SLM Corp [SLM] Filings

10-Q 1 slm-20240630.htm 10-Q slm-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-13251

SLM Corporation

(Exact name of registrant as specified in its charter)


Delaware			52-2013874
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

300 Continental Drive	Newark,	Delaware	19713
(Address of principal executive offices)			(Zip Code)

(302) 451-0200

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $.20 per share	SLM	The NASDAQ Global Select Market
Floating Rate Non-Cumulative Preferred Stock, Series B, par value $.20 per share	SLMBP	The NASDAQ Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

(Do not check if a smaller reporting company)

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of June 30, 2024, there were 217,461,360 shares of common stock outstanding.

SLM CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

INDEX


PART I. Financial Information
Item 1.	Financial Statements	3
Item 1.	Notes to the Financial Statements	12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	55
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	86
Item 4.	Controls and Procedures	89
PART II. Other Information
Item 1.	Legal Proceedings	90
Item 1A.	Risk Factors	90
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	90
Item 3.	Defaults Upon Senior Securities	90
Item 4.	Mine Safety Disclosures	90
Item 5.	Other Information	91
Item 6.	Exhibits	91

2 SLM CORPORATION


CONSOLIDATED BALANCE SHEETS (Unaudited)
	June 30,		December 31,
(Dollars in thousands, except share and per share amounts)	2024		2023
Assets
Cash and cash equivalents	$	5,262,448	$	4,149,838
Investments:
Trading investments at fair value (cost of $45,171 and $43,412, respectively)	60,473		54,481
Available-for-sale investments at fair value (cost of $2,428,037 and $2,563,984, respectively)	2,283,262		2,411,622
Other investments	107,064		91,567
Total investments	2,450,799		2,557,670
Loans held for investment (net of allowance for losses of $1,269,652 and $1,339,772, respectively)	18,915,333		20,306,357

Restricted cash	142,230		149,669
Other interest-earning assets	6,362		9,229
Accrued interest receivable	1,391,081		1,379,904
Premises and equipment, net	126,440		129,501
Goodwill and acquired intangible assets, net	66,102		68,711
Income taxes receivable, net	351,126		366,247

Other assets	56,923		52,342
Total assets	$	28,768,844	$	29,169,468

Liabilities
Deposits	$	20,744,030	$	21,653,188

Long-term borrowings	5,403,012		5,227,512

Other liabilities	338,564		407,971
Total liabilities	26,485,606		27,288,671
Commitments and contingencies
Equity
Preferred stock, par value $0.20 per share, 20 million shares authorized:
Series B: 2.5 million and 2.5 million shares issued, respectively, at stated value of $100 per share	251,070		251,070
Common stock, par value $0.20 per share, 1.125 billion shares authorized: 440.3 million and 438.2 million shares issued, respectively	88,056		87,647
Additional paid-in capital	1,173,735		1,148,689
Accumulated other comprehensive loss (net of tax benefit of ($25,378) and ($24,176), respectively)	(78,809)		(75,104)
Retained earnings	4,107,980		3,624,859
Total SLM Corporation stockholders’ equity before treasury stock	5,542,032		5,037,161
Less: Common stock held in treasury at cost: 222.8 million and 217.9 million shares, respectively	(3,258,794)		(3,156,364)
Total equity	2,283,238		1,880,797
Total liabilities and equity	$	28,768,844	$	29,169,468

See accompanying notes to consolidated financial statements.

SLM CORPORATION 3


CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands, except per share amounts)	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Interest income:
Loans	$	565,338	$	568,342	$	1,161,945	$	1,151,126
Investments	15,139		12,037		29,646		23,368
Cash and cash equivalents	60,999		53,526		113,443		97,009
Total interest income	641,476		633,905		1,305,034		1,271,503
Interest expense:
Deposits	211,286		191,407		431,731		374,938
Interest expense on short-term borrowings	3,310		3,299		6,872		6,317
Interest expense on long-term borrowings	54,708		52,568		107,243		98,549

Total interest expense	269,304		247,274		545,846		479,804
Net interest income	372,172		386,631		759,188		791,699
Less: provisions for credit losses	16,830		17,729		28,871		131,841
Net interest income after provisions for credit losses	355,342		368,902		730,317		659,858
Non-interest income:
Gains on sales of loans, net	111,929		124,754		254,968		124,745
Gains (losses) on securities, net	2,103		(1,213)		4,221		498

Other income	27,773		20,513		56,774		40,522
Total non-interest income	141,805		144,054		315,963		165,765
Non-interest expenses:
Operating expenses:
Compensation and benefits	85,261		78,233		181,737		165,882
FDIC assessment fees	11,727		9,851		25,039		21,380
Other operating expenses	60,218		66,080		110,863		121,441
Total operating expenses	157,206		154,164		317,639		308,703
Acquired intangible assets amortization expense	1,394		2,245		2,609		4,517

Total non-interest expenses	158,600		156,409		320,248		313,220
Income before income tax expense	338,547		356,547		726,032		512,403
Income tax expense	86,554		91,482		184,108		128,820
Net income	251,993		265,065		541,924		383,583
Preferred stock dividends	4,628		4,274		9,281		8,337
Net income attributable to SLM Corporation common stock	$	247,365	$	260,791	$	532,643	$	375,246
Basic earnings per common share	$	1.13	$	1.11	$	2.42	$	1.57
Average common shares outstanding	218,924		235,061		219,670		238,261
Diluted earnings per common share	$	1.11	$	1.10	$	2.39	$	1.56
Average common and common equivalent shares outstanding	222,467		237,592		223,156		240,554
Declared dividends per common share	$	0.11	$	0.11	$	0.22	$	0.22

See accompanying notes to consolidated financial statements.

4 SLM CORPORATION


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(Dollars in thousands)	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net income	$	251,993	$	265,065	$	541,924	$	383,583
Other comprehensive income (loss):
Unrealized gains (losses) on investments	7,116		(14,512)		7,402		21,044
Unrealized gains (losses) on cash flow hedges	(9,260)		7,575		(12,309)		(7,424)
Total unrealized gains (losses)	(2,144)		(6,937)		(4,907)		13,620
Income tax (expense) benefit	626		1,706		1,202		(3,314)
Other comprehensive income (loss), net of tax (expense) benefit	(1,518)		(5,231)		(3,705)		10,306
Total comprehensive income	$	250,475	$	259,834	$	538,219	$	393,889

See accompanying notes to consolidated financial statements.

SLM CORPORATION 5


CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited)
		Common Stock Shares
(In thousands, except share and per share amounts)	Preferred Stock Shares	Issued	Treasury	Outstanding	Preferred Stock		Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Treasury Stock		Total Equity
Balance at March 31, 2023	2,510,696	437,644,884	(195,395,127)	242,249,757	$	251,070	$	87,530	$	1,121,082	$	(78,333)	$	3,250,478	$	(2,804,732)	$	1,827,095
Net income	—	—	—	—	—		—		—		—		265,065		—		265,065
Other comprehensive loss, net of tax	—	—	—	—	—		—		—		(5,231)		—		—		(5,231)
Total comprehensive income	—	—	—	—	—		—		—		—		—		—		259,834
Cash dividends declared:
Common stock ($0.11 per share)	—	—	—	—	—		—		—		—		(25,303)		—		(25,303)
Preferred Stock, Series B ($1.70 per share)	—	—	—	—	—		—		—		—		(4,274)		—		(4,274)


Issuance of common shares	—	349,009	—	349,009	—		69		163		—		(234)		—		(2)
Stock-based compensation expense	—	—	—	—	—		—		8,292		—		—		—		8,292

Common stock repurchased	—	—	(16,389,696)	(16,389,696)	—		—		—		—		—		(257,402)		(257,402)
Shares repurchased related to employee stock-based compensation plans	—	—	(128,212)	(128,212)	—		—		—		—		—		(1,876)		(1,876)
Balance at June 30, 2023	2,510,696	437,993,893	(211,913,035)	226,080,858	$	251,070	$	87,599	$	1,129,537	$	(83,564)	$	3,485,732	$	(3,064,010)	$	1,806,364

See accompanying notes to consolidated financial statements.

6 SLM CORPORATION


CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited)
		Common Stock Shares
(In thousands, except share and per share amounts)	Preferred Stock Shares	Issued	Treasury	Outstanding	Preferred Stock		Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Treasury Stock		Total Equity
Balance at March 31, 2024	2,510,696	440,156,336	(219,880,502)	220,275,834	$	251,070	$	88,032	$	1,163,838	$	(77,291)	$	3,884,694	$	(3,196,604)	$	2,113,739
Net income	—	—	—	—	—		—		—		—		251,993		—		251,993
Other comprehensive loss, net of tax	—	—	—	—	—		—		—		(1,518)		—		—		(1,518)
Total comprehensive income	—	—	—	—	—		—		—		—		—		—		250,475
Cash dividends declared:
Common stock ($0.11 per share)	—	—	—	—	—		—		—		—		(24,027)		—		(24,027)
Preferred Stock, Series B ($1.84 per share)	—	—	—	—	—		—		—		—		(4,628)		—		(4,628)


Issuance of common shares	—	123,311	—	123,311	—		24		320		—		(52)		—		292
Stock-based compensation expense	—	—	—	—	—		—		9,577		—		—		—		9,577
Common stock repurchased	—	—	(2,929,646)	(2,929,646)	—		—		—		—		—		(62,019)		(62,019)
Shares repurchased related to employee stock-based compensation plans	—	—	(8,139)	(8,139)	—		—		—		—		—		(171)		(171)
Balance at June 30, 2024	2,510,696	440,279,647	(222,818,287)	217,461,360	$	251,070	$	88,056	$	1,173,735	$	(78,809)	$	4,107,980	$	(3,258,794)	$	2,283,238

See accompanying notes to consolidated financial statements.

SLM CORPORATION 7


CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited)
		Common Stock Shares
(In thousands, except share and per share amounts)	Preferred Stock Shares	Issued	Treasury	Outstanding	Preferred Stock		Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Treasury Stock		Total Equity
Balance at December 31, 2022	2,510,696	435,121,140	(194,445,696)	240,675,444	$	251,070	$	87,025	$	1,109,072	$	(93,870)	$	3,163,640	$	(2,789,967)	$	1,726,970
Net income	—	—	—	—	—		—		—		—		383,583		—		383,583
Other comprehensive loss, net of tax	—	—	—	—	—		—		—		10,306		—		—		10,306
Total comprehensive income	—	—	—	—	—		—		—		—		—		—		393,889
Cash dividends declared:
Common stock ($0.22 per share)	—	—	—	—	—		—		—		—		(51,938)		—		(51,938)
Preferred Stock, Series B ($3.32 per share)	—	—	—	—	—		—		—		—		(8,337)		—		(8,337)


Issuance of common shares	—	2,872,753	—	2,872,753	—		574		637		—		(1,216)		—		(5)
Stock-based compensation expense	—	—	—	—	—		—		19,828		—		—		—		19,828

Common stock repurchased	—	—	(16,389,696)	(16,389,696)	—		—		—		—		—		(257,402)		(257,402)
Shares repurchased related to employee stock-based compensation plans	—	—	(1,077,643)	(1,077,643)	—		—		—		—		—		(16,641)		(16,641)
Balance at June 30, 2023	2,510,696	437,993,893	(211,913,035)	226,080,858	$	251,070	$	87,599	$	1,129,537	$	(83,564)	$	3,485,732	$	(3,064,010)	$	1,806,364

See accompanying notes to consolidated financial statements.

8 SLM CORPORATION


CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited)
		Common Stock Shares
(In thousands, except share and per share amounts)	Preferred Stock Shares	Issued	Treasury	Outstanding	Preferred Stock		Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Treasury Stock		Total Equity
Balance at December 31, 2023	2,510,696	438,230,416	(217,886,532)	220,343,884	$	251,070	$	87,647	$	1,148,689	$	(75,104)	$	3,624,859	$	(3,156,364)	$	1,880,797
Net income	—	—	—	—	—		—		—		—		541,924		—		541,924
Other comprehensive loss, net of tax	—	—	—	—	—		—		—		(3,705)		—		—		(3,705)
Total comprehensive income	—	—	—	—	—		—		—		—		—		—		538,219
Cash dividends declared:
Common stock ($0.22 per share)	—	—	—	—	—		—		—		—		(48,305)		—		(48,305)
Preferred Stock, Series B ($3.70 per share)	—	—	—	—	—		—		—		—		(9,281)		—		(9,281)


Issuance of common shares	—	2,049,231		2,049,231	—		409		1,679		—		(1,217)		—		871
Stock-based compensation expense	—	—	—	—	—		—		23,367		—		—		—		23,367
Common stock repurchased	—	—	(4,240,369)	(4,240,369)	—		—		—		—		—		(88,658)		(88,658)
Shares repurchased related to employee stock-based compensation plans	—	—	(691,386)	(691,386)	—		—		—		—		—		(13,772)		(13,772)
Balance at June 30, 2024	2,510,696	440,279,647	(222,818,287)	217,461,360	$	251,070	$	88,056	$	1,173,735	$	(78,809)	$	4,107,980	$	(3,258,794)	$	2,283,238

See accompanying notes to consolidated financial statements.

SLM CORPORATION 9


CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
	Six Months Ended June 30,
(Dollars in thousands)	2024		2023
Operating activities
Net income	$	541,924	$	383,583
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provisions for credit losses	28,871		131,841
Income tax expense	184,108		128,820
Amortization of brokered deposit placement fee	5,484		5,986
Amortization of Secured Borrowing Facility upfront fee	1,174		1,441
Amortization of deferred loan origination costs and loan premium/(discounts), net	6,260		6,402
Net amortization of discount on investments	(1,047)		(1,317)

Increase in tax indemnification receivable	—		(86)
Depreciation of premises and equipment	9,267		9,145
Acquired intangible assets amortization expense	2,609		4,517
Stock-based compensation expense	23,367		19,828
Unrealized (gains) losses on derivatives and hedging activities, net	43		(339)
Gains on sales of loans, net	(254,968)		(124,745)
Gains on securities, net	(4,221)		(498)

Other adjustments to net income, net	5,602		8,883
Changes in operating assets and liabilities:
Increase in accrued interest receivable	(550,931)		(511,089)

Increase in non-marketable securities	(283)		(691)
Decrease (increase) in other interest-earning assets	2,867		(790)

Increase in other assets	(23,389)		(37,573)
Decrease in income taxes payable, net	(163,936)		(74,596)
(Decrease) increase in accrued interest payable	(5,572)		10,433

Decrease in other liabilities	(27,742)		(17,301)
Total adjustments	(762,437)		(441,729)
Total net cash used in operating activities	(220,513)		(58,146)
Investing activities
Loans acquired and originated	(3,291,778)		(3,132,075)
Net proceeds from sales of loans held for investment and loans held for sale	3,761,722		2,157,028
Proceeds from FFELP Loan claim payments	20,034		26,477
Net decrease in loans held for investment and loans held for sale (other than loans acquired and originated, and loan sales)	1,380,714		1,605,292
Purchases of available-for-sale securities	(60,012)		(44,782)
Proceeds from sales and maturities of available-for-sale securities	410,835		148,092

Total net cash provided by investing activities	2,221,515		760,032
Financing activities

Brokered deposit placement fee	—		(2,634)
Net decrease in certificates of deposit	(175,483)		(303,027)
Net decrease in other deposits	(744,832)		(793,068)

Borrowings collateralized by loans in securitization trusts - issued	665,069		569,513
Borrowings collateralized by loans in securitization trusts - repaid	(494,161)		(596,692)
Issuance costs for unsecured debt offering	—		(15)



Fees paid on Secured Borrowing Facility	(2,333)		(2,850)

Common stock dividends paid	(48,305)		(51,938)
Preferred stock dividends paid	(9,281)		(8,337)
Common stock repurchased	(86,505)		(259,331)
Total net cash used in financing activities	(895,831)		(1,448,379)
Net decrease in cash, cash equivalents and restricted cash	1,105,171		(746,493)
Cash, cash equivalents and restricted cash at beginning of period	4,299,507		4,772,836
Cash, cash equivalents and restricted cash at end of period	$	5,404,678	$	4,026,343
Cash disbursements made for:

10 SLM CORPORATION


Interest	$	535,146	$	449,268
Income taxes paid	$	164,710	$	82,307
Income taxes refunded	$	(1,251)	$	(8,157)
Reconciliation of the Consolidated Statements of Cash Flows to the Consolidated Balance Sheets:
Cash and cash equivalents	$	5,262,448	$	3,875,758
Restricted cash	142,230		150,585
Total cash, cash equivalents and restricted cash	$	5,404,678	$	4,026,343

See accompanying notes to consolidated financial statements.

SLM CORPORATION 11

1. Significant Accounting Policies

Basis of Presentation

The accompanying unaudited, consolidated financial statements of SLM Corporation (“Sallie Mae,” “SLM,” the “Company,” “we,” or “us”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information. Accordingly, they do not include all the information and footnotes required by GAAP for complete consolidated financial statements. The consolidated financial statements include the accounts of SLM Corporation and its majority-owned and controlled subsidiaries after eliminating the effects of intercompany accounts and transactions. In the opinion of management, all adjustments considered necessary for a fair statement of the results for the interim periods have been included. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Operating results for the three and six months ended June 30, 2024 are not necessarily indicative of the results for the year ending December 31, 2024 or for any other period. These unaudited financial statements should be read in conjunction with the audited financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”).

Consolidation

The consolidated financial statements include the accounts of the Company and its majority-owned and controlled subsidiaries after eliminating the effects of intercompany accounts and transactions.

We consolidate any variable interest entity (“VIE”) where we have determined we are the primary beneficiary. The primary beneficiary is the entity which has both: (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance; and (ii) the obligation to absorb losses or receive benefits of the entity that could potentially be significant to the VIE.

Allowance for Credit Losses

We maintain an allowance for credit losses for the lifetime expected credit losses on loans in our portfolios, as well as for future loan commitments, at the reporting date.

In determining the lifetime expected credit losses on our Private Education Loan portfolio loan segments, we use a discounted cash flow method. This method requires us to project future principal and interest cash flows on our loans in those portfolios.

To estimate the future expected cash flows, we use statistical loan-level models that consider life of loan expectations for defaults, prepayments, recoveries, and any other qualitative adjustments deemed necessary, to determine the adequacy of the allowance at each balance sheet date. These cash flows are discounted at the loan’s effective interest rate to calculate the present value of those cash flows. Management adjusts the effective interest rate used to discount expected cash flows to incorporate expected prepayments. The difference between the present value of those cash flows and the amortized cost basis of the underlying loans is the allowance for credit losses. Entities that measure credit losses based on the present value of expected future cash flows are permitted to report the entire change in present value as credit loss expense, but may alternatively report the change in present value due to the passage of time as interest income. We have elected to report the entire change in present value as credit loss expense.

We estimate future default rates used in our current expected credit losses at a loan level using historical loss experience, current borrower characteristics, current conditions, and economic factors forecasted over a reasonable and supportable period. At the end of the reasonable and supportable forecast period, we immediately revert our forecasted economic factors to long-term historical averages.

We estimate future prepayment speeds used in our current expected credit losses at a loan level using historical prepayment experience, current borrower characteristics, current conditions, and economic factors forecasted over a reasonable and supportable period. At the end of the reasonable and supportable forecast period, we immediately revert our forecasted economic factors to long-term historical averages.

The reasonable and supportable forecast period is meant to represent the period in which we believe we can estimate the impact of forecasted economic factors in our expected losses. We use a two-year reasonable and supportable forecast period, although this period is subject to change as our view evolves on our ability to reasonably forecast economic conditions to estimate future losses.

12 SLM CORPORATION


1.			Significant Accounting Policies (Continued)

In estimating future default rates and prepayment speeds in our current expected credit losses, we use a combination of expected economic scenarios coupled with our historical experience to derive a base case adjusted for any qualitative factors (as described below). We also develop an adverse and favorable economic scenario. At each reporting date, we determine the appropriate weighting of these alternate scenarios based upon the current economic conditions and our view of the risks of alternate outcomes. This weighting of expectations is used in calculating our current expected credit losses recorded each period.

In estimating recoveries, we use both estimates of what we would receive from the sale of defaulted loans as well as historical borrower payment behavior to estimate the timing and amount of future recoveries on charged-off loans.

In addition to the above modeling approach, we also take certain other qualitative factors into consideration when calculating the allowance for credit losses, which could result in management overlays (increases or decreases to the allowance for credit losses). These management overlays can encompass a broad array of factors not captured by model inputs, including, but not limited to, changes in lending policies and procedures, including changes in underwriting standards, changes in servicing policies and collection administration practices, state law changes that could impact servicing and collection practices, charge-offs, recoveries not already included in the analysis, the effect of other external factors such as legal and regulatory requirements on the level of estimated current expected credit losses, the performance of the model over time versus actual losses, and any other operational or regulatory changes that could affect our estimate of future losses.

The evaluation of the allowance for credit losses is inherently subjective, as it requires material estimates that may be susceptible to significant changes. If actual future performance in delinquency, charge-offs, and recoveries is significantly different than estimated, or management assumptions or practices were to change, this could materially affect the estimate of the allowance for credit losses, the timing of when losses are recognized, and the related provision for credit losses in our consolidated statements of income.

When calculating our allowance for credit losses and liability for unfunded commitments, we incorporate several inputs that are subject to change period to period. These include, but are not limited to, CECL model inputs and any overlays deemed necessary by management. The most impactful CECL model inputs include:

•Economic forecasts;

•Weighting of economic forecasts; and

•Recovery rates.

Of the model inputs outlined above, economic forecasts, weighting of economic forecasts, and recovery rates are subject to estimation uncertainty, and changes in these inputs could have a material impact to our allowance for credit losses and the related provision for credit losses.

In the second quarter of 2024, we implemented a loan-level future default rate model that includes current portfolio characteristics and forecasts of real gross domestic product and college graduate unemployment. In the second quarter of 2024, we also implemented a future prepayment speeds model to include forecasts of real gross domestic product, retail sales, SOFR, and the U.S. 10-year treasury rate. These models reduce the reliance on certain qualitative overlays compared to the previous default rate and prepayment speeds models. Prior to these changes, our loss models used forecasts of college graduate unemployment, retail sales, home price index, and median family income. Both the future default rate model and the future prepayment speeds model are used in determining the adequacy of the allowance for credit losses. The combined impact of these model enhancements and the changes in the related qualitative overlays did not have a material impact on the overall level of our allowance for credit losses.

We obtain forecasts for our loss model inputs from Moody’s Analytics. Moody’s Analytics provides a range of forecasts for each of these inputs with various likelihoods of occurrence. We determine which forecasts we will include in our estimation of allowance for credit losses and the associated weightings for each of these inputs. At June 30, 2024, December 31, 2023, and June 30, 2023, we used the Baseline (50th percentile likelihood of occurring)/S1 (stronger near-term growth scenario - 10 percent likelihood of occurring)/S3 (unfavorable (or downside) scenario - 10 percent likelihood of occurring) and weighted them 40 percent, 30 percent, and 30 percent, respectively. Management reviews both the scenarios and their respective weightings each quarter in determining the allowance for credit losses.

SLM CORPORATION 13

2. Investments

Trading Investments

We periodically sell Private Education Loans (as hereinafter defined) through securitization transactions where we are required to retain a five percent vertical risk retention interest (i.e., five percent of each class issued in the securitizations). We classify those vertical risk retention interests related to the transactions as available-for-sale investments, except for the interest in the residual classes, which we classify as trading investments recorded at fair value with changes recorded through earnings. At June 30, 2024 and December 31, 2023, we had $60 million and $54 million, respectively, classified as trading investments.

Available-for-Sale Investments

The amortized cost and fair value of securities available for sale are as follows:


As of June 30, 2024 (dollars in thousands)	Amortized Cost		Allowance for credit losses(1)		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available-for-sale:
Mortgage-backed securities	$	509,861	$	—	$	206	$	(73,956)	$	436,111
Utah Housing Corporation bonds	3,201		—		—		(320)		2,881
U.S. government-sponsored enterprises and Treasuries	1,296,942		—		—		(55,211)		1,241,731
Other securities	618,033		—		3,722		(19,216)		602,539
Total	$	2,428,037	$	—	$	3,928	$	(148,703)	$	2,283,262

As of December 31, 2023 (dollars in thousands)	Amortized Cost		Allowance for credit losses(1)		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available-for-sale:
Mortgage-backed securities	$	468,204	$	—	$	703	$	(62,480)	$	406,427
Utah Housing Corporation bonds	3,408		—		—		(279)		3,129
U.S. government-sponsored enterprises and Treasuries	1,645,609		—		—		(66,870)		1,578,739
Other securities	446,763		—		603		(24,039)		423,327
Total	$	2,563,984	$	—	$	1,306	$	(153,668)	$	2,411,622

(1) Represents the amount of impairment that has resulted from credit-related factors and that was recognized in the consolidated balance sheets (as a credit loss expense on available-for-sale securities). The amount excludes unrealized losses related to non-credit factors.

14 SLM CORPORATION


2.			Investments (Continued)

The following table summarizes the amount of gross unrealized losses for our available-for-sale securities and the estimated fair value for securities having gross unrealized loss positions, categorized by length of time the securities have been in an unrealized loss position:


(Dollars in thousands)	Less than 12 months				12 months or more				Total
	Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value
As of June 30, 2024:
Mortgage-backed securities	$	(1,739)	$	106,041	$	(72,217)	$	313,289	$	(73,956)	$	419,330
Utah Housing Corporation bonds	—		—		(320)		2,881		(320)		2,881
U.S. government-sponsored enterprises and Treasuries	—		—		(55,211)		1,241,731		(55,211)		1,241,731
Other securities	(1,158)		77,628		(18,058)		244,502		(19,216)		322,130
Total	$	(2,897)	$	183,669	$	(145,806)	$	1,802,403	$	(148,703)	$	1,986,072

As of December 31, 2023:
Mortgage-backed securities	$	(531)	$	51,391	$	(61,949)	$	300,318	$	(62,480)	$	351,709
Utah Housing Corporation bonds	—		—		(279)		3,129		(279)		3,129
U.S. government-sponsored enterprises and Treasuries	—		—		(66,870)		1,578,739		(66,870)		1,578,739
Other securities	(2,221)		90,725		(21,818)		241,253		(24,039)		331,978
Total	$	(2,752)	$	142,116	$	(150,916)	$	2,123,439	$	(153,668)	$	2,265,555

At June 30, 2024 and December 31, 2023, 246 of 276 and 213 of 248, respectively, of our available-for-sale securities were in an unrealized loss position.

Impairment

For available-for-sale securities in an unrealized loss position, we first assess whether we intend to sell, or it is more likely than not that we will be required to sell, the security before recovery of its amortized cost basis. If either of these criteria are met, the security’s amortized cost basis is written down to fair value through net income. For securities in an unrealized loss position that do not meet these criteria, we evaluate whether the decline in fair value has resulted from credit loss or other factors. In making this assessment, we consider the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, adverse conditions specifically related to the security, as well as any guarantees (e.g., guarantees by the U.S. Government) that may be applicable to the security. If this assessment indicates a credit loss exists, the credit-related portion of the loss is recorded as an allowance for losses on the security.

Our investment portfolio contains mortgage-backed securities issued by Ginnie Mae, Fannie Mae, and Freddie Mac, as well as Utah Housing Corporation bonds. We own these securities to meet our requirements under the Community Reinvestment Act (“CRA”). We also invest in other U.S. government-sponsored enterprise securities issued by the Federal Home Loan Banks, Freddie Mac, and the Federal Farm Credit Bank. Our mortgage-backed securities that were issued under Ginnie Mae programs carry a full faith and credit guarantee from the U.S. Government. The remaining mortgage-backed securities in a net loss position carry a principal and interest guarantee by Fannie Mae or Freddie Mac, respectively. Our Treasury and other U.S. government-sponsored enterprise bonds are rated Aaa by Moody’s Investors Service or AA+ by Standard and Poor’s. We have the intent and ability to hold these bonds for a period of time sufficient for the market price to recover to at least the adjusted amortized cost of the security. Based on this qualitative analysis, we have determined that no credit impairment exists.

We periodically sell Private Education Loans through securitization transactions where we are required to retain a five percent vertical risk retention interest. We classify the non-residual vertical risk retention interests as available-for-sale investments. We have the intent and ability to hold each of these bonds for a period of time sufficient for the market price to recover to at least the adjusted amortized cost of the security. We expect to receive all contractual cash flows related to these investments and do not consider a credit impairment to exist.

SLM CORPORATION 15


2.			Investments (Continued)

As of June 30, 2024, the amortized cost and fair value of securities, by contractual maturities, are summarized below. Contractual maturities versus actual maturities may differ due to the effect of prepayments.


As of June 30, 2024 Year of Maturity (dollars in thousands)	Amortized Cost	Estimated Fair Value
2024	349,887	346,293
2025	299,312	292,886
2026	548,929	507,701
2027	98,814	94,851
2038	67	67
2039	570	552
2042	2,201	1,870
2043	3,864	3,396
2044	4,297	3,846
2045	4,615	4,011
2046	7,389	6,370
2047	7,359	6,424
2048	1,731	1,650
2049	15,114	13,095
2050	103,837	80,824
2051	149,872	115,523
2052	60,026	52,066
2053	323,017	315,286
2054	120,309	112,740
2055	78,597	75,905
2056	205,354

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