SLM Corp. Reports Operating Results (10-K)
Slm Corp. has a market cap of $7.26 billion; its shares were traded at around $14.96 with a P/E ratio of 7.96 and P/S ratio of 1.07. Slm Corp. had an annual average earning growth of 7.2% over the past 10 years.Hedge Fund Gurus that owns SLM: Irving Kahn of Kahn Brothers & Company Inc., Michael Price of MFP Investors LLC, Whitney Tilson of T2 Partners Management, LP, Jim Simons of Renaissance Technologies LLC, Bruce Kovner of Caxton Associates, Steven Cohen of SAC Capital Advisors, George Soros of Soros Fund Management LLC. Mutual Fund and Other Gurus that owns SLM: James Barrow of Barrow, Hanley, Mewhinney & Strauss, Dodge & Cox, Brian Rogers of T Rowe Price Equity Income Fund, Mario Gabelli of GAMCO Investors, Jeremy Grantham of GMO LLC, Prem Watsa of Fairfax Financial Holdings, Inc..
Highlight of Business Operations: In addition, SAFRA eliminates the Guarantor function and the services we provide to Guarantors. We earned an origination fee when we processed a loan guarantee for a Guarantor client and a maintenance fee for the life of the loan for servicing the Guarantors portfolio of loans. Since FFELP Loans are no longer originated, we will no longer earn the origination fee paid by the Guarantor. The portfolio that generates the maintenance fee is now in run off, and the maintenance fees we earn will decline as the portfolio amortizes. In 2010, we earned Guarantor origination fees of $34 million and maintenance fees of $56 million.
Students and their families use multiple sources of funding to pay for their college education, including savings, current income, grants, scholarships, and federally guaranteed and private education loans. Due to an increase in federal loan limits that took effect in 2007 and 2008, we have seen a substantial increase in borrowing from federal loan programs in recent years. In the Academic Year (AY) that ended on June 30, 2010, according to the College Board, borrowing from federal loan programs increased 14 percent from the prior year to $96.8 billion and has a five-year compound annual growth rate of 9.9 percent. Borrowing from Private Education Loan programs decreased 24 percent to $7.7 billion and is down significantly from the peak of $21.8 billion in the AY 2007-2008. The College Board also reported that federal grants increased 64 percent to $41.2 billion from $25.2 billion in the most recent year. We believe the drop in borrowing from private loan programs was caused by an increase in federal loans and consumer deleveraging.
Prior to its elimination on July 1, 2010 by HCERA, the FFELP was the source of the vast majority of federal loans to students. (For a full description of FFELP, see Appendix A Federal Family Education Loan Program.) As of September 30, 2010, there were $759 billion in federal student loans outstanding, $529 billion of which were originated under the FFELP. Private entities held $390 billion of FFELP Loans as of September 30, 2010, with the remaining amount held by ED. We were the largest originator of loans under the FFELP and had $148.6 billion of loans outstanding at December 31, 2010. See Item 7 Managements Discussion and Analysis of Financial Condition and Results of Operations Segment Earnings Summary Core Earnings Basis FFELP Loans Segment for a full discussion of our FFELP business and related loan portfolio.
Students and their families can borrow money directly from the federal government to pay for a college education under the DSLP. The loans can be used to cover the cost of tuition, room and board. A dependent undergraduate student can borrow up to $5,500 as a freshman and $7,500 as a senior. An independent undergraduate student can borrow $9,500 as a freshman and up to $12,500 as a senior. A graduate student can borrow up to the full cost of attendance. Students apply directly to the federal government for a Direct Loan and the funds are dispersed directly to the school he or she is attending. The DSLP is serviced by four private sector institutions, including Sallie Mae. Defaulted Direct Loans are collected by 22 private sector companies, including Sallie Mae.
In 2010 we originated $2.3 billion of Private Education Loans. As of December 31, 2010 and 2009, we had $35.7 billion and $35.1 billion of total Core Earnings basis Private Education Loans outstanding, respectively. For a more detailed description of these amounts, see Item 7 Managements Discussion and Analysis of Financial Condition and Results of Operations Segment Earnings Summary Core Earnings Basis Consumer Lending Segment. At December 31, 2010, 68 percent of our Private Education Loans were funded to term in securitization trusts and the remainder was funded with term unsecured debt and bank deposits.
Sallie Mae Bank (the Bank), a Utah industrial bank subsidiary, plays an integral role in this segment. We received our Utah State charter approval order effective October 12, 2005 and approval for our insurance from the Federal Deposit Insurance Corporation (FDIC) on October 26, 2005. Since the beginning of 2006, nearly all Private Education Loans have been originated and initially funded by the Bank. At December 31, 2010, the Bank had total assets of $7.6 billion including $4.4 billion in Private Education Loans and total deposits of $5.9 billion. Historically, the Bank focused on raising brokered deposits with an average life in excess of two years. In 2010 we began to gather retail deposits targeting our core customer base. We raised more than $1 billion in retail deposits. We are now fully developing our banking products and services to offer
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