(RTTNews) - Student Loan Corp. (STU: News ) Thursday reported a sharp increase in third-quarter profit, reflecting a positive impact from improved market conditions on the its retained interests in off-balance sheet securitizations, gains on loan sales, reduced provision for loan losses and lower overheads. The company also declared a quarterly dividend of $0.35 a share.

For the third quarter, Student Loan's net income advanced to $54.81 million or $2.74 per share from $5.44 million or $0.27 per share in the previous year.

Net interest income for the quarter dipped 11% to $74.11 million from $83.52 million, reflecting a shift towards longer-term funding that resulted in higher funding costs. Provision for loan losses decreased to $38.69 million from $46.79 million in the same period last year.

Gains on loans sold rose sharply to $17.71 million from $194 thousand. Fee and other income shot up to $68.54 million from $16.92 million, as the company recorded a $28.8 million smaller write-down of its held-for-sale portfolio. Further, Student Loan Corp. also recognized an increase in net mark-to-market gains of $21.7 million on derivatives and retained interests from securitizations, reflecting a slowdown in prepayments on securitized loans.

Total operating expenses decreased 23% to $34.7 million from $44.85 million, as salaries and employee benefits for the quarter reduced year-over-year to $7.86 million from $14.19 million.
Commenting on the results, Mike Reardon, Student Loan's Chief Executive said, "During the third quarter of 2009, the financial markets showed further signs of improvement. The Student Loan Corporation capitalized on this market improvement by completing two securitizations during the quarter which provided the Company with long-term structural liquidity at more favorable pricing than equivalent term funding."

For the nine-month period, net income rose to $87.59 million or $4.38 per share from $61.12 million or $3.06 per share in fiscal 2008. Net interest income declined to $203.07 million from $284.36 million. Provision for loan losses decreased to $104.66 million from $117.93 million in the year-ago period.

Wednesday, the company declared a regular quarterly dividend of $0.35 per share, payable on December 1, 2009 to shareholders of record on November 13.

STU is currently trading at $51.78 , up $1.83 or 3.66%, on the NYSE.

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by RTT Staff Writer

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