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This excerpt taken from the SLM 10-K filed Mar 2, 2009. OVERVIEW
This section provides an overview of the Company’s 2008
business results from a financial perspective. Certain financial
impacts of funding and liquidity, loan losses, asset growth, fee
income, the distressed debt purchased paper business, operating
expenses, and capital adequacy are summarized below. The income
statement amounts discussed in this Overview section are on a
“Core Earnings” basis.
As discussed in the Business section, legislative changes to the
FFELP, the credit markets and the economic downturn impacted the
Company’s financial results for 2008. The Company reported
$526 million in “Core Earnings” net income, a
decrease from $560 million in 2007. (“Core
Earnings” are defined in “BUSINESS
SEGMENTS — Limitations of ‘Core
Earnings’ — Pre-tax Differences between
‘Core Earnings’ and GAAP by Business
Segment.”)
Funding
and Liquidity
The Company’s results were affected by higher funding costs
than in prior periods. The higher costs were, in part, related
to the 2008 Asset-Backed Financing Facility; the after-tax fees
for this Facility were $225 million for the year. This
Facility was reduced from $34 billion at the beginning of
the year to $28 billion by year end and was extended by
60 days to mature on April 28, 2009.
Our funding costs were also affected by higher than average
interest rate index divergence. Most of our FFELP loans earn
interest based on market CP rates; our funding costs are
primarily based on LIBOR. Due to government intervention in the
CP marketplace and other market dislocations, the spread widened
as much as 200 basis points on certain days during the
fourth quarter of 2008, compared to an average spread of
8 basis points in the third quarter of 2008. ED established
an alternative interest rate calculation for a portion of the
fourth quarter to address the issue, which resulted in a
21 basis point spread for the Company for the fourth
quarter.
In the fourth quarter, we secured access to stable and
profitable funding sources for new FFELP and Private Education
Loan originations. ECASLA provides FFELP lenders with access to
unlimited funding to meet student demand through AY
2009-2010.
Our Private Education Loan originations are being funded by term
deposits issued by Sallie Mae Bank.
The Company’s primary funding challenge is to replace our
short-term funding sources, principally the 2008 Asset-Backed
Financing Facility, with longer-term, lower-cost funding. Two
federally-sponsored programs, the ED Conduit Program and the
Federal Reserve Bank of New York’s Term Asset-Backed
Liquidity Facility, which are discussed in the “LIQUIDITY
AND CAPITAL RESOURCES” section, are under development and
offer significant potential. At year end, approximately
$30 billion in student loans assets were eligible for these
programs, which are expected to be operational in the first
quarter of 2009.
In 2008, we issued approximately $26 billion in term
funding, including $18.5 billion in term FFELP ABS funding,
which carried an average spread of 125 basis points over
LIBOR. In early January 2009, we
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announced a $1.5 billion, 12.5 year asset-backed
securities facility. The cost of this facility is expected to
average LIBOR plus 5.75 percent and is expected to fund our
Private Education Loans. Though significantly more expensive
than historical transactions, this facility demonstrates term
funding capability and availability for our Private Education
Loan portfolio.
At year end, 70 percent of our Managed student loans were
funded for the life of the loans and another 12 percent
were funded for an average life of 4.3 years.
At year end, we held approximately $11 billion in primary
liquidity, consisting of cash and short-term investments and
committed lines of credit. We have $5.2 billion in standby
liquidity in the form of unencumbered FFELP loans.
Loan
Losses
On a “Core Earnings” basis, the loan loss provision
for the year was $1 billion, of which $127 million was
for FFELP loans. The provision for Private Education Loans in
the fourth quarter was $348 million, approximately double
the average of the first three quarters of the year. We began
significantly increasing the Private Education Loan allowance
for loan loss in the fourth quarter of 2007 and throughout 2008
primarily related to the continued weakening of the
U.S. economy, which in particular impacts our
non-traditional loans which are now moving into repayment
status. At year end, our Private Education Loan allowance for
loan loss covered approximately two years of expected losses for
Private Education Loans.
Asset
Growth
In 2008, the Company originated $17.9 billion in FFELP
loans, a four percent increase over 2007. We refocused our FFELP
originations on our internal lending brands, which grew
48 percent over 2007. We expect FFELP volume to exceed
$20 billion in AY
2008-2009.
Private Education Loan originations for 2008 were
$6.3 billion, a 20 percent decline from 2007. In 2008,
the Company increased its underwriting standards and as a
result, average FICO scores and loans with cosigner have
increased. The Company expects to continue to increase its
underwriting standards, shorten the term of Private Education
Loans, and require interest payments while students are
attending school. The impact of these product changes and the
overall economy may impact future Private Education Loan asset
growth.
Fee
Income
Fee income from our contingency business was relatively stable,
increasing $4 million from $336 million in 2007 to
$340 million in 2008.
Fee income from our guarantor servicing business was
$121 million for the year, a $35 million decrease from
last year. The decrease was primarily due to legislative changes
that reduce by 40 percent the account maintenance fee paid
to guarantee agencies, and a one-time non-recurring increase to
2007 revenue of $15 million related to a contingency
resolution.
A possible source of additional fee income for 2009 is an
increase in third-party servicing. We originated
$0.5 billion of FFELP loans for third parties in the fourth
quarter, a 14 percent increase from the year-ago quarter.
The Company will seek to be a loan servicer for ED under the
Loan Purchase Program.
Purchased
Paper Business
We have decided to exit the debt purchased paper business (see
“ASSET PERFORMANCE GROUP BUSINESS SEGMENT”). This line
of business reported a $203 million after-tax loss for the
year, primarily due to a $368 million pre-tax impairment
charge. The economy and changes in real estate values will
continue to impact this line of business.
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Operating
Expenses
Excluding restructuring expenses, fourth quarter 2008 operating
expenses on a “Core Earnings” basis were
$270 million, a 26 percent decrease from the year-ago
period, exceeding the Company’s 20 percent cost
reduction target. For 2008, operating expenses on a “Core
Earnings” basis were $1.3 billion, compared to
$1.4 billion in 2007.
Capital
Adequacy
At year end, the Company’s tangible capital ratio was
1.8 percent of Managed assets, compared to 2 percent
at 2007 year end. With 81 percent of our Managed loans
carrying an explicit federal government guarantee and with
70 percent of our Managed loans funded for the life of the
loan, we currently believe that our capital levels are
appropriate. In the current economic environment, we cannot
predict the availability nor cost of additional capital, should
the Company determine that additional capital is necessary.
These excerpts taken from the SLM 10-K filed Feb 29, 2008. Overview
Managing risks is an essential part of successfully operating a
financial services company. Our most prominent risk exposures
are operational, market and interest rate, political and
regulatory, liquidity, credit, and Consolidation Loan
refinancing risk. We discuss these and other risks in the
“Risk Factors” section (Item 1A) of this
document. The discussion that follows enhances that disclosure
by discussing the risk management strategies that we employ to
mitigate these risks.
Overview Managing risks is an essential part of successfully operating a financial services company. Our most prominent risk exposures are operational, market and interest rate, political and regulatory, liquidity, credit, and Consolidation Loan refinancing risk. We discuss these and other risks in the “Risk Factors” section (Item 1A) of this document. The discussion that follows enhances that disclosure by discussing the risk management strategies that we employ to mitigate these risks. This excerpt taken from the SLM 10-Q filed Nov 9, 2007. OVERVIEW
We are the largest source of funding, delivery and servicing
support for education loans in the United States. Our primary
business is to originate, acquire and hold both federally
guaranteed student loans and Private Education Loans, which are
not federally guaranteed or privately insured. The primary
source of our
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earnings is from net interest income earned on those student
loans as well as gains on the sales of such loans in off-balance
sheet securitization transactions. We also earn fees for
pre-default and post-default receivables management services on
student loans, such that we are engaged in every phase of the
student loan life cycle — from originating and
servicing student loans to default prevention and ultimately the
collection on defaulted student loans. Through recent
acquisitions, we have expanded our receivables management
services to a number of different asset classes outside of
student loans. SLM Corporation, more commonly known as Sallie
Mae, is a holding company that operates through a number of
subsidiaries. References in this report to the
“Company” refer to SLM Corporation and its
subsidiaries.
We have used both internal growth and strategic acquisitions to
attain our leadership position in the education finance
marketplace. Our sales force, which delivers our products on
campuses across the country, is the largest in the student loan
industry. The core of our marketing strategy is to promote our
on-campus brands, which generate student loan originations
through our Preferred Channel. Loans generated through our
Preferred Channel are more profitable than loans acquired
through other acquisition channels because we own them earlier
in the student loan’s life and generally incur lower costs
to acquire such loans. We have built brand leadership through
the Sallie Mae name, the brands of our subsidiaries and those of
our lender partners. These sales and marketing efforts are
supported by the largest and most diversified servicing
capabilities in the industry, providing an unmatched array of
services to borrowers. In recent years, borrowers have been
consolidating their FFELP Stafford loans into FFELP
Consolidation Loans in much greater numbers such that FFELP
Consolidation Loans now constitute 55 percent of our
Managed loan portfolio. FFELP Consolidation Loans are marketed
directly to consumers and we believe they will continue to be an
important loan acquisition channel. We continue to expand our
offerings in the Private Education Loan marketplace that we
market both on campus and direct-to-consumers.
We have expanded into a number of fee-based businesses, most
notably, our Asset Performance Group (“APG”), formerly
known as Debt Management Operations (“DMO”), business.
Our APG business provides a wide range of accounts receivable
and collections services including student loan default aversion
services, defaulted student loan portfolio management services,
contingency collections services for student loans and other
asset classes, and accounts receivable management and collection
for purchased portfolios of receivables that are delinquent or
have been charged off by their original creditors as well as
sub-performing and non-performing mortgage loans. In the
purchased receivables business, we focus on a variety of
consumer debt types with emphasis on charged off credit card
receivables and distressed mortgage receivables. We purchase
these portfolios at a discount to their face value, and then use
both our internal collection operations coupled with third party
collection agencies to maximize the recovery on these
receivables.
We manage our business through two primary operating segments:
the Lending operating segment and the APG operating segment.
Accordingly, the results of operations of the Company’s
Lending and APG segments are presented separately below under
“BUSINESS SEGMENTS.” These operating segments are
considered reportable segments under the Financial Accounting
Standards Board’s (“FASB”) Statement of Financial
Accounting Standards (“SFAS”) No. 131,
“Disclosures about Segments of an Enterprise and Related
Information,” based on quantitative thresholds applied to
the Company’s financial statements.
This excerpt taken from the SLM 10-Q filed Aug 7, 2007. OVERVIEW
We are the largest source of funding, delivery and servicing
support for education loans in the United States. Our primary
business is to originate, acquire and hold both federally
guaranteed student loans and Private Education Loans, which are
not federally guaranteed or privately insured. The primary
source of our earnings is from net interest income earned on
those student loans as well as gains on the sales of such loans
in off-balance sheet securitization transactions. We also earn
fees for pre-default and post-default receivables management
services on student loans, such that we are engaged in every
phase of the student loan life cycle — from
originating and servicing student loans to default prevention
and ultimately the collection on defaulted student loans.
Through recent acquisitions, we have expanded our receivables
management services to a number of different asset classes
outside of student loans. SLM Corporation, more commonly known
as
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Sallie Mae, is a holding company that operates through a number
of subsidiaries. References in this report to the
“Company” refer to SLM Corporation and its
subsidiaries.
We have used both internal growth and strategic acquisitions to
attain our leadership position in the education finance
marketplace. Our sales force, which delivers our products on
campuses across the country, is the largest in the student loan
industry. The core of our marketing strategy is to promote our
on-campus brands, which generate student loan originations
through our Preferred Channel. Loans generated through our
Preferred Channel are more profitable than loans acquired
through other acquisition channels because we own them earlier
in the student loan’s life and generally incur lower costs
to acquire such loans. We have built brand leadership through
the Sallie Mae name, the brands of our subsidiaries and those of
our lender partners. These sales and marketing efforts are
supported by the largest and most diversified servicing
capabilities in the industry, providing an unmatched array of
services to borrowers. In recent years, borrowers have been
consolidating their FFELP Stafford loans into FFELP
Consolidation Loans in much greater numbers such that FFELP
Consolidation Loans now constitute 56 percent of our
Managed loan portfolio. FFELP Consolidation Loans are marketed
directly to consumers and we believe they will continue to be an
important loan acquisition channel. We continue to expand our
offerings in the Private Education Loan marketplace that we
market both on campus and direct-to-consumers.
We have expanded into a number of fee-based businesses, most
notably, our Debt Management Operations (“DMO”)
business. Our DMO business provides a wide range of accounts
receivable and collections services including student loan
default aversion services, defaulted student loan portfolio
management services, contingency collections services for
student loans and other asset classes, and accounts receivable
management and collection for purchased portfolios of
receivables that are delinquent or have been charged off by
their original creditors. We also purchase and manage portfolios
of sub-performing and non-performing mortgage loans.
We manage our business through two primary operating segments:
the Lending operating segment and the DMO operating segment.
Accordingly, the results of operations of the Company’s
Lending and DMO segments are presented separately below under
“BUSINESS SEGMENTS.” These operating segments are
considered reportable segments under the Financial Accounting
Standards Board’s (“FASB”) Statement of Financial
Accounting Standards (“SFAS”) No. 131,
“Disclosures about Segments of an Enterprise and Related
Information,” based on quantitative thresholds applied to
the Company’s financial statements.
This excerpt taken from the SLM 10-Q filed May 10, 2007. OVERVIEW
We are the largest source of funding, delivery and servicing
support for education loans in the United States. Our primary
business is to originate, acquire and hold both federally
guaranteed student loans and Private Education Loans, which are
not federally guaranteed or privately insured. The primary
source of our earnings is from net interest income earned on
those student loans as well as gains on the sales of such loans
in securitization transactions. We also earn fees for
pre-default and post-default receivables management services on
student loans, such that we are engaged in every phase of the
student loan life cycle — from originating and
servicing student loans to default prevention and ultimately the
collection on defaulted student loans. Through recent
acquisitions, we have expanded our receivables management
services to a number of different asset classes outside of
student loans. We also provide a wide range of other financial
services, processing capabilities and information technology to
meet the needs of educational institutions, lenders,
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students and their families, and guarantee agencies. SLM
Corporation, more commonly known as Sallie Mae, is a holding
company that operates through a number of subsidiaries.
References in this report to the “Company” refer to
SLM Corporation and its subsidiaries.
We have used both internal growth and strategic acquisitions to
attain our leadership position in the education finance
marketplace. Our sales force, which delivers our products on
campuses across the country, is the largest in the student loan
industry. The core of our marketing strategy is to promote our
on-campus brands, which generate student loan originations
through our Preferred Channel. Loans generated through our
Preferred Channel are more profitable than loans acquired
through other acquisition channels because we own them earlier
in the student loan’s life and generally incur lower costs
to acquire such loans. We have built brand leadership through
the Sallie Mae name, the brands of our subsidiaries and those of
our lender partners. These sales and marketing efforts are
supported by the largest and most diversified servicing
capabilities in the industry, providing an unmatched array of
services to financial aid offices. In recent years, borrowers
have been consolidating their FFELP Stafford loans into FFELP
Consolidation Loans in much greater numbers such that FFELP
Consolidation Loans now constitute 56 percent of our
Managed loan portfolio. FFELP Consolidation Loans are marketed
directly to consumers and we believe they will continue to be an
important loan acquisition channel.
We have expanded into a number of fee-based businesses, most
notably, our Debt Management Operations (“DMO”)
business. Our DMO business provides a wide range of accounts
receivable and collections services including student loan
default aversion services, defaulted student loan portfolio
management services, contingency collections services for
student loans and other asset classes, and accounts receivable
management and collection for purchased portfolios of
receivables that are delinquent or have been charged off by
their original creditors. We also purchase and manage portfolios
of
sub-performing
and non-performing mortgage loans.
We manage our business through two primary operating segments:
the Lending operating segment and the DMO operating segment.
Accordingly, the results of operations of the Company’s
Lending and DMO segments are presented separately below under
“BUSINESS SEGMENTS.” These operating segments are
considered reportable segments under the Financial Accounting
Standards Board’s (“FASB”) Statement of Financial
Accounting Standards (“SFAS”) No. 131,
“Disclosures about Segments of an Enterprise and Related
Information,” based on quantitative thresholds applied to
the Company’s financial statements.
This excerpt taken from the SLM 10-K filed Mar 1, 2007. Overview
Managing risks is an essential part of successfully operating a
financial services company. Our most prominent risk exposures
are operational, market and interest rate, political and
regulatory, liquidity, credit, and Consolidation Loan
refinancing risk. We discuss these and other risks in the
“Risk Factors” section (Item 1A) of this
document. The discussion that follows enhances that disclosure
by discussing the risk management strategies that we employ to
mitigate these risks.
This excerpt taken from the SLM 10-Q filed Nov 7, 2006. We are the largest source of funding, delivery and servicing support for education loans in the United States. Our primary business is to originate, acquire and hold both federally guaranteed student loans and Private Education Loans, which are not federally guaranteed. The primary source of our earnings is from net interest income earned on those student loans as well as gains on the sales of such loans in securitization transactions. We also earn fees for pre-default and post-default receivables management services on student loans, such that we are engaged in every phase of the student loan life cycle—from originating and servicing student loans to default prevention and ultimately the collection on defaulted student loans. In addition, we provide a wide range of other financial services, processing capabilities and information technology to meet the needs of educational institutions, lenders, students and their families, and guarantee agencies. SLM Corporation, more commonly known as Sallie Mae, is a holding company that operates through a number of subsidiaries and references in this report to the “Company” refer to SLM Corporation and its subsidiaries. We have used both internal growth and strategic acquisitions to attain our leadership position in the education finance marketplace. Our sales force, which delivers our products on campuses across the country, is the largest in the student loan industry. The core of our marketing strategy is to promote our 47 on-campus brands, which generate student loan originations through our Preferred Channel. Loans generated through our Preferred Channel are more profitable than loans acquired through other acquisition channels because we own them earlier in the student loan’s life and generally incur lower costs to acquire such loans. We have built brand leadership among the Sallie Mae name, the brands of our subsidiaries and those of our lender partners. These sales and marketing efforts are supported by the largest and most diversified servicing capabilities in the industry, providing an unmatched array of servicing capability to financial aid offices. In recent years we have diversified our business through the acquisition of several companies that provide default management and loan collections services, all of which are combined in our Debt Management Operations (“DMO”) business segment. Our capabilities now include a full range of accounts receivable management services to a number of different industries. The DMO business segment has been expanding rapidly such that revenue grew 25 percent in the nine months ended September 30, 2006, compared to the same period in 2005, and we now employ approximately 4,000 people in this segment. We manage our business through two primary operating segments: the Lending operating segment and the DMO operating segment. Accordingly, the results of operations of the Company’s Lending and DMO segments are presented separately below under “BUSINESS SEGMENTS.” These operating segments are considered reportable segments under the Financial Accounting Standards Board’s (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 131, “Disclosures about Segments of an Enterprise and Related Information,” based on quantitative thresholds applied to the Company’s financial statements. This excerpt taken from the SLM 10-Q filed May 10, 2006. OVERVIEW We are the largest source of funding, delivery and servicing support for education loans in the United States. Our primary business is to originate, acquire and hold both federally guaranteed student loans and Private Education Loans, which are not federally guaranteed. The primary source of our earnings is from net interest income earned on those student loans as well as gains on the sales of them in securitization transactions. We also earn fees for pre-default and post-default receivables management services on student loans, such that we are engaged in every phase of the student loan life cycle—from originating and servicing student loans to default prevention and ultimately the collection on defaulted student loans. In addition, we provide a wide range of other financial services, processing capabilities and information technology to meet the needs of educational institutions, lenders, students and their families, and guarantee agencies. SLM Corporation, more commonly known as Sallie Mae, is a holding company that operates through a number of subsidiaries and references in this report to the "Company" refer to SLM Corporation and its subsidiaries. We have used both internal growth and strategic acquisitions to attain our leadership position in the education finance marketplace. Our sales force, which delivers our products on campuses across the country, is the largest in the student loan industry. The core of our marketing strategy is to promote our on-campus brands, which generate student loan originations through our Preferred Channel. Loans generated through our Preferred Channel are more profitable than loans acquired through other acquisition channels because we own them earlier in the student loan's life and generally incur lower costs to acquire such loans. We have built brand leadership among the Sallie Mae name, the brands of our subsidiaries and those of our lender partners. These sales and marketing efforts are supported by the largest and most diversified servicing capabilities in the industry, providing an unmatched array of servicing capability to financial aid offices. In recent years we have diversified our business through the acquisition of several companies that provide default management and loan collections services, all of which are combined in our Debt Management Operations ("DMO") business segment. Initially these acquisitions were concentrated in the student loan industry, but through our acquisitions of Arrow Financial Services ("AFS") in September 2004 and GRP Financial Services ("GRP") in August 2005, we expanded our capabilities to include a full range of accounts receivable management services to a number of different industries. The DMO business segment has been expanding rapidly such that revenue grew 22 percent in the three months ended March 31, 2006, respectively, compared to the same periods in 2005, and we now employ over 3,500 people in this segment. We manage our business through two primary operating segments: the Lending operating segment and the DMO operating segment. Accordingly, the results of operations of the Company's Lending and 39 DMO segments are presented separately below under "BUSINESS SEGMENTS." These operating segments are considered reportable segments under the Financial Accounting Standards Board's ("FASB") Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures about Segments of an Enterprise and Related Information," based on quantitative thresholds applied to the Company's financial statements. This excerpt taken from the SLM 10-K filed Mar 9, 2006. Overview
Managing risks is an essential part of successfully operating a financial services company. Our most prominent risk exposures are operational, market and interest rate, political and regulatory, liquidity, credit, and Consolidation Loan refinancing risk. We discuss these and other risks in the “Risk Factors” section (Item 1A) of this document. The discussion that follows enhances that disclosure by discussing the risk management strategies employed by the Company to mitigate these risks. This excerpt taken from the SLM 10-Q filed Nov 8, 2005. OVERVIEW We are the largest source of funding, delivery and servicing support for education loans in the United States. Our primary business is to originate, acquire and hold both federally guaranteed student loans and Private Education Loans, which are not federally guaranteed. The primary source of our earnings is from net interest income earned on those student loans as well as gains on the sales of them in securitization transactions. We also earn fees for pre-default and post-default receivables management services on student loans, such that we are engaged in every phase of the student loan life cycle—from originating and servicing student loans to default prevention and ultimately the collection on defaulted student loans. We also provide a wide range of other financial services, processing capabilities and information technology to meet the needs of educational institutions, lenders, students and their families, and guarantee agencies. SLM Corporation, more commonly known as Sallie Mae, is a holding company that operates through a number of subsidiaries and references in this report to the "Company" refer to SLM Corporation and its subsidiaries. We have used both internal growth and strategic acquisitions to attain our leadership position in the education finance marketplace. Our sales force, which delivers our products on campuses across the country, is the largest in the student loan industry. The core of our marketing strategy is to promote our on-campus brands, which generate student loan originations through our Preferred Channel. Loans generated through our Preferred Channel are more profitable than loans acquired through other acquisition channels because we own them earlier in the student loan's life and generally incur lower costs to acquire such loans. We have built brand leadership among the Sallie Mae name, the brands of our subsidiaries and those of our lender partners. These sales and marketing efforts are supported by the largest and most diversified servicing capabilities in the industry, providing an unmatched array of servicing capability to financial aid offices. In recent years we have diversified our business through the acquisition of several companies that provide default management and loan collections services, all of which are combined in our Debt Management Operations ("DMO") business segment. Initially these acquisitions were concentrated in the student loan industry, but through our acquisitions of Arrow Financial Services ("AFS") in September 2004 and GRP Financial Services ("GRP") in August 2005, we expanded our capabilities to include a full range of accounts receivable management services to a number of different industries. The DMO business segment has been expanding rapidly such that revenue grew 71 percent and 66 percent in the three and the nine months ended September 30, 2005, respectively, compared to the same periods in 2004, and we now employ over 3,000 people in this segment. 37 In December 2004, we completed the Wind-Down of the GSE through the defeasance of all remaining GSE debt obligations and dissolution of the GSE's federal charter. The liquidity provided to the Company by the GSE has been replaced primarily by securitizations. In addition to securitizations, we have also increased and diversified our investor base over the last three years to enable us to access a number of additional sources of liquidity including an asset-backed commercial paper program, unsecured revolving credit facilities, and other unsecured corporate debt and equity security issuances. We manage our business through two primary operating segments: the Lending operating segment and the DMO operating segment. Accordingly, the results of operations of the Company's Lending and DMO segments are presented separately below under "BUSINESS SEGMENTS." These operating segments are considered reportable segments under the Financial Accounting Standards Board's ("FASB") Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures about Segments of an Enterprise and Related Information," based on quantitative thresholds applied to the Company's financial statements. This excerpt taken from the SLM 10-Q filed May 9, 2005. OVERVIEW We are the largest source of funding, delivery and servicing support for education loans in the United States primarily through our participation in the FFELP. Our primary business is to originate, acquire and hold student loans, with the net interest income and gains on the sales of student loans in securitization being the primary source of our earnings. We also earn fees for pre-default and post-default receivables management services. We are now engaged in every phase of the student loan life cycle—from originating and servicing student loans to default prevention and ultimately the collection on defaulted student loans. We also provide a wide range of financial services, processing capabilities and information technology to meet the needs of educational institutions, lenders, students and their families, and guarantee agencies. SLM Corporation, more commonly known as Sallie Mae, is a holding company that operates through a number of subsidiaries and references in this report to the “Company” refer to SLM Corporation and its subsidiaries. We have used both internal growth and strategic acquisitions to attain our leadership position in the education finance marketplace. We have the largest sales force in the student loan industry that delivers our product offerings on campuses. The core of our marketing strategy is to promote our on-campus brands, which generate student loan originations through our Preferred Channel. Loans generated through our Preferred Channel are more profitable than loans acquired through our forward purchase commitments or the spot market since they are owned earlier in the student loan’s life and we generally incur lower costs on such loans. We have built brand leadership between the Sallie Mae name, the brands of our subsidiaries and those of our lender partners, such that we capture volume of three of the top five originators of FFELP loans. These sales and marketing efforts are supported by the largest and most diversified servicing capabilities in the industry, providing an unmatched array of servicing capability to financial aid offices. In recent years we have diversified our business through the acquisition of several companies that provide default management and loan collections services, all of which are combined in our Debt Management Operations (“DMO”) business segment. Initially these acquisitions were concentrated in the student loan industry, but through our acquisition of Arrow Financial Services (“AFS”) in September 2004, we expanded our capabilities to include a full range of accounts receivable management services to a number of different industries. The DMO business segment has been expanding rapidly such that revenue grew 51 percent in the first quarter of 2005 over the first quarter 2004, and we now employ over 3,000 people in this segment. 32 In December 2004, we completed the Wind-Down of the GSE and are now a fully privatized company. We have defeased all remaining GSE debt obligations and dissolved the GSE’s federal charter. The liquidity provided to the Company by the GSE has been replaced by non-GSE financing, including securitizations originated by non-GSE subsidiaries of SLM Corporation. This funding transformation was accomplished by increasing and diversifying our investor base over the last three years. We now have a number of sources of liquidity including the formation of our first asset-backed commercial paper program ($5 billion in available borrowings) and our unsecured revolving credit facilities, which totaled $5 billion as of March 31, 2005. See “STUDENT LOAN MARKETING ASSOCIATION—Privatization Act—Completion of the GSE Wind-Down” for a more detailed discussion of the GSE Wind-Down. | EXCERPTS ON THIS PAGE:
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