SLM Corp. Reports Operating Results (10-Q)
Slm Corp has a market cap of $7.86 billion; its shares were traded at around $15.54 with a P/E ratio of 8.4 and P/S ratio of 1.4. The dividend yield of Slm Corp stocks is 3.1%. Slm Corp had an annual average earning growth of 3.6% over the past 10 years.
Highlight of Business Operations:For the three months ended June 30, 2012 and 2011, net income (loss) was $292 million, or $.59 diluted earnings per common share, and $(6) million, or $(.02) diluted loss per common share, respectively. The increase in net income was primarily due to a $516 million difference in net gains (losses) on derivative and hedging activities, a $48 million decrease in provisions for loan losses, a $29 million decrease in operating expenses, and a $20 million increase in gains on debt repurchases, which was partially offset by a $122 million decline in net interest income.
For the six months ended June 30, 2012 and 2011, net income was $403 million, or $.79 diluted earnings per common share, and $169 million, or $.30 diluted earnings per common share, respectively. The increase in net income was primarily due to a $386 million decrease in net losses on derivative and hedging activities, a $98 million decrease in provisions for loan losses and a $71 million decrease in operating expenses, which was partially offset by a $210 million decline in net interest income.
Our Business Services segment earns intercompany loan servicing fees from servicing the FFELP Loans in our FFELP Loans segment. The average balance of this portfolio was $133 billion and $142 billion for the quarters ended June 30, 2012 and 2011, respectively, and $134 billion and $143 billion for the six months ended June 30, 2012 and 2011, respectively. The decline in intercompany loan servicing revenue from the year-ago period is primarily the result of a lower outstanding principal balance in the underlying portfolio.
We are servicing approximately 3.8 million accounts under the ED Servicing Contract as of June 30, 2012 compared with 3.0 million accounts at June 30, 2011. The increase in the third-party loan servicing fees for the current quarter and six-month period compared with the prior-year periods was driven by the increase in the number of accounts serviced as well as an increase in ancillary servicing fees earned. The second quarters of 2012 and 2011 included $22 million and $15 million, respectively, of servicing revenue related to the ED Servicing Contract.
Operating expenses for our FFELP Loans segment primarily include the contractual rates we pay to service loans in term asset-backed securitization trusts or a similar rate if a loan is not in a term financing facility (which is presented as an intercompany charge from the Business Services segment who services the loans), the fees we pay for third-party loan servicing and costs incurred to acquire loans. The intercompany revenue charged from the Business Services segment and included in those amounts was $172 million and $187 million for the quarters ended June 30, 2012 and 2011, respectively, and $348 million and $376 million for the six-month periods ended June 30, 2012 and 2011, respectively. These amounts exceed the actual cost of servicing the loans. Operating expenses were 54 basis points and 53 basis points of average FFELP Loans in the quarters ended June 30, 2012 and 2011, respectively and 54 basis points and 54 basis points for the six months ended June 30, 2012 and 2011, respectively. The decline in operating expenses from the prior-year quarter was primarily the result of the reduction in the average outstanding balance of our FFELP Loans portfolio.
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