 | 87,936,527 | 5,261,617 | | 79,898,054 | 85,159,671 | ||||||||||||||||||||||||
15,741,915 | 3,160,125 | 141,997,339 | 160,899,379 | 15,741,915 | 3,160,125 | 141,997,339 | 160,899,379 | |||||||||||||||||||||||||
Hedge accounting adjustments
|
1,277,865 | 56,040 | 1,310,220 | 2,644,125 | 1,277,865 | 56,040 | 1,310,220 | 2,644,125 | ||||||||||||||||||||||||
Total
|
$ | 17,019,780 | $ | 3,216,165 | $ | 143,307,559 | $ | 163,543,504 | $ | 17,019,780 | $ | 3,216,165 | $ | 143,307,559 | $ | 163,543,504 | ||||||||||||||||
(1) | We view our on-balance sheet securitization trust debt as long-term based on the contractual maturity dates and projects the expected principal paydowns based on our current estimates regarding loan prepayment speeds. The projected principal paydowns in year 2011 include $16.3 billion related to the on-balance sheet securitization trust debt. | |
(2) | The aggregate principal amount of debt that matures in each period is $16.3 billion in 2011, $17.0 billion in 2012, $15.4 billion in 2013, $14.6 billion in 2014, $10.0 billion in 2015, and $88.7 billion in 2016-2047. |
F-51
7. | Borrowings (Continued) |
December 31, 2010 | ||||||||||||||||||||||||||||
(Dollars in millions) | Debt Outstanding | |||||||||||||||||||||||||||
Short
|
Long
|
Carrying Amount of Assets Securing Debt Outstanding | ||||||||||||||||||||||||||
Term | Term | Total | Loans | Cash | Other Assets | Total | ||||||||||||||||||||||
Secured Borrowings:
|
||||||||||||||||||||||||||||
ED Conduit Program Facility
|
$ | 24,484 | $ | | $ | 24,484 | $ | 24,511 | $ | 819 | $ | 634 | $ | 25,964 | ||||||||||||||
ABCP borrowings
|
| 5,853 | 5,853 | 6,290 | 94 | 53 | 6,437 | |||||||||||||||||||||
Securitizations FFELP Loans
|
| 112,425 | 112,425 | 113,400 | 3,728 | 966 | 118,094 | |||||||||||||||||||||
Securitizations Private Education Loans
|
| 21,409 | 21,409 | 24,355 | 1,213 | 690 | 26,258 | |||||||||||||||||||||
Indentured trusts
|
| 1,246 | 1,246 | 1,549 | 129 | 15 | 1,693 | |||||||||||||||||||||
Total before hedge accounting adjustments
|
24,484 | 140,933 | 165,417 | 170,105 | 5,983 | 2,358 | 178,446 | |||||||||||||||||||||
Hedge accounting adjustments
|
| 1,311 | 1,311 | | | 1,348 | 1,348 | |||||||||||||||||||||
Total
|
$ | 24,484 | $ | 142,244 | $ | 166,728 | $ | 170,105 | $ | 5,983 | $ | 3,706 | $ | 179,794 | ||||||||||||||
December 31, 2009 | ||||||||||||||||||||||||||||
(Dollars in millions) | Debt Outstanding | |||||||||||||||||||||||||||
Short
|
Long
|
Carrying Amount of Assets Securing Debt Outstanding | ||||||||||||||||||||||||||
Term | Term | Total | Loans | Cash | Other Assets | Total | ||||||||||||||||||||||
Secured Borrowings:
|
||||||||||||||||||||||||||||
ED Participation Program Facility
|
$ | 9,006 | $ | | $ | 9,006 | $ | 9,397 | $ | 115 | $ | 61 | $ | 9,573 | ||||||||||||||
ED Conduit Program facility
|
14,314 | | 14,314 | 14,594 | 478 | 372 | 15,444 | |||||||||||||||||||||
ABCP borrowings
|
| 8,801 | 8,801 | 9,929 | 204 | 100 | 10,233 | |||||||||||||||||||||
Securitizations FFELP Loans
|
| 81,923 | 81,923 | 82,913 | 2,693 | 686 | 86,292 | |||||||||||||||||||||
Securitizations Private Education Loans
|
| 7,277 | 7,277 | 10,108 | 934 | 763 | 11,805 | |||||||||||||||||||||
Indentured trusts
|
64 | 1,533 | 1,597 | 1,898 | 172 | 24 | 2,094 | |||||||||||||||||||||
Total before hedge accounting adjustments
|
23,384 | 99,534 | 122,918 | 128,839 | 4,596 | 2,006 | 135,441 | |||||||||||||||||||||
Hedge accounting adjustments
|
| 1,479 | 1,479 | | | 1,634 | 1,634 | |||||||||||||||||||||
Total
|
$ | 23,384 | $ | 101,013 | $ | 124,397 | $ | 128,839 | $ | 4,596 | $ | 3,640 | $ | 137,075 | ||||||||||||||
F-52
7. | Borrowings (Continued) |
F-53
7. | Borrowings (Continued) |
F-54
7. | Borrowings (Continued) |
F-55
7. | Borrowings (Continued) |
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Unsecured debt principal repurchased
|
$ | 4,868,201 | $ | 3,447,245 | $ | 1,910,326 | ||||||
Gains on debt repurchases
|
316,941 | 536,190 | 64,477 |
F-56
8. | Student Loan Securitization |
Years Ended December 31, | ||||||||||||||||||||||||
2010 | 2009 | 2008 | ||||||||||||||||||||||
Loan
|
Loan
|
Loan
|
||||||||||||||||||||||
No. of
|
Amount
|
No. of
|
Amount
|
No. of
|
Amount
|
|||||||||||||||||||
(Dollars in millions) | Transactions | Securitized | Transactions | Securitized | Transactions | Securitized | ||||||||||||||||||
Securitizations:
|
||||||||||||||||||||||||
FFELP Stafford/PLUS Loans
|
2 | $ | 1,965 | | $ | | 9 | $ | 18,546 | |||||||||||||||
FFELP Consolidation Loans
|
| | 3 | 5,339 | | | ||||||||||||||||||
Private Education Loans
|
3 | 6,186 | 5 | 11,122 | | | ||||||||||||||||||
Total securitizations
|
5 | $ | 8,151 | 8 | $ | 16,461 | 9 | $ | 18,546 | |||||||||||||||
Years Ended December 31, | ||||||||
(Dollars in millions) | 2009 | 2008 | ||||||
Cash distributions from trusts related to Residual Interests
|
$ | 477 | $ | 909 | ||||
Servicing fees
received
(1)
|
225 | 246 | ||||||
Purchases of previously transferred financial assets for
representation and warranty violations
|
(7 | ) | (37 | ) | ||||
Reimbursements of borrower
benefits
(2)
|
(36 | ) | (29 | ) | ||||
Purchases of delinquent Private Education Loans from
securitization trusts using delinquent loan call option
|
| (172 | ) | |||||
Purchases of loans using
clean-up
call option
|
| (697 | ) |
(1) | We received annual servicing fees of 90 basis points, 50 basis points and 70 basis points of the outstanding securitized loan balance related to our FFELP Stafford, FFELP Consolidation Loan and Private Education Loan securitizations, respectively. | |
(2) | Under the terms of the securitizations, the transaction documents require that we reimburse the trusts for any borrower benefits afforded the borrowers of the underlying securitized loans. |
F-57
8. | Student Loan Securitization (Continued) |
As of December 31, 2009 | ||||||||||||||||
FFELP
|
Consolidation
|
Private
|
||||||||||||||
Stafford and
|
Loan
|
Education
|
||||||||||||||
PLUS | Trusts (1) | Loan Trusts | Total | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Fair value of Residual Interests
|
$ | 243 | $ | 791 | $ | 794 | $ | 1,828 | ||||||||
Underlying securitized loan balance
|
5,377 | 14,369 | 12,986 | 32,732 | ||||||||||||
Weighted average life
|
3.3 yrs. | 9.0 yrs. | 6.3 yrs. | |||||||||||||
Prepayment speed (annual
rate)
(2)
:
|
||||||||||||||||
Interim status
|
0 | % | N/A | 0 | % | |||||||||||
Repayment status
|
0-14 | % | 2-4 | % | 2-15 | % | ||||||||||
Life of loan repayment status
|
9 | % | 3 | % | 6 | % | ||||||||||
Expected remaining credit losses (% of outstanding student loan
principal)
(3)(4)
|
.10 | % | .25 | % | 5.31 | % | ||||||||||
Residual cash flows discount rate
|
10.6 | % | 12.3 | % | 27.5 | % |
(1) | Includes $569 million related to the fair value of the Embedded Floor Income as of December 31, 2009. | |
(2) | We used Constant Prepayment Rate (CPR) curves for Residual Interest valuations that were based on seasoning (the number of months since entering repayment). Under this methodology, a different CPR was applied to each year of a loans seasoning. Repayment status CPR used was based on the number of months since first entering repayment (seasoning). Life of loan CPR is related to repayment status only and does not include the impact of the loan while in interim status. The CPR assumption used for all periods includes the impact of projected defaults. | |
(3) | Remaining expected credit losses as of the respective balance sheet date. | |
(4) | For Private Education Loan trusts, estimated defaults from settlement to maturity are 12.2 percent at December 31, 2009. These estimated defaults do not include recoveries related to defaults but do include prior purchases of loans at par by us when loans reached 180 days delinquent (prior to default) under a contingent call option. Although these loan purchases do not result in a realized loss to the trust, we have included them here. Not including these purchases in the disclosure would result in estimated defaults of 9.3 percent at December 31, 2009. |
| Prepayment speed assumptions on FFELP Stafford and Consolidation Loans were decreased. This change reflects the significant decrease in prepayment activity experienced since 2008. This decrease in prepayment activity, which we expect will continue into the foreseeable future, was primarily due to a reduction in third-party consolidation activity as a result of the CCRAA and the current U.S. economic and credit environment. This resulted in a $61 million unrealized mark-to-market gain. | |
| Life of loan default rate assumptions for Private Education Loans were increased from 9.1 percent to 12.2 percent as a result of the continued weakening of the U.S. economy. This resulted in a $426 million unrealized mark-to-market loss. |
F-58
8. | Student Loan Securitization (Continued) |
December 31,
|
||||||||
2009 | ||||||||
Balance | % | |||||||
(Dollars in millions) | ||||||||
Loans
in-school/grace/deferment
(1)
|
$ | 2,546 | ||||||
Loans in
forbearance
(2)
|
453 | |||||||
Loans in repayment and percentage of each status:
|
||||||||
Loans current
|
8,987 | 90.0 | % | |||||
Loans delinquent
31-60 days
(3)
|
332 | 3.3 | ||||||
Loans delinquent
61-90 days
(3)
|
151 | 1.5 | ||||||
Loans delinquent greater than
90 days
(3)
|
517 | 5.2 | ||||||
Total off-balance sheet Private Education Loans in repayment
|
9,987 | 100 | % | |||||
Total off-balance sheet Private Education Loans, gross
|
$ | 12,986 | ||||||
(1) | Loans for borrowers who may still be attending school or engaging 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 borrowers 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 the 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. |
Year Ended December 31, | ||||||||
2009 | 2008 | |||||||
(Dollars in millions) | ||||||||
Charge-offs
|
$ | (423 | ) | $ | (153 | ) | ||
Charge-offs as a percentage of average loans in repayment
|
4.4 | % | 1.9 | % | ||||
Charge-offs as a percentage of average loans in repayment and
forbearance
|
4.2 | % | 1.6 | % | ||||
Ending off-balance sheet total Private Education
Loans
(1)
|
$ | 13,215 | $ | 13,782 | ||||
Average off-balance sheet Private Education Loans in repayment
|
$ | 9,597 | $ | 8,088 | ||||
Ending off-balance sheet Private Education Loans in repayment
|
$ | 9,987 | $ | 9,530 |
(1) | Ending total loans represents gross Private Education Loans, plus the receivable for partially charged-off loans (see Note 4, Allowance for Loan Losses). |
9. | Derivative Financial Instruments |
F-59
9. | Derivative Financial Instruments (Continued) |
F-60
9. | Derivative Financial Instruments (Continued) |
F-61
9. | Derivative Financial Instruments (Continued) |
F-62
9. | Derivative Financial Instruments (Continued) |
Cash Flow | Fair Value | Trading | Total | |||||||||||||||||||||||||||||||
Hedged Risk
|
Dec. 31,
|
Dec. 31,
|
Dec. 31,
|
Dec. 31,
|
Dec. 31,
|
Dec. 31,
|
Dec. 31,
|
Dec. 31,
|
||||||||||||||||||||||||||
(Dollars in millions) | Exposure | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |||||||||||||||||||||||||
Fair
Values
(1)
|
||||||||||||||||||||||||||||||||||
Derivative Assets:
|
||||||||||||||||||||||||||||||||||
Interest rate swaps
|
Interest rate | $ | | $ | | $ | 967 | $ | 684 | $ | 200 | $ | 133 | $ | 1,167 | $ | 817 | |||||||||||||||||
Cross currency interest rate swaps
|
Foreign
currency and interest rate |
| | 1,925 | 2,932 | 101 | 44 | 2,026 | 2,976 | |||||||||||||||||||||||||
Other
|
Interest rate | | | | | 26 | | 26 | | |||||||||||||||||||||||||
Total derivative
assets
(3)
|
| | 2,892 | 3,616 | 327 | 177 | 3,219 | 3,793 | ||||||||||||||||||||||||||
Derivative Liabilities:
|
||||||||||||||||||||||||||||||||||
Interest rate swaps
|
Interest rate | (75 | ) | (78 | ) | | (6 | ) | (348 | ) | (639 | ) | (423 | ) | (723 | ) | ||||||||||||||||||
Floor Income Contracts
|
Interest rate | | | | | (1,315 | ) | (1,234 | ) | (1,315 | ) | (1,234 | ) | |||||||||||||||||||||
Cross currency interest rate swaps
|
Foreign
currency and interest rate |
| | (215 | ) | (192 | ) | | (1 | ) | (215 | ) | (193 | ) | ||||||||||||||||||||
Other
(2)
|
Interest rate | | | | | (1 | ) | (20 | ) | (1 | ) | (20 | ) | |||||||||||||||||||||
Total derivative
liabilities
(3)
|
(75 | ) | (78 | ) | (215 | ) | (198 | ) | (1,664 | ) | (1,894 | ) | (1,954 | ) | (2,170 | ) | ||||||||||||||||||
Net total derivatives
|
$ | (75 | ) | $ | (78 | ) | $ | 2,677 | $ | 3,418 | $ | (1,337 | ) | $ | (1,717 | ) | $ | 1,265 | $ | 1,623 | ||||||||||||||
(1) | Fair values reported are exclusive of collateral held and pledged and accrued interest. Assets and liabilities are presented without consideration of master netting agreements. Derivatives are carried on the balance sheet based on net position by counterparty under master netting agreements, and classified in other assets or other liabilities depending on whether in a net positive or negative position. | |
(2) | Other includes the fair value of Euro-dollar futures contracts, the embedded derivatives in asset-backed financings, and derivatives related to the our Total Return Swap Facility. The embedded derivatives are required to be accounted for as derivatives. |
(3) | The following table reconciles gross positions without the impact of master netting agreements to the balance sheet classification: |
Other Assets | Other Liabilities | |||||||||||||||
December 31,
|
December 31,
|
December 31,
|
December 31,
|
|||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Gross position
|
$ | 3,219 | $ | 3,793 | $ | (1,954 | ) | $ | (2,170 | ) | ||||||
Impact of master netting agreements
|
(782 | ) | (1,009 | ) | 782 | 1,009 | ||||||||||
Derivative values with impact of master netting agreements (as
carried on balance sheet)
|
2,437 | 2,784 | (1,172 | ) | (1,161 | ) | ||||||||||
Cash collateral (held) pledged
|
(886 | ) | (1,268 | ) | 809 | 636 | ||||||||||
Net position
|
$ | 1,551 | $ | 1,516 | $ | (363 | ) | $ | (525 | ) | ||||||
F-63
9. | Derivative Financial Instruments (Continued) |
Cash Flow | Fair Value | Trading | Total | |||||||||||||||||||||||||||||
Dec. 31,
|
Dec. 31,
|
Dec. 31,
|
Dec. 31,
|
Dec. 31,
|
Dec. 31,
|
Dec. 31,
|
Dec. 31,
|
|||||||||||||||||||||||||
(Dollars in billions) | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||||||||
Notional Values:
|
||||||||||||||||||||||||||||||||
Interest rate swaps
|
$ | 1.6 | $ | 1.7 | $ | 13.5 | $ | 12.4 | $ | 118.9 | $ | 148.2 | $ | 134.0 | $ | 162.3 | ||||||||||||||||
Floor Income Contracts
|
| | | | 39.3 | 47.1 | 39.3 | 47.1 | ||||||||||||||||||||||||
Cross currency interest rate swaps
|
| | 17.5 | 19.3 | .3 | .3 | 17.8 | 19.6 | ||||||||||||||||||||||||
Other
(1)
|
| | | | 1.0 | 1.1 | 1.0 | 1.1 | ||||||||||||||||||||||||
Total derivatives
|
$ | 1.6 | $ | 1.7 | $ | 31.0 | $ | 31.7 | $ | 159.5 | $ | 196.7 | $ | 192.1 | $ | 230.1 | ||||||||||||||||
(1) | Other includes Euro-dollar futures contracts, embedded derivatives bifurcated from securitization debt, as well as derivatives related to our Total Return Swap Facility. |
Unrealized Gain
|
Realized Gain
|
Unrealized Gain
|
||||||||||||||||||||||||||||||||||||||||||||||
(Loss) on
|
(Loss) on
|
(Loss) on
|
||||||||||||||||||||||||||||||||||||||||||||||
Derivatives (1)(2) | Derivatives (3) | Hedged Item (1) | Total Gain (Loss) | |||||||||||||||||||||||||||||||||||||||||||||
(Dollars in millions) | 2010 | 2009 | 2008 | 2010 | 2009 | 2008 | 2010 | 2009 | 2008 | 2010 | 2009 | 2008 | ||||||||||||||||||||||||||||||||||||
Fair Value Hedges:
|
||||||||||||||||||||||||||||||||||||||||||||||||
Interest rate swaps
|
$ | 289 | $ | (801 | ) | $ | 1,427 | $ | 487 | $ | 403 | $ | 157 | $ | (334 | ) | $ | 850 | $ | (1,532 | ) | $ | 442 | $ | 452 | $ | 52 | |||||||||||||||||||||
Cross currency interest rate swaps
|
(1,871 | ) | 692 | (1,537 | ) | 348 | 440 | 67 | 1,732 | (934 | ) | 1,864 | 209 | 198 | 394 | |||||||||||||||||||||||||||||||||
Total fair value derivatives
|
(1,582 | ) | (109 | ) | (110 | ) | 835 | 843 | 224 | 1,398 | (84 | ) | 332 | 651 | 650 | 446 | ||||||||||||||||||||||||||||||||
Cash Flow Hedges:
|
||||||||||||||||||||||||||||||||||||||||||||||||
Interest rate swaps
|
| 2 | | (58 | ) | (75 | ) | (37 | ) | | | | (58 | ) | (73 | ) | (37 | ) | ||||||||||||||||||||||||||||||
Total cash flow derivatives
|
| 2 | | (58 | ) | (75 | ) | (37 | ) | | | | (58 | ) | (73 | ) | (37 | ) | ||||||||||||||||||||||||||||||
Trading:
|
||||||||||||||||||||||||||||||||||||||||||||||||
Interest rate swaps
|
412 | (526 | ) | (261 | ) | 11 | 433 | 584 | | | | 423 | (93 | ) | 323 | |||||||||||||||||||||||||||||||||
Floor Income Contracts
|
156 | 483 | (529 | ) | (888 | ) | (717 | ) | (488 | ) | | | | (732 | ) | (234 | ) | (1,017 | ) | |||||||||||||||||||||||||||||
Cross currency interest rate swaps
|
57 | (26 | ) | 11 | 7 | 4 | 16 | | | | 64 | (22 | ) | 27 | ||||||||||||||||||||||||||||||||||
Other
|
37 | (64 | ) | (3 | ) | 31 | | 3 | | | | 68 | (64 | ) | | |||||||||||||||||||||||||||||||||
Total trading derivatives
|
662 | (133 | ) | (782 | ) | (839 | ) | (280 | ) | 115 | | | | (177 | ) | (413 | ) | (667 | ) | |||||||||||||||||||||||||||||
Total
|
(920 | ) | (240 | ) | (892 | ) | (62 | ) | 488 | 302 | 1,398 | (84 | ) | 332 | 416 | 164 | (258 | ) | ||||||||||||||||||||||||||||||
Less: realized gains (losses) recorded in interest expense
|
| | | 777 | 768 | 187 | | | | 777 | 768 | 187 | ||||||||||||||||||||||||||||||||||||
Gains (losses) on derivative and hedging activities, net
|
$ | (920 | ) | $ | (240 | ) | $ | (892 | ) | $ | (839 | ) | $ | (280 | ) | $ | 115 | $ | 1,398 | $ | (84 | ) | $ | 332 | $ | (361 | ) | $ | (604 | ) | $ | (445 | ) | |||||||||||||||
(1) | Recorded in Gains (losses) on derivative and hedging activities, net in the consolidated statements of income. | |
(2) | Represents ineffectiveness related to cash flow hedges. | |
(3) | For fair value and cash flow hedges, recorded in interest expense. For trading derivatives, recorded in Gains (losses) on derivative and hedging activities, net. |
F-64
9. | Derivative Financial Instruments (Continued) |
Years Ended
|
||||||||||||
December 31, | ||||||||||||
(Dollars in millions) | 2010 | 2009 | 2008 | |||||||||
Total losses on cash flow hedges
|
$ | (35 | ) | $ | (22 | ) | $ | (95 | ) | |||
Realized losses recognized in interest
expense
(1)(2)(3)
|
40 | 63 | 24 | |||||||||
Hedge ineffectiveness reclassified to
earnings
(1)(4)
|
| (1 | ) | | ||||||||
Total change in stockholders equity for unrealized gains
(losses) on derivatives
|
$ | 5 | $ | 40 | $ | (71 | ) | |||||
(1) | Amounts included in Realized gain (loss) on derivatives in the Impact of Derivatives on Consolidated Statements of Income table above. | |
(2) | Includes net settlement income/expense. | |
(3) | We expect to reclassify $.1 million of after-tax net losses from accumulated other comprehensive income to earnings during the next 12 months related to net settlement accruals on interest rate swaps. | |
(4) | Recorded in Gains (losses) derivatives and hedging activities, net in the consolidated statements of income. |
December 31,
|
December 31,
|
|||||||
(Dollars in millions) | 2010 | 2009 | ||||||
Collateral held:
|
||||||||
Cash (obligation to return cash collateral is recorded in
short-term
borrowings)
(1)
|
$ | 886 | $ | 1,268 | ||||
Securities at fair value corporate derivatives (not
recorded in financial
statements)
(2)
|
| 112 | ||||||
Securities at fair value on-balance sheet
securitization derivatives (not recorded in financial
statements)
(3)
|
585 | 717 | ||||||
Total collateral held
|
$ | 1,471 | $ | 2,097 | ||||
Derivative asset at fair value including accrued interest
|
$ | 2,540 | $ | 3,119 | ||||
Collateral pledged to others:
|
||||||||
Cash (right to receive return of cash collateral is recorded in
investments)
|
$ | 809 | $ | 636 | ||||
Securities at fair value (recorded in
investments)
(4)
|
| 25 | ||||||
Securities at fair value (recorded in restricted
investments)
(5)
|
36 | 25 | ||||||
Securities at fair value re-pledged (not recorded in financial
statements)
(5)(6)
|
| 87 | ||||||
Total collateral pledged
|
$ | 845 | $ | 773 | ||||
Derivative liability at fair value including accrued interest
and premium receivable
|
$ | 747 | $ | 758 | ||||
(1) | At December 31, 2010 and 2009, $108 million and $447 million, respectively, was held in restricted cash accounts. | |
(2) | Effective with the downgrade in our unsecured credit ratings on May 13, 2009, certain counterparties do not allow us to sell or re-pledge securities it holds as collateral. | |
(3) | The trusts do not have the ability to sell or re-pledge securities they hold as collateral. | |
(4) | Counterparty does not have the right to sell or re-pledge securities. | |
(5) | Counterparty has the right to sell or re-pledge securities. | |
(6) | Represents securities we hold as collateral that have been pledged to other counterparties. |
F-65
9. | Derivative Financial Instruments (Continued) |
10. | Other Assets |
December 31, 2010 | December 31, 2009 | |||||||||||||||
Ending
|
% of
|
Ending
|
% of
|
|||||||||||||
Balance | Balance | Balance | Balance | |||||||||||||
Derivatives at fair value
|
$ | 2,436,911 | 27 | % | $ | 2,783,696 | 28 | % | ||||||||
Accrued interest receivable
|
2,927,292 | 33 | 2,566,984 | 26 | ||||||||||||
Income tax asset, net current and deferred
|
1,283,344 | 14 | 1,750,424 | 18 | ||||||||||||
Purchased Paper-related receivables and real estate owned
|
95,907 | 1 | 286,108 | 3 | ||||||||||||
Benefit and insurance-related investments
|
462,131 | 5 | 472,079 | 5 | ||||||||||||
Fixed assets, net
|
290,705 | 4 | 322,481 | 3 | ||||||||||||
Accounts receivable general
|
729,592 | 8 | 807,086 | 8 | ||||||||||||
Other loans
|
271,241 | 3 | 420,233 | 4 | ||||||||||||
Other
|
473,149 | 5 | 511,500 | 5 | ||||||||||||
Total
|
$ | 8,970,272 | 100 | % | $ | 9,920,591 | 100 | % | ||||||||
11. | Stockholders Equity |
F-66
11. | Stockholders Equity (Continued) |
F-67
11. | Stockholders Equity (Continued) |
Years Ended December 31, | ||||||||||||
(Shares in millions) | 2010 | 2009 | 2008 | |||||||||
Common shares repurchased:
|
||||||||||||
Benefit
plans
(1)
|
1.1 | .3 | 1.0 | |||||||||
Total shares repurchased
|
1.1 | .3 | 1.0 | |||||||||
Average purchase price per share
|
$ | 13.44 | $ | 20.29 | $ | 24.51 | ||||||
Common shares issued
|
43.0 | 17.8 | 1.9 | |||||||||
Authority remaining at end of period for repurchases
|
38.8 | 38.8 | 38.8 | |||||||||
(1) | Shares withheld from stock option exercises and vesting of restricted stock for employees tax withholding obligations and shares tendered by employees to satisfy option exercise costs. |
December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Net unrealized gains (losses) on
investments
(1)(2)
|
$ | 2,222 | $ | 1,629 | $ | (1,243 | ) | |||||
Net unrealized (losses) on
derivatives
(3)
|
(48,789 | ) | (53,899 | ) | (93,986 | ) | ||||||
Net gain on defined benefit pension
plans
(4)
|
1,903 | 11,445 | 18,753 | |||||||||
Total accumulated other comprehensive loss
|
$ | (44,664 | ) | $ | (40,825 | ) | $ | (76,476 | ) | |||
(1) | Net of tax expense of $1.3 million and $.9 million as of December 31, 2010 and 2009, respectively, and tax benefit of $.8 million as of December 31, 2008. | |
(2) | Net unrealized gains (losses) on investments include currency translation gains of $.5 million, $.8 million and $.4 million as of December 31, 2010, 2009 and 2008, respectively. | |
(3) | Net of tax benefit of $28 million, $31 million and $53 million as of December 31, 2010, 2009 and 2008, respectively. | |
(4) | Net of tax expense of $1 million, $7 million and $11 million as of December 31, 2010, 2009 and 2008, respectively. |
12. | Earnings (Loss) per Common Share |
F-68
12. | Earnings (Loss) per Common Share (Continued) |
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Numerator:
|
||||||||||||
Net income from continuing operations
|
$ | 597,530 | $ | 544,010 | $ | 2,480 | ||||||
Preferred stock dividends
|
72,143 | 145,836 | 111,206 | |||||||||
Net income (loss) from continuing operations attributable to
common stock
|
525,387 | 398,174 | (108,726 | ) | ||||||||
Adjusted for dividends of Series C Preferred
Stock
(1)
|
| | | |||||||||
Net income (loss) from continuing operations attributable to
common stock, adjusted
|
525,387 | 398,174 | (108,726 | ) | ||||||||
Loss from discontinued operations
|
(67,148 | ) | (219,872 | ) | (215,106 | ) | ||||||
Net income (loss) attributable to common stock
|
$ | 458,239 | $ | 178,302 | $ | (323,832 | ) | |||||
Denominator
(shares in thousands):
|
||||||||||||
Weighted average shares used to compute basic EPS
|
486,673 | 470,858 | 466,642 | |||||||||
Effect of dilutive securities:
|
||||||||||||
Dilutive effect of stock options, non-vested deferred
compensation and restricted stock, restricted stock units and
Employee Stock Purchase Plan
(ESPP)
(1)
|
1,812 | 726 | | |||||||||
Dilutive potential common
shares
(2)
|
1,812 | 726 | | |||||||||
Weighted average shares used to compute diluted EPS
|
488,485 | 471,584 | 466,642 | |||||||||
Basic earnings (loss) per common share:
|
||||||||||||
Continuing operations
|
$ | 1.08 | $ | .85 | $ | (.23 | ) | |||||
Discontinued operations
|
(.14 | ) | (.47 | ) | (.46 | ) | ||||||
Total
|
$ | .94 | $ | .38 | $ | (.69 | ) | |||||
Diluted earnings (loss) per common share:
|
||||||||||||
Continuing operations
|
$ | 1.08 | $ | .85 | $ | (.23 | ) | |||||
Discontinued operations
|
(.14 | ) | (.47 | ) | (.46 | ) | ||||||
Total
|
$ | .94 | $ | .38 | $ | (.69 | ) | |||||
(1) | Includes the potential dilutive effect of additional common shares that are issuable upon exercise of outstanding stock options, non-vested deferred compensation and restricted stock, restricted stock units, and the outstanding commitment to issue shares under the ESPP, determined by the treasury stock method. | |
(2) | For the years ended December 31, 2010, 2009 and 2008, stock options covering approximately 15 million, 42 million and 38 million shares, respectively, were outstanding but not included in the computation of diluted earnings per share because they were anti-dilutive. |
13. | Stock-Based Compensation Plans and Arrangements |
F-69
13. | Stock-Based Compensation Plans and Arrangements (Continued) |
F-70
13. | Stock-Based Compensation Plans and Arrangements (Continued) |
Weighted
|
Weighted
|
|||||||||||||||
Average
|
Average
|
|||||||||||||||
Exercise
|
Remaining
|
Aggregate
|
||||||||||||||
Number of
|
Price per
|
Contractual
|
Intrinsic
|
|||||||||||||
Options | Share | Term | Value | |||||||||||||
Outstanding at December 31, 2009
|
43,294,720 | $ | 28.77 | |||||||||||||
Granted
|
7,264,800 | 10.34 | ||||||||||||||
Granted in stock option exchange
|
7,962,176 | 11.39 | ||||||||||||||
Exercised
|
(964,380 | ) | 11.06 | |||||||||||||
Canceled
|
(6,365,241 | ) | 24.77 | |||||||||||||
Canceled in stock option exchange
|
(15,106,197 | ) | 35.87 | |||||||||||||
Outstanding at December 31,
2010
(1)
|
36,085,878 | $ | 19.88 | 6.1 yrs | $ | | ||||||||||
Exercisable at December 31, 2010
|
19,307,142 | $ | 26.69 | 4.6 yrs | $ | | ||||||||||
(1) | Includes gross number of net-settled options awarded. Options granted in 2010 were granted as net-settled options. Upon exercise of a net-settled option, employees are entitled to receive the after-tax spread shares only. The spread shares equal the gross number of options granted less shares for the option cost. Shares for the option cost equal the option price multiplied by the number of gross options exercised divided by the fair market value of our common stock at the time of exercise. |
F-71
13. | Stock-Based Compensation Plans and Arrangements (Continued) |
Weighted
|
||||||||
Average Grant
|
||||||||
Number of
|
Date
|
|||||||
Shares | Fair Value | |||||||
Non-vested at December 31, 2009
|
844,580 | $ | 16.45 | |||||
Granted
|
526,900 | 10.31 | ||||||
Vested
|
(536,263 | ) | 16.80 | |||||
Canceled
|
(133,480 | ) | 18.13 | |||||
Non-vested at December 31, 2010
|
701,737 | $ | 11.98 | |||||
Weighted
|
||||||||
Average Grant
|
||||||||
Number of
|
Date
|
|||||||
RSUs | Fair Value | |||||||
Outstanding at December 31, 2009
|
75,750 | $ | 11.07 | |||||
Granted
|
75,800 | 10.31 | ||||||
Canceled
|
(37,854 | ) | 11.29 | |||||
Vested and converted to common stock
|
(17,015 | ) | 10.44 | |||||
Outstanding at December 31, 2010
|
96,681 | $ | 10.50 | |||||
F-72
13. | Stock-Based Compensation Plans and Arrangements (Continued) |
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Risk-free interest rate
|
.33 | % | .53 | % | 1.91 | % | ||||||
Expected volatility
|
61 | % | 103 | % | 58 | % | ||||||
Expected dividend rate
|
0.00 | % | 0.00 | % | 0.00 | % | ||||||
Expected life of the option
|
1 year | 1 year | 1 year |
14. | Restructuring Activities |
| On March 30, 2010, President Obama signed into law H.R. 4872, HCERA, which included the SAFRA Act. Effective July 1, 2010, the legislation eliminated the authority to provide new loans under FFELP and requires all new federal loans to be made through the DSLP. The new law did not alter or affect the terms and conditions of existing FFELP Loans. We continue to restructure our operations in response to this change in law which will result in a significant reduction of operating costs due to the elimination of positions and facilities associated with the origination of FFELP Loans. |
F-73
14. | Restructuring Activities (Continued) |
| In response to the College Cost Reduction and Access Act of 2007 (CCRAA) and challenges in the capital markets, we initiated a restructuring plan in the fourth quarter of 2007. This plan focused on conforming our lending activities to the economic environment, exiting certain customer relationships and product lines, winding down or otherwise disposing of our debt Purchased Paper businesses, and significantly reducing our operating expenses. This restructuring plan was essentially completed in the fourth quarter of 2009. Under this plan, restructuring expenses for the years ended December 31, 2010, 2009 and 2008 were $7 million, $22 million, and $84 million, respectively. Restructuring expenses from the fourth quarter of 2007 through the fourth quarter of 2010 totaled $136 million, of which $107 million was recorded in continuing operations and $29 million was recorded in discontinued operations. The majority of these restructuring expenses were severance costs related to the elimination of approximately 3,000 positions, or approximately 25 percent of the workforce that existed as of the fourth quarter of 2007. We estimate approximately $1 million of additional restructuring expenses will be incurred in the future related to this restructuring plan. |
Cumulative Expense
|
||||||||||||||||
Years Ended December 31, |
as of December 31,
|
|||||||||||||||
2010 | 2009 | 2008 | 2010 | |||||||||||||
Severance costs
|
$ | 80,536 | $ | 8,402 | $ | 51,357 | $ | 162,800 | ||||||||
Lease and other contract termination costs
|
1,430 | 597 | 8,902 | 10,929 | ||||||||||||
Exit and other costs
|
3,270 | 1,572 | 11,400 | 16,242 | ||||||||||||
Total restructuring expenses from continuing
operations
(1)
|
85,236 | 10,571 | 71,659 | 189,971 | ||||||||||||
Total restructuring expenses from discontinued operations
|
5,562 | 11,658 | 12,116 | 29,336 | ||||||||||||
Total
|
$ | 90,798 | $ | 22,229 | $ | 83,775 | $ | 219,307 | ||||||||
(1) | Aggregate restructuring expenses from continuing operations incurred across our reportable segments during the years ended December 31, 2010, 2009 and 2008 totaled $54 million, $8 million and $42 million, respectively, in our FFELP Loans reportable segment; $12 million, $2 million and $25 million, respectively, in our Consumer Lending reportable segment; $7 million, $2 million and $10 million, respectively, in our Business Services reportable segment; and $12 million, $(2) million and $(5) million, respectively, in our Other reportable segment. |
F-74
14. | Restructuring Activities (Continued) |
Lease and
|
||||||||||||||||
Other
|
||||||||||||||||
Contract
|
||||||||||||||||
Severance
|
Termination
|
Exit and
|
||||||||||||||
Costs | Costs | Other Costs | Total | |||||||||||||
Balance at December 31, 2008
|
$ | 15,124 | $ | 2,798 | $ | 60 | $ | 17,982 | ||||||||
Net accruals from continuing operations
|
8,402 | 597 | 1,572 | 10,571 | ||||||||||||
Net accruals from discontinued operations
|
9,356 | 2,193 | 109 | 11,658 | ||||||||||||
Cash paid
|
(23,687 | ) | (1,807 | ) | (1,741 | ) | (27,235 | ) | ||||||||
Balance at December 31, 2009
|
$ | 9,195 | $ | 3,781 | $ | | $ | 12,976 | ||||||||
Net accruals from continuing operations
|
80,536 | 1,430 | 3,270 | 85,236 | ||||||||||||
Net accruals from discontinued operations
|
3,108 | 2,384 | 70 | 5,562 | ||||||||||||
Cash paid
|
(45,235 | ) | (3,440 | ) | (1,678 | ) | (50,353 | ) | ||||||||
Balance at December 31, 2010
|
$ | 47,604 | $ | 4,155 | $ | 1,662 | $ | 53,421 | ||||||||
15. | Fair Value Measurements |
F-75
15. | Fair Value Measurements (Continued) |
F-76
15. | Fair Value Measurements (Continued) |
| Interest rate swaps Derivatives are valued using standard derivative cash flow models. Derivatives that swap fixed interest payments for LIBOR interest payments (or vice versa) and derivatives swapping quarterly reset LIBOR for daily reset LIBOR were valued using the LIBOR swap yield curve which is an observable input from an active market. These derivatives are level 2 fair value estimates in the hierarchy. Other derivatives swapping LIBOR interest payments for another variable interest payment (primarily T-Bill or Prime) or swapping interest payments based on the Consumer Price Index for LIBOR interest payments are valued using the LIBOR swap yield curve and observable market spreads for the specified index. The markets for these swaps are generally illiquid as indicated by a wide bid/ask spread. The adjustment made for liquidity decreased the valuations by $129 million at December 31, 2010. These derivatives are level 3 fair value estimates. | |
| Cross-currency interest rate swaps Derivatives are valued using standard derivative cash flow models. Derivatives hedging foreign-denominated bonds are valued using the LIBOR swap yield curve (for both USD and the respective currency), cross-currency basis spreads, and forward foreign currency exchange rates. The derivatives are primarily British Pound Sterling and Euro denominated. These inputs are observable inputs from active markets. Therefore, the resulting valuation is a level 2 fair value estimate. Amortizing notional derivatives (derivatives whose notional amounts change based on changes in the balance of, or pool of assets or debt) hedging trust debt use internally derived assumptions for the trust assets prepayment speeds and default rates to model the notional amortization. Management makes assumptions concerning the extension features of derivatives hedging rate-reset notes denominated in a foreign currency. These inputs are not market observable; therefore, these derivatives are level 3 fair value estimates. | |
| Floor Income Contracts Derivatives are valued using an option pricing model. Inputs to the model include the LIBOR swap yield curve and LIBOR interest rate volatilities. The inputs are observable inputs in active markets and these derivatives are level 2 fair value estimates. |
F-77
15. | Fair Value Measurements (Continued) |
F-78
15. | Fair Value Measurements (Continued) |
Fair Value Measurements on a Recurring
|
||||||||||||||||
Basis as of December 31, 2010 | ||||||||||||||||
(Dollars in millions) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets
|
||||||||||||||||
Available-for-sale
investments:
|
||||||||||||||||
U.S. Treasury securities
|
$ | 39 | $ | | $ | | $ | 39 | ||||||||
Asset-backed securities
|
| 68 | | 68 | ||||||||||||
Guaranteed investment contracts
|
| 20 | | 20 | ||||||||||||
Other
|
| 12 | | 12 | ||||||||||||
Total
available-for-sale
investments
|
39 | 100 | | 139 | ||||||||||||
Derivative
instruments:
(1)
|
||||||||||||||||
Interest rate swaps
|
| 1,017 | 150 | 1,167 | ||||||||||||
Cross currency interest rate swaps
|
| 427 | 1,599 | 2,026 | ||||||||||||
Other
|
| | 26 | 26 | ||||||||||||
Total derivative assets
|
| 1,444 | 1,775 | 3,219 | ||||||||||||
Counterparty netting
|
(782 | ) | ||||||||||||||
Subtotal
(3)
|
2,437 | |||||||||||||||
Cash collateral held
|
(886 | ) | ||||||||||||||
Net derivative assets
|
1,551 | |||||||||||||||
Total
|
$ | 39 | $ | 1,544 | $ | 1,775 | $ | 1,690 | ||||||||
Liabilities
(2)
|
||||||||||||||||
Derivative
instruments:
(1)
|
||||||||||||||||
Interest rate swaps
|
$ | | $ | (183 | ) | $ | (240 | ) | $ | (423 | ) | |||||
Floor Income Contracts
|
| (1,315 | ) | | (1,315 | ) | ||||||||||
Cross currency interest rate swaps
|
| (43 | ) | (172 | ) | (215 | ) | |||||||||
Other
|
(1 | ) | | | (1 | ) | ||||||||||
Total derivative instruments
|
(1 | ) | (1,541 | ) | (412 | ) | (1,954 | ) | ||||||||
Counterparty netting
|
782 | |||||||||||||||
Subtotal
(3)
|
(1,172 | ) | ||||||||||||||
Cash collateral pledged
|
809 | |||||||||||||||
Net derivative liabilities
|
(363 | ) | ||||||||||||||
Total
|
$ | (1 | ) | $ | (1,541 | ) | $ | (412 | ) | $ | (363 | ) | ||||
(1) | Fair value of derivative instruments is comprised of market value less accrued interest and excludes collateral. | |
(2) | Borrowings which are the hedged items in a fair value hedge relationship and which are adjusted for changes in value due to benchmark interest rates only are not carried at full fair value and are not reflected in this table. | |
(3) | As carried on the balance sheet. |
F-79
15. | Fair Value Measurements (Continued) |
Fair Value Measurements on a Recurring
|
||||||||||||||||||||||||||||
Basis as of December 31, 2009 | ||||||||||||||||||||||||||||
Counterparty
|
Cash
|
|||||||||||||||||||||||||||
(Dollars in millions) | Level 1 | Level 2 | Level 3 | Netting | Total (4) | Collateral | Net | |||||||||||||||||||||
Assets
|
||||||||||||||||||||||||||||
Available-for-sale
investments
|
$ | | $ | 1,330 | $ | | $ | | $ | 1,330 | $ | | $ | 1,330 | ||||||||||||||
Retained Interest in off-balance sheet securitized loans
|
| | 1,828 | | 1,828 | | 1,828 | |||||||||||||||||||||
Derivative
instruments
(1)(2)
|
| 2,023 | 1,770 | (1,009 | ) | 2,784 | (1,268 | ) | 1,516 | |||||||||||||||||||
Total assets
|
$ | | $ | 3,353 | $ | 3,598 | $ | (1,009 | ) | $ | 5,942 | $ | (1,268 | ) | $ | 4,674 | ||||||||||||
Liabilities
(3)
|
||||||||||||||||||||||||||||
Derivative
instruments
(1)(2)
|
$ | (2 | ) | $ | (1,650 | ) | $ | (518 | ) | $ | 1,009 | $ | (1,161 | ) | $ | 636 | $ | (525 | ) | |||||||||
Total liabilities
|
$ | (2 | ) | $ | (1,650 | ) | $ | (518 | ) | $ | 1,009 | $ | (1,161 | ) | $ | 636 | $ | (525 | ) | |||||||||
(1) | Fair value of derivative instruments is comprised of market value less accrued interest and excludes collateral. | |
(2) | Level 1 derivatives include Euro-dollar futures contracts. Level 2 derivatives include derivatives indexed to interest rate indices and currencies that are considered liquid. Level 3 derivatives include derivatives indexed to illiquid interest rate indices and derivatives for which significant adjustments were made to observable inputs. | |
(3) | Borrowings which are the hedged items in a fair value hedge relationship and which are adjusted for changes in value due to benchmark interest rates only are not carried at full fair value and are not reflected in this table. | |
(4) | As carried on the balance sheet. |
F-80
15. | Fair Value Measurements (Continued) |
Year Ended December 31, 2010 | ||||||||||||||||||||||||||||
Derivative instruments | ||||||||||||||||||||||||||||
Cross
|
||||||||||||||||||||||||||||
Currency
|
Total
|
|||||||||||||||||||||||||||
Residual
|
Interest
|
Floor Income
|
Interest
|
Derivative
|
||||||||||||||||||||||||
(Dollars in millions) | Interests | Rate Swaps | Contracts | Rate Swaps | Other | Instruments | Total | |||||||||||||||||||||
Balance, beginning of period
|
$ | 1,828 | $ | (272 | ) | $ | (54 | ) | $ | 1,596 | $ | (18 | ) | $ | 1,252 | $ | 3,080 | |||||||||||
Total gains/(losses) (realized and unrealized):
|
||||||||||||||||||||||||||||
Included in
earnings
(1)
|
| 234 | 3 | (834 | ) | 34 | (563 | ) | (563 | ) | ||||||||||||||||||
Included in other comprehensive income
|
| | | | | | | |||||||||||||||||||||
Purchases, issuances and settlements
|
| (52 | ) | 51 | 665 | 10 | 674 | 674 | ||||||||||||||||||||
Removal of Residual
Interests
(2)
|
(1,828 | ) | | | | | | (1,828 | ) | |||||||||||||||||||
Transfers in and/or out of level 3
|
| | | | | | | |||||||||||||||||||||
Balance, end of period
|
$ | | $ | (90 | ) | $ | | $ | 1,427 | $ | 26 | $ | 1,363 | $ | 1,363 | |||||||||||||
Change in unrealized gains/(losses) relating to instruments
still held at the reporting
date
(3)
|
$ | | $ | 111 | $ | | $ | (1,010 | ) | $ | 36 | $ | (863 | ) | $ | (863 | ) | |||||||||||
Years Ended December 31, | ||||||||||||||||||||||||
2009 | 2008 | |||||||||||||||||||||||
Residual
|
Derivative
|
Residual
|
Derivative
|
|||||||||||||||||||||
(Dollars in millions) | Interests | Instruments | Total | Interests | Instruments | Total | ||||||||||||||||||
Balance, beginning of period
|
$ | 2,200 | $ | (341 | ) | $ | 1,859 | $ | 3,044 | $ | (71 | ) | $ | 2,973 | ||||||||||
Total gains/(losses) (realized and unrealized):
|
||||||||||||||||||||||||
Included in
earnings
(1)
|
120 | 91 | 211 | 79 | (314 | ) | (235 | ) | ||||||||||||||||
Included in other comprehensive income
|
| | | | | | ||||||||||||||||||
Purchases, issuances and settlements
|
(492 | ) | 434 | (58 | ) | (923 | ) | 35 | (888 | ) | ||||||||||||||
Transfers in and/or out of Level 3
|
| 1,068 | 1,068 | | 9 | 9 | ||||||||||||||||||
Balance, end of period
|
$ | 1,828 | $ | 1,252 | $ | 3,080 | $ | 2,200 | $ | (341 | ) | $ | 1,859 | |||||||||||
Change in unrealized gains/(losses) relating to instruments
still held at the reporting date
|
$ | (330 | ) (4) | $ | 439 | (3) | $ | 109 | $ | (424 | ) (2) | $ | (298 | ) (3) | $ | (722 | ) | |||||||
(1) | Included in earnings is comprised of the following amounts recorded in the specified line item in the consolidated statements of income: |
Years Ended December 31, | ||||||||||||
(Dollars in millions) | 2010 | 2009 | 2008 | |||||||||
Servicing and securitization revenue
|
$ | | $ | 120 | $ | 79 | ||||||
Gains (losses) on derivative and hedging activities, net
|
(732 | ) | 298 | (314 | ) | |||||||
Interest expense
|
169 | (207 | ) | | ||||||||
Total
|
$ | (563 | ) | $ | 211 | $ | (235 | ) | ||||
(2) | Upon adoption of new consolidation accounting guidance on January 1, 2010, we consolidated all of our previously off-balance sheet securitization trusts (see Note 2, Significant Accounting Policies Consolidation). | |
(3) | Recorded in gains (losses) on derivative and hedging activities, net in the consolidated statements of income. | |
(4) | Recorded in servicing and securitization revenue (loss) in the consolidated statements of income. |
F-81
15. | Fair Value Measurements (Continued) |
December 31, 2010 | December 31, 2009 | |||||||||||||||||||||||
Fair
|
Carrying
|
Fair
|
Carrying
|
|||||||||||||||||||||
(Dollars in millions) | Value | Value | Difference | Value | Value | Difference | ||||||||||||||||||
Earning assets
|
||||||||||||||||||||||||
FFELP Loans
|
$ | 147,163 | $ | 148,649 | $ | (1,486 | ) | $ | 119,747 | $ | 121,053 | $ | (1,306 | ) | ||||||||||
Private Education Loans
|
30,949 | 35,656 | (4,707 | ) | 20,278 | 22,753 | (2,475 | ) | ||||||||||||||||
Other loans
|
88 | 270 | (182 | ) | 219 | 420 | (201 | ) | ||||||||||||||||
Cash and investments
|
11,553 | 11,553 | | 13,253 | 13,253 | | ||||||||||||||||||
Total earning assets
|
189,753 | 196,128 | (6,375 | ) | 153,497 | 157,479 | (3,982 | ) | ||||||||||||||||
Interest-bearing liabilities
|
||||||||||||||||||||||||
Short-term borrowings
|
33,604 | 33,616 | 12 | 30,988 | 30,897 | (91 | ) | |||||||||||||||||
Long-term borrowings
|
154,355 | 163,544 | 9,189 | 123,049 | 130,546 | 7,497 | ||||||||||||||||||
Total interest-bearing liabilities
|
187,959 | 197,160 | 9,201 | 154,037 | 161,443 | 7,406 | ||||||||||||||||||
Derivative financial instruments
|
||||||||||||||||||||||||
Floor Income/Cap contracts
|
(1,315 | ) | (1,315 | ) | | (1,234 | ) | (1,234 | ) | | ||||||||||||||
Interest rate swaps
|
744 | 744 | | 94 | 94 | | ||||||||||||||||||
Cross currency interest rate swaps
|
1,811 | 1,811 | | 2,783 | 2,783 | | ||||||||||||||||||
Other
|
25 | 25 | | (20 | ) | (20 | ) | | ||||||||||||||||
Other
|
||||||||||||||||||||||||
Residual interest in securitized assets
|
| 1,828 | 1,828 | | ||||||||||||||||||||
Excess of net asset fair value over carrying value
|
$ | 2,826 | $ | 3,424 | ||||||||||||||||||||
16. | Commitments, Contingencies and Guarantees |
F-82
16. | Commitments, Contingencies and Guarantees (Continued) |
F-83
16. | Commitments, Contingencies and Guarantees (Continued) |
17. | Benefit Plans |
F-84
17. | Benefit Plans (Continued) |
18. | Income Taxes |
Years Ended
|
||||||||||||
December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Statutory rate
|
35.0 | % | 35.0 | % | 35.0 | % | ||||||
State tax, net of federal benefit
|
1.7 | (.1 | ) | 3.5 | ||||||||
Non-deductible goodwill
|
9.2 | | (.6 | ) | ||||||||
Capitalized transaction costs
|
| | 35.9 | |||||||||
Unrecognized tax benefits, U.S. federal and state, net of
federal benefit
|
(.5 | ) | (1.1 | ) | 28.4 | |||||||
Corporate owned life insurance
|
(.3 | ) | (.4 | ) | 9.9 | |||||||
Other, net
|
.1 | (.7 | ) | (4.8 | ) | |||||||
Effective tax rate
|
45.2 | % | 32.7 | % | 107.3 | % | ||||||
F-85
18. | Income Taxes (Continued) |
December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Continuing operations current provision/(benefit):
|
||||||||||||
Federal
|
$ | 252,380 | $ | 156,395 | $ | 391,770 | ||||||
State
|
36,777 | (19,895 | ) | 31,535 | ||||||||
Foreign
|
(2 | ) | 27 | 86 | ||||||||
Total continuing operations current provision/(benefit)
|
289,155 | 136,527 | 423,391 | |||||||||
Continuing operations deferred provision/(benefit):
|
||||||||||||
Federal
|
214,440 | 124,180 | (422,261 | ) | ||||||||
State
|
(10,826 | ) | 3,161 | (37,823 | ) | |||||||
Foreign
|
| | | |||||||||
Total continuing operations deferred provision/(benefit)
|
203,614 | 127,341 | (460,084 | ) | ||||||||
Continuing operations provision for income tax expense/(benefit)
|
492,769 | 263,868 | (36,693 | ) | ||||||||
Discontinued operations current provision/(benefit):
|
||||||||||||
Federal
|
$ | 29,276 | $ | (199,306 | ) | $ | 9,639 | |||||
State
|
7,254 | (13,518 | ) | 1,201 | ||||||||
Foreign
|
49 | 370 | 592 | |||||||||
Total discontinued operations current provision/(benefit)
|
36,579 | (212,454 | ) | 11,432 | ||||||||
Discontinued operations deferred provision/(benefit):
|
||||||||||||
Federal
|
(55,842 | ) | 114,766 | (120,890 | ) | |||||||
State
|
(5,105 | ) | 13,112 | (21,077 | ) | |||||||
Foreign
|
| (321 | ) | (346 | ) | |||||||
Total discontinued operations deferred provision/(benefit)
|
(60,947 | ) | 127,557 | (142,313 | ) | |||||||
Discontinued operations provision for income tax
expense/(benefit)
|
(24,368 | ) | (84,897 | ) | (130,881 | ) | ||||||
Provision for income tax expense/(benefit)
|
$ | 468,401 | $ | 178,971 | $ | (167,574 | ) | |||||
F-86
18. | Income Taxes (Continued) |
December 31, | ||||||||
2010 | 2009 | |||||||
Deferred tax assets:
|
||||||||
Loan reserves
|
$ | 908,781 | $ | 737,762 | ||||
Market value adjustments on student loans, investments and
derivatives
|
480,292 | 496,101 | ||||||
Intangible assets
|
79,960 | | ||||||
Stock-based compensation plans
|
73,182 | 70,528 | ||||||
Deferred revenue
|
70,830 | 83,042 | ||||||
Accrued expenses not currently deductible
|
53,010 | 47,249 | ||||||
Purchased paper impairments
|
51,081 | 42,892 | ||||||
Student loan premiums and discounts, net
|
47,205 | 55,918 | ||||||
Unrealized investment losses
|
25,302 | 25,949 | ||||||
Operating loss and credit carryovers
|
21,775 | 36,747 | ||||||
Other
|
5,721 | 50,962 | ||||||
Total deferred tax assets
|
1,817,139 | 1,647,150 | ||||||
Deferred tax liabilities:
|
||||||||
Gains/(losses) on repurchased debt
|
299,634 | 187,505 | ||||||
Securitization transactions
|
| 93,254 | ||||||
Leases
|
53,267 | 64,246 | ||||||
Intangible assets
|
| 52,971 | ||||||
Other
|
26,053 | 38,646 | ||||||
Total deferred tax liabilities
|
378,954 | 436,622 | ||||||
Net deferred tax assets
|
$ | 1,438,185 | $ | 1,210,528 | ||||
F-87
18. | Income Taxes (Continued) |
December 31, | ||||||||||||
(Dollars in millions) | 2010 | 2009 | 2008 | |||||||||
Unrecognized tax benefits at beginning of year
|
$ | 104.4 | $ | 86.4 | $ | 174.8 | ||||||
Increases resulting from tax positions taken during a prior
period
|
71.0 | 75.2 | 11.3 | |||||||||
Decreases resulting from tax positions taken during a prior
period
|
(92.6 | ) | (58.3 | ) | (132.2 | ) | ||||||
Increases/(decreases) resulting from tax positions taken during
the current period
|
(2.5 | ) | (22.5 | ) | 36.2 | |||||||
Decreases related to settlements with taxing authorities
|
(42.5 | ) | (17.9 | ) | (.1 | ) | ||||||
Increases related to settlements with taxing authorities
|
11.2 | 44.7 | | |||||||||
Reductions related to the lapse of statute of limitations
|
(7.3 | ) | (3.2 | ) | (3.6 | ) | ||||||
Unrecognized tax benefits at end of year
|
$ | 41.7 | $ | 104.4 | $ | 86.4 | ||||||
19. | Segment Reporting |
F-88
19. | Segment Reporting (Continued) |
Business Lines/Activities | New Business Segment | Prior Business Segment | ||
FFELP Loan business
|
FFELP Loans | Lending | ||
Private Education Loan business
|
Consumer Lending | Lending | ||
Direct Banking
|
Consumer Lending | Lending | ||
Intercompany servicing of FFELP Loans
|
Business Services | Lending | ||
FFELP Loan default aversion services
|
Business Services | APG | ||
FFELP defaulted loan portfolio management services
|
Business Services | APG | ||
FFELP Guarantor servicing
|
Business Services | Other | ||
Contingency collections
|
Business Services | APG | ||
Third-party loan servicing
|
Business Services | Other | ||
ED loan servicing
|
Business Services | Other | ||
Upromise
|
Business Services | Other | ||
Campus Payment Solutions
|
Business Services | Other | ||
Purchased Paper Non-Mortgage
|
Other | APG | ||
Purchased Paper Mortgage/Properties
|
Other | APG | ||
Mortgage and other loans
|
Other | Lending | ||
Debt repurchase gains
|
Other | Lending | ||
Corporate liquidity portfolio
|
Other | Lending | ||
Overhead expenses
|
Other | Lending, APG and Other |
F-89
19. | Segment Reporting (Continued) |
| The operating expenses reported for each segment are directly attributable to the generation of revenues by that segment. We have included corporate overhead and certain information technology costs (together referred to as Overhead) in our Other segment rather than allocate those expenses by segment. | |
| The creation of the FFELP Loans and Business Services segments has resulted in our accounting for the significant servicing revenue we earn on FFELP Loans we own in the Business Services segment. This bifurcates the FFELP interest income between the FFELP Loans and Business Services segment, with an intercompany servicing fee charge from the Business Services segment. The intercompany amounts are the contractual rates for encumbered loans within a financing facility or a similar market rate if the loan is not in a financing facility and accordingly exceed our costs. | |
| In our GAAP-basis financial presentation we allocated existing goodwill to the new reporting units within the reportable segments based upon relative fair value. During the fourth quarter 2010, we also evaluated our goodwill for impairment using both the old reporting and new reporting unit framework and there was no impairment under either analysis. | |
| Similar to prior periods, capital is assigned to each segment based on internally determined risk adjusted weightings for the assets in each segment. These weightings have been updated and differ depending on the relative risk of each asset type and represent managements view of the level of capital needed to support different assets. Unsecured debt is allocated based on the remaining funding needed for each segment after direct funding and the capital allocation has been considered. |
F-90
19. | Segment Reporting (Continued) |
December 31, | ||||||||
2010 | 2009 | |||||||
FFELP Loans, net
|
$ | 148,649 | $ | 121,053 | ||||
Cash and
investments
(1)
|
5,963 | 4,812 | ||||||
Retained Interest in off-balance sheet securitized loans
|
| 1,034 | ||||||
Other
|
3,911 | 4,484 | ||||||
Total assets
|
$ | 158,523 | $ | 131,383 | ||||
(1) | Includes restricted cash and investments. |
F-91
19. | Segment Reporting (Continued) |
December 31, | ||||||||
2010 | 2009 | |||||||
Private Education Loans, net
|
$ | 35,656 | $ | 22,753 | ||||
Cash and
investments
(1)
|
3,372 | 3,459 | ||||||
Retained Interest in off-balance sheet securitized loans
|
| 794 | ||||||
Other
|
4,004 | 3,729 | ||||||
Total assets
|
$ | 43,032 | $ | 30,735 | ||||
(1) | Includes restricted cash and investments. |
F-92
19. | Segment Reporting (Continued) |
F-93
19. | Segment Reporting (Continued) |
F-94
19. | Segment Reporting (Continued) |
Year Ended December 31, 2010 | ||||||||||||||||||||||||||||||||
FFELP
|
Consumer
|
Business
|
Total Core
|
Total
|
||||||||||||||||||||||||||||
(Dollars in millions) | Loans | Lending | Services | Other | Eliminations | Earnings | Adjustments (2) | GAAP | ||||||||||||||||||||||||
Interest income:
|
||||||||||||||||||||||||||||||||
Student loans
|
$ | 2,766 | $ | 2,353 | $ | | $ | | $ | | $ | 5,119 | $ | 579 | $ | 5,698 | ||||||||||||||||
Other loans
|
| | | 30 | | 30 | | 30 | ||||||||||||||||||||||||
Cash and investments
|
9 | 14 | 17 | 3 | (17 | ) | 26 | | 26 | |||||||||||||||||||||||
Total interest income
|
2,775 | 2,367 | 17 | 33 | (17 | ) | 5,175 | 579 | 5,754 | |||||||||||||||||||||||
Total interest expense
|
1,407 | 758 | | 45 | (17 | ) | 2,193 | 82 | 2,275 | |||||||||||||||||||||||
Net interest income
|
1,368 | 1,609 | 17 | (12 | ) | | 2,982 | 497 | 3,479 | |||||||||||||||||||||||
Less: provisions for loan losses
|
98 | 1,298 | | 23 | | 1,419 | | 1,419 | ||||||||||||||||||||||||
Net interest income after provisions for loan losses
|
1,270 | 311 | 17 | (35 | ) | | 1,563 | 497 | 2,060 | |||||||||||||||||||||||
Servicing revenue
|
68 | 72 | 912 | 1 | (648 | ) | 405 | | 405 | |||||||||||||||||||||||
Contingency revenue
|
| | 330 | | | 330 | | 330 | ||||||||||||||||||||||||
Gains on debt repurchases
|
| | | 317 | | 317 | | 317 | ||||||||||||||||||||||||
Other income
|
320 | | 51 | 13 | | 384 | (414 | ) | (30 | ) | ||||||||||||||||||||||
Total other income
|
388 | 72 | 1,293 | 331 | (648 | ) | 1,436 | (414 | ) | 1,022 | ||||||||||||||||||||||
Expenses:
|
||||||||||||||||||||||||||||||||
Direct operating expenses
|
736 | 350 | 500 | 12 | (648 | ) | 950 | | 950 | |||||||||||||||||||||||
Overhead expenses
|
| | | 258 | | 258 | | 258 | ||||||||||||||||||||||||
Operating expenses
|
736 | 350 | 500 | 270 | (648 | ) | 1,208 | | 1,208 | |||||||||||||||||||||||
Goodwill and acquired intangible assets impairment and
amortization
|
| | | | | | 699 | 699 | ||||||||||||||||||||||||
Restructuring expenses
|
54 | 12 | 7 | 12 | | 85 | | 85 | ||||||||||||||||||||||||
Total expenses
|
790 | 362 | 507 | 282 | (648 | ) | 1,293 | 699 | 1,992 | |||||||||||||||||||||||
Income from continuing operations, before income tax expense
|
868 | 21 | 803 | 14 | | 1,706 | (616 | ) | 1,090 | |||||||||||||||||||||||
Income tax
expense
(1)
|
311 | 8 | 288 | 4 | | 611 | (118 | ) | 493 | |||||||||||||||||||||||
Net income from continuing operations
|
557 | 13 | 515 | 10 | | 1,095 | (498 | ) | 597 | |||||||||||||||||||||||
Loss from discontinued operations, net of taxes
|
| | | (67 | ) | | (67 | ) | | (67 | ) | |||||||||||||||||||||
Net income (loss)
|
$ | 557 | $ | 13 | $ | 515 | $ | (57 | ) | $ | | $ | 1,028 | $ | (498 | ) | $ | 530 | ||||||||||||||
(1) | The eliminations in servicing revenue and direct operating expense represent the elimination of intercompany servicing revenue where the Business Services segment performs the loan servicing function for the FFELP Loans segment. |
(2) | Core Earnings adjustments to GAAP: |
Year Ended December 31, 2010 | ||||||||||||
Net Impact
|
Net Impact of
|
|||||||||||
of
|
Goodwill and
|
|||||||||||
Derivative
|
Acquired
|
|||||||||||
(Dollars in millions) | Accounting | Intangibles | Total | |||||||||
Net interest income after provisions for loan losses
|
$ | 497 | $ | | $ | 497 | ||||||
Total other income (loss)
|
(414 | ) | | (414 | ) | |||||||
Goodwill and acquired intangible assets impairment and
amortization
|
| 699 | 699 | |||||||||
Total Core Earnings adjustments to GAAP
|
$ | 83 | $ | (699 | ) | (616 | ) | |||||
Income tax benefit
|
(118 | ) | ||||||||||
Net loss
|
$ | (498 | ) | |||||||||
(3) | Income taxes are based on a percentage of net income before tax for the individual reportable segment. |
F-95
19. | Segment Reporting (Continued) |
Year Ended December 31, 2009 | ||||||||||||||||||||||||||||||||
FFELP
|
Consumer
|
Business
|
Total Core
|
Total
|
||||||||||||||||||||||||||||
(Dollars in millions) | Loans | Lending | Services | Other | Eliminations (1) | Earnings | Adjustments (2) | GAAP | ||||||||||||||||||||||||
Interest income:
|
||||||||||||||||||||||||||||||||
Student loans
|
$ | 3,252 | $ | 2,254 | $ | | $ | | $ | | $ | 5,506 | $ | (830 | ) | $ | 4,676 | |||||||||||||||
Other loans
|
| | | 56 | | 56 | | 56 | ||||||||||||||||||||||||
Cash and investments
|
26 | 13 | 20 | (10 | ) | (20 | ) | 29 | (3 | ) | 26 | |||||||||||||||||||||
Total interest income
|
3,278 | 2,267 | 20 | 46 | (20 | ) | 5,591 | (833 | ) | 4,758 | ||||||||||||||||||||||
Total interest expense
|
2,238 | 721 | | 66 | (20 | ) | 3,005 | 30 | 3,035 | |||||||||||||||||||||||
Net interest income (loss)
|
1,040 | 1,546 | 20 | (20 | ) | | 2,586 | (863 | ) | 1,723 | ||||||||||||||||||||||
Less: provisions for loan losses
|
119 | 1,399 | | 46 | | 1,564 | (445 | ) | 1,119 | |||||||||||||||||||||||
Net interest income (loss) after provisions for loan losses
|
921 | 147 | 20 | (66 | ) | | 1,022 | (418 | ) | 604 | ||||||||||||||||||||||
Servicing revenue
|
75 | 70 | 954 | | (659 | ) | 440 | | 440 | |||||||||||||||||||||||
Contingency revenue
|
| | 294 | | | 294 | | 294 | ||||||||||||||||||||||||
Gains on debt repurchases
|
| | | 536 | | 536 | | 536 | ||||||||||||||||||||||||
Other income
|
292 | | 55 | 1 | | 348 | (285 | ) | 63 | |||||||||||||||||||||||
Total other income
|
367 | 70 | 1,303 | 537 | (659 | ) | 1,618 | (285 | ) | 1,333 | ||||||||||||||||||||||
Expenses:
|
||||||||||||||||||||||||||||||||
Direct operating expenses
|
754 | 265 | 440 | 6 | (659 | ) | 806 | | 806 | |||||||||||||||||||||||
Overhead expenses
|
| | | 237 | | 237 | | 237 | ||||||||||||||||||||||||
Operating expenses
|
754 | 265 | 440 | 243 | (659 | ) | 1,043 | | 1,043 | |||||||||||||||||||||||
Goodwill and acquired intangible assets impairment and
amortization
|
| | | | | | 76 | 76 | ||||||||||||||||||||||||
Restructuring expenses
|
8 | 2 | 2 | (2 | ) | | 10 | | 10 | |||||||||||||||||||||||
Total expenses
|
762 | 267 | 442 | 241 | (659 | ) | 1,053 | 76 | 1,129 | |||||||||||||||||||||||
Income (loss) from continuing operations, before income tax
expense benefit
|
526 | (50 | ) | 881 | 230 | | 1,587 | (779 | ) | 808 | ||||||||||||||||||||||
Income tax expense
benefit
(3)
|
186 | (18 | ) | 311 | 81 | | 560 | (296 | ) | 264 | ||||||||||||||||||||||
Net income (loss) from continuing operations
|
340 | (32 | ) | 570 | 149 | | 1,027 | (483 | ) | 544 | ||||||||||||||||||||||
Loss from discontinued operations, net of taxes
|
| | | (220 | ) | | (220 | ) | | (220 | ) | |||||||||||||||||||||
Net income (loss)
|
$ | 340 | $ | (32 | ) | $ | 570 | $ | (71 | ) | $ | | $ | 807 | $ | (483 | ) | $ | 324 | |||||||||||||
(1) | The eliminations in servicing revenue and direct operating expense represent the elimination of intercompany servicing revenue where the Business Services segment performs the loan servicing function for the FFELP Loans segment. |
(2) | Core Earnings adjustments to GAAP: |
Year Ended December 31, 2009 | ||||||||||||||||
Net Impact
|
Net Impact of
|
Net Impact
|
||||||||||||||
of
|
Goodwill and
|
of
|
||||||||||||||
Derivative
|
Acquired
|
Securitization
|
||||||||||||||
(Dollars in millions) | Accounting | Intangibles | Accounting | Total | ||||||||||||
Net interest income (loss)
|
$ | 78 | $ | | $ | (941 | ) | $ | (863 | ) | ||||||
Less: provisions for loan losses
|
| | (445 | ) | (445 | ) | ||||||||||
Net interest income (loss) after provisions for loan losses
|
78 | | (496 | ) | (418 | ) | ||||||||||
Total other income (loss)
|
(580 | ) | | 295 | (285 | ) | ||||||||||
Goodwill and acquired intangible assets impairment and
amortization
|
| 76 | | 76 | ||||||||||||
Total Core Earnings adjustments to GAAP
|
$ | (502 | ) | $ | (76 | ) | $ | (201 | ) | (779 | ) | |||||
Income tax benefit
|
(296 | ) | ||||||||||||||
Net loss
|
$ | (483 | ) | |||||||||||||
(3) | Income taxes are based on a percentage of net income before tax for the individual reportable segment. |
F-96
19. | Segment Reporting (Continued) |
Year Ended December 31, 2008 | ||||||||||||||||||||||||||||||||
FFELP
|
Consumer
|
Business
|
Total Core
|
Total
|
||||||||||||||||||||||||||||
(Dollars in millions) | Loans | Lending | Services | Other | Eliminations (1) | Earnings | Adjustments (2) | GAAP | ||||||||||||||||||||||||
Interest income:
|
||||||||||||||||||||||||||||||||
Student loans
|
$ | 6,052 | $ | 2,752 | $ | | $ | | $ | | $ | 8,804 | $ | (1,893 | ) | $ | 6,911 | |||||||||||||||
Other loans
|
| | | 83 | | 83 | | 83 | ||||||||||||||||||||||||
Cash and investments
|
156 | 79 | 26 | 95 | (26 | ) | 330 | (54 | ) | 276 | ||||||||||||||||||||||
Total interest income
|
6,208 | 2,831 | 26 | 178 | (26 | ) | 9,217 | (1,947 | ) | 7,270 | ||||||||||||||||||||||
Total interest expense
|
5,294 | 1,280 | | 161 | (26 | ) | 6,709 | (804 | ) | 5,905 | ||||||||||||||||||||||
Net interest income (loss)
|
914 | 1,551 | 26 | 17 | | 2,508 | (1,143 | ) | 1,365 | |||||||||||||||||||||||
Less: provisions for loan losses
|
127 | 874 | | 28 | | 1,029 | (309 | ) | 720 | |||||||||||||||||||||||
Net interest income (loss) after provisions for loan losses
|
787 | 677 | 26 | (11 | ) | | 1,479 | (834 | ) | 645 | ||||||||||||||||||||||
Servicing revenue
|
77 | 65 | 897 | 1 | (632 | ) | 408 | | 408 | |||||||||||||||||||||||
Contingency revenue
|
| | 330 | | | 330 | | 330 | ||||||||||||||||||||||||
Gains on debt repurchases
|
| | | 64 | | 64 | | 64 | ||||||||||||||||||||||||
Other income
|
(42 | ) | 1 | 52 | 14 | | 25 | (355 | ) | (330 | ) | |||||||||||||||||||||
Total other income
|
35 | 66 | 1,279 | 79 | (632 | ) | 827 | (355 | ) | 472 | ||||||||||||||||||||||
Expenses:
|
||||||||||||||||||||||||||||||||
Direct operating expenses
|
745 | 201 | 462 | 17 | (632 | ) | 793 | | 793 | |||||||||||||||||||||||
Overhead expenses
|
| | | 236 | | 236 | | 236 | ||||||||||||||||||||||||
Operating expenses
|
745 | 201 | 462 | 253 | (632 | ) | 1,029 | | 1,029 | |||||||||||||||||||||||
Goodwill and acquired intangible assets impairment and
amortization
|
| | | | | | 50 | 50 | ||||||||||||||||||||||||
Restructuring expenses
|
42 | 25 | 10 | (5 | ) | | 72 | | 72 | |||||||||||||||||||||||
Total expenses
|
787 | 226 | 472 | 248 | (632 | ) | 1,101 | 50 | 1,151 | |||||||||||||||||||||||
Income (loss) from continuing operations, before income tax
expense (benefit)
|
35 | 517 | 833 | (180 | ) | | 1,205 | (1,239 | ) | (34 | ) | |||||||||||||||||||||
Income tax expense
(benefit)
(3)
|
13 | 186 | 300 | (65 | ) | | 434 | (470 | ) | (36 | ) | |||||||||||||||||||||
Net income (loss) from continuing operations
|
22 | 331 | 533 | (115 | ) | | 771 | (769 | ) | 2 | ||||||||||||||||||||||
Loss from discontinued operations, net of taxes
|
| | | (188 | ) | | (188 | ) | (27 | ) | (215 | ) | ||||||||||||||||||||
Net income (loss)
|
$ | 22 | $ | 331 | $ | 533 | $ | (303 | ) | $ | | $ | 583 | $ | (796 | ) | $ | (213 | ) | |||||||||||||
(1) | The eliminations in servicing revenue and direct operating expense represent the elimination of intercompany servicing revenue where the Business Services segment performs the loan servicing function for the FFELP Loans segment. |
(2) | Core Earnings adjustments to GAAP: |
Year Ended December 31, 2008 | ||||||||||||||||
Net Impact
|
Net Impact of
|
Net Impact
|
||||||||||||||
of
|
Goodwill and
|
of
|
||||||||||||||
Derivative
|
Acquired
|
Securitization
|
||||||||||||||
Accounting | Intangibles | Accounting | Total | |||||||||||||
Net interest income (loss)
|
$ | (271 | ) | $ | | $ | (872 | ) | $ | (1,143 | ) | |||||
Less: provisions for loan losses
|
| | (309 | ) | (309 | ) | ||||||||||
Net interest income (loss) after provisions for loan losses
|
(271 | ) | | (563 | ) | (834 | ) | |||||||||
Total other income (loss)
|
(476 | ) | | 121 | (355 | ) | ||||||||||
Goodwill and acquired intangible assets impairment and
amortization
|
| 50 | | 50 | ||||||||||||
Loss from continuing operations, before income tax expense
|
(747 | ) | (50 | ) | (442 | ) | (1,239 | ) | ||||||||
Loss from discontinued operations, net of taxes
|
(4 | ) | (23 | ) | | (27 | ) | |||||||||
Total Core Earnings adjustments to GAAP
|
$ | (751 | ) | $ | (73 | ) | $ | (442 | ) | (1,266 | ) | |||||
Income tax benefit
|
(470 | ) | ||||||||||||||
Net loss
|
$ | (796 | ) | |||||||||||||
(3) | Income taxes are based on a percentage of net income before tax for the individual reportable segment. |
F-97
19. | Segment Reporting (Continued) |
Years Ended December 31, | ||||||||||||
(Dollars in millions) | 2010 | 2009 | 2008 | |||||||||
Core Earnings adjustments to GAAP:
|
||||||||||||
Net impact of derivative
accounting
(1)
|
$ | 83 | $ | (502 | ) | $ | (751 | ) | ||||
Net impact of acquired
intangibles
(2)
|
(699 | ) | (76 | ) | (73 | ) | ||||||
Net impact of securitization
accounting
(3)
|
| (201 | ) | (442 | ) | |||||||
Net tax
effect
(4)
|
118 | 296 | 470 | |||||||||
Total Core Earnings adjustments to GAAP
|
$ | (498 | ) | $ | (483 | ) | $ | (796 | ) | |||
(1) | Derivative accounting: Core Earnings exclude periodic unrealized gains and losses that are caused primarily by the mark-to-market derivative valuations on derivatives that do not qualify for hedge accounting treatment under GAAP. These unrealized gains and losses occur in our FFELP Loans and Consumer Lending operating segments. In our Core Earnings presentation, we recognized the economic effect of these hedges, which generally results in any cash paid or received being recognized ratably as an expense or revenue over the hedged items life. | |
(2) | Goodwill and Acquired Intangibles: We exclude goodwill and intangible impairment and amortization of acquired intangibles. | |
(3) | Securitization accounting: Under GAAP, prior to the adoption of the new consolidation accounting guidance on January 1, 2010, certain securitization transactions in our FFELP Loans operating segment were accounted for as sales of assets. Under Core Earnings for the FFELP Loans operating segment, we presented all securitization transactions as long-term non-recourse financings. The upfront gains on sale from securitization transactions, as well as ongoing securitization servicing and Residual Interest revenue (loss) presented in accordance with GAAP, were excluded from Core Earnings and were replaced by interest income, provisions for loan losses, and interest expense as earned or incurred on the securitization loans. We also excluded transactions with our off-balance sheet trusts from Core Earnings as they were considered intercompany transactions on a Core Earnings basis. On January 1, 2010, upon the adoption of the new consolidation accounting guidance, which resulted in the consolidation of these previously off-balance sheet securitization trusts, there are no longer differences between our GAAP and Core Earnings presentation for securitization accounting. | |
(4) | Net Tax Effect: Such tax effect is based upon our Core Earnings effective tax rate for the year. |
20. | Discontinued Operations |
F-98
20. | Discontinued Operations (Continued) |
At December 31, | ||||||||
2010 | 2009 | |||||||
Assets:
|
||||||||
Cash and equivalents
|
$ | 3,848 | $ | 11,570 | ||||
Other assets
|
176,916 | 450,410 | ||||||
Assets of discontinued operations
|
$ | 180,764 | $ | 461,980 | ||||
Liabilities:
|
||||||||
Liabilities of discontinued operations
|
$ | 6,300 | $ | 31,500 | ||||
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Operations:
|
||||||||||||
Loss from discontinued operations before income taxes
|
$ | (91,516 | ) | $ | (304,769 | ) | $ | (345,987 | ) | |||
Income tax benefit
|
(24,368 | ) | (84,897 | ) | (130,881 | ) | ||||||
Loss from discontinued operations, net of taxes
|
$ | (67,148 | ) | $ | (219,872 | ) | $ | (215,106 | ) | |||
Disposal:
|
||||||||||||
Loss on disposal before income taxes
|
$ | | $ | (118,761 | ) | $ | | |||||
Income tax benefit
|
| (23,053 | ) | | ||||||||
Loss on disposal, net of taxes
|
$ | | $ | (95,708 | ) | $ | | |||||
21. | Concentrations of Risk |
F-99
21. | Concentrations of Risk (Continued) |
F-100
22. | Quarterly Financial Information (unaudited) |
2010 | ||||||||||||||||
First
|
Second
|
Third
|
Fourth
|
|||||||||||||
Quarter | Quarter | Quarter | Quarter | |||||||||||||
Net interest income
|
$ | 854,477 | $ | 895,922 | $ | 871,934 | $ | 856,811 | ||||||||
Less: provisions for loan losses
|
359,120 | 382,239 | 358,110 | 319,944 | ||||||||||||
Net interest income after provisions for loan losses
|
495,357 | 513,683 | 513,824 | 536,867 | ||||||||||||
Gains (losses) on derivative and hedging activities, net
|
(82,410 | ) | 95,316 | (344,458 | ) | (29,447 | ) | |||||||||
Other income
|
315,118 | 271,998 | 192,321 | 603,969 | ||||||||||||
Restructuring expenses
|
24,804 | 17,808 | 9,980 | 32,644 | ||||||||||||
Operating expenses
|
297,347 | 319,439 | 971,430 | 318,388 | ||||||||||||
Income tax expense (benefit)
|
159,160 | 198,978 | (126,055 | ) | 260,687 | |||||||||||
Net income (loss) from continuing operations
|
246,754 | 344,772 | (493,668 | ) | 499,670 | |||||||||||
Loss from discontinued operations, net of taxes
|
(6,614 | ) | (6,954 | ) | (1,279 | ) | (52,299 | ) | ||||||||
Net income (loss)
|
240,140 | 337,818 | (494,947 | ) | 447,371 | |||||||||||
Preferred stock dividends
|
18,677 | 18,711 | 18,787 | 15,967 | ||||||||||||
Net income (loss) attributable to common stock
|
$ | 221,463 | $ | 319,107 | $ | (513,734 | ) | $ | 431,404 | |||||||
Basic earnings (loss) per common share:
|
||||||||||||||||
Earnings (loss) from continuing operations
|
$ | .47 | $ | .67 | $ | (1.06 | ) | $ | .99 | |||||||
Earnings (loss) from discontinued operations
|
(.01 | ) | (.01 | ) | | (.11 | ) | |||||||||
Earnings (loss) from net income
|
$ | .46 | $ | .66 | $ | (1.06 | ) | $ | .88 | |||||||
Diluted earnings (loss) per common share:
|
||||||||||||||||
Earnings (loss) from continuing operations
|
$ | .46 | $ | .64 | $ | (1.06 | ) | $ | .94 | |||||||
Earnings (loss) from discontinued operations
|
(.01 | ) | (.01 | ) | | (.10 | ) | |||||||||
Earnings (loss) from net income
|
$ | .45 | $ | .63 | $ | (1.06 | ) | $ | .84 | |||||||
F-101
22. | Quarterly Financial Information (unaudited) (Continued) |
2009 | ||||||||||||||||
First
|
Second
|
Third
|
Fourth
|
|||||||||||||
Quarter | Quarter | Quarter | Quarter | |||||||||||||
Net interest income
|
$ | 215,063 | $ | 383,701 | $ | 525,176 | $ | 598,786 | ||||||||
Less: provisions for loan losses
|
250,279 | 278,112 | 321,127 | 269,442 | ||||||||||||
Net interest income (loss) after provisions for loan losses
|
(35,216 | ) | 105,589 | 204,049 | 329,344 | |||||||||||
Gains (losses) on derivative and hedging activities, net
|
104,025 | (561,795 | ) | (111,556 | ) | (35,209 | ) | |||||||||
Other income
|
204,684 | 584,339 | 447,659 | 700,932 | ||||||||||||
Restructuring expenses
|
3,773 | 3,158 | 2,451 | 1,189 | ||||||||||||
Operating expenses
|
253,114 | 273,464 | 281,518 | 310,300 | ||||||||||||
Income tax expense (benefit)
|
(6,507 | ) | (39,260 | ) | 83,916 | 225,720 | ||||||||||
Net income (loss) from continuing operations
|
23,113 | (109,229 | ) | 172,267 | 457,858 | |||||||||||
Loss from discontinued operations, net of taxes
|
(44,499 | ) | (13,491 | ) | (13,157 | ) | (148,724 | ) | ||||||||
Net income (loss)
|
(21,386 | ) | (122,720 | ) | 159,110 | 309,134 | ||||||||||
Preferred stock dividends
|
26,395 | 25,800 | 42,627 | 51,014 | ||||||||||||
Net income (loss) attributable to common stock
|
$ | (47,781 | ) | $ | (148,520 | ) | $ | 116,483 | $ | 258,120 | ||||||
Basic earnings (loss) per common share:
|
||||||||||||||||
Earnings (loss) from continuing operations
|
$ | (.01 | ) | $ | (.29 | ) | $ | .28 | $ | .85 | ||||||
Earnings (loss) from discontinued operations
|
(.09 | ) | (.03 | ) | (.03 | ) | (.31 | ) | ||||||||
Earnings (loss) from net income
|
$ | (.10 | ) | $ | (.32 | ) | $ | .25 | $ | .54 | ||||||
Diluted earnings (loss) per common share:
|
||||||||||||||||
Earnings (loss) from continuing operations
|
$ | (.01 | ) | $ | (.29 | ) | $ | .28 | $ | .81 | ||||||
Earnings (loss) from discontinued operations
|
(.09 | ) | (.03 | ) | (.03 | ) | (.29 | ) | ||||||||
Earnings (loss) from net income
|
$ | (.10 | ) | $ | (.32 | ) | $ | .25 | $ | .52 | ||||||
F-102
| default of the borrower; | |
| the death, bankruptcy or permanent, total disability of the borrower; | |
| closing of the students school prior to the end of the academic period; | |
| false certification of the borrowers eligibility for the loan by the school; and | |
| an unpaid school refund. |
| Subsidized Federal Stafford Loans to students who demonstrate requisite financial need; | |
| Unsubsidized Federal Stafford Loans to students who either do not demonstrate financial need or require additional loans to supplement their Subsidized Stafford Loans; | |
| Federal PLUS Loans to graduate or professional students (effective July 1, 2006) or parents of dependent students whose estimated costs of attending school exceed other available financial aid; and | |
| FFELP Consolidation Loans, which consolidate into a single loan a borrowers obligations under various federally authorized student loan programs. |
A-1
A-2
| Change to a fixed 6.8 percent interest rate for Stafford Loans. | |
| Increases the scheduled change to a fixed PLUS interest rate from 7.9 percent to 8.5 percent in the FFELP. | |
| Permanently modifies the minimum special allowance calculation for loans made with proceeds of tax-exempt obligations. | |
| Requires submission of Floor Income to the government on loans made on or after April 1, 2006. | |
| Repeals limitations on special allowance for PLUS Loans made on and after January 1, 2000. | |
| Increases first and second year Stafford loan limits from $2,625 and $3,500 to $3,500 and $4,500 respectively (effective July 1, 2007). | |
| Increases graduate and professional student unsubsidized Stafford Loan limits from $10,000 to $12,000 (effective July 1, 2007). | |
| Authorizes graduate and professional students to borrow PLUS Loans. | |
| Reduces insurance from 98 percent to 97 percent for new loans beginning July 1, 2006. | |
| Phases out the Stafford Loan origination fee by 2010. | |
| Reduces insurance for Exceptional Performers from 100 percent to 99 percent. | |
| Repeals in-school consolidation, spousal consolidation, reconsolidation, and aligns loan consolidation terms in the FFELP and DSLP. | |
| Mandates the deposit of a one percent federal default fee into a guaranty agencys Federal Fund, which may be deducted from loan proceeds. | |
| Repeals the guaranty agency Account Maintenance Fee cap (effective FY 2007). | |
| Reduces Guarantor retention of collection fees on defaulted FFELP Consolidation Loans from 18.5 percent to 10 percent (effective October 1, 2006). | |
| Provides a discharge for loans that are falsely certified as a result of identity theft. | |
| Provides 100 percent insurance on ineligible loans due to false or erroneous information on loans made on or after July 1, 2006. | |
| Allows for a 3-year military deferment for a borrowers loans made on or after July 1, 2001. | |
| Reduces the monthly payment remittance needed to rehabilitate defaulted loans from 12 to 9. | |
| Increases from 10 percent to 15 percent the amount of disposable pay a guaranty agency may garnish without borrower consent. | |
| Streamlines mandatory forbearances to accommodate verbal requests. |
| Restrictions on the use of eligible lender trustees by schools that make FFELP Loans; | |
| New discharge provisions for Title IV loans for the survivors of eligible public servants and certain other eligible victims of the terrorist attacks on the United States on September 11, 2001; and | |
| A technical modification to the HEA provision governing account maintenance fees that are paid to guaranty agencies in the FFELP. |
A-3
| Reduces Special Allowance Payments to for-profit lenders and not-for-profit lenders for both Stafford and Consolidation Loans disbursed on or after October 1, 2007 by 0.55 percentage points and 0.40 percentage points, respectively; | |
| Reduces Special Allowance Payments to for-profit lenders and not-for-profit lenders for PLUS Loans disbursed on or after October 1, 2007 by 0.85 percentage points and 0.70 percentage points, respectively; | |
| Reduces fixed interest rates on subsidized Stafford Loans to undergraduates from the current 6.8% to 6.0% for loans disbursed beginning July 1, 2008, to 5.6% for loans disbursed beginning July 1, 2009, to 4.5% for loans disbursed beginning July 1, 2010, and to 3.4% for loans disbursed beginning July 1, 2011 through June 30, 2012. Absent any other legislative changes, the rates would revert to 6.8% for loans disbursed on or after July 1, 2012; | |
| Increases the lender loan fees on all loan types, from 0.5 percent to 1.0 percent; | |
| Reduces default insurance to 95 percent of the unpaid principal and accrued interest for loans first disbursed on or after October 1, 2012; | |
| Eliminates Exceptional Performer designation (and the monetary benefit associated with it) effective October 1, 2007. | |
| Reduces default collections retention by guaranty agencies from 23 percent to 16 percent. | |
| Reduces the guaranty agency account maintenance fee from 0.10 percent to 0.06 percent. | |
| Requires ED to develop and implement a pilot auction for participation in the FFELP Parent PLUS Loan program, by state, effective July 1, 2009. | |
| Provides loan forgiveness for all DSLP borrowers, and FFELP borrowers that consolidate in the DSLP, in certain public service jobs who make 120 monthly payments. | |
| Expands the deferment authority for borrowers due to an economic hardship and military service. | |
| Establishes a new income-based repayment program starting July 1, 2009 for all loans except for parent PLUS Loans and Consolidation Loans that discharged such loans, which includes the potential for loan forgiveness after 25 years. |
| Increases Unsubsidized Stafford Loan limits for undergraduate students for loans first disbursed on or after July 1, 2008 |
| by $2,000 for the annual limit | |
| and to $31,000 and $57,500 as the aggregate limits for dependent students and independent students respectively. |
| Requires, effective for loans first disbursed on or after July 1, 2008, that repayment of a parent PLUS Loan begin no later than 60 days after the final disbursement with interest accrued prior to the beginning of repayment added to the loan principal, or the day after 6 months from the date the dependent student is no longer enrolled at least half time, in which case interest accrued prior to the beginning of repayment may be paid monthly or quarterly, or capitalized no more frequently than quarterly, if agreed by the borrower and lender. | |
| Removes specification that the repayment period of a PLUS Loan begins on the date of the final disbursement and excludes deferment and forbearance periods for loans first disbursed on or after July 1, 2008. |
A-4
| Allows extenuating circumstances for credit requirement purposes for a PLUS Loan if the applicant is up to 180 days delinquent on mortgage or medical bill payments or not more than 89 days delinquent on any other debt during the period January 1, 2007, through December 31, 2009. | |
| Broadens lender of last resort (LLR) provisions so they include subsidized and unsubsidized Stafford Loans and PLUS Loans, prohibits LLR loans with terms and conditions more favorable than those for non-LLR loans, and subjects lenders and Guarantors serving as LLRs to prohibitions on inducements and to prohibitions regarding advertising, marketing or promoting LLR loans. | |
| Gives the Secretary authority until July 1, 2009 (subsequently extended to July 1, 2010 by Public Law 110-350 enacted October 7, 2008), if there is inadequate loan capital, to purchase or enter into forward purchase commitments for Stafford and PLUS Loans first disbursed on or after October 1, 2003 and before July 1, 2009, and makes funds available. Any purchase must be without a net cost to the federal government (including the cost of servicing purchased loans), and funds paid to a lender must be used for the lenders continued FFELP participations and making of FFELP Loans. Authorizes the Secretary to contract for the servicing of purchased FFELP Loans, including with selling lenders, as long as the cost is not more than it would be otherwise. |
| Clarifies the repayment period and the terms for commencement of repayment of PLUS Loans made on or after July 1, 2008, (superseding ECASLA provisions) and makes available in-school deferment to parent borrowers when the student beneficiary is enrolled and a 6-month post-enrollment deferment to all PLUS borrowers following any period of enrollment of the borrower or the student beneficiary. | |
| Makes Section 207 of the Servicemembers Civil Relief Act applicable to FFELP Loans, upon borrower request, reducing the interest rate on such loans to 6% (which encompasses certain fees and other charges), and establishes that as the applicable rate for calculating Special Allowance Payments (for loans made on or after July 1, 2008). | |
| Expands the criteria for disability discharge, including qualifying borrowers with a permanent disability rating from the Veterans Administration. | |
| Requires a lender to provide information on the impact of interest capitalization when granting deferment on for an unsubsidized Stafford Loan or forbearance for any FFELP loan and, for forbearance, to provide the borrower with specific information about interest and capitalization at least every 180 days during the forbearance. | |
| Adds items that the lender must disclose before disbursement and items that the lender must disclose before repayment. | |
| Requires a lender to provide a bill or statement that corresponds to each payment installment time period and include specific disclosures (for loans with a first payment due on or after July 1, 2009). | |
| Requires a lender to provide specified information to borrowers who notify the lender of difficulty in paying (for loans with a first payment due on or after July 1, 2009) and to borrowers who become 60 days delinquent (for loans that become delinquent on or after July 1, 2009). | |
| Eliminates Guarantor and ED obligations for insurance and reinsurance in instances of nondisclosure. | |
| Adds income-based repayment to plans the lender must offer (except for parent PLUS Loans and Consolidation Loans that discharged such loans) and adds income-based repayment for FFELP borrowers to repay defaulted loans to ED. | |
| Permits borrower eligibility for in-school deferment to be based on National Student Loan Data System information. |
A-5
| Adds prohibited inducements that can subject lenders and Guarantors to disqualification from the program and clarifies that both lenders and Guarantors may provide technical assistance comparable to that provided to schools by ED. | |
| Allows FFELP borrowers to consolidate directly into the DSLP to use the zero interest feature available to servicemembers. | |
| Requires a consolidation lender to provide disclosures regarding any loss of benefits, availability of repayment plans, and certain other information. | |
| Requires the Guarantor to notify a borrower twice of options to remove a loan from default. | |
| Limits a borrower to loan rehabilitation once and, upon successful rehabilitation, provides for financial and economic education materials to be available to the borrower and for removal of the default from the borrowers credit report. | |
| Mandates that both the transferor and transferee notify the borrower of certain transfer information when a loan transfer changes the party with which the borrower needs to communicate or send payments. | |
| Introduces a forgiveness program to repay FFELP Loans and to cancel DSLP (except no parent PLUS Loans) at $2000 per year up to an aggregate of $10,000, for non-defaulted borrowers employed full time in areas of national need (replacing the Child Care Loan Forgiveness Program). Subject to appropriations. | |
| Authorizes repayment of FFELP Loans (except parent PLUS Loans) at $6,000 per year up to an aggregate of $40,000 for attorneys employed full time as civil legal assistance attorneys. Subject to appropriations. | |
| Requires reporting to consumer reporting agencies to indicate that a loan is an education loan and to provide information on repayment status. | |
| Requires Guarantors to develop educational programs for budgeting and financial management. | |
| Raises to 30% the school cohort default rate for ineligibility effective in 2012. | |
| Increases to 15% the maximum cohort default rate for exempting loans from rules that would otherwise require multiple disbursement or delayed disbursement. |
| is a United States citizen, national or permanent resident; | |
| has been accepted for enrollment or is enrolled and maintaining satisfactory academic progress at a participating educational institution; and |
A-6
| is carrying at least one-half of the normal full-time academic workload for the course of study the student is pursuing. |
Date of First Disbursement | Special Allowance Margin | |
Before 10/17/86
|
3.50% | |
From 10/17/86 through 09/30/92
|
3.25% | |
From 10/01/92 through 06/30/95
|
3.10% | |
From 07/01/95 through 06/30/98
|
2.50% for Stafford Loans that are in In-School, Grace or Deferment 3.10% for Stafford Loans that are in Repayment and all other loans | |
From 07/01/98 through 12/31/99
|
2.20% for Stafford Loans that are in In-School, Grace or Deferment 2.80% for Stafford Loans that are in Repayment 3.10% for PLUS, SLS and FFELP Consolidation Loans |
A-7
Date of First Disbursement | Special Allowance Margin | |
From 01/01/00 through 09/30/07
|
1.74% for Stafford Loans that are in In-School, Grace or Deferment | |
2.34% for Stafford Loans that are in Repayment | ||
2.64% for PLUS and FFELP Consolidation Loans | ||
From 10/01/07 and after
|
1.19% for Stafford Loans that are in In-School, Grace or Deferment | |
1.79% for Stafford Loans that are in Repayment and PLUS | ||
2.09% for FFELP Consolidation Loans | ||
Note: The margins for loans held by an eligible not-for-profit holder are higher by 15 basis points. |
| Special Allowance Payments are available on variable rate PLUS Loans and SLS Loans only if the variable rate, which is reset annually, exceeds the applicable maximum borrower rate. Effective July 1, 2006, this limitation on special allowance for PLUS Loans made on and after January 1, 2000 is repealed. The variable rate is based on the weekly average one-year constant maturity Treasury yield for loans made before July 1, 1998 and based on the 91-day Treasury bill for loans made on or after July 1, 1998. The maximum borrower rate for these loans is between 9 percent and 12 percent. |
Date of First Disbursement | Maximum Origination Fee | |||
Before 07/01/06
|
3 | % | ||
From 7/01/06 through 06/30/07
|
2 | % | ||
From 7/01/07 through 06/30/08
|
1.5 | % | ||
From 7/01/08 through 06/30/09
|
1 | % | ||
From 7/01/09 through 06/30/10
|
.5 | % |
A-8
| federal reinsurance of Stafford Loans made by eligible lenders to qualified students; | |
| federal interest subsidy payments on Subsidized Stafford Loans paid by ED to holders of the loans in lieu of the borrowers making interest payments during in-school, grace and deferment periods; and | |
| Special Allowance Payments representing an additional subsidy paid by ED to the holders of eligible Stafford Loans. |
Maximum
|
||||||
Trigger Date | Borrower Rate | Borrower Rate | Interest Rate Margin | |||
Before 01/01/81
|
7% | 7% | N/A | |||
From 01/01/81 through 09/12/83
|
9% | 9% | N/A | |||
From 09/13/83 through 06/30/88
|
8% | 8% | N/A | |||
From 07/01/88 through 09/30/92
|
8% for 48 months; thereafter, 91-day Treasury + Interest Rate Margin | 8% for 48 months, then 10% | 3.25% for loans made before 7/23/92 and for loans made on or before 10/1/92 to new student borrowers; 3.10% for loans made after 7/23/92 and before 7/1/94 to borrowers with outstanding FFELP Loans | |||
From 10/01/92 through 06/30/94
|
91-day Treasury + Interest Rate Margin | 9% | 3.10% | |||
From 07/01/94 through 06/30/95
|
91-day Treasury + Interest Rate Margin | 8.25% | 3.10% | |||
From 07/01/95 through 06/30/98
|
91-day Treasury + Interest Rate Margin | 8.25% | 2.50% (In-School, Grace or Deferment); 3.10% (Repayment) | |||
From 07/01/98 through 06/30/06
|
91-day Treasury + Interest Rate Margin | 8.25% | 1.70% (In-School, Grace or Deferment); 2.30% (Repayment) | |||
From 07/01/06 through 06/30/08
|
6.8% | 6.8% | N/A | |||
From 07/01/08 through 06/30/09
|
6.0% for undergraduate subsidized loans; and 6.8% for unsubsidized loans and graduate subsidized loans. | 6.0%, 6.8% | N/A | |||
From 07/01/09 through 06/30/10
|
5.6% for undergraduate subsidized loans; and 6.8% for unsubsidized loans and graduate subsidized loans. | 5.6%, 6.8% | N/A |
A-9
| while the borrower is a qualified student, | |
| during the grace period, and | |
| during prescribed deferral periods. |
Dependent Student | Independent Student | |||||||||||||||||||||||
Maximum
|
Maximum
|
|||||||||||||||||||||||
Subsidized and
|
Additional
|
Annual Total
|
Subsidized and
|
Additional
|
Annual Total
|
|||||||||||||||||||
Borrower Academic Level | Unsubsidized | Unsubsidized | Amount | Unsubsidized | Unsubsidized | Amount | ||||||||||||||||||
Undergraduate (per year)
|
||||||||||||||||||||||||
1
(st)
year
|
$ | 3,500 | $ | 2,000 | $ | 5,500 | $ | 3,500 | $ | 6,000 | $ | 9,500 | ||||||||||||
2
(nd)
year
|
$ | 4,500 | $ | 2,000 | $ | 6,500 | $ | 4,500 | $ | 6,000 | $ | 10,500 | ||||||||||||
3
(rd)
year and above
|
$ | 5,500 | $ | 2,000 | $ | 7,500 | $ | 5,500 | $ | 7,000 | $ | 12,500 | ||||||||||||
Aggregate Limit
|
$ | 23,000 | $ | 8,000 | $ | 31,000 | $ | 23,000 | $ | 34,500 | $ | 57,500 | ||||||||||||
Graduate (per year)
|
N/A | N/A | N/A | $ | 8,500 | $ | 12,000 | $ | 20,500 | |||||||||||||||
Aggregate Limit (includes undergraduate)
|
N/A | N/A | N/A | $ | 65,500 | $ | 73,000 | $ | 138,500 |
Dependent Student
|
Independent Student | |||||||||||||||
Subsidized and
|
Subsidized and
|
Additional
|
||||||||||||||
Unsubsidized
|
Unsubsidized
|
Unsubsidized
|
||||||||||||||
On or After
|
On or After
|
On or After
|
Maximum Annual
|
|||||||||||||
Borrower Academic Level | 07/1/07 | 07/1/07 | 07/1/07 | Total Amount | ||||||||||||
Undergraduate (per year)
|
||||||||||||||||
1
(st)
year
|
$ | 3,500 | $ | 3,500 | $ | 4,000 | $ | 7,500 | ||||||||
2
(nd)
year
|
$ | 4,500 | $ | 4,500 | $ | 4,000 | $ | 8,500 | ||||||||
3
(rd)
year and above
|
$ | 5,500 | $ | 5,500 | $ | 5,000 | $ | 10,500 | ||||||||
Aggregate Limit
|
$ | 23,000 | $ | 23,000 | $ | 23,000 | $ | 46,000 | ||||||||
Graduate (per year)
|
N/A | $ | 8,500 | $ | 12,000 | $ | 20,500 | |||||||||
Aggregate Limit (includes undergraduate)
|
N/A | $ | 65,500 | $ | 73,000 | $ | 138,500 |
A-10
Independent Students | ||||||||||||||||
All Students
|
Additional
|
|||||||||||||||
Borrowers Academic Level Base
|
Subsidized
|
Subsidized and
|
Unsubsidized
|
|||||||||||||
Amount Subsidized and Unsubsidized
|
On or After
|
Unsubsidized On
|
Only On or
|
Maximum Annual
|
||||||||||||
On or After 10/1/93 | 1/1/87 | or After 10/1/93 | After 7/1/94 | Total Amount | ||||||||||||
Undergraduate (per year):
|
||||||||||||||||
1st year
|
$ | 2,625 | $ | 2,625 | $ | 4,000 | $ | 6,625 | ||||||||
2nd year
|
$ | 2,625 | $ | 3,500 | $ | 4,000 | $ | 7,500 | ||||||||
3rd year and above
|
$ | 4,000 | $ | 5,500 | $ | 5,000 | $ | 10,500 | ||||||||
Graduate (per year)
|
$ | 7,500 | $ | 8,500 | $ | 10,000 | $ | 18,500 | ||||||||
Aggregate Limit:
|
||||||||||||||||
Undergraduate
|
$ | 17,250 | $ | 23,000 | $ | 23,000 | $ | 46,000 | ||||||||
Graduate (including undergraduate)
|
$ | 54,750 | $ | 65,500 | $ | 73,000 | $ | 138,500 |
| The loan limits include both FFELP and DSLP loans. | |
| The amounts in the columns labeled Subsidized and Unsubsidized represent the combined maximum loan amount per year between Subsidized and Unsubsidized Stafford Loans. Accordingly, the maximum amount that a student may borrow under an Unsubsidized Stafford Loan is the difference between the combined maximum loan amount and the amount the student received in the form of a Subsidized Stafford Loan. |
| Students attending certain medical schools are eligible for higher annual and aggregate loan limits. | |
| The annual loan limits are sometimes reduced when the student is enrolled in a program of less than one academic year or has less than a full academic year remaining in his program. |
A-11
| enrolled in an approved graduate fellowship program or rehabilitation program; or | |
| seeking, but unable to find, full-time employment (subject to a maximum deferment of 3 years); or | |
| having an economic hardship, as defined in the Act (subject to a maximum deferment of 3 years); or | |
| serving on active duty during a war or other military operation or national emergency, or performing qualifying National Guard duty during a war or other military operation or national emergency (subject to a maximum deferment of 3 years, and effective July 1, 2006 on loans made on or after July 1, 2001). |
A-12
Interest
|
||||||||
Maximum
|
Rate
|
|||||||
Trigger Date | Borrower Rate | Borrower Rate | Margin | |||||
Before 10/01/81
|
9% | 9% | N/A | |||||
From 10/01/81 through 10/30/82
|
14% | 14% | N/A | |||||
From 11/01/82 through 06/30/87
|
12% | 12% | N/A | |||||
From 07/01/87 through 09/30/92
|
1-year Index + Interest Rate Margin | 12% | 3.25 | % | ||||
From 10/01/92 through 06/30/94
|
1-year Index + Interest Rate Margin | PLUS 10%, SLS 11% | 3.10 | % | ||||
From 07/01/94 through 06/30/98
|
1-year Index + Interest Rate Margin | 9% | 3.10 | % | ||||
From 6/30/98 through 06/30/06
|
91-day Treasury + Interest Rate Margin | 9% | 3.10 | % | ||||
From 07/01/06 and after
|
8.5% | 8.5% | N/A |
| the borrower rate is set at the maximum borrower rate and | |
| the sum of the average of the bond equivalent rates of 3-month Treasury bills auctioned during that quarter and the applicable interest rate margin exceeds the maximum borrower rate. |
A-13
A-14
Claims Paid Date | Maximum | 5% Trigger | 9% Trigger | |||||||||
Before October 1, 1993
|
100 | % | 90 | % | 80 | % | ||||||
October 1, 1993 September 30, 1998
|
98 | % | 88 | % | 78 | % | ||||||
On or after October 1, 1998
|
95 | % | 85 | % | 75 | % |
A-15
Source | Basis | |
Insurance Premium (Changed to Federal Default Fee July 1,
2006)
|
Up to 1% of the principal amount guaranteed, withheld from the proceeds of each loan disbursement. | |
Loan Processing and Issuance Fee
|
.4% of the principal amount guaranteed in each fiscal year, paid by ED | |
Account Maintenance Fee
|
.10% (reduced to .06% on October 1, 2007) of the original principal amount of loans outstanding, paid by ED. | |
Default Aversion Fee
|
1% of the outstanding amount of loans submitted by a lender for default aversion assistance, minus 1% of the unpaid principal and interest paid on default claims, which is, paid once per loan by transfers out of the Student Loan Reserve Fund. | |
Collection Retention
|
16% of the amount collected on loans on which reinsurance has been paid (10% or 18.5% of the amount collected for a defaulted loan that is purchased by a lender for consolidation or rehabilitation, respectively), withheld from gross receipts. |
A-16
G-1
G-2
Fixed Borrower Rate
|
7.25 | % | ||
SAP Spread over Commercial Paper Rate
|
(2.64 | )% | ||
Floor Strike
Rate
(1)
|
4.61 | % | ||
(1) | The interest rate at which the underlying index (Treasury bill or commercial paper) plus the fixed SAP spread equals the fixed borrower rate. Floor Income is earned anytime the interest rate of the underlying index declines below this rate. |
G-3
G-4
G-5
1
SLM CORPORATION
|
||||
By: | /s/ Mark L. Heleen | |||
Name: | Mark L. Heleen | |||
Title: | EVP and General Counsel | |||
ANTHONY P. TERRACCIANO
|
||||
/s/ Anthony P. Terracciano | ||||
Anthony P. Terracciano, Chairman | ||||
2
2
3
4
5
6
7
8
1. | Assumptions/Given: |
| Annual salary = $250,000 | ||
| Bonus (MIP) Target = 70% of annual rate ($175,000) | ||
| Current Corp MIP Score = 40% (score for the most recent quarter-end in current year) 1 | ||
| Termination Date = August 1, 2009 | ||
| 2008 bonus (paid in 2009) = $65,000 | ||
| 2007 bonus (paid in 2008) = $125,000 |
2. | Compute 2009 (current year) estimated annual bonus: |
| Bonus Target ($175,000) * most current Corp MIP Score (40%) = $70,000 |
3. | Define 24-month period: |
| Since Termination date is August 1, 2009, the look-back period would include: |
| 8 months in 2009 2 | ||
| All 12 months of 2008 | ||
| 4 months of 2007 |
4. | Prorate each years annual bonus: |
| 2009: 8 months @ $70,000 = $46,667 | ||
| 2008: 12 months @ $65,000 = $65,000 | ||
| 2007: 4 months @ $125,000 = $41,667 | ||
Total: 24 months = $153,333 |
5. | Annualize 24 month prorated total by dividing by 2: |
| $153,333 ÷ 2 = $76,667 | ||
| Round = $76,700 3 |
1 | Use whole months for the calculation regardless of the day within the month the termination falls. | |
2 | If the termination falls between the last day of the quarter and the day the company score for that month is finalized, TBD will be placed on the worksheet until the final company score is posted. | |
3 | Round to the nearest $100. |
9
6. | Assumptions/Given: |
| Annual salary = $250,000 | ||
| Bonus (MIP) Target = 70% of annual rate ($175,000) | ||
| Current Corp MIP Score = 40% (score for the most recent quarter-end in current year) 4 | ||
| Termination Date = June 30, 2009 | ||
| 2008 bonus (paid in 2009) = $65,000 | ||
| 2007 bonus (paid in 2008) = N/A |
7. | Compute 2009 (current year) estimated annual bonus: |
| Bonus Target ($175,000) * most current Corp MIP Score (40%) = $70,000 |
8. | Define 24-month period |
| Since Termination date is June 30, 2009, the look-back period would include: |
| 6 months in 2009 5 | ||
| All 12 months of 2008 | ||
| 0 months of 2007 No additional service time since 18 months total service |
9. | Prorate each years annual bonus: |
| 2009: 8 months @ $70,000 = $35,000 | ||
| 2008: 12 months @ $65,000 = $65,000 | ||
| 6 months no service = $0 | ||
Total: 24 months = $100,000 |
10. | Annualize 24 month prorated total by dividing by 2: |
| $100,000 ÷ 2 = $50,000 | ||
| Round = $50,000 6 |
4 | Use whole months for the calculation regardless of the day within the month the termination falls. | |
5 | If the termination falls between the last day of the quarter and the day the company score for that month is finalized, TBD will be placed on the worksheet until the final company score is posted. | |
6 | Round to the nearest $100. |
10
11
12
13
14
15
|
||
|
||
Name:
|
Date | |
|
||
|
||
|
||
Senior
Vice President, Human Resources
|
Date | |
SLM Corporation
|
||
|
16
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3
4
5
6
7
8
9
10
11
12
13
14
|
Date | |||
[INSERT NAME]
|
||||
|
||||
Name:
Senior Vice President, Administration SLM Corporation |
Date |
15
2
3
9. | Other Benefits . |
4
5
6
7
8
9
10
11
12
13
SLM CORPORATION | EXECUTIVE: | |||||||
|
||||||||
By:
|
/s/ Albert L. Lord | /s/ Laurent C. Lutz | ||||||
|
|
|
||||||
|
Title: Vice Chairman and CEO |
14
1 of 7
2 of 7
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4 of 7
5 of 7
6 of 7
/s/ John J. Hewes
|
1/31/11 | |
|
||
|
Date | |
|
||
/s/ Albert Lord
|
1/31/11 | |
|
||
Al Lord
Vice Chairman and Chief Executive Officer SLM Corporation |
Date |
7 of 7
1
A. | Option Grant . Net-Settled Stock Options (the Options) to purchase a total of _____ shares of Common Stock, par value $.20, of SLM Corporation (the Corporation) are hereby granted to _____ (the Grantee) subject in all respects to the terms and provisions of the SLM Corporation 2009-2012 Incentive Plan (the Plan), which is incorporated herein by reference, and this Stock Option Agreement (the Agreement). The Options are non-qualified stock options and are not intended to qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended, and will be interpreted accordingly. | |
B. | Option Price . The purchase price per share is $_____ dollars (the Option Price). | |
C. | Grant Date . The date of grant of these Options is __________ (the Grant Date). | |
D. | Vesting; Exercisability . The Options are not vested as of the Grant Date. Unless vested earlier as set forth below, the Options will vest in three installments, on the first, second and third anniversaries of the Grant Date. |
| If the Grantee voluntarily ceases to be an employee of the Corporation (or one of its subsidiaries) for any reason or is involuntarily terminated for cause, as determined by the Corporation in its sole discretion, he/she shall forfeit any unvested Options as of the date of such termination of employment. | ||
| If the Grantees employment with the Corporation (or one of its subsidiaries) is terminated by the Corporation for any reason other than Misconduct, as defined in the Plan, or for cause, as determined by the Corporation in its sole discretion, or if the Grantee voluntarily ceases to be an employee of the Corporation (or one of its subsidiaries) and meets the Corporations retirement eligibility requirements under the Corporations current retirement eligibility policy, which shall be determined by the Corporation in its sole discretion, all unvested Options shall continue to vest based on their original vesting terms and each vested portion of the Options will be exercisable for one year after such portion vests. | ||
| Upon termination of employment for death or Disability or as provided for under the SLM Corporation Change in Control Severance Plan for Senior Officers, all unvested Options will vest and vested Options (taking into account any vesting acceleration provided for, if any) are exercisable until the earlier of: (1) the Expiration Date; or (2) one year from the date of termination. | ||
| Upon termination of employment for all reasons except Misconduct, as defined in the Plan, and except as otherwise provided in the SLM Corporation Change in Control Severance Plan, vested Options (taking into account any vesting acceleration, if any) are exercisable until the earlier of: (1) the Expiration Date; or (2) one year from the date of termination. | ||
| Upon termination of employment for Misconduct, any Options, vested or unvested, are forfeited. |
E. | Expiration . These Options expire ten years from the Grant Date (the Expiration Date), subject to the provisions of the Plan and this Agreement, which may provide for earlier expiration in certain instances, including Optionees termination of employment. | |
F. | Non-Transferable; Binding Effect . These Options may not be transferred except as provided for herein. All or any part of these Options may be transferred by the Optionee by will or by the laws of descent and distribution. In addition, Optionee may transfer all or any part of any Option to Immediate Family Members. Immediate Family Members means children, grandchildren, spouse or common law spouse, siblings or parents of the Optionee or bona fide trusts, partnerships or other entities controlled by and of which all beneficiaries are Immediate Family Members of the Optionee. Any Options that are transferred are further conditioned on the Optionees transferees and Immediate Family Members agreeing to abide by the Corporations then current stock option transfer guidelines. The terms of these Options shall be binding upon the executors, administrators, heirs, and successors of the Optionee. | |
G. | Net-Settlement upon Option Exercise; Taxes . These Options shall be exercised only in accordance with the terms of this Agreement. Each exercise must be for no fewer than fifty (50) Options, other than an exercise for all remaining Options. Upon exercise of all or part of the Options, the Optionee shall receive from the Corporation the number of shares of Common Stock resulting from the following formula: the total number of Options exercised less the sum of Shares for the Option Cost and Shares for Taxes, rounded up to the nearest whole share. Shares for the Option Cost equals the Option Price multiplied by the number of Options exercised divided by the fair market value of SLM common stock at the time of exercise. Shares for Taxes equals the tax liability (the statutory withholding maximum) divided by the fair market value of SLM common stock at the time of exercise. Optionee shall receive cash for any resulting fractional share amount. As a condition to the issuance of shares of Common Stock of the Corporation pursuant to these Options, the Optionee agrees to remit to the Corporation (through the procedure described in this paragraph) at the time of any exercise of these Options any taxes required to be withheld by the Corporation under federal, state, or local law as a result of the exercise of these Options. |
H. | Vesting Upon Change In Control . Notwithstanding anything to the contrary in this Agreement, including Section (D): |
(I) | In the event of a Change of Control Transaction or a Change of Control in which the acquiring or surviving company in the transaction does not assume or continue outstanding Awards upon the Change of Control or Change of Control Transaction, immediately prior to such transactions, then if these Options are not assumed or continued as described above, then any portion of these Options that were not vested shall become 100 percent vested and exercisable effective immediately prior to the consummation of such Change of Control or Change of Control Transaction; and |
Page 1 of 3
(II) | If Optionees employment shall terminate within twenty-four months of a Change of Control or a Change of Control Transaction other than for Misconduct, any Options not previously vested shall immediately become vested and exercisable upon such employment termination and such Options shall be exercisable until the earlier of: (1) the Expiration Date; or (2) three months from the date of termination. |
I. | Clawback Provisions. Notwithstanding anything to the contrary herein, if the Board of Directors of the Corporation, or an appropriate committee thereof, determines that, any material misstatement of financial results or a performance metric criteria has occurred as a result of the conduct of any officer at the Senior Vice President level or above (Senior Officer), or such Senior Officer has committed a material violation of corporate policy or has committed fraud or misconduct, then the Board or committee shall consider all factors, with particular scrutiny when one the top 20 members of management are involved, and the Board or such Committee, may in its sole discretion require reimbursement of any compensation resulting from the vesting and exercise of Options and the cancellation of any outstanding Options from such Senior Officer (whether or not such individual is currently employed by the Corporation) during the three-year period following the date the Board first learns of the violation, fraud or misconduct. | |
J. | Board Interpretation . The Optionee hereby agrees to accept as binding, conclusive, and final all decisions and interpretations of the Board of Directors of the Corporation and, where applicable, the Compensation and Personnel Committee of the Board of Directors (the Committee) concerning any questions arising under this Agreement or the Plan. | |
K. | Stockholder Rights . The Optionee shall not be deemed a stockholder of the Corporation with respect to any of the shares of Common Stock subject to the Options, except to the extent that such shares shall have been purchased and transferred to the Optionee. The Corporation shall not be required to issue or transfer any shares of Common Stock purchased upon exercise of the Options until all applicable requirements of law have been complied with and such shares shall have been duly listed on any securities exchange on which the Common Stock may then be listed. | |
L. | No Right to Continued Employment . Nothing in the Plan, in this Agreement or any other instrument executed pursuant thereto or hereto shall confer upon the Optionee any right to continued employment with the Corporation or any of its subsidiaries or affiliates. | |
M. | Amendments for Accounting Charges: The Committee reserves the right to unilaterally amend this Agreement to reflect any changes in applicable law or financial accounting standards. | |
N. | Securities Law Compliance; Restrictions on Resales of Option Shares . The Corporation may impose such restrictions, conditions or limitations as it determines appropriate as to the timing and manner of any exercise of the Option and/or any resales by the Optionee or other subsequent transfers by the Optionee of any shares of Common Stock issued as a result of the exercise of the Option, including without limitation (a) restrictions under an insider trading policy, (b) restrictions that may be necessary in the absence of an effective registration statement under the Securities Act of 1933, as amended, covering the Option and/or the Common Stock underlying the Option and (c) restrictions as to the use of a specified brokerage firm or other agent for exercising the Option and/or for such resales or other transfers. The sale of the shares underlying the Option must also comply with other applicable laws and regulations governing the sale of such shares. | |
O. | Data Privacy . As an essential term of this Option, the Optionee consents to the collection, use and transfer, in electronic or other form, of personal data as described in this Option Agreement for the exclusive purpose of implementing, administering and managing Optionees participation in the Plan. By entering into this Agreement and accepting the Option, the Optionee acknowledges that the Corporation holds certain personal information about the Optionee, including, but not limited to, name, home address and telephone number, date of birth, social security number or other identification number, salary, tax rates and amounts, nationality, job title, any shares of stock held in the Corporation, details of all options or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding, for the purpose of implementing, administering and managing the Plan (Data). Optionee acknowledges that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in jurisdictions that may have different data privacy laws and protections, and Optionee authorizes the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing the Plan, including any requisite transfer of such Data as may be required to a broker or other third party with whom the Optionee or the Corporation may elect to deposit any shares of Common Stock acquired upon exercise of the Option. Optionee acknowledges that Data may be held only as long as is necessary to implement, administer and manage the Optionees participation in the Plan as determined by the Corporation, and that Optionee may request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, provided however, that refusing or withdrawing Optionees consent may adversely affect Optionees ability to participate in the Plan. | |
P. | Electronic Delivery . The Corporation may, in its sole discretion, decide to deliver any documents related to any options granted under the Plan by electronic means or to request Optionees consent to participate in the Plan by electronic means. Optionee hereby consents to receive such documents by electronic delivery and, if requested, to agree to participate in the Plan through an on-line or electronic system established and maintained by the Corporation or another third party designated by the Corporation, and such consent shall remain in effect throughout Optionees term of service with the Corporation and thereafter until withdrawn in writing by Optionee. |
Page 2 of 3
Q. | Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law. | |
R. | Notices . All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given if personally delivered, telefaxed or telecopied to, or, if mailed, when received by, the other party at the following addresses: |
If to the Corporation to: |
|
Manager, Stock Plan Administration | Fax: (703) 984-6006 | ||
|
Sallie Mae | |||
|
12061 Bluemont Way | |||
|
Reston, VA 20190 |
If to the Optionee, to (i) the last address maintained in the Corporations Human Resources files for the Optionee or (ii) the Optionees mail delivery code or place of work at the Corporation. |
S. | Plan Controls; Entire Agreement; Capitalized Terms . In the event of any conflict between the provisions of this Agreement and the provisions of the Plan, the terms of the Plan control, except as expressly stated otherwise herein. This Agreement and the Plan together set forth the entire agreement and understanding between the parties as to the subject matter hereof and supersede all prior oral and written and all contemporaneous or subsequent oral discussions, agreements and understandings of any kind or nature. Capitalized terms not defined herein shall have the meanings as described in the Plan. | |
T. | Miscellaneous . In the event that any provision of this Agreement is declared to be illegal, invalid or otherwise unenforceable by a court of competent jurisdiction, such provision shall be reformed, if possible, to the extent necessary to render it legal, valid and enforceable, or otherwise deleted, and the remainder of this Agreement shall not be affected except to the extent necessary to reform or delete such illegal, invalid or unenforceable provision. The headings in this Agreement are solely for convenience of reference, and shall not constitute a part of this Agreement, nor shall they affect its meaning, construction or effect. The Optionee shall cooperate and take such actions as may be reasonably requested by the Corporation in order to carry out the provisions and purposes of the Agreement. The Optionee is responsible for complying with all laws applicable to Optionee, including federal and state securities reporting laws. |
SLM CORPORATION | ||||
|
||||
|
/s/ Albert L. Lord | |||
|
BY: | Albert L. Lord | ||
|
Chief Executive Officer |
Page 3 of 3
1. | Vesting Schedule . Unless vested earlier as set forth below, the Award will vest, and if RSUs will be converted into shares of common stock, in three annual installments on the first, second and third anniversaries of the Grant Date. | ||
If compensation paid to the Grantee of the Award might be subject to the tax deduction limitations of section 162(m) of the Internal Revenue Code, actual vesting of the Award will occur upon certification by the Compensation and Personnel Committee that applicable performance targets have been met. | |||
2. | Employment Termination; Death; Disability . Except as provided below, if the Grantee voluntarily ceases to be an employee of the Corporation (or one of its subsidiaries) for any reason or his or her employment is terminated by the Corporation for cause, as determined by the Corporation in its sole discretion, he/she shall forfeit any portion of the Award that has not vested as of the date of such termination of employment. | ||
If not previously vested, the Award will continue to vest based on the original vesting terms in the event that (i) the Grantees employment is terminated by the Corporation for any reason other than Misconduct, as defined in the Plan, or for cause, as determined by the Corporation in its sole discretion, or (ii) the Grantee voluntarily ceases to be an employee of the Corporation (or one of its subsidiaries) and meets the Corporations retirement eligibility requirements under the Corporations current retirement eligibility policy, which shall be determined by the Corporation in its sole discretion. | |||
If not previously vested, the Award will vest, and if RSUs, the RSUs will be converted into shares of common stock, upon death, or Disability, or as provided for in the SLM Corporation Change in Control Severance Plan for Senior Officers. If the Grantee becomes a covered employee within the meaning of Section 162(m) of the Internal Revenue Code, any applicable provision regarding acceleration of vesting of the Award, if any, shall not apply to the extent necessary for the satisfaction of such section.. | |||
The entire Award, whether vested or unvested, shall be forfeited upon termination of employment due to Misconduct, as defined in the Plan. |
3. | Change of Control . Notwithstanding anything to the contrary in this Agreement,: |
(a) | In the event of a Change of Control Transaction or a Change of Control in which the acquiring or surviving company in the transaction does not assume or continue outstanding Awards upon the Change of Control or Change of Control Transaction, immediately prior to such transactions, then if the Award is not assumed or continued as described above, then any portion of the Award that is not vested shall become 100 percent vested, and if RSUs converted into shares of common stock, effective immediately prior to the consummation of such Change of Control or Change of Control Transaction; and | ||
(b) | If Grantees employment shall terminate within twenty-four months of a Change of Control or a Change of Control Transaction other than for Misconduct, any portion of the Award not previously vested shall immediately become vested, and if RSUs be converted into shares of common stock, upon such employment termination. |
4. | Taxes; Dividends . The Grantee of the Award shall transfer a sufficient number of shares of the Corporations stock to satisfy the income and employment tax withholding requirements that accrue upon the Award becoming vested, if RSUs converted into shares of common stock and transferable and the Compensation and Personnel Committee hereby approves the transfer of such shares to the Corporation for purposes of SEC Rule 16b-3. Dividends declared on an unvested Award will not be paid currently. Instead, amounts equal to such dividends will be credited to an account established on behalf of the Grantee and such amounts will be deemed |
5. | Clawback Provision . Notwithstanding anything to the contrary herein, if the Board of Directors of the Corporation, or an appropriate committee thereof, determines that, any material misstatement of financial results or a performance metric criteria has occurred as a result of the conduct of any officer at the Senior Vice President level or above (Senior Officer), or such Senior Officer has committed a material violation of corporate policy or has committed fraud or misconduct, then the Board or committee shall consider all factors, with particular scrutiny when one the top 20 members of management are involved, and the Board or such Committee, may in its sole discretion require reimbursement of any compensation resulting from the vesting and exercise of Options and/or Restricted Stock/RSUs and the cancellation of any outstanding Options and/or Restricted Stock/RSUs from such Senior Officer (whether or not such individual is currently employed by the Corporation) during the three-year period following the date the Board first learns of the violation, fraud or misconduct. | ||
6. | Capitalized terms not otherwise defined herein are defined in the Plan. |
Jurisdiction of | ||
Name | Incorporation | |
Bluemont Funding LLC
|
Delaware | |
Bull Run 1 LLC
|
Delaware | |
Cavalier Funding LLC,
|
Delaware | |
Cavalier Funding l LLC
|
Delaware | |
Churchill Funding LLC
|
Delaware | |
HICA Holding, Inc.
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South Dakota | |
HICA Education Loan Corporation
|
South Dakota | |
Mustang Funding I, LLC
|
Delaware | |
Mustang Funding II, LLC
|
Delaware | |
Nellie Mae Corporation
|
Delaware | |
Phoenix Fundings LLC
|
Delaware | |
Sallie Mae Bank
|
Utah | |
Sallie Mae Canada Financial Corporation
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Canada | |
Sallie Mae Education Trust
|
Delaware | |
Sallie Mae UK Holding Corporation
|
Delaware | |
Sallie Mae UK Loan Corporation
|
Delaware | |
Secondary Market Company, LLC
|
Delaware | |
Secondary Market Services, LLC
|
Delaware | |
SLFR, LLC
|
Delaware | |
SLM Education Credit Finance Corporation
|
Delaware | |
SLM Education Credit Funding LLC
|
Delaware | |
SLM Funding LLC
|
Delaware | |
SLM Investment Corporation
|
Delaware | |
SLM Originations Corporation
|
Delaware | |
Southwest Student Services Corporation
|
Delaware | |
Southwest Student Services Finance Corporation
|
Delaware | |
SSSC I LLC
|
Delaware | |
SSSC II LLC
|
Delaware | |
SSSC IV LLC
|
Delaware | |
SSSC Partners, LLC
|
Delaware | |
Student Loan Finance Association, Inc.
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Idaho | |
Student Loan Finance Association Washington, Inc.
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Washington | |
Student Loan Funding LLC
|
Delaware | |
Student Loan Funding Holdings LLC
|
Delaware | |
Student Loan Funding Resources LLC
|
Ohio | |
Town Hall Funding LLC
|
Delaware | |
Town Center Funding LLC
|
Delaware | |
VG Funding, LLC
|
Delaware | |
VK Funding LLC
|
Delaware |
Jurisdiction of | ||
Name | Incorporation | |
VL Funding LLC
|
Delaware | |
Washington Resources LLC
|
Washington |
* | Pursuant to Item 601(b)(21)(ii) of Regulation S-K, the names of other subsidiaries of SLM Corporation are omitted because, considered in the aggregate, they would not constitute a significant subsidiary as of the end of the year covered by this report. |
/s/ PricewaterhouseCoopers LLP
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McLean, VA
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February 28, 2011
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1. | I have reviewed this annual report on Form 10-K of SLM Corporation; | ||
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | ||
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
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/s/ Albert L. Lord
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Vice Chairman and Chief Executive Officer | |||
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(Principal Executive Officer) | |||
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February 28, 2011 |
1. | I have reviewed this annual report on Form 10-K of SLM Corporation; | ||
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | ||
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
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/s/ Jonathan C. Clark
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Executive Vice President and Chief Financial Officer | |||
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(Principal Financial and Accounting Officer) | |||
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February 28, 2011 |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | ||
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
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/s/ Albert L. Lord
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Vice Chairman and Chief Executive Officer | |||
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(Principal Executive Officer) | |||
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February 28, 2011 |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | ||
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
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/s/ Jonathan C. Clark
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Executive Vice President and Chief Financial Officer | |||
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(Principal Financial and Accounting Officer) | |||
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February 28, 2011 |