The Student Loan Corp. (STU) filed Quarterly Report for the period ended 2009-11-04.
The Student Loan Corporation originates holds and services federally insured student loans through a trust agreement with Citibank N.A. an indirect wholly-owned subsidiary of Citigroup Inc. The Student Loan Corporation is one of the nation's leading originators and holders of student loans guaranteed under the Federal Family Education Loan Program authorized by the Department of Education under the Federal Higher Education Act as amended. The Student Loan Corporation also holds student loans including CitiAssist Loans that are originated under alternative programs and are not insured under the Act. The Student Loan Corporation was incorporated in Delaware in November and commenced operations on December. Prior to that date the Student Loan Corporation operated as a division of Citibank of South Dakota. Citibank N.A. is the primary shareholder with an ownership of eighty% of the Student Loan Corporation's outstanding common stock. The Student Loan Corp. has a market cap of $898 million; its shares were traded at around $44.9 with a P/E ratio of 9.1 and P/S ratio of 0.6. The dividend yield of The Student Loan Corp. stocks is 3.1%. The Student Loan Corp. had an annual average earning growth of 19.7% over the past 10 years. GuruFocus rated The Student Loan Corp. the business predictability rank of 3-star.
Highlight of Business Operations:
During the third quarter of 2009, the financial markets showed continued improvement over the modest gains made earlier in the year. However, credit premiums remain significantly higher than those available prior to the credit market dislocation that began in the summer of 2007. These higher credit premiums as well as the shift from one month LIBOR to longer-term base indices such as three month LIBOR have contributed to net interest margin compression as the Company refinanced maturing debt with longer-term funding at higher premiums over base indices, resulting in a decrease in third quarter net interest income of $25.4 million compared to 2008. Higher yields on the Company s student loan assets, which increased net interest income for the third quarter by $12.3 million compared with 2008, partially offset the impact of the higher premiums on borrowings.
During the nine months ended September 30, 2009, the Company further diversified its sources of funding by leveraging an additional $14.2 billion of long-term structural liquidity. This included a cumulative $10.4 billion from the Conduit. The Company also executed three securitizations, including two FFEL Program loan securitizations which provided a total of $2.4 billion of funding, and a private education loan securitization under the Term Asset-Backed Securities Loan Facility (TALF) which provided $1.4 billion of funding.
The Company continued to draw on financing through the Participation Program. The Company has funded $2.9 billion of FFEL Program Stafford and PLUS loan disbursements through this program since its inception. During the nine months ended September 30, 2009, the Company sold $2.3 billion of loans to the Department under the Purchase Program. These proceeds were used to pay back funding from the Participation Program.
During the twelve-month period ended September 30, 2009, the Company s managed student loan portfolio grew by $1.9 billion or 5% to $43.3 billion, reflecting the Company s continued commitment to the education lending market. The managed portfolio includes $28.4 billion of the Company s owned loan assets and $14.9 billion of loans serviced on behalf of securitization trusts or other lenders. Originations for the quarter included FFEL Program Stafford and PLUS loan originations of $1.9 billion, a 10% decrease from the same quarter of 2008. This decrease is largely due to schools moving from the FFEL Program to the Department s Direct Lending Program. The Company also made new CitiAssist loan commitments of $0.3 billion, which was 47% lower than the same quarter of 2008, continuing the recent effort to originate higher quality private education loans.
In order to comply with certain legal and regulatory requirements, private education loans are originated by CBNA through an intercompany agreement. After final disbursement, the Company purchases all private education loans from CBNA. At September 30, 2009 and December 31, 2008, the private education loans disbursed and still held by CBNA were $0.4 billion and $1.0 billion, respectively.
The provision for loan losses, which is composed of builds or releases in the loan loss reserves plus net charge-offs, decreased by $8.1 million in the third quarter of 2009 compared to the same period in 2008. This decrease is primarily driven by specific reserves established in the third quarter of 2008 for a bankrupt proprietary school. Charge-offs increased by $30.3 million during the nine months ended September 30, 2009 compared to the same period in 2008 primarily as a result of seasoning of the CitiAssist portfolios as more loans entered repayment. The Company expects charge-offs will continue to increase as a result of the expected seasoning of the higher risk Uninsured CitiAssist Custom and Uninsured CitiAssist Standard portfolios and credit deterioration across all portfolios.
STU is in the portfolios of Ruane Cunniff of Ruane & Cunniff & Goldfarb Inc.
Rate This Article: |
  |