Wednesday after the bell, student loan provider SLM Corp. (SLM), also known as Sallie Mae, which has been battered by credit crisis, turned in yet another lackluster quarter results, reporting second quarter net income that was down 72% from last year on extraordinarily high funding costs.
On a GAAP basis, the company's second-quarter net income for fiscal 2008 plunged to $266 million or $0.50 per share from $966 million or $1.03 per share, in the same period last year.
Excluding the unrealized, mark-to-market, pre-tax gain of $447 million, "core earnings" net income totaled $156 million, or $0.27 per share in the second quarter of fiscal 2008. This compares with "core earnings" net income of $189 million, or $0.43 per share in the year-ago quarter. On average, 9 analysts polled by FirstCall/Thomson Financial expected the company to earn $0.40 per share.
The core earnings of fiscal 2008 second quarter include the effect of restructuring-related charges of $53 million or $0.08 per share, purchased-paper business losses of $26 million or $0.05 per share, and asset-backed financing facilities fees of $109 million or $0.15 per share.
The company operates under Lending business segment and APG business segment.
In Lending business segment, Sallie Mae originates and acquires both federally guaranteed student loans or FFELP loans, which are administered by the U.S. Department of Education and Private Education Loans, which are not federally guaranteed.
The APG segment provides a wide range of accounts receivable and collections services including student loan default aversion services, defaulted student loan portfolio management services, and contingency collections services for student loans and other asset classes.
Student loans originated through Sallie Mae's internal brands, the most profitable segment of total student loan originations, were $2.7 billion in the second-quarter of 2008, up 12% from $2.4 billion in the comparable quarter a year before. Total student loan originations during the quarter were $3.3 billion, down from $3.6 billion in the year-ago period, the decrease driven by the changing nature of the company's relationships with external lending partners and a shift from purchasing, to servicing, their loans.
The company's managed student loan portfolio at June 30, 2008 totaled $171.9 billion, compared to $153.2 billion a year ago.
The company's total interest income for the quarter decreased to $1.76 billion from $2.09 billion in the year-ago period.
On a GAAP basis, the company's provision for loan losses for the quarter was $143 million, down from $148 million last year. Sallie Mae's GAAP net interest income for the quarter was $403 million, compared to $399 million in the second-quarter 2007.
Sallie Mae's funding and liquidity improved during the 2008 second quarter. The company issued more than $7 billion in term asset-backed securitization transactions and spreads declined significantly. For the first time since March 2007, the company issued $2.5 billion of senior, unsecured notes and the U.S. Department of Education received Congressional authority to implement a solution to provide liquidity for federal student loans.
For the first half of fiscal 2008, the company's GAAP net income totaled $162 million or $0.23 per share, down from $1.08 billion or $1.82 per share in the year-ago period.
Sallie Mae's core earnings for the recent six months declined to $344 million or $0.62 per share from $440 million or $0.99 per share in the year-ago period.
Total interest income for the six-month period dropped to $3.66 billion from $4.04 billion in the year earlier period.
Commenting on the results, Albert L. Lord, vice chairman and CEO of Sallie Mae said, "Recent spread narrowing is encouraging because our earnings potential in 2008 and beyond is largely dependent on future funding costs."
SLM closed Wednesday's trade up 2.74% at $19.09 on a volume of 10.37 million shares. However, in after-hours, the stock shed 0.26% and was at $19.04. The stock has been trading in the range of $12.35 - $53.65 for the past 52 weeks.
For comments and feedback: editorial@rttnews.com