UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)


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

For the quarterly period ended ~~September 30, 2017~~March 31, 2019


¨	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)

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 þ 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 þ 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	þ		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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes þ No ¨

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:



Class	Outstanding at ~~September 30, 2017~~March 31, 2019
Common Stock, $0.20 par value	~~431,889,664~~432,427,285 shares

SLM CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

INDEX



Part I. Financial Information
Item 1.	Financial Statements	3
Item 1.	Notes to the Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	43 39
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	73 63
Item 4.	Controls and Procedures	77 67
PART II. Other Information
Item 1.	Legal Proceedings	78 68
Item 1A.	Risk Factors	79 68
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	80 68
Item 3.	Defaults Upon Senior Securities	80 68
Item 4.	Mine Safety Disclosures	80 68
Item 5.	Other Information	80 69
Item 6.	Exhibits	81 69

SLM CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

(Unaudited)


	September 30,			December 31,			March 31,			December 31,
	2017			2016			2019			2018
Assets
Cash and cash equivalents	$	1,247,764		$	1,918,793		$	2,156,257		$	2,559,106
Available-for-sale investments at fair value (cost of $236,018 and $211,406, respectively)	232,549			208,603
Loans held for investment (net of allowance for losses of $229,919 and $184,701, respectively)	18,040,465			15,137,922
Restricted cash and investments	66,625			53,717
Available-for-sale investments at fair value (cost of $211,049 and $182,325, respectively)							207,907			176,245
Loans held for investment (net of allowance for losses of $358,325 and $341,121, respectively)							23,498,386			22,270,919
Restricted cash							153,552			122,789
Other interest-earning assets	31,303			49,114			31,921			27,157
Accrued interest receivable	1,019,735			766,106			1,299,496			1,191,981
Premises and equipment, net	88,975			87,063			130,536			105,504
Income taxes receivable, net							—			41,570
Tax indemnification receivable	214,496			259,532			43,124			39,207
Other assets	74,258			52,153			92,446			103,695
Total assets	$	21,016,170		$	18,533,003		$	27,613,625		$	26,638,173

Liabilities
Deposits	$	15,034,052		$	13,435,667		$	19,663,986		$	18,943,158
Short-term borrowings	300,000			—
Long-term borrowings	2,738,662			2,167,979			4,476,406			4,284,304
Income taxes payable, net	96,404			184,324			7,011			—
Upromise member accounts	245,094			256,041			203,780			213,104
Other liabilities	180,118			141,934			214,908			224,951
Total liabilities	18,594,330			16,185,945			24,566,091			23,665,517

Commitments and contingencies

Equity
Preferred stock, par value $0.20 per share, 20 million shares authorized:
Series A: 0 and 3.3 million shares issued, respectively, at stated value of $50 per share	—			165,000
Series B: 4 million and 4 million shares issued, respectively, at stated value of $100 per share	400,000			400,000			400,000			400,000
Common stock, par value $0.20 per share, 1.125 billion shares authorized: 442.3 million and 436.6 million shares issued, respectively	88,458			87,327
Common stock, par value $0.20 per share, 1.125 billion shares authorized: 453.3 million and 449.9 million shares issued, respectively							90,666			89,972
Additional paid-in capital	1,213,198			1,175,564			1,290,683			1,274,635
Accumulated other comprehensive loss (net of tax benefit of $2,720 and $5,364, respectively)	(4,417		)	(8,671		)
Accumulated other comprehensive income (net of tax expense of $704 and $3,436, respectively)							2,177			10,623
Retained earnings	824,316			595,322			1,480,718			1,340,017
Total SLM Corporation stockholders’ equity before treasury stock	2,521,555			2,414,542			3,264,244			3,115,247
Less: Common stock held in treasury at cost: 10.4 million and 7.7 million shares, respectively	(99,715		)	(67,484		)
Less: Common stock held in treasury at cost: 20.9 million and 14.2 million shares, respectively							(216,710		)	(142,591		)
Total equity	2,421,840			2,347,058			3,047,534			2,972,656
Total liabilities and equity	$	21,016,170		$	18,533,003		$	27,613,625		$	26,638,173

See accompanying notes to consolidated financial statements.

SLM CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended				Nine Months Ended					Three Months Ended
	September 30,				September 30,					March 31,
	2017		2016		2017			2016		2019		2018
Interest income:
Loans	$	359,610	$	268,341	$	1,021,106		$	765,246	$	553,479	$	430,048
Investments	1,928		2,193		6,272			7,155		1,421		1,947
Cash and cash equivalents	4,686		2,003		10,429			4,832		11,553		5,236
Total interest income	366,224		272,537		1,037,807			777,233		566,453		437,231
Interest expense:
Deposits	61,890		38,210		157,473			107,633		125,987		77,456
Interest expense on short-term borrowings	1,804		1,604		4,234			5,827		1,165		2,393
Interest expense on long-term borrowings	20,469		9,448		56,070			17,869		37,020		24,768
Total interest expense	84,163		49,262		217,777			131,329		164,172		104,617
Net interest income	282,061		223,275		820,030			645,904		402,281		332,614
Less: provisions for credit losses	54,930		41,784		130,441			116,179		63,790		53,931
Net interest income after provisions for credit losses	227,131		181,491		689,589			529,725		338,491		278,683
Non-interest income:
Gains (losses) on derivatives and hedging activities, net	1,661		1,368		(7,326		)	3,156
Gains on derivatives and hedging activities, net										2,763		3,892
Other income	4,455		21,598		26,430			56,309		13,378		9,642
Total non-interest income	6,116		22,966		19,104			59,465		16,141		13,534
Non-interest expenses:
Compensation and benefits	51,052		43,380		157,523			138,659		78,738		68,317
FDIC assessment fees	7,626		5,095		21,477			13,548		7,618		8,796
Other operating expenses	57,464		51,234		151,070			135,164		53,791		47,853
Total operating expenses	116,142		99,709		330,070			287,371
Acquired intangible asset amortization expense	117		226		351			747
Total non-interest expenses	116,259		99,935		330,421			288,118		140,147		124,966
Income before income tax expense	116,988		104,522		378,272			301,072		214,485		167,251
Income tax expense	40,617		47,557		136,341			120,987		56,296		40,997
Net income	76,371		56,965		241,931			180,085		158,189		126,254
Preferred stock dividends	3,028		5,316		12,577			15,698		4,468		3,397
Net income attributable to SLM Corporation common stock	$	73,343	$	51,649	$	229,354		$	164,387	$	153,721	$	122,857
Basic earnings per common share attributable to SLM Corporation	$	0.17	$	0.12	$	0.53		$	0.38	$	0.35	$	0.28
Average common shares outstanding	431,718		428,077		430,958			427,711		434,574		433,952
Diluted earnings per common share attributable to SLM Corporation	$	0.17	$	0.12	$	0.52		$	0.38	$	0.35	$	0.28
Average common and common equivalent shares outstanding	438,419		433,523		438,422			432,079		438,248		438,977
Dividends per common share attributable to SLM Corporation										$	0.03	$	—

See accompanying notes to consolidated financial statements.

SLM CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 30,						September 30,						March 31,
	2017			2016			2017			2016			2019			2018
Net income	$	76,371		$	56,965		$	241,931		$	180,085		$	158,189		$	126,254
Other comprehensive income (loss):
Unrealized gains (losses) on investments	734			406			(666		)	4,723			2,938			(4,127		)
Unrealized gains (losses) on cash flow hedges	4,814			9,324			7,564			(23,782		)	(14,117		)	20,290
Total unrealized gains (losses)	5,548			9,730			6,898			(19,059		)	(11,179		)	16,163
Income tax (expense) benefit	(2,113		)	(3,690		)	(2,644		)	7,305
Other comprehensive income (loss), net of tax (expense) benefit	3,435			6,040			4,254			(11,754		)
Income tax benefit (expense)													2,733			(3,902		)
Other comprehensive income (loss), net of tax benefit (expense)													(8,446		)	12,261
Total comprehensive income	$	79,806		$	63,005		$	246,185		$	168,331		$	149,743		$	138,515

See accompanying notes to consolidated financial statements.

SLM CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands, except share and per share amounts)

(Unaudited)

Common Stock Shares
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, 2015 7,300,000
430,677,434
(4,374,190 ) 426,303,244
$ 565,000
$ 86,136
$ 1,135,860
$ (16,059 ) $ 366,609
$ (41,223 ) $ 2,096,323
Net income —
—
—
—
—
—
—
—
180,085
—
180,085
Other comprehensive loss, net of tax —
—
—
—
—
—
—
(11,754 ) —
—
(11,754 )
Total comprehensive income —
—
—
—
—
—
—
—
—
—
168,331
Cash dividends:
Preferred Stock, series A ($.87 per share) —
—
—
—
—
—
—
—
(8,625 ) —
(8,625 )
Preferred Stock, series B ($.65 per share) —
—
—
—
—
—
—
—
(7,073 ) —
(7,073 )
Dividend equivalent units related to employee stock-based compensation plans —
—
—
—
—
—
402
—
(402 ) —
Issuance of common shares —
3,727,574
—
3,727,574
—
745
5,493
—
—
—
6,238
Tax benefit related to employee stock-based compensation —
—
—
—
—
—
(2,457 ) —
—
—
(2,457 )
Stock-based compensation expense —
—
—
—
—
—
17,950
—
—
—
17,950
Shares repurchased related to employee stock-based compensation plans —
—
(1,763,092 ) (1,763,092 ) —
—
—
—
—
(11,191 ) (11,191 )
Balance at September 30, 2016 7,300,000
434,405,008
(6,137,282 ) 428,267,726
$ 565,000
$ 86,881
$ 1,157,248
$ (27,813 ) $ 530,594
$ (52,414 ) $ 2,259,496



		Common Stock Shares
	Preferred Stock Shares	Issued	Treasury		Outstanding		Preferred Stock		Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income		Retained Earnings			Treasury Stock			Total Equity
Balance at December 31, 2017	4,000,000	443,463,587	(11,087,337	)	432,376,250		$	400,000	$	88,693	$	1,222,277	$	2,748	$	868,182		$	(107,644	)	$	2,474,256
Net income	—	—	—		—		—		—		—		—		126,254			—			126,254
Other comprehensive income, net of tax	—	—	—		—		—		—		—		12,261		—			—			12,261
Total comprehensive income	—	—	—		—		—		—		—		—		—			—			138,515
Reclassification resulting from the adoption of ASU No. 2018-02	—	—	—		—		—		—		—		592		(592		)	—			—
Cash dividends:
Preferred Stock, Series B ($0.83 per share)	—	—	—		—		—		—		—		—		(3,397		)	—			(3,397		)
Issuance of common shares	—	5,559,991	—		5,559,991		—		1,112		15,587		—		—			—			16,699
Stock-based compensation expense	—	—	—		—		—		—		14,745		—		—			—			14,745
Shares repurchased related to employee stock-based compensation plans	—	—	(2,740,018	)	(2,740,018	)	—		—		—		—		—			(30,985		)	(30,985		)
Balance at March 31, 2018	4,000,000	449,023,578	(13,827,355	)	435,196,223		$	400,000	$	89,805	$	1,252,609	$	15,601	$	990,447		$	(138,629	)	$	2,609,833

See accompanying notes to consolidated financial statements.

SLM CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands, except share and per share amounts)

(Unaudited)

Common Stock Shares
Preferred Stock Shares Issued Treasury Outstanding Preferred Stock Common Stock Additional Paid-In Capital
Accumulated
Other
Comprehensive
Income (Loss)
Retained Earnings Treasury Stock Total Equity
Balance at December 31, 2016 7,300,000
436,632,479
(7,728,920 ) 428,903,559
$ 565,000
$ 87,327
$ 1,175,564
$ (8,671 ) $ 595,322
$ (67,484 ) $ 2,347,058
Net income —
—
—
—
—
—
—
—
241,931
—
241,931
Other comprehensive income, net of tax —
—
—
—
—
—
—
4,254
—
—
4,254
Total comprehensive income —
—
—
—
—
—
—
—
—
—
246,185
Cumulative effect of the new stock compensation standard —
—
—
—
—
—
429
—
(264 ) —
165
Cash dividends:
Preferred Stock, series A ($1.74 per share) —
—
—
—
—
—
—
—
(3,961 ) —
(3,961 )
Preferred Stock, series B ($2.15 per share) —
—
—
—
—
—
—
—
(8,616 ) —
(8,616 )
Redemption of Series A Preferred Stock (3,300,000 ) —
—
—
(165,000 ) —
—
—
—
—
(165,000 )
Dividend equivalent units related to employee stock-based compensation plans —
—
—
—
—
—
96
—
(96 ) —
—
Issuance of common shares —
5,652,886

5,652,886
—
1,131
15,336
—
—
—
16,467
Stock-based compensation expense —
—
—
—
—
—
21,773
—
—
—
21,773
Shares repurchased related to employee stock-based compensation plans —
—
(2,666,781 ) (2,666,781 ) —
—
—
—
—
(32,231 ) (32,231 )
Balance at September 30, 2017 4,000,000
442,285,365
(10,395,701 ) 431,889,664
$ 400,000
$ 88,458
$ 1,213,198
$ (4,417 ) $ 824,316
$ (99,715 ) $ 2,421,840



		Common Stock Shares
	Preferred Stock Shares	Issued	Treasury		Outstanding		Preferred Stock		Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Treasury Stock			Total Equity
Balance at December 31, 2018	4,000,000	449,856,221	(14,174,733	)	435,681,488		$	400,000	$	89,972	$	1,274,635	$	10,623		$	1,340,017		$	(142,591	)	$	2,972,656
Net income	—	—	—		—		—		—		—		—			158,189			—			158,189
Other comprehensive loss, net of tax	—	—	—		—		—		—		—		(8,446		)	—			—			(8,446		)
Total comprehensive income	—	—	—		—		—		—		—		—			—			—			149,743
Cash dividends:
Common Stock ($0.03 per share)	—	—	—		—		—		—		—		—			(13,020		)	—			(13,020		)
Preferred Stock, Series B ($1.12 per share)	—	—	—		—		—		—		—		—			(4,468		)	—			(4,468		)
Issuance of common shares	—	3,470,664			3,470,664		—		694		2,157		—			—			—			2,851
Stock-based compensation expense	—	—	—		—		—		—		13,891		—			—			—			13,891
Common stock repurchased	—	—	(5,435,476	)	(5,435,476	)	—		—		—		—			—			(60,000		)	(60,000		)
Shares repurchased related to employee stock-based compensation plans	—	—	(1,289,391	)	(1,289,391	)	—		—		—		—			—			(14,119		)	(14,119		)
Balance at March 31, 2019	4,000,000	453,326,885	(20,899,600	)	432,427,285		$	400,000	$	90,666	$	1,290,683	$	2,177		$	1,480,718		$	(216,710	)	$	3,047,534

See accompanying notes to consolidated financial statements.

SLM CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Nine Months Ended						Three Months Ended
	September 30,						March 31,
	2017			2016			2019			2018
Operating activities
Net income	$	241,931		$	180,085		$	158,189		$	126,254
Adjustments to reconcile net income to net cash used in operating activities:
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provisions for credit losses	130,441			116,179			63,790			53,931
Income tax expense	136,341			118,530			56,296			40,997
Amortization of brokered deposit placement fee	6,831			7,766			3,555			2,789
Amortization of ABCP Facility upfront fee	995			866
Amortization of deferred loan origination costs and fees, net	6,122			4,304
Amortization of Secured Borrowing Facility upfront fee							277			301
Amortization of deferred loan origination costs and loan premium/(discounts), net							3,184			2,607
Net amortization of discount on investments	1,504			1,387			189			475
Loss (income) on tax indemnification receivable	311			(14,386		)
Increase in tax indemnification receivable							(3,917		)	(1,231		)
Depreciation of premises and equipment	8,194			6,896			3,586			3,117
Amortization of acquired intangibles	351			747
Stock-based compensation expense	21,773			17,950			13,891			14,745
Unrealized losses (gains) on derivatives and hedging activities, net	6,931			(1,881		)
Unrealized gains on derivatives and hedging activities, net							(4,027		)	(3,879		)
Other adjustments to net income, net	4,601			2,540			1,918			1,855
Changes in operating assets and liabilities:
Increase in accrued interest receivable	(506,451		)	(430,441		)	(239,180		)	(201,776		)
Decrease in restricted cash and investments, net	5,701			1,564
Decrease in other interest-earning assets	17,811			7,562
Decrease in tax indemnification receivable	44,725			44,725
Increase in other interest-earning assets							(4,764		)	(10,051		)
Increase in other assets	(53,276		)	(22,879		)	(681		)	(35,858		)
Decrease in income taxes payable, net	(217,235		)	(201,338		)	(3,947		)	(1,159		)
Increase in accrued interest payable	15,240			10,202			7,405			11,034
(Decrease) increase in payable due to entity that is a subsidiary of Navient	(305		)	658
Increase in other liabilities	6,143			7,131
Decrease in other liabilities							(39,049		)	(18,309		)
Total adjustments	(363,252		)	(321,918		)	(141,474		)	(140,412		)
Total net cash used in operating activities	(121,321		)	(141,833		)
Total net cash provided by (used in) operating activities							16,715			(14,158		)
Investing activities
Loans acquired and originated	(4,314,711		)	(4,072,631		)	(2,253,624		)	(2,300,135		)
Net proceeds from sales of loans held for investment	5,497			7,912			—			820
Proceeds from claim payments	34,759			49,742			11,587			12,084
Net decrease in loans held for investment	1,488,087			953,715			1,077,273			735,894
Increase in restricted cash and investments - variable interest entities	(18,608		)	(11,840		)
Purchases of available-for-sale securities	(55,569		)	(40,767		)	(33,483		)	—
Proceeds from sales and maturities of available-for-sale securities	29,452			26,318			4,570			10,371
Total net cash used in investing activities	(2,831,093		)	(3,087,551		)	(1,193,677		)	(1,540,966		)
Financing activities
Brokered deposit placement fee	(9,668		)	(3,953		)	(1,498		)	(7,055		)
Net increase in certificates of deposit	1,087,486			481,623			404,121			694,982
Net increase in other deposits	516,343			961,123			290,631			323,614
Issuance costs for collateralized borrowings	—			(1,351		)
Borrowings collateralized by loans in securitization trusts - issued	767,245			1,104,551			451,128			667,848
Borrowings collateralized by loans in securitization trusts - repaid	(397,106		)	(106,567		)	(260,953		)	(200,247		)
Issuance costs for unsecured debt offering	(1,057		)	—
Unsecured debt issued	197,000			—
Borrowings under ABCP Facility	300,000			376,325
Repayment of borrowings under ABCP Facility	—			(526,500		)
Borrowings under Secured Borrowing Facility							—			300,000
Repayment of borrowings under Secured Borrowing Facility							—			(300,000		)
Fees paid on Secured Borrowing Facility							(1,065		)	(1,063		)
Common stock dividends paid							(13,020		)	—
Preferred stock dividends paid							(4,468		)	(3,397		)
Common stock repurchased							(60,000		)	—
Net cash provided by financing activities							804,876			1,474,682
Net decrease in cash, cash equivalents and restricted cash							(372,086		)	(80,442		)
Cash, cash equivalents and restricted cash at beginning of period							2,681,895			1,636,175
Cash, cash equivalents and restricted cash at end of period							$	2,309,809		$	1,555,733

Fees paid on ABCP Facility (1,281 ) (1,450 )
Redemption of Preferred Stock Series A (165,000 ) —
Preferred stock dividends paid (12,577 ) (15,698 )
Net cash provided by financing activities 2,281,385
2,268,103
Net decrease in cash and cash equivalents (671,029 ) (961,281 )
Cash and cash equivalents at beginning of period 1,918,793
2,416,219
Cash and cash equivalents at end of period $ 1,247,764
$ 1,454,938
Cash disbursements made for:
Interest $ 191,488
$ 119,812
Income taxes paid $ 216,321
$ 201,218
Income taxes refunded $ (986 ) $ (86 )



Cash disbursements made for:
Interest	$	147,235		$	94,737
Income taxes paid	$	3,700		$	1,894
Income taxes refunded	$	(41	)	$	(990	)
Reconciliation of the Consolidated Statements of Cash Flows to the Consolidated Balance Sheets:
Cash and cash equivalents	$	2,156,257		$	1,435,649
Restricted cash	153,552			120,084
Total cash, cash equivalents and restricted cash	$	2,309,809		$	1,555,733

See accompanying notes to consolidated financial statements.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, unless otherwise noted)

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 nine~~ months ended ~~September 30, 2017~~March 31, 2019 are not necessarily indicative of the results for the year ending December 31, ~~2017~~2019 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, ~~2016~~2018 (the ~~“2016~~“2018 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: (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (2) the obligation to absorb losses or receive benefits of the entity that could potentially be significant to the VIE.

~~Allowance~~Reclassifications

Certain reclassifications have been made to the balances for ~~Loan Losses~~the three months ended March 31, 2018, to be consistent with classifications adopted in 2019, which had no effect on net income, total assets or total liabilities.

Recently Issued and Adopted Accounting Pronouncements

ASU No. 2016-02, “Leases”

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases,” a comprehensive new lease standard which supersedes previous lease guidance. The standard requires a lessee to recognize in its balance sheet assets and liabilities related to long-term leases that were classified as operating leases under previous guidance. An asset will be recognized related to the right to use the underlying asset and a liability will be recognized related to the obligation to make lease payments over the term of the lease. The standard also requires expanded disclosures surrounding leases. The standard is effective for fiscal periods beginning after December 15, 2018, and requires modified retrospective adoption, with early adoption permitted. We ~~maintain an allowance for loan losses at an amount sufficient~~adopted this guidance on January 1, 2019. In doing so, we identified and evaluated the related lease contracts and revised our controls and processes to ~~absorb probable losses incurred in our portfolios at~~address the ~~reporting date based on a projection~~lease standard. The adoption of ~~estimated probable credit losses incurred~~this guidance resulted in the ~~portfolio. Please refer to Note 2, “Significant Accounting Policies - Allowance for Loan Losses - Allowance for Private Education Loan Losses” in the 2016 Form 10-K for~~recognition of less than $34 million of right of use asset and lease liability, which did not have a ~~description of certain information we use in estimating allowance amounts for Private Education Loans (as hereafter defined).~~

~~Troubled Debt Restructurings (“TDRs”)~~

~~For~~material impact on our TDR portfolio, we estimate an allowance amount sufficient to cover life-of-loan expected losses through an impairment calculation based on the difference between the loan’s basis and the present value of expected future cash flows (which would include life-of-loan default and recovery assumptions) discounted at the loan’s original effective interest rate. Our TDR portfolio is comprised mostly of loans with interest rate reductions and loans with forbearance usage greater than three months, as further described below.

We modify the terms of loans for certain borrowers when we believe such modifications may increase the ability and willingness of a borrower to make payments and thus increase the ultimate overall amount collected on a loan. These modifications generally take the form of a forbearance, a temporary interest rate reduction or an extended repayment plan. We generally consider a loan that is in full principal and interest repayment status which has received more than three months of forbearance in a 24-month period to be a TDR; however, during the first nine months after a loan has entered full principal and interest repayment status, we do not count up to the first six months of forbearance received during that period against the three-month policy limit.consolidated financial statements.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)



1.	Significant Accounting Policies (Continued)

A loan also becomes a TDR when it is modified to reduce the interest rate on the loan (regardless of when such modification occurs and/or whether such interest rate reduction is temporary). The majority of our loans that are considered TDRs involve a temporary forbearance of payments and do not change the contractual interest rate of the loan. Once a loan qualifies for TDR status, it remains a TDR for allowance purposes for the remainder of its life. As of September 30, 2017 and December 31, 2016, approximately 69 percent of TDRs were classified as such due to their forbearance status.

~~Derivative Accounting~~

We account for our derivatives, consisting of interest rate swaps, at fair value on the consolidated balance sheets as either an asset or liability. Derivative positions are recorded as net positions by counterparty based on master netting arrangements (see Note 6, “Derivative Financial Instruments”), exclusive of accrued interest and cash collateral held or pledged. The Chicago Mercantile Exchange (“CME”) and the London Clearing House (“LCH”) made amendments to their respective rules that resulted in the prospective accounting treatment of certain daily payments historically treated as the posting of collateral (variation margin payments) being considered as the legal settlement of the outstanding exposure of the derivative. While the CME rule, which became effective in January 2017, is mandatory, the LCH allows a clearing member institution the option to adopt the rule changes on an individual contract or portfolio basis. As of September 30, 2017, $5.1 billion notional of our derivative contracts were cleared on the CME and $0.7 billion were cleared on the LCH. The derivative contracts cleared through the CME and LCH represent 85.8 percent and 11.9 percent, respectively, of our total notional derivative contracts of $5.9 billion at September 30, 2017.

Under this new rule, for derivatives cleared through the CME, the net gain (loss) position includes the variation margin amounts as settlement of the derivative and not collateral against the fair value of the derivative. Interest income (expense) related to variation margin on derivatives that are not designated as hedging instruments or are designated as fair value relationships is recognized as a gain (loss) rather than as interest income (expense). Changes in fair value for derivatives not designated as hedging instruments will be presented as realized gains (losses).

Our LCH clearing member institution has elected not to adopt the new rule change. Therefore, there has been no change to the accounting for the derivatives cleared through the LCH, and variation margin payments required to be exchanged based on the fair value of these derivatives remain accounted for as collateral.

We determine the fair value for our derivative contracts primarily using pricing models that consider current market conditions and the contractual terms of the derivative contracts. These pricing models consider interest rates, time value, forward interest rate curves, and volatility factors. Inputs are generally from active financial markets.

The majority of our derivatives qualify as effective hedges. For these derivatives, the relationship between the hedging instrument and the hedged items (including the hedged risk and method for assessing effectiveness), as well as the risk management objective and strategy for undertaking various hedge transactions at the inception of the hedging relationship, is documented.

Each derivative is designated to a specific (or pool of) liability(ies) on the consolidated balance sheets, and is designated as either a “fair value” hedge or a “cash flow” hedge. Fair value hedges are designed to hedge our exposure to the changes in fair value of a fixed-rate liability. For effective fair value hedges, both the hedge and the hedged item (for the risk being hedged) are recorded at fair value with any difference reflecting ineffectiveness recorded immediately in the consolidated statements of income. Cash flow hedges are designed to hedge our exposure to variability in cash flows related to variable-rate deposits. The assessment of the hedge’s effectiveness is performed at inception and on an ongoing basis, using regression testing. For hedges of a pool of liabilities, tests are performed to demonstrate the similarity of individual instruments of the pool. When it is determined that a derivative is not currently an effective hedge, ineffectiveness is recognized for the full change in fair value of the derivative with no offsetting amount from the hedged item since the last time it was effective. If it is also determined the hedge will not be effective in the future, we discontinue the hedge accounting prospectively and begin amortization of any basis adjustments that exist related to the hedged item.

~~SLM CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Dollars in thousands, unless otherwise noted)~~



1.	~~Significant Accounting Policies (Continued)~~

~~Stock-Based Compensation~~

We recognize stock-based compensation cost in our consolidated statements of income using the fair value method. Under this method, we determine the fair value of the stock-based compensation at the time of the grant and recognize the resulting compensation expense over the vesting period of the stock-based grant. On January 1, 2017, we adopted the Financial Accounting Standards Board’s (“FASB’s”) Accounting Standards Update (“ASU”) 2016-09 “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” This new guidance requires that we record all excess tax benefits/deficiencies related to the settlement of employee stock-based compensation to the income tax expense line item on our consolidated statements of income, under a modified retrospective basis. In the nine months ended September 30, 2017, we recorded a $7.3 million benefit in income tax expense because of this new standard. We previously recorded the excess tax benefits/deficiencies to the additional paid-in capital line item on our consolidated balance sheets. Under the new guidance, we also elected the option to no longer apply a forfeiture rate to our stock-based compensation expense, but to record forfeitures when they occur, and, as a result, under a modified retrospective basis we recorded a cumulative effect of the new stock compensation standard in total equity of $0.2 million, net of tax, in the first quarter of 2017.

Recently Issued but Not Yet Adopted Accounting Pronouncements

~~On August 28, 2017,~~ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”

In June 2016, the FASB issued ASU ~~2017-12, “Derivatives~~No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This ASU eliminates the incurred loss threshold for initial recognition of credit impairment in current GAAP and ~~Hedging: Targeted Improvements~~replaces it with the expected loss concept. For all loans carried at amortized cost, we will be required to ~~Accounting~~measure our allowance for ~~Hedging Activities,”~~loan losses based on our current estimate of all expected credit losses (“CECL”) over the remaining contractual term of the assets. Because it eliminates the incurred loss trigger, the new accounting guidance will require us, upon the origination of a loan, to record an estimate of all expected credit losses on that loan through an immediate charge to earnings. Updates to that estimate each period will be recorded through provision expense. The estimate of loan losses must be based on historical experience, current conditions and reasonable and supportable forecasts. The ASU does not mandate the use of any specific method for estimating credit loss, permitting companies to use judgment in selecting the approach that is most appropriate in their circumstances. The standard will become effective for us on January 1, 2020, with early adoption permitted no sooner than January 1, 2019. Upon adoption, a cumulative effect adjustment to retained earnings will be recorded as of the beginning of the first reporting period in which ~~improves~~ the guidance is effective in an amount necessary to adjust the allowance for loan losses to equal the current estimate of expected losses on financial ~~reporting~~assets held at that date.

We have evaluated the standard and initiated implementation efforts. We have identified the loss forecasting approach and have built the loss models for our Private Education Loans and our Personal Loans acquired from third-parties. During the remainder of ~~hedging relationships~~2019, we plan to ~~better portray~~complete our loss models for Personal Loans we originate and credit card receivables and complete the ~~economic~~testing and validation for all the models to be used to implement CECL. During the second quarter of 2019, we also plan to run our CECL solution in parallel for our Private Education Loan and purchased Personal Loan portfolios to test the implementation of the new solution.

Adoption of the standard will have a material impact on how we record and report our financial condition and results of ~~an entity's risk management activities in its financial statements~~operations, and ~~make certain targeted improvements to simplify the application~~on regulatory capital. The extent of the ~~hedge accounting guidance. The guidance expands~~impact upon adoption will likely depend on the ~~ability to hedge nonfinancial~~characteristics of our loan portfolio and ~~financial risk components, reduces complexity in fair value hedges of interest rate risk, eliminates the requirement to separately measure and report hedge ineffectiveness,~~economic conditions at that date, as well as eases certain hedge effectiveness assessment requirements. The effective date for the standard is January 1, 2019, with early adoption permitted. We are currently evaluating if we will adopt this standard prior to its final effective date, and we currently do not expect the adoption to materially affect our consolidated financial statements.forecasted conditions thereafter.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

2. Loans Held for Investment

Loans held for investment consist of Private Education Loans, FFELP Loans and Personal Loans. We use “Private Education Loans” to mean education loans to students or their families that are not made, insured or guaranteed by any state or federal government. Private Education Loans do not include loans insured or guaranteed under the previously existing Federal Family Education Loan Program (“FFELP”). We use “Personal Loans” to mean those unsecured loans to individuals that may be used for non-educational purposes. ~~We began to opportunistically acquire Personal Loans in the fourth quarter of 2016.~~

Our Private Education Loans are made largely to bridge the gap between the cost of higher education and the amount funded through financial aid, government loans and customers’ resources. Private Education Loans bear the full credit risk of the customer. We manage this risk through risk-performance underwriting strategies and qualified cosigners. Private Education Loans may be fixed rate or may carry a variable interest rate indexed to LIBOR. As of ~~September 30, 2017~~March 31, 2019, and December 31, ~~2016, 78.2~~2018, 63 percent and ~~81.4~~67 percent, respectively, of all of our Private Education Loans were indexed to LIBOR. We provide incentives for customers to include a cosigner on the loan, and the vast majority of loans in our portfolio are cosigned. We also ~~provide total cost incentives for~~encourage customers to make payments while in school.

FFELP Loans are insured as to their principal and accrued interest in the event of default, subject to a ~~risk sharing~~risk-sharing level based on the date of loan disbursement. These insurance obligations are supported by contractual rights against the United States. For loans disbursed on or after July 1, 2006, we receive 97 percent reimbursement on all qualifying claims. For loans disbursed after October 1, 1993, and before July 1, 2006, we receive 98 percent reimbursement on all qualifying claims. For loans disbursed prior to October 1, 1993, we receive 100 percent reimbursement on all qualifying claims.

In 2016, we began to acquire Personal Loans ~~held for investment are summarized as follows:~~from a marketplace lender, but discontinued those purchases in July 2018. In 2018, we began to originate and service Personal Loans.

September 30, December 31,
2017 2016
Private Education Loans $ 17,132,907
$ 14,251,675
Deferred origination costs 53,501
44,206
Allowance for loan losses (227,167 ) (182,472 )
Total Private Education Loans, net 16,959,241
14,113,409

FFELP Loans 949,180
1,010,908
Unamortized acquisition costs, net 2,696
2,941
Allowance for loan losses (1,352 ) (2,171 )
Total FFELP Loans, net 950,524
1,011,678

Personal Loans 132,100
12,893
Allowance for loan losses (1,400 ) (58 )
Total Personal Loans, net 130,700
12,835

Loans held for investment, net $ 18,040,465
$ 15,137,922

~~The estimated weighted average life of education loans in our portfolio was approximately 5.6 years and 6.0 years at September 30, 2017 and December 31, 2016, respectively.~~

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)



2.	Loans Held for Investment (Continued)

Loans held for investment are summarized as follows:



	March 31,			December 31,
	2019			2018
Private Education Loans:
Fixed-rate	$	8,025,846		$	6,759,019
Variable-rate	13,765,776			13,745,446
Total Private Education Loans, gross	21,791,622			20,504,465
Deferred origination costs and unamortized premium/(discount)	70,858			68,321
Allowance for loan losses	(285,946		)	(277,943		)
Total Private Education Loans, net	21,576,534			20,294,843

FFELP Loans	828,640			846,487
Deferred origination costs and unamortized premium/(discount)	2,323			2,379
Allowance for loan losses	(1,760		)	(977		)
Total FFELP Loans, net	829,203			847,889

Personal Loans (fixed-rate)	1,162,874			1,190,091
Deferred origination costs and unamortized premium/(discount)	394			297
Allowance for loan losses	(70,619		)	(62,201		)
Total Personal Loans, net	1,092,649			1,128,187

Loans held for investment, net	$	23,498,386		$	22,270,919

The estimated weighted average life of education loans in our portfolio was approximately 5.4 years at both March 31, 2019 and December 31, 2018, respectively.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)



2.	Loans Held for Investment (Continued)

The average balance and the respective weighted average interest rates of loans in our portfolio are summarized as follows:


	Three Months Ended								Three Months Ended
	September 30,								March 31,
	2017				2016				2019				2018
	Average Balance		Weighted Average Interest Rate		Average Balance		Weighted Average Interest Rate		Average Balance		Weighted Average Interest Rate		Average Balance		Weighted Average Interest Rate
Private Education Loans	$	16,228,751	8.50	%	$	12,881,890	8.00	%	$	21,732,826	9.50	%	$	18,659,717	8.84	%
FFELP Loans	960,185		4.02		1,049,803		3.52		837,950		4.94		919,717		4.25
Personal Loans	86,441		9.66		—		—		1,176,466		11.81		528,644		10.64
Total portfolio	$	17,275,377			$	13,931,693			$	23,747,242			$	20,108,078

Nine Months Ended
September 30,
2017 2016
Average Balance Weighted Average Interest Rate Average Balance Weighted Average Interest Rate
Private Education Loans $ 15,791,557
8.37 % $ 12,307,932
8.00 %
FFELP Loans 981,106
3.86
1,076,394
3.48
Personal Loans 61,263
9.44
—
—
Total portfolio $ 16,833,926
$ 13,384,326

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

3. Allowance for Loan Losses

Our provision for ~~loan~~credit losses represents the periodic expense of maintaining an allowance sufficient to absorb incurred probable losses in the held-for-investment loan portfolios. The evaluation of the allowance for loan losses is inherently subjective, as it requires material estimates that may be susceptible to significant changes. We believe the allowance for loan losses is appropriate to cover probable losses incurred in the loan portfolios. ~~We began acquiring Personal Loans in the fourth quarter of 2016.~~

Allowance for Loan Losses Metrics


	Allowance for Loan Losses												Allowance for Loan Losses
	Three Months Ended September 30, 2017												Three Months Ended March 31, 2019
	FFELP Loans			Private Education Loans			Personal Loans			Total			FFELP Loans			Private Education Loans			Personal Loans			Total
Allowance for Loan Losses
Beginning balance	$	1,606		$	205,024		$	818		$	207,448		$	977		$	277,943		$	62,201		$	341,121
Total provision	(73		)	53,120			800			53,847			1,017			41,883			22,760			65,660
Net charge-offs:
Charge-offs	(181		)	(34,280		)	(220		)	(34,681		)	(234		)	(39,577		)	(15,251		)	(55,062		)
Recoveries	—			4,560			2			4,562			—			5,697			909			6,606
Net charge-offs	(181		)	(29,720		)	(218		)	(30,119		)	(234		)	(33,880		)	(14,342		)	(48,456		)
Loan sales⁽¹⁾	—			(1,257		)	—			(1,257		)
Ending Balance	$	1,352		$	227,167		$	1,400		$	229,919		$	1,760		$	285,946		$	70,619		$	358,325
Allowance:
Ending balance: individually evaluated for impairment	$	—		$	100,999		$	—		$	100,999		$	—		$	132,442		$	—		$	132,442
Ending balance: collectively evaluated for impairment	$	1,352		$	126,168		$	1,400		$	128,920		$	1,760		$	153,504		$	70,619		$	225,883
Loans:
Ending balance: individually evaluated for impairment	$	—		$	942,561		$	—		$	942,561		$	—		$	1,327,668		$	—		$	1,327,668
Ending balance: collectively evaluated for impairment	$	949,180		$	16,190,346		$	132,100		$	17,271,626		$	828,640		$	20,463,954		$	1,162,874		$	22,455,468
Net charge-offs as a percentage of average loans in repayment (annualized)⁽²⁾	0.10		%	1.08		%	0.96		%
Net charge-offs as a percentage of average loans in repayment (annualized)⁽¹⁾													0.14		%	0.89		%	4.88		%
Allowance as a percentage of the ending total loan balance	0.14		%	1.33		%	1.06		%				0.21		%	1.31		%	6.07		%
Allowance as a percentage of the ending loans in repayment⁽²⁾	0.20		%	1.99		%	1.06		%
Allowance as a percentage of the ending loans in repayment⁽¹⁾													0.27		%	1.87		%	6.07		%
Allowance coverage of net charge-offs (annualized)	1.87			1.91			1.60						1.88			2.11			1.23
Ending total loans, gross	$	949,180		$	17,132,907		$	132,100					$	828,640		$	21,791,622		$	1,162,874
Average loans in repayment⁽²⁾	$	734,613		$	10,971,028		$	90,850
Ending loans in repayment⁽²⁾	$	690,849		$	11,406,581		$	132,100
Average loans in repayment⁽¹⁾													$	650,196		$	15,165,072		$	1,175,356
Ending loans in repayment⁽¹⁾													$	641,658		$	15,310,560		$	1,162,874

____________

⁽¹⁾ Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)



3.	Allowance for Loan Losses (Continued)



	Allowance for Loan Losses
	Three Months Ended March 31, 2018
	FFELP Loans			Private Education Loans			Personal Loans			Total
Allowance for Loan Losses
Beginning balance	$	1,132		$	243,715		$	6,628		$	251,475
Total provision	231			41,870			13,448			55,549
Net charge-offs:
Charge-offs	(250		)	(37,353		)	(1,200		)	(38,803		)
Recoveries	—			5,087			31			5,118
Net charge-offs	(250		)	(32,266		)	(1,169		)	(33,685		)
Loan sales⁽¹⁾	—			(1,216		)	—			(1,216		)
Ending Balance	$	1,113		$	252,103		$	18,907		$	272,123
Allowance:
Ending balance: individually evaluated for impairment	$	—		$	101,824		$	—		$	101,824
Ending balance: collectively evaluated for impairment	$	1,113		$	150,279		$	18,907		$	170,299
Loans:
Ending balance: individually evaluated for impairment	$	—		$	1,043,103		$	—		$	1,043,103
Ending balance: collectively evaluated for impairment	$	907,842		$	17,750,909		$	675,656		$	19,334,407
Net charge-offs as a percentage of average loans in repayment (annualized)⁽²⁾	0.14		%	1.01		%	0.88		%
Allowance as a percentage of the ending total loan balance	0.12		%	1.34		%	2.80		%
Allowance as a percentage of the ending loans in repayment⁽²⁾	0.16		%	1.95		%	2.80		%
Allowance coverage of net charge-offs (annualized)	1.11			1.95			4.04
Ending total loans, gross	$	907,842		$	18,794,012		$	675,656
Average loans in repayment⁽²⁾	$	718,311		$	12,747,929		$	531,889
Ending loans in repayment⁽²⁾	$	702,965		$	12,958,742		$	675,656

____________

⁽¹⁾ Represents fair value adjustments on loans sold.

⁽²⁾ Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period.

~~SLM CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Dollars in thousands, unless otherwise noted)~~



3.	~~Allowance for Loan Losses (Continued)~~

Allowance for Loan Losses
Three Months Ended September 30, 2016
FFELP Loans
Private Education
Loans
Total
Allowance for Loan Losses
Beginning balance $ 2,297
$ 142,628
$ 144,925
Total provision 268
40,502
40,770
Net charge-offs:
Charge-offs (356 ) (22,072 ) (22,428 )
Recoveries —
2,973
2,973
Net charge-offs (356 ) (19,099 ) (19,455 )
Loan sales⁽¹⁾
—
(1,401 ) (1,401 )
Ending Balance $ 2,209
$ 162,630
$ 164,839
Allowance:
Ending balance: individually evaluated for impairment $ —
$ 77,521
$ 77,521
Ending balance: collectively evaluated for impairment $ 2,209
$ 85,109
$ 87,318
Loans:
Ending balance: individually evaluated for impairment $ —
$ 503,632
$ 503,632
Ending balance: collectively evaluated for impairment $ 1,033,929
$ 13,344,630
$ 14,378,559
Net charge-offs as a percentage of average loans in repayment (annualized)⁽²⁾
0.18 % 0.91 %
Allowance as a percentage of the ending total loan balance 0.21 % 1.17 %
Allowance as a percentage of the ending loans in repayment⁽²⁾
0.28 % 1.83 %
Allowance coverage of net charge-offs (annualized) 1.55
2.13

Ending total loans, gross $ 1,033,929
$ 13,848,262

Average loans in repayment⁽²⁾
$ 791,296
$ 8,420,625

Ending loans in repayment⁽²⁾
$ 795,665
$ 8,905,812

~~____________~~

⁽¹⁾ ~~Represents fair value adjustments on loans sold.~~

~~SLM CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Dollars in thousands, unless otherwise noted)~~



3.	~~Allowance for Loan Losses (Continued)~~

Allowance for Loan Losses
Nine Months Ended September 30, 2017

FFELP
Loans

Private
Education
Loans

Personal
Loans
Total
Allowance for Loan Losses
Beginning balance $ 2,171
$ 182,472
$ 58
$ 184,701
Total provision (161 ) 129,105
1,580
130,524
Net charge-offs:
Charge-offs (658 ) (93,235 ) (240 ) (94,133 )
Recoveries —
12,216
2
12,218
Net charge-offs (658 ) (81,019 ) (238 ) (81,915 )
Loan sales⁽¹⁾
—
(3,391 ) —
(3,391 )
Ending Balance $ 1,352
$ 227,167
$ 1,400
$ 229,919
Allowance:
Ending balance: individually evaluated for impairment $ —
$ 100,999
$ —
$ 100,999
Ending balance: collectively evaluated for impairment $ 1,352
$ 126,168
$ 1,400
$ 128,920
Loans:
Ending balance: individually evaluated for impairment $ —
$ 942,561
$ —
$ 942,561
Ending balance: collectively evaluated for impairment $ 949,180
$ 16,190,346
$ 132,100
$ 17,271,626
Net charge-offs as a percentage of average loans in repayment (annualized)⁽²⁾
0.12 % 1.02 % 0.51 %
Allowance as a percentage of the ending total loan balance 0.14 % 1.33 % 1.06 %
Allowance as a percentage of the ending loans in repayment⁽²⁾
0.20 % 1.99 % 1.06 %
Allowance coverage of net charge-offs (annualized) 1.54
2.10
4.41

Ending total loans, gross $ 949,180
$ 17,132,907
$ 132,100

Average loans in repayment⁽²⁾
$ 752,990
$ 10,589,725
$ 62,747

Ending loans in repayment⁽²⁾
$ 690,849
$ 11,406,581
$ 132,100

~~____________~~

⁽¹⁾ ~~Represents fair value adjustments on loans sold.~~

~~SLM CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Dollars in thousands, unless otherwise noted)~~



3.	~~Allowance for Loan Losses (Continued)~~

Allowance for Loan Losses
Nine Months Ended September 30, 2016
FFELP Loans
Private Education
Loans
Total
Allowance for Loan Losses
Beginning balance $ 3,691
$ 108,816
$ 112,507
Total provision (396 ) 116,703
116,307
Net charge-offs:
Charge-offs (1,086 ) (64,979 ) (66,065 )
Recoveries —
7,098
7,098
Net charge-offs (1,086 ) (57,881 ) (58,967 )
Loan sales⁽¹⁾
—
(5,008 ) (5,008 )
Ending Balance $ 2,209
$ 162,630
$ 164,839
Allowance:
Ending balance: individually evaluated for impairment $ —
$ 77,521
$ 77,521
Ending balance: collectively evaluated for impairment $ 2,209
$ 85,109
$ 87,318
Loans:
Ending balance: individually evaluated for impairment $ —
$ 503,632
$ 503,632
Ending balance: collectively evaluated for impairment $ 1,033,929
$ 13,344,630
$ 14,378,559
Net charge-offs as a percentage of average loans in repayment (annualized)⁽²⁾
0.18 % 0.97 %
Allowance as a percentage of the ending total loan balance 0.21 % 1.17 %
Allowance as a percentage of the ending loans in repayment⁽²⁾
0.28 % 1.83 %
Allowance coverage of net charge-offs (annualized) 1.53
2.11

Ending total loans, gross $ 1,033,929
$ 13,848,262

Average loans in repayment⁽²⁾
$ 795,452
$ 7,952,469

Ending loans in repayment⁽²⁾
$ 795,665
$ 8,905,812

~~____________~~

⁽¹⁾ ~~Represents fair value adjustments on loans sold.~~

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)



3.	Allowance for Loan Losses (Continued)

Troubled Debt Restructurings (“TDRs”)

All of our loans are collectively assessed for impairment, except for loans classified as TDRs (where we conduct individual assessments of impairment). We modify the terms of loans for certain borrowers when we believe such modifications may increase the ~~ability and willingness~~collectability of ~~a borrower to make payments and thus increase~~ the ~~ultimate overall amount collected on a~~ loan. These modifications generally take the form of a forbearance, a temporary interest rate reduction or an extended repayment plan. The majority of our loans that are considered TDRs involve a temporary forbearance of payments and do not change the contractual interest rate of the loan. When we give a borrower facing financial difficulty an interest rate reduction, we temporarily reduce the rate to 2.0 percent for a two-year period and, in the vast majority of cases, permanently extend the final maturity of the loan. The combination of these two loan term changes helps reduce the monthly payment due from the borrower and increases the likelihood the borrower will remain current during the interest rate modification period as well as when the loan returns to its original contractual interest rate. At March 31, 2019 and March 31, 2018, 7.2 percent and 5.7 percent, respectively, of our loans then currently in full principal and interest repayment status were subject to interest rate reductions made under our rate modification program. Once a loan qualifies for TDR status, it remains a TDR for allowance purposes for the remainder of its life. As of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, approximately 6955 percent and 57 percent, respectively, of TDRs were classified as such due to their forbearance status. For additional information, see Note 2, “Significant Accounting Policies —Allowance for Loan Losses,” and Note 6, “Allowance for Loan Losses” in our ~~2016~~2018 Form 10-K.

Within the Private Education Loan portfolio, loans greater than 90 days past due are considered to be nonperforming. FFELP Loans are at least 97 percent guaranteed as to their principal and accrued interest by the federal government in the event of default and, therefore, we do not deem FFELP Loans as nonperforming from a credit risk perspective at any point in their life cycle prior to claim payment and continue to accrue interest on those loans through the date of claim.

At ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, all of our TDR loans had a related allowance recorded. The following table provides the recorded investment, unpaid principal balance and related allowance for our TDR loans.


	Recorded Investment		Unpaid Principal Balance		Allowance		Recorded Investment		Unpaid Principal Balance		Allowance

September 30, 2017
March 31, 2019
TDR Loans	$	957,605	$	942,561	$	100,999	$	1,352,673	$	1,327,668	$	132,442

December 31, 2016
December 31, 2018
TDR Loans	$	620,991	$	612,606	$	86,930	$	1,280,713	$	1,257,856	$	120,110

The following table provides the average recorded investment and interest income recognized for our TDR loans.

Three Months Ended
September 30,
2017 2016

Average
Recorded
Investment

Interest
Income
Recognized

Average
Recorded
Investment

Interest
Income
Recognized

TDR Loans $ 877,011
$ 16,517
$ 454,395
$ 8,116



	Three Months Ended March 31,
	2019				2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized

TDR Loans	$	1,312,729	$	21,566	$	1,032,232	$	17,847

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)



3.	Allowance for Loan Losses (Continued)

Nine Months Ended
September 30,
2017 2016

Average
Recorded
Investment

Interest
Income
Recognized

Average
Recorded
Investment

Interest
Income
Recognized

TDR Loans $ 772,362
$ 43,084
$ 373,747
$ 20,396

The following table provides information regarding the loan status and aging of TDR loans.


	September 30,				December 31,				March 31,				December 31,
	2017				2016				2019				2018
	Balance		%		Balance		%		Balance		%		Balance		%
TDR loans in in-school/grace/deferment⁽¹⁾	$	49,287			$	24,185			$	77,327			$	69,212
TDR loans in forbearance⁽²⁾	118,034				71,851				79,410				69,796
TDR loans in repayment⁽³⁾ and percentage of each status:
Loans current	692,282		89.3	%	462,187		89.5	%	1,044,676		89.2	%	994,411		88.9	%
Loans delinquent 31-60 days⁽⁴⁾	43,362		5.6		28,452		5.5		61,698		5.3		63,074		5.6
Loans delinquent 61-90 days⁽⁴⁾	25,268		3.3		17,326		3.4		39,349		3.4		36,804		3.3
Loans delinquent greater than 90 days⁽⁴⁾	14,328		1.8		8,605		1.6		25,208		2.1		24,559		2.2
Total TDR loans in repayment	775,240		100.0	%	516,570		100.0	%	1,170,931		100.0	%	1,118,848		100.0	%
Total TDR loans, gross	$	942,561			$	612,606			$	1,327,668			$	1,257,856

_____


⁽¹⁾	Deferment includes customers who have returned to school or are engaged in other permitted educational activities and are not yet required to make payments on the loans (e.g., residency periods for medical students or a grace period for bar exam preparation).


⁽²⁾	Loans for customers who have requested extension of grace period generally during employment transition or who have temporarily ceased making full payments due to hardship or other factors, consistent with established loan program servicing policies and procedures.


⁽³⁾	Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period.


⁽⁴⁾	The period of delinquency is based on the number of days scheduled payments are contractually past due.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)



3.	Allowance for Loan Losses (Continued)

The following table provides the amount of modified loans (which include forbearance and reductions in interest rates) that became TDRs in the periods presented. Additionally, for the periods presented, the table summarizes charge-offs occurring in the TDR portfolio, as well as TDRs for which a payment default occurred in the relevant period presented and within 12 months of the loan first being designated as a TDR. We define payment default as ~~more than~~ 60 days past due for this disclosure.

Three Months Ended
September 30, 2017 Three Months Ended
September 30, 2016

Modified Loans⁽¹⁾
Charge-offs
Payment-
Default

Modified Loans⁽¹⁾
Charge-offs
Payment-
Default

TDR Loans $ 168,645
$ 12,227
$ 28,275
$ 116,419
$ 5,925
$ 23,326



	Three Months Ended March 31, 2019						Three Months Ended March 31, 2018
	Modified Loans⁽¹⁾		Charge-offs		Payment- Default		Modified Loans⁽¹⁾		Charge-offs		Payment- Default

TDR Loans	$	111,208	$	16,005	$	25,462	$	84,174	$	15,460	$	29,757

Nine Months Ended
September 30, 2017 Nine Months Ended
September 30, 2016

Modified Loans⁽¹⁾
Charge-offs
Payment-
Default

Modified Loans⁽¹⁾
Charge-offs
Payment-
Default

TDR Loans $ 415,341
$ 34,965
$ 77,248
$ 270,266
$ 16,357
$ 70,401

_____


⁽¹⁾	Represents the principal balance of loans that have been modified during the period and resulted in a TDR.

~~SLM CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Dollars in thousands, unless otherwise noted)~~



3.	~~Allowance for~~Private Education Loan ~~Losses (Continued)~~

Key Credit Quality Indicators

FFELP Loans are at least 97 percent insured and guaranteed as to their principal and accrued interest in the event of default; therefore, there are no key credit quality indicators associated with FFELP Loans.

For Private Education Loans, the key credit quality indicators are FICO scores, the existence of a cosigner, the loan status and loan seasoning. The FICO scores are assessed at original approval and periodically refreshed/updated through the loan’s term. The following table highlights the gross principal balance of our Private Education Loan portfolio stratified by key credit quality indicators.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)



3.	Allowance for Loan Losses (Continued)

Private Education Loans
Credit Quality Indicators
September 30, 2017 December 31, 2016
Credit Quality Indicators:
Balance⁽¹⁾
% of Balance
Balance⁽¹⁾
% of Balance

Cosigners:
With cosigner $ 15,395,579
90 % $ 12,816,512
90 %
Without cosigner 1,737,328
10
1,435,163
10
Total $ 17,132,907
100 % $ 14,251,675
100 %

FICO at Original Approval⁽²⁾:

Less than 670 $ 1,119,376
6 % $ 920,132
6 %
670-699 2,532,389
15
2,092,722
15
700-749 5,605,519
33
4,639,958
33
Greater than or equal to 750 7,875,623
46
6,598,863
46
Total $ 17,132,907
100 % $ 14,251,675
100 %

Seasoning⁽³⁾:

1-12 payments $ 4,758,249
28 % $ 3,737,110
26 %
13-24 payments 3,017,316
18
2,841,107
20
25-36 payments 2,033,608
12
1,839,764
13
37-48 payments 1,105,979
6
917,633
7
More than 48 payments 865,084
5
726,106
5
Not yet in repayment 5,352,671
31
4,189,955
29
Total $ 17,132,907
100 % $ 14,251,675
100 %



	Private Education Loans
	Credit Quality Indicators
	March 31, 2019				December 31, 2018
Credit Quality Indicators:	Balance⁽¹⁾		% of Balance		Balance⁽¹⁾		% of Balance

Cosigners:
With cosigner	$	19,531,175	90	%	$	18,378,398	90	%
Without cosigner	2,260,447		10		2,126,067		10
Total	$	21,791,622	100	%	$	20,504,465	100	%

FICO at Original Approval⁽²⁾:
Less than 670	$	1,517,014	7	%	$	1,409,789	7	%
670-699	3,306,017		15		3,106,983		15
700-749	7,186,454		33		6,759,721		33
Greater than or equal to 750	9,782,137		45		9,227,972		45
Total	$	21,791,622	100	%	$	20,504,465	100	%

FICO-Refreshed⁽²⁾⁽³⁾:
Less than 670	$	2,720,777	12	%	$	2,416,979	12	%
670-699	2,721,243		13		2,504,467		12
700-749	6,462,874		30		6,144,489		30
Greater than or equal to 750	9,886,728		45		9,438,530		46
Total	$	21,791,622	100	%	$	20,504,465	100	%

Seasoning⁽⁴⁾:
1-12 payments	$	5,451,167	25	%	$	4,969,334	24	%
13-24 payments	3,543,836		16		3,481,235		17
25-36 payments	2,729,369		13		2,741,954		13
37-48 payments	2,017,498		9		1,990,049		10
More than 48 payments	2,178,899		10		2,061,448		10
Not yet in repayment	5,870,853		27		5,260,445		26
Total	$	21,791,622	100	%	$	20,504,465	100	%

______


⁽¹⁾	Balance represents gross Private Education Loans.


⁽²⁾	Represents the higher credit score of the cosigner or the borrower.


⁽³⁾	Represents the FICO score updated as of the first-quarter 2019.


⁽⁴⁾	Number of months in active repayment (whether interest only payment, fixed payment, or full principal and interest payment status) for which a scheduled payment was due.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)



3.	Allowance for Loan Losses (Continued)

Private Education Loan Delinquencies

~~Key Credit Quality Indicators~~

For Personal Loans, the key credit quality indicators are FICO scores and loan seasoning. The FICO scores are assessed at original approval and periodically refreshed/updated through the loan’s term. The following table highlights the gross principal balance of our Personal Loan portfolio stratified by key credit quality indicators.

Personal Loans
Credit Quality Indicators
September 30, 2017 December 31, 2016
Credit Quality Indicators:
Balance⁽¹⁾
% of Balance
Balance⁽¹⁾
% of Balance

FICO at Original Approval:
Less than 670 $ 10,910
8 % $ 1,189
9 %
670-699 38,330
29
3,139
24
700-749 60,601
46
5,678
44
Greater than or equal to 750 22,259
17
2,888
23
Total $ 132,100
100 % $ 12,894
100 %

Seasoning⁽²⁾:

0-12 payments $ 132,100
100 % $ 12,894
100 %
13-24 payments —
—
—
—
25-36 payments —
—
—
—
37-48 payments —
—
—
—
More than 48 payments —
—
—
—
Total $ 132,100
100 % $ 12,894
100 %


⁽¹⁾	~~Balance represents gross Personal Loans.~~


⁽²⁾	~~Number of months in active repayment for which a scheduled payment was due.~~

~~SLM CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Dollars in thousands, unless otherwise noted)~~



3.	~~Allowance for Loan Losses (Continued)~~

The following table provides information regarding the loan status of our Private Education Loans. Loans in repayment include loans making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period.


	Private Education Loans										Private Education Loans
	September 30,					December 31,					March 31,					December 31,
	2017					2016					2019					2018
	Balance			%		Balance			%		Balance			%		Balance			%
Loans in-school/grace/deferment⁽¹⁾	$	5,352,671				$	4,189,955				$	5,870,853				$	5,260,445
Loans in forbearance⁽²⁾	373,655					351,962					610,209					577,164
Loans in repayment and percentage of each status:
Loans current	11,115,697			97.4	%	9,509,394			97.9	%	14,927,591			97.5	%	14,289,705			97.4	%
Loans delinquent 31-60 days⁽³⁾	175,897			1.6		124,773			1.3		216,295			1.4		231,216			1.6
Loans delinquent 61-90 days⁽³⁾	82,095			0.7		51,423			0.5		104,199			0.7		95,105			0.7
Loans delinquent greater than 90 days⁽³⁾	32,892			0.3		24,168			0.3		62,475			0.4		50,830			0.3
Total Private Education Loans in repayment	11,406,581			100.0	%	9,709,758			100.0	%	15,310,560			100.0	%	14,666,856			100.0	%
Total Private Education Loans, gross	17,132,907					14,251,675					21,791,622					20,504,465
Private Education Loans deferred origination costs	53,501					44,206
Private Education Loans deferred origination costs and unamortized premium/(discount)											70,858					68,321
Total Private Education Loans	17,186,408					14,295,881					21,862,480					20,572,786
Private Education Loans allowance for losses	(227,167		)			(182,472		)			(285,946		)			(277,943		)
Private Education Loans, net	$	16,959,241				$	14,113,409				$	21,576,534				$	20,294,843
Percentage of Private Education Loans in repayment				66.6	%				68.1	%				70.3	%				71.5	%
Delinquencies as a percentage of Private Education Loans in repayment				2.6	%				2.1	%				2.5	%				2.6	%
Loans in forbearance as a percentage of Private Education Loans in repayment and forbearance				3.2	%				3.5	%				3.8	%				3.8	%

_______


⁽¹⁾	Deferment includes customers who have returned to school or are engaged in other permitted educational activities and are not yet required to make payments on the loans (e.g., residency periods for medical students or a grace period for bar exam preparation).


⁽²⁾	Loans for customers who have requested extension of grace period generally during employment transition or who have temporarily ceased making full payments due to hardship or other factors, consistent with established loan program servicing policies and procedures.


⁽³⁾	The period of delinquency is based on the number of days scheduled payments are contractually past due.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)



3.	Allowance for Loan Losses (Continued)

Personal Loan Key Credit Quality Indicators

For Personal Loans, the key credit quality indicators are FICO scores, loan seasoning and loan status. The FICO scores are assessed at original approval and periodically refreshed/updated through the loan’s term. The following table highlights the gross principal balance of our Personal Loan portfolio stratified by key credit quality indicators.



	Personal Loans
	Credit Quality Indicators
	March 31, 2019				December 31, 2018
Credit Quality Indicators:	Balance⁽¹⁾		% of Balance		Balance⁽¹⁾		% of Balance

FICO at Original Approval:
Less than 670	$	71,340	6	%	$	77,702	7	%
670-699	324,934		28		339,053		28
700-749	551,904		47		554,700		47
Greater than or equal to 750	214,696		19		218,636		18
Total	$	1,162,874	100	%	$	1,190,091	100	%

Seasoning⁽²⁾:
0-12 payments	$	832,583	72	%	$	1,008,758	85	%
13-24 payments	320,058		27		181,333		15
25-36 payments	10,233		1		—		—
37-48 payments	—		—		—		—
More than 48 payments	—		—		—		—
Total	$	1,162,874	100	%	$	1,190,091	100	%

______


⁽¹⁾	Balance represents gross Personal Loans.


⁽²⁾	Number of months in active repayment for which a scheduled payment was due.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)



3.	Allowance for Loan Losses (Continued)

Personal Loan Delinquencies

The following table provides information regarding the loan status of our Personal Loans.



	Personal Loans
	March 31,					December 31,
	2019					2018
	Balance			%		Balance			%
Loans in repayment and percentage of each status:
Loans current	$	1,141,664		98.2	%	$	1,172,776		98.5	%
Loans delinquent 31-60 days⁽¹⁾	9,224			0.8		6,722			0.6
Loans delinquent 61-90 days⁽¹⁾	5,991			0.5		5,416			0.5
Loans delinquent greater than 90 days⁽¹⁾	5,995			0.5		5,177			0.4
Total Personal Loans in repayment	1,162,874			100.0	%	1,190,091			100.0	%
Total Personal Loans, gross	1,162,874					1,190,091
Personal Loans deferred origination costs and unamortized premium/(discount)	394					297
Total Personal Loans	1,163,268					1,190,388
Personal Loans allowance for losses	(70,619		)			(62,201		)
Personal Loans, net	$	1,092,649				$	1,128,187
Delinquencies as a percentage of Personal Loans in repayment				1.8	%				1.5	%

_______


⁽¹⁾	The period of delinquency is based on the number of days scheduled payments are contractually past due.

Accrued Interest Receivable

The following table provides information regarding accrued interest receivable on our Private Education Loans. The table also discloses the amount of accrued interest on loans greater than 90 days past due as compared to our allowance for uncollectible interest. The allowance for uncollectible interest exceeds the amount of accrued interest on our 90 days past due Private Education Loan portfolio for all periods presented.

Private Education Loan
Accrued Interest Receivable
Total Interest Receivable Greater Than 90 Days Past Due Allowance for Uncollectible Interest

September 30, 2017 $ 1,008,214
$ 1,216
$ 5,556
December 31, 2016 $ 739,847
$ 845
$ 2,898



	Private Education Loans
	Accrued Interest Receivable
	Total Interest Receivable		Greater Than 90 Days Past Due		Allowance for Uncollectible Interest

March 31, 2019	$	1,276,825	$	2,374	$	4,687
December 31, 2018	$	1,168,823	$	1,920	$	6,322

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

4. Deposits

The following table summarizes total deposits at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016.~~2018.


	September 30,		December 31,		March 31,		December 31,
	2017		2016		2019		2018
Deposits - interest bearing	$	15,033,524	$	13,434,990	$	19,662,290	$	18,942,082
Deposits - non-interest bearing	528		677		1,696		1,076
Total deposits	$	15,034,052	$	13,435,667	$	19,663,986	$	18,943,158

Our total deposits of $19.7 billion were comprised of $10.6 billion in brokered deposits and $9.1 billion in retail and other deposits at March 31, 2019, compared to total deposits of $18.9 billion, which were comprised of $10.3 billion in brokered deposits and $8.6 billion in retail and other deposits, at December 31, 2018.

Interest bearing deposits as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016~~2018 consisted of retail and brokered non-maturity savings deposits, retail and brokered non-maturity money market deposits (“MMDAs”) and ~~brokered~~retail and ~~retail~~brokered certificates of deposit (“CDs”). Interest bearing deposits include deposits from Educational 529 and Health Savings plans that diversify our funding sources and ~~add~~additional deposits we consider to be core. These and other large omnibus accounts, aggregating the deposits of many individual depositors, represented ~~$5.5~~$6.2 billion of our deposit total as of ~~September 30, 2017.~~March 31, 2019, compared with $5.9 billion at December 31, 2018.

Some of our deposit products are serviced by third-party providers. Placement fees associated with the brokered CDs are amortized into interest expense using the effective interest rate method. We recognized placement fee expense of ~~$2.5~~$4 million and ~~$2.6~~$3 million in the three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016, respectively, and placement fee expense of $6.8 million and $7.8 million in the nine months ended September 30, 2017 and 2016,~~2018, respectively. Fees paid to third-party brokers related to brokered CDs were ~~$4.4~~$1 million and ~~$1.1~~$7 million for the three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016, respectively, and fees paid to third-party brokers related to brokered CDs were $9.7 million and $4.0 million for the nine months ended September 30, 2017 and 2016,~~2018, respectively.

Interest bearing deposits at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016~~2018 are summarized as follows:


	September 30, 2017				December 31, 2016				March 31, 2019				December 31, 2018
	Amount		Qtr.-End Weighted Average Stated Rate⁽¹⁾		Amount		Year-End Weighted Average Stated Rate⁽¹⁾		Amount		Qtr.-End Weighted Average Stated Rate⁽¹⁾		Amount		Year-End Weighted Average Stated Rate⁽¹⁾

Money market	$	7,656,169	1.72	%	$	7,129,404	1.22	%	$	8,974,104	2.59	%	$	8,687,766	2.46	%
Savings	824,308		1.09		834,521		0.84		714,518		2.03		702,342		2.00
Certificates of deposit	6,553,047		1.83		5,471,065		1.41		9,973,668		2.76		9,551,974		2.74
Deposits - interest bearing	$	15,033,524			$	13,434,990			$	19,662,290			$	18,942,082

____________

⁽¹⁾ Includes the effect of interest rate swaps in effective hedge relationships.

As of ~~September 30, 2017~~March 31, 2019, and December 31, ~~2016,~~2018, there were ~~$422.4~~$638 million and ~~$304.5~~$523 million, respectively, of deposits exceeding Federal Deposit Insurance Corporation (“FDIC”) insurance limits. Accrued interest on deposits was ~~$28.2~~$57 million and ~~$18.9~~$53 million at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, respectively.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

5. Borrowings

Outstanding borrowings consist of unsecured debt and secured borrowings issued through our term asset-backed securitization (“ABS”) program and our Private Education Loan multi-lender secured borrowing facility (the “Secured Borrowing Facility,” which was previously called the asset-backed commercial paper ~~(“ABCP”) funding~~ facility ~~(the “ABCP Facility”)~~or ABCP Facility). The following table summarizes our borrowings at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016.~~2018.


	September 30, 2017						December 31, 2016						March 31, 2019						December 31, 2018
	Short-Term		Long-Term		Total		Short-Term		Long-Term		Total		Short-Term		Long-Term		Total		Short-Term		Long-Term		Total
Unsecured borrowings:
Unsecured debt	$	—	$	196,337	$	196,337	$	—	$	—	$	—
Unsecured debt (fixed-rate)													$	—	$	197,551	$	197,551	$	—	$	197,348	$	197,348
Total unsecured borrowings	—		196,337		196,337		—		—		—		—		197,551		197,551		—		197,348		197,348
Secured borrowings:
Private Education Loan term securitizations	$	—	$	2,542,325	$	2,542,325	$	—	$	2,167,979	$	2,167,979
ABCP Facility	300,000		—		300,000		—		—		—
Private Education Loan term securitizations:
Fixed-rate													—		2,472,933		2,472,933		—		2,284,347		2,284,347
Variable-rate													—		1,805,922		1,805,922		—		1,802,609		1,802,609
Total Private Education Loan term securitizations													—		4,278,855		4,278,855		—		4,086,956		4,086,956
Secured Borrowing Facility													—		—		—		—		—		—
Total secured borrowings	300,000		2,542,325		2,842,325		—		2,167,979		2,167,979		—		4,278,855		4,278,855		—		4,086,956		4,086,956
Total	$	300,000	$	2,738,662	$	3,038,662	$	—	$	2,167,979	$	2,167,979	$	—	$	4,476,406	$	4,476,406	$	—	$	4,284,304	$	4,284,304

Short-term Borrowings

~~Asset-Backed Commercial Paper Funding~~Secured Borrowing Facility

On February ~~25, 2016 and February 22, 2017,~~20, 2019, we amended and extended the maturity of our ~~ABCP Facility. The amended ABCP Facility is a~~ $750 million ~~facility in which we no longer hold a participation interest. As a result, the full $750 million is available for us to draw.~~Secured Borrowing Facility. We hold 100 percent of the residual interest in the ~~ABCP~~Secured Borrowing Facility trust. Under the amended ~~ABCP~~Secured Borrowing Facility, we incur financing costs of between 0.35 percent and 0.45 percent on unused borrowing capacity and approximately ~~3‑month~~3-month LIBOR plus ~~0.90~~0.85 percent on outstandings. The amended ~~ABCP~~Secured Borrowing Facility extends the revolving period, during which we may borrow, repay and reborrow funds, until February ~~22, 2018.~~19, 2020. The scheduled amortization period, during which amounts outstanding under the ~~ABCP~~Secured Borrowing Facility must be repaid, ends on February ~~22, 2019~~19, 2021 (or earlier, if certain material adverse events occur). At ~~September 30, 2017,~~both March 31, 2019 and December 31, 2018, there were ~~$300 million~~no borrowings outstanding under the ~~ABCP~~Secured Borrowing Facility. ~~We expect to amend and extend the ABCP Facility on an annual basis.~~

Long-term Borrowings

Unsecured Debt

27On April 5, 2017, we issued an unsecured debt offering of $200 million of 5.125 percent Senior Notes due April 5, 2022 at par. At March 31, 2019, the outstanding balance was $198 million.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)



5.	Borrowings (Continued)

~~Long-term Borrowings~~

~~Unsecured Debt~~

~~On April 5, 2017, we issued an unsecured debt offering of $200 million of 5.125 percent Senior Notes due April 5, 2022 at par.~~

Secured Financings

On ~~February 8, 2017,~~March 13, 2019, we executed our ~~$772~~$453 million SMB Private Education Loan Trust ~~2017-A~~2019-A term ABS transaction, which was accounted for as a secured financing. We sold ~~$772~~$453 million of notes to third parties and retained a 100 percent interest in the residual certificates issued in the securitization, raising approximately ~~$768~~$451 million of gross proceeds. The Class A and Class B notes had a weighted average life of ~~4.27~~4.26 years and priced at a weighted average LIBOR equivalent cost of 1-month LIBOR plus ~~0.93~~0.92 percent. At ~~September 30, 2017, $749~~March 31, 2019, $462 million of our Private Education Loans were encumbered ~~as a result~~because of this transaction.

Secured Financings at Issuance

Issue Date Issued Total Issued
Weighted Average Cost of Funds⁽¹⁾

Weighted Average Life
(in years)

Private Education:
2015-B July 2015 $ 630,800
1-month LIBOR plus 1.53% 4.82
Total notes issued in 2015 $ 630,800

Total loan and accrued interest amount securitized at inception in 2015 $ 745,580

2016-A May 2016 $ 501,000
1-month LIBOR plus 1.38% 4.01
2016-B July 2016 607,000
1-month LIBOR plus 1.36% 4.01
2016-C October 2016 674,000
1-month LIBOR plus 1.15% 4.27
Total notes issued in 2016 $ 1,782,000

Total loan and accrued interest amount securitized at inception in 2016 $ 2,107,042

2017-A February 2017 $ 772,000
1-month LIBOR plus 0.93% 4.27
Total notes issued in 2017 $ 772,000

Total loan and accrued interest amount securitized at inception in 2017 $ 856,253



Issue	Date Issued	Total Issued		Weighted Average Cost of Funds⁽¹⁾	Weighted Average Life (in years)

Private Education:

2017-A	February 2017	$	772,000	1-month LIBOR plus 0.93%	4.27
2017-B	November 2017	676,000		1-month LIBOR plus 0.80%	4.07
Total notes issued in 2017		$	1,448,000

Total loan and accrued interest amount securitized at inception in 2017		$	1,606,804

2018-A	March 2018	$	670,000	1-month LIBOR plus 0.78%	4.43
2018-B	June 2018	686,500		1-month LIBOR plus 0.76%	4.40
2018-C	September 2018	544,000		1-month LIBOR plus 0.77%	4.32
Total notes issued in 2018		$	1,900,500

Total loan and accrued interest amount securitized at inception in 2018		$	2,101,644

2019-A	March 2019	453,000		1-month LIBOR plus 0.92%	4.26
Total notes issued in 2019		$	453,000

Total loan and accrued interest amount securitized at inception in 2019		$	498,087

____________

⁽¹⁾ Represents LIBOR equivalent cost of funds for floating and fixed rate bonds, excluding issuance costs.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)



5.	Borrowings (Continued)

Consolidated Funding Vehicles

We consolidate our financing entities that are VIEs as a result of our being the entities’ primary beneficiary. As a result, these financing VIEs are accounted for as secured borrowings. We consolidate the following financing VIEs as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, respectively:


	September 30, 2017														March 31, 2019
	Debt Outstanding						Carrying Amount of Assets Securing Debt Outstanding								Debt Outstanding						Carrying Amount of Assets Securing Debt Outstanding
	Short-Term		Long-Term		Total		Loans		Restricted Cash		Other Assets⁽¹⁾		Total		Short-Term		Long-Term		Total		Loans		Restricted Cash		Other Assets⁽¹⁾		Total
Secured borrowings:
Private Education Loan term securitizations	$	—	$	2,542,325	$	2,542,325	$	3,067,431	$	57,687	$	229,797	$	3,354,915	$	—	$	4,278,855	$	4,278,855	$	5,251,117	$	143,307	$	356,496	$	5,750,920
ABCP Facility	300,000		—		300,000		369,780		5,539		25,072		400,391
Secured Borrowing Facility															—		—		—		—		—		943		943
Total	$	300,000	$	2,542,325	$	2,842,325	$	3,437,211	$	63,226	$	254,869	$	3,755,306	$	—	$	4,278,855	$	4,278,855	$	5,251,117	$	143,307	$	357,439	$	5,751,863


	December 31, 2016														December 31, 2018
	Debt Outstanding						Carrying Amount of Assets Securing Debt Outstanding								Debt Outstanding						Carrying Amount of Assets Securing Debt Outstanding
	Short-Term		Long-Term		Total		Loans		Restricted Cash		Other Assets⁽¹⁾		Total		Short-Term		Long-Term		Total		Loans		Restricted Cash		Other Assets⁽¹⁾		Total
Secured borrowings:
Private Education Loan term securitizations	$	—	$	2,167,979	$	2,167,979	$	2,562,156	$	44,617	$	160,783	$	2,767,556	$	—	$	4,086,956	$	4,086,956	$	5,030,837	$	113,431	$	326,570	$	5,470,838
ABCP Facility	—		—		—		—		—		—		—
Secured Borrowing Facility															—		—		—		—		—		157		157
Total	$	—	$	2,167,979	$	2,167,979	$	2,562,156	$	44,617	$	160,783	$	2,767,556	$	—	$	4,086,956	$	4,086,956	$	5,030,837	$	113,431	$	326,727	$	5,470,995

____

(1) Other assets primarily represent accrued interest receivable.

Other Borrowing Sources

We maintain discretionary uncommitted Federal Funds lines of credit with various correspondent banks, which totaled $125 million at ~~September 30, 2017.~~March 31, 2019. The interest rate we are charged on these lines of credit is priced at Fed Funds plus a spread at the time of borrowing and is payable daily. We did not utilize these lines of credit in the three ~~or nine~~ months ended ~~September 30, 2017~~March 31, 2019 or in the year ended December 31, ~~2016.~~2018.

We established an account at the ~~Federal Reserve Bank (“FRB”)~~FRB to meet eligibility requirements for access to the Primary Credit borrowing facility at the ~~FRB’s~~Federal Reserve Bank (“FRB”) Discount Window (the “Window”). The Primary Credit borrowing facility is a lending program available to depository institutions that are in generally sound financial condition. All borrowings at the Window must be fully collateralized. We can pledge ~~to the FRB~~ asset-backed and mortgage-backed securities, as well as FFELP Loans and Private Education Loans, to the FRB as collateral for borrowings at the Window. Generally, collateral value is assigned based on the estimated fair value of the pledged assets. At ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, the value of our pledged collateral at the FRB totaled ~~$2.5~~$3.3 billion and ~~$2.6~~$3.1 billion, respectively. The interest rate charged to us is the discount rate set by the FRB. We did not utilize this facility in the three ~~or nine~~ months ended ~~September 30, 2017~~March 31, 2019 or in the year ended December 31, ~~2016.~~2018.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

6. Derivative Financial Instruments

Risk Management Strategy

We maintain an overall interest rate risk management strategy that incorporates the use of derivative instruments to reduce the economic effect of interest rate changes. Our goal is to manage interest rate sensitivity by modifying the repricing frequency and underlying index characteristics of certain balance sheet assets or liabilities, so any adverse impacts related to movements in interest rates are managed within low to moderate limits. As a result of interest rate fluctuations, hedged balance sheet positions will appreciate or depreciate in market value or create variability in cash flows. Income or loss on the derivative instruments linked to the hedged item will generally offset the effect of this unrealized appreciation or depreciation or volatility in cash flows for the period the item is being hedged. We view this strategy as a prudent management of interest rate risk. Please refer to Note ~~11,~~10, “Derivative Financial Instruments” in our ~~2016~~2018 Form 10-K for a full discussion of our risk management strategy.

Although we use derivatives to reduce the risk of interest rate changes, the use of derivatives does expose us to both market and credit risk. Market risk is the chance of financial loss resulting from changes in interest rates and market liquidity. Credit risk is the risk that a counterparty will not perform its obligations under a contract and it is limited to the loss of the fair value gain in a derivative that the counterparty owes us less collateral held and plus collateral posted. When the fair value of a derivative contract less collateral held and plus collateral posted is negative, we owe the counterparty and, therefore, we have no credit risk exposure to the counterparty; however, the counterparty has exposure to us. We minimize the credit risk in derivative instruments by entering into transactions with reputable counterparties that are reviewed regularly by our Credit Department. We also maintain a policy of requiring that all derivative contracts be governed by an International Swaps and Derivatives Association, Inc. Master Agreement. Depending on the nature of the derivative transaction, bilateral collateral arrangements are required as well. When we have more than one outstanding derivative transaction with the counterparty, and there exists legally enforceable netting provisions with the counterparty (i.e., a legal right to offset receivable and payable derivative contracts), the “net” mark-to-market exposure, less collateral held and plus collateral posted, represents exposure with the counterparty. We refer to this as the “net position.” When there is a net negative exposure, we consider our exposure to the counterparty and the net position to be zero.

Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) requires all standardized derivatives, including most interest rate swaps, to be submitted for clearing to central counterparties to reduce counterparty risk. Two of the central counterparties we use are the ~~CME~~Chicago Mercantile Exchange (“CME”) and the LCH. The CME and the LCH made amendments to their respective rules that resulted in the prospective accounting treatment of certain daily variation margin payments being considered as the legal settlement of the outstanding exposure of the derivative instead of the posting of collateral. The CME rule changes, which became effective in January 2017, result in allLondon Clearing House (“LCH”). All variation margin payments on derivatives cleared through the CME ~~being~~and LCH are accounted for as legal ~~settlement, while the LCH allows the clearing member institution the option to adopt the rule changes on an individual contract or portfolio basis.~~settlement. As of ~~September 30, 2017, $5.1~~March 31, 2019, $5.6 billion notional of our derivative contracts were cleared on the CME and ~~$0.7~~$0.6 billion were cleared on the LCH. The derivative contracts cleared through the CME and LCH represent ~~85.8~~90.9 percent and ~~11.9~~9.1 percent respectively, of our total notional derivative contracts of ~~$5.9~~$6.2 billion at ~~September 30, 2017.~~March 31, 2019.

~~Under this new rule, for~~For derivatives cleared through the CME and LCH, the net gain (loss) position includes the variation margin amounts as settlement of the derivative and not collateral against the fair value of the derivative. The amount of variation margin included as settlement as of March 31, 2019 was $(33.2) million and $0.3 million for the CME and LCH, respectively. Interest income (expense) related to variation margin on derivatives that are not designated as hedging instruments or are designated as fair value relationships is recognized as a gain (loss) rather than as interest income (expense). Changes in fair value for derivatives not designated as hedging instruments will be presented as realized gains (losses).

Our LCH clearing member institution has elected not to adopt the new rule change. Therefore, there has been no change to the accounting for the derivatives cleared through the LCH, and variation margin payments required to be exchanged based on the fair value of those derivatives remain accounted for as collateral.

~~SLM CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Dollars in thousands, unless otherwise noted)~~



6.	~~Derivative Financial Instruments (Continued)~~

~~Our~~ exposure is limited to the value of the derivative contracts in a gain position less any collateral held and plus any collateral posted. When there is a net negative exposure, we consider our exposure to the counterparty to be zero. At ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, we had a net positive exposure (derivative gain positions to us, less collateral held by us and plus collateral posted with counterparties) related to derivatives of ~~$23.6~~$30 million and ~~$44.6~~$27 million, respectively.

Summary of Derivative Financial Statement Impact

The following tables summarize the fair values and notional amounts of all derivative instruments at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, and their impact on earnings and other comprehensive income for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016.~~2018. Please refer to Note ~~11,~~10, “Derivative Financial Instruments” in our ~~2016~~2018 Form 10-K for a full discussion of cash flow hedges, fair value hedges, and trading activities. ~~The net fair value of derivative instruments as of September 30, 2017 was a liability of $8.0 million, compared to the net fair value as of December 31, 2016 liability of $18.1 million. The change~~

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in the net fair value reflects a $2.0 million decrease in fair value offset by variation margin amounts of $12.1 million. The net position as of September 30, 2017 was $23.0 million, compared to $30.0 million as of December 31, 2016. The change in the net position reflects a $2.0 million decrease in fair value, $22.6 million decrease in collateral held and pledged (for contracts other than those cleared through the CME), offset by variation margin impacts of $17.6 million.thousands, unless otherwise noted)



6.	Derivative Financial Instruments (Continued)

Impact of Derivatives on the Consolidated Balance ~~Sheet~~Sheets


		Cash Flow Hedges						Fair Value Hedges						Trading						Total							Cash Flow Hedges					Fair Value Hedges					Trading					Total
		September 30,			December 31,			September 30,			December 31,			September 30,			December 31,			September 30,			December 31,				March 31,		December 31,			March 31,			December 31,		March 31,			December 31,		March 31,			December 31,
		2017			2016			2017			2016			2017			2016			2017			2016				2019		2018			2019			2018		2019			2018		2019			2018
Fair Values⁽¹⁾	Hedged Risk Exposure																									Hedged Risk Exposure

Derivative Assets:⁽²⁾
Interest rate swaps	Interest rate	$	636		$	—		$	—		$	7,808		$	—		$	—		$	636		$	7,808		Interest rate	$	2,060	$	—		$	—		$	2,000	$	—		$	90	$	2,060		$	2,090
Derivative Liabilities:⁽²⁾
Interest rate swaps	Interest rate	(7,247		)	(14,463		)	(1,168		)	(10,398		)	(221		)	(1,076		)	(8,636		)	(25,937		)	Interest rate	—		(2,032		)	(3,413		)	—		(568		)	—		(3,981		)	(2,032		)
Total net derivatives		$	(6,611	)	$	(14,463	)	$	(1,168	)	$	(2,590	)	$	(221	)	$	(1,076	)	$	(8,000	)	$	(18,129	)		$	2,060	$	(2,032	)	$	(3,413	)	$	2,000	$	(568	)	$	90	$	(1,921	)	$	58

___________

(1)

~~Except for instruments cleared through the CME, fair~~Fair values reported ~~are exclusive~~include variation margin as legal settlement of ~~collateral held and pledged and accrued interest.~~the derivative contract. Assets and liabilities are presented without consideration of master netting agreements. Derivatives are carried on the balance sheet based on net position by counterparty under master netting agreements and classified in other assets or other liabilities depending on whether in a net positive or negative position. ~~The net position includes the variation margin as legal settlement of the derivative contract for instruments cleared through the CME.~~


(2)	The following table reconciles gross positions with the impact of master netting agreements to the balance sheet classification:



	Other Assets						Other Liabilities
	March 31,			December 31,			March 31,			December 31,
	2019			2018			2019			2018
Gross position⁽¹⁾	$	2,060		$	2,090		$	(3,981	)	$	(2,032	)
Impact of master netting agreement	(1,231		)	(1,389		)	1,231			1,389
Derivative values with impact of master netting agreements (as carried on balance sheet)	829			701			(2,750		)	(643		)
Cash collateral pledged⁽²⁾	31,915			27,151			—			—
Net position	$	32,744		$	27,852		$	(2,750	)	$	(643	)

__________


(1)	Gross position amounts include accrued interest and variation margin as legal settlement of the derivative contract.


(2)	Cash collateral pledged excludes amounts that represent legal settlement of the derivative contracts.



	Cash Flow				Fair Value				Trading				Total
	March 31,		December 31,		March 31,		December 31,		March 31,		December 31,		March 31,		December 31,
	2019		2018		2019		2018		2019		2018		2019		2018
Notional Values

Interest rate swaps	$	1,248,190	$	1,280,367	$	3,446,489	$	3,137,965	$	1,521,234	$	1,577,978	$	6,215,913	$	5,996,310

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)



6.	Derivative Financial Instruments (Continued)

As of March 31, 2019 and December 31, 2018, the following amounts were recorded on the consolidated balance sheet related to cumulative basis adjustments for fair value hedges:

Other Assets Other Liabilities
September 30, December 31, September 30, December 31,
2017 2016 2017 2016
Gross position⁽¹⁾
$ 636
$ 7,808
$ (8,636 ) $ (25,937 )
Impact of master netting agreement (636 ) (7,808 ) 636
7,808
Derivative values with impact of master netting agreements (as carried on balance sheet) —
—
(8,000 ) (18,129 )
Cash collateral (held) pledged⁽²⁾
—
—
31,003
48,134
Net position $ —
$ —
$ 23,003
$ 30,005

~~__________~~


~~(1)~~	~~Except for instruments cleared with the CME, gross position amounts are exclusive of accrued interest and collateral held and pledged.~~


~~(2)~~	~~Cash collateral (held) pledged excludes amounts that represent legal settlement of the derivative contracts.~~



Line Item in the Balance Sheet in Which the Hedged Item is Included:	Carrying Amount of the Hedged Assets/(Liabilities)						Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets/(Liabilities)
	March 31,			December 31,			March 31,			December 31,
	2019			2018			2019			2018

Deposits	$	(3,445,524	)	$	(3,114,304	)	$	(9,784	)	$	14,202

Cash Flow Fair Value Trading Total
September 30, December 31, September 30, December 31, September 30, December 31, September 30, December 31,
2017 2016 2017 2016 2017 2016 2017 2016
Notional Values

Interest rate swaps $ 1,440,220
$ 1,054,688
$ 3,480,365
$ 3,628,062
$ 966,542
$ 494,638
$ 5,887,127
$ 5,177,388

~~SLM CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Dollars in thousands, unless otherwise noted)~~



6.	~~Derivative Financial Instruments (Continued)~~

Impact of Derivatives on the Consolidated Statements of Income


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2017			2016			2019			2018

Fair Value Hedges
Interest rate swaps:
Hedge ineffectiveness realized gains (losses) recorded in earnings⁽¹⁾	$	2,748		$	3,199		$	(5,130	)	$	2,000
Realized gains (losses) recorded in interest expense	154			6,944			7,582			21,593
Interest recognized on derivatives													$	(3,827	)	$	5,853
Hedged items recorded in interest expense													(23,986		)	15,265
Derivatives recorded in interest expense													23,888			(15,246		)
Total	$	2,902		$	10,143		$	2,452		$	23,593		$	(3,925	)	$	5,872

Cash Flow Hedges
Interest rate swaps:
Hedge ineffectiveness losses recorded in earnings⁽¹⁾	$	(1,025	)	$	(843	)	$	(1,172	)	$	(1,524	)
Realized losses recorded in interest expense	(2,689		)	(4,381		)	(8,697		)	(13,588		)
Amount of gain (loss) reclassified from accumulated other comprehensive income into interest expense													$	1,296		$	(1,543	)
Total	$	(3,714	)	$	(5,224	)	$	(9,869	)	$	(15,112	)	$	1,296		$	(1,543	)

Trading
Interest rate swaps:
Interest reclassification	$	185		$	537		$	165		$	1,897
Realized gains (losses) recorded in earnings	(247		)	(1,525		)	(1,189		)	783
Total⁽¹⁾	(62		)	(988		)	(1,024		)	2,680
Change in fair value of future interest payments recorded in earnings													$	4,202		$	(4,755	)
Total	$	(874	)	$	3,931		$	(8,441	)	$	11,161		4,202			(4,755		)
Total													$	1,573		$	(426	)

~~________~~


~~(1)~~	~~Amounts included in “gains (losses) on derivatives and hedging activities, net” in the consolidated statements of income.~~

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)



6.	Derivative Financial Instruments (Continued)

Impact of Derivatives on the Statements of Changes in Stockholders’ Equity

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016

Amount of gain (loss) recognized in other comprehensive income (loss) $ 2,125
$ 4,943
$ (1,133 ) $ (37,370 )
Less: amount of gain (loss) reclassified in interest expense⁽¹⁾
(2,689 ) (4,381 ) (8,697 ) (13,588 )
Total change in other comprehensive income (loss) for unrealized gains (losses) on derivatives, before income tax benefit (expense) $ 4,814
$ 9,324
$ 7,564
$ (23,782 )



	Three Months Ended
	March 31,
	2019			2018

Amount of gain recognized in other comprehensive income (loss)	$	(12,821	)	$	18,728
Less: amount of loss reclassified in interest expense	1,296			(1,562		)
Total change in other comprehensive income (loss) for unrealized gains (losses) on derivatives, before income tax (expense) benefit	$	(14,117	)	$	20,290

~~___________~~

⁽¹⁾Amounts ~~included~~reported in ~~“realized gains (losses) recorded in~~accumulated other comprehensive income related to derivatives will be reclassified to interest ~~expense” in~~expense as interest payments are made on our variable-rate deposits. During the ~~“Impact of Derivatives on the Consolidated Statements of Income” table.~~next twelve months, we estimate that $3.7 million will be reclassified as an increase to interest expense.

Cash Collateral

As of ~~September 30, 2017,~~March 31, 2019, cash collateral held and pledged excludes amounts that represent legal settlement of the derivative contracts held with ~~CME. Cash~~the CME and LCH. There was no cash collateral held related to derivative exposure between us and our derivatives counterparties ~~was $0.3 million and $1.0 million~~ at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, respectively. Collateral held is recorded in “Other Liabilities” on the consolidated balance sheets. Cash collateral pledged related to derivative exposure between us and our derivatives counterparties was ~~$31.3~~$32 million and ~~$49.1~~$27 million at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, respectively. Collateral pledged is recorded in “Other interest-earning assets” on the consolidated balance sheets.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

7. Stockholders’ Equity

~~Preferred Stock~~

On May 5, 2017, we redeemed, with the proceeds of our unsecured debt offering, the outstanding 3.3 million shares of our 6.97 percent Cumulative Redeemable Preferred Stock, Series A (the “Series A Preferred Stock”). The Series A Preferred Stock was redeemed at a price of $50.00 per share, plus accrued and unpaid dividends from May 1, 2017 to, but excluding, the May 5, 2017 redemption date.

~~Common Stock~~

The following table summarizes our common share repurchases and issuances.


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
(Shares and per share amounts in actuals)	2017		2016		2017		2016		2019		2018
Shares repurchased related to employee stock-based compensation plans⁽¹⁾⁽²⁾	81,817		371,165		2,666,781		1,763,092
Common stock repurchased under repurchase program⁽¹⁾									5,435,476		—
Average purchase price per share(2)	$	10.93	$	7.22	$	12.09	$	6.35	$	11.04	$	—
Common shares issued⁽³⁾	423,112		561,100		5,652,886		3,727,574
Shares repurchased related to employee stock-based compensation plans⁽³⁾									1,289,391		2,740,018
Average purchase price per share									$	10.95	$	11.31
Common shares issued⁽⁴⁾									3,470,664		5,559,991

__________________


⁽¹⁾	Common shares purchased under our share repurchase program, of which $140 million remained available as of March 31, 2019.


⁽²⁾	Average purchase price per share includes purchase commission costs.


⁽³⁾	Comprised of shares withheld from stock option exercises and vesting of restricted stock for employees’ tax withholding obligations and shares tendered by employees to satisfy option exercise costs.


⁽²⁾	~~At the present time, we do not intend to initiate a publicly announced share repurchase program.~~


⁽³⁾⁽⁴⁾	Common shares issued under our various compensation and benefit plans.

The closing price of our common stock on ~~September~~March 29, ~~2017~~2019 was ~~$11.47.~~$9.91.

Dividend and Share Repurchases

In the three months ended March 31, 2019, we paid a common stock dividend of $0.03 per common share. We did not pay common stock dividends in the three months ended March 31, 2018.

Under our share repurchase program, we repurchased 5 million shares of common stock for $60 million in the three months ended March 31, 2019. Our share repurchase program permits us to repurchase from time to time shares of our common stock up to an aggregate repurchase price not to exceed $200 million and expires on January 22, 2021. In the three months ended March 31, 2018, we only repurchased common stock acquired in connection with taxes withheld resulting from award exercises and vesting under our employee stock-based compensation plans.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

8. Earnings per Common Share

Basic earnings per common share (“EPS”) are calculated using the weighted average number of shares of common stock outstanding during each period. A reconciliation of the numerators and denominators of the basic and diluted EPS calculations follows.


	Three Months Ended				Nine Months Ended				Three Months Ended
	September 30,				September 30,				March 31,
(In thousands, except per share data)	2017		2016		2017		2016		2019		2018
Numerator:
Net income	$	76,371	$	56,965	$	241,931	$	180,085	$	158,189	$	126,254
Preferred stock dividends	3,028		5,316		12,577		15,698		4,468		3,397
Net income attributable to SLM Corporation common stock	$	73,343	$	51,649	$	229,354	$	164,387	$	153,721	$	122,857
Denominator:
Weighted average shares used to compute basic EPS	431,718		428,077		430,958		427,711		434,574		433,952
Effect of dilutive securities:
Dilutive effect of stock options, restricted stock, restricted stock units and Employee Stock Purchase Plan (“ESPP”) ⁽¹⁾⁽²⁾	6,701		5,446		7,464		4,368
Dilutive effect of stock options, restricted stock, restricted stock units, performance stock units and Employee Stock Purchase Plan (“ESPP”) ⁽¹⁾⁽²⁾									3,674		5,025
Weighted average shares used to compute diluted EPS	438,419		433,523		438,422		432,079		438,248		438,977

Basic earnings per common share attributable to SLM Corporation	$	0.17	$	0.12	$	0.53	$	0.38	$	0.35	$	0.28

Diluted earnings per common share attributable to SLM Corporation	$	0.17	$	0.12	$	0.52	$	0.38	$	0.35	$	0.28

________________


⁽¹⁾	Includes the potential dilutive effect of additional common shares that are issuable upon exercise of outstanding stock options, restricted stock, restricted stock units, performance stock units and the outstanding commitment to issue shares under the ESPP, determined by the treasury stock method.

⁽²⁾

For the three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016,~~2018, securities covering approximately 02 million and ~~1 million shares, respectively, and for the nine months ended September 30, 2017 and 2016, securities covering approximately 0 and 1 million~~no shares, respectively, were outstanding but not included in the computation of diluted earnings per share because they were anti-dilutive.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

9. Fair Value Measurements

We use estimates of fair value in applying various accounting standards for our consolidated financial statements.

We categorize our fair value estimates based on a hierarchical framework associated with three levels of price transparency utilized in measuring financial instruments at fair value. For additional information regarding our policies for determining fair value and the hierarchical framework, see Note 2, “Significant Accounting Policies - Fair Value Measurement” in our ~~2016~~2018 Form 10-K.

During the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2019, there were no significant transfers of financial instruments between levels or changes in our methodology or assumptions used to value our financial instruments.

The following table summarizes the valuation of our financial instruments that are marked to fair value on a recurring basis.


	Fair Value Measurements on a Recurring Basis																				Fair Value Measurements on a Recurring Basis
	September 30, 2017										December 31, 2016										March 31, 2019										December 31, 2018
	Level 1		Level 2			Level 3		Total			Level 1		Level 2			Level 3		Total			Level 1		Level 2			Level 3		Total			Level 1		Level 2			Level 3		Total

Assets
Available-for-sale investments	$	—	$	232,549		$	—	$	232,549		$	—	$	208,603		$	—	$	208,603		$	—	$	207,907		$	—	$	207,907		$	—	$	176,245		$	—	$	176,245
Derivative instruments	—		636			—		636			—		7,808			—		7,808			—		2,060			—		2,060			—		2,090			—		2,090
Total	$	—	$	233,185		$	—	$	233,185		$	—	$	216,411		$	—	$	216,411		$	—	$	209,967		$	—	$	209,967		$	—	$	178,335		$	—	$	178,335

Liabilities
Derivative instruments	$	—	$	(8,636	)	$	—	$	(8,636	)	$	—	$	(25,937	)	$	—	$	(25,937	)	$	—	$	(3,981	)	$	—	$	(3,981	)	$	—	$	(2,032	)	$	—	$	(2,032	)
Total	$	—	$	(8,636	)	$	—	$	(8,636	)	$	—	$	(25,937	)	$	—	$	(25,937	)	$	—	$	(3,981	)	$	—	$	(3,981	)	$	—	$	(2,032	)	$	—	$	(2,032	)

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)



9.	Fair Value Measurements (Continued)

The following table summarizes the fair values of our financial assets and liabilities, including derivative financial instruments.


	September 30, 2017							December 31, 2016							March 31, 2019							December 31, 2018
	Fair Value		Carrying Value		Difference			Fair Value		Carrying Value		Difference			Fair Value		Carrying Value		Difference			Fair Value		Carrying Value		Difference
Earning assets
Loans held for investment, net	$	20,013,518	$	18,040,465	$	1,973,053		$	16,520,786	$	15,137,922	$	1,382,864
Earning assets:
Loans held for investment, net:
Private Education Loans															$	23,854,015	$	21,576,534	$	2,277,481		$	22,313,419	$	20,294,843	$	2,018,576
FFELP Loans															841,070		829,203		11,867			859,185		847,889		11,296
Personal Loans															1,137,407		1,092,649		44,758			1,156,531		1,128,187		28,344
Cash and cash equivalents	1,247,764		1,247,764		—			1,918,793		1,918,793		—			2,156,257		2,156,257		—			2,559,106		2,559,106		—
Available-for-sale investments	232,549		232,549		—			208,603		208,603		—			207,907		207,907		—			176,245		176,245		—
Accrued interest receivable	1,019,735		1,019,735		—			766,106		766,106		—			1,409,728		1,299,496		110,232			1,285,842		1,191,981		93,861
Tax indemnification receivable	214,496		214,496		—			259,532		259,532		—			43,124		43,124		—			39,207		39,207		—
Derivative instruments	636		636		—			7,808		7,808		—			2,060		2,060		—			2,090		2,090		—
Total earning assets	$	22,728,698	$	20,755,645	$	1,973,053		$	19,681,628	$	18,298,764	$	1,382,864		$	29,651,568	$	27,207,230	$	2,444,338		$	28,391,625	$	26,239,548	$	2,152,077
Interest-bearing liabilities
Interest-bearing liabilities:
Money-market and savings accounts	$	8,480,477	$	8,480,477	$	—		$	7,963,925	$	7,963,925	$	—		$	9,690,078	$	9,688,622	$	(1,456	)	$	9,370,957	$	9,390,108	$	19,151
Certificates of deposit	6,569,956		6,553,047		(16,909		)	5,510,504		5,471,065		(39,439		)	10,000,546		9,973,668		(26,878		)	9,513,194		9,551,974		38,780
Short-term borrowings	300,000		300,000		—			—		—		—
Long-term borrowings	2,764,427		2,738,662		(25,765		)	2,160,105		2,167,979		7,874			4,505,828		4,476,406		(29,422		)	4,278,931		4,284,304		5,373
Accrued interest payable	36,299		36,299		—			21,058		21,058		—			68,746		68,746		—			61,341		61,341		—
Derivative instruments	8,636		8,636		—			25,937		25,937		—			3,981		3,981		—			2,032		2,032		—
Total interest-bearing liabilities	$	18,159,795	$	18,117,121	$	(42,674	)	$	15,681,529	$	15,649,964	$	(31,565	)	$	24,269,179	$	24,211,423	$	(57,756	)	$	23,226,455	$	23,289,759	$	63,304

Excess of net asset fair value over carrying value					$	1,930,379						$	1,351,299						$	2,386,582						$	2,215,381

Please refer to Note ~~15,~~14, “Fair Value Measurements” in our ~~2016~~2018 Form 10-K for a full discussion of the methods and assumptions used to estimate the fair value of each class of financial instruments.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

10. ~~Arrangements with Navient Corporation~~

In connection with the separation of Navient Corporation (“Navient”) from SLM (“the Spin-Off”), we entered into a separation and distribution agreement (the “Separation and Distribution Agreement”) and other ancillary agreements with Navient. Please refer to Note 16, “Arrangements with Navient Corporation” in our 2016 Form 10-K for a full discussion of these agreements.

~~Indemnification Obligations~~

Navient is responsible for, and has agreed to indemnify us against, all claims, actions, damages, losses or expenses that may arise from the conduct of all activities of pre-Spin-Off SLM Corporation (“pre-Spin-Off SLM”) occurring prior to the Spin-Off other than those specifically excluded in the Separation and Distribution Agreement. Some significant examples of the types of indemnification obligations Navient has under the Separation and Distribution Agreement and related ancillary agreements include:

Navient will indemnify the Company and Sallie Mae Bank, a Utah industrial bank subsidiary of the Company (the “Bank”), for any liabilities, costs or expenses they may incur arising from any action or threatened action related to the servicing, operations and collections activities of pre-Spin-Off SLM and its subsidiaries with respect to Private Education Loans and FFELP Loans that were assets of the Bank or Navient at the time of the Spin-Off; provided that written notice is provided to Navient on or prior to April 30, 2017, the third anniversary date of the Spin-Off. Navient will not indemnify for changes in law or changes in prior existing interpretations of law that occur on or after April 30, 2014.

Pursuant to a tax sharing agreement, Navient has agreed to indemnify us for $283 million in deferred taxes that the Company will be legally responsible for but that relate to gains recognized by the Company’s predecessor on debt repurchases made prior to the Spin-Off. The remaining amount of this indemnification at September 30, 2017 was $73 million. In connection with the Spin-Off, we also recorded a liability related to uncertain tax positions of $27 million for which we are indemnified by Navient. As of September 30, 2017, the remaining balance of the indemnification receivable related to those uncertain tax positions was $26 million. In addition, we believe we are indemnified by Navient for uncertain tax positions relating to historical transactions among entities that are now subsidiaries of Navient that should have been recorded at the time of the Spin-Off. The remaining balance of the indemnification receivable related to those uncertain tax positions was $115 million at September 30, 2017.

~~SLM CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Dollars in thousands, unless otherwise noted)~~

~~11.~~ Regulatory Capital

~~The~~Sallie Mae Bank (the “Bank”) is subject to various regulatory capital requirements administered by the FDIC and the Utah Department of Financial ~~Institutions.~~Institutions (the “UDFI”). Failure to meet minimum capital requirements and any applicable buffers can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material adverse effect on our business, results of operation and financial condition. Under the FDIC’s regulations implementing the Basel III capital framework (“U.S. Basel III”) and the regulatory framework for prompt corrective action, the Bank must meet specific capital standards that involve quantitative measures of its assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s regulatory capital amounts and its classification under the prompt corrective action framework are also subject to qualitative judgments by the regulators about components of capital, risk weightings and other factors.

~~The~~Under U.S. Basel III, the Bank is required to ~~report regulatory~~maintain minimum risk-based and leverage-based capital ~~and ratios in accordance with U.S. Basel III. Among other things, U.S. Basel III establishes~~ratios. In addition, as of January 1, 2019, the Bank is subject to a fully phased-in Common Equity Tier 1 ~~as a new tier of capital, modifies methods for calculating risk-weighted assets, introduces a new~~ capital conservation buffer ~~(which is being phased in over several years), and revises the capital thresholds~~ of ~~the prompt corrective action framework, including the “well capitalized” standard.~~

~~“Well capitalized” regulatory requirements are the quantitative measures established by regulation to ensure capital adequacy. To qualify as “well capitalized,”~~greater than 2.5 percent. (As of December 31, 2018, the Bank ~~must maintain minimum amounts and ratios (set forth in the table below) of~~was subject to a Common Equity Tier 1 ~~Tier 1~~capital conservation buffer of greater than 1.875 percent.) Failure to maintain the buffer will result in restrictions on the Bank’s ability to make capital distributions, including the payment of dividends, and ~~Total capital~~ to ~~risk-weighted assets~~pay discretionary bonuses to executive officers. The Bank’s required and ~~of Tier 1 capital to average assets. The following~~actual regulatory capital amounts and ratios under U.S. Basel III are ~~based upon~~shown in the ~~Bank’s assets.~~following table.


	Actual				“Well Capitalized” Regulatory Requirements					Actual					U.S. Basel III Regulatory Requirements⁽¹⁾
	Amount		Ratio		Amount			Ratio		Amount		Ratio			Amount			Ratio
As of September 30, 2017:
As of March 31, 2019:
Common Equity Tier 1 Capital (to Risk-Weighted Assets)	$	2,285,767	11.8	%	$	1,255,438	>	6.5	%	$	2,989,525	11.9	%		$	1,757,430	>	7.0	%
Tier 1 Capital (to Risk-Weighted Assets)	$	2,285,767	11.8	%	$	1,545,155	>	8.0	%	$	2,989,525	11.9	%		$	2,134,022	>	8.5	%
Total Capital (to Risk-Weighted Assets)	$	2,517,317	13.0	%	$	1,931,444	>	10.0	%	$	3,303,905	13.2	%		$	2,636,145	>	10.5	%
Tier 1 Capital (to Average Assets)	$	2,285,767	11.4	%	$	1,000,262	>	5.0	%	$	2,989,525	11.0	%	⁽²⁾	$	1,085,405	>	4.0	%

As of December 31, 2016:
As of December 31, 2018:
Common Equity Tier 1 Capital (to Risk-Weighted Assets)	$	2,011,583	12.6	%	$	1,038,638	>	6.5	%	$	2,896,091	12.1	%		$	1,528,209	>	6.375	%
Tier 1 Capital (to Risk-Weighted Assets)	$	2,011,583	12.6	%	$	1,278,323	>	8.0	%	$	2,896,091	12.1	%		$	1,887,787	>	7.875	%
Total Capital (to Risk-Weighted Assets)	$	2,197,997	13.8	%	$	1,597,904	>	10.0	%	$	3,196,279	13.3	%		$	2,367,226	>	9.875	%
Tier 1 Capital (to Average Assets)	$	2,011,583	11.1	%	$	907,565	>	5.0	%	$	2,896,091	11.1	%		$	1,039,226	>	4.0	%

________________


⁽¹⁾	Required risk-based capital ratios include the capital conservation buffer.


⁽²⁾	The Bank’s Tier 1 leverage ratio exceeds the 5 percent well-capitalized standard for the Tier 1 leverage ratio under the prompt corrective action framework.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)



10.	Regulatory Capital (Continued)

Bank Dividends

The Bank is chartered under the laws of the State of Utah and its deposits are insured by the FDIC. The Bank’s ability to pay dividends is subject to the laws of Utah and the regulations of the FDIC. Generally, under Utah’s industrial bank laws and regulations as well as FDIC regulations, the Bank may pay dividends from its net profits without regulatory approval if, following the payment of the dividend, the Bank’s capital and surplus would not be impaired. The Bank paid $85 million in dividends to the Company for the three months ended March 31, 2019 and no dividends for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2018. In the future, we expect that the Bank will pay dividends to the Company as may be necessary to enable the Company to pay any declared dividends on its Series B Preferred Stock and ~~September 30, 2016.~~common stock and to consummate any common share repurchases by the Company under its share repurchase program.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

~~12.~~11. Commitments, Contingencies and Guarantees

Commitments

When we approve a Private Education Loan at the beginning of an academic year, that approval may cover the borrowing for the entire academic year. As such, we do not always disburse the full amount of the loan at the time of such approval, but instead have a commitment to fund a portion of the loan at a later date (usually at the start of the second semester or subsequent trimesters). At ~~September 30, 2017,~~March 31, 2019, we had ~~$1.9~~$0.5 billion of outstanding contractual loan commitments which we expect to fund during the remainder of the ~~2017/2018~~2018/2019 academic year. At ~~September 30, 2017,~~March 31, 2019, we had a ~~$1.6~~$0.3 million reserve recorded in “Other Liabilities” to cover expected losses that ~~we conclude are probable to~~may occur during the ~~one year~~one-year loss emergence period on these unfunded commitments.

~~Regulatory Matters~~

On May 13, 2014, the Bank reached settlements with (a) the FDIC regarding disclosures and assessments of certain late fees, as well as compliance with the Servicemembers’ Civil Relief Act (“SCRA”) and (b) the Department of Justice (the “DOJ”) regarding compliance with the SCRA. In connection with the settlements, the Bank became subject to a Consent Order, Order to Pay Restitution, and Order to Pay Civil Money Penalty dated May 13, 2014 issued by the FDIC (“the FDIC Consent Order”) and a DOJ Consent Order (“the DOJ Consent Order”), which was approved by the U.S. District Court for the District of Delaware on September 29, 2014. Under the terms of the Separation and Distribution Agreement, Navient is responsible for funding all liabilities under the regulatory orders and, as of the date hereof, has funded all liabilities other than fines directly levied against the Bank in connection with these matters which the Bank is required to pay.

~~On March 27, 2017, the Bank received confirmation from the FDIC that effective March 23, 2017, the FDIC terminated the FDIC Consent Order. The termination was issued with no conditions.~~

The Bank continues to be in full compliance with the DOJ Consent Order, including policy and procedure updates. Pursuant to the terms of the DOJ Consent Order, the Bank will remain subject to certain DOJ reporting and record-keeping requirements until September 29, 2018.

In May 2014, the Bank received a Civil Investigative Demand (“CID”) from the Consumer Financial Protection Bureau (the “CFPB”) as part of the CFPB’s separate investigation relating to customer complaints, fees and charges assessed in connection with the servicing of student loans and related collection practices of pre-Spin-Off SLM by entities now subsidiaries of Navient during a time period prior to the Spin-Off (the “CFPB Investigation”). Two state attorneys general also provided the Bank identical CIDs and other state attorneys general have become involved in the inquiry over time (collectively, the “Multi-State Investigation”). To the extent requested, the Bank has been cooperating fully with the CFPB and the attorneys general conducting the Multi-State Investigation. Given the timeframe covered by the CIDs, the CFPB Investigation and the Multi-State Investigation, and the focus on practices and procedures previously conducted by Navient and its servicing subsidiaries prior to the Spin-Off, Navient is leading the response to these investigations. Consequently, we have no basis from which to estimate either the duration or ultimate outcome of these investigations. Additional lawsuits may arise from the Multi-State Investigation which may or may not name the Company, the Bank or any of their current subsidiaries as parties to these suits. As with the Illinois lawsuit described below, the Bank is not responsible for any of the alleged conduct in the Multi-State Investigation or any claims that may arise from related lawsuits. As contemplated by the Separation and Distribution Agreement relating to, and the structure of, the Spin-Off, Navient is legally responsible for, and has accepted responsibility to indemnify the Company against, all costs, expenses, losses and remediation that may arise from these matters.

With regard to the CFPB Investigation, we note that on January 18, 2017, the CFPB filed a complaint in federal court in Pennsylvania against Navient, along with its subsidiaries, Navient Solutions, Inc. and Pioneer Credit Recovery, Inc. The complaint alleges these Navient entities, among other things, engaged in deceptive practices with respect to their historic servicing and debt collection practices. Neither SLM, the Bank, nor any of their current subsidiaries are named in, or otherwise

~~SLM CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Dollars in thousands, unless otherwise noted)~~



~~12.~~	~~Commitments, Contingencies and Guarantees (Continued)~~

a party to, the lawsuit and are not alleged to have engaged in any wrongdoing. The CFPB’s complaint asserts Navient’s assumption of these liabilities pursuant to the Separation and Distribution Agreement.

On January 18, 2017, the Illinois Attorney General filed a separate lawsuit in Illinois state court against Navient - its subsidiaries Navient Solutions, Inc., Pioneer Credit Recovery, Inc., and General Revenue Corporation - and the Bank arising out of the Multi-State Investigation. On March 20, 2017, the Bank moved to dismiss the Illinois Attorney General action as to the Bank, arguing, among other things, the complaint failed to allege with sufficient particularity or specificity how the Bank was responsible for any of the alleged conduct, most of which predated the Bank’s existence. Following argument on the Bank’s motion on July 18, 2017, the Illinois court took the Bank’s motion under advisement. As of the date of this report, the court has not ruled on the Bank’s motion. As contemplated by the Separation and Distribution Agreement relating to, and the structure of, the Spin-Off, Navient is legally responsible for, has assumed, and has accepted responsibility to indemnify the Company against, all costs, expenses, losses and remediation that may arise from these matters.

To date, two other state attorneys general (Washington and Pennsylvania) have filed suits against Navient and one or more of its current subsidiaries arising out of matters arising from the Multi-State Investigation. Neither SLM, the Bank, nor any of their current subsidiaries are named in, or otherwise a party to, the Washington or Pennsylvania lawsuits, and no claims are asserted against them. Each complaint asserts in its own fashion that Navient assumed responsibility for these matters under the Separation and Distribution Agreement for the alleged conduct in the complaints.

Contingencies

In the ordinary course of business, we and our subsidiaries are routinely defendants in or parties to pending and threatened legal actions and proceedings, including actions brought on behalf of various classes of claimants. These actions and proceedings may be based on alleged violations of consumer protection, securities, employment and other laws. In certain of these actions and proceedings, claims for substantial monetary ~~damage~~damages may be asserted against us and our subsidiaries.

It is common for the Company, our subsidiaries and affiliates to receive information and document requests and investigative demands from state attorneys general, legislative committees, and administrative agencies. These requests may be for informational or regulatory purposes and may relate to our business practices, the industries in which we operate, or other companies with whom we conduct business. Our practice has been and continues to be to cooperate with these bodies and be responsive to any such requests.

We are required to establish reserves for litigation and regulatory matters where those matters present loss contingencies that are both probable and estimable. When loss contingencies are not both probable and estimable, we do not establish reserves.

Based on current knowledge, management does not believe there are loss contingencies, if any, arising from pending investigations, litigation or regulatory matters for which reserves should be established.


Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following information is current as of ~~October 18, 2017~~April 17, 2019 (unless otherwise noted) and should be read in connection with SLM Corporation’s Annual Report on Form 10-K for the year ended December 31, ~~2016~~2018 (filed with the Securities and Exchange Commission (the “SEC”) on February ~~24, 2017)~~28, 2019) (the ~~“2016~~“2018 Form 10-K”), and subsequent reports filed with the SEC. Definitions for capitalized terms used in this report not defined herein can be found in the ~~2016~~2018 Form 10-K.

References in this Form 10-Q to “we,” “us,” “our,” “Sallie Mae,” “SLM” and the “Company” refer to SLM Corporation and its subsidiaries, except as otherwise indicated or unless the context otherwise requires.

This report contains “forward-looking” statements and information based on management’s current expectations as of the date of this report. Statements that are not historical facts, including statements about our beliefs, opinions or expectations and statements that assume or are dependent upon future events, are forward-looking statements. This includes, but is not limited to, our expectation and ability to pay a quarterly cash dividend on our common stock in the future, subject to the determination by our Board of Directors, and based on an evaluation of our earnings, financial condition and requirements, business conditions, capital allocation determinations, and other factors, risks and uncertainties. Forward-looking statements are subject to risks, uncertainties, assumptions and other factors that may cause actual results to be materially different from those reflected in such forward-looking statements. These factors include, among others, the risks and uncertainties set forth in Item 1A1A. “Risk Factors” and elsewhere in our ~~2016~~2018 Form 10-K and subsequent filings with the SEC; increases in financing costs; limits on liquidity; increases in costs associated with compliance with laws and regulations; failure to comply with consumer protection, banking and other laws; changes in accounting standards and the impact of related changes in significant accounting estimates; any adverse outcomes in any significant litigation to which we are a party; credit risk associated with our exposure to third-parties, including counterparties to our derivative transactions; and changes in the terms of education loans and the educational credit marketplace (including changes resulting from new laws and the implementation of existing laws). We could also be affected by, among other things: changes in ~~its~~our funding costs and availability; reductions to ~~its~~our credit ratings; failures or breaches of ~~its~~our operating systems or infrastructure, including those of third-party vendors; damage to ~~its~~our reputation; risks associated with restructuring initiatives, including failures to successfully implement cost-cutting programs and the adverse effects of such initiatives on our business; changes in the demand for educational financing or in financing preferences of lenders, educational institutions, students and their families; changes in law and regulations with respect to the student lending business and financial institutions generally; changes in banking rules and regulations, including increased capital requirements; increased competition from banks and other consumer lenders; the creditworthiness of our customers; changes in the general interest rate environment, including the rate relationships among relevant money-market instruments and those of our earning assets versus our funding arrangements; rates of prepayment on the loans that we ~~make;~~own; changes in general economic conditions and our ability to successfully effectuate any acquisitions; and other strategic initiatives. The preparation of our consolidated financial statements also requires management to make certain estimates and assumptions, including estimates and assumptions about future events. These estimates or assumptions may prove to be incorrect. All forward-looking statements contained in this quarterly report on Form 10-Q are qualified by these cautionary statements and are made only as of the date of this report. We do not undertake any obligation to update or revise these forward-looking statements to conform such statements to actual results or changes in ~~its~~our expectations.

We report financial results on a GAAP basis and also ~~provides~~provide certain non-GAAP core earnings performance measures. The difference between our “Core Earnings” and GAAP results for the periods presented were the unrealized, mark-to-market gains/losses on derivative contracts (excluding current period accruals on the derivative instruments), net of tax. These are recognized in GAAP, but not in “Core Earnings” results. We provide “Core Earnings” measures because this is what management uses when making management decisions regarding our performance and the allocation of corporate resources. Our “Core Earnings” are not defined terms within GAAP and may not be comparable to similarly titled measures reported by other companies. For additional information, see “Key Financial Measures” and ~~“GAAP Consolidated Earnings Summary -~~“ ‘Core Earnings’ ” in this Form 10-Q for the quarter ended ~~September 30, 2017~~March 31, 2019 for a further discussion and a complete reconciliation between GAAP net income and “Core Earnings.”

Through this discussion and analysis, we intend to provide the reader with some narrative context for how our management views our consolidated financial statements, additional context within which to assess our operating results, and information on the quality and variability of our earnings, liquidity and cash flows.

Selected Financial Information and Ratios


	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
(In thousands, except per share data and percentages)	2017			2016			2017			2016				2019			2018

Net income attributable to SLM Corporation common stock	$	73,343		$	51,649		$	229,354		$	164,387			$	153,721		$	122,857
Diluted earnings per common share attributable to SLM Corporation	$	0.17		$	0.12		$	0.52		$	0.38			$	0.35		$	0.28
Weighted average shares used to compute diluted earnings per share	438,419			433,523			438,422			432,079				438,248			438,977
Return on assets	1.5		%	1.4		%	1.7		%	1.5		%		2.4		%	2.2		%
Non-GAAP operating efficiency ratio - old method⁽¹⁾	40.3		%	40.6		%	39.4		%	40.8		%
Non-GAAP operating efficiency ratio - new method⁽¹⁾	40.6		%	40.7		%	39.0		%	40.9		%
Non-GAAP operating efficiency ratio⁽¹⁾														33.8		%	36.5		%

Other Operating Statistics
Ending Private Education Loans, net	$	16,959,241		$	13,725,959		$	16,959,241		$	13,725,959			$	21,576,534		$	18,600,723
Ending FFELP Loans, net	950,524			1,034,545			950,524			1,034,545				829,203			909,295
Ending total education loans, net	$	17,909,765		$	14,760,504		$	17,909,765		$	14,760,504			$	22,405,737		$	19,510,018

Ending Personal Loans, net														$	1,092,649		$	656,586

Average education loans	$	17,188,936		$	13,931,693		$	16,772,663		$	13,384,326			$	22,570,776		$	19,579,434

(1) In the first-quarter 2017, we changed the way we calculate and report our non-GAAP operating efficiency ratio. Please refer to “- Overview - Key Financial Measures - Operating Expenses” in this Form 10-Q for further details.
Average Personal Loans														$	1,176,466		$	528,644
__________
(1) We calculate and report our non-GAAP operating efficiency ratio as the ratio of (a) the total non-interest expense numerator to (b) the net revenue denominator (which consists of the sum of net interest income, before provision for credit losses, and non-interest income, excluding any gains and losses on sales of loans and securities, net and the net impact of derivative accounting as defined in the “Core Earnings” adjustments to GAAP table set forth in this Form 10-Q). We believe doing so provides useful information to investors because it is a measure used by our management team to monitor our effectiveness in managing operating expenses. Other companies may use similarly titled non-GAAP financial measures that are calculated differently from the way we calculate our ratio. Accordingly, our non-GAAP operating efficiency ratio may not be comparable to similar measures used by other companies.													(1) We calculate and report our non-GAAP operating efficiency ratio as the ratio of (a) the total non-interest expense numerator to (b) the net revenue denominator (which consists of the sum of net interest income, before provision for credit losses, and non-interest income, excluding any gains and losses on sales of loans and securities, net and the net impact of derivative accounting as defined in the “Core Earnings” adjustments to GAAP table set forth in this Form 10-Q). We believe doing so provides useful information to investors because it is a measure used by our management team to monitor our effectiveness in managing operating expenses. Other companies may use similarly titled non-GAAP financial measures that are calculated differently from the way we calculate our ratio. Accordingly, our non-GAAP operating efficiency ratio may not be comparable to similar measures used by other companies.

Overview

The following discussion and analysis presents a review of our business and operations as of and for the three ~~and nine~~ months ended ~~September 30, 2017.~~March 31, 2019.

Key Financial Measures

Our operating results are primarily driven by net interest income from our Private Education Loan portfolio, provision expense for credit losses, and operating expenses. The growth of our business and the strength of our financial condition are primarily driven by our ability to achieve our annual Private Education Loan origination goals while sustaining credit quality and maintaining cost-efficient funding sources to support our originations. A brief summary of our key financial measures (net interest income; ~~loan sales and secured financings, net;~~ allowance for loan losses; charge-offs and delinquencies; operating expenses; “Core Earnings;” Private Education Loan originations; and funding sources) can be found in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our ~~2016~~2018 Form 10-K. ~~As described below, we have recently updated the method of computing of our non-GAAP operating efficiency ratio.~~

~~Operating Expenses~~

The cost of operating our business directly affects our profitability. Our operating expenses include those that are directly attributable to running our business, as well as the costs of building out our servicing and origination platforms and strengthening the Company as a stand-alone entity. We will continue to measure our effectiveness in managing operating expenses by monitoring our non-GAAP operating efficiency ratio.

In 2016, our non-GAAP operating efficiency ratio was calculated for the periods presented as the ratio of (a) the total non-interest expense numerator to (b) the net revenue denominator (which consisted of net interest income, before provision for credit losses, plus non-interest income).

In the first-quarter 2017, we began calculating and reporting our non-GAAP operating efficiency ratio as the ratio of (a) the total non-interest expense numerator to (b) the net revenue denominator (which consists of the sum of net interest income, before provision for credit losses, and non-interest income, less the net impact of derivative accounting as defined in our “Core Earnings” adjustments to GAAP table in “— GAAP Consolidated Earnings Summary — ‘Core Earnings’’’ in this Form 10-Q). We believe this change will improve visibility into our management of operating expenses over time and eliminate the variability in this ratio that may be related to the changes in fair value of our derivative contracts that we consider economic hedges and which do not affect how we manage operating expenses. This change conforms the treatment of our hedging activities in our non-GAAP operating efficiency ratio to our non-GAAP “Core Earnings” measure. The impact of this change on the non-GAAP operating efficiency ratio reported in each of our prior quarterly and annual periods is immaterial. This ratio provides useful information to investors because it is a measure used by our management team to monitor our effectiveness in managing operating expenses. Other companies may use similarly titled non-GAAP financial measures that are calculated differently from our ratio. Accordingly, our non-GAAP operating efficiency ratio may not be comparable to similar measures used by other companies.

~~2017 Management Objectives~~

For 2017, we have set out the following major goals for ourselves: (1) prudently grow our Private Education Loan assets and revenues while continuing to diversify the mix of our funding sources; (2) maintain our strong capital position; (3) manage operating expenses while improving efficiency; (4) enhance our customers’ experience by further improving the delivery of our products and services; (5) sustain the consumer protection improvements we have made since the Spin-Off and maintain our strong governance, risk oversight and compliance infrastructure; (6) continue our disciplined expansion of new products to increase the level of engagement we have with our existing customers and attract new customers; and (7) continue to promote a culture centered on our core values (collaboration, mutual respect, honesty, integrity, performance, and accountability), sustained through ongoing employee engagement, recognition, and development and aligned with our mission and business plan for growth. Here is how we plan to achieve these objectives:

~~Prudently Grow Private Education Loan Assets and Revenues~~

We continue to pursue managed growth in our Private Education Loan portfolio in 2017 by leveraging our Sallie Mae brand, our relationship with more than two thousand colleges and universities, and our direct consumer marketing efforts. To help facilitate the expected increase in our Private Education Loan originations, we are diversifying the mix of our funding sources in 2017. We are determined to maintain overall credit quality and cosigner rates in our Smart Option Student Loan originations. Originations were 3 percent higher in the first nine months of 2017 compared with the year-ago period. The average FICO scores at approval and the cosigner rates for originations in the nine months ended September 30, 2017 were 747 and 88.4 percent, compared with 748 and 89.4 percent in the nine months ended September 30, 2016, respectively. The growth rate in originations in the first nine months of 2017 was lower than expected and, as a result, we expect total originations of our Private Education Loans to be approximately $4.8 billion in 2017, a 2.9 percent increase from 2016. Based on information currently available to us, we believe these lower than expected originations are likely attributable to moderating enrollment and tuition growth rates, as compared to growth rates of the past decade, as well as increasing family contributions available due to an improving economy and rising asset valuations.

~~Maintain Our Strong Capital Position~~

We intend to maintain levels of capital at the Bank that significantly exceed those necessary to be considered “well capitalized” by the FDIC. The Company is a source of strength for the Bank and will obtain or provide additional capital as, and if, necessary to the Bank. We regularly evaluate the quality of assets, stability of earnings, and adequacy of our allowance for loan losses, and we continue to believe our existing capital levels are sufficient to support the Bank’s plan for significant growth over the next several years while remaining “well capitalized.” As our balance sheet has grown in 2017, these ratios have declined but remain significantly in excess of the capital levels required to be considered “well capitalized” by our regulators. As of September 30, 2017, the Bank had a Common Equity Tier 1 risk-based capital ratio of 11.8 percent, a Tier 1 risk-based capital ratio of 11.8 percent, a Total risk-based capital ratio of 13.0 percent and a Tier 1 leverage ratio of 11.4 percent, all exceeding the current regulatory guidelines for “well capitalized” institutions by a significant amount. We do not plan to pay a common stock dividend or repurchase shares in 2017 (except to repurchase common stock acquired as a result of taxes withheld in connection with award exercises and vesting under our employee stock-based compensation plans).

On April 5, 2017, we issued our unsecured debt offering of $200 million of 5.125 percent Senior Notes due April 5, 2022 at par. We used the net proceeds from this debt offering to redeem all of our 6.97 percent Series A preferred stock and for general corporate purposes.

~~Manage Operating Expenses While Improving Efficiency~~

We will continue to measure our effectiveness in managing operating expenses by monitoring our non-GAAP operating efficiency ratio. See “- Key Financial Measures - Operating Expenses” in this Form 10-Q for a discussion of the method for calculating this ratio. This ratio provides useful information to investors because it is a measure used by our management team to monitor our effectiveness in managing operating expenses. Other companies may use similarly titled non-GAAP financial measures that are calculated differently from our ratio. Accordingly, our non-GAAP operating efficiency ratio may not be comparable to similar measures used by other companies.

The operating efficiency ratio was 40.6 percent for the three months ended September 30, 2017, compared with 40.7 percent for the three months ended September 30, 2016. The operating efficiency ratio was 39.0 percent for the nine months ended September 30, 2017, compared with 40.9 percent for the nine months ended September 30, 2016. The operating efficiency ratio for the three months ended September 30, 2016 was favorably affected by a $9 million increase in other income due to an increase in the tax indemnification receivable related to uncertain tax positions. The operating efficiency ratio for the nine months ended September 30, 2016 was also favorably affected by the increase in the tax indemnification receivable described above, as well as a $10 million, one-time gain from the change in reserve estimates for our Upromise rewards program. Excluding these items, the operating efficiency ratio for the three and nine month periods ended September 30, 2016 would have been 42.2 percent and 42.0 percent, respectively. The improvement in the non-GAAP operating efficiency ratio in the three and nine month periods ended September 30, 2017 compared with the three and nine month periods ended September 30, 2016, respectively, was primarily due to the growth rate in net interest income exceeding the growth rate in our operating expense base for each period.

We expect this ratio to decline steadily over the next several years as the number of loans on which we earn net interest income grows to a level commensurate with our loan origination platform and we control the growth of our expense base.

~~Enhance Customers’ Experience By Further Improving Delivery of Products and Services~~

We have made significant improvements in our customers’ experience over the last two years, and we will continue to implement strategies and tactics to fulfill our brand and customer experience visions. In 2017, we enhanced customer communications that include an annual summary during in-school periods, enhanced entering into repayment communication designed to help borrowers transition into their repayment period successfully, and simplified billing statements. We also launched new auto debit functionality online to allow customers to enroll with a designated amount greater than their minimum due so they can pay down loans faster. Additionally, we have provided targeted customer service training to further improve our interactions with our customers. We will continue to focus on initiatives that will further simplify the application, fulfillment and servicing experience for our customers, including:

~~Creating an integrated online origination and servicing experience with a single point of entry and improved customer messaging;~~

~~Providing enhanced functionality to our customers that will give them more flexibility to service their accounts online, via chat and mobile, and over the phone; and~~

~~Continuing to support customers throughout the Private Education Loan experience with enhanced communication and tools.~~

~~Sustain Consumer Protection Improvements Made Since the Spin-Off and Maintain our Strong Governance, Risk Oversight and Compliance Infrastructure~~

We have continued to undertake significant work to establish that all customer protection policies, procedures and compliance management systems are sufficient to meet or exceed currently applicable regulatory standards. On March 27, 2017, the Bank received confirmation from the FDIC that effective March 23, 2017, the FDIC terminated the FDIC Consent Order. The termination was issued with no conditions.

In the first quarter of 2017, we also began conducting our own audits of consumer protection processes and procedures, including our compliance management system, using internal audit staff supplemented with staff from the same third-party firm that had conducted the compliance audits since 2014. Our goal is to sustain the improvements implemented to date and consistently comply with or exceed regulatory standards while continuing to improve our customers’ experience and satisfaction levels.

We have continued to advance our overall governance processes, including robust oversight, education, policies and procedures, all supported by strong enterprise risk management, compliance and internal audit functions.

~~Continue Disciplined Expansion of New Products to Increase Level of Engagement With Our Existing Customers and Attract New Customers~~

In 2016, we began to expand the suite of products we provide to customers. We did so by leveraging our core competencies and capabilities, rather than requiring the development or acquisition of new or alternative ones. For example, we leveraged our experience with our Smart Option Student Loan products to launch a Parent Loan program designed for parents who wish to separately finance their children’s education, rather than cosign loans with their children.

In March 2017, through an affiliation with another lender, we launched a credit card program for young professionals. We do not expect this product to have a material impact on 2017 earnings. We are also continuing to develop our infrastructure in 2017 so that in early 2018 we have the capability to originate and service unsecured personal loans to be used for non-educational purposes. In the nine months ended September 30, 2017, we purchased $135 million in Personal Loans. We will also continue to explore other product opportunities in 2017. In this process, we will place a high premium on designing and launching products that meet the needs of our existing customers, attract new customers, and assist both populations in achieving their financial goals. Any 2017 activity will focus on implementation success. We are not forecasting significant contributions to our originations, revenues or net income from any potential new products in 2017.

Continue to Promote a Culture Centered on Our Core Values (Collaboration, Mutual Respect, Honesty, Integrity, Performance, and Accountability), Sustained Through Ongoing Employee Engagement, Recognition, and Development and Aligned with our Mission and Business Plan for Growth

We promote a culture centered on our core values - collaboration, mutual respect, honesty, integrity, performance, and accountability - as we seek to grow our business. When evaluating employee performance, we will review not only what was accomplished by employees, but whether and how they demonstrated our core values in achieving those accomplishments. We will continue to encourage and enable high performance in a variety of ways, including by encouraging employee engagement, and differentiating, recognizing, and rewarding high performing employees. In addition, we plan to invest in our employees by identifying and providing development opportunities that align with our business plan and support succession plans throughout our organization.

Over the course of 2017, to ensure commitment to our culture and core values, we cascaded level-appropriate goals to employees across the Company. As part of our investment in employee development, we finalized our talent development strategy, and established a roadmap to execute on our key talent priorities. We established leadership panels to steer the development of our competency model and provide input into the design of learning programs to support employee development. We also implemented a pilot management training program to provide entry- to mid-level managers with fundamental education, leadership development, and mentorship opportunities. Moreover, we implemented an enhanced talent assessment process to further evaluate performance and potential and effectively align development plans that support succession management. We also launched a business knowledge series to provide all employees with opportunities to learn about our business, capabilities as a Company, and our future. We engaged employees to promote wellness across the Company and also launched a financial wellness education platform. We continued to recognize employees with superior performance and commitment to the Company’s values through our quarterly Awards of Excellence Program. We also launched our 2017 Employee Engagement Survey to gather employee input on how we are doing relative to promoting our culture.

GAAP Results of Operations

We present the results of operations below first on a consolidated basis in accordance with GAAP.

GAAP Statements of Income (Unaudited)


	Three Months Ended September 30,				Increase (Decrease)					Nine Months Ended September 30,					Increase (Decrease)					Three Months Ended March 31,				Increase (Decrease)
(In millions, except per share data)	2017		2016		$			%		2017			2016		$			%		2019		2018		$			%
Interest income:
Loans	$	359	$	268	$	91		34	%	$	1,021		$	765	$	256		33	%	$	553	$	430	$	123		29	%
Investments	2		2		—			—		6			7		(1		)	(14	)	1		2		(1		)	(50	)
Cash and cash equivalents	5		2		3			150		10			5		5			100		12		5		7			140
Total interest income	366		272		94			35		1,037			777		260			33		566		437		129			30
Total interest expense	84		49		35			71		218			131		87			66		164		104		60			58
Net interest income	282		223		59			26		819			646		174			27		402		333		70			21
Less: provisions for credit losses	55		42		13			31		130			116		14			12		64		54		10			19
Net interest income after provisions for credit losses	227		181		46			25		689			530		160			30		338		279		60			22
Non-interest income:
Gains (losses) on derivatives and hedging activities, net	2		1		1			100		(7		)	3		(10		)	(333	)
Gains on derivatives and hedging activities, net																				3		4		(1		)	(25	)
Other income	4		22		(17		)	(77	)	26			56		(30		)	(54	)	13		9		4			44
Total non-interest income	6		23		(16		)	(70	)	19			59		(40		)	(68	)	16		13		3			23
Non-interest expenses:
Total operating expenses	116		100		16			16		330			287		43			15
Acquired intangible asset amortization expense	—		—		—			—		—			1		(1		)	(100	)
Total non-interest expenses	116		100		16			16		330			288		42			15		140		125		15			12

Income before income tax expense	117		104		13			13		378			301		77			26		214		167		47			28
Income tax expense	41		47		(7		)	(15	)	136			121		15			12		56		41		15			37
Net income	76		57		20			35		242			180		62			34		158		126		32			25
Preferred stock dividends	3		5		(2		)	(40	)	13			16		(3		)	(19	)	4		3		1			33
Net income attributable to SLM Corporation common stock	$	73	$	52	$	22		42	%	$	229		$	164	$	65		40	%	$	154	$	123	$	31		25	%

Basic earnings per common share attributable to SLM Corporation	$	0.17	$	0.12	$	0.05		42	%	$	0.53		$	0.38	$	0.15		39	%	$	0.35	$	0.28	$	0.07		25	%

Diluted earnings per common share attributable to SLM Corporation	$	0.17	$	0.12	$	0.05		42	%	$	0.52		$	0.38	$	0.14		37	%	$	0.35	$	0.28	$	0.07		25	%
Dividends per common share attributable to SLM Corporation																				$	0.03	$	—	$	0.03		100	%

GAAP Consolidated Earnings Summary

Three Months Ended ~~September 30, 2017~~March 31, 2019 Compared with Three Months Ended ~~September 30, 2016~~March 31, 2018

For the three months ended ~~September 30, 2017,~~March 31, 2019, net income was ~~$76~~$158 million, or ~~$0.17~~$0.35 diluted earnings per common share, compared with net income of ~~$57~~$126 million, or ~~$0.12~~$0.28 diluted earnings per common share, for the three months ended ~~September 30, 2016.~~March 31, 2018. The year-over-year increase in net income ~~increase~~ was ~~affected by~~due to a ~~$59~~$70 million increase in net interest income and a $7$3 million ~~decrease~~increase in non-interest income, ~~tax expense,~~ which ~~was~~were offset by a ~~$13~~$10 million increase in provisions for credit losses, a ~~$17 million decrease in other income, and a $16~~$15 million increase in total non-interest ~~expenses.~~expenses and a $15 million increase in income tax expense.

The primary contributors to each of the identified drivers of changes in net income for the current quarter compared with the year-ago quarter are as follows:

•Net interest income increased by ~~$59~~$70 million in the current quarter compared with the year-ago quarter ~~primarily~~ due to a ~~$3.3~~$3.6 billion increase in average ~~Private Education Loans outstanding.~~loans outstanding and an 11 basis point increase in net interest margin. Net interest margin increased ~~by 27 basis points~~ primarily as a result of ~~an increase in the ratio of higher yielding Private Education Loans relative to our other interest earning assets, growth in the higher yielding Personal Loan portfolio, and~~ the benefit from an increase in LIBOR rates during 2018, which increased the yield on our ~~variable rate~~variable-rate Private Education Loan portfolio more than it increased our cost of ~~funds.~~funds, and of growth in the higher-yielding Personal Loan portfolio. Cost of funds increased primarily due to the increase in LIBOR rates as well as ~~an increase in the amount~~a higher percentage of ~~funding from higher-cost, long-term~~our total interest-bearing liabilities consisting of higher cost other interest-bearing liabilities, which include both our unsecured and secured borrowings.

•Provisions for credit losses in the current quarter increased ~~$13~~$10 million compared with the year-ago quarter. This increase was primarily the result of ~~an additional $2.5 billion of loans being in repayment~~growth in the ~~third quarter of 2017~~provision for our Personal Loan portfolio. The provision for Personal Loans grew because the portfolio increased from $676 million at March 31, 2018 to $1.2 billion at March 31, 2019. Provision expenses for our Private Education Loan portfolio remained unchanged compared with the year-ago quarter ~~offset by a benefit from a $9 million reduction in our estimate~~because of ~~expected future net~~improved credit ~~losses.~~performance.

•Gains ~~(losses)~~ on derivatives and hedging activities, net, ~~resulted in a net gain of $2~~decreased $1 million in the ~~third~~first quarter of ~~2017~~2019 compared with ~~a net gain of $1 million in~~ the year-ago quarter.

•Other income ~~decreased $17~~in the current quarter increased $4 million from the year-ago quarter primarily due to a $9$4 million increase in the tax indemnification receivable related to uncertain tax positions recorded in the third of quarter 2016, a $4 million reduction in the tax indemnification receivable recorded in the third quarter of 2017, and lower fee income related to our Upromise rewards business. Changes in the tax indemnification receivable have an equal and offsetting amount recorded in income tax expense.positions.

•~~Third-quarter 2017 operating expenses and acquired intangible asset amortization~~First-quarter 2019 non-interest expenses were ~~$116~~$140 million, compared with ~~$100~~$125 million in the year-ago quarter. The increase in ~~operating~~non-interest expenses was primarily driven by growth in the portfolio and costs related to product diversification. Our non-GAAP efficiency ratio declined to 33.8 percent at March 31, 2019 from 36.5 percent at March 31, 2018. The decline was primarily the result of net interest income increasing 21 percent while non-interest expenses only increased ~~technology costs, FDIC assessment fees, and marketing and personnel costs, largely driven~~ by ~~the growth in our Private Education Loan portfolio, which increased 24~~12 percent ~~from~~compared to the year-ago quarter.

•~~Income~~First-quarter 2019 income tax expense ~~decreased $7~~was $56 million, compared with $41 million in the year-ago quarter. The effective tax rate ~~decreased~~increased in the ~~third-quarter 2017~~first-quarter 2019 to ~~34.7~~26.2 percent from ~~45.5~~24.5 percent in the year-ago quarter. The ~~change~~growth in the effective tax rate was primarily ~~as a result of a reduction in state taxes and the release of reserves for uncertain tax positions. The rate in the third quarter of 2016 was negatively affected~~driven by a $9$4 million increase in ~~the reserve for~~ indemnified uncertain tax positions. ~~The changes due to indemnified uncertain tax positions had no impact on earnings per share as we recorded a matching offset in other income related to the tax indemnification.~~

~~Nine Months Ended September 30, 2017 Compared with Nine Months Ended September 30, 2016~~

~~For the nine months ended September 30, 2017, net income~~This amount was $242 million, or $0.52 diluted earnings per common share, compared with net income of $180 million, or $0.38 diluted earnings per common share for the nine months ended September 30, 2016. The year-over-year net income increase was affected by a $174 million increase in net interest income, which wasfully offset by a ~~$14 million~~corresponding increase in ~~provisions for credit losses, a $30 million decrease~~our indemnification receivable, which was recorded in other ~~income, a $42 million increase in total non-interest expenses, a $15 million increase in income~~income. Absent this item, the effective tax ~~expense, and a $10 million reduction in our derivatives and hedging activities.~~

~~The primary contributors to each of the identified drivers of changes in net income for the first nine months of 2017 compared with the year-ago period are as follows:~~

•Net interest income increased by $174 million in the first nine months compared with the year-ago period primarily due to a $3.5 billion increase in average Private Education Loans outstanding. Net interest margin increased by 17 basis pointsrate would have been 24.9 percent.

primarily as a result of an increase in the ratio of higher yielding Private Education Loans relative to our other interest earning assets, growth in the higher yielding Personal Loan portfolio, and the benefit from increases in LIBOR rates which increased the yield on our variable rate Private Education Loan portfolio more than it increased our cost of funds. Cost of funds increased due to the increase in LIBOR rates, as well as an increase in the amount of funding from higher-cost, long-term secured borrowings.

•Provisions for credit losses increased $14 million compared with the year-ago period. This increase was primarily the result of an additional $2.5 billion of loans being in repayment in the first nine months of 2017 compared with the year-ago period, offset by a benefit from a reduction in our estimate of expected future net credit losses.

•Gains (losses) on derivatives and hedging activities, net, resulted in a net loss of $7 million in the first nine months of 2017 compared with a net gain of $3 million in the year-ago period. The primary factors affecting the change were interest rates and whether derivatives qualified for hedge accounting treatment.

•Other income decreased $30 million primarily due to a $10 million change in reserve estimates related to our Upromise rewards business that was recorded in the first quarter of 2016, a $9 million increase in the tax indemnification receivable related to uncertain tax positions recorded in the third quarter of 2016, a $4 million reduction in the tax indemnification receivable recorded in the third quarter of 2017, and lower fee income related to our Upromise rewards business. Changes in the tax indemnification receivable have an equal and offsetting amount recorded in income tax expense.

•Operating expenses and acquired intangible asset amortization expenses in the first nine months of 2017 were $330 million, compared with $288 million in the year-ago period. The increase in operating expenses was primarily the result of increased technology costs, FDIC assessment fees, marketing, servicing, and personnel costs, largely driven by growth in our loan portfolio.

•Income tax expense in the first nine months of 2017 increased $15 million compared with the year-ago period. The effective tax rate decreased in the first nine months of 2017 to 36.0 percent from 40.2 percent in the year-ago period. The change was primarily due to the release of reserves for uncertain tax positions and a $6 million benefit recorded in the first quarter of 2017 related to the new stock compensation accounting standard, which changed the treatment of excess tax benefits/deficiencies related to the settlement of employee stock-based awards. In addition, in the nine months ended September 30, 2016, we recorded an additional $9 million of expense related to uncertain tax positions.

“Core ~~Earnings~~”Earnings”

We prepare financial statements in accordance with GAAP. However, we also produce and report our after-tax earnings on a separate basis that we refer to as “Core Earnings.” While pre-Spin-Off SLM also reported a metric by that name, what we now report and what we describe below is significantly different and should not be compared to any Core Earnings reported by pre-Spin-Off SLM. The difference between our “Core Earnings” and GAAP results for periods presented generally is driven by the unrealized, mark-to-market gains (losses) on derivatives contracts recognized in GAAP, but not in “Core Earnings.”

“Core Earnings” recognizes the difference in accounting treatment based upon whether a derivative qualifies ~~for hedge accounting treatment and eliminates the earnings impact associated with hedge ineffectiveness and derivatives we use as an economic hedge but which do not qualify~~ for hedge accounting treatment. We enter into derivative instruments to economically hedge interest rate and cash flow risk associated with our portfolio. We believe that our derivatives are effective economic hedges, and as such, are a critical element of our interest rate risk management strategy. Those derivative instruments that qualify for hedge accounting treatment have their related cash flows recorded in interest income or interest expense along with the hedged item. ~~Hedge ineffectiveness related to these derivatives is recorded in “Gains (losses) on derivatives and hedging activities, net.”~~ Some of our derivatives do not qualify for hedge accounting treatment and the stand-alone derivative must be marked-to-fair value in the income statement with no consideration for the corresponding change in fair value of the hedged item. These gains and losses, recorded in “Gains (losses) on derivatives and hedging activities, net,” are primarily caused by interest rate volatility and changing credit spreads during the period as well as the volume and term of derivatives not receiving hedge accounting treatment. Cash flows on derivative instruments that do not qualify for hedge accounting are not recorded in interest income and interest expense; they are recorded in non-interest income: “Gains ~~(losses)~~ on derivatives and hedging activities, net.”

~~The~~In the third-quarter 2018, we changed our definition of “Core Earnings” to no longer exclude ineffectiveness related to derivative instruments that are receiving hedge accounting treatment. As such, the only adjustments required to reconcile from our “Core Earnings” results to our GAAP results of operations, net of tax, relate to differing treatments for our derivative instruments used to hedge our economic risks that do not qualify for hedge accounting ~~treatment or~~treatment. For periods beginning July 1, 2018, the amount recorded in “Gains on derivatives and hedging activities, net” includes (a) the accrual of the current payment on the interest rate swaps that do not qualify for hedge accounting treatment ~~but result~~and (b) the change in ~~ineffectiveness, net~~fair values related to future expected cash flows for derivatives that do not qualify for hedge accounting treatment. For purposes of ~~tax. The~~“Core Earnings”, we are including in GAAP earnings the current period accrual amounts (interest reclassification) on the swaps and excluding the change in fair values for those derivatives not qualifying for hedge accounting treatment. “Core Earnings” is meant to represent what earnings would have been had these derivatives qualified for hedge accounting and there was no ineffectiveness.

For periods prior to July 1, 2018, the amount

recorded in “Gains (losses) on derivatives and hedging activities, net” includes (a) the accrual of the current payment on ~~the~~those interest rate swaps that do not qualify for hedge accounting treatment, (b) the change in fair values related to future expected cash flows for derivatives that do not qualify for hedge accounting treatment and (c) ineffectiveness on derivatives that receive hedge accounting treatment. For purposes of “Core Earnings”, in those periods prior to July 1, 2018, we are including in GAAP earnings the current period accrual amounts (interest reclassification) on the swaps and excluding the remaining ineffectiveness (and change in fair values for those derivatives not qualifying for hedge accounting treatment). “Core Earnings” in those periods is meant to represent what earnings would have been had these derivatives qualified for hedge accounting and there was no ineffectiveness.

“Core Earnings” are not a substitute for reported results under GAAP. We provide a “Core Earnings” basis of presentation because (i) earnings per share computed on a “Core Earnings” basis is one of several measures we utilize in establishing management incentive compensation and (ii) we believe it better reflects the financial results for derivatives that are economic hedges of interest rate risk, but which do not qualify for hedge accounting treatment.

GAAP provides a uniform, comprehensive basis of accounting. Our “Core Earnings” basis of presentation differs from GAAP in the way it treats derivatives as described above.

The following table shows the amount in “Gains ~~(losses)~~ on derivatives and hedging activities, net” that relates to the interest reclassification on the derivative contracts.

Three Months Ended
September 30, Nine Months Ended
September 30,
(Dollars in thousands) 2017 2016 2017 2016

Hedge ineffectiveness gains (losses) $ 1,723
$ 2,356
$ (6,302 ) $ 476
Unrealized (losses) gains on instruments not in a hedging relationship (247 ) (1,525 ) (1,189 ) 783
Interest reclassification 185
537
165
1,897
Gains (losses) on derivatives and hedging activities, net $ 1,661
$ 1,368
$ (7,326 ) $ 3,156



	Three Months Ended March 31,
(Dollars in thousands)	2019			2018

Hedge ineffectiveness gains prior to adoption of ASU No. 2017-12	$	—		$	8,537
Unrealized gains (losses) on instruments not in a hedging relationship	4,202			(4,755		)
Interest reclassification	(1,439		)	110
Gains on derivatives and hedging activities, net	$	2,763		$	3,892

The following table reflects adjustments associated with our derivative activities.


	Three Months Ended September 30,						Nine Months Ended September 30,					Three Months Ended March 31,
(Dollars in thousands, except per share amounts)	2017			2016			2017		2016			2019			2018

“Core Earnings” adjustments to GAAP:

GAAP net income attributable to SLM Corporation	$	76,371		$	56,965		$	241,931	$	180,085
GAAP net income												$	158,189		$	126,254
Preferred stock dividends	3,028			5,316			12,577		15,698			4,468			3,397
GAAP net income attributable to SLM Corporation common stock	$	73,343		$	51,649		$	229,354	$	164,387		$	153,721		$	122,857

Adjustments:
Net impact of derivative accounting⁽¹⁾	(1,475		)	(831		)	7,491		(1,259		)	(4,202		)	(3,782		)
Net tax effect⁽²⁾	(563		)	(320		)	2,861		(483		)	(1,027		)	(919		)
Total “Core Earnings” adjustments to GAAP	(912		)	(511		)	4,630		(776		)	(3,175		)	(2,863		)

“Core Earnings” attributable to SLM Corporation common stock	$	72,431		$	51,138		$	233,984	$	163,611		$	150,546		$	119,994

GAAP diluted earnings per common share	$	0.17		$	0.12		$	0.52	$	0.38		$	0.35		$	0.28
Derivative adjustments, net of tax	—			—			0.01		—			(0.01		)	(0.01		)
“Core Earnings” diluted earnings per common share	$	0.17		$	0.12		$	0.53	$	0.38		$	0.34		$	0.27

______

(1) Derivative Accounting: “Core Earnings” exclude periodic unrealized gains and losses caused by the mark-to-market valuations on derivatives that do not qualify for hedge accounting treatment under GAAP, ~~as well as~~but include current period accruals on the derivative instruments. For periods prior to July 1, 2018, “Core Earnings” also exclude the periodic unrealized gains and losses that are a result of ineffectiveness recognized related to effective hedges under GAAP, ~~(but include current period accruals on the derivative instruments),~~ net of tax. Under GAAP, for our derivatives held to maturity, the cumulative net unrealized gain or loss over the life of the contract will equal $0.

(2) “Core Earnings” tax rate is based on the effective tax rate at the Bank where the derivative instruments are held.

Financial Condition

Average Balance Sheets - GAAP

The following table reflects the rates earned on interest-earning assets and paid on interest-bearing liabilities and reflects our net interest margin on a consolidated basis.


	Three Months Ended September 30,								Nine Months Ended September 30,								Three Months Ended March 31,
	2017				2016				2017				2016				2019				2018
(Dollars in thousands)	Balance		Rate		Balance		Rate		Balance		Rate		Balance		Rate		Balance		Rate		Balance		Rate
Average Assets
Private Education Loans	$	16,228,751	8.50	%	$	12,881,890	8.00	%	$	15,791,557	8.37	%	$	12,307,932	8.00	%	$	21,732,826	9.50	%	$	18,659,717	8.84	%
FFELP Loans	960,185		4.02		1,049,803		3.52		981,106		3.86		1,076,394		3.48		837,950		4.94		919,717		4.25
Personal and other loans	86,441		9.66		593		3.43		61,547		9.41		314		4.04
Personal Loans																	1,176,466		11.81		528,644		10.64
Taxable securities	316,444		2.42		388,886		2.24		330,256		2.54		383,844		2.49		188,538		3.05		296,512		2.65
Cash and other short-term investments	1,548,215		1.20		1,599,320		0.50		1,403,702		1.00		1,299,894		0.50		2,033,492		2.31		1,451,437		1.47
Total interest-earning assets	19,140,036		7.59	%	15,920,492		6.81	%	18,568,168		7.47	%	15,068,378		6.89	%	25,969,272		8.85	%	21,856,027		8.11	%

Non-interest-earning assets	1,120,714				800,567				1,028,235				757,336				1,164,857				1,111,430

Total assets	$	20,260,750			$	16,721,059			$	19,596,403			$	15,825,714			$	27,134,129			$	22,967,457

Average Liabilities and Equity
Brokered deposits	$	7,270,750	1.92	%	$	7,311,591	1.32	%	$	6,989,486	1.70	%	$	7,104,453	1.31	%	$	10,540,219	2.72	%	$	8,673,261	2.04	%
Retail and other deposits	7,054,553		1.49		5,091,021		1.08		6,800,832		1.35		4,805,039		1.05		8,915,526		2.51		7,727,564		1.77
Other interest-bearing liabilities⁽¹⁾	2,964,696		2.99		1,602,760		2.78		2,822,009		2.86		1,231,972		2.62		4,270,252		3.63		3,461,050		3.18
Total interest-bearing liabilities	17,289,999		1.93	%	14,005,372		1.40	%	16,612,327		1.75	%	13,141,464		1.33	%	23,725,997		2.81	%	19,861,875		2.14	%

Non-interest-bearing liabilities	597,075				488,198				603,160				510,652				395,974				561,546
Equity	2,373,676				2,227,489				2,380,916				2,173,598				3,012,158				2,544,036
Total liabilities and equity	$	20,260,750			$	16,721,059			$	19,596,403			$	15,825,714			$	27,134,129			$	22,967,457

Net interest margin			5.85	%			5.58	%			5.90	%			5.73	%			6.28	%			6.17	%

_________________


⁽¹⁾	Includes the average balance of our unsecured borrowing, as well as secured borrowings and amortization expense of transaction costs related to our ~~ABCP~~term asset-backed securitizations and our Secured Borrowing Facility.

Rate/Volume Analysis - GAAP

The following rate/volume analysis shows the relative contribution of changes in interest rates and asset volumes.


(Dollars in thousands)	Increase		Change Due To⁽¹⁾				Increase		Change Due To⁽¹⁾
(Dollars in thousands)	Increase		Rate		Volume		Increase		Rate		Volume
Three Months Ended September 30, 2017 vs. 2016
Three Months Ended March 31, 2019 vs. 2018
Interest income	$	93,687	$	33,644	$	60,043	$	129,222	$	41,914	$	87,308
Interest expense	34,901		21,524		13,377		59,555		36,758		22,797
Net interest income	$	58,786	$	11,147	$	47,639	$	69,667	$	6,047	$	63,620

Nine Months Ended September 30, 2017 vs. 2016
Interest income	$	260,574	$	69,747	$	190,827
Interest expense	86,448		46,935		39,513
Net interest income	$	174,126	$	20,714	$	153,412

_________________


⁽¹⁾	Changes in income and expense due to both rate and volume have been allocated in proportion to the relationship of the absolute dollar amounts of the change in each. The changes in income and expense are calculated independently for each line in the table. The totals for the rate and volume columns are not the sum of the individual lines.

Summary of Our Loan Portfolio

Ending Loan Balances, net


	September 30, 2017												March 31, 2019
(Dollars in thousands)	Private Education Loans			FFELP Loans			Personal Loans			Total Portfolio			Private Education Loans			FFELP Loans			Personal Loans			Total Portfolio
Total loan portfolio:
In-school⁽¹⁾	$	3,641,923		$	384		$	—		$	3,642,307		$	4,515,470		$	155		$	—		$	4,515,625
Grace, repayment and other⁽²⁾	13,490,984			948,796			132,100			14,571,880			17,276,152			828,485			1,162,874			19,267,511
Total, gross	17,132,907			949,180			132,100			18,214,187			21,791,622			828,640			1,162,874			23,783,136
Deferred origination costs and unamortized premium	53,501			2,696			—			56,197
Deferred origination costs and unamortized premium/(discount)													70,858			2,323			394			73,575
Allowance for loan losses	(227,167		)	(1,352		)	(1,400		)	(229,919		)	(285,946		)	(1,760		)	(70,619		)	(358,325		)
Total loan portfolio	$	16,959,241		$	950,524		$	130,700		$	18,040,465
Total loan portfolio, net													$	21,576,534		$	829,203		$	1,092,649		$	23,498,386

% of total	94		%	5		%	1		%	100		%	92		%	3		%	5		%	100		%

^____________

⁽¹⁾ ~~Loans for customers still attending school and who are not yet required to make payments on the loan.~~

⁽²⁾ ~~Includes loans in deferment or forbearance.~~


⁽¹⁾	Loans for customers still attending school and who are not yet required to make payments on the loans.


⁽²⁾	Includes loans in deferment or forbearance. Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period.


	December 31, 2016												December 31, 2018
(Dollars in thousands)	Private Education Loans			FFELP Loans			Personal Loans			Total Portfolio			Private Education Loans			FFELP Loans			Personal Loans			Total Portfolio
Total loan portfolio:
In-school⁽¹⁾	$	3,371,870		$	377		$	—		$	3,372,247		$	4,037,125		$	163		$	—		$	4,037,288
Grace, repayment and other⁽²⁾	10,879,805			1,010,531			12,893			11,903,229			16,467,340			846,324			1,190,091			18,503,755
Total, gross	14,251,675			1,010,908			12,893			15,275,476			20,504,465			846,487			1,190,091			22,541,043
Deferred origination costs and unamortized premium	44,206			2,941						47,147
Deferred origination costs and unamortized premium/(discount)													68,321			2,379			297			70,997
Allowance for loan losses	(182,472		)	(2,171		)	(58		)	(184,701		)	(277,943		)	(977		)	(62,201		)	(341,121		)
Total loan portfolio	$	14,113,409		$	1,011,678		$	12,835		$	15,137,922
Total loan portfolio, net													$	20,294,843		$	847,889		$	1,128,187		$	22,270,919

% of total	93		%	7		%	—		%	100		%	91		%	4		%	5		%	100		%

^____________


⁽¹⁾	Loans for customers still attending school and who are not yet required to make payments on the loans.


⁽²⁾	Includes loans in deferment or forbearance. Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period.

⁽¹⁾ ~~Loans for customers still attending school and who are not yet required to make payments on the loan.~~

⁽²⁾ ~~Includes loans in deferment or forbearance.~~

Average Loan Balances (net of unamortized premium/discount)


	Three Months Ended September 30,								Nine Months Ended September 30,								Three Months Ended March 31,
(Dollars in thousands)	2017				2016				2017				2016				2019				2018
Private Education Loans	$	16,228,751	94	%	$	12,881,890	92	%	$	15,791,557	94	%	$	12,307,932	92	%	$	21,732,826	92	%	$	18,659,717	93	%
FFELP Loans	960,185		6		1,049,803		8		981,106		6		1,076,394		8		837,950		3		919,717		4
Personal Loans	86,441		—		—		—		61,263		—		—		—		1,176,466		5		528,644		3
Total portfolio	$	17,275,377	100	%	$	13,931,693	100	%	$	16,833,926	100	%	$	13,384,326	100	%	$	23,747,242	100	%	$	20,108,078	100	%

Loan Activity


	Three Months Ended September 30, 2017												Three Months Ended March 31, 2019
(Dollars in thousands)	Private Education Loans			FFELP Loans			Personal Loans			Total Portfolio			Private Education Loans			FFELP Loans			Personal Loans			Total Portfolio
Beginning balance	$	15,523,338		$	968,398		$	68,690		$	16,560,426		$	20,294,843		$	847,889		$	1,128,187		$	22,270,919
Acquisitions and originations	1,896,620			—			70,748			1,967,368
Acquisitions and originations:
Fixed-rate													1,443,953			—			120,890			1,564,843
Variable-rate													688,781			—			—			688,781
Total acquisitions and originations													2,132,734			—			120,890			2,253,624
Capitalized interest and deferred origination cost premium amortization	77,510			8,732			—			86,242			121,105			7,432			(58		)	128,479
Sales	(2,025		)	—			—			(2,025		)	—			—			—			—
Loan consolidations to third parties	(144,028		)	(9,526		)	—			(153,554		)
Loan consolidations to third-parties													(386,149		)	(8,031		)	—			(394,180		)
Allowance													(8,003		)	(783		)	(8,418		)	(17,204		)
Repayments and other	(392,174		)	(17,080		)	(8,738		)	(417,992		)	(577,996		)	(17,304		)	(147,952		)	(743,252		)
Ending balance	$	16,959,241		$	950,524		$	130,700		$	18,040,465		$	21,576,534		$	829,203		$	1,092,649		$	23,498,386


	Three Months Ended September 30, 2016									Three Months Ended March 31, 2018
(Dollars in thousands)	Private Education Loans			FFELP Loans			Total Portfolio			Private Education Loans			FFELP Loans			Personal Loans			Total Portfolio
Beginning balance	$	12,183,293		$	1,062,133		$	13,245,426		$	17,244,830		$	929,159		$	393,652		$	18,567,641
Acquisitions and originations	1,838,076			—			1,838,076
Acquisitions and originations:
Fixed-rate										941,444			—			327,181			1,268,625
Variable-rate										1,031,510			—			—			1,031,510
Total acquisitions and originations										1,972,954			—			327,181			2,300,135
Capitalized interest and deferred origination cost premium amortization	57,315			8,158			65,473			95,398			7,777			—			103,175
Sales	(2,176		)	—			(2,176		)	(2,036		)	—			—			(2,036		)
Loan consolidations to third parties	(65,161		)	(11,847		)	(77,008		)
Loan consolidations to third-parties										(223,751		)	(7,429		)	—			(231,180		)
Allowance										(8,388		)	19			(12,279		)	(20,648		)
Repayments and other	(285,388		)	(23,899		)	(309,287		)	(478,284		)	(20,231		)	(51,968		)	(550,483		)
Ending balance	$	13,725,959		$	1,034,545		$	14,760,504		$	18,600,723		$	909,295		$	656,586		$	20,166,604

Nine Months Ended September 30, 2017
(Dollars in thousands)
Private
Education
Loans

FFELP
Loans

Personal
Loans

Total
Portfolio
Beginning balance $ 14,113,409
$ 1,011,678
$ 12,835
$ 15,137,922
Acquisitions and originations 4,180,209
—
134,502
4,314,711
Capitalized interest and deferred origination cost premium amortization 221,437
25,255
—
246,692
Sales (5,497 ) —
—
(5,497 )
Loan consolidations to third parties (408,198 ) (30,164 ) —
(438,362 )
Repayments and other (1,142,119 ) (56,245 ) (16,637 ) (1,215,001 )
Ending balance $ 16,959,241
$ 950,524
$ 130,700
$ 18,040,465

Nine Months Ended September 30, 2016
(Dollars in thousands)
Private
Education
Loans

FFELP
Loans

Total
Portfolio
Beginning balance $ 10,515,505
$ 1,115,086
$ 11,630,591
Acquisitions and originations 4,072,631
—
4,072,631
Capitalized interest and deferred origination cost premium amortization 158,111
26,873
184,984
Sales (7,912 ) —
(7,912 )
Loan consolidations to third parties (173,142 ) (34,896 ) (208,038 )
Repayments and other (839,234 ) (72,518 ) (911,752 )
Ending balance $ 13,725,959
$ 1,034,545
$ 14,760,504

“Loan consolidations to ~~third parties”~~third-parties” and “Repayments and other” are both significantly affected by the volume of loans in our portfolio in full principal and interest repayment status. Loans in full principal and interest repayment status in our Private Education Loan portfolio at ~~September 30, 2017~~March 31, 2019 increased by 4824 percent compared with ~~September 30, 2016,~~March 31, 2018, and now total 3241 percent of our Private Education Loan ~~portfolio.~~

In the second quarter of 2017, we improved our methodology for identifying “Loan consolidations to third parties” for Private Education Loans. This improvement in methodology resulted in certain loans previously included in “Repayments and other” in the first quarter of 2017, three months ended September 30, 2016 and nine months ended September 30, 2016, being re-classified as “Loan consolidations to third parties.” Therefore, for these periods, we have updated the “Loan consolidations to third parties” and “Repayments and other” line items to reflect this re-allocation. For these periods, the sum of the “Loan consolidations to third parties” and “Repayment and other” line items did not change.portfolio at March 31, 2019.

“Loan consolidations to ~~third parties”~~third-parties” for the three months ended ~~September 30, 2017~~March 31, 2019 total ~~2.6~~4.4 percent of our Private Education Loan portfolio in full principal and interest repayment status at ~~September 30, 2017,~~March 31, 2019, or ~~0.9~~1.8 percent of our total ~~loan~~Private Education Loan portfolio at ~~September 30, 2017 (which percentages are unchanged from the corresponding percentages for the three months ended June 30, 2017),~~March 31, 2019, compared with the year-ago period of ~~1.8~~3.1 percent of our Private Education Loan portfolio in full principal and interest repayment status, or ~~0.5~~1.2 percent of our total Private Education Loan portfolio, respectively. Historical experience has shown that loan consolidation activity is heightened in the period when the loan initially enters full principal and interest repayment status and then subsides over time.

The “Repayments and other” category includes all scheduled repayments, as well as voluntary prepayments, made on loans in repayment (including loans in full principal and interest repayment status) and also includes charge-offs. Consequently,

this category can be significantly affected by the volume of loans in repayment. The increase in the volume of loans in

repayment accounts for the ~~vast~~ majority of the aggregate increase in loan consolidations, scheduled repayments, unscheduled prepayments and capitalized interest set forth above.

In the second quarter of 2017, we increased our life of loan voluntary constant prepayment rate expectation to 6.0 percent from 5.1 percent, which contributed to a lowering of the weighted average life on our Private Education Loan portfolio from 5.7 years to 5.5 years, as of June 30, 2017, reflecting the increased repayment activity and portfolio seasoning as, increasingly, more significant portions of our Private Education Loan portfolio enter full principal and interest repayment status. The significant portion of our Private Education Loan portfolio that is not yet in full principal and interest repayment status and for which principal payments are not yet required continues generating capitalized interest. There was no change to our life of loan voluntary constant prepayment rate expectation in the third quarter of 2017 and the weighted average life on our Private Education Loan portfolio was 5.6 years as of September 30, 2017.

Private Education Loan Originations

The following table summarizes our Private Education Loan originations. Originations represent loans that were funded or acquired during the period presented.


	Three Months Ended September 30,										Three Months Ended March 31,
(Dollars in thousands)	2017			%		2016			%		2019			%		2018			%
Smart Option - interest only⁽¹⁾	$	467,785		25	%	$	468,237		26	%	$	480,712		23	%	$	445,720		23	%
Smart Option - fixed pay⁽¹⁾	555,945			29		542,504			30		594,461			28		517,847			26
Smart Option - deferred⁽¹⁾	827,607			44		795,305			43		819,793			38		797,425			40
Smart Option - principal and interest	3,204			—		4,306			—		3,958			—		2,268			—
Graduate Loan											181,678			9		172,612			9
Parent Loan	33,724			2		20,968			1		50,466			2		36,297			2
Total Private Education Loan originations	$	1,888,265		100	%	$	1,831,320		100	%	$	2,131,068		100	%	$	1,972,169		100	%

Percentage of loans with a cosigner	89		%			90		%			88.6		%			89.3		%
Average FICO at approval⁽²⁾	747					749					747					746

Nine Months Ended
September 30,
(Dollars in thousands) 2017 % 2016 %
Smart Option - interest only⁽¹⁾
$ 1,057,895
25 % $ 1,033,009
25 %
Smart Option - fixed pay⁽¹⁾
1,194,522
29
1,225,650
30
Smart Option - deferred⁽¹⁾
1,841,865
44
1,770,804
44
Smart Option - principal and interest 6,901
—
6,634
—
Parent Loan 65,073
2
22,478
1
Total Private Education Loan originations $ 4,166,256
100 % $ 4,058,575
100 %

Percentage of loans with a cosigner 88 % 89 %
Average FICO at approval⁽²⁾
747
748

_____________

⁽¹⁾Interest only, fixed pay and deferred describe the payment option while in school or in grace period.

⁽²⁾Represents the higher credit score of the cosigner or the borrower.

Allowance for Loan Losses

~~Education Loan~~ Allowance for Loan Losses Activity


	Three Months Ended September 30,																		Three Months Ended March 31,
	2017									2016									2019												2018
(Dollars in thousands)	Private Education Loans			FFELP Loans			Total Portfolio			Private Education Loans			FFELP Loans			Total Portfolio			Private Education Loans			FFELP Loans			Personal Loans			Total Portfolio			Private Education Loans			FFELP Loans			Personal Loans			Total Portfolio
Beginning balance	$	205,024		$	1,606		$	206,630		$	142,628		$	2,297		$	144,925		$	277,943		$	977		$	62,201		$	341,121		$	243,715		$	1,132		$	6,628		$	251,475
Less:
Charge-offs	(34,280		)	(181		)	(34,461		)	(22,072		)	(356		)	(22,428		)	(39,577		)	(234		)	(15,251		)	(55,062		)	(37,353		)	(250		)	(1,200		)	(38,803		)
Loan sales⁽¹⁾	(1,257		)	—			(1,257		)	(1,401		)	—			(1,401		)	—			—			—			—			(1,216		)	—			—			(1,216		)
Plus:
Recoveries	4,560			—			4,560			2,973			—			2,973			5,697			—			909			6,606			5,087			—			31			5,118
Provision for loan losses	53,120			(73		)	53,047			40,502			268			40,770			41,883			1,017			22,760			65,660			41,870			231			13,448			55,549
Ending balance	$	227,167		$	1,352		$	228,519		$	162,630		$	2,209		$	164,839		$	285,946		$	1,760		$	70,619		$	358,325		$	252,103		$	1,113		$	18,907		$	272,123

Troubled debt restructurings⁽²⁾	$	942,561		$	—		$	942,561		$	503,632		$	—		$	503,632		$	1,327,668		$	—		$	—		$	1,327,668		$	1,043,103		$	—		$	—		$	1,043,103

Nine Months Ended September 30,
2017 2016
(Dollars in thousands)
Private
Education
Loans

FFELP
Loans

Total
Portfolio

Private
Education
Loans

FFELP
Loans

Total
Portfolio
Beginning balance $ 182,472
$ 2,171
$ 184,643
$ 108,816
$ 3,691
$ 112,507
Less:
Charge-offs (93,235 ) (658 ) (93,893 ) (64,979 ) (1,086 ) (66,065 )
Loan sales⁽¹⁾
(3,391 ) —
(3,391 ) (5,008 ) —
(5,008 )
Plus:
Recoveries 12,216
—
12,216
7,098
—
7,098
Provision for loan losses 129,105
(161 ) 128,944
116,703
(396 ) 116,307
Ending balance $ 227,167
$ 1,352
$ 228,519
$ 162,630
$ 2,209
$ 164,839

Troubled debt restructurings⁽²⁾
$ 942,561
$ —
$ 942,561
$ 503,632
$ —
$ 503,632

_________


⁽¹⁾	Represents fair value adjustments on loans sold.


⁽²⁾	Represents the unpaid principal balance of loans classified as troubled debt restructurings.

Private Education Loan Allowance for Loan Losses

In establishing the allowance for Private Education Loan losses as of ~~September 30, 2017,~~March 31, 2019, we considered several factors with respect to our Private Education Loan portfolio, in particular, credit quality and delinquency, forbearance and charge-off trends.

Private Education Loans in full principal and interest repayment status were 3241 percent of our total Private Education Loan portfolio at ~~September 30, 2017~~March 31, 2019, compared with 2738 percent at ~~September 30, 2016.~~March 31, 2018.

For a more detailed discussion of our policy for determining the collectability of Private Education Loans and maintaining our allowance for Private Education Loan losses, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates — Allowance for Loan Losses” in the ~~2016~~2018 Form 10-K.

The table below presents our Private Education Loan delinquency trends. Loans in repayment include loans making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period.


	Private Education Loans										Private Education Loans
	September 30,										March 31,
	2017					2016					2019					2018
(Dollars in thousands)	Balance			%		Balance			%		Balance			%		Balance			%
Loans in-school/grace/deferment⁽¹⁾	$	5,352,671				$	4,662,941				$	5,870,853				$	5,369,984
Loans in forbearance⁽²⁾	373,655					279,509					610,209					465,286
Loans in repayment and percentage of each status:
Loans current	11,115,697			97.4	%	8,724,365			98.0	%	14,927,591			97.5	%	12,635,627			97.5	%
Loans delinquent 31-60 days⁽³⁾	175,897			1.6		108,591			1.2		216,295			1.4		179,989			1.4
Loans delinquent 61-90 days⁽³⁾	82,095			0.7		51,029			0.6		104,199			0.7		95,974			0.7
Loans delinquent greater than 90 days⁽³⁾	32,892			0.3		21,827			0.2		62,475			0.4		47,152			0.4
Total Private Education Loans in repayment	11,406,581			100.0	%	8,905,812			100.0	%	15,310,560			100.0	%	12,958,742			100.0	%
Total Private Education Loans, gross	17,132,907					13,848,262					21,791,622					18,794,012
Private Education Loan deferred origination costs	53,501					40,327
Private Education Loans deferred origination costs and unamortized premium/(discount)											70,858					58,814
Total Private Education Loans	17,186,408					13,888,589					21,862,480					18,852,826
Private Education Loan allowance for losses	(227,167		)			(162,630		)
Total Private Education Loans, net	$	16,959,241				$	13,725,959
Private Education Loans allowance for losses											(285,946		)			(252,103		)
Private Education Loans, net											$	21,576,534				$	18,600,723

Percentage of Private Education Loans in repayment				66.6	%				64.3	%				70.3	%				69.0	%

Delinquencies as a percentage of Private Education Loans in repayment				2.6	%				2.0	%				2.5	%				2.5	%

Loans in forbearance as a percentage of Private Education Loans in repayment and forbearance				3.2	%				3.0	%				3.8	%				3.5	%

________


⁽¹⁾	Deferment includes customers who have returned to school or are engaged in other permitted educational activities and are not yet required to make payments on ~~their~~the loans (e.g., residency periods for medical students or a grace period for bar exam preparation).


⁽²⁾	Loans for customers who have requested extension of grace period generally during employment transition or who have temporarily ceased making full payments due to hardship or other factors, consistent with established loan program servicing policies and procedures.


⁽³⁾	The period of delinquency is based on the number of days scheduled payments are contractually past due.

Changes in Allowance for Private Education Loan Losses

The following table summarizes changes in the allowance for Private Education Loan losses.


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
(Dollars in thousands)	2017			2016			2017			2016			2019			2018
Allowance at beginning of period	$	205,024		$	142,628		$	182,472		$	108,816
Provision for Private Education Loan losses	53,120			40,502			129,105			116,703
Beginning balance													$	277,943		$	243,715
Total provision													41,883			41,870
Net charge-offs:
Charge-offs	(34,280		)	(22,072		)	(93,235		)	(64,979		)	(39,577		)	(37,353		)
Recoveries	4,560			2,973			12,216			7,098			5,697			5,087
Net charge-offs	(29,720		)	(19,099		)	(81,019		)	(57,881		)	(33,880		)	(32,266		)
Loan sales⁽¹⁾	(1,257		)	(1,401		)	(3,391		)	(5,008		)	—			(1,216		)
Allowance at end of period	$	227,167		$	162,630		$	227,167		$	162,630		$	285,946		$	252,103

Allowance as a percentage of ending total loans	1.33		%	1.17		%	1.33		%	1.17		%
Allowance as a percentage of ending loans in repayment⁽²⁾	1.99		%	1.83		%	1.99		%	1.83		%
Allowance as a percentage of the ending total loan balance													1.31		%	1.34		%
Allowance as a percentage of the ending loans in repayment⁽²⁾													1.87		%	1.95		%
Allowance coverage of net charge-offs (annualized)	1.91			2.13			2.10			2.11			2.11			1.95
Net charge-offs as a percentage of average loans in repayment (annualized)⁽²⁾	1.08		%	0.91		%	1.02		%	0.97		%	0.89		%	1.01		%
Delinquencies as a percentage of ending loans in repayment⁽²⁾	2.55		%	2.04		%	2.55		%	2.04		%	2.50		%	2.49		%
Loans in forbearance as a percentage of ending loans in repayment and forbearance⁽²⁾	3.17		%	3.04		%	3.17		%	3.04		%	3.83		%	3.47		%
Ending total loans, gross	$	17,132,907		$	13,848,262		$	17,132,907		$	13,848,262		$	21,791,622		$	18,794,012
Average loans in repayment⁽²⁾	$	10,971,028		$	8,420,625		$	10,589,725		$	7,952,469		$	15,165,072		$	12,747,929
Ending loans in repayment⁽²⁾	$	11,406,581		$	8,905,812		$	11,406,581		$	8,905,812		$	15,310,560		$	12,958,742

_______


⁽¹⁾	Represents fair value adjustments on loans sold.


⁽²⁾	Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period.

As part of concluding on the adequacy of the allowance for loan losses, we review key allowance and loan metrics. The most significant of these metrics considered are the allowance coverage of net charge-offs ratio; the allowance as a percentage of ending total loans and of ending loans in repayment; and delinquency and forbearance percentages. The allowance as a percentage of ending total loans and of ending loans in repayment increased at September 30, 2017 compared with September 30, 2016 because of an increase in our TDRs (for which we hold a life-of-loan allowance) and an increase in the percentage of loans in full principal and interest repayment status.

Use of Forbearance and Rate Modifications as a Private Education Loan Collection Tool

We modify the terms of loans for certain borrowers when we believe such modifications will increase the collectability of the loan. These modifications generally take the form of a forbearance, a temporary interest rate reduction or an extended repayment plan. The majority of our loans that are considered TDRs involve a temporary forbearance of payments and do not change the contractual interest rate of the loan.

Forbearance involves granting the customer a temporary cessation of payments (or temporary acceptance of smaller than scheduled payments) for a specified period of time. Using forbearance extends the original term of the loan. Forbearance does not grant any reduction in the total repayment obligation (principal or interest). While a loan is in forbearance status, interest continues to accrue and is capitalized to principal when the loan re-enters repayment status. Our forbearance policies include limits on the number of forbearance months granted consecutively and the total number of forbearance months granted over the life of the loan. We grant forbearance in our servicing centers if a borrower who is current requests it for increments of three months at a time, for up to 12 months. Forbearance as a collection tool is used most effectively when applied based on a customer’s unique situation, including historical information and judgments. We leverage updated customer information and other decision support tools to best determine who will be granted forbearance based on our expectations as to a customer’s ability and willingness to repay their obligation. This strategy is aimed at mitigating the overall risk of the portfolio as well as encouraging cash resolution of delinquent loans. In some instances, we require good faith payments before granting forbearance. Exceptions to forbearance policies are permitted when such exceptions are judged to increase the likelihood of collection of the loan.

Forbearance may be granted to customers who are exiting their grace period to provide additional time to obtain employment and income to support their obligations, or to current customers who are faced with a hardship and request forbearance time to provide temporary payment relief. In these circumstances, a customer’s loan is placed into a forbearance status in limited monthly increments and is reflected in the forbearance status at month-end during this time. At the end of their granted forbearance period, the customer will enter repayment status as current and is expected to begin making scheduled monthly payments on a go-forward basis.

Forbearance may also be granted to customers who are delinquent in their payments. If specific requirements are met, the forbearance can cure the delinquency and the customer is returned to a current repayment status. In more limited instances, delinquent customers will also be granted additional forbearance time. We review our forbearance policies and practices from time to time and update them as circumstances warrant.

When we give a borrower facing financial difficulty an interest rate reduction, we temporarily reduce the rate to 2.0 percent for a two-year period and, in the vast majority of cases, permanently extend the final maturity of the loan. The combination of these two loan term changes helps reduce the monthly payment due from the borrower and increases the likelihood the borrower will remain current during the interest rate modification period as well as when the loan returns to its original contractual interest rate. At March 31, 2019 and March 31, 2018, 7.2 percent and 5.7 percent, respectively, of our loans then currently in full principal and interest repayment status were subject to interest rate reductions made under our rate modification program.

The tables below show the composition and status of the Private Education Loan portfolio aged by number of months in active repayment status (months for which a scheduled monthly payment was due). Active repayment status includes loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period. Our experience shows that the percentage of loans in forbearance status decreases the longer the loans have been in active repayment status. At ~~September 30, 2017,~~March 31, 2019, loans in forbearance status as a percentage of total loans in repayment and forbearance were ~~2.4~~2.7 percent for Private Education Loans that have been in active repayment status for fewer than 25 months. Approximately 7671 percent of our Private Education Loans in forbearance status have been in active repayment status fewer than 25 months.


(Dollars in millions) September 30, 2017	Private Education Loans Monthly Scheduled Payments Due															Not Yet in Repayment			Total
	0 to 12			13 to 24			25 to 36			37 to 48			More than 48
(Dollars in millions) March 31, 2019																						Private Education Loans Monthly Scheduled Payments Due															Not Yet in Repayment			Total
																						0 to 12			13 to 24			25 to 36			37 to 48			More than 48
Loans in-school/grace/deferment	$	—		$	—		$	—		$	—		$	—		$	5,353		$	5,353		$	—		$	—		$	—		$	—		$	—		$	5,871		$	5,871
Loans in forbearance	218			65			45			25			21			—			374			351			83			71			53			52			—			610
Loans in repayment - current	4,395			2,893			1,948			1,058			822			—			11,116			4,935			3,391			2,600			1,924			2,079			—			14,929
Loans in repayment - delinquent 31-60 days	87			37			25			13			14			—			176			89			40			34			24			29			—			216
Loans in repayment - delinquent 61-90 days	43			16			11			7			5			—			82			46			19			15			11			13			—			104
Loans in repayment - delinquent greater than 90 days	15			6			5			3			3			—			32			30			11			9			6			6			—			62
Total	$	4,758		$	3,017		$	2,034		$	1,106		$	865		$	5,353		17,133			$	5,451		$	3,544		$	2,729		$	2,018		$	2,179		$	5,871		21,792
Unamortized discount																			53
Deferred origination costs and unamortized premium/(discount)																																								71
Allowance for loan losses																			(227		)																			(286		)
Total Private Education Loans, net																			$	16,959																				$	21,577

Loans in forbearance as a percentage of total Private Education Loans in repayment and forbearance	1.85		%	0.55		%	0.38		%	0.21		%	0.18		%	—		%	3.17		%	2.20		%	0.52		%	0.45		%	0.33		%	0.33		%	—		%	3.83		%


(Dollars in millions) September 30, 2016	Private Education Loans Monthly Scheduled Payments Due															Not Yet in Repayment			Total
	0 to 12			13 to 24			25 to 36			37 to 48			More than 48
(Dollars in millions) March 31, 2018																						Private Education Loans Monthly Scheduled Payments Due															Not Yet in Repayment			Total
																						0 to 12			13 to 24			25 to 36			37 to 48			More than 48
Loans in-school/grace/deferment	$	—		$	—		$	—		$	—		$	—		$	4,663		$	4,663		$	—		$	—		$	—		$	—		$	—		$	5,370		$	5,370
Loans in forbearance	172			46			31			17			14			—			280			273			68			55			37			32			—			465
Loans in repayment - current	4,040			2,314			1,303			601			466			—			8,724			4,326			3,131			2,390			1,516			1,273			—			12,636
Loans in repayment - delinquent 31-60 days	56			23			15			8			7			—			109			78			36			29			18			19			—			180
Loans in repayment - delinquent 61-90 days	28			10			6			2			4			—			50			51			15			13			8			9			—			96
Loans in repayment - delinquent greater than 90 days	11			5			3			2			1			—			22			26			7			6			4			4			—			47
Total	$	4,307		$	2,398		$	1,358		$	630		$	492		$	4,663		13,848			$	4,754		$	3,257		$	2,493		$	1,583		$	1,337		$	5,370		18,794
Unamortized discount																			41
Deferred origination costs and unamortized premium/(discount)																																								59
Allowance for loan losses																			(163		)																			(252		)
Total Private Education Loans, net																			$	13,726																				$	18,601

Loans in forbearance as a percentage of total Private Education Loans in repayment and forbearance	1.87		%	0.50		%	0.34		%	0.18		%	0.15		%	—		%	3.04		%	2.03		%	0.51		%	0.41		%	0.28		%	0.24		%	—		%	3.47		%

Private Education Loan Types

The following table provides information regarding the loans in repayment balance and total loan balance by Private Education Loan product type at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016.~~2018.


	September 30, 2017										March 31, 2019
(Dollars in thousands)	Signature and Other		Parent Loan		Smart Option		Career Training		Total		Signature and Other		Parent Loan		Smart Option		Career Training		Total
$ in repayment⁽¹⁾	$	196,563	$	85,655	$	11,109,644	$	14,719	$	11,406,581	$	380,750	$	214,476	$	14,703,422	$	11,912	$	15,310,560
$ in total	$	355,389	$	86,809	$	16,675,410	$	15,299	$	17,132,907	$	627,350	$	216,840	$	20,934,993	$	12,439	$	21,791,622


	December 31, 2016										December 31, 2018
(Dollars in thousands)	Signature and Other		Parent Loan		Smart Option		Career Training		Total		Signature and Other		Parent Loan		Smart Option		Career Training		Total
$ in repayment⁽¹⁾	$	164,725	$	29,212	$	9,501,040	$	14,781	$	9,709,758	$	297,844	$	175,885	$	14,180,350	$	12,777	$	14,666,856
$ in total	$	334,512	$	29,430	$	13,872,378	$	15,355	$	14,251,675	$	512,259	$	177,750	$	19,801,184	$	13,272	$	20,504,465

_______


⁽¹⁾	Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period.

Accrued Interest Receivable

Private Education Loan

Accrued Interest Receivable
(Dollars in thousands) Total Interest Receivable
Greater Than
90 Days
Past Due

Allowance for
Uncollectible
Interest
September 30, 2017 $ 1,008,214
$ 1,216
$ 5,556
December 31, 2016 $ 739,847
$ 845
$ 2,898
September 30, 2016 $ 773,967
$ 803
$ 3,562



	Private Education Loans
	Accrued Interest Receivable
(Dollars in thousands)	Total Interest Receivable		Greater Than 90 Days Past Due		Allowance for Uncollectible Interest
March 31, 2019	$	1,276,825	$	2,374	$	4,687
December 31, 2018	$	1,168,823	$	1,920	$	6,322
March 31, 2018	$	1,045,577	$	1,783	$	4,694

Personal Loan Delinquencies

The following table provides information regarding the loan status of our Personal Loans.



	Personal Loans
	March 31,
	2019					2018
(Dollars in thousands)	Balance			%		Balance			%
Loans in repayment and percentage of each status:
Loans current	$	1,141,664		98.2	%	$	672,762		99.6	%
Loans delinquent 31-60 days⁽¹⁾	9,224			0.8		1,463			0.2
Loans delinquent 61-90 days⁽¹⁾	5,991			0.5		865			0.1
Loans delinquent greater than 90 days⁽¹⁾	5,995			0.5		566			0.1
Total Personal Loans in repayment	1,162,874			100.0	%	675,656			100.0	%
Total Personal Loans, gross	1,162,874					675,656
Personal Loans deferred origination costs and unamortized premium/(discount)	394					(163		)
Total Personal Loans	1,163,268					675,493
Personal Loans allowance for losses	(70,619		)			(18,907		)
Personal Loans, net	$	1,092,649				$	656,586
Delinquencies as a percentage of Personal Loans in repayment				1.8	%				0.4	%

_______


⁽¹⁾	The period of delinquency is based on the number of days scheduled payments are contractually past due.

Liquidity and Capital Resources

Funding and Liquidity Risk Management

Our primary liquidity needs include our ongoing ability to fund our businesses throughout market cycles, including during periods of financial stress, our ongoing ability to fund originations of Private Education Loans and Personal Loans and servicing our Bank deposits. To achieve these objectives, we analyze and monitor our liquidity needs, maintain excess liquidity and access diverse funding sources, such as deposits at the Bank, issuance of secured debt primarily through asset-backed securitizations and other financing facilities. It is our policy to manage operations so liquidity needs are fully satisfied through normal operations to avoid unplanned asset sales under emergency conditions. Our liquidity management is governed by policies approved by our Board of Directors. Oversight of these policies is performed in the Asset and Liability Committee, a management-level committee.

These policies take into account the volatility of cash flow forecasts, expected maturities, anticipated loan demand and a variety of other factors to establish minimum liquidity guidelines.

Key risks associated with our liquidity relate to our ability to access the capital markets and the markets for bank deposits at reasonable rates. This ability may be affected by our performance, competitive pressures, the macroeconomic environment and the impact they have on the availability of funding sources in the marketplace.

Sources of Liquidity and Available Capacity

Ending Balances


(Dollars in thousands)	September 30, 2017		December 31, 2016		March 31, 2019		December 31, 2018
Sources of primary liquidity:
Unrestricted cash and liquid investments:
Holding Company and other non-bank subsidiaries	$	27,119	$	18,133	$	26,328	$	25,990
Sallie Mae Bank⁽¹⁾	1,220,645		1,900,660		2,129,929		2,533,116
Available-for-sale investments	232,549		208,603		207,907		176,245
Total unrestricted cash and liquid investments	$	1,480,313	$	2,127,396	$	2,364,164	$	2,735,351

____

(1) This amount will be used primarily to originate Private Education Loans and Personal Loans at the Bank.

Average Balances


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
(Dollars in thousands)	2017		2016		2017		2016		2019		2018
Sources of primary liquidity:
Unrestricted cash and liquid investments:
Holding Company and other non-bank subsidiaries	$	27,625	$	22,233	$	26,138	$	19,242	$	25,968	$	19,125
Sallie Mae Bank⁽¹⁾	1,418,109		1,538,485		1,265,542		1,247,498		1,838,484		1,302,703
Available-for-sale investments	234,169		209,496		222,459		203,986		188,310		238,281
Total unrestricted cash and liquid investments	$	1,679,903	$	1,770,214	$	1,514,139	$	1,470,726	$	2,052,762	$	1,560,109

~~____~~


	____

(1) This amount will be used primarily to originate Private Education Loans and Personal Loans at the Bank.

Deposits

The following table summarizes total deposits.


	September 30,		December 31,		March 31,		December 31,
(Dollars in thousands)	2017		2016		2019		2018
Deposits - interest bearing	$	15,033,524	$	13,434,990	$	19,662,290	$	18,942,082
Deposits - non-interest bearing	528		677		1,696		1,076
Total deposits	$	15,034,052	$	13,435,667	$	19,663,986	$	18,943,158

Our total deposits of ~~$15.0~~$19.7 billion were comprised of ~~$7.7~~$10.6 billion in brokered deposits and ~~$7.3~~$9.1 billion in retail and other deposits at ~~September 30, 2017,~~March 31, 2019, compared to total deposits of ~~$13.4~~$18.9 billion, which were comprised of ~~$7.1~~$10.3 billion in brokered deposits and ~~$6.3~~$8.6 billion in retail and other deposits, at December 31, ~~2016.~~2018.

Interest bearing deposits as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016~~2018 consisted of retail and brokered non-maturity savings deposits, retail and brokered non-maturity MMDAs and ~~brokered~~retail and ~~retail~~brokered CDs. Interest bearing deposits include deposits from Educational 529 and Health Savings plans that diversify our funding sources and ~~add~~additional deposits we consider to be core. These and other large omnibus accounts, aggregating the deposits of many individual depositors, represented ~~$5.5~~$6.2 billion of our deposit total as of ~~September 30, 2017.~~March 31, 2019, compared with $5.9 billion at December 31, 2018.

Interest bearing deposits at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016~~2018 are summarized as follows:


	September 30, 2017				December 31, 2016				March 31, 2019				December 31, 2018
(Dollars in thousands)	Amount		Qtr.-End Weighted Average Stated Rate⁽¹⁾		Amount		Year-End Weighted Average Stated Rate⁽¹⁾		Amount		Qtr.-End Weighted Average Stated Rate⁽¹⁾		Amount		Year-End Weighted Average Stated Rate⁽¹⁾

Money market	$	7,656,169	1.72	%	$	7,129,404	1.22	%	$	8,974,104	2.59	%	$	8,687,766	2.46	%
Savings	824,308		1.09		834,521		0.84		714,518		2.03		702,342		2.00
Certificates of deposit	6,553,047		1.83		5,471,065		1.41		9,973,668		2.76		9,551,974		2.74
Deposits - interest bearing	$	15,033,524			$	13,434,990			$	19,662,290			$	18,942,082

____________

⁽¹⁾ Includes the effect of interest rate swaps in effective hedge relationships.

~~The increase in rates paid on our interest bearing deposits was generally the result of increases in short-term market interest rates since December 31, 2016.~~

As of ~~September 30, 2017~~March 31, 2019, and December 31, ~~2016,~~2018, there were ~~$422.4~~$638 million and ~~$304.5~~$523 million, respectively, of deposits exceeding FDIC insurance limits. Accrued interest on deposits was ~~$28.2~~$57 million and ~~$18.9~~$53 million at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, respectively.

Counterparty Exposure

Counterparty exposure related to financial instruments arises from the risk that a lending, investment or derivative counterparty will not be able to meet its obligations to us.

Excess cash is generally invested with the FRB on an overnight basis or in the FRB’s Term Deposit Facility, minimizing counterparty exposure on cash balances.

Our investment portfolio is primarily comprised of a small portfolio of mortgage-backed securities issued by government agencies and government-sponsored enterprises that are purchased to meet Community Reinvestment Act targets. Additionally, our investing activity is governed by Board-approved limits on the amount that is allowed to be invested with any one issuer based on the credit rating of the issuer, further minimizing our counterparty exposure. Counterparty credit risk is considered when valuing investments and considering impairment.

Related to derivative transactions, protection against counterparty risk is generally provided by International Swaps and Derivatives Association, Inc. Credit Support Annexes (“CSAs”), or clearinghouses for over-the-counter derivatives. CSAs require a counterparty to post collateral if a potential default would expose the other party to a loss. All derivative contracts entered into by the Bank are covered under CSAs or clearinghouse agreements and require collateral to be exchanged based on the net fair value of derivatives with each counterparty. Our exposure is limited to the value of the derivative contracts in a gain position, less any collateral held by us and plus collateral posted with the counterparty.

Title VII of the Dodd-Frank Act requires all standardized derivatives, including most interest rate swaps, to be submitted for clearing to central counterparties to reduce counterparty risk. ~~The~~Two of the central counterparties we use are the CME and the LCH made amendments to their respective rules that resulted in the prospective accounting treatment of certain daily variation margin payments being considered as the legal settlement of the outstanding exposure of the derivative instead of the posting of collateral. The CME rule changes, which became effective in January 2017, result in allLCH. All variation margin payments on derivatives cleared through the CME ~~being~~and LCH are accounted for as legal ~~settlement, while the LCH allows the clearing member institution the option to adopt the rule changes on an individual contract or portfolio basis.~~settlement. As of ~~September 30, 2017, $5.1~~March 31, 2019, $5.6 billion notional of our derivative contracts were cleared on the CME and ~~$0.7~~$0.6 billion were cleared on the LCH. The derivative contracts cleared through the CME and LCH represent ~~85.8~~90.9 percent and ~~11.9~~9.1 percent, respectively, of our total notional derivative contracts of ~~$5.9~~$6.2 billion at ~~September 30, 2017.~~March 31, 2019.

Our LCH clearing member institution has elected not to adopt the new rule change. Therefore, there has been no change to the accounting for the derivatives cleared through the LCH, and variation margin payments required to be exchanged based on the fair value of those derivatives remain accounted for as collateral.

We have liquidity exposure related to collateral movements between us and our derivative counterparties. Movements in the value of the derivatives, which are primarily affected by changes in interest rates, may require us to return cash collateral held or may require us to access primary liquidity to post collateral to counterparties.

As of ~~September 30, 2017,~~March 31, 2019, LCH was not rated by any of the major rating agencies. However, all derivative counterparties are evaluated internally for credit worthiness. LCH has been deemed by management to have strong liquidity and robust capital levels as of our most recent credit review and has been assigned our strongest risk rating.

The table below highlights exposure related to our derivative counterparties as of ~~September 30, 2017.~~March 31, 2019.


(Dollars in thousands)	SLM Corporation and Sallie Mae Bank Contracts			SLM Corporation and Sallie Mae Bank Contracts
Total exposure, net of collateral	$	23,606		$	29,995
Exposure to counterparties with credit ratings, net of collateral	$	9,785		$	21,683
Percent of exposure to counterparties with credit ratings below S&P AA- or Moody’s Aa3	6.11		%	—		%
Percent of exposure to counterparties with credit ratings below S&P A- or Moody’s A3	2.16		%	—		%

Regulatory Capital

The Bank is subject to various regulatory capital requirements administered by ~~federal~~the FDIC and ~~state banking authorities.~~the UDFI. Failure to meet minimum capital requirements and any applicable buffers can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material adverse effect on our business, results of ~~operation~~operations and financial condition. Under ~~the FDIC’s regulations implementing the U. S~~U.S. Basel III ~~capital framework~~ and the regulatory framework for prompt corrective action, the Bank must meet specific capital standards that involve quantitative measures of its assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s regulatory capital amounts and its classification under the prompt corrective action framework are also subject to qualitative judgments by the regulators about components of capital, risk weightings and other factors.

“Well capitalized” regulatory requirements are the quantitative measures established by regulation to ensure capital adequacy. To qualify as “well capitalized,” the Bank must maintain minimum amounts and ratios (set forth in the table below) of Common Equity Tier 1, Tier 1 and Total capital to risk-weighted assets and of Tier 1 capital to average assets. The following capital amounts and ratios are based upon the Bank’s assets.

Actual “Well Capitalized” Regulatory Requirements
(Dollars in thousands) Amount Ratio Amount Ratio
As of September 30, 2017
Common Equity Tier 1 Capital (to Risk-Weighted Assets) $ 2,285,767
11.8 % $ 1,255,438
> 6.5 %
Tier 1 Capital (to Risk-Weighted Assets) $ 2,285,767
11.8 % $ 1,545,155
> 8.0 %
Total Capital (to Risk-Weighted Assets) $ 2,517,317
13.0 % $ 1,931,444
> 10.0 %
Tier 1 Capital (to Average Assets) $ 2,285,767
11.4 % $ 1,000,262
> 5.0 %

As of December 31, 2016:
Common Equity Tier 1 Capital (to Risk-Weighted Assets) $ 2,011,583
12.6 % $ 1,038,638
> 6.5 %
Tier 1 Capital (to Risk-Weighted Assets) $ 2,011,583
12.6 % $ 1,278,323
> 8.0 %
Total Capital (to Risk-Weighted Assets) $ 2,197,997
13.8 % $ 1,597,904
> 10.0 %
Tier 1 Capital (to Average Assets) $ 2,011,583
11.1 % $ 907,565
> 5.0 %

Capital Management

The Bank ~~seeks~~intends to ~~remain “well capitalized”~~maintain at all times ~~with sufficient~~regulatory capital levels that meet both the minimum levels required under U.S. Basel III (including applicable buffers) and the levels necessary to be considered “well capitalized” under the FDIC’s prompt corrective action framework, in order to support asset growth and operating needs, address unexpected credit risks and to protect the interests of depositors and the ~~FDIC-administered~~ Deposit Insurance Fund. The Bank is required by its regulators, the Utah Department of Financial Institutions and the FDIC, to comply with mandated capital ratios. We intend to maintain levels of capital at the Bank that significantly exceed the levels of capital necessary to be considered “well capitalized”Fund administered by the FDIC. The ~~Company is a source of strength for~~Bank’s Capital Policy requires management to monitor these capital standards and the ~~Bank and will provide additional capital if necessary.~~Bank’s compliance with them. The Board of Directors and management periodically evaluate the quality of assets, the stability of earnings, and the adequacy of the allowance for loan losses for the Bank. The Company is a source of strength for the Bank and will provide additional capital if necessary.

We ~~currently~~ believe that current and projected capital levels are appropriate for ~~2017.~~the remainder of 2019. As of March 31, 2019, the Bank’s risk-based and leverage capital ratios exceed the required minimum ratios and the applicable buffers under the fully phased-in U.S. Basel III standards as well as the “well capitalized” standards under the prompt corrective action framework. As our balance sheet continues to grow in ~~2017,~~2019, these ratios will ~~decline but will~~be stable as we now expect to generate earnings and capital sufficient to cover growth in our risk-weighted assets and remain significantly in excess of ~~the~~these regulatory capital levels required to be considered “well capitalized” by our regulators. We do not plan to pay dividends on our common stock. We do not intend to initiate share repurchase programs to return capital to shareholders. We only expect to repurchase common stock acquired in connection with taxes withheld as a result of award exercises and vesting under our employee stock-based compensation plans. Our Board of Directors will periodically reconsider these matters.standards for 2019.

~~The~~Under U.S. Basel III, the Bank is required to comply with U.S. Basel III, which is aimed at increasing both the quantity and quality of regulatory capital and, among other things, establishes Common Equity Tier 1 as a new tier of capital and modifies methods for calculating risk-weighted assets. Certain aspects of U.S. Basel III, including new deductions from and adjustments to regulatory capital and a new capital conservation buffer, are being phased in over several years. The Bank’s Capital Policy requires management to monitor the new capital standards. The Bank is subject tomaintain the following minimum regulatory capital ~~ratios under U.S. Basel III:~~ratios: a Common Equity Tier 1 risk-based capital ratio of 4.5 percent, a Tier 1 risk-based capital ratio of 6.0 percent, a Total risk-based capital ratio of 8.0 percent, and a Tier 1 leverage ratio of 4.0 percent. In addition, as of January 1, 2019, the Bank is subject to a fully phased-in Common Equity Tier 1 capital conservation buffer of greater than 2.5 percent. (As of December 31, 2018, the Bank was subject to a Common Equity Tier 1 capital conservation buffer ~~which will be phased in over three years beginning January 1, 2016: 0.625 percent of risk-weighted assets for 2016, 1.25 percent for 2017, and 1.875 percent for 2018, with the fully phased-in level~~ of greater than ~~2.5 percent effective as of January 1, 2019.~~1.875 percent.) Failure to maintain the buffer will result in restrictions on the Bank’s ability to make capital distributions, including the payment of dividends, and to pay discretionary bonuses to executive officers. ~~Including the buffer, by January 1, 2019, the Bank will be~~

The Bank’s required ~~to maintain the following minimum~~and actual regulatory capital ~~ratios: a Common Equity Tier 1 risk-based capital ratio of greater than 7.0 percent, a Tier 1 risk-based capital ratio of greater than 8.5 percent~~amounts and ~~a Total risk-based capital ratio of greater than 10.5 percent.~~

U.S. Basel III also revised the capital thresholds for the prompt corrective action framework for insured depository institutions. To qualify as “well capitalized,” the Bank must maintain a Common Equity Tier 1 risk-based capital ratio of at least 6.5 percent, a Tier 1 risk-based capital ratio of at least 8.0 percent, a Total risk-based capital ratio of at least 10.0 percent, and a Tier 1 leverage ratio of at least 5.0 percent.

As of September 30, 2017, the Bank had a Common Equity Tier 1 risk-based capital ratio of 11.8 percent, a Tier 1 risk-based capital ratio of 11.8 percent, a Total risk-based capital ratio of 13.0 percent and a Tier 1 leverage ratio of 11.4 percent, which are each in excess of the current “well capitalized” standard for insured depository institutions. If calculated today based on the fully phased-in U.S. Basel III standards, our ratios ~~would also exceed the capital levels required~~ under U.S. Basel III ~~and~~are shown in the ~~“well capitalized” standard.~~following table.



	Actual					U.S. Basel III Regulatory Requirements⁽¹⁾
	Amount		Ratio			Amount			Ratio
As of March 31, 2019:
Common Equity Tier 1 Capital (to Risk-Weighted Assets)	$	2,989,525	11.9	%		$	1,757,430	>	7.0	%
Tier 1 Capital (to Risk-Weighted Assets)	$	2,989,525	11.9	%		$	2,134,022	>	8.5	%
Total Capital (to Risk-Weighted Assets)	$	3,303,905	13.2	%		$	2,636,145	>	10.5	%
Tier 1 Capital (to Average Assets)	$	2,989,525	11.0	%	⁽²⁾	$	1,085,405	>	4.0	%

As of December 31, 2018:
Common Equity Tier 1 Capital (to Risk-Weighted Assets)	$	2,896,091	12.1	%		$	1,528,209	>	6.375	%
Tier 1 Capital (to Risk-Weighted Assets)	$	2,896,091	12.1	%		$	1,887,787	>	7.875	%
Total Capital (to Risk-Weighted Assets)	$	3,196,279	13.3	%		$	2,367,226	>	9.875	%
Tier 1 Capital (to Average Assets)	$	2,896,091	11.1	%		$	1,039,226	>	4.0	%

________________


⁽¹⁾	Required risk-based capital ratios include the capital conservation buffer.


⁽²⁾	The Bank’s Tier 1 leverage ratio exceeds the 5 percent well-capitalized standard for the Tier 1 leverage ratio under the prompt corrective action framework.

Dividends

The Bank is chartered under the laws of the State of Utah and its deposits are insured by the FDIC. The Bank’s ability to pay dividends is subject to the laws of Utah and the regulations of the FDIC. Generally, under Utah’s industrial bank laws and regulations as well as FDIC regulations, the Bank may pay dividends to the Company from its net profits without regulatory approval if, following the payment of the dividend, the Bank’s capital and surplus would not be impaired. The Bank paid $85 million in dividends to the Company for the three months ended March 31, 2019 and no dividends for the ~~nine~~three months ended ~~September 30, 2017 and September 30, 2016. For~~March 31, 2018. In the ~~foreseeable~~ future, we expect that the Bank ~~to only~~will pay dividends to the Company as may be necessary to ~~provide for regularly scheduled~~enable the Company to pay any declared dividends ~~payable~~ on ~~the Company’s~~its Series B Preferred ~~Stock.~~

Stock and common stock and to consummate any common share repurchases by the Company under its share repurchase program.

Borrowings

Outstanding borrowings consist of unsecured debt and secured borrowings issued through our term ABS program and our ~~ABCP~~Secured Borrowing Facility. The issuing entities for those secured borrowings are VIEs and are consolidated for accounting purposes. The following table summarizes our borrowings at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, respectively. For additional information, see Notes to Consolidated Financial Statements, Note 5, “Borrowings.”


	September 30, 2017						December 31, 2016						March 31, 2019						December 31, 2018
	Short-Term		Long-Term		Total		Short-Term		Long-Term		Total		Short-Term		Long-Term		Total		Short-Term		Long-Term		Total
Unsecured borrowings:
Unsecured debt	$	—	$	196,337	$	196,337	$	—	$	—	$	—
Unsecured debt (fixed-rate)													$	—	$	197,551	$	197,551	$	—	$	197,348	$	197,348
Total unsecured borrowings	—		196,337		196,337		—		—		—		—		197,551		197,551		—		197,348		197,348
Secured borrowings:
Private Education Loan term securitizations	$	—	$	2,542,325	$	2,542,325	$	—	$	2,167,979	$	2,167,979
ABCP Facility	300,000		—		300,000		—		—		—
Private Education Loan term securitizations:
Fixed-rate													—		2,472,933		2,472,933		—		2,284,347		2,284,347
Variable-rate													—		1,805,922		1,805,922		—		1,802,609		1,802,609
Total Private Education Loan term securitizations													—		4,278,855		4,278,855		—		4,086,956		4,086,956
Secured Borrowing Facility													—		—		—		—		—		—
Total secured borrowings	300,000		2,542,325		2,842,325		—		2,167,979		2,167,979		—		4,278,855		4,278,855		—		4,086,956		4,086,956
Total	$	300,000	$	2,738,662	$	3,038,662	$	—	$	2,167,979	$	2,167,979	$	—	$	4,476,406	$	4,476,406	$	—	$	4,284,304	$	4,284,304

Other Borrowing Sources

~~On April 5, 2017, we issued our unsecured debt offering of $200 million of 5.125 percent Senior Notes due April 5, 2022 at par.~~ We ~~used the net proceeds from this debt offering to redeem all of our 6.97 percent Series A preferred stock and for general corporate purposes.~~

~~Borrowed Funds~~

~~The Bank maintains~~maintain discretionary uncommitted Federal Funds lines of credit with various correspondent banks, which totaled $125 million at ~~September 30, 2017.~~March 31, 2019. The interest rate we are charged ~~to the Bank~~ on these lines of credit is priced at Fed Funds plus a spread at the time of borrowing and is payable daily. ~~The Bank~~We did not utilize these lines of credit in the three ~~or nine~~ months ended ~~September 30, 2017~~March 31, 2019 or in the year ended December 31, ~~2016.~~2018.

~~The Bank~~We established an account at the FRB to meet eligibility requirements for access to the Primary Credit borrowing facility at the FRB’s Window. The Primary Credit borrowing facility is a lending program available to depository institutions that are in generally sound financial condition. All borrowings at the Window must be fully collateralized. We can pledge ~~to the FRB~~ asset-backed and mortgage-backed securities, as well as FFELP Loans and Private Education Loans, to the FRB as collateral for borrowings at the Window. Generally, collateral value is assigned based on the estimated fair value of the pledged assets. At ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, the value of our pledged collateral at the FRB totaled ~~$2.5~~$3.3 billion and ~~$2.6~~$3.1 billion, respectively. The interest rate charged to us is the discount rate set by the FRB. We did not utilize this facility in the three ~~or nine~~ months ended ~~September 30, 2017~~March 31, 2019 or in the year ended December 31, ~~2016.~~2018.

Contractual Loan Commitments

When we approve a Private Education Loan at the beginning of an academic year, that approval may cover the borrowing for the entire academic year. As such, we do not always disburse the full amount of the loan at the time of such approval, but instead have a commitment to fund a portion of the loan at a later date (usually at the start of the second semester or subsequent trimesters). At ~~September 30, 2017,~~March 31, 2019, we had ~~$1.9~~$0.5 billion of outstanding contractual loan commitments which we expect to fund during the remainder of the ~~2017/2018~~2018/2019 academic year. At ~~September 30, 2017,~~March 31, 2019, we had a ~~$1.6~~$0.3 million reserve recorded in “Other Liabilities” to cover expected losses that may occur during the ~~one year~~one-year loss emergence period on these unfunded commitments.

Critical Accounting Policies and Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations addresses our consolidated financial statements, which have been prepared in accordance with GAAP. A discussion of our critical accounting policies, which include allowance for loan losses, ~~fair value measurement,~~derivative accounting, and transfers of financial assets and the VIE consolidation model, ~~and derivative accounting,~~ can be found in our ~~2016~~2018 Form 10-K. There were no significant changes to these critical accounting policies during the ~~third~~ quarter of 2017. However, related to derivative accounting, in the first quarter of 2017 we changed the accounting treatment of variation margin payments as a result of changes to the rules of certain of our central clearing parties, as described below.ended March 31, 2019.

~~Derivative Accounting~~

The most significant judgments related to derivative accounting are: (1) concluding the derivative is an effective hedge and qualifies for hedge accounting and (2) determining the fair value of certain derivatives and hedged items. To qualify for hedge accounting, a derivative must be a highly effective hedge upon designation and on an ongoing basis. There are no “bright line” tests on what is considered a highly effective hedge. We use a historical regression analysis to prove ongoing and prospective hedge effectiveness. Although some of our valuations are more judgmental than others, we compare the fair values of our derivatives that we calculate to those fair values provided by our counterparties on a monthly basis. We view this as a critical control which helps validate these judgments. Any significant differences with our counterparties are identified and resolved appropriately.

The CME and the LCH made amendments to their respective rules that resulted in the prospective accounting treatment of certain daily variation margin payments being considered as the legal settlement of the outstanding exposure of the derivative instead of the posting of collateral. The CME rule changes, which became effective in January 2017, result in all variation margin payments on derivatives cleared through the CME being accounted for as legal settlement, while the LCH allows the clearing member institution the option to adopt the rule changes on an individual contract or portfolio basis. As of September 30, 2017, $5.1 billion notional of our derivative contracts were cleared on the CME and $0.7 billion were cleared on the LCH. The derivative contracts cleared through the CME and LCH represent 85.8 percent and 11.9 percent, respectively, of our total notional derivative contracts of $5.9 billion at September 30, 2017.

Our LCH clearing member institution has elected not to adopt the new rule change. Therefore, there has been no change to the accounting for the derivatives cleared through the LCH, and variation margin payments required to be exchanged based on the fair value of those derivatives remain accounted for as collateral.


Item 3.	Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Sensitivity Analysis

Our interest rate risk management program seeks to manage and control interest rate risk, thereby reducing our exposure to fluctuations in interest rates and achieving consistent and acceptable levels of profit in any rate environment and sustainable growth in net interest income over the long term. We evaluate and monitor interest rate risk through two primary methods:

•Earnings at Risk (“EAR”), which measures the impact of hypothetical changes in interest rates on net interest income; and

•Economic Value of Equity (“EVE”), which measures the sensitivity or change in the economic value of equity to changes in interest rates.

A number of potential interest rate scenarios are simulated using our asset liability management system. The Bank is the primary source of interest rate risk within the Company. At present, a significant portion of the ~~majority of~~Bank’s earning assets ~~on the Bank’s balance sheet~~ are priced off of 1-month LIBOR. Therefore, 1-month LIBOR is considered a core rate in our interest rate risk analysis. Other interest rate changes are correlated to changes in 1-month LIBOR ~~with~~for analytic purposes, to achieve a parallel yield curve shock for most rates. Some rates are shocked at higher or lower correlations based on historical relationships. In addition, key rates ~~may be~~are modeled with a floor, which indicates how low each specific rate is likely to move in practice. Rates are adjusted up or down via a set of scenarios that includes both rate shocks and ramps. Rate shocks represent an immediate and sustained change in 1-month LIBOR, ~~plus~~with the resulting changes in other indices correlated accordingly. Interest rate ramps represent a linear ~~change~~increase in 1-month LIBOR over the course of 12 months, ~~plus~~with the resulting changes in other indices correlated accordingly.

The following ~~table summarizes~~tables summarize the potential effect on earnings over the next 24 months and the potential effect on market values of balance sheet assets and liabilities at ~~September 30, 2017~~March 31, 2019 and ~~2016,~~2018, based upon a sensitivity analysis performed by management assuming a hypothetical increase or decrease in market interest rates of 100 basis points and a hypothetical increase in market interest rates of 300 basis points while funding spreads remain constant. The EVE sensitivity is applied only to financial assets and liabilities, including hedging instruments, that existed at the balance sheet date, and does not take into account new assets, liabilities, commitments or hedging instruments that may arise in the future.

With ~~recent~~ increases in the level of interest rates, it became possible in the first quarter of 2017 to measure meaningfully the impact of a downward rate shock of 100 basis points. As the results of this interest rate scenario project a more negative impact to both earnings and to the economic value of equity than the upward shock of 100 basis points, the results of the downward rate shock of 100 basis points have been reflected in the table below. At today’s levels of interest rates, a 300 basis point downward rate shock does not provide a meaningful indication of interest rate sensitivity. These results indicate a market risk profile that has changed slightly from the prior year’s EAR results. The EVE analysis indicates a change in the direction of rate sensitivity, due primarily to a balance sheet mix change toward more fixed-rate Private Education Loans. This leads the overall change in value in response to an upward rate shock to have a minor negative impact on EVE. The baseline valuation of equity showed a higher relative value in 2018 and a lower relative valuation in 2019, due to the significant changes in the shape of the yield curve used for discounting purposes between the fourth quarter of 2018 and the first quarter of 2019. Both EAR and EVE analyses continue to indicate a relatively low level of interest rate sensitivity.

September 30,

March 31,

2017

2016

2019

2018

+300

Basis Points

+100

Basis Points

-100

Basis Points

+300

Basis Points

+100

Basis Points

+300

Basis Points

+100

Basis Points

-100

Basis Points

+300

Basis Points

+100

Basis Points

-100

Basis Points

EAR - Shock

+9.3%

+3.0%

-2.9%

+7.2%

+2.3%

+6.0%

+1.9%

-1.9%

+7.0%

+2.3%

-2.6%

EAR - Ramp

+5.8%

+2.6%

-2.0%

+5.0%

+1.6%

+6.3%

+2.2%

-1.7%

+5.1%

+1.7%

-2.0%

EVE

+2.3%

+0.5%

-0.3%

-1.0%

-0.6%

-1.3%

-0.6%

+0.7%

+2.6%

+0.9%

-2.0%

The EVE results in the table above reflect a change in the calculation of the 2019 and 2018 rate sensitivities. A modification of the discounting methodology resulted in a higher baseline EVE measurement, which results in lower sensitivities. The actual dollar changes in EVE in response to interest rate shocks has changed only slightly. Prior to the change

in calculation, the EVE sensitivities at December 31, 2018 were +4.5 percent for “+300 basis points”, +1.3 percent for “+100 basis points” and -3.0 percent for “-100 basis points.”

A primary objective in our funding is to manage our sensitivity to changing interest rates by generally funding our assets with liabilities of similar interest rate repricing characteristics. This funding objective is frequently obtained through the use of derivatives. Uncertainty in loan repayment cash flows and the pricing behavior of our non-maturity retail deposits pose challenges in achieving our interest rate risk objectives. In addition to these considerations, we can have a mismatch in the index (including the frequency of reset) of floating rate debt versus floating rate assets.

As part of its suite of financial products, the Bank offers fixed-rate Private Education Loans. As with other Private Education Loans, the term to maturity is lengthy, and the customer has the option to repay the loan faster than the promissory note requires. Asset securitization and fixed-rate CDs provide intermediate to long-term fixed-rate funding for some of these assets. Additionally, a portion of the fixed-rate loans have been hedged with derivatives, which have been used to convert a portion of ~~variable rate~~variable-rate funding to fixed-rate to match the anticipated cash flows of these loans. Any unhedged position arising from the fixed-rate loan portfolio is monitored and modeled to ensure that the interest rate risk does not cause the Company to exceed its policy limits for earnings at risk or for the value of equity at risk.

In the preceding tables, the interest rate sensitivity analysis reflects the heavy balance sheet mix of fully variable LIBOR-based loans, which exceeds the mix of fully variable funding, which includes brokered CDs that have been converted to LIBOR through derivative transactions. The analysis does not anticipate that retail MMDAs or retail savings balances, while relatively sensitive to interest rate changes, will reprice to the full extent of interest rate shocks or ramps. Also considered is (i) the impact of FFELP loans, which receive floor income in low interest rate environments, and will therefore not reprice fully with interest rate shocks and (ii) the impact of fixed-rate loans that have not been fully match-funded through derivative transactions and fixed-rate funding from CDs and asset securitization. An additional consideration ~~which does not impact the results for the third quarter,~~ is the implementation of a loan cap of 25 percent on ~~variable rate~~variable-rate loans originated on and after September 25, 2016. As of ~~September 30, 2017,~~March 31, 2019, there were ~~$3.3~~$10.5 billion of loans with 25 percent interest rate caps on the balance sheet. The ~~overall slightly~~less asset-sensitive position ~~will generally cause net~~at the end of the first quarter of 2019 results in a more balanced interest ~~income to increase somewhat when interest rates rise, and decrease somewhat when interest rates fall. However, this~~rate risk profile, leaving the Bank positioned more defensively against potential rate decreases. This sensitivity position will fluctuate somewhat during the year, depending on the funding mix in place at the time of the analysis.

Although we believe that these measurements provide an estimate of our interest rate sensitivity, they do not account for potential changes in credit quality, balance sheet mix and size of our balance sheet. They also do not account for other business developments that could affect net income, or for management actions that could affect net income or could be taken to change our risk profile. Accordingly, we can give no assurance that actual results would not differ materially from the estimated outcomes of our simulations. Further, such simulations do not represent our current view of expected future interest rate movements.

Asset and Liability Funding Gap

The table below presents our assets and liabilities (funding) arranged by underlying indices as of ~~September 30, 2017.~~March 31, 2019. In the following GAAP presentation, the funding gap only includes derivatives that qualify as effective hedges (those derivatives which are reflected in net interest income, as opposed to those reflected in the “gains (losses) on derivatives and hedging activities, net” line on the consolidated statements of income). The difference between the asset and the funding is the funding gap for the specified index. This represents at a high level our exposure to interest rate risk in the form of basis risk and repricing risk, which is the risk that the different indices may reset at different frequencies or may not move in the same direction or at the same magnitude. (Note that all fixed-rate assets and liabilities are aggregated into one line item, which does not capture the differences in time due to maturity.)


(Dollars in millions) Index	Frequency of Variable Resets	Assets		Funding⁽¹⁾		Funding Gap			Frequency of Variable Resets	Assets		Funding⁽¹⁾		Funding Gap
Fed Funds Effective Rate									daily/weekly/monthly	$	—	$	415.8	$	(415.8	)
3-month Treasury bill	weekly	$	142.7	$	—	$	142.7		weekly	121.3		—		121.3
Prime	monthly	5.2		—		5.2			monthly	2.1		—		2.1
3-month LIBOR	quarterly	—		399.2		(399.2		)	quarterly	—		400.0		(400.0		)
1-month LIBOR	monthly	13,394.0		7,972.1		5,421.9			monthly	13,763.6		8,393.4		5,370.2
1-month LIBOR	daily	806.5		—		806.5			daily	707.3		—		707.3
Non-Discrete reset⁽²⁾	daily/weekly	1,314.4		3,186.9		(1,872.5		)	daily/weekly	2,309.9		3,578.4		(1,268.5		)
Fixed Rate⁽³⁾		5,347.7		9,452.3		(4,104.6		)
Fixed-Rate⁽³⁾										10,709.4		14,826.0		(4,116.6		)
Total		$	21,010.5	$	21,010.5	$	—			$	27,613.6	$	27,613.6	$	—

______________________


⁽¹⁾	Funding (by index) includes the impact of all derivatives that qualify as effective hedges.


⁽²⁾	Assets include restricted and unrestricted cash equivalents and other overnight type instruments. Funding includes liquid retail deposits and the obligation to return cash collateral held related to derivatives exposures.


⁽³⁾	Assets include receivables and other assets (including premiums and reserves). Funding includes unswapped time deposits, liquid MMDAs swapped to ~~fixed rates~~fixed-rates and stockholders' equity.

The “Funding Gap” in the above table shows primarily mismatches in the 1-month LIBOR, fixed-rate and Non-Discrete reset categories. ~~As changes~~Changes in ~~1-month and~~the Fed Funds Effective Rate, 3-month LIBOR and 1-Month LIBOR daily categories are generally quite highly correlated, ~~the minor funding gap associated with 3-month LIBOR is expected to partially~~and should offset ~~the 1-month LIBOR gaps.~~each other relatively effectively. We consider the overall risk to be moderate since the funding in the Non-Discrete bucket is our liquid retail portfolio, for which ~~we have significant flexibility~~the rates offered are quite highly correlated to ~~reprice at any time, and~~changes in the 1-month LIBOR on a monthly basis. The funding in the fixed-rate bucket includes ~~$2.0~~$2.6 billion of equity ~~$0.5~~and $0.4 billion of non-interest bearing ~~liabilities~~liabilities. In addition, as of March 31, 2019, a block of fixed-rate funding has been placed on the balance sheet that will mature coincident with an anticipated ABS issuance providing both fixed and $0.7 billion of shorter-term fixed rate CDs whose maturities will coincide with anticipated replacements by long-term funding in the second quarter of 2018, facilitating efficient liquidity and market risk management.variable-rate debt.

We use interest rate swaps and other derivatives to achieve our risk management objectives. Our asset liability management strategy is to match assets with debt (in combination with derivatives) that have the same underlying index and reset frequency or have interest rate characteristics that we believe are highly correlated. The use of funding with index types and reset frequencies that are different from our assets exposes us to interest rate risk in the form of basis and repricing risk. This could result in our cost of funds not moving in the same direction or with the same magnitude as the yield on our assets. While we believe this risk is low, as all of these indices are short-term with rate movements that are highly correlated over a long period of time, market disruptions (which have occurred in recent years) can lead to a temporary divergence between indices, resulting in a negative impact to our earnings.

Weighted Average Life

The following table reflects the weighted average lives of our earning assets and liabilities at ~~September 30, 2017.~~March 31, 2019.



	Weighted
	Average
(Averages in Years)	Life
Earning assets
Education loans	~~5.55~~5.39
Personal loans	~~1.44~~1.37
Cash and investments	~~0.96~~0.55
Total earning assets	~~5.16~~4.74

Deposits
Short-term deposits	~~0.06~~0.61
Long-term deposits	~~2.40~~2.81
Total deposits	~~0.60~~1.13

Borrowings
~~Short-term borrowings~~⁽¹⁾	~~1.29~~
Long-term borrowings	~~4.17~~4.10
Total borrowings	~~3.89~~4.10

~~____~~


⁽¹⁾	~~Weighted average life of short-term borrowings assumes full contractual term for repayment through February 22, 2019.~~


Item 4.	Controls and Procedures

Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of ~~September 30, 2017.~~March 31, 2019. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of ~~September 30, 2017,~~March 31, 2019, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (a) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (b) accumulated and communicated to our management, including our principal executive officer and principal financial officer as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended ~~September 30, 2017~~March 31, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION


Item 1.	Legal Proceedings

~~Regulatory Update~~

On May 13, 2014, the Bank reached settlements with (a) the FDIC regarding disclosures and assessments of certain late fees, as well as compliance with the SCRA, and (b) the DOJ regarding compliance with the SCRA. In connection with the settlements, the Bank became subject to the FDIC Consent Order and the DOJ Consent Order, which was approved by the U.S. District Court for the District of Delaware on September 29, 2014. Under the terms of the Separation and Distribution Agreement, Navient is responsible for funding all liabilities under the regulatory orders and, as of the date hereof, has funded all liabilities other than fines directly levied against the BankFor information, see Item 3. “Legal Proceedings” in ~~connection with these matters which the Bank is required to pay.~~

~~On March 27, 2017, the Bank received confirmation from the FDIC that effective March 23, 2017, the FDIC terminated the FDIC Consent Order. The termination was issued with no conditions.~~

In May 2014, the Bank received a CID from the CFPB as part of the CFPB’s separate investigation relating to customer complaints, fees and charges assessed in connection with the servicing of student loans and related collection practices of pre-Spin-Off SLM by entities now subsidiaries of Navient during a time period prior to the Spin-Off (the “CFPB Investigation”). Two state attorneys general also provided the Bank identical CIDs and other state attorneys general have become involved in the inquiry over time (collectively, the “Multi-State Investigation”). To the extent requested, the Bank has been cooperating fully with the CFPB and the attorneys general conducting the Multi-State Investigation. Given the timeframe covered by the CIDs, the CFPB Investigation and the Multi-State Investigation, and the focus on practices and procedures previously conducted by Navient and its servicing subsidiaries prior to the Spin-Off, Navient is leading the response to these investigations. Consequently, we have no basis from which to estimate either the duration or ultimate outcome of these investigations. Additional lawsuits may arise from the Multi-State Investigation which may or may not name the Company, the Bank or any of their current subsidiaries as parties to these suits. As with the Illinois lawsuit described below, the Bank is not responsible for any of the alleged conduct in the Multi-State Investigation or any claims that may arise from related lawsuits. As contemplated by the Separation and Distribution Agreement relating to, and the structure of, the Spin-Off, Navient is legally responsible for, and has accepted responsibility to indemnify the Company against, all costs, expenses, losses and remediation that may arise from these matters.

On July 10, 2017, the CFPB released its final rule imposing limitations on the use of pre-dispute arbitration clauses and prohibiting the use of class action waivers in various consumer financial products, including private education loans. The rule also provides for the reporting of arbitration proceedings to the CFPB and for related record keeping requirements. The rule will be applicable to all agreements for consumer financial products entered into 240 days or more after publication of the rule. Consequently, our existing student loan portfolio is not impacted. We will be taking steps to revise our promissory notes to comply with the rule. As a consequence of the rule, in coming years we may experience a possible increase in litigation defense costs and settlements.2018 Form 10-K.

~~Legal Proceedings~~

We and our subsidiaries and affiliates are subject to various claims, lawsuits and other actions that arise in the normal course of business. It is common for the Company, our subsidiaries and affiliates to receive information and document requests and investigative demands from state attorneys general, legislative committees and administrative agencies. These requests may be for informational or regulatory purposes and may relate to our business practices, the industries in which we operate, or other companies with whom we conduct business. Our practice has been and continues to be to cooperate with these bodies and be responsive to any such requests.

Pursuant to the terms of the Spin-Off and applicable law, Navient assumed responsibility for all liabilities (whether accrued, contingent or otherwise and whether known or unknown) arising out of or resulting from the conduct of pre-Spin-Off SLM and its subsidiaries’ businesses prior to the Spin-Off, other than certain specifically identified liabilities relating to the conduct of our consumer banking business. Nonetheless, given the prior usage of the Sallie Mae and SLM names by entities now owned by Navient, we and our subsidiaries may from time to time be improperly named as defendants in legal proceedings where the allegations at issue are the legal responsibility of Navient. Most of these legal proceedings involve matters that arose in whole or in part in the ordinary course of business of pre-Spin-Off SLM. Likewise, as the period of time since the Spin-Off increases, so does the likelihood any allegations that may be made may be in part for our own actions in a post-Spin-Off time period and in part for Navient’s conduct in a pre-Spin-Off time period. We will not be providing information on these ordinary course of business proceedings unless there are material issues of fact or disagreement with Navient as to the bases of the proceedings or responsibility therefor that we believe could have a material, adverse impact on our business, assets, financial condition, liquidity or outlook if not resolved in our favor.

Item 1A. Risk Factors

Our business activities involve a variety of risks. Readers should carefully consider the risk factors disclosed in Item 1A. “Risk Factors” of our ~~2016~~2018 Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Share Repurchases

The following table provides information relating to our purchase of shares of our common stock in the three months ended ~~September 30, 2017.~~March 31, 2019.

(In thousands, except per share data)
Total Number
of Shares
Purchased⁽¹⁾

Average Price
Paid per
Share

Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs⁽²⁾

Approximate Dollar
Value
of Shares That
May Yet Be
Purchased Under
Publicly Announced
Plans or
Programs⁽²⁾
Period:
July 1 - July 31, 2017 9
$ 11.21
—
—
August 1 - August 31, 2017 64
$ 10.92
—
—
September - September 30, 2017 9
$ 10.73
—
—
Total third-quarter 2017 82
$ 10.93
—



(In thousands, except per share data)	Total Number of Shares Purchased⁽¹⁾	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs⁽²⁾	Approximate Dollar Value of Shares That May Yet Be Purchased Under Publicly Announced Plans or Programs⁽²⁾
Period:
January 1 - January 31, 2019	683	$	10.80	—	$	200,000
February 1 - February 28, 2019	4,082	$	11.15	3,499	$	161,000
March 1 - March 31, 2019	1,960	$	10.83	1,936	$	140,000
Total first-quarter 2019	6,725	$	11.02	5,435

_________

⁽¹⁾

~~All~~The total number of shares purchased ~~are~~includes: (i) shares purchased under the stock repurchase program discussed herein, and (ii) shares of our common stock tendered to us to satisfy the exercise price in connection with cashless exercises of stock options, and tax withholding obligations in connection with exercises of stock options and vesting of restricted stock, restricted stock units and ~~restricted~~performance stock units.


⁽²⁾	~~At the present time, the Company does~~In January 2019, our Board of Directors authorized us to repurchase shares of our common stock up to an aggregate repurchase price not ~~have a publicly announced~~to exceed $200 million. The share repurchase ~~plan or program.~~program expires on January 22, 2021.

The closing price of our common stock on the Nasdaq Global Select Market on ~~September~~March 29, ~~2017~~2019 was ~~$11.47.~~$9.91.


Item 3.	Defaults Upon Senior Securities

Nothing to report.


Item 4.	Mine Safety Disclosures

Not applicable.


Item 5.	Other Information

Nothing to report.


Item 6.	Exhibits

The following exhibits are furnished or filed, as applicable:



~~12.1~~
10.1	~~Computation~~Form of ~~Ratio~~SLM Corporation 2012 Omnibus Incentive Plan, 2019 Restricted Stock Unit Term Sheet.

10.2	Form of ~~Earnings~~SLM Corporation 2012 Omnibus Incentive Plan, 2019 Performance Stock Unit Term Sheet.

10.3	Form of SLM Corporation 2012 Omnibus Incentive Plan, Bonus Restricted Stock Unit Term Sheet (Three-Year Restriction), 2018 Management Incentive Plan Award.

10.4	Amendment to ~~Fixed Charges and Preferred Stock Dividends.~~Sallie Mae 401(k) Savings Plan (Effective as of March 5, 2019).

10.5	Amendment to Sallie Mae Supplemental 401(k) Savings Plan (Effective March 5, 2019).

10.6	Amendment to SLM Corporation Deferred Compensation Plan for Key Employees (Effective March 5, 2019).

31.1	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002~~2002..

32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS	XBRL Instance Document.

101.SCH	XBRL Taxonomy Extension Schema Document.

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB	XBRL Taxonomy Extension Label Linkbase Document.

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.




SLM CORPORATION (Registrant)

By:		/S/ STEVEN J. MCGARRY
	Steven J. McGarry Executive Vice President and Chief Financial Officer (Principal Financial Officer)

Date: ~~October 18, 2017~~April 17, 2019

8270



Fees paid on ABCP Facility	(1,281		)	(1,450		)
Redemption of Preferred Stock Series A	(165,000		)	—
Preferred stock dividends paid	(12,577		)	(15,698		)
Net cash provided by financing activities	2,281,385			2,268,103
Net decrease in cash and cash equivalents	(671,029		)	(961,281		)
Cash and cash equivalents at beginning of period	1,918,793			2,416,219
Cash and cash equivalents at end of period	$	1,247,764		$	1,454,938
Cash disbursements made for:
Interest	$	191,488		$	119,812
Income taxes paid	$	216,321		$	201,218
Income taxes refunded	$	(986	)	$	(86	)



	Allowance for Loan Losses
	Nine Months Ended September 30, 2017
	FFELP Loans			Private Education Loans			Personal Loans			Total
Allowance for Loan Losses
Beginning balance	$	2,171		$	182,472		$	58		$	184,701
Total provision	(161		)	129,105			1,580			130,524
Net charge-offs:
Charge-offs	(658		)	(93,235		)	(240		)	(94,133		)
Recoveries	—			12,216			2			12,218
Net charge-offs	(658		)	(81,019		)	(238		)	(81,915		)
Loan sales⁽¹⁾	—			(3,391		)	—			(3,391		)
Ending Balance	$	1,352		$	227,167		$	1,400		$	229,919
Allowance:
Ending balance: individually evaluated for impairment	$	—		$	100,999		$	—		$	100,999
Ending balance: collectively evaluated for impairment	$	1,352		$	126,168		$	1,400		$	128,920
Loans:
Ending balance: individually evaluated for impairment	$	—		$	942,561		$	—		$	942,561
Ending balance: collectively evaluated for impairment	$	949,180		$	16,190,346		$	132,100		$	17,271,626
Net charge-offs as a percentage of average loans in repayment (annualized)⁽²⁾	0.12		%	1.02		%	0.51		%
Allowance as a percentage of the ending total loan balance	0.14		%	1.33		%	1.06		%
Allowance as a percentage of the ending loans in repayment⁽²⁾	0.20		%	1.99		%	1.06		%
Allowance coverage of net charge-offs (annualized)	1.54			2.10			4.41
Ending total loans, gross	$	949,180		$	17,132,907		$	132,100
Average loans in repayment⁽²⁾	$	752,990		$	10,589,725		$	62,747
Ending loans in repayment⁽²⁾	$	690,849		$	11,406,581		$	132,100



	Allowance for Loan Losses
	Nine Months Ended September 30, 2016
	FFELP Loans			Private Education Loans			Total
Allowance for Loan Losses
Beginning balance	$	3,691		$	108,816		$	112,507
Total provision	(396		)	116,703			116,307
Net charge-offs:
Charge-offs	(1,086		)	(64,979		)	(66,065		)
Recoveries	—			7,098			7,098
Net charge-offs	(1,086		)	(57,881		)	(58,967		)
Loan sales⁽¹⁾	—			(5,008		)	(5,008		)
Ending Balance	$	2,209		$	162,630		$	164,839
Allowance:
Ending balance: individually evaluated for impairment	$	—		$	77,521		$	77,521
Ending balance: collectively evaluated for impairment	$	2,209		$	85,109		$	87,318
Loans:
Ending balance: individually evaluated for impairment	$	—		$	503,632		$	503,632
Ending balance: collectively evaluated for impairment	$	1,033,929		$	13,344,630		$	14,378,559
Net charge-offs as a percentage of average loans in repayment (annualized)⁽²⁾	0.18		%	0.97		%
Allowance as a percentage of the ending total loan balance	0.21		%	1.17		%
Allowance as a percentage of the ending loans in repayment⁽²⁾	0.28		%	1.83		%
Allowance coverage of net charge-offs (annualized)	1.53			2.11
Ending total loans, gross	$	1,033,929		$	13,848,262
Average loans in repayment⁽²⁾	$	795,452		$	7,952,469
Ending loans in repayment⁽²⁾	$	795,665		$	8,905,812



	Three Months Ended September 30, 2017						Three Months Ended September 30, 2016
	Modified Loans⁽¹⁾		Charge-offs		Payment- Default		Modified Loans⁽¹⁾		Charge-offs		Payment- Default

TDR Loans	$	168,645	$	12,227	$	28,275	$	116,419	$	5,925	$	23,326



	Nine Months Ended September 30, 2017						Nine Months Ended September 30, 2016
	Modified Loans⁽¹⁾		Charge-offs		Payment- Default		Modified Loans⁽¹⁾		Charge-offs		Payment- Default

TDR Loans	$	415,341	$	34,965	$	77,248	$	270,266	$	16,357	$	70,401



	Private Education Loan
	Accrued Interest Receivable
	Total Interest Receivable		Greater Than 90 Days Past Due		Allowance for Uncollectible Interest

September 30, 2017	$	1,008,214	$	1,216	$	5,556
December 31, 2016	$	739,847	$	845	$	2,898