SLM Corporation Reports Earnings for First Quarter

SLM Corporation, commonly known as Sallie Mae, today reported first-quarter 2006 earnings and performance results that include a 14-percent increase in the managed student loan portfolio to $126.9 billion from the year-ago quarter’s $111.7 billion. Also during the quarter, the company originated $3.6 billion through its internal lending brands, a 51-percent increase over the year-ago period.

“We are pleased with our portfolio growth and the strong performance of our lending brands. Our pipeline of new school wins is impressive,” said Tim Fitzpatrick, chief executive officer. “This quarter’s results put us on the right path to deliver on our 2006 projections.”

During the first-quarter 2006, the company originated $7.6 billion in preferred-channel loans, of which $2.2 billion were private education loans. Preferred-channel loan originations include loans originated by the company’s internal lending brands and external lending partners.

Sallie Mae reports financial results on a GAAP basis and also presents certain non-GAAP or “core earnings” performance measures. The company’s management, equity investors, credit rating agencies and debt capital providers use these “core earnings” measures to monitor the company’s business performance.

Sallie Mae reported first-quarter 2006 GAAP net income of $152 million, or $.34 per diluted share, compared to $223 million, or $.49 per diluted share, in the year-ago period. Included in these GAAP results are pre-tax losses on derivative and hedging activities of $(87) million, compared to $(34) million in the year-ago quarter, and a decrease of $(44) million in servicing and securitization revenue.

“Core earnings” net income for the quarter was $287 million, or $.65 per diluted share, up from $256 million, or $.57 per diluted share in the year-ago quarter. During the first-quarter 2006, the company began expensing stock- based compensation. Recognizing stock-based compensation expense in both the current and year-ago periods, “core earnings” per diluted share were $.63 in the 2006 first quarter after eliminating the $.02 impact of a revision to borrower benefit estimates, up from $.55 in the same quarter in 2005, a 15- percent increase.

“Core earnings” net interest income was $596 million for the quarter, a 21-percent increase over the year-ago quarter’s $494 million. “Core earnings” other income, which consists primarily of fees earned from guarantor servicing and collection activity, was $245 million for the 2006 first quarter, up from $221 million in the year-ago quarter. “Core earnings” operating expenses were $309 million, compared to $249 million in the same quarter last year.

Both a description of the “core earnings” treatment and a full reconciliation to the GAAP income statement can be found at http://www2.salliemae.com/investors/stockholderinfo/earningsinfo, click on the First Quarter 2006 Supplemental Earnings Disclosure.

Total equity for the company at March 31, 2006, was $3.8 billion, up from $3.1 billion a year ago. The company’s tangible capital at March 31, 2006, was 1.86 percent of managed assets, compared to 1.63 percent at the same time last year.