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SLM Corp - Quarter Report: 2023 March (Form 10-Q)



 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
 
(Mark One)
☑    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2023
or
☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File Number: 001-13251
 
SLM Corporation
(Exact name of registrant as specified in its charter)
 
Delaware52-2013874
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
300 Continental DriveNewark,Delaware19713
(Address of principal executive offices)(Zip Code)
(302) 451-0200
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $.20 per shareSLMThe NASDAQ Global Select Market
Floating Rate Non-Cumulative Preferred Stock, Series B, par value $.20 per shareSLMBPThe NASDAQ Global Select Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer Accelerated filer
Non-accelerated filer(Do not check if a smaller reporting company)Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  No  
As of March 31, 2023, there were 242,249,757 shares of common stock outstanding.





SLM CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS
INDEX

Part I. Financial Information  
Item 1.
Item 1.
Item 2.
Item 3.
Item 4.
PART II. Other Information
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.


2 SLM CORPORATION




 
CONSOLIDATED BALANCE SHEETS (Unaudited)
March 31,December 31,
(Dollars in thousands, except share and per share amounts)20232022
Assets
Cash and cash equivalents$3,716,379 $4,616,117 
Investments:
Trading investments at fair value (cost of $41,282 and $47,554, respectively)
51,342 55,903 
Available-for-sale investments at fair value (cost of $2,487,749 and $2,554,332, respectively)
2,311,062 2,342,089 
Other investments98,067 94,716 
Total investments2,460,471 2,492,708 
Loans held for investment (net of allowance for losses of $1,479,306 and $1,357,075, respectively)
21,087,563 19,626,868 
Loans held for sale26,202 29,448 
Restricted cash 181,764 156,719 
Other interest-earning assets13,031 11,162 
Accrued interest receivable1,331,017 1,202,059 
Premises and equipment, net137,890 140,728 
Goodwill and acquired intangible assets, net116,001 118,273 
Income taxes receivable, net337,177 380,058 
Tax indemnification receivable2,858 2,816 
Other assets43,548 34,073 
Total assets$29,453,901 $28,811,029 
Liabilities
Deposits$21,803,666 $21,448,071 
Long-term borrowings5,513,976 5,235,114 
Other liabilities309,164 400,874 
Total liabilities27,626,806 27,084,059 
Commitments and contingencies
Equity
Preferred stock, par value $0.20 per share, 20 million shares authorized:
Series B: 2.5 million and 2.5 million shares issued, respectively, at stated value of $100 per share
251,070 251,070 
Common stock, par value $0.20 per share, 1.125 billion shares authorized: 437.6 million and 435.1 million shares issued, respectively
87,530 87,025 
Additional paid-in capital1,121,082 1,109,072 
Accumulated other comprehensive loss (net of tax benefit of ($25,139) and ($30,160), respectively)
(78,333)(93,870)
Retained earnings3,250,478 3,163,640 
Total SLM Corporation stockholders’ equity before treasury stock4,631,827 4,516,937 
Less: Common stock held in treasury at cost: 195.4 million and 194.4 million shares, respectively
(2,804,732)(2,789,967)
Total equity1,827,095 1,726,970 
Total liabilities and equity$29,453,901 $28,811,029 






See accompanying notes to consolidated financial statements.
SLM CORPORATION 3




 
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(Dollars in thousands, except per share amounts)
Three Months Ended 
 March 31,
20232022
Interest income:
Loans$582,784 $458,044 
Investments11,331 5,479 
Cash and cash equivalents43,483 1,515 
Total interest income637,598 465,038 
Interest expense:
Deposits183,531 49,537 
Interest expense on short-term borrowings3,018 2,875 
Interest expense on long-term borrowings45,981 37,594 
Total interest expense232,530 90,006 
Net interest income405,068 375,032 
Less: provisions for credit losses114,112 98,050 
Net interest income after provisions for credit losses290,956 276,982 
Non-interest income:
Gains (losses) on sales of loans, net(9)9,881 
Gains (losses) on securities, net1,711 (3,580)
Gains (losses) on derivatives and hedging activities, net— (5)
Other income 20,009 15,629 
Total non-interest income21,711 21,925 
Non-interest expenses:
Operating expenses:
Compensation and benefits87,649 71,981 
FDIC assessment fees11,529 5,684 
Other operating expenses55,361 54,341 
Total operating expenses154,539 132,006 
Acquired intangible assets amortization expense2,272 733 
Total non-interest expenses156,811 132,739 
Income before income tax expense 155,856 166,168 
Income tax expense37,338 37,356 
Net income 118,518 128,812 
Preferred stock dividends4,063 1,275 
Net income attributable to SLM Corporation common stock$114,455 $127,537 
Basic earnings per common share $0.47 $0.46 
Average common shares outstanding241,497 276,977 
Diluted earnings per common share$0.47 $0.45 
Average common and common equivalent shares outstanding243,549 280,654 
Declared dividends per common share$0.11 $0.11 





See accompanying notes to consolidated financial statements.
4 SLM CORPORATION




 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(Dollars in thousands)
Three Months Ended 
 March 31,
20232022
Net income$118,518 $128,812 
Other comprehensive income (loss):
Unrealized gains (losses) on investments35,556 (81,041)
Unrealized gains (losses) on cash flow hedges(14,999)52,530 
Total unrealized gains (losses)20,557 (28,511)
Income tax (expense) benefit(5,020)6,894 
Other comprehensive income (loss), net of tax (expense) benefit15,537 (21,617)
Total comprehensive income$134,055 $107,195 






















See accompanying notes to consolidated financial statements.
SLM CORPORATION 5





CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited)
Common Stock Shares
(In thousands, except share and per share amounts)Preferred Stock SharesIssuedTreasuryOutstandingPreferred StockCommon StockAdditional Paid-In CapitalAccumulated
Other
Comprehensive
Loss
Retained EarningsTreasury StockTotal Equity
Balance at December 31, 20212,510,696 432,013,372 (153,056,639)278,956,733 $251,070 $86,403 $1,074,384 $(17,897)$2,817,134 $(2,061,383)$2,149,711 
Net income— — — — — — — — 128,812 — 128,812 
Other comprehensive loss, net of tax— — — — — — — (21,617)— — (21,617)
Total comprehensive income— — — — — — — — — — 107,195 
Cash dividends declared:
Common stock ($0.11 per share)
— — — — — — — — (30,493)— (30,493)
Preferred Stock, Series B ($0.51 per share)
— — — — — — — — (1,275)— (1,275)
Dividend equivalent units related to employee stock-based compensation plans— — — — — — 618 — (634)— (16)
Issuance of common shares— 2,594,817 — 2,594,817 — 519 (71)— — — 448 
Stock-based compensation expense— — — — — — 11,921 — — — 11,921 
Common stock repurchased— — (9,533,392)(9,533,392)— — — — — (175,943)(175,943)
Shares repurchased related to employee stock-based compensation plans— — (934,602)(934,602)— — — — — (17,341)(17,341)
Balance at March 31, 20222,510,696 434,608,189 (163,524,633)271,083,556 $251,070 $86,922 $1,086,852 $(39,514)$2,913,544 $(2,254,667)$2,044,207 













See accompanying notes to consolidated financial statements.
6 SLM CORPORATION




CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited)
Common Stock Shares
(In thousands, except share and per share amounts)Preferred Stock SharesIssuedTreasuryOutstandingPreferred StockCommon StockAdditional Paid-In CapitalAccumulated
Other
Comprehensive
Loss
Retained EarningsTreasury StockTotal Equity
Balance at December 31, 20222,510,696 435,121,140 (194,445,696)240,675,444 $251,070 $87,025 $1,109,072 $(93,870)$3,163,640 $(2,789,967)$1,726,970 
Net income— — — — — — — — 118,518 — 118,518 
Other comprehensive income, net of tax— — — — — — — 15,537 — — 15,537 
Total comprehensive income— — — — — — — — — — 134,055 
Cash dividends declared:
Common stock ($0.11 per share)
— — — — — — — — (26,635)— (26,635)
Preferred Stock, Series B ($1.62 per share)
— — — — — — — — (4,063)— (4,063)
Issuance of common shares— 2,523,744 — 2,523,744 — 505 474 — (982)— (3)
Stock-based compensation expense— — — — — — 11,536 — — — 11,536 
Shares repurchased related to employee stock-based compensation plans— — (949,431)(949,431)— — — — — (14,765)(14,765)
Balance at March 31, 20232,510,696 437,644,884 (195,395,127)242,249,757 $251,070 $87,530 $1,121,082 $(78,333)$3,250,478 $(2,804,732)$1,827,095 

















See accompanying notes to consolidated financial statements.

SLM CORPORATION 7



CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended 
 March 31,
(Dollars in thousands)20232022
Operating activities
Net income$118,518 $128,812 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provisions for credit losses114,112 98,050 
Income tax expense37,338 37,356 
Amortization of brokered deposit placement fee3,121 3,425 
Amortization of Secured Borrowing Facility upfront fee723 569 
Amortization of deferred loan origination costs and loan premium/(discounts), net3,421 4,455 
Net amortization of discount on investments(622)965 
Increase in tax indemnification receivable(42)(108)
Depreciation of premises and equipment4,524 4,189 
Acquired intangible assets amortization expense2,272 733 
Stock-based compensation expense11,536 11,921 
Unrealized (gains) losses on derivatives and hedging activities, net(56)315 
(Gains) losses on sales of loans, net(9,881)
(Gains) losses on securities, net(1,711)3,580 
Acquisition transaction costs, net— 2,511 
Other adjustments to net income, net3,063 3,655 
Changes in operating assets and liabilities:
Increase in accrued interest receivable(257,888)(185,294)
Increase in non-marketable securities— (992)
(Increase) decrease in other interest-earning assets(1,869)328 
Increase in other assets(26,632)(17,529)
Increase (decrease) in income taxes payable, net2,483 (4,243)
Increase in accrued interest payable20,358 14,779 
Decrease in other liabilities(23,770)(34,808)
Total adjustments(109,630)(66,024)
Total net cash provided by operating activities8,888 62,788 
Investing activities
Loans acquired and originated(2,463,358)(2,215,958)
Net proceeds from sales of loans held for investment(9)45,729 
Proceeds from FFELP Loan claim payments11,274 5,594 
Net decrease in loans held for investment (other than loans acquired and originated, and loan sales)912,681 1,153,297 
Purchases of available-for-sale securities(4,992)(536,633)
Proceeds from sales and maturities of available-for-sale securities73,352 686,806 
Purchase of subsidiary, net of cash acquired— (127,702)
Total net cash used in investing activities(1,471,052)(988,867)
Financing activities
Brokered deposit placement fee(2,634)(2,207)
Net increase (decrease) in certificates of deposit515,909 (127,815)
Net increase (decrease) in other deposits(167,836)543,767 
Borrowings collateralized by loans in securitization trusts - issued569,871 — 
Borrowings collateralized by loans in securitization trusts - repaid(293,120)(381,005)
Issuance costs for unsecured debt offering— (360)
Fees paid on Secured Borrowing Facility(16)— 
Common stock dividends paid(26,635)(30,493)
Preferred stock dividends paid(4,063)(1,275)
Common stock repurchased(4,005)(169,322)
Total net cash provided by (used in) financing activities587,471 (168,710)
Net increase (decrease) in cash, cash equivalents and restricted cash(874,693)(1,094,789)
Cash, cash equivalents and restricted cash at beginning of period4,772,836 4,545,344 
8 SLM CORPORATION


Cash, cash equivalents and restricted cash at end of period$3,898,143 $3,450,555 
Cash disbursements made for:
Interest$198,874 $68,458 
Income taxes paid$4,700 $5,066 
Income taxes refunded$(7,273)$(916)
Reconciliation of the Consolidated Statements of Cash Flows to the Consolidated Balance Sheets:
Cash and cash equivalents$3,716,379 $3,262,595 
Restricted cash181,764 187,960 
Total cash, cash equivalents and restricted cash$3,898,143 $3,450,555 



















See accompanying notes to consolidated financial statements.
SLM CORPORATION 9





1. Significant Accounting Policies
Basis of Presentation
The accompanying unaudited, consolidated financial statements of SLM Corporation (“Sallie Mae,” “SLM,” the “Company,” “we,” or “us”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information. Accordingly, they do not include all the information and footnotes required by GAAP for complete consolidated financial statements. The consolidated financial statements include the accounts of SLM Corporation and its majority-owned and controlled subsidiaries after eliminating the effects of intercompany accounts and transactions. In the opinion of management, all adjustments considered necessary for a fair statement of the results for the interim periods have been included. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results for the year ending December 31, 2023 or for any other period. These unaudited financial statements should be read in conjunction with the audited financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”).
Consolidation
The consolidated financial statements include the accounts of the Company and its majority-owned and controlled subsidiaries after eliminating the effects of intercompany accounts and transactions.
We consolidate any variable interest entity (“VIE”) where we have determined we are the primary beneficiary. The primary beneficiary is the entity which has both: (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance; and (ii) the obligation to absorb losses or receive benefits of the entity that could potentially be significant to the VIE.

10 SLM CORPORATION


2. Investments
Trading Investments
We periodically sell Private Education Loans through securitization transactions where we are required to retain a five percent vertical risk retention interest (i.e., five percent of each class issued in the securitizations). We classify those vertical risk retention interests related to the transactions as available-for-sale investments, except for the interest in the residual classes, which we classify as trading investments recorded at fair value with changes recorded through earnings.
At December 31, 2022 we had a $5 million investment in a convertible debt security classified as a trading investment. In March 2023, this security, and the related accrued interest, was converted into equity securities classified as investments in non-marketable securities.
At March 31, 2023 and December 31, 2022, we had $51 million and $56 million, respectively, classified as trading investments.
Available-for-Sale Investments
The amortized cost and fair value of securities available for sale are as follows:

As of March 31, 2023
(dollars in thousands)
Amortized Cost
Allowance for credit losses(1)
Gross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Available-for-sale:
Mortgage-backed securities$387,158 $— $62 $(61,886)$325,334 
Utah Housing Corporation bonds3,460 — — (294)3,166 
U.S. government-sponsored enterprises and Treasuries1,758,032 — — (92,548)1,665,484 
Other securities339,099 — 334 (22,355)317,078 
Total $2,487,749 $— $396 $(177,083)$2,311,062 
As of December 31, 2022
(dollars in thousands
Amortized Cost
Allowance for credit losses(1)
Gross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Available-for-sale:
Mortgage-backed securities$389,067 $— $$(68,705)$320,364 
Utah Housing Corporation bonds3,584 — — (357)3,227 
U.S. government-sponsored enterprises and Treasuries1,804,726 — — (115,416)1,689,310 
Other securities356,955 — 33 (27,800)329,188 
Total $2,554,332 $— $35 $(212,278)$2,342,089 


(1) Represents the amount of impairment that has resulted from credit-related factors and that was recognized in the consolidated balance sheets (as a credit loss expense on available-for-sale securities). The amount excludes unrealized losses related to non-credit factors.

SLM CORPORATION 11


2.Investments (Continued)
The following table summarizes the amount of gross unrealized losses for our available-for-sale securities and the estimated fair value for securities having gross unrealized loss positions, categorized by length of time the securities have been in an unrealized loss position:

(Dollars in thousands)
Less than 12 months12 months or moreTotal
Gross
Unrealized
Losses
Estimated
Fair Value
Gross
Unrealized
Losses
Estimated
Fair Value
Gross
Unrealized
Losses
Estimated
Fair Value
As of March 31, 2023:
Mortgage-backed securities$(1,138)$22,201 $(60,748)$297,543 $(61,886)$319,744 
Utah Housing Corporation bonds— — (294)3,166 (294)3,166 
U.S. government-sponsored enterprises and Treasuries(4,463)193,623 (88,085)1,471,861 (92,548)1,665,484 
Other securities(8,451)156,624 (13,904)128,538 (22,355)285,162 
Total$(14,052)$372,448 $(163,031)$1,901,108 $(177,083)$2,273,556 
As of December 31, 2022:
Mortgage-backed securities$(13,956)$99,598 $(54,749)$220,576 $(68,705)$320,174 
Utah Housing Corporation bonds(357)3,227 — — (357)3,227 
U.S. government-sponsored enterprises and Treasuries(28,128)689,300 (87,288)1,000,010 (115,416)1,689,310 
Other securities(15,852)232,546 (11,948)92,883 (27,800)325,429 
Total$(58,293)$1,024,671 $(153,985)$1,313,469 $(212,278)$2,338,140 

At March 31, 2023 and December 31, 2022, 182 of 193 and 191 of 194, respectively, of our available-for-sale securities were in an unrealized loss position.
Impairment
For available-for-sale securities in an unrealized loss position, we first assess whether we intend to sell, or it is more likely than not that we will be required to sell, the security before recovery of its amortized cost basis. If either of these criteria is met, the security’s amortized cost basis is written down to fair value through net income. For securities in an unrealized loss position that do not meet these criteria, we evaluate whether the decline in fair value has resulted from credit loss or other factors. In making this assessment, we consider the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, adverse conditions specifically related to the security, as well as any guarantees (e.g., guarantees by the U.S. Government) that may be applicable to the security. If this assessment indicates a credit loss exists, the credit-related portion of the loss is recorded as an allowance for losses on the security.
Our investment portfolio contains mortgage-backed securities issued by Ginnie Mae, Fannie Mae, and Freddie Mac, as well as Utah Housing Corporation bonds. We own these securities to meet our requirements under the Community Reinvestment Act (“CRA”). We also invest in other U.S. government-sponsored enterprise securities issued by the Federal Home Loan Bank, Freddie Mac, and the Federal Farm Credit Bank. Our mortgage-backed securities that were issued under Ginnie Mae programs carry a full faith and credit guarantee from the U.S. Government. The remaining mortgage-backed securities in a net loss position carry a principal and interest guarantee by Fannie Mae or Freddie Mac, respectively. Our Treasury and other U.S. government-sponsored enterprise bonds are rated Aaa by Moody’s Investors Service or AA+ by Standard and Poor’s. The decline in value from December 31, 2022 to March 31, 2023 was driven by the current interest rate environment and is not credit related. We have the intent and ability to hold these bonds for a period of time sufficient for the market price to recover to at least the adjusted amortized cost of the security. Based on this qualitative analysis, we have determined that no credit impairment exists.
We periodically sell Private Education Loans through securitization transactions where we are required to retain a five percent vertical risk retention interest. We classify the non-residual vertical risk retention interests as available-for-sale investments. We have the intent and ability to hold each of these bonds for a period of time sufficient for the market price to recover to at least the adjusted amortized cost of the security. We expect to receive all contractual cash flows related to these investments and do not consider a credit impairment to exist.
12 SLM CORPORATION


2.Investments (Continued)
As of March 31, 2023, the amortized cost and fair value of securities, by contractual maturities, are summarized below. Contractual maturities versus actual maturities may differ due to the effect of prepayments.
As of March 31, 2023
Year of Maturity
(dollars in thousands)
Amortized CostEstimated Fair Value
2023$114,993 $113,061 
2024698,346 670,601 
2025298,066 286,613 
2026548,319 499,306 
202798,309 95,902 
203871 73 
2039718 719 
20422,528 2,227 
20434,434 4,055 
20445,412 5,057 
20455,443 4,940 
20467,963 7,165 
20478,386 7,586 
20482,056 2,001 
204916,374 14,836 
2050114,601 93,786 
2051161,035 130,855 
205256,605 50,153 
2053109,892 100,141 
205483,670 75,428 
205598,051 94,030 
205852,477 52,527 
Total$2,487,749 $2,311,062 

Some of the mortgage-backed securities and a portion of the government securities have been pledged to the Federal Reserve Bank (the “FRB”) as collateral against any advances and accrued interest under the Primary Credit lending program sponsored by the FRB. We had $530 million and $547 million par value of securities pledged to this borrowing facility at March 31, 2023 and December 31, 2022, respectively, as discussed further in Notes to Consolidated Financial Statements, Note 9, “Borrowings” in this Form 10-Q.
Other Investments
Investments in Non-Marketable Securities
We hold investments in non-marketable securities and account for these investments at cost, less impairment, plus or minus observable price changes of identical or similar securities of the same issuer. Changes in market value are recorded through earnings. Because these are non-marketable securities, we use observable price changes of identical or similar securities of the same issuer, or when observable prices are not available, use market data of similar entities, in determining any changes in the value of the securities. In March 2023 our $5 million investment in a convertible debt security, classified as a trading investment, and the related accrued interest were converted into a equity securities and were reclassified to investments in non-marketable securities. As of March 31, 2023, and December 31, 2022, our total investment in these securities was $14 million and $8 million, respectively.
Low Income Housing Tax Credit Investments
We invest in affordable housing projects that qualify for the low-income housing tax credit (“LIHTC”), which is designed to promote private development of low-income housing. These investments generate a return mostly through
SLM CORPORATION 13


2.Investments (Continued)
realization of federal tax credits and tax benefits from net operating losses on the underlying properties. Total carrying value of the LIHTC investments was $78 million at March 31, 2023 and $80 million at December 31, 2022. We are periodically required to provide additional financial support during the investment period. Our liability for these unfunded commitments was $40 million at March 31, 2023 and $46 million at December 31, 2022.
Related to these investments, we recognized tax credits and other tax benefits through tax expense of less than $1 million at March 31, 2023 and $9 million at December 31, 2022. Tax credits and other tax benefits are recognized as part of our annual effective tax rate used to determine tax expense in a given quarter. Accordingly, the portion of a year’s expected tax benefits recognized in any given quarter may differ from 25 percent.

3. Loans Held for Investment
Loans held for investment consist of Private Education Loans, FFELP Loans, and Credit Cards. We use “Private Education Loans” to mean education loans to students or their families that are not made, insured, or guaranteed by any state or federal government. Private Education Loans do not include loans insured or guaranteed under the previously existing Federal Family Education Loan Program (“FFELP”). We use “Credit Cards” to refer to our suite of Credit Cards with bonus rewards. At September 30, 2022, we transferred our Credit Card portfolio to loans held for sale because we plan to sell our Credit Card portfolio. For additional information, see Notes to Consolidated Financial Statements, Note 4, “Loans Held for Sale” in this Form 10-Q.
Our Private Education Loans are made largely to bridge the gap between the cost of higher education and the amount funded through financial aid, government loans, and customers’ resources. Private Education Loans bear the full credit risk of the customer. We manage this risk through risk-performance underwriting strategies and qualified cosigners. Private Education Loans may be fixed-rate or may carry a variable interest rate indexed to LIBOR, the London interbank offered rate, or SOFR, the Secured Overnight Financing Rate. As of March 31, 2023 and December 31, 2022, 42 percent and 45 percent, respectively, of all of our Private Education Loans were indexed to LIBOR or SOFR. We provide incentives for customers to include a cosigner on the loan, and the vast majority of Private Education Loans in our portfolio are cosigned. We also encourage customers to make payments while in school.
FFELP Loans are insured as to their principal and accrued interest in the event of default, subject to a risk-sharing level based on the date of loan disbursement. These insurance obligations are supported by contractual rights against the United States. For loans disbursed on or after July 1, 2006, we receive 97 percent reimbursement on all qualifying claims. For loans disbursed after October 1, 1993, and before July 1, 2006, we receive 98 percent reimbursement on all qualifying claims. For loans disbursed prior to October 1, 1993, we receive 100 percent reimbursement on all qualifying claims.
In the first quarter of 2022, we recognized $10 million in gains from the sale of approximately $95 million of our Private Education Loans, including $89 million of principal and $6 million in capitalized interest, to an unaffiliated third party. There were VIEs created in the execution of certain of these loan sales; however, based on our consolidation analysis, we are not the primary beneficiary of these VIEs. These transactions qualified for sale treatment and removed the balance of the loans from our balance sheet on the respective settlement dates. We remained the servicer of these loans pursuant to applicable servicing agreements executed in connection with the sales. For additional information, see Notes to Consolidated Financial Statements, Note 9, “Borrowings - Unconsolidated VIEs” in this Form 10-Q. There were no loan sales in the first quarter of 2023.

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3.Loans Held for Investment (Continued)
Loans held for investment are summarized as follows:
March 31,December 31,
(Dollars in thousands)20232022
Private Education Loans:
Fixed-rate$12,726,875 $11,108,079 
Variable-rate9,171,128 9,195,609 
Total Private Education Loans, gross21,898,003 20,303,688 
Deferred origination costs and unamortized premium/(discount)75,051 69,656 
Allowance for credit losses(1,475,379)(1,353,631)
Total Private Education Loans, net20,497,675 19,019,713 
FFELP Loans592,318 609,050 
Deferred origination costs and unamortized premium/(discount)1,497 1,549 
Allowance for credit losses(3,927)(3,444)
Total FFELP Loans, net589,888 607,155 
Loans held for investment, net$21,087,563 $19,626,868 
 
The estimated weighted average life of education loans in our portfolio was approximately 5.0 years and 5.0 years at March 31, 2023 and December 31, 2022, respectively.

The average balance (net of unamortized premium/(discount)) and the respective weighted average interest rates of loans held for investment in our portfolio are summarized as follows:

20232022
Three Months Ended March 31,
(dollars in thousands)
Average BalanceWeighted Average Interest RateAverage BalanceWeighted Average Interest Rate
Private Education Loans$21,755,202 10.66 %$21,858,270 8.38 %
FFELP Loans602,072 6.87 690,540 3.51 
Credit Cards(1)
— — 26,622 3.95 
Total portfolio$22,357,274 $22,575,432 

(1) Credit Card loans were transferred to loans held for sale at September 30, 2022.






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4. Loans Held for Sale
We had $26 million in loans held for sale at March 31, 2023 and $29 million in loans held for sale at December 31, 2022. The balance at both March 31, 2023 and December 31, 2022 was comprised of our Credit Card loan portfolio. At September 30, 2022, we reversed $2.4 million through the provisions for credit losses for the allowance related to these loans, when the loans were transferred to held for sale. At September 30, 2022, we wrote down this loan portfolio to its estimated fair value through a charge-off to the allowance for credit losses of $1.5 million.

5. Allowance for Credit Losses
Our provision for credit losses represents the periodic expense of maintaining an allowance sufficient to absorb lifetime expected credit losses in the held for investment loan portfolios. The evaluation of the allowance for credit losses is inherently subjective, as it requires material estimates that may be susceptible to significant changes. We believe the allowance for credit losses is appropriate to cover lifetime losses expected to be incurred in the loan portfolios. See Notes to Consolidated Financial Statements, Note 2, “Significant Accounting Policies — Allowance for Credit Losses — Allowance for Private Education Loan Losses, — Allowance for FFELP Loan Losses” in our 2022 Form 10-K for a more detailed discussion.

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5.Allowance for Credit Losses (Continued)

Allowance for Credit Losses Metrics
Three Months Ended March 31, 2023
(dollars in thousands)
FFELP
Loans
Private Education
Loans
Credit CardsTotal
Allowance for Credit Losses
Beginning balance$3,444 $1,353,631 $— $1,357,075 
Transfer from unfunded commitment liability(1)
— 148,513 — 148,513 
Provisions:
Provision for current period739 56,334 730 57,803 
Total provisions(2)
739 56,334 730 57,803 
Net charge-offs:
Charge-offs(256)(95,085)(741)(96,082)
Recoveries— 11,986 11 11,997 
Net charge-offs(256)(83,099)(730)(84,085)
Ending Balance$3,927 $1,475,379 $— $1,479,306 
Allowance(3):
Ending balance: collectively evaluated for impairment$3,927 $1,475,379 $— $1,479,306 
Loans(3):
Ending balance: collectively evaluated for impairment$592,318 $21,898,003 $— $22,490,321 
Accrued interest to be capitalized(3):
Ending balance: collectively evaluated for impairment$— $1,150,802 $— $1,150,802 
Net charge-offs as a percentage of average loans in repayment (annualized)(4)
0.23 %2.11 %— %
Allowance as a percentage of the ending total loan balance and accrued interest to be capitalized(5)
0.66 %6.40 %— %
Allowance as a percentage of the ending loans in repayment and accrued interest to be capitalized on loans in repayment(4)(5)
0.88 %9.00 %— %
Allowance coverage of net charge-offs (annualized)3.83 4.44 — 
Ending total loans, gross$592,318 $21,898,003 $— 
Average loans in repayment(4)
$451,451 $15,764,143 $— 
Ending loans in repayment(4)
$446,214 $15,990,459 $— 
Accrued interest to be capitalized on loans in repayment(6)
$— $408,263 $— 
(1) See Note 6, “Unfunded Loan Commitments,” for a summary of the activity in the allowance for and balance of unfunded loan commitments, respectively.

(2) Below is a reconciliation of the provisions for credit losses reported in the consolidated statements of income. When a new loan commitment is made, we record the CECL allowance as a liability for unfunded loan commitments by recording a provision for credit losses. When the loan is funded, we transfer that liability to the allowance for credit losses.
Consolidated Statements of Income
Provisions for Credit Losses Reconciliation
Three Months Ended March 31, 2023 (dollars in thousands)
Private Education Loan provisions for credit losses:
Provisions for loan losses$56,334 
Provisions for unfunded loan commitments56,309 
Total Private Education Loan provisions for credit losses112,643 
Other impacts to the provisions for credit losses:
FFELP Loans739 
Credit Cards730 
Total1,469 
Provisions for credit losses reported in consolidated statements of income$114,112 

(3) For the three months ended March 31, 2023, there were no allowance for credit losses, loans, or accrued interest to be capitalized balances that were individually evaluated for impairment.
(4) Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period (but, for purposes of the table, do not include those loans while they are in forbearance).
(5) Accrued interest to be capitalized on Private Education Loans only.
(6) Accrued interest to be capitalized on loans in repayment includes interest on loans that are in repayment but have not yet entered into full principal and interest repayment status after any applicable grace period (but, for purposes of the table, does not include the interest on those loans while they are in forbearance).
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5.Allowance for Credit Losses (Continued)

Three Months Ended March 31, 2022
(dollars in thousands)
FFELP 
Loans
Private
 Education
Loans
Credit CardsTotal
Allowance for Credit Losses
Beginning balance$4,077 $1,158,977 $2,281 $1,165,335 
Transfer from unfunded commitment liability(1)
— 94,686 — 94,686 
Provisions:
Provision for current period21 48,460 137 48,618 
Loan sale reduction to provision— (5,247)— (5,247)
Total provisions(2)
21 43,213 137 43,371 
Net charge-offs:
Charge-offs(99)(83,856)(111)(84,066)
Recoveries— 8,033 8,036 
Net charge-offs(99)(75,823)(108)(76,030)
Ending Balance$3,999 $1,221,053 $2,310 $1,227,362 
Allowance(3):
Ending balance: collectively evaluated for impairment$3,999 $1,221,053 $2,310 $1,227,362 
Loans(3):
Ending balance: collectively evaluated for impairment$682,273 $21,735,369 $27,547 $22,445,189 
Accrued interest to be capitalized(3):
Ending balance: collectively evaluated for impairment$— $993,698 $— $993,698 
Net charge-offs as a percentage of average loans in repayment (annualized)(4)
0.07 %1.89 %1.63 %
Allowance as a percentage of the ending total loan balance and accrued interest to be capitalized(5)
0.59 %5.37 %8.39 %
Allowance as a percentage of the ending loans in repayment and accrued interest to be capitalized on loans in repayment(4)(5)
0.75 %7.43 %8.39 %
Allowance coverage of net charge-offs (annualized)10.10 4.03 5.35 
Ending total loans, gross$682,273 $21,735,369 $27,547 
Average loans in repayment(4)
$543,303 $16,013,289 $26,551 
Ending loans in repayment(4)
$535,080 $16,095,157 $27,547 
Accrued interest to be capitalized on loans in repayment(6)
$— $331,405 $— 
(1) See Note 6, “Unfunded Loan Commitments,” for a summary of the activity in the allowance for and balance of unfunded loan commitments, respectively.
(2) Below is a reconciliation of the provisions for credit losses reported in the consolidated statements of income. When a new loan commitment is made, we record the CECL allowance as a liability for unfunded loan commitments by recording a provision for credit losses. When the loan is funded, we transfer that liability to the allowance for credit losses.
Consolidated Statements of Income
Provisions for Credit Losses Reconciliation
Three Months Ended March 31, 2022 (dollars in thousands)
Private Education Loan provisions for credit losses:
Provisions for loan losses$43,213 
Provisions for unfunded loan commitments54,679 
Total Private Education Loan provisions for credit losses97,892 
Other impacts to the provisions for credit losses:
FFELP Loans21 
Credit Cards137 
Total158 
Provisions for credit losses reported in consolidated statements of income$98,050 
(3) For the three months ended March 31, 2022, there were no allowance for credit losses, loans, or accrued interest to be capitalized balances that were individually evaluated for impairment.
(4) Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period (but, for purposes of the table, do not include those loans while they are in forbearance).
(5) Accrued interest to be capitalized on Private Education Loans only.
(6) Accrued interest to be capitalized on loans in repayment includes interest on loans that are in repayment but have not yet entered into full principal and interest repayment status after any applicable grace period (but, for purposes of the table, does not include the interest on those loans while they are in forbearance).

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5.Allowance for Credit Losses (Continued)

Allowance for Credit Losses - Forecast Assumptions
In the fourth quarter of 2022, we changed our loss model to include forecasts of college graduate unemployment, home price index, and median family income in determining the adequacy of the allowance for credit losses. Prior to this change, we used forecasts of college graduate unemployment and the Consumer Price Index in our loss forecasting models. We obtain forecasts for these inputs from Moody’s Analytics. Moody’s Analytics provides a range of forecasts for each of these inputs with various likelihoods of occurring. We determine which forecasts we will include in our estimation of the allowance for credit losses and the associated weightings for each of these inputs. At March 31, 2022, December 31, 2022, and March 31, 2023, we used the Base (50th percentile likelihood of occurring)/S1 (stronger near-term growth scenario with 10 percent likelihood of occurring)/S3 (downside scenario with 10 percent likelihood of occurring) scenarios and weighted them 40 percent, 30 percent, and 30 percent, respectively. Management reviews both the scenarios and their respective weightings each quarter in determining the allowance for credit losses.
Provisions for credit losses in the three months ended March 31, 2023 increased by $16 million compared with the year-ago period. During the three months ended March 31, 2023, the increase in the provision for credit losses was primarily the result of new loan commitments, net of expired commitments, slower prepayment rates, and changes in economic outlook and recovery rates.
As part of concluding on the adequacy of the allowance for credit losses, we review key allowance and loan metrics. The most significant of these metrics considered are the allowance coverage of net charge-offs ratio; the allowance as a percentage of ending total loans and accrued interest to be capitalized and of ending loans in repayment and accrued interest to be capitalized on loans in repayment; and delinquency and forbearance percentages.
Loan Modifications to Borrowers Experiencing Financial Difficulty
The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon asset origination or acquisition. The starting point for the estimate of the allowance for credit losses is historical information, which includes losses from modifications of receivables whose borrowers are experiencing financial difficulty. We use a discounted cash flow model to determine the allowance for credit losses. An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification.
The effect of most modifications of loans made to borrowers who are experiencing financial difficulty is already included in the allowance for credit losses because of the measurement methodologies used to estimate the allowance. The forecast of expected future cash flows is updated as the loan modifications occur.
We adjust the terms of loans for certain borrowers when we believe such changes will help our customers manage their student loan obligations and achieve better student outcomes and increase the collectability of the loans. These changes generally take the form of a temporary forbearance of payments, a temporary interest rate reduction, a temporary interest rate reduction with a permanent extension of the loan term, and/or a short-term extended repayment alternative.
When we give a borrower facing financial difficulty an interest rate reduction, we temporarily reduce the contractual interest rate on a loan to 4.0 percent for a two-year period and, in the vast majority of cases, permanently extend the final maturity date of the loan. The combination of these two loan term changes helps reduce the monthly payment due from the borrower and increases the likelihood the borrower will remain current during the interest rate modification period as well as when the loan returns to its original contractual interest rate.
Within the Private Education Loan portfolio, we deem loans greater than 90 days past due as nonperforming. FFELP Loans are at least 97 percent guaranteed as to their principal and accrued interest by the federal government in the event of default and, therefore, we do not deem FFELP Loans as nonperforming from a credit risk perspective at any point in their life cycle prior to claim payment and continue to accrue interest on those loans through the date of claim.
For additional information, see Notes to Consolidated Financial Statements, Note 2, “Significant Accounting Policies —Allowance for Credit Losses,” and Note 7, “Allowance for Credit Losses” in our 2022 Form 10-K.
Under our current forbearance practices, temporary forbearance of payments is generally granted in one-to-two month increments, for up to 12 months over the life of the loan, with 12 months of positive payment performance by a borrower required between grants (meaning the borrower must make payment in a cumulative amount equivalent to 12 monthly required payments under the loan). See Notes to Consolidated Financial Statements, Note 5, “Loans Held for Investment — Certain Collection Tools - Private Education Loans” in our 2022 Form 10-K. If the loan has been previously restructured, we consider the cumulative effect of past restructurings made within the 12-month period before the current restructuring when determining whether a delay in payment resulting from the current restructuring is insignificant. Due to
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5.Allowance for Credit Losses (Continued)
our current forbearance practices, including the limitations on forbearances offered to borrowers, we do not believe the granting of forbearances will exceed the significance threshold and, therefore, we do not consider the forbearances as loan modifications.
The limitations on granting of forbearances described above apply to hardship forbearances. We offer other administrative forbearances (e.g., death and disability, bankruptcy, military service, disaster forbearance, and in school assistance) that are either required by law (such as by the Servicemembers Civil Relief Act) or are considered separate from our active loss mitigation programs and therefore are not considered to be loan modifications requiring disclosure. In addition, we may offer on a limited basis term extensions or rate reductions or a combination of both to borrowers to reduce consolidation activities. For purposes of this disclosure, we do not consider them modifications of loans to borrowers experiencing financial difficulty and they therefore are not included in the tables below.
The following tables show the amortized cost basis at the end of the respective reporting periods of the loans to borrowers experiencing financial difficulty that were modified during the period, disaggregated by class of financing receivable and type of modification. When we approve a Private Education Loan at the beginning of an academic year, we do not always disburse the full amount of the loan at the time of approval, but instead have a commitment to fund a portion of the loan at a later date (usually at the start of the second semester or subsequent trimesters). We consider borrowers to be in financial difficulty after they have exited school and have difficulty making their scheduled principal and interest payments.
Loan Modifications Made to Borrowers Experiencing Financial Difficulty
Three Months Ended March 31, 2023
(dollars in thousands)
Interest Rate ReductionCombination - Interest Rate Reduction and Term Extension
Loan Type:Amortized Cost Basis% of Total Class of Financing ReceivableAmortized Cost Basis% of Total Class of Financing Receivable
Private Education Loans$12,902 0.06 %$81,780 0.35 %
Total$12,902 0.06 %$81,780 0.35 %

Loan Modifications Made to Borrowers Experiencing Financial Difficulty
Three Months Ended March 31, 2022
(dollars in thousands)
Interest Rate ReductionCombination - Interest Rate Reduction and Term Extension
Loan Type:Amortized Cost Basis% of Total Class of Financing ReceivableAmortized Cost Basis% of Total Class of Financing Receivable
Private Education Loans$7,679 0.04 %$79,597 0.37 %
Total$7,679 0.04 %$79,597 0.37 %


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5.Allowance for Credit Losses (Continued)
The following tables describe the financial effect of the modifications made to loans whose borrowers are experiencing financial difficulty:
Three Months Ended March 31, 2023
Interest Rate ReductionCombination - Interest Rate
Reduction and Term Extension
Loan TypeFinancial EffectLoan TypeFinancial Effect
Private Education Loans
Reduced average contractual rate from 12.47% to 4.00%
Private Education Loans
Added a weighted average 10.19 years to the life of loans

Reduced average contractual rate from 12.74% to 4.00%

Three Months Ended March 31, 2022
Interest Rate ReductionCombination - Interest Rate
Reduction and Term Extension
Loan TypeFinancial EffectLoan TypeFinancial Effect
Private Education Loans
Reduced average contractual rate from 10.09% to 4.00%
Private Education Loans
Added a weighted average 10.51 years to the life of loans

Reduced average contractual rate from 9.43% to 4.00%

Private Education Loans are charged off at the end of the month in which they reach 120 days delinquent or otherwise when the loans are classified as a loss by us or our regulator. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount. See Notes to Consolidated Financial Statements, Note 2, “Significant Accounting Policies — Allowance for Credit Losses — Allowance for Private Education Loan Losses, and — Allowance for FFELP Loan Losses” in our 2022 Form 10-K for a more detailed discussion.

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5.Allowance for Credit Losses (Continued)
For the current period presented, the following table provides loan modifications for which a payment default occurred in the relevant period presented and within 12 months of the loan receiving a loan modification. Additionally, for the current period presented, the table summarizes charge-offs occurring in the relevant period presented and within 12 months of the loan receiving a loan modification. The charge-offs and payment defaults for the year-ago period are presented for loans receiving a loan modification during the reporting period rather than within 12 months of the loan receiving a loan modification, as the effective date of adoption for the Financial Accounting Standards Board’s Accounting Standards Update (“ASU”) No. 2022-02, Troubled Debt Restructurings and Vintage Disclosures, was January 1, 2022. We define payment default as 60 days past due for purposes of this disclosure.
Three Months Ended
March 31, 2023
Three Months Ended
March 31, 2022
(Dollars in thousands)
Modified Loans(1)(2)
Payment Default(3)
Charge-Offs(4)
Modified Loans(1)(2)
Payment Default(3)
Charge-Offs(4)
Loan Type:
Private Education Loans$11,624 $11,404 $4,628 $290 $287 $— 
Total$11,624 $11,404 $4,628 $290 $287 $— 
(1) Represents period-end amortized cost basis of loans that have been modified and for which a payment default occurred in the relevant period presented and within 12 months of receiving a modification (or within the reporting period, for the loans shown in in the year-ago period, as the case may be).
(2) For the three months ended March 31, 2023, the modified loans include $10.4 million of interest rate reduction and term extension loan modifications and $1.2 million of interest rate reduction only loan modifications. For the three months ended March 31, 2022, the modified loans include $0.3 million of interest rate reduction and term extension loan modifications and no interest rate reduction only loan modifications.
(3) Represents the unpaid principal balance at the time of payment default.
(4) Represents the unpaid principal balance at the time of charge off.
We closely monitor performance of the loans to borrowers experiencing financial difficulty that are modified to understand the effectiveness of the modification efforts. The following tables depict the performance of loans that have been modified during the respective reporting periods (first-quarter 2023 and full year 2022, respectively).
Payment Status (Amortized Cost Basis)
At March 31, 2023
(dollars in thousands)
Deferment(1)
Current(2)(3)
30-59 Days
Past Due(2)(3)
60-89 Days
Past Due(2)(3)
90 Days or Greater
 Past Due(2)(3)
Total
Loan Type:
Private Education Loans$412 $92,213 $1,353 $358 $346 $94,682 
Total$412 $92,213 $1,353 $358 $346 $94,682 

Payment Status (Amortized Cost Basis)
At December 31, 2022
(dollars in thousands)
Deferment(1)
Current(2)(3)
30-59 Days
Past Due(2)(3)
60-89 Days
Past Due(2)(3)
90 Days or Greater
 Past Due(2)(3)
Total
Loan Type:
Private Education Loans$7,698 $289,134 $13,859 $8,809 $6,616 $326,116 
Total$7,698 $289,134 $13,859 $8,809 $6,616 $326,116 
(1) Deferment includes customers who have returned to school or are engaged in other permitted educational activities and are not yet required to make full principal and interest payments on the loans (e.g., residency periods for medical students or a grace period for bar exam preparation). Deferment also includes loans that have entered a forbearance after the loan modification was granted.
(2) Loans in repayment include loans on which borrowers are making full principal and interest payments after any applicable grace period (but, for purposes of the table, do not include those loans while they are in forbearance).
(3) The period of delinquency is based on the number of days scheduled payments are contractually past due.

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5.Allowance for Credit Losses (Continued)

Private Education Loans Held for Investment - Key Credit Quality Indicators
FFELP Loans are at least 97 percent guaranteed as to their principal and accrued interest in the event of default; therefore, there are no key credit quality indicators associated with FFELP Loans.
For Private Education Loans, the key credit quality indicators are FICO scores, the existence of a cosigner, the loan status, and loan seasoning. The FICO scores are assessed at original approval and periodically refreshed/updated through the loan’s term. The following tables highlight the gross principal balance of our Private Education Loan portfolio (held for investment), by year of origination, stratified by key credit quality indicators.

As of March 31, 2023
(dollars in thousands)
Private Education Loans Held for Investment - Credit Quality Indicators
Year of Origination
2023(1)
2022(1)
2021(1)
2020(1)
2019(1)
2018 and Prior(1)
Total(1)
% of Balance
Cosigners:
With cosigner$728,950 $4,951,808 $3,858,219 $2,130,947 $1,782,069 $5,681,899 $19,133,892 87 %
Without cosigner123,455 736,310 586,435 360,304 305,385 652,222 2,764,111 13 
Total$852,405 $5,688,118 $4,444,654 $2,491,251 $2,087,454 $6,334,121 $21,898,003 100 %
FICO at Origination(2):
Less than 670$72,432 $438,029 $304,216 $154,665 $171,983 $554,184 $1,695,509 %
670-699125,846 785,900 602,706 346,297 327,433 1,077,557 3,265,739 15 
700-749270,689 1,771,760 1,410,157 806,546 692,615 2,132,757 7,084,524 32 
Greater than or equal to 750383,438 2,692,429 2,127,575 1,183,743 895,423 2,569,623 9,852,231 45 
Total$852,405 $5,688,118 $4,444,654 $2,491,251 $2,087,454 $6,334,121 $21,898,003 100 %
FICO Refreshed(2)(3):
Less than 670$88,378 $659,414 $498,641 $256,177 $249,547 $969,883 $2,722,040 12 %
670-699128,620 792,523 571,683 277,061 235,805 706,213 2,711,905 12 
700-749267,500 1,715,364 1,324,781 710,463 591,355 1,717,774 6,327,237 30 
Greater than or equal to 750367,907 2,520,817 2,049,549 1,247,550 1,010,747 2,940,251 10,136,821 46 
Total$852,405 $5,688,118 $4,444,654 $2,491,251 $2,087,454 $6,334,121 $21,898,003 100 %
Seasoning(4):
1-12 payments$443,563 $2,988,688 $522,305 $327,647 $271,788 $507,620 $5,061,611 23 %
13-24 payments— 324,873 2,414,470 201,750 211,025 586,952 3,739,070 17 
25-36 payments— — 159,673 1,299,993 158,750 570,770 2,189,186 10 
37-48 payments— — — 118,240 1,023,883 568,996 1,711,119 
More than 48 payments— — — — 62,249 3,448,382 3,510,631 16 
Not yet in repayment408,842 2,374,557 1,348,206 543,621 359,759 651,401 5,686,386 26 
Total$852,405 $5,688,118 $4,444,654 $2,491,251 $2,087,454 $6,334,121 $21,898,003 100 %
2023 Current period(5) gross charge-offs
$— $(2,262)$(12,072)$(10,615)$(11,773)$(58,363)$(95,085)
2023 Current period(5) recoveries
— 207 1,428 1,167 1,460 7,723 11,985 
2023 Current period(5) net charge-offs
$— $(2,055)$(10,644)$(9,448)$(10,313)$(50,640)$(83,100)
Total accrued interest by origination vintage$13,564 $241,786 $351,527 $209,889 $177,587 $310,373 $1,304,726 
        
(1)Balance represents gross Private Education Loans held for investment.
(2)Represents the higher credit score of the cosigner or the borrower.
(3)Represents the FICO score updated as of the first-quarter 2023.
(4)Number of months in active repayment (whether interest only payment, fixed payment, or full principal and interest payment status) for which a scheduled payment was due.
(5)Current period refers to period from January 1, 2023 through March 31, 2023.


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5.Allowance for Credit Losses (Continued)
As of December 31, 2022
(dollars in thousands)
Private Education Loans Held for Investment - Credit Quality Indicators
Year of Origination
2022(1)
2021(1)
2020(1)
2019(1)
2018(1)
2017 and Prior(1)
Total(1)
% of Balance
Cosigners:
With cosigner$3,656,111 $3,941,921 $2,208,033 $1,853,619 $1,402,828 $4,626,491 $17,689,003 87 %
Without cosigner620,422 605,238 376,589 319,041 213,014 480,381 2,614,685 13 
Total$4,276,533 $4,547,159 $2,584,622 $2,172,660 $1,615,842 $5,106,872 $20,303,688 100 %
FICO at Origination(2):
Less than 670$326,991 $307,646 $158,606 $177,098 $143,674 $439,587 $1,553,602 %
670-699593,216 611,649 356,541 339,685 259,142 878,426 3,038,659 15 
700-7491,336,765 1,440,510 834,819 719,777 537,680 1,722,068 6,591,619 32 
Greater than or equal to 7502,019,561 2,187,354 1,234,656 936,100 675,346 2,066,791 9,119,808 45 
Total$4,276,533 $4,547,159 $2,584,622 $2,172,660 $1,615,842 $5,106,872 $20,303,688 100 %
FICO Refreshed(2)(3):
Less than 670$443,868 $461,589 $242,310 $237,105 $204,894 $773,324 $2,363,090 12 %
670-699594,118 579,784 284,244 240,999 173,754 564,344 2,437,243 12 
700-7491,322,558 1,378,910 748,368 628,060 449,701 1,388,090 5,915,687 29 
Greater than or equal to 7501,915,989 2,126,876 1,309,700 1,066,496 787,493 2,381,114 9,587,668 47 
Total$4,276,533 $4,547,159 $2,584,622 $2,172,660 $1,615,842 $5,106,872 $20,303,688 100 %
Seasoning(4):
1-12 payments$2,448,884 $636,073 $384,334 $330,316 $235,878 $424,636 $4,460,121 22 %
13-24 payments2,477,764255,510195,753166,045455,7823,550,85418 
25-36 payments1,366,398257,534126,223489,1572,239,31211 
37-48 payments1271,008,418224,805451,1021,684,452
More than 48 payments643,6112,830,2853,473,89617 
Not yet in repayment1,827,6491,433,322578,253380,639219,280455,9104,895,05324 
Total$4,276,533 $4,547,159 $2,584,622 $2,172,660 $1,615,842 $5,106,872 $20,303,688 100 %
2022 Current period(5) gross charge-offs
$(2,224)$(25,698)$(48,271)$(62,071)$(57,505)$(231,647)$(427,416)
2022 Current period(5) recoveries
124 1,841 4,170 5,556 5,407 24,639 41,737 
2022 Current period(5) net charge-offs
$(2,100)$(23,857)$(44,101)$(56,515)$(52,098)$(207,008)$(385,679)
Total accrued interest by origination vintage$142,915 $315,308 $207,858 $184,832 $116,211 $210,438 $1,177,562 
(1)Balance represents gross Private Education Loans held for investment.
(2)Represents the higher credit score of the cosigner or the borrower.
(3)Represents the FICO score updated as of the fourth-quarter 2022.
(4)Number of months in active repayment (whether interest only payment, fixed payment, or full principal and interest payment status) for which a scheduled payment was due.
(5)Current period refers to January 1, 2022 through December 31, 2022.

24 SLM CORPORATION


5.Allowance for Credit Losses (Continued)
Delinquencies - Private Education Loans Held for Investment

The following tables provide information regarding the loan status of our Private Education Loans held for investment, by year of origination. Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period (but, for purposes of the following tables, do not include those loans while they are in forbearance).

Private Education Loans Held for Investment - Delinquencies by Origination Vintage
As of March 31, 2023
(dollars in thousands)
202320222021202020192018 and PriorTotal
Loans in-school/grace/deferment(1)
$408,842 $2,374,557 $1,348,206 $543,621 $359,759 $651,401 $5,686,386 
Loans in forbearance(2)
1,256 20,755 42,385 27,115 28,094 101,553 221,158 
Loans in repayment:
Loans current441,192 3,263,917 2,972,969 1,859,452 1,632,668 5,275,984 15,446,182 
Loans delinquent 30-59 days(3)
1,115 17,902 38,446 28,762 31,442 149,333 267,000 
Loans delinquent 60-89 days(3)
— 6,395 22,104 17,136 18,428 76,723 140,786 
Loans 90 days or greater past due(3)
— 4,592 20,544 15,165 17,063 79,127 136,491 
Total Private Education Loans in repayment442,307 3,292,806 3,054,063 1,920,515 1,699,601 5,581,167 15,990,459 
Total Private Education Loans, gross852,405 5,688,118 4,444,654 2,491,251 2,087,454 6,334,121 21,898,003 
Private Education Loans deferred origination costs and unamortized premium/(discount)5,089 29,718 15,151 8,476 5,109 11,508 75,051 
Total Private Education Loans857,494 5,717,836 4,459,805 2,499,727 2,092,563 6,345,629 21,973,054 
Private Education Loans allowance for losses(61,767)(372,947)(296,851)(170,497)(138,625)(434,692)(1,475,379)
Private Education Loans, net$795,727 $5,344,889 $4,162,954 $2,329,230 $1,953,938 $5,910,937 $20,497,675 
Percentage of Private Education Loans in repayment51.9 %57.9 %68.7 %77.1 %81.4 %88.1 %73.0 %
Delinquent Private Education Loans in repayment as a percentage of Private Education Loans in repayment0.3 %0.9 %2.7 %3.2 %3.9 %5.5 %3.4 %
Loans in forbearance as a percentage of loans in repayment and forbearance0.3 %0.6 %1.4 %1.4 %1.6 %1.8 %1.4 %
(1)Deferment includes customers who have returned to school or are engaged in other permitted educational activities and are not yet required to make payments on the loans (e.g., residency periods for medical students or a grace period for bar exam preparation).
(2)Loans for customers who have requested extension of grace period generally during employment transition or who have temporarily ceased making full payments due to hardship or other factors, consistent with established loan program servicing policies and procedures.
(3)The period of delinquency is based on the number of days scheduled payments are contractually past due.
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5.Allowance for Credit Losses (Continued)
Private Education Loans Held for Investment - Delinquencies by Origination Vintage
As of December 31, 2022
(dollars in thousands)
202220212020201920182017 and PriorTotal
Loans in-school/grace/deferment(1)
$1,827,649 $1,433,322 $578,253 $380,639 $219,280 $455,910 $4,895,053 
Loans in forbearance(2)
16,046 64,360 38,613 37,802 30,583 91,681 279,085 
Loans in repayment:
Loans current2,411,441 2,991,839 1,907,574 1,683,986 1,301,809 4,262,698 14,559,347 
Loans delinquent 30-59 days(3)
14,164 30,740 30,877 35,213 31,366 144,948 287,308 
Loans delinquent 60-89 days(3)
5,523 15,056 14,433 18,201 16,697 77,595 147,505 
Loans 90 days or greater past due(3)
1,710 11,842 14,872 16,819 16,107 74,040 135,390 
Total Private Education Loans in repayment2,432,838 3,049,477 1,967,756 1,754,219 1,365,979 4,559,281 15,129,550 
Total Private Education Loans, gross4,276,533 4,547,159 2,584,622 2,172,660 1,615,842 5,106,872 20,303,688 
Private Education Loans deferred origination costs and unamortized premium/(discount)26,714 15,933 9,062 5,496 3,575 8,876 69,656 
Total Private Education Loans4,303,247 4,563,092 2,593,684 2,178,156 1,619,417 5,115,748 20,373,344 
Private Education Loans allowance for losses(304,943)(323,506)(181,915)(141,424)(101,023)(300,820)(1,353,631)
Private Education Loans, net$3,998,304 $4,239,586 $2,411,769 $2,036,732 $1,518,394 $4,814,928 $19,019,713 
Percentage of Private Education Loans in repayment56.9 %67.1 %76.1 %80.7 %84.5 %89.3 %74.5 %
Delinquent Private Education Loans in repayment as a percentage of Private Education Loans in repayment0.9 %1.9 %3.1 %4.0 %4.7 %6.5 %3.8 %
Loans in forbearance as a percentage of loans in repayment and forbearance0.7 %2.1 %1.9 %2.1 %2.2 %2.0 %1.8 %

(1)Deferment includes customers who have returned to school or are engaged in other permitted educational activities and are not yet required to make payments on the loans (e.g., residency periods for medical students or a grace period for bar exam preparation).
(2)Loans for customers who have requested extension of grace period generally during employment transition or who have temporarily ceased making full payments due to hardship or other factors, consistent with established loan program servicing policies and procedures.
(3)The period of delinquency is based on the number of days scheduled payments are contractually past due.
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5.Allowance for Credit Losses (Continued)


 Accrued Interest Receivable

The following table provides information regarding accrued interest receivable on our Private Education Loans. The table also discloses the amount of accrued interest on loans 90 days or greater past due as compared to our allowance for uncollectible interest on loans making full interest payments. The majority of the total accrued interest receivable represents accrued interest on deferred loans where no payments are due while the borrower is in school and fixed-pay loans where the borrower makes a $25 monthly payment that is smaller than the interest accruing on the loan in that month. The accrued interest on these loans will be capitalized to the balance of the loans when the borrower exits the grace period after separation from school, and the current expected credit losses on accrued interest that will be capitalized is included in our allowance for credit losses.

 Private Education Loans
Accrued Interest Receivable
(Dollars in thousands)Total Interest Receivable90 Days or Greater Past Due
Allowance for Uncollectible Interest(1)
March 31, 2023$1,304,726 $6,638 $6,523 
December 31, 2022$1,177,562 $6,609 $8,121 
(1)The allowance for uncollectible interest at March 31, 2023 and December 31, 2022 represents the expected losses related to the portion of accrued interest receivable on those loans that are in repayment (at March 31, 2023 and December 31, 2022 relates to $154 million and $240 million, respectively, of accrued interest receivable) that is not expected to be capitalized. The accrued interest receivable that is expected to be capitalized ($1.2 billion and $937 million at March 31, 2023 and December 31, 2022, respectively) is reserved in the allowance for credit losses.

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6. Unfunded Loan Commitments
When we approve a Private Education Loan at the beginning of an academic year, that approval may cover the borrowing for the entire academic year. As such, we do not always disburse the full amount of the loan at the time of such approval, but instead have a commitment to fund a portion of the loan at a later date (usually at the start of the second semester or subsequent trimesters). We estimate expected credit losses over the contractual period in which we are exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by us. See Notes to Consolidated Financial Statements, Note 2, “Significant Accounting Policies - Allowance for Credit Losses, — Off-Balance Sheet Exposure for Contractual Loan Commitments” in our 2022 Form 10-K for additional information.
At March 31, 2023, we had $684 million of outstanding contractual loan commitments that we expect to fund during the remainder of the 2022/2023 academic year. The tables below summarize the activity in the allowance recorded to cover lifetime expected credit losses on the unfunded commitments, which is recorded in “Other Liabilities” on the consolidated balance sheets, as well as the activity in the unfunded commitments balance.
20232022
Three Months Ended March 31,
(dollars in thousands)
AllowanceUnfunded CommitmentsAllowanceUnfunded Commitments
Beginning Balance$124,924 $1,995,808 $72,713 $1,776,976 
Provision/New commitments - net(1)
52,252 1,124,816 47,454 968,830 
Other provision items4,057 — 7,226 — 
Transfer - funded loans(2)
(148,513)(2,436,271)(94,686)(2,184,058)
Ending Balance$32,720 $684,353 $32,707 $561,748 
(1)     Net of expirations of commitments unused.
(2)     When a loan commitment is funded, its related liability for credit losses (which originally was recorded as a provision for unfunded commitments) is transferred to the allowance for credit losses.
The unfunded commitments disclosed above represent the total amount of outstanding unfunded commitments at each period end. However, historically not all of these commitments are funded prior to the expiration of the commitments. We estimate the amount of commitments expected to be funded in calculating the reserve for unfunded commitments. The amount we expect to fund and use in our calculation of the reserve for unfunded commitments will change period to period based upon the loan characteristics of the underlying commitments.
28 SLM CORPORATION


7. Goodwill and Acquired Intangible Assets
Goodwill
We recorded as goodwill the excess of the purchase price over the estimated fair values of identifiable assets and liabilities acquired as part of the acquisition of the assets primarily used or held for use of Epic Research Education Services, LLC, which does business as Nitro College (“Nitro”), in the first quarter of 2022. Goodwill is not amortized but is tested periodically for impairment. We test goodwill for impairment annually in the fourth quarter of the year, or more frequently if we believe that indicators of impairment exist. At March 31, 2023 we had $51 million in total goodwill. See Notes to Consolidated Financial Statements, Note 2, “Significant Accounting Policies — Business Combination” in our 2022 Form 10-K for additional details on our acquisition of Nitro.
Acquired Intangible Assets
Our intangible assets include acquired tradename and trademarks, customer relationships, and developed technology. We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.
Acquired intangible assets include the following:

March 31, 2023December 31, 2022
(Dollars in thousands)
Useful Life
(in years)(1)
Cost BasisAccumulated AmortizationNetCost BasisAccumulated AmortizationNet
Tradename and trademarks10$68,470 $(7,418)$61,052 $68,470 $(5,706)$62,764 
Customer relationships55,670 (2,178)3,492 5,670 (1,723)3,947 
Developed technology31,260 (455)805 1,260 (350)910 
Total acquired intangible assets$75,400 $(10,051)$65,349 $75,400 $(7,779)$67,621 
(1)     The weighted average useful life of acquired intangible assets related to the Nitro acquisition is 9.51 years.
We recorded amortization of acquired intangible assets totaling approximately $2 million and $1 million in the three months ended March 31, 2023 and 2022, respectively. We will continue to amortize our intangible assets with definite useful lives over their remaining estimated useful lives. We estimate amortization expense associated with these intangible assets will be approximately $9 million, $8 million, $8 million, $7 million, and $7 million in 2023, 2024, 2025, 2026, and 2027, respectively.
SLM CORPORATION 29


8. Deposits

The following table summarizes total deposits at March 31, 2023 and December 31, 2022.

March 31,December 31,
(Dollars in thousands)20232022
Deposits - interest-bearing$21,801,666 $21,446,647 
Deposits - non-interest-bearing2,000 1,424 
Total deposits$21,803,666 $21,448,071 

Our total deposits of $21.8 billion were comprised of $10.3 billion in brokered deposits and $11.5 billion in retail and other deposits at March 31, 2023, compared to total deposits of $21.4 billion, which were comprised of $9.9 billion in brokered deposits and $11.5 billion in retail and other deposits, at December 31, 2022.
Interest-bearing deposits as of March 31, 2023 and December 31, 2022 consisted of retail and brokered non-maturity savings deposits, retail and brokered non-maturity money market deposits (“MMDAs”), and retail and brokered certificates of deposit (“CDs”). Interest-bearing deposits include deposits from Educational 529 and Health Savings plans that diversify our funding sources and additional deposits we consider to be core. These and other large omnibus accounts, aggregating the deposits of many individual depositors, represented $8.0 billion and $8.0 billion of our deposit total as of March 31, 2023 and December 31, 2022, respectively.
Some of our deposit products are serviced by third-party providers. Placement fees associated with the brokered CDs are amortized into interest expense using the effective interest rate method. We recognized placement fee expense of $3 million and $3 million in the three months ended March 31, 2023 and 2022, respectively. Fees paid to third-party brokers related to brokered CDs were $3 million and $2 million for the three months ended March 31, 2023 and 2022, respectively.

Interest bearing deposits at March 31, 2023 and December 31, 2022 are summarized as follows:
 
 March 31, 2023December 31, 2022
(Dollars in thousands)Amount
Qtr.-End Weighted Average Stated Rate(1)
Amount
Year-End Weighted Average Stated Rate(1)
Money market$10,788,126 4.26 %$10,977,242 3.75 %
Savings1,007,994 3.75 982,586 3.15 
Certificates of deposit10,005,546 2.97 9,486,819 2.57 
Deposits - interest bearing$21,801,666 $21,446,647 
    (1) Includes the effect of interest rate swaps in effective hedge relationships.









30 SLM CORPORATION


8.Deposits (Continued)

Certificates of deposit remaining maturities are summarized as follows:


(Dollars in thousands)
March 31, 2023December 31, 2022
One year or less$3,257,529 $3,224,573 
After one year to two years3,123,281 2,954,257 
After two years to three years2,199,697 1,904,919 
After three years to four years1,176,953 1,031,881 
After four years to five years207,676 324,375 
After five years40,410 46,814 
Total$10,005,546 $9,486,819 


As of March 31, 2023 and December 31, 2022, there were $471 million and $615 million, respectively, of deposits exceeding Federal Deposit Insurance Corporation (“FDIC”) insurance limits. These omnibus accounts are structured in such a way that entitles the individual depositor pass-through deposit insurance (subject to FDIC rules and limitations), and the majority of these deposits have contractual minimum balances and maturity terms. Accrued interest on deposits was $69 million and $59 million at March 31, 2023 and December 31, 2022, respectively.

SLM CORPORATION 31


9. Borrowings

Outstanding borrowings consist of unsecured debt and secured borrowings issued through our term asset-backed securitization (“ABS”) program and our Private Education Loan multi-lender secured borrowing facility (the “Secured Borrowing Facility”). For additional information regarding our borrowings, see Notes to Consolidated Financial Statements, Note 12, “Borrowings” in our 2022 Form 10-K. The following table summarizes our borrowings at March 31, 2023 and December 31, 2022.

March 31, 2023December 31, 2022
(Dollars in thousands)Short-TermLong-TermTotalShort-TermLong-TermTotal
Unsecured borrowings:
Unsecured debt (fixed-rate)$— $989,788 $989,788 $— $988,986 $988,986 
Total unsecured borrowings— 989,788 989,788 — 988,986 988,986 
Secured borrowings:
Private Education Loan term securitizations:
Fixed-rate— 3,759,190 3,759,190 — 3,462,363 3,462,363 
Variable-rate— 764,998 764,998 — 783,765 783,765 
Total Private Education Loan term securitizations— 4,524,188 4,524,188 — 4,246,128 4,246,128 
Secured Borrowing Facility— — — — — — 
Total secured borrowings— 4,524,188 4,524,188 — 4,246,128 4,246,128 
Total$— $5,513,976 $5,513,976 $— $5,235,114 $5,235,114 

Short-term Borrowings
On May 17, 2022, we amended our Secured Borrowing Facility to extend the maturity of the facility. The amount that can be borrowed under the facility is $2 billion. We hold 100 percent of the residual interest in the Secured Borrowing Facility trust. Under the Secured Borrowing Facility, we incur financing costs on unused borrowing capacity and on outstanding advances. The amended Secured Borrowing Facility extended the revolving period, during which we may borrow, repay, and reborrow funds, until May 16, 2023. The scheduled amortization period, during which amounts outstanding under the Secured Borrowing Facility must be repaid, ends on May 16, 2024 (or earlier, if certain material adverse events occur). At both March 31, 2023, and December 31, 2022, there were no secured borrowings outstanding under the Secured Borrowing Facility.

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9.Borrowings (Continued)

Long-term Borrowings
Secured Financings
2023 Transaction
On March 15, 2023, we executed our $579 million SMB Private Education Loan Trust 2023-A term ABS transaction, which was accounted for as a secured financing. We sold $579 million of notes to third parties and retained a 100 percent interest in the residual certificates issued in the securitization, raising approximately $572 million of gross proceeds. The Class A and Class B notes had a weighted average life of 5.06 years and priced at a weighted average SOFR equivalent cost of SOFR plus 1.53 percent. On March 31, 2023, $639 million of our Private Education Loans, including $598 million of principal and $41 million in capitalized interest, were encumbered because of this transaction.
Secured Financings at Issuance
The following table summarizes our secured financings issued in the year ended December 31, 2022 and in the three months ended March 31, 2023.

IssueDate IssuedTotal Issued
Weighted Average Cost of Funds(1)
Weighted Average Life
 (in years)
(Dollars in thousands)
Private Education Loans:
2022-CAugust 2022$575,000 
SOFR plus 1.76%
4.69
Total notes issued in 2022$575,000 
Total loan and accrued interest amount securitized at inception in 2022(2)
$674,387 
2023-AMarch 2023$579,000 
SOFR plus 1.53%
5.06
Total notes issued in 2023$579,000 
Total loan and accrued interest amount securitized at inception in 2023(3)
$644,573 


(1) Represents SOFR equivalent cost of funds for floating and fixed-rate bonds, excluding issuance costs.
(2) At March 31, 2023, $610 million of our Private Education Loans, including $572 million of principal and $38 million in capitalized interest, were encumbered related to these transactions.
(3) At March 31, 2023, $639 million of our Private Education Loans, including $598 million of principal and $41 million in capitalized interest, were encumbered related to these transactions.



SLM CORPORATION 33



9.Borrowings (Continued)

Consolidated Funding Vehicles

We consolidate our financing entities that are VIEs as a result of our being the entities’ primary beneficiary. As a result, these financing VIEs are accounted for as secured borrowings.

As of March 31, 2023
(dollars in thousands)
Debt OutstandingCarrying Amount of Assets Securing Debt Outstanding
Short-TermLong-TermTotalLoansRestricted Cash
Other Assets(1)
Total
Secured borrowings:
Private Education Loan term securitizations$— $4,524,188 $4,524,188 $5,728,010 $181,764 $322,715 $6,232,489 
Secured Borrowing Facility— — — — — 360 360 
Total$— $4,524,188 $4,524,188 $5,728,010 $181,764 $323,075 $6,232,849 

As of December 31, 2022
(dollars in thousands)
Debt OutstandingCarrying Amount of Assets Securing Debt Outstanding
Short-TermLong-TermTotalLoansRestricted Cash
Other
Assets(1)
Total
Secured borrowings:
Private Education Loan term securitizations$— $4,246,128 $4,246,128 $5,433,602 $156,719 $286,093 $5,876,414 
Secured Borrowing Facility— — — — — 1,066 1,066 
Total$— $4,246,128 $4,246,128 $5,433,602 $156,719 $287,159 $5,877,480 

(1) Other assets primarily represent accrued interest receivable.

Unconsolidated VIEs
Private Education Loan Securitizations
Unconsolidated VIEs include variable interests that we hold in certain securitization trusts created by the sale of our Private Education Loans to unaffiliated third parties. We remained the servicer of these loans pursuant to applicable servicing agreements executed in connection with the sales, and we are also the administrator of these trusts. Additionally, we own five percent of the securities issued by the trusts to meet risk retention requirements. We were not required to consolidate these entities because the fees we receive as the servicer/administrator are commensurate with our responsibility, so the fees are not considered a variable interest. Additionally, the five percent vertical interest we maintain does not absorb more than an insignificant amount of the VIE’s expected losses, nor do we receive more than an insignificant amount of the VIE’s expected residual returns.
The table below provides a summary of our exposure related to our unconsolidated VIEs.

March 31, 2023
December 31, 2022
(Dollars in thousands)
Debt Interests(1)
Equity Interests(2)
Total Exposure
Debt Interests(1)
Equity Interests(2)
Total Exposure
Private Education Loan term securitizations$317,077 $51,342 $368,419 $329,188 $50,786 $379,974 

(1) Vertical risk retention interest classified as available-for-sale investment.
(2) Vertical risk retention interest classified as trading investment.


34 SLM CORPORATION



9.Borrowings (Continued)

Other Borrowing Sources
We maintain discretionary uncommitted Federal Funds lines of credit with various correspondent banks, which totaled $125 million at March 31, 2023. The interest rate we are charged on these lines of credit is priced at Fed Funds plus a spread at the time of borrowing and is payable daily. We did not utilize these lines of credit in the three months ended March 31, 2023 or in the year ended December 31, 2022.
We established an account at the FRB to meet eligibility requirements for access to the Primary Credit borrowing facility at the FRB’s Discount Window (the “Window”). The Primary Credit borrowing facility is a lending program available to depository institutions that are in generally sound financial condition. All borrowings at the Window must be fully collateralized. We can pledge asset-backed and mortgage-backed securities, as well as FFELP Loans and Private Education Loans, to the FRB as collateral for borrowings at the Window. Generally, collateral value is assigned based on the estimated fair value of the pledged assets. At March 31, 2023 and December 31, 2022, the value of our pledged collateral at the FRB totaled $2.1 billion and $2.2 billion, respectively. The interest rate charged to us is the discount rate set by the FRB. We did not utilize this facility in the three months ended March 31, 2023 or in the year ended December 31, 2022.


10. Derivative Financial Instruments
Risk Management Strategy
We maintain an overall interest rate risk management strategy that incorporates the use of derivative instruments to reduce the economic effect of interest rate changes. Our goal is to manage interest rate sensitivity by modifying the repricing frequency and underlying index characteristics of certain balance sheet assets or liabilities so any adverse impacts related to movements in interest rates are managed within low to moderate limits. As a result of interest rate fluctuations, hedged balance sheet positions will appreciate or depreciate in market value or create variability in cash flows. Income or loss on the derivative instruments linked to the hedged item will generally offset the effect of this unrealized appreciation or depreciation or volatility in cash flows for the period the item is being hedged. We view this strategy as a prudent management of interest rate risk. Please refer to Notes to Consolidated Financial Statements, Note 13, “Derivative Financial Instruments” in our 2022 Form 10-K for a full discussion of our risk management strategy.
Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) requires all standardized derivatives, including most interest rate swaps, to be submitted for clearing to central counterparties to reduce counterparty risk. Two of the central counterparties we use are the Chicago Mercantile Exchange (“CME”) and the London Clearing House (“LCH”). All variation margin payments on derivatives cleared through the CME and LCH are accounted for as legal settlement. As of March 31, 2023, $1.8 billion notional of our derivative contracts were cleared on the CME and $0.2 billion were cleared on the LCH. The derivative contracts cleared through the CME and LCH represent 90.0 percent and 10.0 percent, respectively, of our total notional derivative contracts of $2.0 billion at March 31, 2023.
For derivatives cleared through the CME and LCH, the net gain (loss) position includes the variation margin amounts as settlement of the derivative and not collateral against the fair value of the derivative. The amount of variation margin included as settlement as of March 31, 2023 was $(47) million and $(6) million for the CME and LCH, respectively. Changes in fair value for derivatives not designated as hedging instruments are presented as realized gains (losses).
Our exposure is limited to the value of the derivative contracts in a gain position less any collateral held and plus any collateral posted. When there is a net negative exposure, we consider our exposure to the counterparty to be zero. At March 31, 2023 and December 31, 2022, we had a net positive exposure (derivative gain/loss positions to us, less collateral held by us and plus collateral posted with counterparties) related to derivatives of $11 million and $12 million, respectively.


SLM CORPORATION 35


10.Derivative Financial Instruments (Continued)
Summary of Derivative Financial Statement Impact
The following tables summarize the fair values and notional amounts of all derivative instruments at March 31, 2023 and December 31, 2022, and their impact on earnings and other comprehensive income for the three months ended March 31, 2023 and March 31, 2022. Please refer to Notes to Consolidated Financial Statements, Note 13, “Derivative Financial Instruments” in our 2022 Form 10-K for a full discussion of cash flow hedges, fair value hedges, and trading activities.

Impact of Derivatives on the Consolidated Balance Sheets
Cash Flow HedgesFair Value HedgesTradingTotal
March 31,December 31,March 31,December 31,March 31,December 31,March 31,December 31,
(Dollars in thousands)20232022202320222023202220232022
Fair Values(1)
Hedged Risk Exposure
Derivative Assets:(2)
Interest rate swapsInterest rate$— $972 $— $— $— $— $— $972 
Derivative Liabilities:(2)
Interest rate swaps Interest rate(1,714)— (101)(567)— — (1,815)(567)
Total net derivatives$(1,714)$972 $(101)$(567)$— $— $(1,815)$405 
 
(1)    Fair values reported include variation margin as legal settlement of the derivative contract. 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)    The following table reconciles gross positions with the impact of master netting agreements to the balance sheet classification:
    
Other AssetsOther Liabilities
March 31,December 31,March 31,December 31,
(Dollars in thousands)2023202220232022
Gross position(1)
$— $972 $(1,815)$(567)
Impact of master netting agreement— (567)— 567 
Derivative values with impact of master netting agreements (as carried on balance sheet)— 405 (1,815)— 
Cash collateral pledged(2)
13,031 11,162 — — 
Net position$13,031 $11,567 $(1,815)$— 

(1)Gross position amounts include accrued interest and variation margin as legal settlement of the derivative contract.
(2)Cash collateral pledged excludes amounts that represent legal settlement of the derivative contracts.


Notional Values
Cash FlowFair ValueTradingTotal
(Dollars in thousands)March 31,December 31,March 31,December 31,March 31,December 31,March 31,December 31,
20232022202320222023202220232022
Interest rate swaps$1,285,120 $1,314,660 $702,309 $1,528,186 $— $— $1,987,429 $2,842,846 
Net total notional$1,285,120 $1,314,660 $702,309 $1,528,186 $— $— $1,987,429 $2,842,846 


36 SLM CORPORATION


10.Derivative Financial Instruments (Continued)
As of March 31, 2023 and December 31, 2022, the following amounts were recorded on the consolidated balance sheet related to cumulative basis adjustments for fair value hedges:
(Dollars in thousands)Carrying Amount of the Hedged Assets/(Liabilities)Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets/(Liabilities)
Line Item in the Balance Sheet in Which the Hedged Item is Included:March 31,December 31,March 31,December 31,
2023202220232022
Deposits$(677,893)$(1,494,087)$24,224 $31,259 


Impact of Derivatives on the Consolidated Statements of Income
Three Months Ended 
 March 31,
(Dollars in thousands)20232022
Fair Value Hedges
Interest rate swaps:
Interest recognized on derivatives$(6,405)$17,287 
Hedged items recorded in interest expense(7,035)51,268 
Derivatives recorded in interest expense7,096 (51,319)
Total $(6,344)$17,236 
Cash Flow Hedges
Interest rate swaps:
Amount of gain (loss) reclassified from accumulated other comprehensive income into interest expense$10,278 $(4,541)
Total $10,278 $(4,541)
Trading
Interest rate swaps:
Change in fair value of future interest payments recorded in earnings$— $(248)
Total— (248)
Total$3,934 $12,447 

    
SLM CORPORATION 37


10.Derivative Financial Instruments (Continued)
Impact of Derivatives on the Statements of Changes in Stockholders’ Equity
Three Months Ended
March 31,
(Dollars in thousands)20232022
Amount of gain (loss) recognized in other comprehensive income (loss)$(4,721)$47,989 
Less: amount of gain (loss) reclassified in interest expense10,278 (4,541)
Total change in other comprehensive income (loss) for unrealized gains (losses) on derivatives, before income tax (expense) benefit$(14,999)$52,530 
    
Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on our variable-rate deposits. During the next 12 months, we estimate that $41 million will be reclassified as a decrease to interest expense.
Cash Collateral
As of March 31, 2023, cash collateral held and pledged excludes amounts that represent legal settlement of the derivative contracts held with the CME and LCH. There was no cash collateral held by us related to derivative exposure between us and our derivatives counterparties at March 31, 2023 and December 31, 2022, respectively. Collateral held is recorded in “Other Liabilities” on the consolidated balance sheets. Cash collateral pledged by us related to derivative exposure between us and our derivatives counterparties was $13 million and $11 million at March 31, 2023 and December 31, 2022, respectively. Collateral pledged is recorded in “Other interest-earning assets” on the consolidated balance sheets.

38 SLM CORPORATION




11. Stockholders’ Equity

The following table summarizes our common share repurchases and issuances.

 
Three Months Ended 
 March 31,

(Shares and per share amounts in actuals)
20232022
Common stock repurchased under repurchase programs(1)
— 9,533,392 
Average purchase price per share(2)
$— $18.46 
Shares repurchased related to employee stock-based compensation plans(3)
949,431 934,602 
Average purchase price per share$15.55 $18.55 
Common shares issued(4)
2,523,744 2,594,817 
 
(1) Common shares purchased under our share repurchase programs. We have utilized all capacity under our 2021 Share Repurchase Program. There was $581 million of capacity remaining under the 2022 Share Repurchase Program at March 31, 2023.
(2) Average purchase price per share includes purchase commission costs.
(3) Comprised of 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.
(4)  Common shares issued under our various compensation and benefit plans.
 
The closing price of our common stock on the NASDAQ Global Select Market on March 31, 2023 was $12.39.

Common Stock Dividends

In both March 2023 and March 2022, we paid a common stock dividend of $0.11 per common share.

Share Repurchases
On January 27, 2021, we announced a share repurchase program (the “2021 Share Repurchase Program”), which was effective upon announcement and expired on January 26, 2023, and originally permitted us to repurchase shares of our common stock from time to time up to an aggregate repurchase price not to exceed $1.25 billion.
In October 2021, our Board of Directors approved a $250 million increase in the amount of common stock that may be repurchased under our 2021 Share Repurchase Program. This was in addition to the original $1.25 billion of authorization announced on January 27, 2021, for a total 2021 Share Repurchase Program authorization of $1.5 billion. Under the 2021 Share Repurchase Program, we repurchased 2.0 million shares of common stock for $38 million in the three months ended March 31, 2022. We have utilized all capacity under the 2021 Share Repurchase Program.
On January 26, 2022, we announced a new share repurchase program (the “2022 Share Repurchase Program”), which was effective upon announcement and expires on January 25, 2024, and permits us to repurchase shares of our common stock from time to time up to an aggregate repurchase price not to exceed $1.25 billion. Under the 2022 Share Repurchase Program, we repurchased 7.5 million shares of common stock for $138 million in the three months ended March 31, 2022. We did not repurchase shares of common stock in the three months ended March 31, 2023. We had $581 million of capacity remaining under the 2022 Share Repurchase Program at March 31, 2023.
So long as there is unexpired capacity under a given repurchase program, repurchases under the programs may occur from time to time and through a variety of methods, including tender offers, open market repurchases, repurchases effected through Rule 10b5-1 trading plans, negotiated block purchases, accelerated share repurchase programs, or other similar transactions. The timing and volume of any repurchases under the 2022 Share Repurchase Program will be subject to market conditions, and there can be no guarantee that the Company will repurchase up to the limit of the program or at all.
Share Repurchases under Rule 10b5-1 trading plans
During the three months ended March 31, 2023 we did not repurchase shares of our common stock; during the three months ended March 31, 2022 we repurchased 9.5 million shares of our common stock at a total cost of $176 million under Rule 10b5-1 trading plans authorized under our share repurchase programs.
SLM CORPORATION 39



12. Earnings per Common Share

Basic earnings per common share (“EPS”) are calculated using the weighted average number of shares of common stock outstanding during each period. A reconciliation of the numerators and denominators of the basic and diluted EPS calculations follows.

Three Months Ended 
 March 31,

(Dollars in thousands, except per share data)
20232022
Numerator:
Net income$118,518 $128,812 
Preferred stock dividends4,063 1,275 
Net income attributable to SLM Corporation common stock$114,455 $127,537 
Denominator:
Weighted average shares used to compute basic EPS241,497 276,977 
Effect of dilutive securities:
Dilutive effect of stock options, restricted stock, restricted stock units, performance stock units, and Employee Stock Purchase Plan (“ESPP”) (1)(2)
2,052 3,677 
Weighted average shares used to compute diluted EPS243,549 280,654 
Basic earnings per common share $0.47 $0.46 
Diluted earnings per common share$0.47 $0.45 


            
(1)     Includes the potential dilutive effect of additional common shares that are issuable upon exercise of outstanding stock options, restricted stock, restricted stock units, performance stock units, and the outstanding commitment to issue shares under the ESPP, determined by the treasury stock method.
(2)      For the three months ended March 31, 2023 and 2022, securities covering approximately 4 million shares and 3 million shares, respectively, were outstanding but not included in the computation of diluted earnings per share because they were anti-dilutive.
 

40 SLM CORPORATION





13. Fair Value Measurements

We use estimates of fair value in applying various accounting standards for our consolidated financial statements.

We categorize our fair value estimates based on a hierarchical framework associated with three levels of price transparency utilized in measuring financial instruments at fair value. For additional information regarding our policies for determining fair value and the hierarchical framework, see Notes to Consolidated Financial Statements, Note 2, “Significant Accounting Policies - Fair Value Measurement” in our 2022 Form 10-K.

During the three months ended March 31, 2023, there were no significant transfers of financial instruments between levels or changes in our methodology or assumptions used to value our financial instruments.

The following table summarizes the valuation of our financial instruments that are marked-to-fair value on a recurring basis.
 Fair Value Measurements on a Recurring Basis
 March 31, 2023December 31, 2022
(Dollars in thousands)Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total 
Assets:
Trading investments$— $— $51,342 $51,342 $— $— $55,903 $55,903 
Available-for-sale investments— 2,311,062 — 2,311,062 — 2,342,089 — 2,342,089 
Derivative instruments— — — — — 972 — 972 
Total$— $2,311,062 $51,342 $2,362,404 $— $2,343,061 $55,903 $2,398,964 
Liabilities:
Derivative instruments$— $(1,815)$— $(1,815)$— $(567)$— $(567)
Total$— $(1,815)$— $(1,815)$— $(567)$— $(567)




 
SLM CORPORATION 41


13.Fair Value Measurements (Continued)

The following table summarizes the fair values of our financial assets and liabilities, including derivative financial instruments.
 March 31, 2023December 31, 2022
(Dollars in thousands)Fair
Value
Carrying
Value
DifferenceFair
Value
Carrying
Value
Difference
Earning assets:
Loans held for investment, net:
Private Education Loans$23,088,030 $20,497,675 $2,590,355 $21,062,548 $19,019,713 $2,042,835 
FFELP Loans601,203 589,888 11,315 618,186 607,155 11,031 
Loans held for sale26,202 26,202 — 29,448 29,448 — 
Cash and cash equivalents3,716,379 3,716,379 — 4,616,117 4,616,117 — 
Trading investments51,342 51,342 — 55,903 55,903 — 
Available-for-sale investments2,311,062 2,311,062 — 2,342,089 2,342,089 — 
Accrued interest receivable1,393,556 1,331,017 62,539 1,237,074 1,202,059 35,015 
Tax indemnification receivable2,858 2,858 — 2,816 2,816 — 
Derivative instruments— — — 972 972 — 
Total earning assets$31,190,632 $28,526,423 $2,664,209 $29,965,153 $27,876,272 $2,088,881 
Interest-bearing liabilities:
Money-market and savings accounts$11,671,878 $11,796,120 $124,242 $11,854,849 $11,959,828 $104,979 
Certificates of deposit9,637,370 10,005,546 368,176 9,175,339 9,486,819 311,480 
Long-term borrowings5,106,299 5,513,976 407,677 4,813,233 5,235,114 421,881 
Accrued interest payable91,943 91,943 — 71,586 71,586 — 
Derivative instruments1,815 1,815 — 567 567 — 
Total interest-bearing liabilities$26,509,305 $27,409,400 $900,095 $25,915,574 $26,753,914 $838,340 
Excess of net asset fair value over carrying value$3,564,304 $2,927,221 

Please refer to Notes to Consolidated Financial Statements, Note 17, “Fair Value Measurements” in our 2022 Form 10-K for a full discussion of the methods and assumptions used to estimate the fair value of each class of financial instruments.

42 SLM CORPORATION



14. Regulatory Capital
    
Sallie Mae Bank (the “Bank”) is subject to various regulatory capital requirements administered by the FDIC and the Utah Department of Financial Institutions. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material adverse effect on our business, results of operations, and financial position. Under the FDIC’s regulations implementing the Basel III capital framework (“U.S. Basel III”) and the regulatory framework for prompt corrective action, the Bank must meet specific capital standards that involve quantitative measures of its assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and its classification under the prompt corrective action framework are also subject to qualitative judgments by the regulators about components of capital, risk weightings, and other factors.
The Bank is subject to the following minimum capital ratios under U.S. Basel III: a Common Equity Tier 1 risk-based capital ratio of 4.5 percent, a Tier 1 risk-based capital ratio of 6.0 percent, a Total risk-based capital ratio of 8.0 percent, and a Tier 1 leverage ratio of 4.0 percent. In addition, the Bank is subject to a Common Equity Tier 1 capital conservation buffer of greater than 2.5 percent. Failure to maintain the buffer will result in restrictions on the Bank’s ability to make capital distributions, including the payment of dividends, and to pay discretionary bonuses to executive officers. Including the buffer, the Bank is required to maintain the following capital ratios under U.S. Basel III in order to avoid such restrictions: a Common Equity Tier 1 risk-based capital ratio of greater than 7.0 percent, a Tier 1 risk-based capital ratio of greater than 8.5 percent, and a Total risk-based capital ratio of greater than 10.5 percent.
To qualify as “well capitalized” under the prompt corrective action framework for insured depository institutions, the Bank must maintain a Common Equity Tier 1 risk-based capital ratio of at least 6.5 percent, a Tier 1 risk-based capital ratio of at least 8.0 percent, a Total risk-based capital ratio of at least 10.0 percent, and a Tier 1 leverage ratio of at least 5.0 percent.
Under regulations issued by the FDIC and other federal banking agencies, banking organizations that adopted CECL during the 2020 calendar year, including the Bank, could elect to delay for two years, and then phase in over the following three years, the effects on regulatory capital of CECL relative to the incurred loss methodology. The Bank elected to use this option. Therefore, the regulatory capital impact of the Bank’s transition adjustments recorded on January 1, 2020 from the adoption of CECL, and 25 percent of the ongoing impact of CECL on the Bank’s allowance for credit losses, retained earnings, and average total consolidated assets, each as reported for regulatory capital purposes (collectively, the “adjusted transition amounts”), were deferred for the two-year period ending January 1, 2022. On January 1, 2022, 25 percent of the adjusted transition amounts was phased in for regulatory capital purposes. On January 1, 2023, an additional 25 percent of the adjusted transition amounts was phased in for regulatory capital purposes. On January 1 of 2024 and 2025, the adjusted transition amounts will continue to be phased in for regulatory capital purposes at a rate of 25 percent per year, with the phased-in amounts included in regulatory capital at the beginning of each year. The Bank’s January 1, 2020 CECL transition amounts increased our allowance for credit losses by $1.1 billion, increased the liability representing our off-balance sheet exposure for unfunded commitments by $116 million, and increased our deferred tax asset by $306 million, resulting in a cumulative effect adjustment that reduced retained earnings by $953 million. This transition adjustment was inclusive of qualitative adjustments incorporated into our CECL allowance as necessary, to address any limitations in the models used.
SLM CORPORATION 43


14.Regulatory Capital (Continued)
At March 31, 2023, the adjusted transition amounts that were deferred and are being phased in for regulatory capital purposes are as follows:
Adjusted Transition AmountsPhase-In Amounts for the Year EndedPhase-In Amounts for the Three Months EndedRemaining Adjusted Transition Amounts to be Phased-In
(Dollars in thousands)December 31, 2021December 31, 2022March 31, 2023March 31, 2023
Retained earnings$836,351 $(209,088)$(209,088)$418,175 
Allowance for credit losses1,038,145 (259,536)(259,536)519,073 
Liability for unfunded commitments104,377 (26,094)(26,094)52,189 
Deferred tax asset306,171 (76,542)(76,542)153,087 


The Bank’s required and actual regulatory capital amounts and ratios under U.S. Basel III are shown in the following table. The following capital amounts and ratios are based upon the Bank’s average assets and risk-weighted assets, as indicated. The Bank has elected to exclude accumulated other comprehensive income related to both available-for-sale investments and swap valuations from Common Equity Tier 1 Capital. At March 31, 2023 and December 31, 2022, the unrealized loss on available-for-sale investments included in other comprehensive income totaled $133 million and $160 million, respectively. The capital ratios would remain above the well capitalized thresholds if the unrealized loss became fully recognized into capital.

(Dollars in thousands)Actual
U.S. Basel III Minimum
Requirements Plus Buffer(1)(2)
AmountRatioAmountRatio
As of March 31, 2023(3):
Common Equity Tier 1 Capital (to Risk-Weighted Assets)$2,979,433 12.0 %$1,738,576 >7.0 %
Tier 1 Capital (to Risk-Weighted Assets)$2,979,433 12.0 %$2,111,128 >8.5 %
Total Capital (to Risk-Weighted Assets)$3,297,674 13.3 %$2,607,863 >10.5 %
Tier 1 Capital (to Average Assets)$2,979,433 10.0 %

$1,188,369 >4.0 %
As of December 31, 2022(3):
Common Equity Tier 1 Capital (to Risk-Weighted Assets)$3,040,662 12.9 %$1,645,807 >7.0 %
Tier 1 Capital (to Risk-Weighted Assets)$3,040,662 12.9 %$1,998,480 >8.5 %
Total Capital (to Risk-Weighted Assets)$3,338,645 14.2 %$2,468,711 >10.5 %
Tier 1 Capital (to Average Assets)$3,040,662 10.3 %$1,185,280 >4.0 %

             
(1)    Reflects the U.S. Basel III minimum required ratio plus the applicable capital conservation buffer.
(2)    The Bank’s regulatory capital ratios also exceeded all applicable standards for the Bank to qualify as “well capitalized” under the prompt corrective action framework.
(3)    For both March 31, 2023 and December 31, 2022, the actual amounts and the actual ratios include the adjusted transition amounts discussed above that were phased in at the beginning of 2022 and 2023.

Bank Dividends

The Bank is chartered under the laws of the State of Utah and its deposits are insured by the FDIC. The Bank’s ability to pay dividends is subject to the laws of Utah and the regulations of the FDIC. Generally, under Utah’s industrial bank laws and regulations as well as FDIC regulations, the Bank may pay dividends from its net profits without regulatory approval if, following the payment of the dividend, the Bank’s capital and surplus would not be impaired. The Bank declared no dividends to the Company for the three months ended March 31, 2023 and $108 million in dividends to the Company for the three months ended March 31, 2022, with the proceeds primarily used to fund the 2022 and 2021 Share
44 SLM CORPORATION


14.Regulatory Capital (Continued)
Repurchase Programs and stock dividends. In the future, we expect that the Bank will pay dividends to the Company as may be necessary to enable the Company to pay any declared dividends on its Series B Preferred Stock and common stock and to consummate any common share repurchases by the Company under its share repurchase programs.

15. Commitments, Contingencies and Guarantees
Commitments
When we approve a Private Education Loan at the beginning of an academic year, that approval may cover the borrowing for the entire academic year. As such, we do not always disburse the full amount of the loan at the time of such approval, but instead have a commitment to fund a portion of the loan at a later date (usually at the start of the second semester or subsequent trimesters). We estimate expected credit losses over the contractual period that we are exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by us. At March 31, 2023, we had $684 million of outstanding contractual loan commitments which we expect to fund during the 2022/2023 academic year. At March 31, 2023, we had a $33 million reserve recorded in “Other Liabilities” to cover expected losses that may occur during the one-year loss emergence period on these unfunded commitments. See Notes to Consolidated Financial Statements, Note 2, “Significant Accounting Policies - Allowance for Credit Losses — Off-Balance Sheet Exposure for Contractual Loan Commitments” in our 2022 Form 10-K and Note 6, “Unfunded Loan Commitments” in this Form 10-Q for additional information.
Regulatory Matters
For additional information regarding our regulatory matters, see Notes to Consolidated Financial Statements, Note 21, “Commitments, Contingencies and Guarantees” in our 2022 Form 10-K.
Contingencies
In the ordinary course of business, we and our subsidiaries are routinely defendants in or parties to pending and threatened legal actions and proceedings, including actions brought on behalf of various classes of claimants. These actions and proceedings may be based on alleged violations of consumer protection, securities, employment, and other laws. In certain of these actions and proceedings, claims for substantial monetary damage may be asserted against us and our subsidiaries.
It is common for the Company, our subsidiaries, and affiliates to receive information and document requests and investigative demands from state attorneys general, legislative committees, and administrative agencies. These requests may be for informational or regulatory purposes and may relate to our business practices, the industries in which we operate, or other companies with whom we conduct business. Our practice has been and continues to be to cooperate with these bodies and be responsive to any such requests.
We are required to establish reserves for litigation and regulatory matters where those matters present loss contingencies that are both probable and estimable. When loss contingencies are not both probable and estimable, we do not establish reserves.
Based on current knowledge, management does not believe there are loss contingencies, if any, arising from pending investigations, litigation, or regulatory matters for which reserves should be established.

16. Subsequent Event
2023 Loan Sale
In April 2023, we identified a pool of $2 billion of Private Education Loans that we intend to sell in a transaction that is expected to close in May 2023. The transaction will be recognized in the second-quarter 2023 consolidated financial statements.
SLM CORPORATION 45


Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following information should be read in connection with SLM Corporation’s Annual Report on Form 10-K for the year ended December 31, 2022 (filed with the Securities and Exchange Commission (the “SEC”) on February 23, 2023) (the “2022 Form 10-K”), and subsequent reports filed with the SEC. Definitions for capitalized terms used in this report not defined herein can be found in the 2022 Form 10-K.

References in this Form 10-Q to “we,” “us,” “our,” “Sallie Mae,” “SLM,” and the “Company” refer to SLM Corporation and its subsidiaries, except as otherwise indicated or unless the context otherwise requires.
    
This report contains “forward-looking” statements and information based on management’s current expectations as of the date of this report. Statements that are not historical facts, including statements about our beliefs, opinions, or expectations and statements that assume or are dependent upon future events, are forward-looking statements. This includes, but is not limited to: statements regarding future developments surrounding COVID-19 or any other pandemic, including, without limitation, statements regarding the potential impact of COVID-19 or any other pandemic on the Company’s business, results of operations, financial condition, and/or cash flows; our expectation and ability to pay a quarterly cash dividend on our common stock in the future, subject to the determination by our Board of Directors, and based on an evaluation of our earnings, financial condition and requirements, business conditions, capital allocation determinations, and other factors, risks, and uncertainties; the Company’s 2023 guidance; the Company’s three-year horizon outlook; the Company’s expectation and ability to execute loan sales and share repurchases; the Company’s projections regarding originations, net charge-offs, non-interest expenses, earnings, balance sheet position, and other metrics; any estimates related to accounting standard changes; and any estimates related to the impact of credit administration practices changes, including the results of simulations or other behavioral observations. Forward-looking statements are subject to risks, uncertainties, assumptions, and other factors that may cause actual results to be materially different from those reflected in such forward-looking statements. These factors include, among others, the risks and uncertainties set forth in Item 1A. “Risk Factors” and elsewhere in our 2022 Form 10-K and subsequent filings with the SEC; the societal, business, and legislative/regulatory impact of pandemics and other public heath crises; increases in financing costs; limits on liquidity; increases in costs associated with compliance with laws and regulations; failure to comply with consumer protection, banking, and other laws; changes in accounting standards and the impact of related changes in significant accounting estimates, including any regarding the measurement of our allowance for credit losses and the related provision expense; any adverse outcomes in any significant litigation to which we are a party; credit risk associated with our exposure to third-parties, including counterparties to our derivative transactions; and changes in the terms of education loans and the educational credit marketplace (including changes resulting from new laws and the implementation of existing laws). We could also be affected by, among other things: changes in our funding costs and availability; reductions to our credit ratings; cybersecurity incidents, cyberattacks, and other failures or breaches of our operating systems or infrastructure, including those of third-party vendors; damage to our reputation; risks associated with restructuring initiatives, including failures to successfully implement cost-cutting programs and the adverse effects of such initiatives on our business; changes in the demand for educational financing or in financing preferences of lenders, educational institutions, students, and their families; changes in law and regulations with respect to the student lending business and financial institutions generally; changes in banking rules and regulations, including increased capital requirements; increased competition from banks and other consumer lenders; the creditworthiness of our customers; changes in the general interest rate environment, including the rate relationships among relevant money-market instruments and those of our earning assets versus our funding arrangements; rates of prepayment on the loans that we own; changes in general economic conditions and our ability to successfully effectuate any acquisitions; and other strategic initiatives. The preparation of our consolidated financial statements also requires us to make certain estimates and assumptions, including estimates and assumptions about future events. These estimates or assumptions may prove to be incorrect. All forward-looking statements contained in this quarterly report on Form 10-Q are qualified by these cautionary statements and are made only as of the date of this report. We do not undertake any obligation to update or revise these forward-looking statements to conform such statements to actual results or changes in our expectations.    

We report financial results on a GAAP basis and also provide certain non-GAAP core earnings performance measures. The difference between our non-GAAP “Core Earnings” and GAAP results for the periods presented were the unrealized, mark-to-fair value gains/losses on derivative contracts (excluding current period accruals on the derivative instruments), net of tax. These are recognized in GAAP, but not in non-GAAP “Core Earnings” results. We provide non-GAAP “Core Earnings” measures because this is one of several measures management uses when making management decisions regarding our performance and the allocation of corporate resources. Our non-GAAP “Core Earnings” are not defined terms within GAAP and may not be comparable to similarly titled measures reported by other companies. For additional information, see “—Key Financial Measures” and “—Non-GAAP ‘Core Earnings’ ” in this Form 10-Q for the
46 SLM CORPORATION


quarter ended March 31, 2023 for a further discussion and a complete reconciliation between GAAP net income and non-GAAP “Core Earnings.”
Through this discussion and analysis, we intend to provide the reader with some narrative context for how our management views our consolidated financial statements, additional context within which to assess our operating results, and information on the quality and variability of our earnings, liquidity, and cash flows.
Impact of COVID-19 on Sallie Mae
For further discussion of the impact of the coronavirus 2019 or COVID-19 (“COVID-19”) pandemic on the Company, see Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Impact of COVID-19 on Sallie Mae” in the 2022 Form 10-K.
The COVID-19 crisis was unprecedented and has had a significant impact on the economic environment globally and in the U.S. On April 10, 2023, President Biden signed into law a joint resolution that immediately terminates the COVID-19 national emergency. There still remains some uncertainty as to the length and breadth of the COVID-19 impact to the U.S. economy and, consequently, on us. Economists expect the impact of COVID-19 on the U.S. economy to continue to be significant into 2023 and beyond. See Part I, Item 1A. “Risk Factors — Pandemic Risk” in the 2022 Form 10-K for additional discussion regarding the risks associated with COVID-19.
Selected Financial Information and Ratios
 
(In thousands,
except per share data and percentages) 
Three Months Ended 
 March 31,
20232022
Net income attributable to SLM Corporation common stock$114,455 $127,537 
Diluted earnings per common share$0.47 $0.45 
Weighted average shares used to compute diluted earnings per common share243,549 280,654 
Return on assets(1)
1.7 %1.8 %
Other Operating Statistics (Held for Investment)
Ending Private Education Loans, net$20,497,675 $20,586,223 
Ending FFELP Loans, net589,888 680,044 
Ending total education loans, net$21,087,563 $21,266,267 
Ending Credit Cards, net(2)
$— $25,408 
Average education loans$22,357,274 $22,548,810 
Average Credit Cards(2)
$— $26,622 
(1) We calculate and report our Return on Assets as the ratio of (a) GAAP net income numerator (annualized) to (b) the GAAP total average assets denominator.
(2) Credit Card loans were transferred to loans held-for-sale at September 30, 2022.
 

SLM CORPORATION 47



Overview
The following discussion and analysis presents a review of our business and operations as of and for the three months ended March 31, 2023.
Key Financial Measures
Our operating results are primarily driven by net interest income from our Private Education Loan portfolio, gains and losses on loan sales, provision expense for credit losses, and operating expenses. The growth of our business and the strength of our financial condition are primarily driven by our ability to achieve our annual Private Education Loan origination goals while sustaining credit quality and maintaining cost-efficient funding sources to support our originations. A brief summary of our key financial measures (net interest income; loan sales and secured financings; allowance for credit losses; charge-offs and delinquencies; operating expenses; Private Education Loan originations; funding sources; and non-GAAP “Core Earnings;”) can be found in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2022 Form 10-K.
LIBOR Transition
Following announcements by the United Kingdom's Financial Conduct Authority (“UKFCA”), which regulates LIBOR, and ICE Benchmark Administration Limited, the administrator of LIBOR, publication of 1-week and 2-month USD LIBOR and all tenors for other currencies ceased after December 31, 2021. While publication of the remaining USD settings is expected to cease after June 30, 2023, U.S. banking and other global financial services regulators directed regulated institutions to cease entering into new LIBOR-based contracts as soon as practicable and in any event by the end of 2021.
In 2020, we launched a formal cross-functional replacement project with the goal of ensuring a smooth transition to a replacement index for our LIBOR-based assets and obligations with minimal negative impact on our customers, investors, and the Company’s business, financial condition, and results of operations.
The Chief Financial Officer and the project team monitor developments, assess impacts, propose plans and, with the approval of an executive committee, implement changes. The Chief Financial Officer and/or project team reports status regularly to our Board of Directors. In 2020, we began accepting certain deposits based on SOFR. In the second quarter of 2021, we began issuing variable-rate Private Education Loans that are indexed to SOFR. In May 2022, we renewed the Secured Borrowing Facility with an index based on SOFR and, in the third quarter of 2022, we began issuing ABS that are indexed to SOFR.
Substantially all our assets, liabilities, and off-balance sheet items referencing LIBOR are comprised of Private Education Loans originated before April 2021, deposits, variable-rate ABS, and derivatives. In addition, our Series B Preferred Stock is indexed to LIBOR. We plan to transition these exposures to LIBOR by changing them to an alternative reference rate, either through modification or replacement, by June 30, 2023. Approximately $157 million of our variable-rate ABS (those issued before November 2017) do not have fallback provisions for an alternative reference rate and we intend to rely upon the safe harbors provided by recently passed federal legislation to transition these ABS to an alternative reference rate. Generally, the safe harbors will shield parties from liability and damages for transitioning certain USD LIBOR-indexed contracts (generally, those that do not have provisions for an alternative reference rate) to a benchmark replacement rate based on SOFR and selected by the Federal Reserve Board. We have evaluated the potential basis risk associated with a mismatch in variable-rate assets and liabilities, including any mismatches related to (i) legacy assets and liabilities that remain indexed to LIBOR up to June 2023 and newly issued assets and liabilities that are, or will be, indexed to SOFR and (ii) term SOFR-indexed assets and liabilities and average SOFR assets and liabilities. In all such cases, we have determined the basis risk is immaterial on an aggregate basis.

48 SLM CORPORATION


The chart below depicts our current LIBOR exposure at March 31, 2023.

 
As of March 31, 2023
(dollars in thousands)
LIBOR
Exposure
Private Education Loans$6,103,128 
FFELP Loans499,647 
Available-for-sale investments45,818 
Total Assets$6,648,593 
  
Deposits$1,872,573 
Private Education Loan term securitizations - no contractual fallback156,920 
Private Education Loan term securitizations - alternative reference rate fallback485,069 
Total Liabilities2,514,562 
Total Equity (preferred stock)251,070 
Total Liabilities and Equity$2,765,632 
Off-Balance Sheet:
Pay LIBOR derivative notional$702,309 
Receive LIBOR derivative notional1,285,120 
Total derivative notional1,987,429 
Total Off-Balance Sheet$1,987,429 

See Part I, Item 1A. “Risk Factors” in the 2022 Form 10-K for additional discussion regarding the risks associated with the transition from LIBOR.

Strategic Imperatives
To further focus our business and increase shareholder value, we continue to advance our strategic imperatives. Our focus remains on maximizing the profitability and growth of our core private student loan business, while harnessing and optimizing the power of our brand and attractive client base. In addition, we continue to seek to better inform the external narrative about student lending and Sallie Mae. We also strive to maintain a rigorous and predictable capital allocation and return program to create shareholder value. We are focused on driving a mission-led culture that continues to make Sallie Mae a great place to work. We also continue to strengthen our risk and compliance function, enhance and build upon our risk management framework, and assess and monitor enterprise-wide risk.
During the first three months of 2023, we made the following progress on the above corporate strategic imperatives.
2023-A Securitization
On March 15, 2023, we executed our $579 million SMB Private Education Loan Trust 2023-A term ABS transaction, which was accounted for as a secured financing. We sold $579 million of notes to third parties and retained a 100 percent interest in the residual certificates issued in the securitization, raising approximately $572 million of gross proceeds. The Class A and Class B notes had a weighted average life of 5.06 years and priced at a weighted average SOFR equivalent cost of SOFR plus 1.53 percent.

SLM CORPORATION 49


Results of Operations
We present the results of operations below on a consolidated basis in accordance with GAAP.
 
GAAP Consolidated Statements of Income (Unaudited)

(Dollars in millions,
except per share amounts)
Three Months Ended 
 March 31,
Increase
(Decrease)
20232022$%
Interest income:
Loans$583 $458 $125 27 %
Investments11 120 
Cash and cash equivalents 44 42 2,100 
Total interest income638 465 173 37 
Total interest expense233 90 143 159 
Net interest income405 375 30 
Less: provisions for credit losses114 98 16 16 
Net interest income after provisions for credit losses291 277 14 
Non-interest income:
Gains on sales of loans, net— 10 (10)(100)
Gains (losses) on securities, net(4)150 
Other income20 16 25 
Total non-interest income22 22 — — 
Non-interest expenses:
Total operating expenses155 132 23 17 
Acquired intangible assets amortization expense100 
Total non-interest expenses157 133 24 18 
Income before income tax expense156 166 (10)(6)
Income tax expense37 37 — — 
Net income119 129 (10)(8)
Preferred stock dividends300 
Net income attributable to SLM Corporation common stock$114 $128 $(14)(11)%
Basic earnings per common share$0.47 $0.46 $0.01 %
Diluted earnings per common share $0.47 $0.45 $0.02 %
Declared dividends per common share$0.11 $0.11 $— — %

50 SLM CORPORATION


 GAAP Consolidated Earnings Summary
Three Months Ended March 31, 2023 Compared with Three Months Ended March 31, 2022
For the three months ended March 31, 2023, net income attributable to common stock was $114 million, or $0.47 diluted earnings per common share, compared with net income attributable to common stock of $128 million, or $0.45 diluted earnings per common share, for the three months ended March 31, 2022.
The primary drivers of changes in net income for the current quarter compared with the year-ago quarter are as follows:
Net interest income increased by $30 million in the current quarter compared with the year-ago quarter primarily due to a 41-basis point increase in our net interest margin, which more than offset a $192 million reduction in our average Private Education Loans and FFELP Loans outstanding. Our net interest margin increased in the current quarter from the year-ago quarter primarily because our interest-earning assets repriced faster than our cost of funds as interest rates increased dramatically over the past year. Historically, during a period of rising interest rates, our net interest margin will typically increase because the yields on interest-earnings assets reprice more quickly than our cost of funds, and during a period of declining interest rates, we typically see our net interest margin decline.
Provision for credit losses in the current quarter was $114 million, compared with $98 million in the year-ago quarter. During the first quarter of 2023, the increase in the provision for credit losses was primarily the result of new loan commitments, net of expired commitments, slower prepayment rates, and changes in economic outlook and recovery rates.
Gains on sales of loans, net, in the current quarter decreased $10 million from the year-ago quarter, as there were no loan sales in the first quarter of 2023, versus $95 million in loan sales that occurred in the year-ago quarter.
Gains (losses) on securities, net, were $2 million of gains in the current quarter compared with $4 million of losses in the year-ago quarter. The increase was due to the change in mark-to-fair value of our trading investments.
Other income was $20 million in the first quarter of 2023, compared with $16 million in the year-ago quarter. In the first quarter of 2023, there was a $4 million increase in third-party servicing fees from the year-ago quarter and a $1 million increase in Private Education Loan late fees from the year-ago quarter. The increase in third-party servicing fees was due to an additional $2.4 billion of loans that we sold during the past year where we continue to service on behalf of the owners of the loans.
First-quarter 2023 total operating expenses were $155 million, compared with $132 million in the year-ago quarter. The increase in total operating expenses was primarily driven by higher personnel costs, initiative spending, and higher FDIC assessment fees.
During the first quarter of 2023, we recorded $2 million in amortization of acquired intangible assets versus $1 million in the year-ago quarter related to our acquisition of Nitro in the first quarter of 2022.
First-quarter 2023 income tax expense was $37 million, unchanged from $37 million in the year-ago quarter. Our effective income tax rate increased to 24.0 percent in the first quarter of 2023 from 22.5 percent in the year-ago quarter. The increase in the effective rate for the first quarter of 2023 was primarily due to an increase in non-deductible expenses.


SLM CORPORATION 51


Non-GAAP “Core Earnings”
We prepare financial statements in accordance with GAAP. However, we also produce and report our after-tax earnings on a separate basis that we refer to as “Core Earnings.” The difference between our non-GAAP “Core Earnings” and GAAP results for periods presented generally is driven by the unrealized, mark-to-fair value gains (losses) on derivative contracts recognized in GAAP, but not in non-GAAP “Core Earnings.”
Non-GAAP “Core Earnings” recognizes the difference in accounting treatment based upon whether a derivative qualifies for hedge accounting treatment. We enter into derivative instruments to economically hedge interest rate and cash flow risk associated with our portfolio. We believe that our derivatives are effective economic hedges and, as such, are a critical element of our interest rate risk management strategy. Those derivative instruments that qualify for hedge accounting treatment have their related cash flows recorded in interest income or interest expense along with the hedged item. Some of our derivatives do not qualify for hedge accounting treatment and the stand-alone derivative must be marked-to-fair value in the income statement with no consideration for the corresponding change in fair value of the hedged item. These gains and losses, recorded in “Gains (losses) on derivatives and hedging activities, net,” are primarily caused by interest rate volatility and changing credit spreads during the period as well as the volume and term of derivatives not receiving hedge accounting treatment. Cash flows on derivative instruments that do not qualify for hedge accounting are not recorded in interest income and interest expense; they are recorded in non-interest income: “Gains (losses) on derivatives and hedging activities, net.”
The adjustments required to reconcile from our non-GAAP “Core Earnings” results to our GAAP results of operations, net of tax, relate to differing treatments for those derivative instruments used to hedge our economic risks that do not qualify for hedge accounting treatment. The amount recorded in “Gains (losses) on derivatives and hedging activities, net” includes (i) the accrual of the current payment on the interest rate swaps that do not qualify for hedge accounting treatment, and (ii) the change in fair values related to future expected cash flows for derivatives that do not qualify for hedge accounting treatment. For purposes of non-GAAP “Core Earnings,” we include in GAAP earnings the current period accrual amounts (interest reclassification) on the swaps and exclude the change in fair values for those derivatives not qualifying for hedge accounting treatment. Non-GAAP “Core Earnings” is meant to represent what earnings would have been had these derivatives qualified for hedge accounting and there was no ineffectiveness.
Non-GAAP “Core Earnings” are not a substitute for reported results under GAAP. We provide a non-GAAP “Core Earnings” basis of presentation because we believe it better reflects the financial results for derivatives that are economic hedges of interest rate risk, but which do not qualify for hedge accounting treatment.
GAAP provides a uniform, comprehensive basis of accounting. Our non-GAAP “Core Earnings” basis of presentation differs from GAAP in the way it treats derivatives as described above.
The following table shows the amount in “Gains (losses) on derivatives and hedging activities, net” that relates to the interest reclassification on the derivative contracts for the three months ended March 31, 2022. There were no gains (losses) on derivative and hedging activities in the three months ended March 31, 2023.

Three Months Ended 
 March 31,
(Dollars in thousands)2022
Unrealized gains (losses) on instruments not in a hedging relationship$(248)
Interest reclassification243 
Gains (losses) on derivatives and hedging activities, net$(5)










52 SLM CORPORATION



The following table reflects adjustments associated with our derivative activities.

Three Months Ended 
 March 31,
(Dollars in thousands, except per share amounts)20232022
Non-GAAP “Core Earnings” adjustments to GAAP:
GAAP net income$118,518 $128,812 
Preferred stock dividends4,063 1,275 
GAAP net income attributable to SLM Corporation common stock$114,455 $127,537 
Adjustments:
Net impact of derivative accounting(1)
— 248 
Net tax expense(2)
— 60 
Total non-GAAP “Core Earnings” adjustments to GAAP— 188 
Non-GAAP “Core Earnings” attributable to SLM Corporation common stock$114,455 $127,725 
GAAP diluted earnings per common share$0.47 $0.45 
Derivative adjustments, net of tax— 0.01 
Non-GAAP “Core Earnings” diluted earnings per common share$0.47 $0.46 

(1) Derivative Accounting: Non-GAAP “Core Earnings” exclude periodic unrealized gains and losses caused by the mark-to-fair value valuations on derivatives that do not qualify for hedge accounting treatment under GAAP, but include current period accruals on the derivative instruments. Under GAAP, for our derivatives held to maturity, the cumulative net unrealized gain or loss over the life of the contract will equal $0.
(2) Non-GAAP “Core Earnings” tax rate is based on the effective tax rate at the Bank where the derivative instruments are held.




SLM CORPORATION 53


Financial Condition
Average Balance Sheets
The following table reflects the rates earned on interest-earning assets and paid on interest-bearing liabilities and reflects our net interest margin on a consolidated basis.
 
 Three Months Ended March 31,
 20232022
(Dollars in thousands)BalanceRateBalanceRate
Average Assets    
Private Education Loans$21,755,202 10.66 %$21,858,270 8.38 %
FFELP Loans602,072 6.87 690,540 3.51 
Credit Cards27,722 12.28 26,622 3.95 
Taxable securities2,529,536 1.82 2,646,397 0.84 
Cash and other short-term investments3,919,113 4.52 3,535,198 0.20 
Total interest-earning assets28,833,645 8.97 %28,757,027 6.56 %
 
Non-interest-earning assets165,444 472,002 
 
Total assets$28,999,089 $29,229,029 
 
Average Liabilities and Equity
Brokered deposits$10,278,132 3.08 %$10,131,989 1.25 %
Retail and other deposits11,681,489 3.86 11,058,963 0.66 
Other interest-bearing liabilities(1)
5,243,091 3.36 5,779,749 2.87 
Total interest-bearing liabilities27,202,712 3.47 %26,970,701 1.35 %
 
Non-interest-bearing liabilities21,461 97,582 
Equity1,774,916 2,160,746 
Total liabilities and equity$28,999,089 $29,229,029 
 
Net interest margin5.70 %5.29 %
 
(1)  Includes the average balance of our unsecured borrowings, as well as secured borrowings and amortization expense of transaction costs related to our term asset-backed securitizations and our Secured Borrowing Facility.




54 SLM CORPORATION


Rate/Volume Analysis

The following rate/volume analysis shows the relative contribution of changes in interest rates and asset volumes to changes in interest income, interest expense, and net interest income.

 
(Dollars in thousands)Increase
Change Due To(1)
Rate 
Volume
Three Months Ended March 31, 2023 vs. 2022   
Interest income$172,560 $171,321 $1,239 
Interest expense142,524 141,743 781 
Net interest income$30,036 $29,036 $1,000 

(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.
Summary of Our Loans Held for Investment Portfolio
Ending Loans Held for Investment Balances, net

 
As of March 31, 2023
(dollars in thousands)
Private
Education
Loans
FFELP
Loans
Total Loans Held for Investment
Total loan portfolio:   
In-school(1)
$4,306,839$57$4,306,896
Grace, repayment and other(2)
17,591,164592,26118,183,425
Total, gross21,898,003592,31822,490,321
Deferred origination costs and unamortized premium/(discount)75,0511,49776,548
Allowance for credit losses(1,475,379)(3,927)(1,479,306)
Total loans held for investment portfolio, net$20,497,675$589,888$21,087,563
    
% of total97 %%100 %


As of December 31, 2022
(dollars in thousands)
Private
Education
Loans
FFELP
Loans
Total Loans
Held for
Investment
Total loan portfolio:   
In-school(1)
$3,659,323 $57 $3,659,380 
Grace, repayment and other(2)
16,644,365 608,993 17,253,358 
Total, gross20,303,688 609,050 20,912,738 
Deferred origination costs and unamortized premium/(discount)69,656 1,549 71,205 
Allowance for credit losses(1,353,631)(3,444)(1,357,075)
Total loans held for investment portfolio, net$19,019,713 $607,155 $19,626,868 
   
% of total97 %%100 %

(1)      Loans for customers still attending school and who are not yet required to make payments on the loans.

(2)     Includes loans in deferment or forbearance. Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period (but, for purposes of the table, do not include those loans while they are in forbearance).


SLM CORPORATION 55


    
Average Loans Held for Investment Balances (net of unamortized premium/(discount))

 
Three Months Ended 
 March 31,
(Dollars in thousands)20232022
Private Education Loans$21,755,202 97 %$21,858,270 97 %
FFELP Loans602,072 690,540 
Credit Cards(1)
— — 26,622 — 
Total portfolio$22,357,274 100 %$22,575,432 100 %

(1) Credit Card loans were transferred to loans held-for-sale at September 30, 2022.


Loans Held for Investment, Net Activity

 
Three Months Ended March 31, 2023
(dollars in thousands)
 Private
Education
Loans
FFELP
Loans
Total Loans
Held for
Investment, net
Beginning balance$19,019,713 $607,155 $19,626,868 
Acquisitions and originations:
Fixed-rate1,977,845 — 1,977,845 
Variable-rate470,132 — 470,132 
Total acquisitions and originations2,447,977 — 2,447,977 
Capitalized interest and deferred origination cost premium amortization119,184 5,904 125,088 
Loan consolidations to third-parties(285,483)(8,586)(294,069)
Allowance(121,748)(483)(122,231)
Repayments and other(681,968)(14,102)(696,070)
Ending balance$20,497,675 $589,888 $21,087,563 


Three Months Ended March 31, 2022
(dollars in thousands)
 Private
Education
Loans
FFELP
Loans
Credit
Cards
Total Loans
Held for
Investment, net
Beginning balance$19,625,374 $692,954 $22,955 $20,341,283 
Acquisitions and originations:
Fixed-rate1,357,719 — — 1,357,719 
Variable-rate836,916 — 21,323 858,239 
Total acquisitions and originations2,194,635 — 21,323 2,215,958 
Capitalized interest and deferred origination cost premium amortization114,691 6,567 (80)121,178 
Sales
(89,058)— — (89,058)
Loan consolidations to third-parties(499,431)(8,683)— (508,114)
Allowance(62,076)78 (29)(62,027)
Repayments and other(697,912)(10,872)(18,761)(727,545)
Ending balance$20,586,223 $680,044 $25,408 $21,291,675 


“Loan consolidations to third-parties” and “Repayments and other” are both significantly affected by the volume of loans in our held for investment portfolio in full principal and interest repayment status. The amount of loans in full principal and interest repayment status in our Private Education Loans held for investment portfolio at March 31, 2023
56 SLM CORPORATION


decreased by 3 percent compared with March 31, 2022, and now totals 41 percent of our Private Education Loans held for investment portfolio at March 31, 2023.
“Loan consolidations to third-parties” for the three months ended March 31, 2023 total 3.4 percent of our Private Education Loans held for investment portfolio in full principal and interest repayment status at March 31, 2023, or 1.4 percent of our total Private Education Loans held for investment portfolio at March 31, 2023, compared with the year-ago period of 5.7 percent of our Private Education Loans held for investment portfolio in full principal and interest repayment status, or 2.4 percent of our total Private Education Loans held for investment portfolio, respectively. Historical experience has shown that loan consolidation activity is heightened in the period when the loan initially enters full principal and interest repayment status and then subsides over time. In addition, in higher interest rate environments, such as occurred in the first quarter of 2023, we typically experience reduced loan consolidated activity.
The “Repayments and other” category includes all scheduled repayments, as well as voluntary prepayments, made on loans in repayment (including loans in full principal and interest repayment status) and also includes charge-offs. Consequently, this category can be significantly affected by the volume of loans in repayment.
Private Education Loan Originations
The following table summarizes our Private Education Loan originations. Originations represent loans that were funded or acquired during the period presented.

 
 Three Months Ended 
 March 31,
(Dollars in thousands)2023%2022%
Smart Option - interest only(1)
$478,162 20 %$430,329 20 %
Smart Option - fixed pay(1)
808,246 33 711,395 32 
Smart Option - deferred(1)
1,002,888 41 867,108 40 
Graduate Loan(2)
151,912 150,460 
Parent Loan(3)
38 — 29,365 
Total Private Education Loan originations$2,441,246 100 %$2,188,657 100 %
Percentage of loans with a cosigner89.1 %88.0 %
Average FICO at approval(4)
746 748 

(1) Interest only, fixed pay and deferred describe the payment option while in school or in grace period. See Item 1. “Business - Our Business - Private Education Loans” in the 2022 Form 10-K for a further discussion.
(2) For the three months ended March 31, 2023, the Graduate Loan originations include $10.4 million of Smart Option Loans where the student was in a graduate status. For the three months ended March 31, 2022, the Graduate Loan originations include $1.4 million of Parent Loans and $9.7 million of Smart Option Loans where the student was in a graduate status.
(3) In December 2021, we discontinued offering our Parent Loan product. Applications for those loans received before the offering termination date were processed, and final disbursements under those loans occurred in December 2022.
(4) Represents the higher credit score of the cosigner or the borrower.
SLM CORPORATION 57


Allowance for Credit Losses
Allowance for Credit Losses Activity

  
Three Months Ended March 31,
(dollars in thousands)
20232022
Private
Education
Loans
FFELP
Loans
Credit CardsTotal
Portfolio
Private
Education
Loans
FFELP
Loans
Credit CardsTotal
Portfolio
Beginning balance$1,353,631 $3,444 $— $1,357,075 $1,158,977 $4,077 $2,281 $1,165,335 
Transfer from unfunded commitment liability(1)
148,513 — — 148,513 94,686 — — 94,686 
Less:      
Charge-offs
(95,085)(256)(741)(96,082)(83,856)(99)(111)(84,066)
Plus:      
Recoveries11,986 — 11 11,997 8,033 — 8,036 
Provisions for credit losses:
Provision, current period56,334 739 730 57,803 48,460 21 137 48,618 
Loan sale reduction to provision— — — — (5,247)— — (5,247)
Total provisions for credit losses(2)
56,334 739 730 57,803 43,213 21 137 43,371 
Ending balance$1,475,379 $3,927 $— $1,479,306 $1,221,053 $3,999 $2,310 $1,227,362 

(1)  See Notes to Consolidated Financial Statements, Note 6, “Unfunded Loan Commitments,” in this Form 10-Q for a summary of the activity in the allowance for and balance of unfunded loan commitments, respectively.
(2)  Below is a reconciliation of the provision for credit losses reported in the consolidated statements of income. When a new loan commitment is made, we record the CECL allowance as a liability for unfunded commitments by recording a provision for credit losses. When the loan is funded, we transfer that liability to the allowance for credit losses.
Consolidated Statements of Income
Provisions for Credit Losses Reconciliation
Three Months Ended March 31,
(dollars in thousands)
20232022
Private Education Loan provisions for credit losses:
Provisions for loan losses$56,334 $43,213 
Provisions for unfunded loan commitments56,309 54,679 
Total Private Education Loan provisions for credit losses112,643 97,892 
Other impacts to the provisions for credit losses:
FFELP Loans739 21 
Credit Cards730 137 
Total1,469 158 
Provisions for credit losses reported in consolidated statements of income$114,112 $98,050 


58 SLM CORPORATION



Private Education Loan Allowance for Credit Losses
In establishing the allowance for Private Education Loan losses as of March 31, 2023, we considered several factors with respect to our Private Education Loan portfolio, in particular, credit quality and delinquency, forbearance, and charge-off trends.
Private Education Loans held for investment in full principal and interest repayment status were 41 percent of our total Private Education Loans held for investment portfolio at March 31, 2023, compared with 42 percent at March 31, 2022.
For a more detailed discussion of our policy for determining the collectability of Private Education Loans and maintaining our allowance for Private Education Loans, see Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Allowance for Credit Losses” and Notes to Consolidated Financial Statements, Note 5, “Loans Held for Investment — Certain Collection Tools - Private Education Loans” in the 2022 Form 10-K.
The table below presents our Private Education Loans held for investment portfolio delinquency trends. Loans in repayment include loans making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period (but, for purposes of the following table, do not include those loans while they are in forbearance).

Private Education Loans Held for Investment20232022
March 31,
(dollars in thousands)
Balance%Balance%
Loans in-school/grace/deferment(1)
$5,686,386 $5,405,952 
Loans in forbearance(2)
221,158 234,260 
Loans in repayment and percentage of each status:
Loans current15,446,182 96.6 %15,530,080 96.5 %
Loans delinquent 30-59 days(3)
267,000 1.7 260,535 1.6 
Loans delinquent 60-89 days(3)
140,786 0.9 169,060 1.1 
Loans 90 days or greater past due(3)
136,491 0.8 135,482 0.8 
Total Private Education Loans in repayment15,990,459 100.0 %16,095,157 100.0 %
Total Private Education Loans, gross21,898,003 21,735,369  
Private Education Loans deferred origination costs and unamortized premium/(discount)75,051 71,907  
Total Private Education Loans21,973,054 21,807,276  
Private Education Loans allowance for losses(1,475,379)(1,221,053) 
Private Education Loans, net$20,497,675 $20,586,223  
 
Percentage of Private Education Loans in repayment73.0 %74.1 %
Delinquencies as a percentage of Private Education Loans in repayment3.4 %3.5 %
 
Loans in forbearance as a percentage of Private Education Loans in repayment and forbearance1.4 %1.4 %
(1)Deferment includes customers who have returned to school or are engaged in other permitted educational activities and are not yet required to make payments on the loans (e.g., residency periods for medical students or a grace period for bar exam preparation).
(2)Loans for customers who have requested extension of grace period generally during employment transition or who have temporarily ceased making full payments due to hardship or other factors, consistent with established loan program servicing policies and procedures.
(3)The period of delinquency is based on the number of days scheduled payments are contractually past due.

Delinquencies as a percentage of Private Education Loans (held for investment) in repayment decreased to 3.4 percent at March 31, 2023 from 3.5 percent at March 31, 2022, and the forbearance rate remained unchanged at 1.4 percent at March 31, 2023 and March 31, 2022. The delinquency rate at March 31, 2023 was slightly lower than the year-ago quarter due to several factors, including the improving collection practices and staffing we implemented in late
SLM CORPORATION 59


2022 to address the prior trend of increasing credit losses. In addition, the year-ago quarter’s delinquencies were affected by certain loans whose borrowers took a “gap year” during the pandemic entering full principal and interest repayment status starting in late 2021 and early 2022. See additional discussion related to collections activity and the COVID-19 pandemic in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Impact of COVID-19 on Sallie Mae — Customers and Credit Performance” and “—Financial Condition — Allowance for Credit Losses — Use of Forbearance and Rate Modifications as a Private Education Loan Collection Tool” in the 2022 Form 10-K.

Changes in Allowance for Private Education Loan Losses
The following table summarizes changes in the allowance for Private Education Loan (held for investment) losses.
 
 Three Months Ended 
 March 31,
(Dollars in thousands)20232022
Beginning balance$1,353,631 $1,158,977 
Transfer from unfunded commitment liability(1)
148,513 94,686 
Provision for credit losses:
Provision, current period56,334 48,460 
Loan sale reduction to provision— (5,247)
Total provision56,334 43,213 
Net charge-offs:
Charge-offs(95,085)(83,856)
Recoveries11,986 8,033 
Net charge-offs(83,099)(75,823)
Ending balance$1,475,379 $1,221,053 
 
Allowance as a percentage of the ending total loan balance and accrued interest to be capitalized6.40 %5.37 %
Allowance as a percentage of the ending loans in repayment and accrued interest to be capitalized on loans in repayment(2)
9.00 %7.43 %
Allowance coverage of net charge-offs (annualized)4.44 4.03 
Net charge-offs as a percentage of average loans in repayment (annualized)(2)
2.11 %1.89 %
Delinquencies as a percentage of ending loans in repayment(2)
3.40 %3.51 %
Loans in forbearance as a percentage of ending loans in repayment and forbearance(2)
1.36 %1.43 %
Ending total loans, gross$21,898,003 $21,735,369 
Average loans in repayment(2)
$15,764,143 $16,013,289 
Ending loans in repayment(2)
$15,990,459 $16,095,157 
Accrued interest to be capitalized$1,150,802 $993,698 
Accrued interest to be capitalized on loans in repayment(3)
$408,263 $331,405 
(1) See Notes to Consolidated Financial Statements, Note 6, “Unfunded Loan Commitments,” in this Form 10-Q for a summary of the activity in the allowance for and balance of unfunded loan commitments, respectively.
(2) Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period (but, for purposes of the table, do not include those loans while they are in forbearance).
(3) Accrued interest to be capitalized on loans in repayment includes interest on loans that are in repayment but have not yet entered into full principal and interest payment status after any applicable grace period (but, for purposes of the table, does not include the interest on those loans while they are in forbearance).
 
As part of concluding on the adequacy of the allowance for credit losses, we review key allowance and loan metrics. The most significant of these metrics considered are the allowance coverage of net charge-offs ratio; the allowance as a percentage of ending total loans and accrued interest to be capitalized and of ending loans in repayment and accrued interest to be capitalized on loans in repayment; and delinquency and forbearance percentages.
60 SLM CORPORATION


Delinquency Trends by Active Repayment Status
The tables below show the composition and status of the Private Education Loan portfolio held for investment aged by number of months in active repayment status (months for which a scheduled monthly payment was due). Active repayment status includes loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period (but for purposes of the tables below, do not include those loans while they are in forbearance). Our experience shows that the percentage of loans in forbearance status generally decreases the longer the loans have been in active repayment status. At March 31, 2023, for Private Education Loans (held for investment) that have been in active repayment status for fewer than 25 months, loans in forbearance status as a percentage of all loans in repayment and forbearance were 1.0 percent. Approximately 73 percent of our Private Education Loans (held for investment) in forbearance status have been in active repayment status fewer than 25 months. The March 31, 2022 Form 10-Q incorrectly reported the breakout of the “aged by number of months in active repayment status” categories; the March 31, 2022 table below reflects reclassifications in “aged by number of months in active repayment status” categories to be consistent with the current period presentation. There was no effect to the total loan portfolio balances.

As of March 31, 2023
(dollars in millions)
Private Education Loans Held for Investment
Aged by Number of Months in Active Repayment Status
Not Yet in
Repayment
Total
0 to 1213 to 2425 to 3637 to 48More than 48
Loans in-school/grace/deferment$— $— $— $— $— $5,686 $5,686 
Loans in forbearance126 36 23 15 21 — 221 
Loans in repayment - current4,761 3,594 2,092 1,638 3,362 — 15,447 
Loans in repayment - delinquent 30-59 days82 55 37 28 65 — 267 
Loans in repayment - delinquent 60-89 days47 27 19 16 32 — 141 
Loans in repayment - 90 days or greater past due46 27 18 14 31 — 136 
Total$5,062 $3,739 $2,189 $1,711 $3,511 $5,686 21,898 
Deferred origination costs and unamortized premium/(discount)      75 
Allowance for credit losses      (1,475)
Total Private Education Loans, net      $20,498 
   
Loans in forbearance as a percentage of total Private Education Loans in repayment and forbearance0.78 %0.22 %0.14 %0.09 %0.13 %— %1.36 %


 
SLM CORPORATION 61


As of March 31, 2022
(dollars in millions)
Private Education Loans Held for Investment
Aged by Number of Months in Active Repayment Status
Not Yet in
Repayment
Total
0 to 1213 to 2425 to 3637 to 48More than 48
Loans in-school/grace/deferment$— $— $— $— $— $5,406 $5,406 
Loans in forbearance141 35 23 15 20 — 234 
Loans in repayment - current4,772 3,353 2,456 1,655 3,294 — 15,530 
Loans in repayment - delinquent 30-59 days92 48 38 28 55 — 261 
Loans in repayment - delinquent 60-89 days71 28 22 16 32 — 169 
Loans in repayment - 90 days or greater past due56 24 18 12 25 — 135 
Total$5,132 $3,488 $2,557 $1,726 $3,426 $5,406 21,735 
Deferred origination costs and unamortized premium/(discount)      72 
Allowance for credit losses      (1,221)
Total Private Education Loans, net      $20,586 
 
Loans in forbearance as a percentage of total Private Education Loans in repayment and forbearance0.86 %0.21 %0.15 %0.09 %0.12 %— %1.43 %


Private Education Loans Held for Investment Types
The following table provides information regarding the loans in repayment balance and total loan balance by Private Education Loan held for investment product type at March 31, 2023 and December 31, 2022.

 
As of March 31, 2023
(dollars in thousands)
Signature and
Other
Parent Loan(1)
Smart Option
Career
Training(2)
Graduate
Loan
Total
$ in repayment(3)
$218,517 $246,043 $14,404,070 $3,745 $1,118,084 $15,990,459 
$ in total$304,344 $246,828 $19,749,090 $3,804 $1,593,937 $21,898,003 
 

 
As of December 31, 2022 (dollars in thousands)
Signature and
Other
Parent Loan(1)
Smart Option
Career
Training(2)
Graduate
Loan
Total
$ in repayment(3)
$216,513 $261,316 $13,599,750 $4,565 $1,047,406 $15,129,550 
$ in total$308,884 $262,602 $18,218,925 $4,602 $1,508,675 $20,303,688 
(1) In December 2021, we discontinued offering our Parent Loan product. Applications for those loans received before the offering termination date continued to be processed, and final disbursements under those loans occurred in December 2022.
(2) In May 2022, we discontinued offering our Career Training loan product. Applications for those loans received before the offering termination date will continue to be processed, with final disbursements under those loans to occur until May 2023.
(3) Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period (but, for purposes of the table, do not include those loans while they are in forbearance).





62 SLM CORPORATION


Accrued Interest Receivable
The following table provides information regarding accrued interest receivable on our Private Education Loans held for investment. The table also discloses the amount of accrued interest on loans 90 days or greater past due as compared to our allowance for uncollectible interest. The majority of the total accrued interest receivable represents accrued interest on deferred loans where no payments are due while the borrower is in school and fixed-pay loans where the borrower makes a $25 monthly payment that is smaller than the interest accruing on that loan in that month. The accrued interest on these loans will be capitalized to the balance of the loans when the borrower exits the grace period after separation from school, and the current expected credit losses on accrued interest that will be capitalized is included in our allowance for credit losses.

Private Education Loans
 
Accrued Interest Receivable
(Dollars in thousands)Total Interest Receivable90 Days or Greater Past Due
Allowance for
Uncollectible
Interest(1)
March 31, 2023$1,304,726 $6,638 $6,523 
December 31, 2022$1,177,562 $6,609 $8,121 
March 31, 2022$1,241,574 $6,292 $5,505 
(1)The allowance for uncollectible interest at March 31, 2023, December 31, 2022, and March 31, 2022 represents the expected losses related to the portion of accrued interest receivable on those loans that are in repayment (at March 31, 2023, December 31, 2022, and March 31, 2022, relates to $154 million, $240 million, and $248 million, respectively, of accrued interest receivable) that is not expected to be capitalized. The accrued interest receivable that is expected to be capitalized ($1.2 billion, $937 million, and $994 million, at March 31, 2023, December 31, 2022, and March 31, 2022, respectively) is reserved in the allowance for credit losses.

SLM CORPORATION 63


Liquidity and Capital Resources
Funding and Liquidity Risk Management
Our primary liquidity needs include our ongoing ability to fund our businesses throughout market cycles, including during periods of financial stress, our ongoing ability to fund originations of Private Education Loans, and our ability to meet any outflows of our Bank deposits. To achieve these objectives, we analyze and monitor our liquidity needs, and maintain excess liquidity and access to diverse funding sources, such as deposits at the Bank, issuance of secured debt primarily through asset-backed securitizations, other financing facilities, and loan sales.
Interest-bearing deposits as of March 31, 2023 and December 31, 2022 consisted of retail and brokered non-maturity savings deposits, retail and brokered non-maturity MMDAs, and retail and brokered CDs. Interest-bearing deposits include deposits from Educational 529 and Health Savings plans that diversify our funding sources and additional deposits we consider to be core. These and other large omnibus accounts, aggregating the deposits of many individual depositors, represented $8.0 billion and $8.0 billion of our deposit total as of March 31, 2023 and December 31, 2022, respectively. These omnibus accounts are structured in such a way that entitles the individual depositor pass-through deposit insurance (subject to FDIC rules and limitations), and the majority of these deposits have contractual minimum balances and maturity terms.
It is our policy to manage operations so liquidity needs are fully satisfied through normal operations to avoid unplanned loan sales under all but the most dire emergency conditions. Our liquidity management is governed by policies approved by our Board of Directors. Oversight of these policies is performed in the Asset and Liability Committee, a management-level committee.
These policies take into account the volatility of cash flow forecasts, expected asset and liability maturities, anticipated loan demand, and a variety of other factors to establish minimum liquidity guidelines.
Key risks associated with our liquidity relate to our ability to access the capital markets and the markets for bank deposits at reasonable rates. This ability may be affected by our performance, competitive pressures, the macroeconomic environment, and the impact they have on the availability of funding sources in the marketplace. We target maintaining sufficient on-balance sheet and contingent sources of liquidity to enable us to meet all contractual and contingent obligations under various stress scenarios, including severe macroeconomic stresses as well as specific stresses that test the resiliency of our balance sheet. As the Bank has grown, we have improved our liquidity stress testing practices to align more closely with the industry, which resulted in our adopting increased liquidity requirements. Beginning in the second quarter of 2019, we began to increase our liquidity levels by increasing cash and marketable investments held as part of our ongoing efforts to enhance our ability to maintain a strong risk management position. By early 2020 and continuing through 2022, we held a significant liquidity buffer of cash and securities, which we expect to maintain through 2023. Due to the seasonal nature of our business, our liquidity levels will likely vary from quarter to quarter.
Sources of Liquidity and Available Capacity
Ending Balances
(Dollars in thousands)March 31, 2023December 31, 2022
Sources of primary liquidity:  
Unrestricted cash and liquid investments:  
Holding Company and other non-bank subsidiaries$3,506 $— 
Sallie Mae Bank(1)
3,712,873 4,617,533 
Available-for-sale investments
1,993,984 2,012,901 
Total unrestricted cash and liquid investments$5,710,363 $6,630,434 

(1) This amount will be used primarily to originate Private Education Loans at the Bank.
64 SLM CORPORATION


Average Balances
 
 Three Months Ended 
 March 31,
(Dollars in thousands)20232022
Sources of primary liquidity:
Unrestricted cash and liquid investments:
Holding Company and other non-bank subsidiaries$5,389 $9,674 
Sallie Mae Bank(1)
3,721,807 3,308,624 
Available-for-sale investments2,002,111 2,452,193 
Total unrestricted cash and liquid investments$5,729,307 $5,770,491 
(1) This amount will be used primarily to originate Private Education Loans at the Bank.
Deposits
The following table summarizes total deposits.
March 31,December 31,
(Dollars in thousands)20232022
Deposits - interest-bearing$21,801,666 $21,446,647 
Deposits - non-interest-bearing2,000 1,424 
Total deposits$21,803,666 $21,448,071 

Our total deposits of $21.8 billion were comprised of $10.3 billion in brokered deposits and $11.5 billion in retail and other deposits at March 31, 2023, compared to total deposits of $21.4 billion, which were comprised of $9.9 billion in brokered deposits and $11.5 billion in retail and other deposits, at December 31, 2022.
Interest-bearing deposits as of March 31, 2023 and December 31, 2022 consisted of retail and brokered non-maturity savings deposits, retail and brokered non-maturity MMDAs, and retail and brokered CDs. Interest-bearing deposits include deposits from Educational 529 and Health Savings plans that diversify our funding sources and additional deposits we consider to be core. These and other large omnibus accounts, aggregating the deposits of many individual depositors, represented $8.0 billion and $8.0 billion of our deposit total as of March 31, 2023 and December 31, 2022, respectively.
Some of our deposit products are serviced by third-party providers. Placement fees associated with the brokered CDs are amortized into interest expense using the effective interest rate method. We recognized placement fee expense of $3 million and $3 million in the three months ended March 31, 2023 and 2022, respectively. Fees paid to third-party brokers related to brokered CDs were $3 million and $2 million for the three months ended March 31, 2023 and 2022, respectively.

Interest bearing deposits at March 31, 2023 and December 31, 2022 are summarized as follows:

 March 31, 2023December 31, 2022
(Dollars in thousands)Amount
Qtr.-End
Weighted
Average
Stated Rate(1)
Amount
Year-End
Weighted
Average
Stated Rate(1)
Money market$10,788,126 4.26 %$10,977,242 3.75 %
Savings1,007,994 3.75 982,586 3.15 
Certificates of deposit10,005,546 2.97 9,486,819 2.57 
Deposits - interest bearing$21,801,666 $21,446,647 
(1) Includes the effect of interest rate swaps in effective hedge relationships.
SLM CORPORATION 65



As of March 31, 2023 and December 31, 2022, there were $471 million and $615 million, respectively, of deposits exceeding FDIC insurance limits. These omnibus accounts are structured in such a way that entitles the individual depositor pass-through deposit insurance (subject to FDIC rules and limitations), and the majority of these deposits have contractual minimum balances and maturity terms. Accrued interest on deposits was $69 million and $59 million at March 31, 2023 and December 31, 2022, respectively.

Counterparty Exposure
Counterparty exposure related to financial instruments arises from the risk that a lending, investment, or derivative counterparty will not be able to meet its obligations to us.
Excess cash is generally invested with the FRB on an overnight basis or in the FRB’s Term Deposit Facility, minimizing counterparty exposure on cash balances.
Our investment portfolio is primarily comprised of a small portfolio of mortgage-backed securities issued by government agencies and government-sponsored enterprises that are purchased to meet CRA targets. Additionally, our investing activity is governed by Board-approved limits on the amount that is allowed to be invested with any one issuer based on the credit rating of the issuer, further minimizing our counterparty exposure. Counterparty credit risk is considered when valuing investments and considering impairment.
Related to derivative transactions, protection against counterparty risk is generally provided by International Swaps and Derivatives Association, Inc. Credit Support Annexes (“CSAs”), or clearinghouses for over-the-counter derivatives. CSAs require a counterparty to post collateral if a potential default would expose the other party to a loss. All derivative contracts entered into by the Bank are covered under CSAs or clearinghouse agreements and require collateral to be exchanged based on the net fair value of derivatives with each counterparty. Our exposure to the counterparty is limited to the value of the derivative contracts in a gain position, less any collateral held by us and plus collateral posted with the counterparty.
Title VII of the Dodd-Frank Act requires all standardized derivatives, including most interest rate swaps, to be submitted for clearing to central counterparties to reduce counterparty risk. Two of the central counterparties we use are the CME and the LCH. All variation margin payments on derivatives cleared through the CME and LCH are accounted for as legal settlement. As of March 31, 2023, $1.8 billion notional of our derivative contracts were cleared on the CME and $0.2 billion were cleared on the LCH. The derivative contracts cleared through the CME and LCH represent 90.0 percent and 10.0 percent, respectively, of our total notional derivative contracts of $2.0 billion at March 31, 2023.
For derivatives cleared through the CME and LCH, the net gain (loss) position includes the variation margin amounts as settlement of the derivative and not collateral against the fair value of the derivative. The amount of variation margin included as settlement as of March 31, 2023 was $(47) million and $(6) million for the CME and LCH, respectively. Changes in fair value for derivatives not designated as hedging instruments are presented as realized gains (losses).
Our exposure to the counterparty is limited to the value of the derivative contracts in a gain position less any collateral held and plus any collateral posted. When there is a net negative exposure, we consider our exposure to the counterparty to be zero. At March 31, 2023 and December 31, 2022, we had a net positive exposure (derivative gain/loss positions to us, less collateral held by us and plus collateral posted with counterparties) related to derivatives of $11 million and $12 million, respectively.
We have liquidity exposure related to collateral movements between us and our derivative counterparties. Movements in the value of the derivatives, which are primarily affected by changes in interest rates, may require us to return cash collateral held or may require us to access primary liquidity to post collateral to counterparties.
The table below highlights exposure related to our derivative counterparties as of March 31, 2023.

66 SLM CORPORATION


As of March 31, 2023
(dollars in thousands)
SLM Corporation
and Sallie Mae Bank
Contracts
Total exposure, net of collateral
$11,216 
Exposure to counterparties with credit ratings, net of collateral$11,216 
Percent of exposure to counterparties with credit ratings below S&P AA- or Moody’s Aa3— %
Percent of exposure to counterparties with credit ratings below S&P A- or Moody’s A3— %

Regulatory Capital
The Bank is subject to various regulatory capital requirements administered by federal and state banking authorities. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material adverse effect on our business, results of operations, and financial condition. Under U.S. Basel III and the regulatory framework for prompt corrective action, the Bank must meet specific capital standards that involve quantitative measures of its assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and its classification under the prompt corrective action framework are also subject to qualitative judgments by the regulators about components of capital, risk weightings, and other factors.
 Capital Management
The Bank intends to maintain at all times regulatory capital levels that meet both the minimum levels required under U.S. Basel III (including applicable buffers) and the levels necessary to be considered “well capitalized” under the FDIC’s prompt corrective action framework, in order to support asset growth and operating needs, address unexpected credit risks, and protect the interests of depositors and the Deposit Insurance Fund administered by the FDIC. The Bank’s Capital Policy requires management to monitor these capital standards and the Bank’s compliance with them. The Board of Directors and management periodically evaluate the quality of assets, the stability of earnings, and the adequacy of the allowance for credit losses for the Bank. The Company is a source of strength for the Bank and will provide additional capital if necessary.
We believe that current and projected capital levels are appropriate for 2023. As of March 31, 2023, the Bank’s risk-based and leverage capital ratios exceed the required minimum ratios and the applicable buffers under the fully phased-in U.S. Basel III standards as well as the “well capitalized” standards under the prompt corrective action framework.
Under U.S. Basel III, the Bank is required to maintain the following minimum regulatory capital ratios: a Common Equity Tier 1 risk-based capital ratio of 4.5 percent, a Tier 1 risk-based capital ratio of 6.0 percent, a Total risk-based capital ratio of 8.0 percent, and a Tier 1 leverage ratio of 4.0 percent. In addition, the Bank is subject to a Common Equity Tier 1 capital conservation buffer of greater than 2.5 percent. Failure to maintain the buffer will result in restrictions on the Bank’s ability to make capital distributions, including the payment of dividends, and to pay discretionary bonuses to executive officers. Including the buffer, the Bank is required to maintain the following capital ratios under U.S. Basel III in order to avoid such restrictions: a Common Equity Tier 1 risk-based capital ratio of greater than 7.0 percent, a Tier 1 risk-based capital ratio of greater than 8.5 percent, and a Total risk-based capital ratio of greater than 10.5 percent.
To qualify as “well capitalized” under the prompt corrective action framework for insured depository institutions, the Bank must maintain a Common Equity Tier 1 risk-based capital ratio of at least 6.5 percent, a Tier 1 risk-based capital ratio of at least 8.0 percent, a Total risk-based capital ratio of at least 10.0 percent, and a Tier 1 leverage ratio of at least 5.0 percent.
Under regulations issued by the FDIC and other federal banking agencies, banking organizations that adopted CECL during the 2020 calendar year, including the Bank, could elect to delay for two years, and then phase in over the following three years, the effects on regulatory capital of CECL relative to the incurred loss methodology. The Bank elected to use this option. Therefore, the regulatory capital impact of the Bank’s transition adjustments recorded on January 1, 2020 from the adoption of CECL, and 25 percent of the ongoing impact of CECL on the Bank’s allowance for credit losses, retained earnings, and average total consolidated assets, each as reported for regulatory capital purposes (collectively, the “adjusted transition amounts”), were deferred for the two-year period ending January 1, 2022. On January 1, 2022, 25 percent of the adjusted transition amounts was phased in for regulatory capital purposes. On January 1, 2023, an additional 25 percent of the adjusted transition amounts was phased in for regulatory capital purposes. On January 1 of 2024 and 2025, the adjusted transition amounts will continue to be phased in for regulatory capital purposes at a rate of
SLM CORPORATION 67


25 percent per year, with the phased-in amounts included in regulatory capital at the beginning of each year. The Bank’s January 1, 2020 CECL transition amounts increased our allowance for credit losses by $1.1 billion, increased the liability representing our off-balance sheet exposure for unfunded commitments by $116 million, and increased our deferred tax asset by $306 million, resulting in a cumulative effect adjustment that reduced retained earnings by $953 million. This transition adjustment was inclusive of qualitative adjustments incorporated into our CECL allowance as necessary, to address any limitations in the models used.
At March 31, 2023, the adjusted transition amounts that were deferred and are being phased in for regulatory capital purposes are as follows:
Adjusted Transition AmountsPhase-In Amounts for the Year EndedPhase-In Amounts for the Three Months EndedRemaining Adjusted Transition Amounts to be Phased-In
(Dollars in thousands)December 31, 2021December 31, 2022March 31, 2023March 31, 2023
Retained earnings$836,351 $(209,088)$(209,088)$418,175 
Allowance for credit losses1,038,145 (259,536)(259,536)519,073 
Liability for unfunded commitments104,377 (26,094)(26,094)52,189 
Deferred tax asset306,171 (76,542)(76,542)153,087 

The Bank’s required and actual regulatory capital amounts and ratios under U.S. Basel III are shown in the following table. The following capital amounts and ratios are based upon the Bank’s average assets and risk-weighted assets, as indicated. The Bank has elected to exclude accumulated other comprehensive income related to both available-for-sale investments and swap valuations from Common Equity Tier 1 Capital. At March 31, 2023 and December 31, 2022, the unrealized loss on available-for-sale investments included in other comprehensive income totaled $133 million and $160 million, respectively. The capital ratios would remain above the well capitalized thresholds if the unrealized loss became fully recognized into capital.

 Actual
U.S. Basel III Minimum
Requirements Plus Buffer(1)(2)
(Dollars in thousands)AmountRatioAmountRatio
As of March 31, 2023(3):
Common Equity Tier 1 Capital (to Risk-Weighted Assets)$2,979,433 12.0 %$1,738,576 >7.0 %
Tier 1 Capital (to Risk-Weighted Assets)$2,979,433 12.0 %$2,111,128 >8.5 %
Total Capital (to Risk-Weighted Assets)$3,297,674 13.3 %$2,607,863 >10.5 %
Tier 1 Capital (to Average Assets)$2,979,433 10.0 %

$1,188,369 >4.0 %
As of December 31, 2022(3):
Common Equity Tier 1 Capital (to Risk-Weighted Assets)$3,040,662 12.9 %$1,645,807 >7.0 %
Tier 1 Capital (to Risk-Weighted Assets)$3,040,662 12.9 %$1,998,480 >8.5 %
Total Capital (to Risk-Weighted Assets)$3,338,645 14.2 %$2,468,711 >10.5 %
Tier 1 Capital (to Average Assets)$3,040,662 10.3 %$1,185,280 >4.0 %
            
             
(1)    Reflects the U.S. Basel III minimum required ratio plus the applicable capital conservation buffer.
(2)    The Bank’s regulatory capital ratios also exceeded all applicable standards for the Bank to qualify as “well capitalized” under the prompt corrective action framework.
(3)    For March 31, 2023 and December 31, 2022, the actual amounts and the actual ratios include the adjusted transition amounts discussed above that were phased in at the beginning of 2022 and 2023.
 
68 SLM CORPORATION


Dividends
The Bank is chartered under the laws of the State of Utah and its deposits are insured by the FDIC. The Bank’s ability to pay dividends is subject to the laws of Utah and the regulations of the FDIC. Generally, under Utah’s industrial bank laws and regulations as well as FDIC regulations, the Bank may pay dividends from its net profits without regulatory approval if, following the payment of the dividend, the Bank’s capital and surplus would not be impaired. The Bank declared no dividends and $108 million in dividends to the Company for the three months ended March 31, 2023 and 2022, respectively, with the proceeds primarily used to fund the 2022 and 2021 Share Repurchase Programs and stock dividends. In the future, we expect that the Bank will pay dividends to the Company as may be necessary to enable the Company to pay any declared dividends on its Series B Preferred Stock and common stock and to consummate any common share repurchases by the Company under its share repurchase programs.

Borrowings
Outstanding borrowings consist of unsecured debt and secured borrowings issued through our term ABS program and our Secured Borrowing Facility. The issuing entities for those secured borrowings are VIEs and are consolidated for accounting purposes. The following table summarizes our borrowings at March 31, 2023 and December 31, 2022, respectively. For additional information, see Notes to Consolidated Financial Statements, Note 9, “Borrowings” in this Form 10-Q.

March 31, 2023December 31, 2022
(Dollars in thousands)Short-TermLong-TermTotalShort-TermLong-TermTotal
Unsecured borrowings:
Unsecured debt (fixed-rate)$— $989,788 $989,788 $— $988,986 $988,986 
Total unsecured borrowings— 989,788 989,788 — 988,986 988,986 
Secured borrowings:
Private Education Loan term securitizations:
Fixed-rate— 3,759,190 3,759,190 — 3,462,363 3,462,363 
Variable-rate— 764,998 764,998 — 783,765 783,765 
Total Private Education Loan term securitizations— 4,524,188 4,524,188 — 4,246,128 4,246,128 
Secured Borrowing Facility— — — — — — 
Total secured borrowings— 4,524,188 4,524,188 — 4,246,128 4,246,128 
Total$— $5,513,976 $5,513,976 $— $5,235,114 $5,235,114 

Short-term Borrowings
On May 17, 2022, we amended our Secured Borrowing Facility to extend the maturity of the facility. The amount that can be borrowed under the facility is $2 billion. We hold 100 percent of the residual interest in the Secured Borrowing Facility trust. Under the Secured Borrowing Facility, we incur financing costs on unused borrowing capacity and on outstanding advances. The amended Secured Borrowing Facility extended the revolving period, during which we may borrow, repay, and reborrow funds, until May 16, 2023. The scheduled amortization period, during which amounts outstanding under the Secured Borrowing Facility must be repaid, ends on May 16, 2024 (or earlier, if certain material adverse events occur). At both March 31, 2023, and December 31, 2022, there were no secured borrowings outstanding under the Secured Borrowing Facility.
Other Borrowing Sources
We maintain discretionary uncommitted Federal Funds lines of credit with various correspondent banks, which totaled $125 million at March 31, 2023. The interest rate we are charged on these lines of credit is priced at Fed Funds plus a spread at the time of borrowing and is payable daily. We did not utilize these lines of credit in the three months ended March 31, 2023 or in the year ended December 31, 2022.
SLM CORPORATION 69


We established an account at the FRB to meet eligibility requirements for access to the Primary Credit borrowing facility at the FRB’s Window. The Primary Credit borrowing facility is a lending program available to depository institutions that are in generally sound financial condition. All borrowings at the Window must be fully collateralized. We can pledge asset-backed and mortgage-backed securities, as well as FFELP Loans and Private Education Loans, to the FRB as collateral for borrowings at the Window. Generally, collateral value is assigned based on the estimated fair value of the pledged assets. At March 31, 2023 and December 31, 2022, the value of our pledged collateral at the FRB totaled $2.1 billion and $2.2 billion, respectively. The interest rate charged to us is the discount rate set by the FRB. We did not utilize this facility in the three months ended March 31, 2023 or in the year ended December 31, 2022.
Contractual Loan Commitments
When we approve a Private Education Loan at the beginning of an academic year, that approval may cover the borrowing for the entire academic year. As such, we do not always disburse the full amount of the loan at the time of such approval, but instead have a commitment to fund a portion of the loan at a later date (usually at the start of the second semester or subsequent trimesters). We estimate expected credit losses over the contractual period in which we are exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by us. At March 31, 2023, we had $684 million of outstanding contractual loan commitments that we expect to fund during the 2022/2023 academic year. At March 31, 2023, we had a $33 million reserve recorded in “Other Liabilities” to cover expected losses that may occur during the one-year loss emergence period on these unfunded commitments. See Notes to Consolidated Financial Statements, Note 2, “Significant Accounting Policies - Allowance for Credit Losses — Off-Balance Sheet Exposure for Contractual Loan Commitments” in our 2022 Form 10-K and Note 6, “Unfunded Loan Commitments” in this Form 10-Q for additional information.

Critical Accounting Policies and Estimates
Management’s Discussion and Analysis of Financial Condition and Results of Operations addresses our consolidated financial statements, which have been prepared in accordance with GAAP. In preparing our consolidated financial statements, we have identified certain accounting estimates and assumptions that we consider to be the most critical to an understanding of our financial statements because they involve significant judgments and uncertainties.
The critical accounting estimates we have identified relate to the allowance for credit losses. These estimates reflect our best judgment about current and, for some estimates, including management overlays, future economic and market conditions. These estimates are based on information available as of the date of these financial statements. If conditions change from those expected, it is reasonably possible that these judgments and estimates could change, which may result in a change in the allowance for credit losses or material changes to our consolidated financial statements. A discussion of our critical accounting policies can be found in our 2022 Form 10-K.


70 SLM CORPORATION


Item 3.     Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Sensitivity Analysis
Our interest rate risk management program seeks to manage and control interest rate risk, thereby reducing our exposure to fluctuations in interest rates and achieving consistent and acceptable levels of profit in any rate environment and sustainable growth in net interest income over the long term. We evaluate and monitor interest rate risk through two primary methods:
Earnings at Risk (“EAR”), which measures the impact of hypothetical changes in interest rates on net interest income; and
Economic Value of Equity (“EVE”), which measures the sensitivity or change in the economic value of equity to changes in interest rates.
A number of potential interest rate scenarios are simulated using our asset liability management system. The Bank is the primary source of interest rate risk within the Company. At present, a significant portion of the Bank’s earning assets and a large balance of deposits are indexed to 1-month LIBOR. Therefore, 1-month LIBOR is considered a core rate in our interest rate risk analysis. 1-month LIBOR and other rates are shocked in parallel for shock scenarios unless otherwise indicated. In addition, key rates are modeled with a floor, which indicates how low each specific rate is likely to move in practice. On April 1, 2021, we began offering variable-rate Private Education Loans based on the 30-day average SOFR, replacing 1-month LIBOR for new originations. Rates are adjusted up or down via a set of scenarios that includes both rate shocks and ramps. Rate shocks represent an immediate and sustained change in key rates, including both 1-month LIBOR and 30-day average SOFR, with the resulting changes in other indices correlated accordingly. Interest rate ramps represent a linear increase in those key rates over the course of 12 months, with the resulting changes in other indices correlated accordingly.
The following table summarizes the potential effect on earnings over the next 24 months and the potential effect on market values of balance sheet assets and liabilities at March 31, 2023 and 2022, based upon a sensitivity analysis performed by management assuming hypothetical increases in market interest rates of 100 and 300 basis points and a decrease of 100 and 300 basis points while credit and funding spreads remain constant. EAR analysis assumes a static balance sheet, with maturities of each product replaced with assumed issuance of new products of the same type. The EVE sensitivity is applied only to financial assets and liabilities, including hedging instruments, that existed at the balance sheet date, and does not reflect any impact of new assets, liabilities, commitments, or hedging instruments that may arise in the future.
Due to the low interest rate environment in early 2022, results for downward 100 and 300-basis point rate shocks were not presented because they did not provide a meaningful indication of interest rate sensitivity at that time. As interest rates rose, the 100-basis point downward rate shock was added to the model in the second quarter of 2022 and the 300-basis point downward rate shock was added in the fourth quarter of 2022. The EAR results for March 31, 2023 indicate a market risk profile of low sensitivity to rate changes, based on static balance sheet assumptions over the next two years. The EVE metrics demonstrate higher sensitivity than results from one year ago, but remain well within established trigger and threshold limits.
20232022
As of March 31,
+300
Basis Points
+100
Basis Points
-100
Basis Points
 -300 Basis Points+300
Basis Points
+100
Basis Points
-100
Basis Points
-300 Basis Points
EAR - Shock-0.1%-0.1%0.0%-0.2%-0.1%0.0%N/AN/A
EAR - Ramp+0.7%+0.2%-0.3%-0.9%-0.3%-0.1%N/AN/A
EVE-12.7%-4.7%+5.1%+15.1%-13.3%-4.5%N/AN/A
    
In the preceding tables, the interest rate sensitivity analysis reflects the balance sheet mix of fully variable LIBOR, SOFR, and Prime-based loans, and fully variable funding, including brokered CDs that have been converted to LIBOR or SOFR through derivative transactions. The analysis assumes that retail MMDAs and retail savings balances, while relatively sensitive to interest rate changes, will not correlate 100 percent to the full interest rate shocks or ramps. Also
SLM CORPORATION 71


considered is the impact of FFELP Loans, which receive floor income in low interest rate environments, and will therefore not reprice fully with interest rate shocks.
Although we believe that these measurements provide an estimate of our interest rate sensitivity, they do not account for potential changes in credit quality, balance sheet mix, and size of our balance sheet. They also do not account for other business developments that could affect net income, or for management actions that could affect net income or could be taken to change our risk profile. Accordingly, we can give no assurance that actual results would not differ materially from the estimated outcomes of our simulations. Further, such simulations do not represent our current view of expected future interest rate movements.
Asset and Liability Funding Gap
The table below presents our assets and liabilities (funding) arranged by underlying indices as of March 31, 2023. In the following GAAP presentation, the funding gap only includes derivatives that qualify as effective hedges (those derivatives which are reflected in net interest income, as opposed to those reflected in the “gains (losses) on derivatives and hedging activities, net” line on the consolidated statements of income). The difference between the asset and the funding is the funding gap for the specified index. This represents at a high level our exposure to interest rate risk in the form of basis risk and repricing risk, which is the risk that the different indices may reset at different frequencies or may not move in the same direction or at the same magnitude. (Note that all fixed-rate assets and liabilities are aggregated into one line item, which does not capture the differences in time due to maturity.)

As of March 31, 2023
(dollars in millions)
Index
Frequency of
Variable
Resets
Assets
Funding (1)
Funding
Gap
Fed Funds Effective Ratedaily/weekly/monthly$— $1,456.7 $(1,456.7)
SOFR Ratedaily/weekly/monthly3,125.9 2,996.3 129.6 
3-month Treasury billweekly92.7 — 92.7 
Primemonthly26.6 — 26.6 
3-month LIBORquarterly— 251.1 (251.1)
1-month LIBORmonthly6,149.0 1,931.7 4,217.3 
1-month LIBORdaily499.6 — 499.6 
Non-Discrete reset(2)
daily/weekly3,949.5 3,976.2 (26.7)
Fixed-Rate(3)
 15,610.6 18,841.9 (3,231.3)
Total $29,453.9 $29,453.9 $— 
         
(1)     Funding (by index) includes the impact of all derivatives that qualify as effective hedges.
(2)     Assets include restricted and unrestricted cash equivalents and other overnight type instruments. Funding includes liquid retail deposits and the obligation to return cash collateral held related to derivatives exposures.
(3)     Assets include receivables and other assets (including premiums and reserves). Funding includes unswapped time deposits, liquid MMDAs swapped to fixed-rates, and stockholders' equity.

The “Funding Gap” in the above table shows primarily mismatches in the Fed Funds Effective, 3-month LIBOR, 1-Month LIBOR monthly, 1-Month LIBOR daily, and fixed-rate categories. Changes in the Fed Funds Effective Rate, 3-month LIBOR, and 1-Month LIBOR categories are generally quite highly correlated and the rates should offset each other relatively effectively. The funding in the fixed-rate bucket includes $1.6 billion of equity and $0.3 billion of non-interest bearing liabilities. We consider the overall repricing risk to be moderate, which is supported by other analyses of interest rate sensitivity.
We use interest rate swaps and other derivatives to achieve our risk management objectives. Our asset liability management strategy is to match assets with debt (in combination with derivatives) that have the same underlying index and reset frequency or have interest rate characteristics that we believe are highly correlated. The use of funding with index types and reset frequencies that are different from our assets exposes us to interest rate risk in the form of basis and repricing risk. This could result in our cost of funds not moving in the same direction or with the same magnitude as the yield on our assets. While we believe this risk is low, as all of these indices are short-term with rate movements that
72 SLM CORPORATION


are highly correlated over a long period of time, market disruptions (which have occurred in recent years) can lead to a temporary divergence between indices, resulting in a negative impact to our earnings.
Weighted Average Life
The following table reflects the weighted average lives of our earning assets and liabilities at March 31, 2023.
 
As of March 31, 2023
(averages in years)
Weighted Average Life
Earning assets 
Education loans5.00 
Cash and investments1.42 
Total earning assets4.20 
Deposits
Short-term deposits0.91 
Long-term deposits2.24 
Total deposits1.26 
Borrowings
Long-term borrowings3.47 
Total borrowings3.47 

SLM CORPORATION 73




Item 4.     Controls and Procedures

Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of March 31, 2023. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of March 31, 2023, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended March 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

74 SLM CORPORATION


PART II. OTHER INFORMATION
Item 1.    Legal Proceedings
We and our subsidiaries and affiliates are subject to various claims, lawsuits, and other actions that arise in the normal course of business. It is common for the Company, our subsidiaries, and affiliates to receive information and document requests and investigative demands from state attorneys general, legislative committees, and administrative agencies. These requests may be for informational or regulatory purposes and may relate to our business practices, the industries in which we operate, or other companies with whom we conduct business. Our practice has been and continues to be to cooperate with these bodies and be responsive to any such requests.
For additional information regarding our legal proceedings, see Part I, Item 3. “Legal Proceedings” in our 2022 Form 10-K.
Item 1A. Risk Factors
Our business activities involve a variety of risks. Readers should carefully consider the risk factors disclosed in Part I, Item 1A. “Risk Factors” of our 2022 Form 10-K.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
Share Repurchases
The following table provides information relating to our purchase of shares of our common stock in the three months ended March 31, 2023.
 
(In thousands,
except per share data)
Total Number
of Shares
Purchased(1)
Average Price
Paid per
Share
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs(2)(3)  
Approximate Dollar
Value
of Shares That
May Yet Be
Purchased Under
Publicly Announced
Plans or
Programs(2)
Period:   
January 1 - January 31, 2023267 $16.97 — $581,000 
February 1 - February 28, 2023668 $15.02 — $581,000 
March 1 - March 31, 202314 $13.61 — $581,000 
Total first-quarter 2023949 $15.55 —  

(1)      The total number of shares purchased includes the shares of our common stock tendered to us to satisfy the exercise price in connection with cashless exercises of stock options, and tax withholding obligations in connection with exercises of stock options and vesting of restricted stock, restricted stock units, and performance stock units.
(2)     As of March 31, 2023, we had $581 million remaining under the 2022 Share Repurchase Program.
(3)    In the first quarter of 2023, we did not repurchase shares under any 10b5-1 trading plan. See Note 11, “Stockholders’ Equity” to our consolidated financial statements in this Form 10-Q for further discussion.

The closing price of our common stock on the NASDAQ Global Select Market on March 31, 2023 was $12.39.

Item 3.    Defaults Upon Senior Securities
Nothing to report.
Item 4.    Mine Safety Disclosures
Not applicable.
Item 5.    Other Information
Nothing to report.
SLM CORPORATION 75


Item 6.    Exhibits
The following exhibits are furnished or filed, as applicable:
10.1
10.2
10.3
10.4
10.5
31.1
31.2
32.1
32.2
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHXBRL Taxonomy Extension Schema Document.
101.CALXBRL Taxonomy Extension Calculation Linkbase Document.
101.DEFXBRL Taxonomy Extension Definition Linkbase Document.
101.LABXBRL Taxonomy Extension Label Linkbase Document.
101.PREXBRL Taxonomy Extension Presentation Linkbase Document.
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
 

76 SLM CORPORATION


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
SLM CORPORATION
(Registrant)
By:
/S/ STEVEN J. MCGARRY
 
Steven J. McGarry
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
Date: April 26, 2023

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