UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
 
(Mark One)
þQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 20192020
or
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐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)
 
Delaware52-2013874
(State or other jurisdiction of

incorporation or organization)
(I.R.S. Employer

Identification No.)
300 Continental Drive Newark, DelawareNewark,Delaware19713
(Address of principal executive offices)(Zip Code)
(302) 451-0200
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $.20 per shareSLMThe NASDAQ Global Select Market
Floating Rate Non-Cumulative Preferred Stock, Series B, par value $.20 per shareSLMBPThe NASDAQ Global Select Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ¨ ☐No þ
Indicate the numberAs of March 31, 2020, there were 375,088,960 shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date:outstanding.
ClassOutstanding at March 31, 2019
Common Stock, $0.20 par value432,427,285 shares












SLM CORPORATION


CONSOLIDATED FINANCIAL STATEMENTS
INDEX




Part I. Financial Information
Item 1.
3
Item 1.
10
Item 2.
3958
Item 3.
6396
Item 4.
67100
PART II. Other Information
Item 1.
68101
Item 1A.
68102
Item 2.
68103
Item 3.
68103
Item 4.
68103
Item 5.
69104
Item 6.
69104






2

SLM CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
 
March 31,December 31,
20202019
Assets
Cash and cash equivalents$7,292,929  $5,563,877  
Investments:
Trading investments at fair value (cost of $12,551)11,360  —  
Available-for-sale investments at fair value (cost of $607,867 and $485,756, respectively)614,582  487,669  
Other investments82,853  84,420  
Total investments708,795  572,089  
Loans held for investment (net of allowance for losses of $1,673,324 and $441,912, respectively)21,695,851  24,667,792  
Restricted cash189,439  156,883  
Other interest-earning assets92,968  52,564  
Accrued interest receivable1,281,746  1,392,725  
Premises and equipment, net143,622  134,749  
Income taxes receivable, net286,006  88,844  
Tax indemnification receivable27,727  27,558  
Other assets41,812  29,398  
Total assets$31,760,895  $32,686,479  
Liabilities
Deposits$24,445,614  $24,283,983  
Short-term borrowings—  289,230  
Long-term borrowings4,708,036  4,354,037  
Upromise member accounts187,103  192,662  
Other liabilities299,559  254,731  
Total liabilities29,640,312  29,374,643  
Commitments and contingencies
Equity
Preferred stock, par value $0.20 per share, 20 million shares authorized:
Series B: 4 million and 4 million shares issued, respectively, at stated value of $100 per share400,000  400,000  
Common stock, par value $0.20 per share, 1.125 billion shares authorized: 456.4 million and 453.6 million shares issued, respectively91,288  90,720  
Additional paid-in capital1,226,886  1,307,630  
Accumulated other comprehensive income (loss) (net of tax expense (benefit) of ($13,979) and ($3,995), respectively)(43,274) (12,367) 
Retained earnings1,243,722  1,850,512  
Total SLM Corporation stockholders’ equity before treasury stock2,918,622  3,636,495  
Less: Common stock held in treasury at cost: 81.3 million and 32.5 million shares, respectively(798,039) (324,659) 
Total equity2,120,583  3,311,836  
Total liabilities and equity$31,760,895  $32,686,479  
  March 31, December 31,
  2019 2018
Assets    
Cash and cash equivalents $2,156,257
 $2,559,106
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 31,921
 27,157
Accrued interest receivable 1,299,496
 1,191,981
Premises and equipment, net 130,536
 105,504
Income taxes receivable, net —
 41,570
Tax indemnification receivable 43,124
 39,207
Other assets 92,446
 103,695
Total assets $27,613,625
 $26,638,173
     
Liabilities    
Deposits $19,663,986
 $18,943,158
Long-term borrowings 4,476,406
 4,284,304
Income taxes payable, net 7,011
 —
Upromise member accounts 203,780
 213,104
Other liabilities 214,908
 224,951
Total liabilities 24,566,091
 23,665,517
     
Commitments and contingencies 
 
     
Equity    
Preferred stock, par value $0.20 per share, 20 million shares authorized:    
Series B: 4 million and 4 million shares issued, respectively, at stated value of $100 per share 400,000
 400,000
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 1,290,683
 1,274,635
Accumulated other comprehensive income (net of tax expense of $704 and $3,436, respectively) 2,177
 10,623
Retained earnings 1,480,718
 1,340,017
Total SLM Corporation stockholders’ equity before treasury stock 3,264,244
 3,115,247
Less: Common stock held in treasury at cost: 20.9 million and 14.2 million shares, respectively (216,710) (142,591)
Total equity 3,047,534
 2,972,656
Total liabilities and equity $27,613,625
 $26,638,173


See accompanying notes to consolidated financial statements.

3


SLM CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
 
 Three Months EndedThree Months Ended
 March 31, March 31,
 2019 2018 20202019
Interest income:    Interest income:
Loans $553,479
 $430,048
Loans$555,277  $553,479  
Investments 1,421
 1,947
Investments2,517  1,421  
Cash and cash equivalents 11,553
 5,236
Cash and cash equivalents17,139  11,553  
Total interest income 566,453
 437,231
Total interest income574,933  566,453  
Interest expense:    Interest expense:
Deposits 125,987
 77,456
Deposits135,112  125,987  
Interest expense on short-term borrowings 1,165
 2,393
Interest expense on short-term borrowings4,217  1,165  
Interest expense on long-term borrowings 37,020
 24,768
Interest expense on long-term borrowings35,488  37,020  
Total interest expense 164,172
 104,617
Total interest expense174,817  164,172  
Net interest income 402,281
 332,614
Net interest income400,116  402,281  
Less: provisions for credit losses 63,790
 53,931
Less: provisions for credit losses61,258  63,790  
Net interest income after provisions for credit losses 338,491
 278,683
Net interest income after provisions for credit losses338,858  338,491  
Non-interest income:    Non-interest income:
Gains on sales of loans, netGains on sales of loans, net238,935  —  
Gains on derivatives and hedging activities, net 2,763
 3,892
Gains on derivatives and hedging activities, net45,672  2,763  
Other income 13,378
 9,642
Other income7,487  13,378  
Total non-interest income 16,141
 13,534
Total non-interest income292,094  16,141  
Non-interest expenses:    Non-interest expenses:
Compensation and benefits 78,738
 68,317
Compensation and benefits84,222  78,738  
FDIC assessment fees 7,618
 8,796
FDIC assessment fees8,890  7,618  
Other operating expenses 53,791
 47,853
Other operating expenses54,186  53,791  
Total non-interest expenses 140,147
 124,966
Total non-interest expenses147,298  140,147  
Income before income tax expense 214,485
 167,251
Income before income tax expense483,654  214,485  
Income tax expense 56,296
 40,997
Income tax expense121,481  56,296  
Net income 158,189
 126,254
Net income362,173  158,189  
Preferred stock dividends 4,468
 3,397
Preferred stock dividends3,464  4,468  
Net income attributable to SLM Corporation common stock $153,721
 $122,857
Net income attributable to SLM Corporation common stock$358,709  $153,721  
Basic earnings per common share attributable to SLM Corporation $0.35
 $0.28
Basic earnings per common share attributable to SLM Corporation$0.88  $0.35  
Average common shares outstanding 434,574
 433,952
Average common shares outstanding409,786  434,574  
Diluted earnings per common share attributable to SLM Corporation $0.35
 $0.28
Diluted earnings per common share attributable to SLM Corporation$0.87  $0.35  
Average common and common equivalent shares outstanding 438,248
 438,977
Average common and common equivalent shares outstanding412,755  438,248  
Dividends per common share attributable to SLM Corporation $0.03
 $—
Declared dividends per common share attributable to SLM CorporationDeclared dividends per common share attributable to SLM Corporation$0.03  $0.03  








See accompanying notes to consolidated financial statements.

4


SLM CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
 
Three Months Ended
 March 31,
 20202019
Net income$362,173  $158,189  
Other comprehensive income (loss):
Unrealized gains (losses) on investments4,803  2,938  
Unrealized gains (losses) on cash flow hedges(45,694) (14,117) 
Total unrealized gains (losses)(40,891) (11,179) 
Income tax benefit (expense)9,984  2,733  
Other comprehensive income (loss), net of tax benefit (expense)(30,907) (8,446) 
Total comprehensive income$331,266  $149,743  
  Three Months Ended
  March 31,
  2019 2018
Net income $158,189
 $126,254
Other comprehensive income (loss):    
Unrealized gains (losses) on investments 2,938
 (4,127)
Unrealized gains (losses) on cash flow hedges (14,117) 20,290
Total unrealized gains (losses) (11,179) 16,163
Income tax benefit (expense) 2,733
 (3,902)
Other comprehensive income (loss), net of tax benefit (expense) (8,446) 12,261
Total comprehensive income $149,743
 $138,515


































See accompanying notes to consolidated financial statements.



5

SLM CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In thousands, except share and per share amounts)
(Unaudited)




Common Stock Shares
Preferred Stock SharesIssuedTreasuryOutstandingPreferred StockCommon StockAdditional Paid-In CapitalAccumulated
Other
Comprehensive
Income (Loss)		Retained EarningsTreasury StockTotal Equity
Balance at December 31, 20184,000,000  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, 20194,000,000  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  
    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.



6


SLM CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In thousands, except share and per share amounts)
(Unaudited)




 
Common Stock Shares
   Common Stock Shares              Preferred Stock SharesIssuedTreasuryOutstandingPreferred StockCommon StockAdditional Paid-In CapitalAccumulated
Other
Comprehensive
Loss		Retained EarningsTreasury StockTotal Equity
 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
Balance at December 31, 2019Balance at December 31, 20194,000,000  453,599,926  (32,506,562) 421,093,364  $400,000  $90,720  $1,307,630  $(12,367) $1,850,512  $(324,659) $3,311,836  
Net income —
 —
 —
 —
 —
 —
 —
 —
 158,189
 —
 158,189
Net income—  —  —  —  —  —  —  —  362,173  —  362,173  
Other comprehensive loss, net of tax —
 —
 —
 —
 —
 —
 —
 (8,446) —
 —
 (8,446)Other comprehensive loss, net of tax—  —  —  —  —  —  —  (30,907) —  —  (30,907) 
Total comprehensive income —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 149,743
Total comprehensive income—  —  —  —  —  —  —  —  —  —  331,266  
Cumulative adjustment for the adoption of ASU No. 2016-13 (CECL)Cumulative adjustment for the adoption of ASU No. 2016-13 (CECL)—  —  —  —  —  —  —  —  (952,639) —  (952,639) 
Cash dividends:                      Cash dividends:
Common Stock ($0.03 per share) —
 —
 —
 —
 —
 —
 —
 —
 (13,020) —
 (13,020)Common Stock ($0.03 per share)—  —  —  —  —  —  —  —  (12,595) —  (12,595) 
Preferred Stock, Series B ($1.12 per share) —
 —
 —
 —
 —
 —
 —
 —
 (4,468) —
 (4,468)
Preferred Stock, Series B ($0.87 per share)Preferred Stock, Series B ($0.87 per share)—  —  —  —  —  —  —  —  (3,464) —  (3,464) 
Dividend equivalent units related to employee stock-based compensation plansDividend equivalent units related to employee stock-based compensation plans—  —  —  —  —  —  265  —  (265) —  —  
Issuance of common shares —
 3,470,664
 
 3,470,664
 —
 694
 2,157
 —
 —
 —
 2,851
Issuance of common shares—  2,837,562  2,837,562  —  568  2,304  —  —  —  2,872  
Stock-based compensation expense —
 —
 —
 —
 —
 —
 13,891
 —
 —
 —
 13,891
Stock-based compensation expense—  —  —  —  —  —  13,610  —  —  —  13,610  
Common stock repurchased —
 —
 (5,435,476) (5,435,476) —
 —
 —
 —
 —
 (60,000) (60,000)Common stock repurchased—  —  (47,736,847) (47,736,847) —  —  (96,923) —  —  (461,244) (558,167) 
Shares repurchased related to employee stock-based compensation plans —
 —
 (1,289,391) (1,289,391) —
 —
 —
 —
 —
 (14,119) (14,119)Shares repurchased related to employee stock-based compensation plans—  —  (1,105,119) (1,105,119) —  —  —  —  —  (12,136) (12,136) 
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
Balance at March 31, 2020Balance at March 31, 20204,000,000  456,437,488  (81,348,528) 375,088,960  $400,000  $91,288  $1,226,886  $(43,274) $1,243,722  $(798,039) $2,120,583  




















See accompanying notes to consolidated financial statements.



7

SLM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)



 Three Months Ended
March 31,
 20202019
Operating activities
Net income$362,173  $158,189  
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provisions for credit losses61,258  63,790  
Income tax expense121,481  56,296  
Amortization of brokered deposit placement fee5,193  3,555  
Amortization of Secured Borrowing Facility upfront fee526  277  
Amortization of deferred loan origination costs and loan premium/(discounts), net12,241  3,184  
Net amortization of discount on investments610  189  
Unrealized loss on investments1,191  —  
Increase in tax indemnification receivable(169) (3,917) 
Depreciation of premises and equipment3,855  3,586  
Stock-based compensation expense13,610  13,891  
Unrealized gains on derivatives and hedging activities, net(43,195) (4,027) 
Gains on sales of loans, net(238,935) —  
Other adjustments to net income, net1,574  1,918  
Changes in operating assets and liabilities:
Increase in accrued interest receivable(236,282) (239,180) 
Increase in other interest-earning assets(40,404) (4,764) 
Increase in other assets(32,874) (681) 
Decrease in income taxes payable, net(710) (3,947) 
Increase in accrued interest payable18,610  7,405  
Increase (decrease) in other liabilities134,661  (39,049) 
Total adjustments(217,759) (141,474) 
Total net cash provided by operating activities144,414  16,715  
Investing activities
Loans acquired and originated(2,310,173) (2,253,624) 
Net proceeds from sales of loans held for investment3,283,408  —  
Proceeds from claim payments11,314  11,587  
Net decrease in loans held for investment1,177,589  1,077,273  
Purchases of available-for-sale securities(62,752) (33,483) 
Proceeds from sales and maturities of available-for-sale securities18,836  4,570  
Total net cash provided by (used in) investing activities2,118,222  (1,193,677) 
Financing activities
Brokered deposit placement fee(1,762) (1,498) 
Net increase in certificates of deposit69,971  404,121  
Net increase (decrease) in other deposits(55,044) 290,631  
Borrowings collateralized by loans in securitization trusts - issued633,532  451,128  
Borrowings collateralized by loans in securitization trusts - repaid(281,086) (260,953) 
Repayment of borrowings under Secured Borrowing Facility(289,230) —  
Fees paid on Secured Borrowing Facility(3,183) (1,065) 
Common stock dividends paid(12,595) (13,020) 
Preferred stock dividends paid(3,464) (4,468) 
Common stock repurchased(558,167) (60,000) 
Net cash provided by (used in) financing activities(501,028) 804,876  
Net increase (decrease) in cash, cash equivalents and restricted cash1,761,608  (372,086) 
Cash, cash equivalents and restricted cash at beginning of period5,720,760  2,681,895  
Cash, cash equivalents and restricted cash at end of period$7,482,368  $2,309,809  
8

  Three Months Ended
  March 31,
  2019 2018
Operating activities    
Net income $158,189
 $126,254
Adjustments to reconcile net income to net cash provided by (used in) operating activities:    
Provisions for credit losses 63,790
 53,931
Income tax expense 56,296
 40,997
Amortization of brokered deposit placement fee 3,555
 2,789
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 189
 475
Increase in tax indemnification receivable (3,917) (1,231)
Depreciation of premises and equipment 3,586
 3,117
Stock-based compensation expense 13,891
 14,745
Unrealized gains on derivatives and hedging activities, net (4,027) (3,879)
Other adjustments to net income, net 1,918
 1,855
Changes in operating assets and liabilities:    
Increase in accrued interest receivable (239,180) (201,776)
Increase in other interest-earning assets (4,764) (10,051)
Increase in other assets (681) (35,858)
Decrease in income taxes payable, net (3,947) (1,159)
Increase in accrued interest payable 7,405
 11,034
Decrease in other liabilities (39,049) (18,309)
Total adjustments (141,474) (140,412)
Total net cash provided by (used in) operating activities 16,715
 (14,158)
Investing activities    
Loans acquired and originated (2,253,624) (2,300,135)
Net proceeds from sales of loans held for investment —
 820
Proceeds from claim payments 11,587
 12,084
Net decrease in loans held for investment 1,077,273
 735,894
Purchases of available-for-sale securities (33,483) —
Proceeds from sales and maturities of available-for-sale securities 4,570
 10,371
Total net cash used in investing activities (1,193,677) (1,540,966)
Financing activities    
Brokered deposit placement fee (1,498) (7,055)
Net increase in certificates of deposit 404,121
 694,982
Net increase in other deposits 290,631
 323,614
Borrowings collateralized by loans in securitization trusts - issued 451,128
 667,848
Borrowings collateralized by loans in securitization trusts - repaid (260,953) (200,247)
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


Cash disbursements made for:    Cash disbursements made for:
Interest $147,235
 $94,737
Interest$151,017  $147,235  
Income taxes paid $3,700
 $1,894
Income taxes paid$3,630  $3,700  
Income taxes refunded $(41) $(990)Income taxes refunded$(2,890) $(41) 
Reconciliation of the Consolidated Statements of Cash Flows to the Consolidated Balance Sheets:    Reconciliation of the Consolidated Statements of Cash Flows to the Consolidated Balance Sheets:
Cash and cash equivalents $2,156,257
 $1,435,649
Cash and cash equivalents$7,292,929  $2,156,257  
Restricted cash 153,552
 120,084
Restricted cash189,439  153,552  
Total cash, cash equivalents and restricted cash $2,309,809
 $1,555,733
Total cash, cash equivalents and restricted cash$7,482,368  $2,309,809  
See accompanying notes to consolidated financial statements.


9








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 months ended March 31, 20192020 are not necessarily indicative of the results for the year ending December 31, 20192020 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, 20182019 (the “2018“2019 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.
ReclassificationsAllowance for Credit Losses
Certain reclassificationsWe maintain an allowance for credit losses for the lifetime expected credit losses on loans in our portfolios, as well as for future loan commitments, at the reporting date.
In determining the lifetime expected credit losses on our Private Education Loan and Personal Loan portfolios, we use a discounted cash flow model. This method requires us to project future principal and interest cash flows on our loans in those portfolios.
To estimate the future expected cash flows, we use a vintage-based model that considers life of loan loss expectations, prepayments (both voluntary and involuntary), defaults, recoveries and any other adjustments deemed necessary, to determine the adequacy of the allowance at each balance sheet date. These cash flows are discounted at the loan’s effective interest rate to calculate the present value of those cash flows. Management adjusts the effective interest rate used to discount expected cash flows to incorporate expected prepayments. The difference between the present value of those cash flows and the amortized cost basis of the underlying loans is the allowance for loan losses. Entities that measure credit losses based on the present value of expected future cash flows are permitted to report the entire change in present value as credit loss expense, but may alternatively report the change in present value due to the passage of time as interest income. We have beenelected to report the entire change in present value as credit loss expense.
In determining the loss rates used for the vintage-based approach, we start with our historical loss rates, stratify the loans within each vintage, and then adjust the loss rates based upon exogenous factors over a reasonable and supportable period. The reasonable and supportable period is meant to represent the period in which we believe we can estimate the impact of forecasted economic variables in our expected losses. At the end of the reasonable and supportable period, we immediately revert our forecast of expected losses to our historical averages. We use a two-year reasonable and supportable period, although this
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SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
1.Significant Accounting Policies (Continued)

period is subject to change as our view evolves on our ability to reasonably estimate future losses based upon economic forecasts.
In estimating our current expected credit losses, we use our historical experience to derive a base case adjusted for any qualitative factors (as described below). We also develop an adverse and favorable economic scenario as well. At each reporting date, we determine the appropriate weighting of these alternate scenarios based upon the current economic conditions and our view of the risks of alternate outcomes. This weighting of expectations is used in calculating our current expected credit losses recorded each period.
In estimating recoveries, we use both estimates of what we would receive from the sale of defaulted loans as well as historical borrower payment behavior to estimate the timing and amount of future recoveries on charged-off loans.
Our prepayment estimates include the effect of voluntary prepayments and consolidation (if the loans are consolidated to third parties), both of which shorten the lives of loans. Constant Prepayment Rate (“CPR”) estimates also consider the utilization of deferment, forbearance, and extended repayment plans, which lengthen the lives of loans. We regularly evaluate the assumptions used to estimate the CPRs. We use economic forecasts to help in the estimation of future CPRs. As with our loss forecasts, at the end of the two-year reasonable and supportable forecast for CPRs, we immediately revert to our historical long-term CPR rates.
In addition to the above modeling approach, we also take certain other qualitative factors into consideration when calculating the allowance for loan losses. These qualitative factors include, but are not limited to, changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off and recovery practices not already included in the analysis, and the effect of other external factors such as legal and regulatory requirements on the level of estimated current expected credit losses.
The evaluation of the allowance for loan losses is inherently subjective, as it requires material estimates that may be susceptible to significant changes. If actual future performance in delinquency, charge-offs and recoveries is significantly different than estimated, or management assumptions or practices were to change, this could materially affect the estimate of the allowance for loan losses, the timing of when losses are recognized, and the related provision for credit losses on our consolidated statements of income.
Below we describe in further detail our policies and procedures for the allowance for loan losses as they relate to our Private Education Loan, Personal Loan, Credit Card and FFELP Loan portfolios.
Allowance for Private Education Loan Losses
We collect on defaulted loans through a mix of in-house collectors, third-party collectors and sales to third-parties. For March 31, 2020 and December 31, 2019, we used both an estimate of recovery rates from in-house collections as well as expectations of future sales of defaulted loans to estimate the timing and amount of future recoveries on charged-off loans.
In addition to the key assumptions/estimates above, some estimates are unique to our Private Education Loan portfolio. Estimates are made on our Private Education Loans regarding when each borrower will separate from school. The cash flow timing of when a borrower will begin making full principal and interest payments is dependent upon when the student either graduates or leaves school. These dates can change based upon many factors. We receive information regarding projected graduation dates from a third-party clearinghouse. The separation from school date will be updated quarterly based on updated information received from the school clearinghouse.
Additionally, when we have a contractual obligation to fund a loan or a portion of a loan at a later date, we make an estimate regarding the percentage of this obligation that will be funded. This estimate is based on historical experience. For unfunded commitments, we recognize the life of loan allowance as a liability. Once the loan is funded, that liability transfers to the allowance for Private Education Loan losses.



11




SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
1.Significant Accounting Policies (Continued)

Key Credit Quality Indicators - Private Education Loans
We determine the collectability of our Private Education Loan portfolio by evaluating certain risk characteristics. We consider credit score at original approval and periodically refreshed/updated credit scores through the loan’s term, existence of a cosigner, loan status and loan seasoning as the key credit quality indicators because they have the most significant effect on the determination of the adequacy of our allowance for loan losses. Credit scores are an indicator of the creditworthiness of borrowers and the higher the credit scores the more likely it is the borrowers will be able to make all of their contractual payments. Loan status affects the credit risk because a past due loan is more likely to result in a credit loss than a current loan. Additionally, loans in the deferred payment status have different credit risk profiles compared with those in current pay status. Loan seasoning affects credit risk because a loan with a history of making payments generally has a lower incidence of default than a loan with a history of making infrequent or no payments. The existence of a cosigner lowers the likelihood of default as well. We monitor and update these credit quality indicators in the analysis of the adequacy of our allowance for loan losses on a quarterly basis.
Private Education Loans generally do not require borrowers to begin repayment until at least six months after the borrowers have graduated or otherwise separated from school. Consequently, the loss estimates for these loans is generally low while the borrower is in school and then increases upon the end of the six-month grace period after separation from school. At March 31, 2020 and December 31, 2019, 27 percent and 25 percent, respectively, of the principal balance of the Private Education Loan portfolio was related to borrowers who are in an in-school (fully deferred), grace, or other deferment status and not required to make payments.
Our collection policies for Private Education Loans allow for periods of nonpayment for certain borrowers requesting an extended grace period upon leaving school or experiencing temporary difficulty meeting payment obligations. This is referred to as forbearance and is considered in estimating the allowance for loan losses.
As part of concluding on the adequacy of the allowance for loan losses for Private Education Loans, we review key allowance and loan metrics. The most relevant of these metrics considered are the allowance as a percentage of ending total loans, delinquency percentages and forbearance percentages.
We consider a Private Education Loan to be delinquent 31 days after the last payment was contractually due.
Troubled Debt Restructurings (“TDRs”)
In estimating the expected defaults for our Private Education Loans that are considered TDRs, we follow the same discounted cash flow process described above but use the historical loss rates related to past TDR loans. The appropriate gross loss rates are determined for each individual loan by determining loan maturity, risk characteristics and macroeconomic conditions.
The allowance for our TDR portfolio is included in our overall allowance for Private Education Loans. 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 adjust the terms of loans for certain borrowers when we believe such changes will help our customers manage their student loan obligations, achieve better student outcomes, and increase the collectability of the loans. These changes generally take the form of a temporary forbearance of payments, a temporary interest rate reduction, a temporary interest rate reduction with a permanent extension of the loan term, and/or a short-term extended repayment alternative. When we give a borrower facing financial difficulty an interest rate reduction, we temporarily reduce the rate (currently to 4.0 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.
We classify a loan as a TDR due to forbearance using a two-step process. The first step is to identify a loan that was in full principal and interest repayment status and received more than three months of forbearance in a 24-month period; however,
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SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
1.Significant Accounting Policies (Continued)

during the first nine months after a loan had 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. The second step is to evaluate the creditworthiness of the loan by examining its most recent refreshed FICO score. Loans that have met the criteria in the first test and have a FICO score above a certain threshold (based on the most recent quarterly FICO score refresh) will not be classified as TDRs. Loans that have met the criteria in the first test and have a FICO score under the threshold (based on the most recent quarterly FICO score refresh) will be classified as TDRs.
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). Once a loan qualifies for TDR status, it remains a TDR for allowance purposes for the remainder of its life. About half our loans that are considered TDRs involve a temporary forbearance of payments and do not change the contractual interest rate of the loan. As of March 31, 2020 and December 31, 2019, approximately 48 percent and 50 percent, respectively, of TDRs were classified as such due to their forbearance status. For additional information, see Note 6, “Allowance for Loan Losses” in our 2019 Form 10-K.
During the first quarter of 2020, the respiratory disease caused by a novel coronavirus, coronavirus 2019 or COVID-19 (“COVID-19”), began to spread worldwide and has caused significant disruptions to the U.S. and world economies.
On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which, among other things, allows us to (i) elect to suspend the requirements under GAAP for loan modifications related to COVID-19 that would otherwise be categorized as TDRs, and (ii) suspend any determination of a loan modified as a result of the effects of COVID-19 as being a TDR, including impairment for accounting purposes.
We have elected to suspend TDR accounting for modifications of loans that occur as a result of COVID-19 for the applicable period of the CARES Act relief. The relief from TDR guidance applies to modifications of loans that were not more than 30 days past due as of December 31, 2019, and that occur during the period beginning on March 1, 2020, and ending on the earlier of (i) sixty days after the date on which the national emergency related to the COVID-19 outbreak is terminated, or (ii) December 31, 2020.
Off-Balance Sheet Exposure for 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 the start of the second semester or subsequent trimesters). We estimate expected credit losses over the contractual period in which we are exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by us. The discounted cash flow approach described above includes expected future contractual disbursements. The portion of the allowance for loan losses related to future disbursements is shown as a liability on the face of the balance sheet, and related provision for credit losses is reflected on the income statement.
Uncollectible Interest
The majority of the total accrued interest receivable on our Private Education Loan portfolio represents accrued interest on deferred loans where no payments are due while the borrower is in-school and on fixed-pay loans where the borrower makes a $25 monthly payment that is smaller than the interest accrued on the loan in that month. The accrued interest on these loans will be capitalized and increase the unpaid principal balance of the loans when the borrower exits the grace period after separation from school. The discounted cash flow approach described above considers both the collectability of principal as well as this portion of accrued interest that is expected to capitalize to the balance of the loan. Therefore, the allowance for this portion of accrued interest balance is included in our allowance for loan losses. The discounted cash flow approach does not consider interest accrued on loans that are in a full principal and interest repayment status or in interest-only repayment status. We separately capture the amount of expected uncollectible interest associated with these loans using historical experience to estimate the uncollectible interest for the next four months at each period-end date. This amount is recorded as a reduction of interest income. Accrued interest receivable is separately disclosed on the face of the balance sheet.

13




SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
1.Significant Accounting Policies (Continued)

Allowance for Personal Loans
From late 2016 through mid-2018, we acquired newly-originated Personal Loans from a marketplace lender. In 2018, we began to originate Personal Loans and ceased originating these loans at the end of 2019. We maintain an allowance for Personal Loan losses at an amount sufficient to absorb lifetime expected credit losses using the same discounted cash flow approach described above for Private Education Loans. The difference between the amortized cost basis and the present value of expected cash flows on our Personal Loan portfolio equals the allowance related to this portfolio. At March 31, 2020, and December 31, 2019, we held $747 million and $984 million, respectively, in Personal Loans, net of allowance. At March 31, 2020, there were no Personal Loans classified as TDRs.
We collect on defaulted Personal Loans through a mix of in-house collectors, third-party collectors and sales to third-parties. For March 31, 2020 and December 31, 2019, we used both an estimate of recovery rates from in-house collections as well as expectations of future sales of defaulted Personal Loans to estimate the timing and amount of future recoveries on charged-off Personal Loans.
Key Credit Quality Indicators - Personal Loans
For Personal Loans, we consider FICO scores at original approval and periodically refreshed/updated credit scores through the loan’s term, loan seasoning, and loan delinquency status to be our key credit quality indicators for the same reasons discussed above under “— Key Credit Quality Indicators — Private Education Loans.”
As part of concluding on the adequacy of the allowance for Personal Loan losses, we review key allowance and loan metrics. The most relevant of these metrics considered are the allowance as a percentage of ending total loans, delinquency percentages, and forbearance percentages. We consider a Personal Loan to be delinquent 31 days after the last payment was contractually due.
Allowance for Credit Card Loans
We use the gross loss approach when estimating the allowance for loan losses for our Credit Card portfolio. Because our Credit Card portfolio is new and we do not have historical loss experience, we use estimated loss rates reported by other financial institutions to estimate our allowance for loan losses for credit cards, net of expected recoveries. In addition, we use a model that utilizes purchased credit card information with risk characteristics similar to those of our own portfolio as a challenger model. We then consider any qualitative factors that may change our future expectations of losses.
As all of our Credit Card loans are unconditionally cancelable by us, the issuer, we do not record any estimate of credit losses for unused portions of our Credit Card commitments.
Allowance for FFELP Loan Losses
FFELP Loans are insured as to their principal and accrued interest in the event of default, subject to a 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 default 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. Because we bear a maximum of three percent loss exposure due to this federal guarantee, our allowance for loan losses for FFELP loans and related periodic provision expense are small.
We use the gross loss approach when estimating the allowance for loan losses for our FFELP Loans. We maintain an allowance for loan losses for our FFELP Loans at a level sufficient to cover lifetime expected credit losses. The allowance for FFELP Loan losses uses historical experience of customer default behavior. We apply the default rate projections, net of applicable risk sharing, to our FFELP Loans for the current period to perform our quantitative calculation. Once the quantitative calculation is performed, we review the adequacy of the allowance for loan losses and determine if qualitative adjustments need to be considered.


14




SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
1.Significant Accounting Policies (Continued)

Loan Interest Income
For all loans, including impaired loans, classified as held for investment, we recognize interest income as earned, adjusted for the amortization of deferred direct origination and acquisition costs. Deferred fees or costs are required to be recognized as yield adjustments over the life of the related loans and are recognized by the interest method. The objective of the interest method is to arrive at periodic interest income (including recognition of fees and costs) at a constant effective yield on the net investment in the receivable (i.e., the principal amount of the receivable adjusted by unamortized fess or costs, purchase premium or discount and any hedging activity—these unamortized costs will collectively be referred to as “basis adjustments”). The difference between the periodic interest income so determined and the interest income determined by applying the stated interest rate to the outstanding principal amount of the receivable is the amount of periodic amortization.
For the amortization of the basis adjustments, we determine the constant effective yield necessary to apply the interest method based upon the payment terms required by the loan contract. Expected prepayments of principal are not included in the determination of the effective interest rate.
For fixed-rate loans, when a prepayment occurs the unamortized balance of the amortized cost adjustments is adjusted so that future amortization (based upon the contractual terms of the loan) will result in constant effective yield equal to the original effective interest rate. Prepayments do not result in a change in the effective interest rate of the loan. We determine the contractual payments on a pool basis; as such, when a prepayment occurs, future contractual payments will be determined assuming the pool will make smaller payments through the original term of the contract. The adjustment to the unamortized basis adjustment balance is recorded in interest income.
For variable-rate loans, the effective interest rate at the time of origination is the loan’s effective interest rate assuming all future contractual payments. The effective interest rate remains the same for that loan until the loan rate changes. If there is no prepayment and no change in the stated interest rate, the periodic amortization of the basis adjustments is equal to the difference between the effective interest rate multiplied by the book basis and the contractual interest due. We determine the contractual payments on a pool basis; as such, when a prepayment occurs, future contractual payments will be determined assuming the pool will make smaller payments through the original term of the contract. The adjustment to the unamortized basis adjustment balance is recorded in interest income.
When the interest rate on a variable-rate loan changes, the effective interest rate is recalculated using the same methodology described in the previous paragraph; however, the future contractual payments are changed to reflect the new interest rate. There is no forecasting of future expected changes in interest rates. The accounting basis used to determine the effective interest rate of the cash flows is equal to the balances of the unpaid principal balance and unamortized basis adjustments at the time of the rate change.
We also pay to the U.S. Department of Education (the “DOE”) an annual 105 basis point Consolidation Loan Rebate Fee on FFELP consolidation loans, which is netted against loan interest income. Additionally, interest earned on education loans reflects potential non-payment adjustments in accordance with our uncollectible interest recognition policy. We do not amortize any adjustments to the basis of loans when they are classified as held-for-sale.
With the adoption of CECL on January 1, 2020, we continue to analyze the collectability of accrued interest associated with loans not currently in full principal and interest repayment status or in interest only repayment status as discussed above; however, we will change the recognition of the allowance for this portion of uncollectible interest (amounts to be capitalized after separation from school and the expiration of the grace period) to the provision for loan losses from our historical practice of recording it as a reduction of interest income, as well as classifying this allowance as part of our allowance for loan losses as opposed to our historical practice of recording it as a reduction of accrued interest income receivable.
The allowance for the three months ended March 31, 2018,portion of uncollectible interest on loans making full interest payments will continue to be consistent with classifications adoptedrecorded as a reduction of interest income.
15




SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in 2019, which had no effectthousands, unless otherwise noted)
1.Significant Accounting Policies (Continued)

We recognize certain fee income (primarily late fees) on neteducation loans when earned according to the contractual provisions of the promissory notes, as well as our expectation of collectability. Fee income total assets or total liabilities.is recorded when earned in “other non-interest income” in the accompanying consolidated statements of income.
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 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 address the lease standard. The adoption of this guidance resulted in the recognition of less than $34 million of right of use asset and lease liability, which did not have a material impact on our consolidated financial statements.


10




SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
1.Significant Accounting Policies (Continued)



Recently Issued but Not Yet Adopted Accounting Pronouncements
ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”
In June 2016, the FASBFinancial Accounting Standards Board (“FASB”) issued ASUAccounting Standards Update (“ASU”) No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.Instruments,” which became effective for us on January 1, 2020 (“CECL”). This ASU eliminateseliminated the incurred loss thresholdprevious accounting guidance for initialthe recognition of credit impairment in current GAAP and replaces it withimpairment. Under the expected loss concept. Fornew guidance, for all loans carried at amortized cost, upon loan origination we will beare required to measure our allowance for loan losses based on our current estimate of all current 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
In addition, Topic 326 made changes to the accounting for usavailable-for-sale debt securities. One such change is to require an assessment of unrealized losses on January 1, 2020, with early adoption permitted no sooner than January 1, 2019. Upon adoption,available-for-sale debt securities that we have the ability and intent to hold for a cumulative effect adjustmentperiod of time sufficient to retained earnings will be recorded asrecover the amortized cost of the beginningsecurity, for the purpose of determining credit impairment. If any credit impairment exists, an allowance for losses must be established for the amount of the first reporting period in which the guidanceunrealized loss that is effective in an amount necessary to adjust the allowance for loan losses to equal the current estimate of expected losses on financial 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 2019, we plan to complete our loss models for Personal Loans we originate and credit card receivables and complete the testing and validation for all the modelsdetermined 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.credit-related.
Adoption of the standard will havehad a material impact on how we record and report our financial condition and results of operations, and on regulatory capital. The extentfollowing table illustrates the impact of the impactcumulative effect adjustment made upon adoption will likely dependof CECL:

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SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
1.Significant Accounting Policies (Continued)

January 1, 2020
As reported under CECLPre-CECL AdoptionImpact of CECL Adoption
Assets:
Allowance for loan losses:
Private Education Loans$1,435,130  $374,300  $1,060,830  
FFELP Loans4,485  1,633  2,852  
Personal Loans145,060  65,877  79,183  
Credit Card290  102  188  
Total$1,584,965  $441,912  $1,143,053  
Deferred tax asset$415,540  $109,369  $306,171  
Liabilities:
Allowance for loan losses:
Off-balance sheet exposures$118,239  $2,481  $115,758  
Equity:
Retained Earnings$897,873  $1,850,512  $(952,639) 

This transition adjustment is inclusive of qualitative adjustments incorporated into our CECL allowance as necessary, to address any limitations in the models used.
We also elected to use the relief offered in the interim final rule recently issued by the Federal Deposit Insurance Corporation (the “FDIC”) and other federal banking agencies that provides those banking organizations adopting CECL in 2020 with the option to delay for 2 years the estimated impact of CECL on regulatory capital and to phase in the characteristicsaggregate impact of the deferral on regulatory capital over a subsequent three year period. Under this interim final rule, because we have elected the deferred option, the regulatory capital impact of our transition adjustments recorded on January 1, 2020 from the adoption of CECL will be deferred for 2 years. In addition, 25 percent of the ongoing impact, from January 1, 2020 through the end of the two-year deferral period, of CECL on our allowance for loan portfoliolosses, retained earnings, and economic conditionsaverage total consolidated assets, each as reported for regulatory capital purposes, will be added to the deferred transition amounts (“adjusted transition amounts”) and deferred for the 2-year period. At the conclusion of the 2-year period (January 1, 2022), the adjusted transition amounts will be phased-in for regulatory capital purposes at that date, as well as forecasted conditions thereafter.a rate of 25 percent per year, with the phased-in amounts included in regulatory capital at the beginning of each year. For additional information, see Note 11, “Regulatory Capital.”




11
17








SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

2. Investments
Trading Investments
In March 2020, we sold approximately $1.7 billion of Private Education Loans through securitization transactions where we were required to retain a 5 percent vertical risk retention interest (i.e., 5 percent of each class issued in the securitizations). We classified those vertical risk retention interests related to the transactions as available-for-sale investments, except for the interest in the residual classes, which we classified as trading investments recorded at fair value with changes recorded through earnings. At March 31, 2020, we had $11 million classified as trading investments.
Available-for-Sale Investments

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

March 31, 2020
Amortized Cost
Allowance for credit losses(1)
Gross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Available-for-sale:
Mortgage-backed securities$206,640  $—  $6,400  $—  $213,040  
Utah Housing Corporation bonds15,931  —  156  (74) 16,013  
U.S. government-sponsored enterprises306,491  —  3,206  (8) 309,689  
Other securities78,805  —  —  (2,965) 75,840  
Total$607,867  $—  $9,762  $(3,047) $614,582  
December 31, 2019
Amortized Cost
Allowance for credit losses(1)
Gross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Available-for-sale:
Mortgage-backed securities$215,888  $—  $1,895  $(658) $217,125  
Utah Housing Corporation bonds19,474  —  145  (83) 19,536  
U.S. government-sponsored enterprises250,394  —  635  (21) 251,008  
Total$485,756  $—  $2,675  $(762) $487,669  

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

18




SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
2.Investments (Continued)
The following table summarizes the amount of gross unrealized losses for our available-for-sale securities and the estimated fair value for securities having gross unrealized loss positions, categorized by length of time the securities have been in an unrealized loss position:
Less than 12 months12 months or moreTotal
Gross
Unrealized
Losses		Estimated
Fair Value		Gross
Unrealized
Losses		Estimated
Fair Value		Gross
Unrealized
Losses		Estimated
Fair Value
As of March 31, 2020:
Mortgage-backed securities$—  $—  $—  $—  $—  $—  
Utah Housing Corporation bonds—  —  (74) 8,965  (74) 8,965  
U.S. government-sponsored enterprises(8) 16,823  —  —  (8) 16,823  
Other securities(2,965) 75,840  —  —  (2,965) 75,840  
Total$(2,973) $92,663  $(74) $8,965  $(3,047) $101,628  
As of December 31, 2019:
Mortgage-backed securities$(218) $25,624  $(440) $42,448  $(658) $68,072  
Utah Housing Corporation bonds—  —  (83) 11,097  (83) 11,097  
U.S. government-sponsored enterprises(21) 14,977  —  —  (21) 14,977  
Total$(239) $40,601  $(523) $53,545  $(762) $94,146  

For available-for-sale debt securities in an unrealized loss position, we first assess whether we intend to sell, or it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. If either of these criteria is met, the security’s amortized cost basis is written down to fair value through income. For securities in an unrealized loss position that do not meet these critera, we evaluate whether the decline in fair value has resulted from credit loss or other factors. In making this assessment, we consider the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, adverse conditions specifically related to the security, as well as any guarantees (e.g., guarantees by the U.S. Government) that may be applicable to the security. If this assessment indicates a credit loss exists, the credit-related portion of the loss is recorded as an allowance for losses on the security.
Our investment portfolio contains mortgage-backed securities issued by Ginnie Mae, Fannie Mae and Freddie Mac, with amortized costs of $51 million, $104 million, and $52 million, respectively, at March 31, 2020. We own these securities to meet our requirements under the Community Reinvestment Act (“CRA”). As of March 31, 2020, NaN of the separate mortgage-backed securities in our investment portfolio had unrealized losses. Approximately 37 percent of our mortgage-backed securities were issued under Ginnie Mae programs that carry a full faith and credit guarantee from the U.S. Government. The remaining securities in our portfolio carry a principal and interest guarantee by Fannie Mae or Freddie Mac, respectively. We have the ability and the intent to hold each of these securities for a period of time sufficient for the market price to recover to at least the adjusted amortized cost of the security. As of December 31, 2019, 33 of the 107 separate mortgage-backed securities in our investment portfolio had unrealized losses, and 18 of the 33 securities in a net loss position were issued under Ginnie Mae programs that carry a full faith and credit guarantee from the U.S. Government. The remainder carried a principal and interest guarantee by Fannie Mae or Freddie Mac, respectively.
19




SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
2.Investments (Continued)
We also invest in Utah Housing Corporation bonds for the purpose of complying with the CRA. As of March 31, 2020, 1 of the 3 separate bonds was in a net loss position. We have the intent and ability to hold each of these bonds for a period of time sufficient for the market price to recover to at least the adjusted amortized cost of the security. These bonds are rated Aa3 by Moody’s Investors Service, and the majority of the underlying assets are insured by the Federal Housing Administration or the Department of Veterans Affairs. Based on this qualitative analysis, we have determined that no credit impairment exists.
We also invest in U.S. government-sponsored enterprise securities issued by the Federal Home Loan Bank, Freddie Mac and the Federal Farm Credit Bank. As of March 31, 2020, 1 of the 20 securities had unrealized losses. We have the intent and ability to hold each of these bonds for a period of time sufficient for the market price to recover to at least the adjusted amortized cost of the security. These bonds are rated AA+ by Moody’s Investors Services. Based on this qualitative analysis, we have determined that no credit impairment exists.
In March 2020, we sold approximately $1.7 billion of Private Education Loans through a securitization transaction where we were required to retain a 5 percent vertical risk retention interest. We classify the non-residual vertical retention interests as available-for-sale investments. As of March 31, 2020, 10 out of 10 of these investments had unrealized losses. We have the intent and ability to hold each of these bonds for a period of time sufficient for the market price to recover to at least the adjusted amortized cost of the security. We expect to receive all contractual cash flows related to these investment and do not consider a credit impairment to exist.
As of March 31, 2020, the amortized cost and fair value of securities, by contractual maturities, are summarized below. Contractual maturities versus actual maturities may differ due to the effect of prepayments.
Year of MaturityAmortized CostEstimated Fair Value
2020$94,048  $94,320  
2021145,340  147,711  
202254,127  54,317  
202312,977  13,341  
2038175  192  
20392,457  2,668  
20427,115  7,172  
204311,130  11,560  
204416,149  16,684  
204516,896  17,286  
204627,641  28,385  
204739,927  40,313  
204810,248  10,664  
204984,282  87,458  
20506,550  6,671  
205478,805  75,840  
Total$607,867  $614,582  

The mortgage-backed securities have been pledged to the Federal Reserve Bank (the “FRB”) as collateral against any advances and accrued interest under the Primary Credit lending program sponsored by the FRB. We had $285 million and $252 million par value of mortgage-backed securities pledged to this borrowing facility at March 31, 2020 and December 31, 2019, respectively, as discussed further in Note 6, “Borrowings.”
20




SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
2.Investments (Continued)
Other Investments
Investments in Non-Marketable Securities
We hold investments in non-marketable securities and account for these investments at cost, less impairment, plus or minus observable price changes of identical or similar securities of the same issuer. In the third quarter of 2019, we funded an additional investment in an issuer whose equity securities we purchased in the past. We used the valuation associated with the more recent securities investment to adjust the valuation of our previous investments and, as a result, recorded a gain of $8 million on our earlier equity securities investments. As of March 31, 2020 and December 31, 2019, our total investment in the securities of this issuer was $26 million and $26 million, respectively.
Low Income Housing Tax Credit Investments
We invest in affordable housing projects that qualify for the low income housing tax credit (“LIHTC”), which is designed to promote private development of low income housing. These investments generate a return mostly through realization of federal tax credits. Total carrying value of the LIHTC investments was $57 million at March 31, 2020 and $58 million at December 31, 2019. We are periodically required to provide additional financial support during the investment period. Our liability for these unfunded commitments was $25 million at March 31, 2020 and $29 million at December 31, 2019.
Related to these investments, we recognized tax credits and other tax benefits through tax expense of $1 million at March 31, 2020 and $6 million at December 31, 2019. Tax credits and other tax benefits are recognized as part of our annual effective tax rate used to determine tax expense in a given quarter. Accordingly, the portion of a year’s expected tax benefits recognized in any given quarter may differ from 25 percent.

3. Loans Held for Investment
Loans held for investment consist of Private Education Loans, FFELP Loans, Personal Loans and Personal Loans.Credit Cards. 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 use “Credit Cards” to refer to our suite of cash-back Credit Cards with bonus rewards.
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 ratefixed-rate or may carry a variable interest rate indexed to LIBOR.LIBOR, the London interbank offered rate. As of March 31, 2019,2020 and December 31, 2018, 632019, 55 percent and 6758 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 loansPrivate Education Loans in our portfolio are cosigned. We also 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 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,the first quarter of 2020, we beganrecognized a $239 million gain from the sale of approximately $3.1 billion of our Private Education Loans, including $2.9 billion of principal and $199 million in capitalized interest, as well as $12 million in accrued interest to acquire Personal Loans from a marketplace lender, but discontinued those purchasesunaffiliated third parties. There were VIEs created in July 2018. In 2018, we began to originate and service Personal Loans.

the execution of certain of these loan sales; however, based on
12
21








SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
2.3.Loans Held for Investment (Continued)
our consolidation analysis, we are not the primary beneficiary of these VIEs. These transactions qualified for sale treatment and removed the balance of the loans from our balance sheet on the respective settlement dates. We remained the servicer of these loans pursuant to applicable servicing agreements executed in connection with the sales.



Loans held for investment are summarized as follows:
 March 31, December 31,March 31,December 31,
 2019 201820202019
Private Education Loans: 
 
Private Education Loans:
Fixed-rate $8,025,846
 $6,759,019
Fixed-rate$9,813,075  $9,830,301  
Variable-rate 13,765,776
 13,745,446
Variable-rate11,813,672  13,359,290  
Total Private Education Loans, gross 21,791,622
 20,504,465
Total Private Education Loans, gross21,626,747  23,189,591  
Deferred origination costs and unamortized premium/(discount) 70,858
 68,321
Deferred origination costs and unamortized premium/(discount)65,267  81,224  
Allowance for loan losses (285,946) (277,943)Allowance for loan losses(1,515,781) (374,300) 
Total Private Education Loans, net 21,576,534
 20,294,843
Total Private Education Loans, net20,176,233  22,896,515  
    
FFELP Loans 828,640
 846,487
FFELP Loans766,954  783,306  
Deferred origination costs and unamortized premium/(discount) 2,323
 2,379
Deferred origination costs and unamortized premium/(discount)2,113  2,143  
Allowance for loan losses (1,760) (977)Allowance for loan losses(4,296) (1,633) 
Total FFELP Loans, net 829,203
 847,889
Total FFELP Loans, net764,771  783,816  
    
Personal Loans (fixed-rate) 1,162,874
 1,190,091
Personal Loans (fixed-rate)899,704  1,049,007  
Deferred origination costs and unamortized premium/(discount) 394
 297
Deferred origination costs and unamortized premium/(discount)413  513  
Allowance for loan losses (70,619) (62,201)Allowance for loan losses(152,673) (65,877) 
Total Personal Loans, net 1,092,649
 1,128,187
Total Personal Loans, net747,444  983,643  
    
Credit Cards (fixed-rate)Credit Cards (fixed-rate)7,234  3,884  
Deferred origination costs and unamortized premium/(discount)Deferred origination costs and unamortized premium/(discount)743  36  
Allowance for loan lossesAllowance for loan losses(574) (102) 
Total Credit Cards, netTotal Credit Cards, net7,403  3,818  
Loans held for investment, net $23,498,386
 $22,270,919
Loans held for investment, net$21,695,851  $24,667,792  
 
The estimated weighted average life of education loans in our portfolio was approximately 5.3 years and 5.4 years at both March 31, 20192020 and December 31, 2018,2019, respectively.

1322








SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
2.3.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
March 31,
20202019
Average BalanceWeighted Average Interest RateAverage BalanceWeighted Average Interest Rate
Private Education Loans$23,502,844  8.86 %$21,732,826  9.50 %
FFELP Loans776,326  4.29  837,950  4.94  
Personal Loans973,671  12.11  1,176,466  11.81  
Total portfolio$25,252,841  $23,747,242  

Certain Collection Tools - Private Education Loans
We adjust the terms of loans for certain borrowers when we believe such changes will help our customers manage their student loan obligations, achieve better student outcomes, and increase the collectability of the loan. These changes generally take the form of a temporary forbearance of payments, a temporary interest rate reduction, a temporary interest rate reduction with a permanent extension of the loan term, and/or a short-term extended repayment alternative. Forbearance is granted prospectively for borrowers who are current in their payments and may be granted retroactively for certain delinquent borrowers.
Forbearance allows a borrower to temporarily not make scheduled payments or to make smaller than scheduled payments, in each case for a specified period of time. Using forbearance extends the original term of the loan by the term of forbearance taken. Forbearance does not grant any reduction in the total principal or interest repayment obligation. While a loan is in forbearance status, interest continues to accrue and is capitalized to principal when the loan re-enters repayment status.
We grant forbearance through our servicing centers to borrowers who are current in their payments and through our collections centers to certain borrowers who are delinquent. Our forbearance policies and practices vary depending upon whether a borrower is current or delinquent at the time forbearance is requested, generally with stricter payment requirements for delinquent borrowers. We view the population of borrowers that use forbearance positively because the borrowers are either proactively reaching out to us to obtain assistance in managing their obligations or are working with our collections center to bring their loans current.
Forbearance may be granted through our servicing centers to customers who are exiting their grace period, which generally is the six-month period after the borrower separates from school and during which the borrower is not required to make full principal and interest payments, and to other customers who are current in their payments, 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 the forbearance period, the customer will enter repayment status as current and is expected to begin making scheduled monthly payments. Currently, we generally grant forbearance in our servicing centers if a borrower who is current requests it for increments of up to three months at a time, for up to 12 months.
Forbearance may also be granted through our collections centers to customers who are delinquent in their payments. If specific payment requirements are met, the forbearance can cure the delinquency and the customer is returned to a current repayment status. Forbearance as a collection tool is used most effectively when applying historical experience and our
23
  Three Months Ended
  March 31,
  2019 2018
  Average Balance Weighted Average Interest Rate Average Balance Weighted Average Interest Rate
Private Education Loans $21,732,826
 9.50% $18,659,717
 8.84%
FFELP Loans 837,950
 4.94
 919,717
 4.25
Personal Loans 1,176,466
 11.81
 528,644
 10.64
Total portfolio $23,747,242
   $20,108,078
  


14




SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
3.Loans Held for Investment (Continued)
judgment to a customer’s unique situation. 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 assisting customers while mitigating the risks of delinquency and default as well as encouraging resolution of delinquent loans. In all instances, we require one or more payments before granting forbearance to delinquent borrowers.
The COVID-19 pandemic is having far reaching, negative impacts on individuals, businesses, and, consequently, the overall economy. Specifically, COVID-19 has materially disrupted business operations resulting in significantly higher levels of unemployment or underemployment. As a result, we expect many of our individual customers will experience financial hardship, making it difficult, if not impossible, to meet their payment obligations to us without temporary assistance. We are monitoring key metrics as early warning indicators of financial hardship, including changes in weekly unemployment claims, enrollment in auto-debit payments, requests for new forbearances, enrollment in hardship payment plans and early delinquency metrics.
As a result of the negative impact on employment from COVID-19, we are anticipating higher levels of financial hardship for our customers, which we expect will lead to higher levels of forbearance, delinquency and defaults. We expect that, left unabated, this deterioration in forbearance, delinquency and default rates will persist until such time as the economy and employment return to relatively normal levels.
We assist customers with an array of payment programs during periods of financial hardship as standard operating convention, including: forbearance, which defers payments during a short-term hardship; our Graduated Repayment Plan (“GRP”), which is an interest-only payment for 12 months; or a loan modification that, in the event of long-term hardship, reduces the interest rate on a loan to 4 percent for 24 months and/or permanently extends the maturity date of the loan. Historically we have utilized disaster forbearance for material events, including hurricanes, wildfires and floods. Disaster forbearance defers payments for as much as 90 days upon enrollment. We have invoked this same disaster forbearance program to assist our customers through COVID-19 and offer this program across our operations, including through mobile app and self-service channels such as chat and interactive voice response (“IVR”). Customers who receive a disaster forbearance will not progress in delinquency and will not be assessed late fees or other fees. During a disaster forbearance, a customer’s credit file will continue to reflect the status of the loan as it was immediately prior to granting the disaster forbearance. During the period of the disaster forbearance, interest will continue to accrue, but will not be added to the loan balance until the end of the loan term. If the financial hardship extends beyond 90 days, additional assistance will be available for eligible customers. This program is applied across our Private Education Loan and Personal Loan portfolios.
Management continually monitors our credit administration practices and may periodically modify these practices based upon performance, industry conventions, and/or regulatory feedback. In light of these considerations, we previously announced that we plan to implement certain changes to our credit administration practices in the future. As discussed below, however, we have postponed until the fourth quarter of 2020 the implementation of the announced credit administration practices changes due to the COVID-19 pandemic.
Specifically, we previously announced that we plan to revise our credit administration practices limiting the number of forbearance months granted consecutively and the number of times certain extended or reduced repayment alternatives may be granted. For example, we currently grant forbearance to borrowers without requiring any period of prior principal and interest payments, meaning that, if a borrower satisfies all eligibility requirements, forbearance increments may be granted consecutively. We previously announced that, beginning in the second quarter of 2020, we would phase in a required six-month period between successive grants of forbearance and between forbearance grants and certain other repayment alternatives. We announced this required period will not apply, however, to forbearances granted during the first six months following a borrower’s grace period and will not be required for a borrower to receive a contractual interest rate reduction. In addition, we announced we would limit the participation of delinquent borrowers in certain short-term extended or interest-only repayment alternatives to once in 12 months and twice in five years.

24







SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
3.Loans Held for Investment (Continued)
As previously announced, prior to full implementation of the credit administration practices changes described above, management will conduct a controlled testing program on randomly selected borrowers to measure the impact of the changes on our customers, our credit operations, and key credit metrics. The testing commenced in October 2019 for some of the planned changes on a very small percentage of our total portfolio and we originally expected to expand the testing over subsequent quarters as the impacts are better understood. Due to the COVID-19 pandemic, however, we have postponed implementation of the credit administration practices changes and related testing until the fourth quarter of 2020 so that we can be more flexible in dealing with our customers’ financial hardship. Management now expects to have completed implementation of the new policies and practices by mid-2021. However, we may modify or delay the contemplated practice changes, the proposed timeline, or the method of implementation as we learn more about the impacts during the progression of the testing program.
We also offer rate and term modifications to customers experiencing more severe hardship. Currently, we temporarily reduce the contractual interest rate on a loan to 4.0 percent (previously, to 2.0 percent) for a two-year period and, in the vast majority of cases, permanently extend the final maturity date of the loan. As part of demonstrating the ability and willingness to pay, the customer must make three consecutive monthly payments at the reduced payment to qualify for the program. The combination of the rate reduction and maturity extension 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, 2020 and December 31, 2019, 8.5 percent and 7.2 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. We currently have no plans to change the basic elements of the rate and term modifications we offer to our customers experiencing more severe hardship.
While there are limitations to our estimate of the future impact of the credit administration practices changes described above, absent the effect of any mitigating measures, and based on an analysis of borrower behavior under our current credit administration practices, which may not be indicative of how borrowers will behave under revised credit administration practices, we expect that the credit administration practices changes described above will accelerate defaults and could increase life of loan defaults in our Private Education Loan portfolio by approximately 4 percent to 14 percent. Among the measures that we are planning to implement and expect may partly offset or moderate any acceleration of or increase in defaults will be greater focus on the risk assessment process to ensure borrowers are mapped to the appropriate program, better utilization of existing programs (e.g., GRP and rate modifications), and the introduction of a new program offering short-term payment reductions (permitting interest-only payments for up to six months) for certain early stage delinquencies.
The full impact of these changes to our collections practices described above may only be realized over the longer term, however. In particular, when we calculate the allowance for loan losses under CECL, which became effective on January 1, 2020, our loan loss reserves increased materially because we expect the life of loan defaults on our overall Private Education Loan portfolio to increase, in part as a result of the planned changes to our credit administration practices. As we progress with the controlled testing program of the planned changes to our credit administration practices, we expect to learn more about how our borrowers are reacting to these changes and, as we analyze such reactions, will continue to refine our estimates of the impact of those changes on our allowance for loan losses.

25




SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

3.4. Allowance for Loan Losses
Our provision for credit losses represents the periodic expense of maintaining an allowance sufficient to absorb incurred probablelifetime expected credit 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 probablelifetime expected losses incurred in the loan portfolios. See Note 1, “Significant Accounting Policies — Allowance for Credit Losses — Allowance for Private Education Loan Losses, — Allowance for Personal Loans, — Allowance for FFELP Loan Losses, and — Allowance for Credit Card Loans” in this Form 10-Q for additional details.



26




SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
4.Allowance for Loan Losses (Continued)
Allowance for Loan Losses Metrics
 Allowance for Loan Losses Allowance for Loan Losses
 Three Months Ended March 31, 2019 Three Months Ended March 31, 2020
 
FFELP
Loans
 
Private Education
Loans
 
Personal
Loans
 TotalFFELP
Loans		Private Education
Loans		Personal
Loans		Credit CardsTotal
Allowance for Loan Losses        Allowance for Loan Losses
Beginning balance $977
 $277,943
 $62,201
 $341,121
Beginning balance$1,633  $374,300  $65,877  $102  $441,912  
Total provision 1,017
 41,883
 22,760
 65,660
Day 1 adjustment for the adoption of CECLDay 1 adjustment for the adoption of CECL2,852  1,060,830  79,183  188  1,143,053  
Transfer from unfunded commitment liabilityTransfer from unfunded commitment liability—  142,075  —  —  142,075  
Provisions:Provisions:
Provision for current periodProvision for current period37  143,862  25,318  291  169,508  
Loan sale reduction to provisionLoan sale reduction to provision—  (161,793) —  —  (161,793) 
Total provision(1)
Total provision(1)
37  (17,931) 25,318  291  7,715  
Net charge-offs: 

 

 

 

Net charge-offs:
Charge-offs (234) (39,577) (15,251) (55,062)Charge-offs(226) (51,469) (19,247) (7) (70,949) 
Recoveries —
 5,697
 909
 6,606
Recoveries—  7,976  1,542  —  9,518  
Net charge-offs (234) (33,880) (14,342) (48,456)Net charge-offs(226) (43,493) (17,705) (7) (61,431) 
Ending Balance $1,760
 $285,946
 $70,619
 $358,325
Ending Balance$4,296  $1,515,781  $152,673  $574  $1,673,324  
Allowance: 
 
 
 
Allowance:
Ending balance: individually evaluated for impairment $—
 $132,442
 $—
 $132,442
Ending balance: individually evaluated for impairment$—  $150,822  $—  $—  $150,822  
Ending balance: collectively evaluated for impairment $1,760
 $153,504
 $70,619
 $225,883
Ending balance: collectively evaluated for impairment$4,296  $1,364,959  $152,673  $574  $1,522,502  
Loans: 
 
 
 
Loans:
Ending balance: individually evaluated for impairment $—
 $1,327,668
 $—
 $1,327,668
Ending balance: individually evaluated for impairment$—  $1,518,763  $—  $—  $1,518,763  
Ending balance: collectively evaluated for impairment $828,640
 $20,463,954
 $1,162,874
 $22,455,468
Ending balance: collectively evaluated for impairment$766,954  $20,107,984  $899,704  $7,234  $21,781,876  
Net charge-offs as a percentage of average loans in repayment (annualized)(1)
 0.14% 0.89% 4.88% 
Net charge-offs as a percentage of average loans in repayment (annualized)(2)
Net charge-offs as a percentage of average loans in repayment (annualized)(2)
0.15 %1.05 %7.27 %0.52 %
Allowance as a percentage of the ending total loan balance 0.21% 1.31% 6.07% 
Allowance as a percentage of the ending total loan balance0.56 %7.01 %16.97 %7.93 %
Allowance as a percentage of the ending loans in repayment(1)
 0.27% 1.87% 6.07% 
Allowance as a percentage of the ending loans in repayment(2)
Allowance as a percentage of the ending loans in repayment(2)
0.74 %10.11 %16.97 %7.93 %
Allowance coverage of net charge-offs (annualized) 1.88
 2.11
 1.23
 
Allowance coverage of net charge-offs (annualized)4.75  8.71  2.16  20.50  
Ending total loans, gross $828,640
 $21,791,622
 $1,162,874
 
Ending total loans, gross$766,954  $21,626,747  $899,704  $7,234  
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
 
Average loans in repayment(2)
Average loans in repayment(2)
$600,534  $16,521,356  $973,772  $5,364  
Ending loans in repayment(2)
Ending loans in repayment(2)
$581,997  $14,988,345  $899,704  $7,234  
____________
(1) Below is a reconciliation of the provision for credit losses reported in the consolidated statements of income. When a new loan commitment is made, we record the CECL allowance as a liability for unfunded commitments by recording a provision for credit losses. When the loan is funded, we transfer that liability to the allowance for loan losses.

Consolidated Statements of Income
Provisions for Credit Losses Reconciliation
Three Months Ended March 31, 2020
Provisions for credit losses for new loan commitments made during the quarter$53,543 
Total provision for allowance for loan losses7,715
Provisions for credit losses reported in consolidated statements of income$61,258 


(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.





15
27








SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
3.4.Allowance for Loan Losses (Continued)

 Allowance for Loan Losses Allowance for Loan Losses
 Three Months Ended March 31, 2018 Three Months Ended March 31, 2019
 
FFELP
Loans
 
Private Education
Loans
 
Personal
Loans
 TotalFFELP
Loans		Private Education
Loans		Personal
Loans		Total
Allowance for Loan Losses        Allowance for Loan Losses
Beginning balance $1,132
 $243,715
 $6,628
 $251,475
Beginning balance$977  $277,943  $62,201  $341,121  
Total provision 231
 41,870
 13,448
 55,549
Total provision1,017  41,883  22,760  65,660  
Net charge-offs:        Net charge-offs:
Charge-offs (250) (37,353) (1,200) (38,803)Charge-offs(234) (39,577) (15,251) (55,062) 
Recoveries —
 5,087
 31
 5,118
Recoveries—  5,697  909  6,606  
Net charge-offs (250) (32,266) (1,169) (33,685)Net charge-offs(234) (33,880) (14,342) (48,456) 
Loan sales(1)
 —
 (1,216) —
 (1,216)
Ending Balance $1,113
 $252,103
 $18,907
 $272,123
Ending Balance$1,760  $285,946  $70,619  $358,325  
Allowance:        Allowance:
Ending balance: individually evaluated for impairment $—
 $101,824
 $—
 $101,824
Ending balance: individually evaluated for impairment$—  $132,442  $—  $132,442  
Ending balance: collectively evaluated for impairment $1,113
 $150,279
 $18,907
 $170,299
Ending balance: collectively evaluated for impairment$1,760  $153,504  $70,619  $225,883  
Loans:        Loans:
Ending balance: individually evaluated for impairment $—
 $1,043,103
 $—
 $1,043,103
Ending balance: individually evaluated for impairment$—  $1,327,668  $—  $1,327,668  
Ending balance: collectively evaluated for impairment $907,842
 $17,750,909
 $675,656
 $19,334,407
Ending balance: collectively evaluated for impairment$828,640  $20,463,954  $1,162,874  $22,455,468  
Net charge-offs as a percentage of average loans in repayment (annualized)(2)
 0.14% 1.01% 0.88%  
Net charge-offs as a percentage of average loans in repayment (annualized)(1)
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 0.12% 1.34% 2.80%  Allowance as a percentage of the ending total loan balance0.21 %1.31 %6.07 %
Allowance as a percentage of the ending loans in repayment(2)
 0.16% 1.95% 2.80%  
Allowance as a percentage of the ending loans in repayment(1)
Allowance as a percentage of the ending loans in repayment(1)
0.27 %1.87 %6.07 %
Allowance coverage of net charge-offs (annualized) 1.11
 1.95
 4.04
  Allowance coverage of net charge-offs (annualized)1.88  2.11  1.23  
Ending total loans, gross $907,842
 $18,794,012
 $675,656
  Ending total loans, gross$828,640  $21,791,622  $1,162,874  
Average loans in repayment(2)
 $718,311
 $12,747,929
 $531,889
  
Ending loans in repayment(2)
 $702,965
 $12,958,742
 $675,656
  
Average loans in repayment(1)
Average loans in repayment(1)
$650,196  $15,165,072  $1,175,356  
Ending loans in repayment(1)
Ending loans in repayment(1)
$641,658  $15,310,560  $1,162,874  
____________
(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.


        

















16
28








SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
3.4.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 modifyadjust the terms of loans for certain borrowers when we believe such modifications maychanges will help our customers manage their student loan obligations, achieve better student outcomes, and increase the collectability of the loan. These modificationschanges generally take the form of a temporary forbearance of payments, a temporary interest rate reduction, a temporary interest rate reduction with a permanent extension of the loan term, and/or ana short-term 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. alternative.
When we give a borrower facing financial difficulty an interest rate reduction, we temporarily reduce the contractual interest rate on a loan to 4.0 percent (previously, to 2.0 percentpercent) for a two-yeartwo-year period and, in the vast majority of cases, permanently extend the final maturity date 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, 20192020 and March 31, 2018, 7.22019, 8.5 percent and 5.77.2 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 March 31, 20192020 and December 31, 2018,2019, approximately 5548 percent and 5750 percent, respectively, of TDRs were classified as such due to their forbearance status. For additional information, see Note 2, “Significant Accounting Policies —Allowance for LoanCredit Losses — TDRs,” and Note 6, “Allowance for Loan Losses” in our 20182019 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 March 31, 20192020 and December 31, 2018,2019, 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 InvestmentUnpaid Principal BalanceAllowance
March 31, 2020
TDR Loans$1,550,600  $1,518,763  $150,822  
December 31, 2019
TDR Loans$1,612,896  $1,581,966  $186,697  
  Recorded Investment Unpaid Principal Balance Allowance
       
March 31, 2019      
TDR Loans $1,352,673
 $1,327,668
 $132,442
       
December 31, 2018      
TDR Loans $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 
 March 31,
20202019
Average
Recorded
Investment		Interest
Income
Recognized		Average
Recorded
Investment		Interest
Income
Recognized
TDR Loans$1,615,764  $26,488  $1,312,729  $21,566  
  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



17
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SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
3.4.Allowance for Loan Losses (Continued)

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


 March 31,December 31,
 20202019
Balance%Balance%
TDR loans in in-school/grace/deferment(1)
$83,964  $87,749  
TDR loans in forbearance(2)
162,048  99,054  
TDR loans in repayment(3) and percentage of each status:
Loans current1,113,104  87.5 %1,230,954  88.2 %
Loans delinquent 31-60 days(4)
74,856  5.9  85,555  6.1  
Loans delinquent 61-90 days(4)
50,237  3.9  49,626  3.6  
Loans delinquent greater than 90 days(4)
34,554  2.7  29,028  2.1  
Total TDR loans in repayment1,272,751  100.0 %1,395,163  100.0 %
Total TDR loans, gross$1,518,763  $1,581,966  
         _____
(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.


30
  March 31, December 31,
  2019 2018
  Balance % Balance %
TDR loans in in-school/grace/deferment(1)
 $77,327
   $69,212
  
TDR loans in forbearance(2)
 79,410
   69,796
  
TDR loans in repayment(3) and percentage of each status:
        
Loans current 1,044,676
 89.2% 994,411
 88.9%
Loans delinquent 31-60 days(4)
 61,698
 5.3
 63,074
 5.6
Loans delinquent 61-90 days(4)
 39,349
 3.4
 36,804
 3.3
Loans delinquent greater than 90 days(4)
 25,208
 2.1
 24,559
 2.2
Total TDR loans in repayment 1,170,931
 100.0% 1,118,848
 100.0%
Total TDR loans, gross $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.


18








SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
3.4.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 60 days past due for this disclosure.


Three Months Ended 
 March 31, 2020		Three Months Ended 
 March 31, 2019
Modified Loans(1)
Charge-offsPayment-
Default
Modified Loans(1)
Charge-offsPayment-
Default
TDR Loans$132,815  $19,375  $30,725  $111,208  $16,005  $25,462  
  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


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

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




Private Education Loan 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 tabletables highlights the gross principal balance of our Private Education Loan portfolio, by year of origination, stratified by key credit quality indicators.




19
31








SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
3.4.Allowance for Loan Losses (Continued)

Private Education Loans Credit Quality Indicators
March 31, 2020
Year of Origination202020192018201720162015 and PriorTotal% of Balance
Cosigners:
With cosigner$698,291  $4,527,042  $3,311,178  $2,869,295  $2,515,751  $5,295,854  $19,217,411  89 %
Without cosigner126,138  676,071  489,070  353,832  268,799  495,426  2,409,336  11  
Total$824,429  $5,203,113  $3,800,248  $3,223,127  $2,784,550  $5,791,280  $21,626,747  100 %
FICO at Origination:
Less than 670$62,064  $363,345  $274,016  $237,052  $197,390  $446,246  $1,580,113  7 %
670-699123,512  757,806  555,719  502,930  435,075  955,404  3,330,446  15  
700-749268,388  1,688,114  1,243,712  1,068,091  937,643  1,933,589  7,139,537  33  
Greater than or equal to 750370,465  2,393,848  1,726,801  1,415,054  1,214,442  2,456,041  9,576,651  45  
Total$824,429  $5,203,113  $3,800,248  $3,223,127  $2,784,550  $5,791,280  $21,626,747  100 %
FICO Refreshed:
Less than 670$86,212  $544,160  $442,893  $419,466  $400,833  $1,029,741  $2,923,305  14 %
670-699127,503  735,546  495,808  400,096  324,334  651,732  2,735,019  13  
700-749261,585  1,633,986  1,145,724  952,467  795,350  1,542,487  6,331,599  29  
Greater than or equal to 750349,129  2,289,421  1,715,823  1,451,098  1,264,033  2,567,320  9,636,824  44  
Total$824,429  $5,203,113  $3,800,248  $3,223,127  $2,784,550  $5,791,280  $21,626,747  100 %
Seasoning(2):
1-12 payments$460,330  $2,838,628  $469,314  $529,441  $460,742  $715,809  $5,474,264  25 %
13-24 payments—  255,403  1,979,761  277,499  258,606  580,426  3,351,695  15  
25-36 payments—  —  169,436  1,494,597  268,357  538,209  2,470,599  11  
37-48 payments—  —  —  117,409  1,194,038  568,792  1,880,239  9  
More than 48 payments—  —  —  —  87,201  2,714,272  2,801,473  13  
Not yet in repayment364,099  2,109,082  1,181,737  804,181  515,606  673,772  5,648,477  27  
Total$824,429  $5,203,113  $3,800,248  $3,223,127  $2,784,550  $5,791,280  $21,626,747  100 %
Current period gross charge-offs$—  $(1,597) $(5,241) $(8,136) $(10,284) $(26,211) $(51,469) 
Current period recoveries—  92  599  1,080  1,505  4,700  7,976  
Current period net charge-offs$—  $(1,505) $(4,642) $(7,056) $(8,779) $(21,511) $(43,493) 
Total accrued interest by origination vintage$9,927  $181,551  $281,619  $279,039  $217,988  $288,627  $1,258,751  
______
(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 2020.
(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.
32
  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.

20








SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
3.4.Allowance for Loan Losses (Continued)
Private Education Loans Credit Quality Indicators
December 31, 2019
Year of Origination201920182017201620152014 and PriorTotal% of Balance
Cosigners:
With cosigner$3,475,256  $4,303,772  $3,575,973  $3,112,873  $2,579,214  $3,662,547  $20,709,635  89 %
Without cosigner571,792  584,601  427,512  320,985  241,958  333,108  2,479,956  11  
Total$4,047,048  $4,888,373  $4,003,485  $3,433,858  $2,821,172  $3,995,655  $23,189,591  100 %
FICO at Origination:
Less than 670$283,040  $343,613  $285,747  $236,457  $203,145  $313,587  $1,665,589  7 %
670-699592,376  714,779  617,676  529,575  439,050  676,569  3,570,025  16  
700-7491,319,563  1,601,904  1,325,387  1,155,253  944,135  1,324,506  7,670,748  33  
Greater than or equal to 7501,852,069  2,228,077  1,774,675  1,512,573  1,234,842  1,680,993  10,283,229  44  
Total$4,047,048  $4,888,373  $4,003,485  $3,433,858  $2,821,172  $3,995,655  $23,189,591  100 %
FICO Refreshed:
Less than 670$401,979  $515,901  $475,007  $449,568  $419,308  $717,674  $2,979,437  13 %
670-699582,256  645,422  497,497  397,889  308,607  451,451  2,883,122  13  
700-7491,284,867  1,506,849  1,199,564  994,309  772,205  1,048,808  6,806,602  29  
Greater than or equal to 7501,777,946  2,220,201  1,831,417  1,592,092  1,321,052  1,777,722  10,520,430  45  
Total$4,047,048  $4,888,373  $4,003,485  $3,433,858  $2,821,172  $3,995,655  $23,189,591  100 %
Seasoning(2):
1-12 payments$2,376,404  $719,158  $705,181  $617,174  $462,946  $470,839  $5,351,702  23 %
13-24 payments—2,588,702424,953305,078285,513399,9054,004,15117  
25-36 payments——1,862,587418,048227,391394,3392,902,36512  
37-48 payments———1,457,760413,508342,6762,213,94410  
More than 48 payments————1,056,2291,973,7953,030,02413  
Not yet in repayment1,670,6441,580,5131,010,764635,798375,585414,1015,687,40525  
Total$4,047,048  $4,888,373  $4,003,485  $3,433,858  $2,821,172  $3,995,655  $23,189,591  100 %
2019 gross charge-offs$(1,697) $(14,650) $(29,119) $(40,576) $(41,141) $(81,795) $(208,978) 
2019 recoveries69  1,016  2,622  4,431  5,175  12,452  25,765  
2019 net charge-offs$(1,628) $(13,634) $(26,497) $(36,145) $(35,966) $(69,343) $(183,213) 
Total accrued interest by origination vintage$116,423  $321,568  $327,002  $261,083  $165,764  $174,318  $1,366,158  


______
(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 fourth-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.

33




SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
4.Allowance for Loan Losses (Continued)
Private Education Loan Delinquencies


The following table providestables provide information regarding the loan status of our Private Education Loans.Loans, by year of origination. 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.



Private Education Loan Delinquencies by Origination Vintage
March 31, 2020
202020192018201720162015 and PriorTotal
Loans in-school/grace/deferment(1)
$364,100  $2,109,092  $1,181,737  $804,181  $515,606  $673,761  $5,648,477  
Loans in forbearance(2)
4,370  51,418  144,691  180,617  186,362  422,467  989,925  
Loans in repayment:
Loans current454,436  3,020,099  2,422,162  2,162,435  1,999,047  4,458,032  14,516,211  
Loans delinquent 31-60 days(3)
1,524  15,771  27,690  40,349  43,630  125,661  254,625  
Loans delinquent 61-90 days(3)
—  4,760  15,016  22,286  24,645  69,189  135,896  
Loans delinquent greater than 90 days(3)
—  1,983  8,952  13,259  15,260  42,159  81,613  
Total Private Education Loans in repayment455,960  3,042,613  2,473,820  2,238,329  2,082,582  4,695,041  14,988,345  
Total Private Education Loans, gross824,430  5,203,123  3,800,248  3,223,127  2,784,550  5,791,269  21,626,747  
Private Education Loans deferred origination costs and unamortized premium/(discount)4,958  20,484  12,515  9,491  7,960  9,859  65,267  
Total Private Education Loans829,388  5,223,607  3,812,763  3,232,618  2,792,510  5,801,128  21,692,014  
Private Education Loans allowance for losses(59,208) (369,890) (275,259) (234,085) (195,324) (382,015) (1,515,781) 
Private Education Loans, net$770,180  $4,853,717  $3,537,504  $2,998,533  $2,597,186  $5,419,113  $20,176,233  
Percentage of Private Education Loans in repayment55.3 %  58.5 %  65.1 %  69.4 %  74.8 %  81.1 %  69.3 %  
Delinquencies as a percentage of Private Education Loans in repayment0.3 %  0.7 %  2.1 %  3.4 %  4.0 %  5.0 %  3.2 %  
Loans in forbearance as a percentage of loans in repayment and forbearance0.9 %  1.7 %  5.5 %  7.5 %  8.2 %  8.3 %  6.2 %  
_______
(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.

34
  Private Education Loans
  March 31, December 31,
  2019 2018
  Balance % Balance %
Loans in-school/grace/deferment(1)
 $5,870,853
   $5,260,445
  
Loans in forbearance(2)
 610,209
   577,164
  
Loans in repayment and percentage of each status:        
Loans current 14,927,591
 97.5% 14,289,705
 97.4%
Loans delinquent 31-60 days(3)
 216,295
 1.4
 231,216
 1.6
Loans delinquent 61-90 days(3)
 104,199
 0.7
 95,105
 0.7
Loans delinquent greater than 90 days(3)
 62,475
 0.4
 50,830
 0.3
Total Private Education Loans in repayment 15,310,560
 100.0% 14,666,856
 100.0%
Total Private Education Loans, gross 21,791,622
   20,504,465
  
Private Education Loans deferred origination costs and unamortized premium/(discount) 70,858
   68,321
  
Total Private Education Loans 21,862,480
   20,572,786
  
Private Education Loans allowance for losses (285,946)   (277,943)  
Private Education Loans, net $21,576,534
   $20,294,843
  
Percentage of Private Education Loans in repayment   70.3%   71.5%
Delinquencies as a percentage of Private Education Loans in repayment   2.5%   2.6%
Loans in forbearance as a percentage of Private Education Loans in repayment and forbearance   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.


21








SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
3.4.Allowance for Loan Losses (Continued)


Private Education Loan Delinquencies by Origination Vintage
December 31, 2019
201920182017201620152014 and PriorTotal
Loans in-school/grace/deferment(1)
$1,670,644  $1,580,513  $1,010,764  $635,798  $375,585  $414,101  $5,687,405  
Loans in forbearance(2)
21,009  108,509  142,341  146,114  127,799  168,744  714,516  
Loans in repayment:
Loans current2,340,221  3,159,878  2,781,132  2,566,815  2,225,721  3,241,884  16,315,651  
Loans delinquent 31-60 days(3)
11,152  26,096  44,382  51,656  54,559  100,206  288,051  
Loans delinquent 61-90 days(3)
3,087  9,527  17,048  21,161  24,562  45,917  121,302  
Loans delinquent greater than 90 days(3)
935  3,850  7,818  12,314  12,946  24,803  62,666  
Total Private Education Loans in repayment2,355,395  3,199,351  2,850,380  2,651,946  2,317,788  3,412,810  16,787,670  
Total Private Education Loans, gross4,047,048  4,888,373  4,003,485  3,433,858  2,821,172  3,995,655  23,189,591  
Private Education Loans deferred origination costs and unamortized premium/(discount)23,661  17,699  13,843  12,304  8,564  5,153  81,224  
Total Private Education Loans4,070,709  4,906,072  4,017,328  3,446,162  2,829,736  4,000,808  23,270,815  
Private Education Loans allowance for losses(3,013) (19,105) (44,858) (71,598) (80,974) (154,752) (374,300) 
Private Education Loans, net$4,067,696  $4,886,967  $3,972,470  $3,374,564  $2,748,762  $3,846,056  $22,896,515  
Percentage of Private Education Loans in repayment58.2 %  65.4 %  71.2 %  77.2 %  82.2 %  85.4 %  72.4 %  
Delinquencies as a percentage of Private Education Loans in repayment0.6 %  1.2 %  2.4 %  3.2 %  4.0 %  5.0 %  2.8 %  
Loans in forbearance as a percentage of loans in repayment and forbearance0.9 %  3.3 %  4.8 %  5.2 %  5.2 %  4.7 %  4.1 %  

______
(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.
35




SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
4.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 delinquency status. The FICO scores are assessed at original approval and periodically refreshed/updated through the loan’s term. The following tabletables highlights the gross principal balance of our Personal Loan portfolio, by year of origination, stratified by key credit quality indicators.


Personal Loans Credit Quality Indicators
 Personal LoansMarch 31, 2020
Year of OriginationYear of Origination
2020(1)
2019(1)
2018(1)
2017(1)
2016(1)
Total(1)
% of
Balance
 Credit Quality Indicators
 March 31, 2019 December 31, 2018
Credit Quality Indicators: 
Balance(1)
 % of Balance 
Balance(1)
 % of Balance
        
FICO at Original Approval:        
FICO at Origination:FICO at Origination:
Less than 670 $71,340
 6% $77,702
 7%Less than 670$—  $7,501  $26,745  $5,072  $—  $39,318  4 %
670-699 324,934
 28
 339,053
 28
670-699—  70,479  128,797  21,295  47  220,618  25  
700-749 551,904
 47
 554,700
 47
700-74940  195,857  215,424  37,261  456  449,038  50  
Greater than or equal to 750 214,696
 19
 218,636
 18
Greater than or equal to 750—  91,012  84,726  14,708  284  190,730  21  
Total $1,162,874
 100% $1,190,091
 100%Total$40  $364,849  $455,692  $78,336  $787  $899,704  100 %
        
Seasoning(2):
        
Seasoning(2):
0-12 payments $832,583
 72% $1,008,758
 85%
1-12 payments1-12 payments$40  $331,474  $400  $—  $—  $331,914  37 %
13-24 payments 320,058
 27
 181,333
 15
13-24 payments—  33,375  393,608  6  —  426,989  48  
25-36 payments 10,233
 1
 —
 —
25-36 payments—  —  61,684  76,924  —  138,608  15  
37-48 payments —
 —
 —
 —
37-48 payments—  —  —  1,406  787  2,193  —  
More than 48 payments —
 —
 —
 —
More than 48 payments—  —  —  —  —  —  —  
Not yet in repaymentNot yet in repayment—  —  —  —  —  —  —  
Total $1,162,874
 100% $1,190,091
 100%Total$40  $364,849  $455,692  $78,336  $787  $899,704  100 %
Current period gross charge-offsCurrent period gross charge-offs$—  $(2,885) $(13,758) $(2,563)��$(41) $(19,247) 
Current period recoveriesCurrent period recoveries—  15  1,127  389  11  1,542  
Current period net charge-offsCurrent period net charge-offs$—  $(2,870) $(12,631) $(2,174) $(30) $(17,705) 
Total accrued interest by origination vintageTotal accrued interest by origination vintage$—  $3,161  $3,443  $414  $3  $7,021  
______
(1)
Balance represents gross Personal Loans.
(2)
Number of months in active repayment for which a scheduled payment was due.

(1)Balance represents gross Personal Loans.

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


















22
36








SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
3.4.Allowance for Loan Losses (Continued)




Personal Loans Credit Quality Indicators
December 31, 2019
Year of Origination
2019(1)
2018(1)
2017(1)
2016(1)
Total(1)
% of Balance
FICO at Origination:
Less than 670$8,315  $32,021  $7,030  $1  $47,367  4 %
670-69977,746  152,909  28,384  59  259,098  25  
700-749217,642  255,374  48,254  586  521,856  50  
Greater than or equal to 750101,073  100,480  18,795  338  220,686  21  
Total$404,776  $540,784  $102,463  $984  $1,049,007  100 %
Seasoning(2):
1-12 payments$404,776  $65,164  $—  $—  $469,940  45 %
13-24 payments—  475,620  29,698  —  505,318  48  
25-36 payments—  —  72,765  984  73,749  7  
37-48 payments—  —  —  —  —  —  
More than 48 payments—  —  —  —  —  —  
Not yet in repayment—  —  —  —  —  —  
Total$404,776  $540,784  $102,463  $984  $1,049,007  100 %
2019 gross charge-offs$(2,350) $(58,134) $(13,693) $(136) $(74,313) 
2019 recoveries48  3,397  1,722  39  5,206  
2019 net charge-offs$(2,302) $(54,737) $(11,971) $(97) $(69,107) 
Total accrued interest by origination vintage$3,431  $4,166  $572  $5  $8,174  
______
(1)Balance represents gross Personal Loans.
(2)Number of months in active repayment for which a scheduled payment was due.








37




SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
4.Allowance for Loan Losses (Continued)
Personal Loan Delinquencies


The following tabletables provides information regarding the loan status of our Personal Loans.Loans, by vintage.



  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%

Personal Loan Delinquencies by Origination Vintage
March 31, 2020
20202019201820172016Total% of Balance
Loans in Forbearance$—  $12,380  $7,137  $—  $—  $19,517  
Loans in repayment:
Loans current40  346,123  433,664  76,188  787  856,802  97.4 %
Loans delinquent 31-60 days(1)
—  3,321  7,448  810  —  11,579  1.3  
Loans delinquent 61-90 days(1)
—  991  2,663  701  —  4,355  0.5  
Loans delinquent greater than 90 days(1)
—  2,034  4,781  636  —  7,451  0.8  
Total Personal Loans in repayment40  352,469  448,556  78,335  787  880,187  100.0 %
Total Personal Loans, gross40  364,849  455,693  78,335  787  899,704  
Personal Loans deferred origination costs and unamortized premium/(discount)—  335  78  —  —  413  
Total Personal Loans40  365,184  455,771  78,335  787  900,117  
Personal Loans allowance for loan losses(6) (51,280) (89,194) (12,110) (83) (152,673) 
Personal Loans, net$34  $313,904  $366,577  $66,225  $704  $747,444  
Delinquencies as a percentage of Personal Loans in repayment— %1.8 %3.3 %2.7 %— %2.6 %

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
















38




SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
(1)
4.		The period of delinquency is based on the number of days scheduled payments are contractually past due.Allowance for Loan Losses (Continued)


Personal Loan Delinquencies by Origination Vintage
December 31, 2019
2019201820172016Total% of Balance
Loans in Forbearance$—  $—  $—  $—  $—  
Loans in repayment:
Loans current400,216  522,778  99,581  942  1,023,517  97.6 %
Loans delinquent 31-60 days(1)
2,164  6,213  1,045  13  9,435  0.9  
Loans delinquent 61-90 days(1)
1,074  5,148  943  7  7,172  0.7  
Loans delinquent greater than 90 days(1)
1,322  6,645  895  21  8,883  0.8  
Total Personal Loans in repayment404,776  540,784  102,464  983  1,049,007  100.0 %
Total Personal Loans, gross404,776  540,784  102,464  983  1,049,007  
Personal Loans deferred origination costs and unamortized premium/(discount)380  133  —  —  513  
Total Personal Loans405,156  540,917  102,464  983  1,049,520  
Personal Loans allowance for loan losses(21,589) (37,492) (6,722) (74) (65,877) 
Personal Loans, net$383,567  $503,425  $95,742  $909  $983,643  
Delinquencies as a percentage of Personal Loans in repayment1.1 %3.3 %2.8 %4.2 %2.4 %

_______
(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.interest on loans making full interest payments. The majority of the total accrued interest receivable represents accrued interest on deferred loans where no payments are due while the borrower is in school and fixed-pay loans where the borrower makes a $25 monthly payment that is smaller than the interest accruing on the loan in that month. The accrued interest on these loans will be capitalized to the balance of the loans when the borrower exits the grace period after separation from school. The allowance for this portion of interest is included in our loan loss reserve. 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.
39




SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
4.Allowance for Loan Losses (Continued)
  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

 Private Education Loans
Accrued Interest Receivable
Total Interest ReceivableGreater Than 90 Days Past DueAllowance for Uncollectible Interest
March 31, 2020$1,258,751  $3,127  $3,479  
December 31, 2019$1,366,158  $2,390  $5,309  
 

2340








SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

4.5. Deposits


The following table summarizes total deposits at March 31, 20192020 and December 31, 2018.2019.
March 31,December 31,
20202019
Deposits - interest bearing$24,443,963  $24,282,906  
Deposits - non-interest bearing1,651  1,077  
Total deposits$24,445,614  $24,283,983  
  March 31, December 31, 
  2019 2018 
Deposits - interest bearing $19,662,290
 $18,942,082
 
Deposits - non-interest bearing 1,696
 1,076
 
Total deposits $19,663,986
 $18,943,158
 


Our total deposits of $19.7$24.4 billion were comprised of $10.6$13.7 billion in brokered deposits and $9.1$10.7 billion in retail and other deposits at March 31, 2019,2020, compared to total deposits of $18.9$24.3 billion, which were comprised of $10.3$13.8 billion in brokered deposits and $8.6$10.5 billion in retail and other deposits, at December 31, 2018.2019.
Interest bearing deposits as of March 31, 20192020 and December 31, 20182019 consisted of retail and brokered non-maturity savings deposits, retail and brokered non-maturity money market deposits (“MMDAs”) and retail and brokered certificates of deposit (“CDs”). Interest bearing deposits include deposits from Educational 529 and Health Savings plans that diversify our funding sources and additional deposits we consider to be core. These and other large omnibus accounts, aggregating the deposits of many individual depositors, represented $6.2$6.8 billion of our deposit total as of March 31, 2019, compared with $5.9 billion at2020 and December 31, 2018.2019.
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 $4$5 million and $3$4 million in the three months ended March 31, 20192020 and 2018,2019, respectively. Fees paid to third-party brokers related to brokered CDs were $1$2 million and $7$1 million for the three months ended March 31, 20192020 and 2018,2019, respectively.
Interest bearing deposits at March 31, 20192020 and December 31, 20182019 are summarized as follows:
 
 March 31, 2019 December 31, 2018  March 31, 2020December 31, 2019
 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 $8,974,104
 2.59% $8,687,766
 2.46% Money market$9,561,715  1.74 %$9,616,547  2.04 %
Savings 714,518
 2.03
 702,342
 2.00
 Savings752,357  1.44  718,616  1.71  
Certificates of deposit 9,973,668
 2.76
 9,551,974
 2.74
 Certificates of deposit14,129,891  1.95  13,947,743  2.44  
Deposits - interest bearing $19,662,290
   $18,942,082
 

 Deposits - interest bearing$24,443,963  $24,282,906  
____________
(1) Includes the effect of interest rate swaps in effective hedge relationships.




As of March 31, 2019,2020, and December 31, 2018,2019, there were $638 million$1.1 billion and $523$963 million, respectively, of deposits exceeding Federal Deposit Insurance Corporation (“FDIC”)FDIC insurance limits. Accrued interest on deposits was $57$82 million and $53$68 million at March 31, 20192020 and December 31, 2018,2019, respectively.



24
41








SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

5.6. 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 facility or ABCP Facility). The following table summarizes our borrowings at March 31, 20192020 and December 31, 2018.2019.


March 31, 2020December 31, 2019
Short-TermLong-TermTotalShort-TermLong-TermTotal
Unsecured borrowings:
Unsecured debt (fixed-rate)$—  $198,362  $198,362  $—  $198,159  $198,159  
Total unsecured borrowings—  198,362  198,362  —  198,159  198,159  
Secured borrowings:
Private Education Loan term securitizations:
Fixed-rate—  2,912,346  2,912,346  —  2,629,902  2,629,902  
Variable-rate—  1,597,328  1,597,328  —  1,525,976  1,525,976  
Total Private Education Loan term securitizations—  4,509,674  4,509,674  —  4,155,878  4,155,878  
Secured Borrowing Facility—  —  —  289,230  —  289,230  
Total secured borrowings—  4,509,674  4,509,674  289,230  4,155,878  4,445,108  
Total$—  $4,708,036  $4,708,036  $289,230  $4,354,037  $4,643,267  
  March 31, 2019 December 31, 2018
  Short-Term Long-Term Total Short-Term Long-Term Total
Unsecured borrowings:            
Unsecured debt (fixed-rate) $—
 $197,551
 $197,551
 $—
 $197,348
 $197,348
Total unsecured borrowings —
 197,551
 197,551
 —
 197,348
 197,348
Secured borrowings:            
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 —
 4,278,855
 4,278,855
 —
 4,086,956
 4,086,956
Total $—
 $4,476,406
 $4,476,406
 $—
 $4,284,304
 $4,284,304


Short-term Borrowings
Secured Borrowing Facility
On February 20, 2019,19, 2020, we amended our Secured Borrowing Facility to, among other things, increase the amount that can be borrowed under the facility to $2 billion (from $750 million) and extendedextend the maturity of our $750 million Secured Borrowing Facility.the facility. We hold 100 percent of the residual interest in the Secured Borrowing Facility trust. Under the amended Secured Borrowing Facility, we incur financing costs of between 0.35 percent and 0.45 percent on unused borrowing capacity and approximately 3-month LIBOR plus 0.85 percent on outstandings. The amended Secured Borrowing Facility extendsextended the revolving period, during which we may borrow, repay and reborrow funds, until February 19, 2020.17, 2021. The scheduled amortization period, during which amounts outstanding under the Secured Borrowing Facility must be repaid, ends on February 19, 202117, 2022 (or earlier, if certain material adverse events occur). At both March 31, 20192020, there were 0 borrowings outstanding under the Secured Borrowing Facility and at December 31, 2018,2019, there were no$289 million borrowings outstanding under the Secured Borrowing Facility.


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. At March 31, 2019, the outstanding balance was $198 million.

25




SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
5.Borrowings (Continued)



Secured Financings
2020 Transactions
On March 13, 2019,February 12, 2020, we executed our $453$636 million SMB Private Education Loan Trust 2019-A2020-A term ABS transaction, which was accounted for as a secured financing. We sold $453$636 million of notes to third parties and retained a 100 percent interest in the residual certificates issued in the securitization, raising approximately $451$634 million of gross proceeds. The Class A and Class B notes had a weighted average life of 4.264.18 years and priced at a weighted average LIBOR equivalent cost of 1-month1-
42




SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
6.Borrowings (Continued)
month LIBOR plus 0.920.88 percent. At March 31, 2019, $4622020, $665 million of our Private Education Loans, including $622 million of principal and $43 million in capitalized interest, were encumbered because of this transaction.


Secured Financings at Issuance
The following summarizes our secured financings issued in 2019 and through March 31, 2020:
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
    

IssueDate IssuedTotal Issued
Weighted Average Cost of Funds(1)
Weighted Average Life
(in years)
Private Education:
2019-AMarch 2019$453,000  1-month LIBOR plus 0.92%4.26
2019-BJune 2019657,000  1-month LIBOR plus 1.01%4.41
Total notes issued in 2019$1,110,000  
Total loan and accrued interest amount securitized at inception in 2019$1,208,963  
2020-AFebruary 2020$636,000  1-month LIBOR plus 0.88%4.18
Total notes issued in 2020$636,000  
Total loan and accrued interest amount securitized at inception in 2020$676,089  
____________
(1) Represents LIBOR equivalent cost of funds for floating and fixed ratefixed-rate bonds, excluding issuance costs.




26




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 March 31, 20192020 and December 31, 2018,2019, respectively:


  March 31, 2019
  Debt Outstanding Carrying Amount of Assets Securing Debt Outstanding
  Short-Term Long-Term Total Loans Restricted Cash 
Other Assets(1)
 Total
Secured borrowings:              
Private Education Loan term securitizations $—
 $4,278,855
 $4,278,855
 $5,251,117
 $143,307
 $356,496
 $5,750,920
Secured Borrowing Facility —
 —
 —
 —
 —
 943
 943
Total $—
 $4,278,855
 $4,278,855
 $5,251,117
 $143,307
 $357,439
 $5,751,863

 December 31, 2018March 31, 2020
 Debt Outstanding Carrying Amount of Assets Securing Debt OutstandingDebt OutstandingCarrying Amount of Assets Securing Debt Outstanding
 Short-Term Long-Term Total Loans Restricted Cash 
Other
Assets(1)
 TotalShort-TermLong-TermTotalLoansRestricted Cash
Other Assets(1)
Total
Secured borrowings:              Secured borrowings:
Private Education Loan term securitizations $—
 $4,086,956
 $4,086,956
 $5,030,837
 $113,431
 $326,570
 $5,470,838
Private Education Loan term securitizations$—  $4,509,674  $4,509,674  $5,594,488  $172,546  $370,795  $6,137,829  
Secured Borrowing Facility —
 —
 —
 —
 —
 157
 157
Secured Borrowing Facility—  —  —  —  9,316  1,835  11,151  
Total $—
 $4,086,956
 $4,086,956
 $5,030,837
 $113,431
 $326,727
 $5,470,995
Total$—  $4,509,674  $4,509,674  $5,594,488  $181,862  $372,630  $6,148,980  
____
(1) Other assets primarily represent accrued interest receivable.

43




SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
6.Borrowings (Continued)
December 31, 2019
Debt OutstandingCarrying Amount of Assets Securing Debt Outstanding
Short-TermLong-TermTotalLoansRestricted Cash
Other
Assets(1)
Total
Secured borrowings:
Private Education Loan term securitizations$—  $4,155,878  $4,155,878  $5,246,986  $145,760  $333,173  $5,725,919  
Secured Borrowing Facility289,230  —  289,230  339,666  8,803  23,832  372,301  
Total$289,230  $4,155,878  $4,445,108  $5,586,652  $154,563  $357,005  $6,098,220  
____
(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 March 31, 2019.2020. 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 months ended March 31, 20192020 or in the year ended December 31, 2018.2019.
We established an account at the FRB to meet eligibility requirements for access to the Primary Credit borrowing facility at the Federal Reserve Bank (“FRB”)FRB’s 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 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 March 31, 20192020 and December 31, 2018,2019, the value of our pledged collateral at the FRB totaled $3.3$2.4 billion and $3.1$3.2 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 months ended March 31, 20192020 or in the year ended December 31, 2018.2019.


27
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SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

6.7. 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 10, “Derivative Financial Instruments” in our 20182019 Form 10-K for a full discussion of our risk management strategy.
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 Chicago Mercantile Exchange (“CME”) and the London Clearing House (“LCH”). All variation margin payments on derivatives cleared through the CME and LCH are accounted for as legal settlement. As of March 31, 2019, $5.62020, $9.3 billion notional of our derivative contracts were cleared on the CME and $0.6$0.5 billion were cleared on the LCH. The derivative contracts cleared through the CME and LCH represent 90.995.2 percent and 9.14.8 percent respectively, of our total notional derivative contracts of $6.2$9.8 billion at March 31, 2019.2020.
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, 20192020 was $(33.2)$(268) million and $0.3$24 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 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 March 31, 20192020 and December 31, 2018,2019, 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 $30$96 million and $27$52 million, respectively.


Summary of Derivative Financial Statement Impact
The following tables summarize the fair values and notional amounts of all derivative instruments at March 31, 20192020 and December 31, 2018,2019, and their impact on earnings and other comprehensive income for the three months ended March 31, 20192020 and 2018.2019. Please refer to Note 10, “Derivative Financial Instruments” in our 20182019 Form 10-K for a full discussion of cash flow hedges, fair value hedges, and trading activities.



28
45








SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
6.7.Derivative Financial Instruments (Continued)

Impact of Derivatives on the Consolidated Balance Sheets
 Cash Flow Hedges Fair Value Hedges Trading TotalCash Flow HedgesFair Value HedgesTradingTotal
 March 31, 
December
31,
 March 31, December
31,		 March 31, December
31,		 March 31, December
31,		March 31,December
31,		March 31,December
31,		March 31,December
31,		March 31,December
31,
 2019 2018 2019 2018 2019 2018 2019 201820202019202020192020201920202019
Fair Values(1)
Hedged Risk Exposure                
Fair Values(1)
Hedged Risk Exposure
                
Derivative Assets:(2)
                
Derivative Assets:(2)
Interest rate swapsInterest rate $2,060
 $—
 $—
 $2,000
 $—
 $90
 $2,060
 $2,090
Interest rate swapsInterest rate$—  $715  $2,902  $—  $751  $—  $3,653  $715  
Derivative Liabilities:(2)
                
Derivative Liabilities:(2)
Interest rate swapsInterest rate —
 (2,032) (3,413) —
 (568) —
 (3,981) (2,032)Interest rate swapsInterest rate(275) —  —  (896) —  (268) (275) (1,164) 
Total net derivatives $2,060
 $(2,032) $(3,413) $2,000
 $(568) $90
 $(1,921) $58
Total net derivatives$(275) $715  $2,902  $(896) $751  $(268) $3,378  $(449) 
  ___________
(1)
(1) Fair values reported include variation margin as legal settlement of 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.
(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)
(2) The following table reconciles gross positions with the impact of master netting agreements to the balance sheet classification:
Other AssetsOther Liabilities
March 31,December 31,March 31,December 31,
2020201920202019
Gross position(1)
$3,653  $715  $(275) $(1,164) 
Impact of master netting agreement(222) (519) 222  519  
Derivative values with impact of master netting agreements (as carried on balance sheet)3,431  196  (53) (645) 
Cash collateral pledged(2)
92,969  52,564  —  —  
Net position$96,400  $52,760  $(53) $(645) 
__________
(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.

(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 FlowFair ValueTradingTotal
March 31,December 31,March 31,December 31,March 31,December 31,March 31,December 31,
20202019202020192020201920202019
Notional Values
Interest rate swaps$1,117,945  $1,150,518  $5,193,323  $5,031,429  $3,452,241  $3,744,917  $9,763,509  $9,926,864  


46
  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



29








SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
6.7.Derivative Financial Instruments (Continued)

As of March 31, 20192020 and December 31, 2018,2019, the following amounts were recorded on the consolidated balance sheet related to cumulative basis adjustments for fair value hedges:
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,
2020201920202019
Deposits$(5,391,335) $(5,085,426) $(206,396) $(63,148) 
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






Impact of Derivatives on the Consolidated Statements of Income
Three Months Ended 
 March 31,
20202019
Fair Value Hedges
Interest rate swaps:
Interest recognized on derivatives$4,623  $(3,827) 
Hedged items recorded in interest expense(143,248) (23,986) 
Derivatives recorded in interest expense144,183  23,888  
Total$5,558  $(3,925) 
Cash Flow Hedges
Interest rate swaps:
Amount of gain (loss) reclassified from accumulated other comprehensive income into interest expense$(1,528) $1,296  
Total$(1,528) $1,296  
Trading
Interest rate swaps:
Change in fair value of future interest payments recorded in earnings$42,312  $4,202  
Total42,312  4,202  
Total$46,342  $1,573  
  Three Months Ended 
 March 31,
  2019 2018
     
Fair Value Hedges    
Interest rate swaps:    
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 $(3,925) $5,872
     
Cash Flow Hedges    
Interest rate swaps:    
Amount of gain (loss) reclassified from accumulated other comprehensive income into interest expense $1,296
 $(1,543)
Total $1,296
 $(1,543)
     
Trading    
Interest rate swaps:    
Change in fair value of future interest payments recorded in earnings $4,202
 $(4,755)
Total 4,202
 (4,755)
Total $1,573
 $(426)


        


30
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SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
6.7.Derivative Financial Instruments (Continued)


Impact of Derivatives on the Statements of Changes in Stockholders’ Equity
  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) $20,290
Three Months Ended
March 31,
20202019
Amount of loss recognized in other comprehensive income (loss)$(47,222) $(12,821) 
Less: amount of gain (loss) reclassified in interest expense(1,528) 1,296  
Total change in other comprehensive income (loss) for unrealized gains (losses) on derivatives, before income tax (expense) benefit$(45,694) $(14,117) 
        
Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on our variable-rate deposits. During the next twelve12 months, we estimate that $3.7$18 million will be reclassified as an increase to interest expense.
Cash Collateral
As of March 31, 2019,2020, cash collateral held and pledged excludes amounts that represent legal settlement of the derivative contracts held with the CME and LCH. There was no0 cash collateral held related to derivative exposure between us and our derivatives counterparties at March 31, 20192020 and December 31, 2018,2019, 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 $32$93 million and $27$53 million at March 31, 20192020 and December 31, 2018,2019, respectively. Collateral pledged is recorded in “Other interest-earning assets” on the consolidated balance sheets.



31
48








SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

7.8. Stockholders’ Equity


The following table summarizes our common share repurchases and issuances.
 
  Three Months Ended 
 March 31,
(Shares and per share amounts in actuals) 2019 2018
Common stock repurchased under repurchase program(1)
 5,435,476
 —
Average purchase price per share(2)
 $11.04
 $—
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
 Three Months Ended 
 March 31,
(Shares and per share amounts in actuals)20202019
Common stock repurchased under repurchase program(1)(2)
47,736,847  5,435,476  
Average purchase price per share(3)
$9.66  $11.04  
Shares repurchased related to employee stock-based compensation plans(4)
1,105,119  1,289,391  
Average purchase price per share$10.98  $10.95  
Common shares issued(5)
2,837,562  3,470,664  
    
__________________
(1)
(1)  Common shares purchased under our share repurchase programs. $75 million of capacity under the 2020 Share Repurchase Program remained available as of March 31, 2020.
(2)  For the three months ended March 31, 2020, the amount includes 44.9 million shares related to the initial delivery of shares under our accelerated share repurchase agreement, described below.
(3) Average purchase price per share includes purchase commission costs.
(4) 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.
(5)Common shares issued under our various compensation and benefit plans.
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.
(4)
Common shares issued under our various compensation and benefit plans.
 


The closing price of our common stock on March 29, 201931, 2020 was $9.91.$7.19.


Dividend and Share Repurchases


In the three months endedboth March 31,2020 and 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 ourThe January 23, 2019 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(the “2019 Share Repurchase Program”), which was effective upon announcement and expires on January 22, 2021, permits us to repurchase from time to time shares of our common stock up to an aggregate repurchase price not to exceed $200 million. Under the 2019 Share Repurchase Program, we repurchased 3 million and expires on January 22, 2021. Inshares of common stock for $33 million in the three months ended March 31, 2018, we only repurchased2020 and 5 million shares of common stock acquiredfor $60 million in connectionthe three months ended March 31, 2019. We have now utilized all capacity under the 2019 Share Repurchase Program.

On January 22, 2020, we announced a new share repurchase program (the “2020 Share Repurchase Program”), which was effective upon announcement and expires on January 21, 2022, and permits us to repurchase shares of common stock from time to time up to an aggregate repurchase price not to exceed $600 million.

On March 10, 2020, we entered into an accelerated share repurchase agreement (“ASR”) with taxes withheld resulting from award exercises and vestinga third-party financial institution under which we purchased $525 million of our employee stock-based compensation plans.


outstanding common stock. On March 11, 2020, the third-party financial institution delivered to us approximately 44.9 million shares. The final total actual number of shares of common stock to be delivered to us will be based generally upon a discount to the Rule 10b-18 volume-weighted average price at which the shares of our common stock trade during the regular trading sessions on the NASDAQ Global Select Market during the term of the ASR. At settlement, the third-party financial institution may be obligated to deliver additional shares of common stock to us or we may be obligated to make delivery of common stock or a cash payment to them, at our option. The transactions are
32
49



SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
8.Stockholders’ Equity (Continued)
accounted for as equity transactions and are included in treasury stock when the shares are received, at which time there is an immediate reduction in the weighted average common shares calculation for basic and diluted earnings per share. We expect final settlement of the share repurchases under the ASR to occur before or during the first quarter of 2021.

Under the 2020 Share Repurchase Program, repurchases may occur from time to time and through a variety of methods, including open market repurchases, repurchases effected through Rule 10b5-1 trading plans, negotiated block purchases, accelerated share repurchase programs, tender offers or other similar transactions.



50







SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

8.9. 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
 March 31,
(In thousands, except per share data)20202019
Numerator:
Net income$362,173  $158,189  
Preferred stock dividends3,464  4,468  
Net income attributable to SLM Corporation common stock$358,709  $153,721  
Denominator:
Weighted average shares used to compute basic EPS409,786  434,574  
Effect of dilutive securities:
Dilutive effect of stock options, restricted stock, restricted stock units, performance stock units and Employee Stock Purchase Plan (“ESPP”) (1)(2)
2,969  3,674  
Weighted average shares used to compute diluted EPS412,755  438,248  
Basic earnings per common share attributable to SLM Corporation$0.88  $0.35  
Diluted earnings per common share attributable to SLM Corporation$0.87  $0.35  
  Three Months Ended
  March 31,
(In thousands, except per share data) 2019 2018
Numerator:    
Net income $158,189
 $126,254
Preferred stock dividends 4,468
 3,397
Net income attributable to SLM Corporation common stock $153,721
 $122,857
Denominator:    
Weighted average shares used to compute basic EPS 434,574
 433,952
Effect of dilutive securities:    
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 438,248
 438,977
     
Basic earnings per common share attributable to SLM Corporation $0.35
 $0.28
     
Diluted earnings per common share attributable to SLM Corporation $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 March 31, 2019 and 2018, securities covering approximately 2 million and no shares, respectively, were outstanding but not included in the computation of diluted earnings per share because they were anti-dilutive.
          

(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 March 31, 2020 and 2019, securities covering approximately 2 million shares were outstanding but not included in the computation of diluted earnings per share because they were anti-dilutive.

33
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SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

9.10. 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 20182019 Form 10-K.


During the three months ended March 31, 2019,2020, 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
 March 31, 2020December 31, 2019
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total 
Assets
Available-for-sale investments$—  $538,742  $75,840  $614,582  $—  $487,669  $—  $487,669  
Derivative instruments—  3,653  —  3,653  —  715  —  715  
Total$—  $542,395  $75,840  $618,235  $—  $488,384  $—  $488,384  
Liabilities
Derivative instruments$—  $(275) $—  $(275) $—  $(1,164) $—  $(1,164) 
Total$—  $(275) $—  $(275) $—  $(1,164) $—  $(1,164) 
  Fair Value Measurements on a Recurring Basis
  March 31, 2019 December 31, 2018
  Level 1  Level 2  Level 3  Total  Level 1  Level 2  Level 3  Total 
                 
Assets                
Available-for-sale investments $—
 $207,907
 $—
 $207,907
 $—
 $176,245
 $—
 $176,245
Derivative instruments —
 2,060
 —
 2,060
 —
 2,090
 —
 2,090
Total $—
 $209,967
 $—
 $209,967
 $—
 $178,335
 $—
 $178,335
                 
Liabilities                
Derivative instruments $—
 $(3,981) $—
 $(3,981) $—
 $(2,032) $—
 $(2,032)
Total $—
 $(3,981) $—
 $(3,981) $—
 $(2,032) $—
 $(2,032)








 


34
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SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
9.10.Fair Value Measurements (Continued)




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


 March 31, 2020December 31, 2019
Fair
Value		Carrying
Value		DifferenceFair
Value		Carrying
Value		Difference
Earning assets:
Loans held for investment, net:
Private Education Loans$21,826,300  $20,176,233  $1,650,067  $24,988,941  $22,896,515  $2,092,426  
FFELP Loans755,449  764,771  (9,322) 795,055  783,816  11,239  
Personal Loans851,750  747,444  104,306  1,047,119  983,643  63,476  
Credit Cards6,959  7,403  (444) 3,818  3,818  —  
Cash and cash equivalents7,292,929  7,292,929  —  5,563,877  5,563,877  —  
Trading investments11,360  11,360  —  —  —  —  
Available-for-sale investments614,582  614,582  —  487,669  487,669  —  
Accrued interest receivable1,291,972  1,281,746  10,226  1,491,471  1,392,725  98,746  
Tax indemnification receivable27,727  27,727  —  27,558  27,558  —  
Derivative instruments3,653  3,653  —  715  715  —  
Total earning assets$32,682,681  $30,927,848  $1,754,833  $34,406,223  $32,140,336  $2,265,887  
Interest-bearing liabilities:
Money-market and savings accounts$10,360,970  $10,314,072  $(46,898) $10,363,691  $10,335,163  $(28,528) 
Certificates of deposit14,202,601  14,129,891  (72,710) 14,065,007  13,947,743  (117,264) 
Short-term borrowings—  —  —  289,230  289,230  —  
Long-term borrowings4,572,625  4,708,036  135,411  4,434,323  4,354,037  (80,286) 
Accrued interest payable93,768  93,768  —  75,158  75,158  —  
Derivative instruments275  275  —  1,164  1,164  —  
Total interest-bearing liabilities$29,230,239  $29,246,042  $15,803  $29,228,573  $29,002,495  $(226,078) 
Excess of net asset fair value over carrying value$1,770,636  $2,039,809  
  March 31, 2019 December 31, 2018
  
Fair
Value
 
Carrying
Value
 Difference 
Fair
Value
 
Carrying
Value
 Difference
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 2,156,257
 2,156,257
 —
 2,559,106
 2,559,106
 —
Available-for-sale investments 207,907
 207,907
 —
 176,245
 176,245
 —
Accrued interest receivable 1,409,728
 1,299,496
 110,232
 1,285,842
 1,191,981
 93,861
Tax indemnification receivable 43,124
 43,124
 —
 39,207
 39,207
 —
Derivative instruments 2,060
 2,060
 —
 2,090
 2,090
 —
Total earning assets $29,651,568
 $27,207,230
 $2,444,338
 $28,391,625
 $26,239,548
 $2,152,077
Interest-bearing liabilities:            
Money-market and savings accounts $9,690,078
 $9,688,622
 $(1,456) $9,370,957
 $9,390,108
 $19,151
Certificates of deposit 10,000,546
 9,973,668
 (26,878) 9,513,194
 9,551,974
 38,780
Long-term borrowings 4,505,828
 4,476,406
 (29,422) 4,278,931
 4,284,304
 5,373
Accrued interest payable 68,746
 68,746
 —
 61,341
 61,341
 —
Derivative instruments 3,981
 3,981
 —
 2,032
 2,032
 —
Total interest-bearing liabilities $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     $2,386,582
     $2,215,381


Please refer to Note 14, “Fair Value Measurements” in our 20182019 Form 10-K for a full discussion of the methods and assumptions used to estimate the fair value of each class of financial instruments.



35
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SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

10.11. Regulatory Capital
        
Sallie Mae Bank (the “Bank”) is subject to various regulatory capital requirements administered by the FDIC and the Utah Department of Financial Institutions (the “UDFI”(“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 operationoperations 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.


Under U.S. Basel III is aimed at increasing both the quantity and quality of regulatory capital. Certain aspects of U.S. Basel III, including new deductions from and adjustments to regulatory capital and a capital conservation buffer, have been phased in over several years.

The Bank is requiredsubject to maintainthe following minimum capital ratios under U.S. Basel III: 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 leverage-based capital ratios.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 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 to pay discretionary bonuses to executive officers. The Bank’sIncluding the buffer, as of January 1, 2019, the Bank is required and actual regulatoryto maintain the following minimum capital amounts and ratios under U.S. Basel III are shownin order to avoid such restrictions: 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 and a Total risk-based capital ratio of greater than 10.5 percent.

To qualify as “well capitalized” under the prompt corrective action framework for insured depository institutions, 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.

On March 27, 2020, the FDIC and other federal banking agencies published an interim final rule that provides those banking organizations adoptingCECL during 2020 with the option to delay for 2 years the estimated impact of CECL on regulatory capital and to phase in the following table.aggregate impact of the deferral on regulatory capital over a subsequent three year period. Under this interim final rule, because we have elected to use the deferral option, the regulatory capital impact of our transition adjustments recorded on January 1, 2020 from the adoption of CECL will be deferred for 2 years. In addition, 25 percent of the ongoing impact, from January 1, 2020 through the end of the two-year deferral period, of CECL on our allowance for loan losses, retained earnings, and average total consolidated assets, each as reported for regulatory capital purposes, will be added to the deferred transition amounts (“adjusted transition amounts”) and deferred for the 2-year period. At the conclusion of the 2-year period (January 1, 2022), the adjusted transition amounts will be phased-in for regulatory capital purposes at a rate of 25 percent per year, with the phased-in amounts included in regulatory capital at the beginning of each year. Our January 1, 2020 CECL transition amounts increased the allowance for loan losses by $1.1 billion, increased the liability representing our off-balance sheet exposure for unfunded commitments by $116 million, and increased our deferred tax asset by $306 million, resulting in a cumulative effect adjustment that reduced retained earnings by $953 million.



54
  Actual 
U.S. Basel III
Regulatory Requirements(1)
  AmountRatio 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.



36






SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
10.11.Regulatory Capital (Continued)
The following capital amounts and ratios are based upon the Bank’s average assets and risk-weighted assets, as indicated.



 Actual
U.S. Basel III Minimum
Requirements Plus Buffer(1)(2)
AmountRatioAmountRatio
As of March 31, 2020:
Common Equity Tier 1 Capital (to Risk-Weighted Assets)$3,112,763  12.4 %$1,757,168  >7.0 %
Tier 1 Capital (to Risk-Weighted Assets)$3,112,763  12.4 %$2,133,704  >8.5 %
Total Capital (to Risk-Weighted Assets)$3,428,154  13.7 %$2,635,752  >10.5 %
Tier 1 Capital (to Average Assets)$3,112,763  9.4 %

$1,326,107  >4.0 %
As of December 31, 2019:
Common Equity Tier 1 Capital (to Risk-Weighted Assets)$3,264,309  12.2 %$1,876,050  >7.0 %
Tier 1 Capital (to Risk-Weighted Assets)$3,264,309  12.2 %$2,278,060  >8.5 %
Total Capital (to Risk-Weighted Assets)$3,600,668  13.4 %$2,814,074  >10.5 %
Tier 1 Capital (to Average Assets)$3,264,309  10.2 %$1,284,642  >4.0 %

________________    
(1)Reflects the U.S. Basel III minimum required ratio plus the applicable capital conservation buffer.
(2)The Bank’s regulatory capital ratios also exceeded all applicable standards for the Bank to qualify as “well capitalized” under the prompt corrective action framework.

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 $85declared $541 million in dividends to the Company for the three months ended March 31, 20192020, and no$85 million in dividends for the three months ended March 31, 2018.2019. 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 common stock and to consummate any common share repurchases by the Company under its share repurchase program.

3755








SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

11.12. 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). We estimate expected credit losses over the contractual period in which we are exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by us. At March 31, 2019,2020, we had $0.5 billion$450 million of outstanding contractual loan commitments which we expect to fund during the remainder of the 2018/20192019/2020 academic year. At March 31, 2019,2020, we had a $0.3$30 million reserve recorded in “Other Liabilities” to cover lifetime expected credit losses that may occur during the one-year loss emergence period on these unfunded commitments. See Note 1, “Significant Accounting Policies — Allowance for Credit Losses — Off-Balance Sheet Exposure for Contractual Loan Commitments” for additional information.
Regulatory Matters
On July 17, 2018, the Mississippi Attorney General filed a lawsuit in Mississippi state court against Navient, Navient Solutions, LLC, and the Bank arising out of the Multi-State Investigation. The complaint alleges unfair and deceptive trade practices against all three defendants as to private loan origination practices from 2000 to 2009, and against the two Navient defendants as to servicing practices between 2010 and the present. The complaint further alleges that Navient assumed responsibility for these matters under the Separation and Distribution Agreement for alleged conduct that pre-dated the Spin-Off. On September 27, 2018, the Mississippi Attorney General filed an amended complaint. On October 8, 2018, the Bank moved to dismiss the Mississippi Attorney General’s action as to the Bank, arguing, among other things, that 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. On November 20, 2018, the Mississippi Attorney General filed an opposition brief and the Bank filed a reply on December 21, 2018. The court heard oral argument on the Bank’s motion to dismiss on April 11, 2019. On August 15, 2019, the court entered an order denying the Bank’s motion to dismiss. On September 5, 2019, the Bank filed with the Supreme Court of Mississippi a petition for interlocutory appeal. The Mississippi Attorney General filed an opposition to the petition for interlocutory appeal on September 19, 2019. On October 16, 2019, the Supreme Court of Mississippi granted the Bank’s petition for interlocutory appeal and stayed the trial court proceedings. The Mississippi Attorney General has since agreed to dismiss with prejudice all claims against the Bank in the underlying case. On March 31, 2020, the Mississippi Attorney General and the Bank filed a Joint Motion to Dismiss Interlocutory Appeal with the Supreme Court of Mississippi. On April 10, 2020, the Mississippi Attorney General filed with the trial court a Notice of Voluntary Dismissal with Prejudice as to the Bank.
For additional information regarding our regulatory matters, see Note 18, “Commitments, Contingencies and Guarantees” in our 2019 Form 10-K.
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 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.
56




SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
12.Commitments, Contingencies and Guarantees (Continued)
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.



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


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

The following information is current as of April 17, 201922, 2020 (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, 20182019 (filed with the Securities and Exchange Commission (the “SEC”) on February 28, 2019)2020) (the “2018“2019 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 20182019 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,to: statements regarding future developments surrounding COVID-19 or any other pandemic, including, without limitation, statements regarding the potential impact of COVID-19 or any other pandemic on the Company’s business, results of operations, financial condition and/or cash flows; 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.uncertainties; the Company’s 2020 guidance; the Company’s three-year horizon outlook; the Company’s expectation and ability to execute loan sales and share repurchases; the Company’s projections regarding originations, earnings and balance sheet position; and any estimates related to accounting standard changes. 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 1A. “Risk Factors” and elsewhere in our 20182019 Form 10-K and subsequent filings with the SEC; the societal, business, and legislative/regulatory impact of pandemics and other public heath crises; 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;estimates, including any regarding the measurement of our allowance for loan losses and the related provision expense; 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 our funding costs and availability; reductions to our credit ratings; cybersecurity incidents, cyberattacks and other failures or breaches of our operating systems or infrastructure, including those of third-party vendors; damage to 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 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 managementus 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 our expectations.


We report financial results on a GAAP basis and also 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-marketmark-to-fair value 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“—Key Financial Measures” and “ ‘Core“—‘Core Earnings’ ” in this Form 10-Q for
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the quarter ended March 31, 20192020 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.


Impact of COVID-19 on Sallie Mae
During the first quarter of 2020, the respiratory disease caused by a novel coronavirus, coronavirus 2019 or COVID-19 (“COVID-19”), began to spread worldwide and has caused significant disruptions to the U.S. and world economies. On March 11, 2020, the World Health Organization declared the COVID-19 outbreak to be a pandemic. On March 13, 2020, President Trump declared a national emergency, which made federal funds available to respond to the crisis. Beginning on March 15, 2020, many businesses closed or reduced hours throughout the U.S. to combat the spread of COVID-19. All 50 states have reported cases of COVID-19 and the states have implemented various containment efforts, including lockdowns on non-essential businesses. Economists expect that the impact of COVID-19 on the U.S. economy will be significant during the remainder of 2020. We used Moody’s Analytics economic forecasts as of March 31, 2020 in estimating the losses on our loan portfolio; however, more recent forecasts of economic conditions appear to have worsened. As the economic impact of the COVID-19 pandemic becomes clearer as the year progresses, we could see significant changes in our allowance for loan losses. As the largest private student lender in the U.S., we, along with our customers and employees, are feeling the impact of COVID-19. In response to COVID-19, we have implemented efforts to safeguard our workforce as well as to help our customers in this time of crisis. The following discussion highlights how we are responding and the expected impacts of COVID-19 on our business.
The COVID-19 crisis is unprecedented and has had a significant impact on the economic environment globally and in the U.S. While we have highlighted below how we have responded to the pandemic and described its financial impact, there is a significant amount of uncertainty as to the length and breadth of the impact to the U.S. economy and, consequently, on us. Accordingly, the information below should be read in conjunction with our COVID-19 Pandemic risk factor. See Part II, Item 1A. “Risk Factors — COVID-19 Pandemic” in this quarterly report on Form 10-Q for risks associated with COVID-19. See also Part I, Item 1A. “Risk Factors” in our 2019 Form 10-K. In addition, see the forward-looking and cautionary statements discussion above. 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 1A. “Risk Factors” and elsewhere in the 2019 Form 10-K and this quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2020.
Customers and Credit Performance
COVID-19 is having far reaching, negative impacts on individuals, businesses, and, consequently, the overall economy. Specifically, COVID-19 has materially disrupted business operations, resulting in significantly higher levels of unemployment or underemployment. As a result, we expect many of our individual customers will experience financial hardship, making it difficult, if not impossible, to meet their payment obligations to us without temporary assistance. We are monitoring key metrics as early warning indicators of financial hardship, including changes in weekly unemployment claims, enrollment in auto-debit payments, requests for new forbearances, enrollment in hardship payment plans and early delinquency metrics.
As a result of the negative impact on employment from COVID-19, we are anticipating higher levels of financial hardship for our customers, which we expect will lead to higher levels of forbearance, delinquency and defaults. We expect that, left unabated, this deterioration in forbearance, delinquency and default rates will persist until such time as the economy and employment return to relatively normal levels. We maintain an allowance for credit losses that incorporates multiple economic scenarios. The process for determining our allowance contemplates material external factors that may require management adjustments.
Historically we have utilized disaster forbearance for material events, including hurricanes, wildfires and floods. Disaster forbearance defers payments for as much as 90 days upon enrollment. In accordance with regulatory guidance that encourages lenders to work constructively with borrowers who have been impacted by COVID-19, we have invoked this same disaster forbearance program to assist our customers through COVID-19 and offer this program across our operations, including through mobile and self-service channels such as chat and IVR. Customers who receive a disaster forbearance will not progress in delinquency and will not be assessed late fees or other fees. During a disaster forbearance, a customer’s credit file will continue to reflect the status of the loan as it was immediately prior to granting the disaster forbearance. During the period of
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the disaster forbearance, interest will continue to accrue, but will not be added to the loan balance until the end of the loan term. If the financial hardship extends beyond 90 days, additional assistance will be available for eligible customers. This program is applied across our Private Education Loan and Personal Loan portfolios.
We have observed a significant increase in the use of disaster forbearance as businesses have closed in accordance with broadly adopted ‘shelter at home’ policies and unemployment has risen. While the pandemic persists, we expect to see corresponding reductions in the usage of other payment programs, given the availability of the disaster forbearance. Additionally, we expect to see lower usage of automatic direct debit payments as customers manage the uncertainty associated with the pandemic. For customers experiencing financial hardship unrelated to COVID-19, our normal collection efforts and programs are in place.
We previously disclosed that, beginning in the second quarter of 2020, we planned to revise our credit administration practices to phase in (i) a required six-month period between successive grants of forbearance and between forbearance grants and certain other repayment alternatives (with exceptions for forbearances granted during the first six months following a customer’s grace period and exceptions for contractual interest rate reductions), and (ii) a limitation on the participation of delinquent customers in certain short-term extended or interest-only repayment alternatives to once in 12 months and twice in five years. We also disclosed that prior to full implementation of the planned credit administration practices changes, which we originally expected to have been completed by year-end 2020, we planned to conduct a controlled testing program on randomly selected customers to measure the impact of the changes on our customers, our credit operations, and key credit metrics. We commenced the testing in October 2019 for some of the planned changes. We have postponed implementation of the credit administration practices changes and related testing until the fourth quarter of 2020 so that we can be more flexible in dealing with our customers’ financial hardship.
We sent all our customers an email explaining their self-serve options and how to contact us if they need assistance. We are also regularly updating www.SallieMae.com/coronavirus with the latest information on how our customers can access their account and get assistance or payment relief, if needed. We expect that, as the economic impact of COVID-19 evolves, we will continue to evaluate the measures we have put in place to assist our customers during this unprecedented challenge. We continue to adapt and evolve our customer care and collections practices to meet the needs of our customers.
Employees
Our employees have been affected by COVID-19 in many ways, including disruptions due to unexpected school and day-care closings, family underemployment or unemployment, and learning how to work remotely and, in some cases, with new tools and technology to learn and support that work. Our goal has been to support our people during the present uncertainty while remaining focused on meeting the needs of our customers and business continuity. Early in the crisis, we provided employees with information about best practices to prevent the spread of COVID-19 and other viruses or illnesses. We recommended non-customer facing employees work from home and reduced the density and provided space for us to implement social distancing protocols for the employees who were required to work in our offices. Later, we enabled substantially all of our workforce to work remotely. In addition, we have limited in-person meetings, non-employee visits to our locations, and non-essential business travel.
To further protect the health and welfare of our employees and respond to their individual circumstances, we have provided additional wellness assistance. For employees who were required to work in our offices, we provided up to five additional days of paid time off for illness or to resolve family issues. We have also encouraged employees who potentially have been exposed to COVID-19 to self-quarantine for 14 days while we continue to pay them. To ease access to medical assistance, we are waiving co-payments for COVID-19 testing and telemedicine for those employees enrolled in our health insurance plans.
Operations
We have robust pandemic and business continuity plans that include our business units and technology environments. When COVID-19 advanced to a pandemic, we activated our business continuity plan (the “Plan”). As an element of the Plan, we activated our Executive Crisis Management Team (“ECMT”), a group of the senior most managers across the enterprise. The ECMT directed a series of activities to address the health and safety of our workforce, to assist customers, to sustain business operations and to address our management of other ongoing pandemic activities.
In response to a growing infected population across the United States, we executed plans for social-distancing in our facilities and implemented work-from-home contingencies. As the virus spread, we created remote-working capabilities for our call center agents. We also completed a series of additional steps to appropriately ensure compliance with our telecommuting
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policy. The policy is designed to create a secure at-home work environment that protects our customers’ information and transactions while also providing the necessary technology capabilities to enable effective remote-working for our staff.
In addition, we quickly trained more customer service agents on our chat functionality to increase their ability to work efficiently in a work-from-home environment, and we enhanced the functionality of our chatbot, IVR, mobile app, and website features to help our customers manage their accounts, make or postpone payments, and request hardship relief all on a self-service basis.
There has been a modest decline in productivity as our people adjust to this significant change in work environment. We currently believe our technology infrastructure is sufficient to maintain a remote-working environment for the vast majority of our workforce for the foreseeable future and that productivity should improve as our people adjust to this significant change in work environment. The level and ability of our employees to continue working from home could change, however, as conditions surrounding COVID-19 evolve and infections increase, or if there are interruptions in the internet infrastructure where our employees live or if our internet service providers are otherwise adversely affected.
Liquidity and Capital
Over the course of 2019, we significantly increased our overall liquidity position for risk management purposes and enhanced our liquidity stress testing regime. As a result of these efforts and the activities that occurred in the first quarter of 2020, described below, we currently believe our liquidity position is stable and we expect to be able to fund our business operations in 2020. However, because of disruptions in the capital markets, we have implemented our Contingency Funding Plan, which entails monitoring and reporting to management our liquidity position and the health of deposit and asset-backed securities markets. In times of financial distress, we often see a flight to quality, where investors seek safer places to invest their money, such as banks and in guaranteed securities such as U.S. Treasuries and government- sponsored debt and mortgage-backed securities. We are currently seeing similar trends in the marketplace during this crisis and expect that as a well-capitalized insured depository institution, we will have ample access to deposit markets. We manage our capital position through a rigorous capital stress testing regime. As a result, we believe that, given the high quality of our Private Education Loan portfolio, we have sufficient capital to withstand our current estimate of the expected downturn. If circumstances surrounding COVID-19 continue to change in a significantly adverse way, however, it is possible our liquidity and regulatory capital position could be materially and adversely affected, which could materially and adversely impact our business operations and our overall financial condition.
Regulatory agencies have also provided regulatory capital relief to financial institutions as a result of the crisis. See “ — Financial Results” for additional discussion regarding the regulatory relief.
2020-A Securitization
On February 12, 2020, we executed the $636 million SMB Private Education Loan Trust 2020-A term ABS transaction, which was accounted for as a secured financing. We sold $636 million of notes to third parties and retained a 100 percent interest in the residual certificates issued in the securitization, raising approximately $634 million of gross proceeds. The Class A and Class B notes had a weighted average life of 4.18 years and priced at a weighted average LIBOR equivalent cost of 1- month LIBOR plus 0.88 percent.
Amended and Increased Secured Borrowing Facility
On February 19, 2020, we amended and extended the maturity of our Secured Borrowing Facility, discussed in Note 6, “Borrowings.” The amended Secured Borrowing Facility is a $2 billion Secured Borrowing Facility (previously $750 million before the amendment), under which the full $2 billion is available for us to draw. Under the amended Secured Borrowing Facility, we incur financing costs on unused borrowing capacity and on outstanding advances. The amended Secured Borrowing Facility extended the revolving period, during which we may borrow, repay, and reborrow funds, until February 17, 2021. The scheduled amortization period, during which amounts outstanding under the Secured Borrowing Facility must be repaid, ends on February 17, 2022 (or earlier, if certain material adverse events occur).
2020 Loan Sales
In the first quarter of 2020, we sold $3.1 billion of our Private Education Loans, including $2.9 billion of principal and $199 million in capitalized interest, as well as $12 million in accrued interest to unaffiliated third parties. There were VIEs created in the execution of certain of these loans sales; however, based on our consolidation analysis, we are not the primary beneficiary of these VIEs. These transactions qualified for sale treatment and removed the balance of the loans from our balance sheet on the respective settlement dates, and we recognized a $239 million gain from the sale of these loans. We remained the servicer of these loans pursuant to applicable servicing agreements executed in connection with the sales.
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Share Repurchase Programs and Common Stock Dividends
Under the 2019 Share Repurchase Program, we repurchased 3 million shares in the first quarter of 2020 with the $33 million of remaining capacity under the 2019 Share Repurchase Program that was available as of December 31, 2019.
On January 22, 2020, we announced the 2020 Share Repurchase Program, which was effective upon announcement and expires on January 21, 2022, and permits us to repurchase shares of our common stock from time to time up to an aggregate repurchase price not to exceed $600 million.
On March 10, 2020, we entered into an ASR with a third-party financial institution under which we purchased $525 million of our outstanding common stock. On March 11, 2020, the third-party financial institution delivered to us approximately 44.9 million shares. The final total actual number of shares of common stock to be delivered to us will be based generally upon a discount to the Rule 10b-18 volume-weighted average price at which the shares of our common stock trade during the regular trading sessions on the NASDAQ Global Select Market during the term of the ASR. At settlement, the third-party financial institution may be obligated to deliver additional shares of common stock to us or we may be obligated to make delivery of common stock or a cash payment to them, at our option. The transactions are accounted for as equity transactions and are included in treasury stock when the shares are received, at which time there is an immediate reduction in the weighted average common shares calculation for basic and diluted earnings per share. We expect final settlement of the share repurchases under the ASR to occur before or during the first quarter of 2021.
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 common stock and to consummate any common share repurchases by the Company under its share repurchase programs. The Bank declared $541 million in dividends for the quarter ended March 31, 2020, with the proceeds primarily used to fund the 2020 Share Repurchase Program and stock dividends.
Regulatory
We are regulated by the FDIC, the UDFI and the Consumer Financial Protection Bureau. These agencies have encouraged regulated entities to work constructively with customers affected by COVID-19 and have provided guidance regarding loan modifications.
The federal banking regulators have stated that working with customers who are current on existing loans, either individually or as part of a program for creditworthy customers who are experiencing short-term financial or operational problems as a result COVID-19, generally would not be considered TDRs. For modification programs, such as forbearance, designed to provide temporary relief for current customers affected by COVID-19, we may presume that customers who are current on payments are not experiencing financial difficulties at the time of the modification for purposes of determining TDR status, and thus no further TDR analysis is required for each loan modification in the program.
In addition, the regulators have indicated their examiners will exercise judgment in reviewing loan modifications, including TDRs, and will not automatically adversely risk-rate credits that are affected by COVID-19, including those considered TDRs. Regardless of whether modifications result in loans being considered TDRs or adversely classified, bank examiners have indicated they will not criticize prudent efforts to modify the terms of existing loans to affected customers.
We have briefed our regulators on the actions taken to date, including the vast majority of our employees working from home and the exceptions we have granted to our existing policies, and on privacy and security issues and how these risks have been mitigated in a work-from-home environment.
Community
We understand that the communities in which our employees live, work, and serve are also suffering financial distress as a result of COVID-19. Due to the growing needs of our neighbors, many of the organizations in place to provide assistance are overburdened. In March 2020, The Sallie Mae Fund donated a total of $1 million to local food banks in states home to Sallie Mae facilities. Each of the five organizations received a $200,000 grant from The Sallie Mae Fund to support emergency response efforts to combat food insecurity for those in the community impacted by the COVID-19 pandemic.
Financial Results
We estimate that the expected losses related to the financial crisis caused by COVID-19 have resulted in an increase in our provision for credit losses by approximately $153 million. Offsetting the increase in the provision for credit losses was a $162 million negative provision for credit losses from the sale of $3.1 billion in loans in the first quarter of 2020. Higher forbearance rates in the first quarter of 2020 compared with the year-ago period are primarily a result of our working with
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customers affected by COVID-19. The use of forbearance in our Private Education Loan portfolio increased to 6.2 percent at March 31, 2020 compared with 3.8 percent at March 31, 2019.
Colleges, universities, and trades schools have largely moved to on-line classes for their students. It is unclear at this time whether schools will be back to on-campus learning beginning with the 2020/2021 academic year. Our application volumes have begun to decrease and our current expectation is that our Private Education Loan origination volumes will decline in 2020 compared with 2019 originations. The magnitude of the expected decline in originations depends upon many factors, including the economic impact caused by the pandemic coupled with uncertainty regarding on-line versus in person classes.
On March 27, 2020, President Trump signed into law the CARES Act, which, among other things, allows us to (i) elect to suspend the requirements under GAAP for loan modifications related to COVID-19 that would otherwise be categorized as TDRs, and (ii) suspend any determination of a loan modified as a result of the effects of COVID-19 as being a TDR, including impairment for accounting purposes.
We have elected to suspend TDR accounting for modifications of loans that occur as a result of COVID-19 for the applicable period of the CARES Act relief. The relief from TDR guidance applies to modifications of loans that were not more than 30 days past due as of December 31, 2019, and that occur during the period beginning on March 1, 2020, and ending on the earlier of (i) sixty days after the date on which the national emergency related to the COVID-19 outbreak is terminated, or (ii) December 31, 2020.
On March 27, 2020, the federal banking agencies, published an interim final rule that provides those banking organizations that adopt CECL during the 2020 calendar year with the option to delay for two years and then phase-in some of the regulatory capital impact of the implementation of CECL. We have elected to use this option. Under this interim final rule, because we have elected to use the deferal option the regulatory capital impact of our transition adjustments recorded on January 1, 2020 from the adoption of CECL will be deferred for two years. In addition, 25 percent of the ongoing impact from January 1, 2020 through the end of the two-year deferral period, of CECL on our allowance for loan lossses, retained earnings and average total consolidated assets, each as reported for regulatory capital purposes, will be added to the deferred transition amounts (“adjusted transition amounts”) and deferred for the two-year period. At the conclusion of the two-year period (January 1, 2022), the adjusted transition amounts will be phased-in for regulatory capital purposes at a rate of 25 percent per year, with the phased-in amounts included in regulatory capital at the beginning of each year. Our January 1, 2020 CECL transition amounts increased the allowance for loan losses by $1.1 billion, increased the liability representing our off-balance sheet exposure for unfunded commitments by $116 million, and increased our deferred tax asset by $306 million, resulting in a cumulative effect adjustment that reduced retained earnings by $953 million. This transition adjustment was inclusive of qualitative adjustments incorporated into our CECL allowance as necessary, to address any limitations in the models used.
At March 31, 2020, the adjusted transition amounts, subject to changes over the two-year phase-in period, that will be deferred for regulatory capital purposes are as follows:

Transition AmountsCurrent PeriodAdjusted Transition Amounts
(Dollars in thousands)January 1, 2020AdjustmentsMarch 31, 2020
Retained earnings$952,639  $(43) $952,596  
Allowance for loan losses1,143,053  22,090  1,165,143  
Liability for unfunded commitments115,758  (22,133) 93,625  
Deferred tax asset306,171  —  306,171  



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Selected Financial Information and Ratios
 
 Three Months Ended 
 March 31,		 Three Months Ended 
 March 31,
(In thousands, except per share data and percentages)
 2019 2018
(In thousands, except per share data and percentages)
20202019
    
Net income attributable to SLM Corporation common stock $153,721
 $122,857
Net income attributable to SLM Corporation common stock$358,709  $153,721  
Diluted earnings per common share attributable to SLM Corporation $0.35
 $0.28
Diluted earnings per common share attributable to SLM Corporation$0.87  $0.35  
Weighted average shares used to compute diluted earnings per share 438,248
 438,977
Weighted average shares used to compute diluted earnings per share412,755  438,248  
Return on assets 2.4% 2.2%
Non-GAAP operating efficiency ratio(1)
 33.8% 36.5%
Return on assets(1)
Return on assets(1)
4.6 %2.4 %
    
Other Operating Statistics    Other Operating Statistics
Ending Private Education Loans, net $21,576,534
 $18,600,723
Ending Private Education Loans, net$20,176,233  $21,576,534  
Ending FFELP Loans, net 829,203
 909,295
Ending FFELP Loans, net764,771  829,203  
Ending total education loans, net $22,405,737
 $19,510,018
Ending total education loans, net$20,941,004  $22,405,737  
    
Ending Personal Loans, net $1,092,649
 $656,586
Ending Personal Loans, net$747,444  $1,092,649  
Ending Credit Cards, netEnding Credit Cards, net$7,403  $—  
    
Average education loans $22,570,776
 $19,579,434
Average education loans$24,279,170  $22,570,776  
Average Personal Loans $1,176,466
 $528,644
Average Personal Loans$973,671  $1,176,466  
__________    __________
(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 Return on Assets as the ratio of (a) GAAP net income numerator (annualized) to (b) the GAAP total average assets denominator.(1) We calculate and report our Return on Assets as the ratio of (a) GAAP net income numerator (annualized) to (b) the GAAP total average assets denominator.
 
Overview
The following discussion and analysis presents a review of our business and operations as of and for the three months ended March 31, 2019.2020.
Key Financial Measures
Our operating results are primarily driven by net interest income from our Private Education Loan portfolio, gains and losses on loan sales, 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, allowance for loan losses; charge-offs and delinquencies; operating expenses; “Core Earnings;” Private Education Loan originations; and funding sources) can be found in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 20182019 Form 10-K.



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GAAP Results of Operations
We present the results of operations below first on a consolidated basis in accordance with GAAP.
 
GAAP Consolidated Statements of Income (Unaudited)
 Three Months Ended 
 March 31,
Increase
(Decrease)
(In millions, except per share data)20202019$%
Interest income:
Loans$555  $553  $2  — %
Investments3  1  2  200  
Cash and cash equivalents17  12  5  42  
Total interest income575  566  9  2  
Total interest expense175  164  11  7  
Net interest income400  402  (2) —  
Less: provisions for credit losses61  64  (3) (5) 
Net interest income after provisions for credit losses339  338  1  —  
Non-interest income:
Gains on sales of loans, net239  —  239  100  
Gains on derivatives and hedging activities, net46  3  43  1,433  
Other income7  13  (6) (46) 
Total non-interest income292  16  276  1,725  
Non-interest expenses:
Total non-interest expenses147  140  7  5  
Income before income tax expense484  214  270  126  
Income tax expense121  56  65  116  
Net income362  158  204  129  
Preferred stock dividends3  4  (1) (25) 
Net income attributable to SLM Corporation common stock$359  $154  $205  133 %
Basic earnings per common share attributable to SLM Corporation$0.88  $0.35  $0.53  151 %
Diluted earnings per common share attributable to SLM Corporation$0.87  $0.35  $0.52  149 %
Declared dividends per common share attributable to SLM Corporation$0.03  $0.03  $—  —  

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  Three Months Ended 
 March 31,		 
Increase
(Decrease) 
(In millions, except per share data) 2019 2018 $ %
Interest income:        
Loans $553
 $430
 $123
 29 %
Investments 1
 2
 (1) (50)
Cash and cash equivalents 12
 5
 7
 140
Total interest income 566
 437
 129
 30
Total interest expense 164
 104
 60
 58
Net interest income 402
 333
 70
 21
Less: provisions for credit losses 64
 54
 10
 19
Net interest income after provisions for credit losses 338
 279
 60
 22
Non-interest income:        
Gains on derivatives and hedging activities, net 3
 4
 (1) (25)
Other income 13
 9
 4
 44
Total non-interest income 16
 13
 3
 23
Non-interest expenses:        
Total non-interest expenses 140
 125
 15
 12
Income before income tax expense 214
 167
 47
 28
Income tax expense 56
 41
 15
 37
Net income 158
 126
 32
 25
Preferred stock dividends 4
 3
 1
 33
Net income attributable to SLM Corporation common stock $154
 $123
 $31
 25 %
Basic earnings per common share attributable to SLM Corporation $0.35
 $0.28
 $0.07
 25 %
Diluted earnings per common share attributable to SLM Corporation $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 March 31, 20192020 Compared with Three Months Ended March 31, 20182019
For the three months ended March 31, 2019,2020, net income was $158$362 million, or $0.35$0.87 diluted earnings per common share, compared with net income of $126$158 million, or $0.28$0.35 diluted earnings per common share, for the three months ended March 31, 2018. The year-over-year increase in net income was due to a $70 million increase in net interest income and a $3 million increase in non-interest income, which were offset by a $10 million increase in provisions for credit losses, a $15 million increase in total non-interest expenses and a $15 million increase in income tax expense.2019.
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 increaseddecreased by $70$2 million in the current quarter compared with the year-ago quarter primarily due to a $3.6120 basis point decrease in the net interest margin. The decrease in net interest margin was caused primarily by the yield on our Private Education Loans declining by 64 basis points while our cost of funds declined by 40 basis points, and a $3.9 billion increase in average cash and other short-term investments, which was offset by a $1.5 billion increase in average loans outstandingoutstanding. The increase in our cash and an 11 basis pointcash equivalents balance was associated with our efforts to increase inoverall liquidity levels for risk management purposes. Yields on cash and other short-term investments are much lower than yields on consumer loans, which reduces the weighted average yield on our interest-earning assets and our net interest margin. NetThe overall impact of the increased liquidity in the first-quarter 2020 reduced the net interest margin increased primarily as a result ofby approximately $5 million compared with the benefit from an increase in LIBOR rates during 2018, which increased the yield on our variable-rate Private Education Loan portfolio more than it increased our cost of 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 a higher percentage of our total interest-bearing liabilities consisting of higher cost other interest-bearing liabilities, which include both our unsecured and secured borrowings.year-ago quarter.
•Provisions for credit losses in the current quarter increased $10decreased by $3 million compared with the year-ago quarter. This increasedecrease was primarily due to the resultsale of growth$3.1 billion of loans in the first quarter of 2020, which resulted in a negative provision of $162 million and offset higher than expected losses due to the COVID-19 pandemic. We estimate that the expected losses related to the financial crisis caused by COVID-19 have resulted in an increase in our provision for our Personal Loan portfolio. The provisioncredit losses by approximately $153 million in the current quarter. In addition, we adopted CECL in the first quarter of 2020 which requires a life of loan allowance. Prior to the adoption of CECL, the estimate for Personal Loans grew because the portfolio increased from $676 million at March 31, 2018 to $1.2 billion at March 31, 2019. Provision expensesallowance for our Private Education Loan portfolio remained unchanged compared with the year-ago quarter because of improved credit performance.loan losses used a 12-month loss emergence period.
•Gains on derivatives and hedging activities, net, decreased $1was a net gain of $46 million in the first quarter of 20192020 compared with a net gain of $3 million in the year-ago quarter. The increase was driven by a significant decrease in interest rates caused by the economic fallout from the COVID-19 pandemic, which made our receive fixed/pay variable interest rate swaps that are not designated as accounting hedges but are economic hedges to increase in value.
•Gains on sales of loans, net were $239 million in the first quarter of 2020 as a result of the sale of $3.1 billion in principal and $12 million in accrued interest of Private Education Loans to unaffiliated third parties. There were no loan sales in the year-ago quarter.
•Other income was $7 million in the currentfirst quarter increased $4of 2020 compared with other income of $13 million fromin the year-ago quarter. The decrease of $6 million in the first quarter primarilyof 2020 was due to a $4 million increase in the tax indemnification receivable related to uncertain tax positions.positions recorded in the first quarter of 2019 and lower Upromise revenue.
•First-quarter 20192020 non-interest expenses were $140$147 million, compared with $125$140 million in the year-ago quarter. The increase in non-interest expenses was primarily driven by growth in the portfolio andseverance costs related to product diversification. Our non-GAAP efficiency ratio declinedthe departure of our Chief Executive Officer announced in the first quarter of 2020 and higher costs related 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 by 12 percent compared to the year-ago quarter.managed portfolio growth.
•First-quarter 20192020 income tax expense was $56$121 million, compared with $41$56 million in the year-ago quarter. TheOur effective income tax rate increaseddecreased to 25.1 percent in the first-quarter 2019 tofirst quarter of 2020 from 26.2 percent from 24.5 percent in the year-ago quarter. The growthdecrease in the effective tax rate in the first quarter of 2020 was primarily driven by a $4 million increase in indemnified uncertain tax positions.positions recorded in the first quarter of 2019. This amount was fully offset by a corresponding increase in our indemnification receivable, which was recorded in other income. Absent this item, the effective tax rate for the first quarter of 2019 would have been 24.9 percent.



66




“Core 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.” The difference between our non-GAAP “Core Earnings” and GAAP results for periods presented generally is driven by the unrealized, mark-to-marketmark-to-fair value 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. 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. 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.”
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 onlyThe 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. For periods beginning July 1, 2018, theThe amount recorded in “Gains (losses) 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 and (b) the change in fair values related to future expected cash flows for derivatives that do not qualify for hedge accounting treatment. For purposes of “Core Earnings”,Earnings,” we are includinginclude in GAAP earnings the current period accrual amounts (interest reclassification) on the swaps and excludingexclude 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 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 those 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 on derivatives and hedging activities, net” that relates to the interest reclassification on the derivative contracts.
Three Months Ended 
 March 31,
(Dollars in thousands)20202019
Unrealized gains on instruments not in a hedging relationship$42,312  $4,202  
Interest reclassification3,360  (1,439) 
Gains on derivatives and hedging activities, net$45,672  $2,763  





67
  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 
 March 31,		Three Months Ended 
 March 31,
(Dollars in thousands, except per share amounts) 2019 2018(Dollars in thousands, except per share amounts)20202019
    
“Core Earnings” adjustments to GAAP:
    
“Core Earnings” adjustments to GAAP:
    
GAAP net income $158,189
 $126,254
GAAP net income$362,173  $158,189  
Preferred stock dividends 4,468
 3,397
Preferred stock dividends3,464  4,468  
GAAP net income attributable to SLM Corporation common stock $153,721
 $122,857
GAAP net income attributable to SLM Corporation common stock$358,709  $153,721  
    
Adjustments:    Adjustments:
Net impact of derivative accounting(1)
 (4,202) (3,782)
Net impact of derivative accounting(1)
(42,312) (4,202) 
Net tax effect(2)
 (1,027) (919)
Net tax expense (benefit)(2)
Net tax expense (benefit)(2)
(10,330) (1,027) 
Total “Core Earnings” adjustments to GAAP (3,175) (2,863)Total “Core Earnings” adjustments to GAAP(31,982) (3,175) 
    
“Core Earnings” attributable to SLM Corporation common stock $150,546
 $119,994
“Core Earnings” attributable to SLM Corporation common stock$326,727  $150,546  
    
GAAP diluted earnings per common share $0.35
 $0.28
GAAP diluted earnings per common share$0.87  $0.35  
Derivative adjustments, net of tax (0.01) (0.01)Derivative adjustments, net of tax(0.08) (0.01) 
“Core Earnings” diluted earnings per common share $0.34
 $0.27
“Core Earnings” diluted earnings per common share$0.79  $0.34  
______
(1) Derivative Accounting: “Core Earnings” exclude periodic unrealized gains and losses caused by the mark-to-marketmark-to-fair value valuations on derivatives that do not qualify for hedge accounting treatment under GAAP, 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, 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.



The following table reflects our provisions for credit losses and total portfolio net charge-offs:


Three Months Ended 
 March 31,
(Dollars in thousands)20202019
Provisions for credit losses$61,258  $63,790  
Total portfolio net charge-offs$(61,431) $(48,456) 

In 2020, we began to evaluate management’s performance internally using a measure that starts with “Core Earnings” net income as disclosed above for a period, and further adjusting it by increasing it by the impact of GAAP provisions for credit losses, and decreasing it by the total portfolio net charge-offs recorded in that period, net of the tax impact of these adjustments.


68


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 March 31, Three Months Ended March 31,
 2019 2018 20202019
(Dollars in thousands) Balance Rate Balance Rate(Dollars in thousands)BalanceRateBalanceRate
Average Assets        Average Assets    
Private Education Loans $21,732,826
 9.50% $18,659,717
 8.84%Private Education Loans$23,502,844  8.86 %$21,732,826  9.50 %
FFELP Loans 837,950
 4.94
 919,717
 4.25
FFELP Loans776,326  4.29  837,950  4.94  
Personal Loans 1,176,466
 11.81
 528,644
 10.64
Personal Loans973,671  12.11  1,176,466  11.81  
Taxable securities 188,538
 3.05
 296,512
 2.65
Taxable securities506,883  2.03  188,538  3.05  
Cash and other short-term investments 2,033,492
 2.31
 1,451,437
 1.47
Cash and other short-term investments5,919,801  1.16  2,033,492  2.31  
Total interest-earning assets 25,969,272
 8.85% 21,856,027
 8.11%Total interest-earning assets31,679,525  7.30 %25,969,272  8.85 %
        
Non-interest-earning assets 1,164,857
   1,111,430
  Non-interest-earning assets291,609  1,164,857  
        
Total assets $27,134,129
   $22,967,457
  Total assets$31,971,134  $27,134,129  
        
Average Liabilities and Equity        Average Liabilities and Equity
Brokered deposits $10,540,219
 2.72% $8,673,261
 2.04%Brokered deposits$13,709,268  2.33 %$10,540,219  2.72 %
Retail and other deposits 8,915,526
 2.51
 7,727,564
 1.77
Retail and other deposits10,632,054  2.11  8,915,526  2.51  
Other interest-bearing liabilities(1)
 4,270,252
 3.63
 3,461,050
 3.18
Other interest-bearing liabilities(1)
4,876,861  3.27  4,270,252  3.63  
Total interest-bearing liabilities 23,725,997
 2.81% 19,861,875
 2.14%Total interest-bearing liabilities29,218,183  2.41 %23,725,997  2.81 %
        
Non-interest-bearing liabilities 395,974
   561,546
  Non-interest-bearing liabilities212,835  395,974  
Equity 3,012,158
   2,544,036
  Equity2,540,116  3,012,158  
Total liabilities and equity $27,134,129
   $22,967,457
  Total liabilities and equity$31,971,134  $27,134,129  
        
Net interest margin   6.28%   6.17%Net interest margin5.08 %6.28 %

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

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









69

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)
(Dollars in thousands)Increase
Change Due To(1)
Rate 
 Volume
Rate 
Volume
Three Months Ended March 31, 2019 vs. 2018      
Three Months Ended March 31, 2020 vs. 2019Three Months Ended March 31, 2020 vs. 2019   
Interest income $129,222
 $41,914
 $87,308
Interest income$8,480  $(110,310) $118,790  
Interest expense 59,555
 36,758
 22,797
Interest expense10,645  (25,137) 35,782  
Net interest income $69,667
 $6,047
 $63,620
Net interest income$(2,165) $(85,197) $83,032  
 
_________________
(1)
(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.
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
 
March 31, 2020
(Dollars in thousands)
Private
Education
Loans
FFELP
Loans		Personal
Loans		Credit CardsTotal
Portfolio
Total loan portfolio:   
In-school(1)
$4,277,928  $101  $—  $—  $4,278,029  
Grace, repayment and other(2)
17,348,819  766,853  899,704  7,234  19,022,610  
Total, gross21,626,747  766,954  899,704  7,234  23,300,639  
Deferred origination costs and unamortized premium/(discount)65,267  2,113  413  743  68,536  
Allowance for loan losses(1,515,781) (4,296) (152,673) (574) (1,673,324) 
Total loan portfolio, net$20,176,233  $764,771  $747,444  $7,403  $21,695,851  
    
% of total93 %4 %3 %— %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.









70

  March 31, 2019
(Dollars in thousands) 
Private
Education
Loans 
 FFELP
Loans		 Personal
Loans		 Total
Portfolio
Total loan portfolio:        
In-school(1)
 $4,515,470
 $155
 $—
 $4,515,625
Grace, repayment and other(2)
 17,276,152
 828,485
 1,162,874
 19,267,511
Total, gross 21,791,622
 828,640
 1,162,874
 23,783,136
Deferred origination costs and unamortized premium/(discount) 70,858
 2,323
 394
 73,575
Allowance for loan losses (285,946) (1,760) (70,619) (358,325)
Total loan portfolio, net $21,576,534
 $829,203
 $1,092,649
 $23,498,386
         
% of total 92% 3% 5% 100%

December 31, 2019
(Dollars in thousands)Private
Education
Loans		FFELP
Loans		Personal
Loans		Credit CardsTotal
Portfolio
Total loan portfolio:
In-school(1)
$4,288,239  $81  $—  $—  $4,288,320  
Grace, repayment and other(2)
18,901,352  783,225  1,049,007  3,884  20,737,468  
Total, gross23,189,591  783,306  1,049,007  3,884  25,025,788  
Deferred origination costs and unamortized premium/(discount)81,224  2,143  513  36  83,916  
Allowance for loan losses(374,300) (1,633) (65,877) (102) (441,912) 
Total loan portfolio, net$22,896,515  $783,816  $983,643  $3,818  $24,667,792  
 
% of total93 %3 %4 %— %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 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, 2018
(Dollars in thousands) Private
Education
Loans		 FFELP
Loans		 Personal
Loans		 Total
Portfolio
Total loan portfolio:        
In-school(1)
 $4,037,125
 $163
 $—
 $4,037,288
Grace, repayment and other(2)
 16,467,340
 846,324
 1,190,091
 18,503,755
Total, gross 20,504,465
 846,487
 1,190,091
 22,541,043
Deferred origination costs and unamortized premium/(discount) 68,321
 2,379
 297
 70,997
Allowance for loan losses (277,943) (977) (62,201) (341,121)
Total loan portfolio, net $20,294,843
 $847,889
 $1,128,187
 $22,270,919
         
% of total 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.





Average Loan Balances (net of unamortized premium/discount)


 
Three Months Ended 
 March 31,
(Dollars in thousands)20202019
Private Education Loans$23,502,844  93 %$21,732,826  92 %
FFELP Loans776,326  3  837,950  3  
Personal Loans973,671  4  1,176,466  5  
Total portfolio$25,252,841  100 %$23,747,242  100 %



71
  Three Months Ended 
 March 31,
(Dollars in thousands) 2019 2018
Private Education Loans $21,732,826
 92% $18,659,717
 93%
FFELP Loans 837,950
 3
 919,717
 4
Personal Loans 1,176,466
 5
 528,644
 3
Total portfolio $23,747,242
 100% $20,108,078
 100%





Loan Activity
 
Three Months Ended March 31, 2020
(Dollars in thousands) Private
Education
Loans		FFELP
Loans		Personal
Loans		Credit CardsTotal
Portfolio
Beginning balance$22,896,515  $783,816  $983,643  $3,818  $24,667,792  
Acquisitions and originations:
Fixed-rate1,468,698  —  41  —  1,468,739  
Variable-rate833,672  —  —  7,762  841,434  
Total acquisitions and originations2,302,370  —  41  7,762  2,310,173  
Capitalized interest and deferred origination cost premium amortization117,877  7,411  (100) (71) 125,117  
Sales(2,925,478) —  —  —  (2,925,478) 
Loan consolidations to third-parties(465,349) (5,709) —  —  (471,058) 
Day 1 CECL Adjustment to Allowance(1,060,830) (2,852) (79,183) (188) (1,143,053) 
Allowance(80,652) 189  (7,612) (284) (88,359) 
Repayments and other(608,220) (18,084) (149,345) (3,634) (779,283) 
Ending balance$20,176,233  $764,771  $747,444  $7,403  $21,695,851  
  Three Months Ended March 31, 2019
(Dollars in thousands)  Private
Education
Loans		 FFELP
Loans		 Personal
Loans		 Total
Portfolio
Beginning balance $20,294,843
 $847,889
 $1,128,187
 $22,270,919
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 121,105
 7,432
 (58) 128,479
Sales —
 —
 —
 —
Loan consolidations to third-parties (386,149) (8,031) —
 (394,180)
Allowance (8,003) (783) (8,418) (17,204)
Repayments and other (577,996) (17,304) (147,952) (743,252)
Ending balance $21,576,534
 $829,203
 $1,092,649
 $23,498,386


Three Months Ended March 31, 2019
(Dollars in thousands)Private
Education
Loans		FFELP
Loans		Personal
Loans		Total
Portfolio
Beginning balance$20,294,843  $847,889  $1,128,187  $22,270,919  
Acquisitions and originations:
Fixed-rate1,443,953  —  120,890  1,564,843  
Variable-rate688,781  —  —  688,781  
Total acquisitions and originations2,132,734  —  120,890  2,253,624  
Capitalized interest and deferred origination cost premium amortization121,105  7,432  (58) 128,479  
Sales—  —  —  —  
Loan consolidations to third-parties(386,149) (8,031) —  (394,180) 
Allowance(8,003) (783) (8,418) (17,204) 
Repayments and other(577,996) (17,304) (147,952) (743,252) 
Ending balance$21,576,534  $829,203  $1,092,649  $23,498,386  
  Three Months Ended March 31, 2018
(Dollars in thousands) Private
Education
Loans		 FFELP
Loans		 Personal
Loans		 Total
Portfolio
Beginning balance $17,244,830
 $929,159
 $393,652
 $18,567,641
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 95,398
 7,777
 —
 103,175
Sales (2,036) —
 —
 (2,036)
Loan consolidations to third-parties (223,751) (7,429) —
 (231,180)
Allowance (8,388) 19
 (12,279) (20,648)
Repayments and other (478,284) (20,231) (51,968) (550,483)
Ending balance $18,600,723
 $909,295
 $656,586
 $20,166,604



“Loan consolidations to 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 March 31, 20192020 increased by 243 percent compared with March 31, 2018,2019, and now total 4145 percent of our Private Education Loan portfolio at March 31, 2019.2020.


“Loan consolidations to third-parties” for the three months ended March 31, 20192020 total 4.45.1 percent of our Private Education Loan portfolio in full principal and interest repayment status at March 31, 2019,2020, or 1.82.3 percent of our total Private Education Loan portfolio at March 31, 2019,2020, compared with the year-ago period of 3.14.4 percent of our Private Education Loan portfolio in full principal and interest repayment status, or 1.21.8 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.


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

Historically, voluntary repayments, including loan consolidations, decrease when unemployment increases as borrowers and lenders look to conserve liquidity.While we have seen a slight decrease in these in March 2020 as a result of the COVID-19 pandemic and we expect this trend to continue throughout the remainder of this year, the magnitude of this change is uncertain at this time.
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 
 March 31,
(Dollars in thousands)2020%2019%
Smart Option - interest only(1)
$522,432  23 %$480,712  23 %
Smart Option - fixed pay(1)
656,594  29  594,461  28  
Smart Option - deferred(1)
880,581  38  819,793  38  
Smart Option - principal and interest3,245  —  3,958  —  
Graduate Loan188,820  8  181,678  9  
Parent Loan49,228  2  50,466  2  
Total Private Education Loan originations$2,300,900  100 %$2,131,068  100 %
Percentage of loans with a cosigner88.1 %88.6 %
Average FICO at approval(2)
746  747  
  Three Months Ended 
 March 31,
(Dollars in thousands) 2019 % 2018 %
Smart Option - interest only(1)
 $480,712
 23% $445,720
 23%
Smart Option - fixed pay(1)
 594,461
 28
 517,847
 26
Smart Option - deferred(1)
 819,793
 38
 797,425
 40
Smart Option - principal and interest 3,958
 —
 2,268
 —
Graduate Loan 181,678
 9
 172,612
 9
Parent Loan 50,466
 2
 36,297
 2
Total Private Education Loan originations $2,131,068
 100% $1,972,169

100%
         
Percentage of loans with a cosigner 88.6%   89.3%  
Average FICO at approval(2)
 747
   746
  

_____________
(1) Interest only, fixed pay and deferred describe the payment option while in school or in grace period. See Item 1. “Business - Our Business - Private Education Loans” in the 2019 Form 10-K for a further discussion.
(2) Represents the higher credit score of the cosigner or the borrower.







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Allowance for Loan Losses


Allowance for Loan Losses Activity
  
 Three Months Ended March 31,
 20202019
(Dollars in thousands)Private
Education
Loans		FFELP
Loans		Personal LoansCredit CardsTotal
Portfolio		Private
Education
Loans		FFELP
Loans		Personal LoansTotal
Portfolio
Beginning balance$374,300  $1,633  $65,877  $102  $441,912  $277,943  $977  $62,201  $341,121  
Day 1 adjustment for adoption of CECL1,060,830  2,852  79,183  188  1,143,053  —  —  —  —  
Transfer from unfunded commitment liability142,075  —  —  —  142,075  —  —  —  —  
Less:      
Charge-offs(51,469) (226) (19,247) (7) (70,949) (39,577) (234) (15,251) (55,062) 
Plus:      
Recoveries7,976  —  1,542  —  9,518  5,697  —  909  6,606  
Provision for loan losses:
Provision, current period143,862  37  25,318  291  169,508  41,883  1,017  22,760  65,660  
Loan sale provision reduction(161,793) —  —  —  (161,793) —  —  —  —  
Total provision for loan losses(1)
(17,931) 37  25,318  291  7,715  41,883  1,017  22,760  65,660  
Ending balance$1,515,781  $4,296  $152,673  $574  $1,673,324  $285,946  $1,760  $70,619  $358,325  
       
Troubled debt restructurings(2)
$1,518,763  $—  $—  $—  $1,518,763  $1,327,668  $—  $—  $1,327,668  
  Three Months Ended March 31,
  2019 2018
(Dollars in thousands) 
Private
Education
Loans
 
FFELP
Loans
 Personal Loans 
Total
Portfolio
 
Private
Education
Loans
 
FFELP
Loans
 Personal Loans 
Total
Portfolio
Beginning balance $277,943
 $977
 $62,201
 $341,121
 $243,715
 $1,132
 $6,628
 $251,475
Less:                
Charge-offs (39,577) (234) (15,251) (55,062) (37,353) (250) (1,200) (38,803)
Loan sales(1)
 —
 —
 —
 —
 (1,216) —
 —
 (1,216)
Plus:                
Recoveries 5,697
 —
 909
 6,606
 5,087
 —
 31
 5,118
Provision for loan losses 41,883
 1,017
 22,760
 65,660
 41,870
 231
 13,448
 55,549
Ending balance $285,946
 $1,760
 $70,619
 $358,325
 $252,103
 $1,113
 $18,907
 $272,123
                 
Troubled debt restructurings(2)
 $1,327,668
 $—
 $—
 $1,327,668
 $1,043,103
 $—
 $—
 $1,043,103


        _________
_________(1)Below is a reconciliation of the provision for credit losses reported in the consolidated statements of income. When a new loan commitment is made, we record the CECL allowance as a liability for unfunded commitments by recording a provision for credit losses. When the loan is funded, we transfer that liability to the allowance for loan losses.

(1)
Consolidated Statements of Income
Provisions for Credit Losses Reconciliation		Represents fair value adjustments on loans sold.
(2)
RepresentsThree Months Ended March 31, 2020
Provisions for credit losses for new loan commitments made during the unpaid principal balancequarter$53,543 
Total provision for allowance for loan losses7,715
Provisions for credit losses reported in consolidated statements of loans classified as troubled debt restructurings.income$61,258 





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


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Private Education Loan Allowance for Loan Losses
In establishing the allowance for Private Education Loan losses as of March 31, 2019,2020, 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 4145 percent of our total Private Education Loan portfolio at March 31, 2019,2020, compared with 3841 percent at March 31, 2018.2019.
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,Loans, 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 2018 Form 10-K.Losses.”
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
 March 31,
 20202019
(Dollars in thousands)Balance%Balance%
Loans in-school/grace/deferment(1)
$5,648,477  $5,870,853  
Loans in forbearance(2)
989,925  610,209  
Loans in repayment and percentage of each status:
Loans current14,516,211  96.8 %14,927,591  97.5 %
Loans delinquent 31-60 days(3)
254,625  1.7  216,295  1.4  
Loans delinquent 61-90 days(3)
135,896  0.9  104,199  0.7  
Loans delinquent greater than 90 days(3)
81,613  0.6  62,475  0.4  
        Total Private Education Loans in repayment14,988,345  100.0 %15,310,560  100.0 %
Total Private Education Loans, gross21,626,747  21,791,622   
Private Education Loans deferred origination costs and unamortized premium/(discount)65,267  70,858   
Total Private Education Loans21,692,014  21,862,480   
Private Education Loans allowance for losses(1,515,781) (285,946)  
Private Education Loans, net$20,176,233  $21,576,534   
 
Percentage of Private Education Loans in repayment69.3 %70.3 %
Delinquencies as a percentage of Private Education Loans in repayment3.2 %2.5 %
 
Loans in forbearance as a percentage of Private Education Loans in repayment and forbearance6.2 %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.

The increase in the delinquency rate from 2.5 percent at March 31, 2019 to 3.2 percent at March 31, 2020 was primarily caused by combination of factors, including worsening economic conditions, the sale of $3.1 billion in Private Education Loans that occurred in the first quarter of 2020 (the loans sold did not include loans greater than 31 days delinquent and, as such, the remaining portfolio had a higher percentage of delinquent loans after the sale), an increase in consolidation activity
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  Private Education Loans
  March 31,
  2019 2018
(Dollars in thousands) Balance % Balance %
Loans in-school/grace/deferment(1)
 $5,870,853
   $5,369,984
  
Loans in forbearance(2)
 610,209
   465,286
  
Loans in repayment and percentage of each status:        
Loans current 14,927,591
 97.5% 12,635,627
 97.5%
Loans delinquent 31-60 days(3)
 216,295
 1.4
 179,989
 1.4
Loans delinquent 61-90 days(3)
 104,199
 0.7
 95,974
 0.7
Loans delinquent greater than 90 days(3)
 62,475
 0.4
 47,152
 0.4
        Total Private Education Loans in repayment 15,310,560
 100.0% 12,958,742
 100.0%
Total Private Education Loans, gross 21,791,622
   18,794,012
  
Private Education Loans deferred origination costs and unamortized premium/(discount) 70,858
   58,814
  
Total Private Education Loans 21,862,480
   18,852,826
  
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   70.3%   69.0%
         
Delinquencies as a percentage of Private Education Loans in repayment   2.5%   2.5%
         
Loans in forbearance as a percentage of Private Education Loans in repayment and forbearance   3.8%   3.5%
(consolidation loans tend to have lower delinquency rates), and an increase in loans entering repayment during the first quarter of 2020 compared with the year-ago quarter.
________
(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.

The increase in the forbearance rate from 3.8 percent at March 31, 2019 to 6.2 percent at March 31, 2020 is primarily attributable to the increase in disaster forbearance granted to borrowers in financial distress as a result of the COVID-19 pandemic. As this pandemic extends into 2020 causing higher unemployment, we expect the percentage of loans in forbearance to increase as we work with customers experiencing financial hardship. See additional discussion related to collections activity and the COVID-19 pandemic in “ — Impact of COVID-19 on Sallie Mae — Customers and Credit Performance.”



Changes in Allowance for Private Education Loan Losses
The following table summarizes changes in the allowance for Private Education Loan losses.
 
 Three Months Ended 
 March 31,
(Dollars in thousands)20202019
Beginning balance$374,300  $277,943  
Day 1 adjustment for adoption of CECL1,060,830  —  
Transfer from unfunded commitment liability142,075  —  
Provision for loan losses:
Provision, current period143,862  41,883  
Loan sale provision reduction(161,793) —  
Total provision(17,931) 41,883  
Net charge-offs:
Charge-offs(51,469) (39,577) 
Recoveries7,976  5,697  
Net charge-offs(43,493) (33,880) 
Allowance at end of period$1,515,781  $285,946  
 
Allowance as a percentage of the ending total loan balance7.01 %1.31 %
Allowance as a percentage of the ending loans in repayment(2)
10.11 %1.87 %
Allowance coverage of net charge-offs (annualized)8.71  2.11  
Net charge-offs as a percentage of average loans in repayment (annualized)(1)
1.05 %0.89 %
Delinquencies as a percentage of ending loans in repayment(1)
3.15 %2.50 %
Loans in forbearance as a percentage of ending loans in repayment and forbearance(1)
6.20 %3.83 %
Ending total loans, gross$21,626,747  $21,791,622  
Average loans in repayment(1)
$16,521,356  $15,165,072  
Ending loans in repayment(1)
$14,988,345  $15,310,560  
  Three Months Ended 
 March 31,
(Dollars in thousands) 2019 2018
Beginning balance $277,943
 $243,715
Total provision 41,883
 41,870
Net charge-offs:    
Charge-offs (39,577) (37,353)
Recoveries 5,697
 5,087
Net charge-offs (33,880) (32,266)
Loan sales(1)
 —
 (1,216)
Allowance at end of period $285,946
 $252,103
     
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) 2.11
 1.95
Net charge-offs as a percentage of average loans in repayment (annualized)(2)
 0.89% 1.01%
Delinquencies as a percentage of ending loans in repayment(2)
 2.50% 2.49%
Loans in forbearance as a percentage of ending loans in repayment and forbearance(2)
 3.83% 3.47%
Ending total loans, gross $21,791,622
 $18,794,012
Average loans in repayment(2)
 $15,165,072
 $12,747,929
Ending loans in repayment(2)
 $15,310,560
 $12,958,742
_______
     _______(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.
(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.

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Use of Forbearance and Rate Modifications as a Private Education Loan Collection Tool
We modifyadjust the terms of loans for certain borrowers when we believe such modificationschanges will help our customers manage their student loan obligations, achieve better student outcomes, and increase the collectability of the loan. These modificationschanges generally take the form of a temporary forbearance of payments, a temporary interest rate reduction, a temporary interest rate reduction with a permanent extension of the loan term, and/or ana short-term extended repayment plan. The majority of our loans thatalternative. Forbearance is granted prospectively for borrowers who are considered TDRs involve a temporary forbearance ofcurrent in their payments and do not change the contractual interest rate of the loan.may be granted retroactively for certain delinquent borrowers.
Forbearance involves granting the customerallows a temporary cessation ofborrower to temporarily not make scheduled payments (or temporary acceptance ofor to make smaller than scheduled payments)payments, in each case for a specified period of time. Using forbearance extends the original term of the loan.loan by the term of forbearance taken. Forbearance does not grant any reduction in the total principal or interest repayment obligation (principal or interest).obligation. While a loan is in forbearance status, interest continues to accrue and is capitalized to principal when the loan re-enters repayment status.
We grant forbearance through our servicing centers to borrowers who are current in their payments and through our collections centers to certain borrowers who are delinquent. Our forbearance policies include limits onand practices vary depending upon whether a borrower is current or delinquent at the numbertime forbearance is requested, generally with stricter payment requirements for delinquent borrowers. We view the population of borrowers that use forbearance monthspositively because the borrowers are either proactively reaching out to us to obtain assistance in managing their obligations or are working with our collections center to bring their loans current.
Forbearance may be granted consecutivelythrough our servicing centers to customers who are exiting their grace period, which generally is the six-month period after the borrower separates from school and during which the total number ofborrower is not required to make full principal and interest payments, and to other customers who are current in their payments, to provide temporary payment relief. In these circumstances, a customer’s loan is placed into a forbearance months granted overstatus in limited monthly increments and is reflected in the lifeforbearance status at month-end during this time. At the end of the loan. Weforbearance period, the customer will enter repayment status as current and is expected to begin making scheduled monthly payments. Currently, we generally grant forbearance in our servicing centers if a borrower who is current requests it for increments of up to three months at a time, for up to 12 months.
Forbearance may also be granted through our collections centers to customers who are delinquent in their payments. If specific payment requirements are met, the forbearance can cure the delinquency and the customer is returned to a current repayment status. Forbearance as a collection tool is used most effectively when applied based onapplying historical experience and our judgment to a customer’s unique situation, including historical information and judgments.situation. 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 assisting customers while mitigating the overall riskrisks of the portfoliodelinquency and default as well as encouraging cash resolution of delinquent loans. In someall instances, we require good faithone or more payments before granting forbearance. Exceptionsforbearance to forbearance policiesdelinquent borrowers.
The COVID-19 pandemic is having far reaching, negative impacts on individuals, businesses, and, consequently, the overall economy. Specifically, COVID-19 has materially disrupted business operations resulting in significantly higher levels of unemployment or underemployment. As a result, we expect many of our individual customers will experience financial hardship, making it difficult, if not impossible, to meet their payment obligations to us without temporary assistance. We are permitted when such exceptions are judged to increase the likelihoodmonitoring key metrics as early warning indicators of collectionfinancial hardship, including changes in weekly unemployment claims, enrollment in auto-debit payments, requests for new forbearances, enrollment in hardship payment plans and early delinquency metrics.
As a result of the loan.negative impact on employment from COVID-19, we are anticipating higher levels of financial hardship for our customers, which we expect will lead to higher levels of forbearance, delinquency and defaults. We expect that, left unabated, this deterioration in forbearance, delinquency and default rates will persist until such time as the economy and employment return to relatively normal levels.
ForbearanceWe assist customers with an array of payment programs during periods of financial hardship as standard operating convention, including: forbearance, which defers payments during a short-term hardship; our GRP, which is an interest-only payment for 12 months; or a loan modification that, in the event of long-term hardship, reduces the interest rate on a loan to 4 percent for 24 months and/or permanently extends the maturity date of the loan. Historically we have utilized disaster
77

forbearance for material events, including hurricanes, wildfires and floods. Disaster forbearance defers payments for as much as 90 days upon enrollment. We have invoked this same disaster forbearance program to assist our customers through COVID-19 and offer this program across our operations including through mobile app and self-service channels such as chat and IVR. Customers who receive a disaster forbearance will not progress in delinquency and will not be assessed late fees or other fees. During a disaster forbearance, a customer’s credit file will continue to reflect the status of the loan as it was immediately prior to granting the disaster forbearance. During the period of the disaster forbearance, interest will continue to accrue, but will not be added to the loan balance until the end of the loan term. If the financial hardship extends beyond 90 days, additional assistance will be available for eligible customers. This program is applied across our Private Education Loan and Personal Loan portfolios.
Management continually monitors our credit administration practices and may periodically modify these practices based upon performance, industry conventions, and/or regulatory feedback. In light of these considerations, we previously announced that we plan to implement certain changes to our credit administration practices in the future. As discussed below, however, we have postponed until the fourth quarter of 2020 the implementation of the announced credit administration practices changes due to the COVID-19 pandemic.
Specifically, we previously announced that we plan to revise our credit administration practices limiting the number of forbearance months granted consecutively and the number of times certain extended or reduced repayment alternatives may be granted. For example, we currently grant forbearance to borrowers without requiring any period of prior principal and interest payments, meaning that, if a borrower satisfies all eligibility requirements, forbearance increments may be granted consecutively. We previously announced that, beginning in the second quarter of 2020, we would phase in a required six-month period between successive grants of forbearance and between forbearance grants and certain other repayment alternatives. We announced this required period will not apply, however, to customers who are exiting theirforbearances granted during the first six months following a borrower’s grace period and will not be required for a borrower to provide additional timereceive a contractual interest rate reduction. In addition, we announced we would limit the participation of delinquent borrowers in certain short-term extended or interest-only repayment alternatives to obtain employmentonce in 12 months and incometwice in five years.
As previously announced, prior to support their obligations, orfull implementation of the credit administration practices changes described above, management will conduct a controlled testing program on randomly selected borrowers to currentmeasure the impact of the changes on our customers, who are faced withour credit operations, and key credit metrics. The testing commenced in October 2019 for some of the planned changes on a hardshipvery small percentage of our total portfolio 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 iswe originally expected to begin making scheduled monthly payments on a go-forward basis.
Forbearance may alsoexpand the testing over subsequent quarters as the impacts are better understood. Due to the COVID-19 pandemic, however, we have postponed implementation of the credit administration practices changes and related testing until the fourth quarter of 2020 so that we can be grantedmore flexible in dealing with our customers’ financial hardship. Management now expects to customers who are delinquent in their payments. If specific requirements are met,have completed implementation of 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 forbearancenew policies and practices from timeby mid-2021. However, we may modify or delay the contemplated practice changes, the proposed timeline, or the method of implementation as we learn more about the impacts during the progression of the testing program.
We also offer rate and term modifications to time and update them as circumstances warrant.
When we give a borrower facing financial difficulty an interest rate reduction,customers experiencing more severe hardship. Currently, we temporarily reduce the contractual interest rate on a loan to 4.0 percent (previously, to 2.0 percentpercent) for a two-year period and, in the vast majority of cases, permanently extend the final maturity date of the loan. As part of demonstrating the ability and willingness to pay, the customer must make three consecutive monthly payments at the reduced payment to qualify for the program. The combination of these two loan term changesthe rate reduction and maturity extension 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, 2020 and December 31, 2019, and March 31, 2018, 7.28.5 percent and 5.77.2 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. We currently have no plans to change the basic elements of the rate and term modifications we offer to our customers experiencing more severe hardship.
While there are limitations to our estimate of the future impact of the credit administration practices changes described above, absent the effect of any mitigating measures, and based on an analysis of borrower behavior under our current credit administration practices, which may not be indicative of how borrowers will behave under revised credit administration practices, we expect that the credit administration practices changes described above will accelerate defaults and could increase life of loan defaults in our Private Education Loan portfolio by approximately 4 percent to 14 percent. Among the measures that we are planning to implement and expect may partly offset or moderate any acceleration of or increase in defaults will be greater focus on the risk assessment process to ensure borrowers are mapped to the appropriate program, better utilization of
78

existing programs (e.g., GRP and rate modifications), and the introduction of a new program offering short-term payment reductions (permitting interest-only payments for up to six months) for certain early stage delinquencies.
The full impact of these changes to our collections practices described above may only be realized over the longer term, however. In particular, when we calculate the allowance for loan losses under CECL, which became effective on January 1, 2020, our loan loss reserves increased materially because we expect the life of loan defaults on our overall Private Education Loan portfolio to increase, in part as a result of the planned changes to our credit administration practices. As we progress with the controlled testing program of the planned changes to our credit administration practices, we expect to learn more about how our borrowers are reacting to these changes and, as we analyze such reactions, will continue to refine our estimates of the impact of those changes on our allowance for loan losses.

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). The period of delinquency is based on the number of days scheduled payments are contractually past 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 generally decreases the longer the loans have been in active repayment status. At March 31, 2019,2020, loans in forbearance status as a percentage of total loans in repayment and forbearance were 2.73.8 percent for Private Education Loans that have been in active repayment status for fewer than 25 months. Approximately 71 percent61percent of our Private Education Loans in forbearance status have been in active repayment status fewer than 25 months.



(Dollars in millions)
March 31, 2020
Private Education Loans Monthly Scheduled Payments DueNot Yet in
Repayment		Total
0 to 1213 to 2425 to 3637 to 48More than 48
Loans in-school/grace/deferment$—  $—  $—  $—  $—  $5,648  $5,648  
Loans in forbearance438  169  133  106  144  —  990  
Loans in repayment - current4,835  3,099  2,271  1,725  2,586  —  14,516  
Loans in repayment - delinquent 31-60 days100  47  37  29  42  —  255  
Loans in repayment - delinquent 61-90 days61  24  19  13  19  —  136  
Loans in repayment - delinquent greater than 90 days40  13  11  7  11  —  82  
Total$5,474  $3,352  $2,471  $1,880  $2,802  $5,648  21,627  
Deferred origination costs and unamortized premium/(discount)      65  
Allowance for loan losses      (1,516) 
Total Private Education Loans, net      $20,176  
   
Loans in forbearance as a percentage of total Private Education Loans in repayment and forbearance2.74 %1.06 %0.83 %0.67 %0.90 %— %6.20 %












(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 $—
 $—
 $—
 $—
 $—
 $5,871
 $5,871
Loans in forbearance 351
 83
 71
 53
 52
 —
 610
Loans in repayment - current 4,935
 3,391
 2,600
 1,924
 2,079
 —
 14,929
Loans in repayment - delinquent 31-60 days 89
 40
 34
 24
 29
 —
 216
Loans in repayment - delinquent 61-90 days 46
 19
 15
 11
 13
 —
 104
Loans in repayment - delinquent greater than 90 days 30
 11
 9
 6
 6
 —
 62
Total $5,451
 $3,544
 $2,729
 $2,018
 $2,179
 $5,871
 21,792
Deferred origination costs and unamortized premium/(discount)             71
Allowance for loan losses             (286)
Total Private Education Loans, net             $21,577
               
Loans in forbearance as a percentage of total Private Education Loans in repayment and forbearance 2.20% 0.52% 0.45% 0.33% 0.33% —% 3.83%
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(Dollars in millions)
March 31, 2019
Private Education Loans Monthly Scheduled Payments DueNot Yet in
Repayment		Total
0 to 1213 to 2425 to 3637 to 48More than 48
Loans in-school/grace/deferment$—  $—  $—  $—  $—  $5,871  $5,871  
Loans in forbearance351  83  71  53  52  —  610  
Loans in repayment - current4,935  3,391  2,600  1,924  2,079  —  14,929  
Loans in repayment - delinquent 31-60 days89  40  34  24  29  —  216  
Loans in repayment - delinquent 61-90 days46  19  15  11  13  —  104  
Loans in repayment - delinquent greater than 90 days30  11  9  6  6  —  62  
Total$5,451  $3,544  $2,729  $2,018  $2,179  $5,871  21,792  
Deferred origination costs and unamortized premium/(discount)      71  
Allowance for loan losses      (286) 
Total Private Education Loans, net      $21,577  
 
Loans in forbearance as a percentage of total Private Education Loans in repayment and forbearance2.20 %0.52 %0.45 %0.33 %0.33 %— %3.83 %


80
(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 $—
 $—
 $—
 $—
 $—
 $5,370
 $5,370
Loans in forbearance 273
 68
 55
 37
 32
 —
 465
Loans in repayment - current 4,326
 3,131
 2,390
 1,516
 1,273
 —
 12,636
Loans in repayment - delinquent 31-60 days 78
 36
 29
 18
 19
 —
 180
Loans in repayment - delinquent 61-90 days 51
 15
 13
 8
 9
 —
 96
Loans in repayment - delinquent greater than 90 days 26
 7
 6
 4
 4
 —
 47
Total $4,754
 $3,257
 $2,493
 $1,583
 $1,337
 $5,370
 18,794
Deferred origination costs and unamortized premium/(discount)             59
Allowance for loan losses             (252)
Total Private Education Loans, net             $18,601
  

 
 
 
 
 
 
Loans in forbearance as a percentage of total Private Education Loans in repayment and forbearance 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 March 31, 20192020 and December 31, 2018.2019.
 
 March 31, 2019March 31, 2020
(Dollars in thousands) 
Signature and
Other
 Parent Loan Smart Option 
Career
Training
 Total(Dollars in thousands)Signature and
Other		Parent LoanSmart OptionCareer
Training		Graduate
Loan		Total
$ in repayment(1)
 $380,750
 $214,476
 $14,703,422
 $11,912
 $15,310,560
$ in repayment(1)
$209,958  $277,483  $14,011,937  $10,561  $478,406  $14,988,345  
$ in total $627,350
 $216,840
 $20,934,993
 $12,439
 $21,791,622
$ in total$339,054  $285,872  $20,210,962  $11,688  $779,171  $21,626,747  
 
 
 December 31, 2018December 31, 2019
(Dollars in thousands) 
Signature and
Other
 Parent Loan Smart Option 
Career
Training
 Total(Dollars in thousands)Signature and
Other		Parent LoanSmart OptionCareer
Training		Graduate
Loan		Total
$ in repayment(1)
 $297,844
 $175,885
 $14,180,350
 $12,777
 $14,666,856
$ in repayment(1)
$205,203  $248,662  $15,928,942  $12,394  $392,469  $16,787,670  
$ in total $512,259
 $177,750
 $19,801,184
 $13,272
 $20,504,465
$ in total$341,919  $251,104  $21,951,654  $12,895  $632,019  $23,189,591  
_______
(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.

(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
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.interest on loans making full interest payments. The majority of the total accrued interest receivable represents accrued interest on deferred loans where no payments are due while the borrower is in school and fixed-pay loans where the borrower makes a $25 monthly payment that is smaller than the interest accruing on the loan in that month. The accrued interest on these loans will be capitalized to the balance of the loans when the borrower exits the grace period after separation from school. The allowance for this portion of interest is included in our loan loss reserve. 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 LoansPrivate Education Loans
 
Accrued Interest Receivable 
Accrued Interest Receivable
(Dollars in thousands) Total Interest Receivable 
Greater Than
90 Days
Past Due
 
Allowance for
Uncollectible
Interest
(Dollars in thousands)Total Interest ReceivableGreater Than
90 Days
Past Due		Allowance for
Uncollectible
Interest
March 31, 2020March 31, 2020$1,258,751  $3,127  $3,479  
December 31, 2019December 31, 2019$1,366,158  $2,390  $5,309  
March 31, 2019 $1,276,825
 $2,374
 $4,687
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
 


81

Personal Loan Delinquencies


The following table provides information regarding the loan status of our Personal Loans.
 Personal Loans Personal Loans
 March 31,March 31,
 2019 2018 20202019
(Dollars in thousands) Balance % Balance %(Dollars in thousands)Balance%Balance%
Loans in forbearanceLoans in forbearance$19,517  $—  
Loans in repayment and percentage of each status:        Loans in repayment and percentage of each status:
Loans current $1,141,664
 98.2% $672,762
 99.6%Loans current856,802  97.4 %1,141,664  98.2 %
Loans delinquent 31-60 days(1)
 9,224
 0.8
 1,463
 0.2
Loans delinquent 31-60 days(1)
11,579  1.3  9,224  0.8  
Loans delinquent 61-90 days(1)
 5,991
 0.5
 865
 0.1
Loans delinquent 61-90 days(1)
4,355  0.5  5,991  0.5  
Loans delinquent greater than 90 days(1)
 5,995
 0.5
 566
 0.1
Loans delinquent greater than 90 days(1)
7,451  0.8  5,995  0.5  
Total Personal Loans in repayment 1,162,874
 100.0% 675,656
 100.0%Total Personal Loans in repayment880,187  100.0 %1,162,874  100.0 %
Total Personal Loans, gross 1,162,874
   675,656
  Total Personal Loans, gross899,704  1,162,874  
Personal Loans deferred origination costs and unamortized premium/(discount) 394
   (163)  Personal Loans deferred origination costs and unamortized premium/(discount)413  394  
Total Personal Loans 1,163,268
   675,493
  Total Personal Loans900,117  1,163,268  
Personal Loans allowance for losses (70,619)   (18,907)  Personal Loans allowance for losses(152,673) (70,619) 
Personal Loans, net $1,092,649
   $656,586
  Personal Loans, net$747,444  $1,092,649  
Delinquencies as a percentage of Personal Loans in repayment   1.8%   0.4%Delinquencies as a percentage of Personal Loans in repayment2.6 %1.8 %
_______
(1)
(1)The period of delinquency is based on the number of days scheduled payments are contractually past due.
82

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 other loans, and the 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. We target maintaining sufficient on-balance sheet and contingent sources of liquidity to enable us to meet all contractual and contingent obligations under various stress scenarios, including severe macroeconomic stresses as well as specific stresses that test the resiliency of our balance sheet. As the Bank has grown, we have improved our liquidity stress testing practices to align more closely with the industry, which has resulted in our adopting increased liquidity requirements. Beginning in the second quarter of 2019, we began to increase our liquidity levels by increasing cash and cash equivalents and investments held as part of our ongoing efforts to enhance our ability to maintain a strong risk management position. We expect to increase liquidity levels into 2020, and as such, we expect the increased proportion of cash in our assets will cause our net interest margin to be lower in 2020 when compared with 2019. Due to the seasonal nature of our business, our liquidity levels will likely vary from quarter to quarter.
Sources of Liquidity and Available Capacity
Ending Balances
(Dollars in thousands) March 31, 2019 December 31, 2018(Dollars in thousands)March 31, 2020December 31, 2019
Sources of primary liquidity:    Sources of primary liquidity:  
Unrestricted cash and liquid investments:    Unrestricted cash and liquid investments:  
Holding Company and other non-bank subsidiaries $26,328
 $25,990
Holding Company and other non-bank subsidiaries$45,956  $29,620  
Sallie Mae Bank(1)
 2,129,929
 2,533,116
Sallie Mae Bank(1)
7,246,973  5,534,257  
Available-for-sale investments 207,907
 176,245
Available-for-sale investments538,742  487,668  
Total unrestricted cash and liquid investments $2,364,164
 $2,735,351
Total unrestricted cash and liquid investments$7,831,671  $6,051,545  
____
(1) This amount will be used primarily to originate Private Education Loans and Personal Loans at the Bank.

83

Average Balances
 
 Three Months Ended 
 March 31,
(Dollars in thousands)20202019
Sources of primary liquidity:
Unrestricted cash and liquid investments:
Holding Company and other non-bank subsidiaries$35,001  $25,968  
Sallie Mae Bank(1)
5,633,891  1,838,484  
Available-for-sale investments487,398  188,310  
Total unrestricted cash and liquid investments$6,156,290  $2,052,762  
  Three Months Ended 
 March 31,
(Dollars in thousands) 2019 2018
Sources of primary liquidity:    
Unrestricted cash and liquid investments:    
Holding Company and other non-bank subsidiaries $25,968
 $19,125
Sallie Mae Bank(1)
 1,838,484
 1,302,703
Available-for-sale investments 188,310
 238,281
Total unrestricted cash and liquid investments $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.
March 31,December 31,
(Dollars in thousands)20202019
Deposits - interest bearing$24,443,963  $24,282,906  
Deposits - non-interest bearing1,651  1,077  
Total deposits$24,445,614  $24,283,983  
  March 31, December 31,
(Dollars in thousands) 2019 2018
Deposits - interest bearing $19,662,290
 $18,942,082
Deposits - non-interest bearing 1,696
 1,076
Total deposits $19,663,986
 $18,943,158


Our total deposits of $19.7$24.4 billion were comprised of $10.6$13.7 billion in brokered deposits and $9.1$10.7 billion in retail and other deposits at March 31, 2019,2020, compared to total deposits of $18.9$24.3 billion, which were comprised of $10.3$13.8 billion in brokered deposits and $8.6$10.5 billion in retail and other deposits, at December 31, 2018.2019.
Interest bearing deposits as of March 31, 20192020 and December 31, 20182019 consisted of retail and brokered non-maturity savings deposits, retail and brokered non-maturity MMDAs and retail and brokered CDs. Interest bearing deposits include deposits from Educational 529 and Health Savings plans that diversify our funding sources and additional deposits we consider to be core. These and other large omnibus accounts, aggregating the deposits of many individual depositors, represented $6.2$6.8 billion of our deposit total as of March 31, 2019, compared with $5.9 billion at2020 and December 31, 2018.2019.
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 $4$5 million and $3$4 million in the three months ended March 31, 20192020 and 2018,2019, respectively. Fees paid to third-party brokers related to brokered CDs were $1$2 million and $7$1 million for the three months ended March 31, 2020 and 2019, and 2018, respectively.

84

Interest bearing deposits at March 31, 20192020 and December 31, 20182019 are summarized as follows:

 March 31, 2019 December 31, 2018  March 31, 2020December 31, 2019
(Dollars in thousands) Amount 
Qtr.-End
Weighted
Average
Stated Rate(1)
 Amount 
Year-End
Weighted
Average
Stated Rate(1)
 (Dollars in thousands)Amount
Qtr.-End
Weighted
Average
Stated Rate(1)
Amount
Year-End
Weighted
Average
Stated Rate(1)
         
Money market $8,974,104
 2.59% $8,687,766
 2.46% Money market$9,561,715  1.74 %$9,616,547  2.04 %
Savings 714,518
 2.03
 702,342
 2.00
 Savings752,357  1.44  718,616  1.71  
Certificates of deposit 9,973,668
 2.76
 9,551,974
 2.74
 Certificates of deposit14,129,891  1.95  13,947,743  2.44  
Deposits - interest bearing $19,662,290
   $18,942,082
 

 Deposits - interest bearing$24,443,963  $24,282,906  
____________
(1) Includes the effect of interest rate swaps in effective hedge relationships.


As of March 31, 2019,2020, and December 31, 2018,2019, there were $638 million$1.1 billion and $523$963 million, respectively, of deposits exceeding FDIC insurance limits. Accrued interest on deposits was $57$82 million and $53$68 million at March 31, 20192020 and December 31, 2018,2019, 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 comprisedcomposed of a small portfolio of mortgage-backed securities issued by government agencies and government-sponsored enterprises that are purchased to meet Community Reinvestment ActCRA 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. Two of the central counterparties we use are the CME and the LCH. All variation margin payments on derivatives cleared through the CME and LCH are accounted for as legal settlement. As of March 31, 2019, $5.62020, $9.3 billion notional of our derivative contracts were cleared on the CME and $0.6$0.5 billion were cleared on the LCH. The derivative contracts cleared through the CME and LCH represent 90.995.2 percent and 9.14.8 percent, respectively, of our total notional derivative contracts of $6.2$9.8 billion at March 31, 2019.2020.
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, 20192020 was $(33.2)$(268) million and $0.3$24 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 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 March 31, 2019
85

2020 and December 31, 2018,2019, 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 $30$96 million and $27$52 million, respectively.
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 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 March 31, 2019.2020.


(Dollars in thousands)SLM Corporation
and Sallie Mae Bank
Contracts
Total exposure, net of collateral$96,347 
Exposure to counterparties with credit ratings, net of collateral$96,347 
Percent of exposure to counterparties with credit ratings below S&P AA- or Moody’s Aa3— %
Percent of exposure to counterparties with credit ratings below S&P A- or Moody’s A3— %
(Dollars in thousands) 
SLM Corporation
and Sallie Mae Bank
Contracts
Total exposure, net of collateral $29,995
Exposure to counterparties with credit ratings, net of collateral $21,683
Percent of exposure to counterparties with credit ratings below S&P AA- or Moody’s Aa3 —%
Percent of exposure to counterparties with credit ratings below S&P A- or Moody’s A3 —%


Regulatory Capital
The Bank is subject to various regulatory capital requirements administered by the FDIC and 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 operations and financial condition. Under 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.
Capital Management
The Bank intends to maintain at all times 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 protect the interests of depositors and the Deposit Insurance FundDIF administered by the FDIC. The Bank’s Capital Policy requires management to monitor these capital standards and the 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 believe that current and projected capital levels are appropriate for the remainder of 2019.2020. As of March 31, 2019,2020, 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 2019, these ratios 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 these regulatory capital standards for 2019.
Under U.S. Basel III, the Bank is required to maintain the following minimum regulatory capital 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 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 to pay discretionary bonuses to executive officers. Including the buffer, as of January 1, 2019, the Bank is required to maintain the following minimum capital ratios under U.S. Basel III in order to avoid such restrictions: 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 and a Total risk-based capital ratio of greater than 10.5 percent.


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On March 27, 2020, the FDIC and other federal banking agencies published an interim final rule that provides those banking organizations adoptingCECL during 2020 with the option to delay for two years the estimated impact of CECL on regulatory capital and to phase in the aggregate impact of the deferral on regulatory capital over a subsequent three year period. Under this interim final rule, because we have elected the deferred option, the regulatory capital impact of our transition adjustments recorded on January 1, 2020 from the adoption of CECL will be deferred for two years. In addition, 25 percent of the ongoing impact, from January 1, 2020 through the end of the two-year deferral period, of CECL on our allowance for loan losses, retained earnings, and average total consolidated assets, each as reported for regulatory capital purposes, will be added to the deferred transition amounts (“adjusted transition amounts”) and deferred for the two-year period. At the conclusion of the two-year period (January 1, 2022), the adjusted transition amounts will be phased-in for regulatory capital purposes at a rate of 25 percent per year, with the phased-in amounts included in regulatory capital at the beginning of each year. Our January 1, 2020, CECL transition amounts increased the allowance for loan losses by $1.1 billion, increased the liability representing our off-balance sheet exposure for unfunded commitments by $116 million, and increased our deferred tax asset by $306 million, resulting in a cumulative effect adjustment that reduced retained earnings by $953 million.
The Bank’s required and actual regulatory capital amounts and ratios under U.S. Basel III are shown in the following table.
Actual
U.S. Basel III Minimum
Requirements Plus Buffer(1)(2)
 Actual 
U.S. Basel III
Regulatory Requirements(1)
AmountRatioAmountRatio
 AmountRatio Amount Ratio
As of March 31, 2019:       
As of March 31, 2020:As of March 31, 2020:
Common Equity Tier 1 Capital (to Risk-Weighted Assets) $2,989,525
11.9% $1,757,430
>7.0%Common Equity Tier 1 Capital (to Risk-Weighted Assets)$3,112,763  12.4 %$1,757,168  >7.0 %
Tier 1 Capital (to Risk-Weighted Assets) $2,989,525
11.9% $2,134,022
>8.5%Tier 1 Capital (to Risk-Weighted Assets)$3,112,763  12.4 %$2,133,704  >8.5 %
Total Capital (to Risk-Weighted Assets) $3,303,905
13.2% $2,636,145
>10.5%Total Capital (to Risk-Weighted Assets)$3,428,154  13.7 %$2,635,752  >10.5 %
Tier 1 Capital (to Average Assets) $2,989,525
11.0%
(2) 
$1,085,405
>4.0%Tier 1 Capital (to Average Assets)$3,112,763  9.4 %

$1,326,107  >4.0 %
       
As of December 31, 2018:       
As of December 31, 2019:As of December 31, 2019:
Common Equity Tier 1 Capital (to Risk-Weighted Assets) $2,896,091
12.1% $1,528,209
>6.375%Common Equity Tier 1 Capital (to Risk-Weighted Assets)$3,264,309  12.2 %$1,876,050  >7.0 %
Tier 1 Capital (to Risk-Weighted Assets) $2,896,091
12.1% $1,887,787
>7.875%Tier 1 Capital (to Risk-Weighted Assets)$3,264,309  12.2 %$2,278,060  >8.5 %
Total Capital (to Risk-Weighted Assets) $3,196,279
13.3% $2,367,226
>9.875%Total Capital (to Risk-Weighted Assets)$3,600,668  13.4 %$2,814,074  >10.5 %
Tier 1 Capital (to Average Assets) $2,896,091
11.1% $1,039,226
>4.0%Tier 1 Capital (to Average Assets)$3,264,309  10.2 %$1,284,642  >4.0 %
________________    
(1)
(1)Reflects the U.S. Basel III minimum required ratio plus the applicable capital conservation buffer.
(2)The Bank’s regulatory capital ratios also exceeded all applicable standards for the Bank to qualify as “well capitalized” under the prompt corrective action framework.
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 $85declared $541 million in dividends to the Company for the three months ended March 31, 20192020, and no$85 million in dividends for the three months ended March 31, 2018.2019. 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 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 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 March 31, 20192020 and December 31, 2018,2019, respectively. For additional information, see Notes to Consolidated Financial Statements, Note 5,6, “Borrowings.”



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 March 31, 2019 December 31, 2018March 31, 2020December 31, 2019
 Short-Term Long-Term Total Short-Term Long-Term TotalShort-TermLong-TermTotalShort-TermLong-TermTotal
Unsecured borrowings:            Unsecured borrowings:
Unsecured debt (fixed-rate) $—
 $197,551
 $197,551
 $—
 $197,348
 $197,348
Unsecured debt (fixed-rate)$—  $198,362  $198,362  $—  $198,159  $198,159  
Total unsecured borrowings —
 197,551
 197,551
 —
 197,348
 197,348
Total unsecured borrowings—  198,362  198,362  —  198,159  198,159  
Secured borrowings:            Secured borrowings:
Private Education Loan term securitizations: 
 
 
 
 
 
Private Education Loan term securitizations:
Fixed-rate —
 2,472,933
 2,472,933
 —
 2,284,347
 2,284,347
Fixed-rate—  2,912,346  2,912,346  —  2,629,902  2,629,902  
Variable-rate —
 1,805,922
 1,805,922
 —
 1,802,609
 1,802,609
Variable-rate—  1,597,328  1,597,328  —  1,525,976  1,525,976  
Total Private Education Loan term securitizations —
 4,278,855
 4,278,855
 —
 4,086,956
 4,086,956
Total Private Education Loan term securitizations—  4,509,674  4,509,674  —  4,155,878  4,155,878  
Secured Borrowing Facility —
 —
 —
 —
 —
 —
Secured Borrowing Facility—  —  —  289,230  —  289,230  
Total secured borrowings —
 4,278,855
 4,278,855
 —
 4,086,956
 4,086,956
Total secured borrowings—  4,509,674  4,509,674  289,230  4,155,878  4,445,108  
Total $—
 $4,476,406
 $4,476,406
 $—
 $4,284,304
 $4,284,304
Total$—  $4,708,036  $4,708,036  $289,230  $4,354,037  $4,643,267  


Other Borrowing Sources
We maintain discretionary uncommitted Federal Funds lines of credit with various correspondent banks, which totaled $125 million at March 31, 2019.2020. 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 months ended March 31, 20192020 or in the year ended December 31, 2018.2019.
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 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 March 31, 20192020 and December 31, 2018,2019, the value of our pledged collateral at the FRB totaled $3.3$2.4 billion and $3.1$3.2 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 months ended March 31, 20192020 or in the year ended December 31, 2018.2019.
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). We estimate expected credit losses over the contractual period in which we are exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by us. At March 31, 2019,2020, we had $0.5 billion$450 million of outstanding contractual loan commitments which we expect to fund during the remainder of the 2018/20192019/2020 academic year. At March 31, 2019,2020, we had a $0.3$30 million reserve recorded in “Other Liabilities” to cover lifetime expected credit losses that may occur during the one-year loss emergence period on these unfunded commitments.
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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 and derivative accounting, and transfers of financial assets and the VIE consolidation model, can be found in our 20182019 Form 10-K. On January 1, 2020, we adopted FASB’s ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” (“CECL”) which resulted in a significant change to our allowance for loan losses policy, and is outlined below. There were no significant changes to these criticalour derivative accounting policiespolicy during the quarterthree months ended March 31, 2019.2020.



Recently Issued and Adopted Accounting Pronouncements
Item 3.Quantitative and Qualitative Disclosures about Market Risk

ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”
In June 2016, the FASB issued ASU No. 2016-13, which became effective for us on January 1, 2020. This ASU eliminated the previous accounting guidance for the recognition of credit impairment. Under the new guidance, for all loans carried at amortized cost, upon loan origination we are required to measure our allowance for credit losses based on our estimate of all current expected credit losses over the remaining contractual term of the assets. Updates to that estimate each period will be recorded through provision expense. The estimate of credit 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.
In addition, Topic 326 made changes to the accounting for available-for-sale debt securities. One such change is to require an assessment of unrealized losses on available-for-sale debt securities that we have the ability and intent to hold for a period of time sufficient to recover the amortized cost of the security, for the purpose of determining credit impairment. If any credit impairment exists, an allowance for losses must be established for the amount of the unrealized loss that is determined to be credit-related.
On January 1, 2020, we adopted CECL using the modified retrospective method and it had a material impact on how we record and report our financial condition and results of operations and on regulatory capital. The following table illustrates the impact of the cumulative effect adjustment made upon adoption of CECL:

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January 1, 2020
(Dollars in thousands)As reported under CECLPre-CECL AdoptionImpact of CECL Adoption
Assets:
Allowance for loan losses:
Private Education Loans$1,435,130  $374,300  $1,060,830  
FFELP Loans4,485  1,633  2,852  
Personal Loans145,060  65,877  79,183  
Credit Card290  102  188  
Total$1,584,965  $441,912  $1,143,053  
Deferred tax asset$415,540  $109,369  $306,171  
Liabilities:
Allowance for loan losses:
Off-balance sheet exposures$118,239  $2,481  $115,758  
Equity:
Retained Earnings$897,873  $1,850,512  $(952,639) 

This transition adjustment is inclusive of qualitative adjustments incorporated into our CECL allowance as necessary, to address any limitations in the models used.

Allowance for Credit Losses
We maintain an allowance for loan losses for the lifetime expected credit losses on loans in our portfolios, as well as for future loan commitments, at the reporting date.
In determining the lifetime expected credit losses on our Private Education Loan and Personal Loan portfolios, we use a discounted cash flow model. This method requires us to project future principal and interest cash flows on our loans in those portfolios.
To estimate the future expected cash flows, we use a vintage-based model that considers life of loan loss expectations, prepayments (both voluntary and involuntary), defaults, recoveries and any other adjustments deemed necessary, to determine the adequacy of the allowance at each balance sheet date. These cash flows are discounted at the loan’s effective interest rate to calculate the present value of those cash flows. Management adjusts the effective interest rate used to discount expected cash flows to incorporate expected prepayments. The difference between the present value of those cash flows and the amortized cost basis of the underlying loans is the allowance for loan losses. Entities that measure credit losses based on the present value of expected future cash flows are permitted to report the entire change in present value as credit loss expense, but may alternatively report the change in present value due to the passage of time as interest income. We have elected to report the entire change in present value as credit loss expense.
In determining the loss rates used for the vintage-based approach, we start with our historical loss rates, stratify the loans within each vintage, and then adjust the loss rates based upon exogenous factors over a reasonable and supportable period. The reasonable and supportable period is meant to represent the period in which we believe we can estimate the impact of forecasted economic variables in our expected losses. At the end of the reasonable and supportable period, we immediately revert our forecast of expected losses to our historical averages. We use a two-year reasonable and supportable period, although this period is subject to change as our view evolves on our ability to reasonably estimate future losses based upon economic forecasts.
In estimating our current expected credit losses, we use our historical experience to derive a base case adjusted for any qualitative factors (as described below). We also develop an adverse and favorable economic scenario as well. At each
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reporting date, we determine the appropriate weighting of these alternate scenarios based upon the current economic conditions and our view of the risks of alternate outcomes. This weighting of expectations is used in calculating our current expected credit losses recorded each period.
In estimating recoveries, we use both estimates of what we would receive from the sale of defaulted loans as well as historical borrower payment behavior to estimate the timing and amount of future recoveries on charged-off loans.
Our prepayment estimates include the effect of voluntary prepayments and consolidation (if the loans are consolidated to third parties), both of which shorten the lives of loans. Constant Prepayment Rate (“CPR”) estimates also consider the utilization of deferment, forbearance, and extended repayment plans, which lengthen the lives of loans. We regularly evaluate the assumptions used to estimate the CPRs. We use economic forecasts to help in the estimation of future CPRs. As with our loss forecasts, at the end of the two-year reasonable and supportable forecast for CPRs, we immediately revert to our historical long-term CPR rates.
In addition to the above modeling approach, we also take certain other qualitative factors into consideration when calculating the allowance for loan losses. These qualitative factors include, but are not limited to, changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off and recovery practices not already included in the analysis, and the effect of other external factors such as legal and regulatory requirements on the level of estimated current expected credit losses.
The evaluation of the allowance for loan losses is inherently subjective, as it requires material estimates that may be susceptible to significant changes. If actual future performance in delinquency, charge-offs and recoveries is significantly different than estimated, or management assumptions or practices were to change, this could materially affect the estimate of the allowance for loan losses, the timing of when losses are recognized, and the related provision for credit losses on our consolidated statements of income.
Below we describe in further detail our policies and procedures for the allowance for loan losses as they relate to our Private Education Loan, Personal Loan, Credit Card and FFELP Loan portfolios.
Allowance for Private Education Loan Losses
We collect on defaulted loans through a mix of in-house collectors, third-party collectors and sales to third-parties. For March 31, 2020 and December 31, 2019, we used both an estimate of recovery rates from in-house collections as well as expectations of future sales of defaulted loans to estimate the timing and amount of future recoveries on charged-off loans.
In addition to the key assumptions/estimates above, some estimates are unique to our Private Education Loan portfolio. Estimates are made on our Private Education Loans regarding when each borrower will separate from school. The cash flow timing of when a borrower will begin making full principal and interest payments is dependent upon when the student either graduates or leaves school. These dates can change based upon many factors. We receive information regarding projected graduation dates from a third-party clearinghouse. The separation from school date will be updated quarterly based on updated information received from the school clearinghouse.
Additionally, when we have a contractual obligation to fund a loan or a portion of a loan at a later date, we make an estimate regarding the percentage of this obligation that will be funded. This estimate is based on historical experience. For unfunded commitments, we recognize the life of loan allowance as a liability. Once the loan is funded, that liability transfers to the allowance for Private Education Loan losses.
Key Credit Quality Indicators - Private Education Loans
We determine the collectability of our Private Education Loan portfolio by evaluating certain risk characteristics. We consider credit score at original approval and periodically refreshed/updated credit scores through the loan’s term, existence of a cosigner, loan status and loan seasoning as the key credit quality indicators because they have the most significant effect on the determination of the adequacy of our allowance for loan losses. Credit scores are an indicator of the creditworthiness of borrowers and the higher the credit scores the more likely it is the borrowers will be able to make all of their contractual payments. Loan status affects the credit risk because a past due loan is more likely to result in a credit loss than a current loan. Additionally, loans in the deferred payment status have different credit risk profiles compared with those in current pay status. Loan seasoning affects credit risk because a loan with a history of making payments generally has a lower incidence of default than a loan with a history of making infrequent or no payments. The existence of a cosigner lowers the likelihood of default as well. We monitor and update these credit quality indicators in the analysis of the adequacy of our allowance for loan losses on a quarterly basis.
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Private Education Loans generally do not require borrowers to begin repayment until at least six months after the borrowers have graduated or otherwise separated from school. Consequently, the loss estimates for these loans is generally low while the borrower is in school and then increases upon the end of the six-month grace period after separation from school. At March 31, 2020 and December 31, 2019, 27 percent and 25 percent, respectively, of the principal balance of the Private Education Loan portfolio was related to borrowers who are in an in-school (fully deferred), grace, or other deferment status and not required to make payments.
Our collection policies for Private Education Loans allow for periods of nonpayment for certain borrowers requesting an extended grace period upon leaving school or experiencing temporary difficulty meeting payment obligations. This is referred to as forbearance and is considered in estimating the allowance for loan losses.
As part of concluding on the adequacy of the allowance for loan losses for Private Education Loans, we review key allowance and loan metrics. The most relevant of these metrics considered are the allowance as a percentage of ending total loans, delinquency percentages and forbearance percentages.
We consider a Private Education Loan to be delinquent 31 days after the last payment was contractually due.
Troubled Debt Restructurings
In estimating the expected defaults for our Private Education Loans that are considered TDRs, we follow the same discounted cash flow process described above but use the historical loss rates related to past TDR loans. The appropriate gross loss rates are determined for each individual loan by determining loan maturity, risk characteristics and macroeconomic conditions.
The allowance for our TDR portfolio is included in our overall allowance for Private Education Loans. 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 adjust the terms of loans for certain borrowers when we believe such changes will help our customers manage their student loan obligations, achieve better student outcomes, and increase the collectability of the loans. These changes generally take the form of a temporary forbearance of payments, a temporary interest rate reduction, a temporary interest rate reduction with a permanent extension of the loan term, and/or a short-term extended repayment alternative. When we give a borrower facing financial difficulty an interest rate reduction, we temporarily reduce the rate (currently to 4.0 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.
We classify a loan as a TDR due to forbearance using a two-step process. The first step is to identify a loan that was in full principal and interest repayment status and received more than three months of forbearance in a 24-month period; however, during the first nine months after a loan had 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. The second step is to evaluate the creditworthiness of the loan by examining its most recent refreshed FICO score. Loans that have met the criteria in the first test and have a FICO score above a certain threshold (based on the most recent quarterly FICO score refresh) will not be classified as TDRs. Loans that have met the criteria in the first test and have a FICO score under the threshold (based on the most recent quarterly FICO score refresh) will be classified as TDRs.
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). Once a loan qualifies for TDR status, it remains a TDR for allowance purposes for the remainder of its life. About half of our loans that are considered TDRs involve a temporary forbearance of payments and do not change the contractual interest rate of the loan. As of March 31, 2020 and December 31, 2019, approximately 48 percent and 50 percent, respectively, of TDRs were classified as such due to their forbearance status. For additional information, see Note 6, “Allowance for Loan Losses” in our 2019 Form 10-K.
During the first quarter of 2020, COVID-19 began to spread worldwide and has caused significant disruptions to the U.S. and world economies.
On March 27, 2020, President Trump signed into law the CARES Act, which, among other things, allows us to (i) elect to suspend the requirements under GAAP for loan modifications related to COVID-19 that would otherwise be categorized as TDRs, and (ii) suspend any determination of a loan modified as a result of the effects of COVID-19 as being a TDR, including impairment for accounting purposes.
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We have elected to suspend TDR accounting for modifications of loans that occur as a result of COVID-19 for the applicable period of the CARES Act relief. The relief from TDR guidance applies to modifications of loans that were not more than 30 days past due as of December 31, 2019, and that occur during the period beginning on March 1, 2020, and ending on the earlier of (i) sixty days after the date on which the national emergency related to the COVID-19 outbreak is terminated, or (ii) December 31, 2020.
Off-Balance Sheet Exposure for 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 the start of the second semester or subsequent trimesters). We estimate expected credit losses over the contractual period in which we are exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by us. The discounted cash flow approach described above includes expected future contractual disbursements. The portion of the allowance for loan losses related to future disbursements is shown as a liability on the face of the balance sheet, and related provision for credit losses is reflected on the income statement.
Uncollectible Interest
The majority of the total accrued interest receivable on our Private Education Loan portfolio represents accrued interest on deferred loans where no payments are due while the borrower is in- school and on fixed-pay loans where the borrower makes a $25 monthly payment that is smaller than the interest accrued on the loan in that month. The accrued interest on these loans will be capitalized and increase the unpaid principal balance of the loans when the borrower exits the grace period after separation from school. The discounted cash flow approach described above considers both the collectability of principal as well as this portion of accrued interest that is expected to capitalize to the balance of the loan. Therefore, the allowance for this portion of accrued interest balance is included in our allowance for loan losses. The discounted cash flow approach does not consider interest accrued on loans that are in a full principal and interest repayment status or in interest-only repayment status. We separately capture the amount of expected uncollectible interest associated with these loans using historical experience to estimate the uncollectible interest for the next four months at each period-end date. This amount is recorded as a reduction of interest income. Accrued interest receivable is separately disclosed on the face of the balance sheet.
Allowance for Personal Loans
From late 2016 through mid-2018, we acquired newly-originated Personal Loans from a marketplace lender. In 2018, we began to originate Personal Loans and ceased originating these loans at the end of 2019. We maintain an allowance for Personal Loan losses at an amount sufficient to absorb lifetime expected credit losses using the same discounted cash flow approach described above for Private Education Loans. The difference between the amortized cost basis and the present value of expected cash flows on our Personal Loan portfolio equals the allowance related to this portfolio. At March 31, 2020, and December 31, 2019, we held $747 million and $984 million, respectively, in Personal Loans, net of allowance. At March 31, 2020, there were no Personal Loans classified as TDRs.
We collect on defaulted Personal Loans through a mix of in-house collectors, third-party collectors and sales to third-parties. For March 31, 2020 and December 31, 2019, we used both an estimate of recovery rates from in-house collections as well as expectations of future sales of defaulted Personal Loans to estimate the timing and amount of future recoveries on charged-off Personal Loans.
Key Credit Quality Indicators - Personal Loans
For Personal Loans, we consider FICO scores at original approval and periodically refreshed/updated credit scores through the loan’s term, loan seasoning, and loan delinquency status to be our key credit quality indicators for the same reasons discussed above under “— Key Credit Quality Indicators — Private Education Loans.”
As part of concluding on the adequacy of the allowance for Personal Loan losses, we review key allowance and loan metrics. The most relevant of these metrics considered are the allowance as a percentage of ending total loans, delinquency percentages, and forbearance percentages. We consider a Personal Loan to be delinquent 31 days after the last payment was contractually due.
Allowance for Credit Card Loans
We use the gross loss approach when estimating the allowance for loan losses for our Credit Card portfolio. Because our Credit Card portfolio is new and we do not have historical loss experience, we use estimated loss rates reported by other
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financial institutions to estimate our allowance for loan losses for credit cards, net of expected recoveries. In addition, we use a model that utilizes purchased credit card information with risk characteristics similar to those of our own portfolio as a challenger model. We then consider any qualitative factors that may change our future expectations of losses.
As all of our Credit Card loans are unconditionally cancelable by us, the issuer, we do not record any estimate of credit losses for unused portions of our Credit Card commitments.
Allowance for FFELP Loan Losses
FFELP Loans are insured as to their principal and accrued interest in the event of default, subject to a 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 default 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. Because we bear a maximum of three percent loss exposure due to this federal guarantee, our allowance for loan losses for FFELP loans and related periodic provision expense are small.
We use the gross loss approach when estimating the allowance for loan losses for our FFELP Loans. We maintain an allowance for loan losses for our FFELP Loans at a level sufficient to cover lifetime expected credit losses. The allowance for FFELP Loan losses uses historical experience of customer default behavior. We apply the default rate projections, net of applicable risk sharing, to our FFELP Loans for the current period to perform our quantitative calculation. Once the quantitative calculation is performed, we review the adequacy of the allowance for loan losses and determine if qualitative adjustments need to be considered.
Loan Interest Income
For all loans, including impaired loans, classified as held for investment, we recognize interest income as earned, adjusted for the amortization of deferred direct origination and acquisition costs. Deferred fees or costs are required to be recognized as yield adjustments over the life of the related loans and are recognized by the interest method. The objective of the interest method is to arrive at periodic interest income (including recognition of fees and costs) at a constant effective yield on the net investment in the receivable (i.e., the principal amount of the receivable adjusted by unamortized fess or costs, purchase premium or discount and any hedging activity—these unamortized costs will collectively be referred to as “basis adjustments”). The difference between the periodic interest income so determined and the interest income determined by applying the stated interest rate to the outstanding principal amount of the receivable is the amount of periodic amortization.
For the amortization of the basis adjustments, we determine the constant effective yield necessary to apply the interest method based upon the payment terms required by the loan contract. Expected prepayments of principal are not included in the determination of the effective interest rate.
For fixed-rate loans, when a prepayment occurs the unamortized balance of the amortized cost adjustments is adjusted so that future amortization (based upon the contractual terms of the loan) will result in constant effective yield equal to the original effective interest rate. Prepayments do not result in a change in the effective interest rate of the loan. We determine the contractual payments on a pool basis; as such, when a prepayment occurs, future contractual payments will be determined assuming the pool will make smaller payments through the original term of the contract. The adjustment to the unamortized basis adjustment balance is recorded in interest income.
For variable-rate loans, the effective interest rate at the time of origination is the loan’s effective interest rate assuming all future contractual payments. The effective interest rate remains the same for that loan until the loan rate changes. If there is no prepayment and no change in the stated interest rate, the periodic amortization of the basis adjustments is equal to the difference between the effective interest rate multiplied by the book basis and the contractual interest due. We determine the contractual payments on a pool basis; as such, when a prepayment occurs, future contractual payments will be determined assuming the pool will make smaller payments through the original term of the contract. The adjustment to the unamortized basis adjustment balance is recorded in interest income.
When the interest rate on a variable-rate loan changes, the effective interest rate is recalculated using the same methodology described in the previous paragraph; however, the future contractual payments are changed to reflect the new interest rate. There is no forecasting of future expected changes in interest rates. The accounting basis used to determine the effective interest rate of the cash flows is equal to the balances of the unpaid principal balance and unamortized basis adjustments at the time of the rate change.
94

We also pay to the U.S. Department of Education (the “DOE”) an annual 105 basis point Consolidation Loan Rebate Fee on FFELP consolidation loans, which is netted against loan interest income. Additionally, interest earned on education loans reflects potential non-payment adjustments in accordance with our uncollectible interest recognition policy. We do not amortize any adjustments to the basis of loans when they are classified as held-for-sale.
With the adoption of CECL on January 1, 2020, we continue to analyze the collectability of accrued interest associated with loans not currently in full principal and interest repayment status or in interest only repayment status as discussed above; however, we will change the recognition of the allowance for this portion of uncollectible interest (amounts to be capitalized after separation from school and the expiration of the grace period) to the provision for loan losses from our historical practice of recording it as a reduction of interest income, as well as classifying this allowance as part of our allowance for loan losses as opposed to our historical practice of recording it as a reduction of accrued interest income receivable.
The allowance for the portion of uncollectible interest on loans making full interest payments will continue to be recorded as a reduction of interest income.
We recognize certain fee income (primarily late fees) on education loans when earned according to the contractual provisions of the promissory notes, as well as our expectation of collectability. Fee income is recorded when earned in “other non-interest income” in the accompanying consolidated statements of income.
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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 Bank’s earning assets 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 for analytic purposes, to achieve a parallel yield curve shock for most rates. Some rates are shocked atwith higher or lower correlations based on historical relationships. In addition, key rates 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, with the resulting changes in other indices correlated accordingly. Interest rate ramps represent a linear increase in 1-month LIBOR over the course of 12 months, with the resulting changes in other indices correlated accordingly.
The following 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 March 31, 20192020 and 2018,2019, 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 accountreflect any impact of new assets, liabilities, commitments or hedging instruments that may arise in the future.
With 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. At today’s levels of interest rates, a 300 basis300-basis point downward rate shock does not provide a meaningful indication of interest rate sensitivity. Thesesensitivity, so results for that scenario have not been presented. At March 31, 2020, the full impact of a 100-basis point downward rate shock cannot be realized for some instruments on our balance sheet, due to the precipitous fall in many short-term rates during March 2020.The results below indicate a market risk profile that has changed slightly from the prior year’s results, with the EAR results. The EVE analysis indicates a change in the directionresults exhibiting very low levels of variability with rate shocks. Economic Value of Equity 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 shockappears to have increased significantly. However, we believe the risk position has increased less than what the table below indicates and that we maintain a minor negativemoderate level of risk. Because of the impact on EVE. The baseline valuationof our adoption of the CECL accounting standard in 2020, the dollar value of equity showed a higher relative valueagainst which the EVE metrics are calculated has decreased by one-third, making each dollar of valuation change appear more significant than it would have in 2018 and a lower relative valuation in 2019, dueprevious periods’ analysis. It is important to note that 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 continuemeasure was sensitive to indicate a relatively low levellevels of interest rate sensitivity.
 March 31,
 2019 2018
 
+300
Basis Points
 
+100
Basis Points
 
-100
Basis Points
 
+300
Basis Points
 
+100
Basis Points
 
-100
Basis Points
            
EAR - Shock+6.0% +1.9% -1.9% +7.0% +2.3% -2.6%
EAR - Ramp+6.3% +2.2% -1.7% +5.1% +1.7% -2.0%
EVE-1.3% -0.6% +0.7% +2.6% +0.9% -2.0%
The EVE resultsmismatch in the table above reflect a change in the calculation of the 2019prior year’s analysis 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 changeis more sensitive at March 31, 2020.

96

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.”
March 31,
20202019
+300
Basis Points		+100
Basis Points		-100
Basis Points		+300
Basis Points		+100
Basis Points		-100
Basis Points
EAR - Shock+4.3%+1.3%+2.3%+6.0%+1.9%-1.9%
EAR - Ramp+3.7%+1.3%+1.8%+6.3%+2.2%-1.7%
EVE-11.0%-4.2%-1.6%-1.3%-0.6%+0.7%
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 ratefloating-rate debt versus floating ratefloating-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 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 includesincluding 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 is the implementation of a loan cap of 25 percent on variable-rate loans originated on and after September 25, 2016. As of March 31, 2019,2020, there were $10.5$13.3 billion of loans with 25 percent interest rate caps on the balance sheet. The lessoverall slightly asset-sensitive position atwould generally cause net interest income to increase somewhat when interest rates rise and decrease somewhat when interest rates fall. However, as the endposition demonstrates very low levels of variability, the first quarter of 2019 results in a more balanced interest 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.analysis, and is exhibiting more fully this quarter the impact of loan floors and very low levels of some interest rates.
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.




97

Asset and Liability Funding Gap
The table below presents our assets and liabilities (funding) arranged by underlying indices as of March 31, 2019.2020. 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
(Dollars in millions)
Index
Frequency of
Variable
Resets		Assets
Funding (1)
Funding
Gap
Fed Funds Effective Rate daily/weekly/monthly $—
 $415.8
 $(415.8)Fed Funds Effective Ratedaily/weekly/monthly$—  $448.6  $(448.6) 
3-month Treasury bill weekly 121.3
 —
 121.3
3-month Treasury billweekly111.6  —  111.6  
Prime monthly 2.1
 —
 2.1
Primemonthly8.8  —  8.8  
3-month LIBOR quarterly —
 400.0
 (400.0)3-month LIBORquarterly—  400.0  (400.0) 
1-month LIBOR monthly 13,763.6
 8,393.4
 5,370.2
1-month LIBORmonthly11,845.6  10,637.0  1,208.6  
1-month LIBOR daily 707.3
 —
 707.3
1-month LIBORdaily655.4  —  655.4  
Non-Discrete reset(2)
 daily/weekly 2,309.9
 3,578.4
 (1,268.5)
Non-Discrete reset(2)
daily/weekly7,493.7  3,541.9  3,951.8  
Fixed-Rate(3)
   10,709.4
 14,826.0
 (4,116.6)
Fixed-Rate(3)
 11,645.8  16,733.4  (5,087.6) 
Total   $27,613.6
 $27,613.6
 $—
Total $31,760.9  $31,760.9  $—  
    ______________________
(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 and stockholders' equity.

(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 and stockholders' equity.

The “Funding Gap” in the above table shows primarily mismatches in the 1-month LIBOR, fixed-rateNon-Discrete reset and Non-Discrete resetfixed-rate categories. Changes in the Fed Funds Effective Rate, 3-month LIBOR and 1-Month LIBOR daily categories are generally quite highly correlated, and should offset 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 the rates offered are quite highly correlated to changes in the 1-month LIBOR on a monthly basis. The funding in the fixed-rate bucket includes $2.6$1.7 billion of equity and $0.4$0.7 billion of non-interest bearing liabilities. In addition, as of March 31, 2019, a block ofthe fixed-rate funding has been placed on the balance sheetcategory includes $0.8 billion in CDs that will mature coincident with an anticipated ABS issuance providing both fixedwithin six months and variable-rate debt.will be available to reprice. We consider the overall market risk to be moderate and current strategies are designed to further reduce the fixed-rate exposure.
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.



98

Weighted Average Life
The following table reflects the weighted average lives of our earning assets and liabilities at March 31, 2019.2020.
 
Weighted
Average
(Averages in Years)Life
Earning assets
Education loans5.395.34 
Personal loans1.371.24 
Cash and investments0.550.19 
Total earning assets4.743.88 
Deposits
Short-term deposits0.61
Long-term deposits2.81
Total deposits1.13
Borrowings
Long-term borrowings4.10
Total borrowings4.10





Item 4.DepositsControls and Procedures
Short-term deposits0.52 
Long-term deposits2.19 
Total deposits1.09 
Borrowings
Long-term borrowings3.97 
Total borrowings3.97 



99

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 March 31, 2019.2020. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of March 31, 2019,2020, 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 March 31, 20192020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



100

PART II. OTHER INFORMATION
Item 1.Legal Proceedings
Item 1.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.
On July 17, 2018, the Mississippi Attorney General filed a lawsuit in Mississippi state court against Navient, Navient Solutions, LLC, and the Bank arising out of the Multi-State Investigation. The complaint alleges unfair and deceptive trade practices against all three defendants as to private loan origination practices from 2000 to 2009, and against the two Navient defendants as to servicing practices between 2010 and the present. The complaint further alleges that Navient assumed responsibility for these matters under the Separation and Distribution Agreement for alleged conduct that pre-dated the Spin-Off. On September 27, 2018, the Mississippi Attorney General filed an amended complaint. On October 8, 2018, the Bank moved to dismiss the Mississippi Attorney General’s action as to the Bank, arguing, among other things, that 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. On November 20, 2018, the Mississippi Attorney General filed an opposition brief and the Bank filed a reply on December 21, 2018. The court heard oral argument on the Bank’s motion to dismiss on April 11, 2019. On August 15, 2019, the court entered an order denying the Bank’s motion to dismiss. On September 5, 2019, the Bank filed with the Supreme Court of Mississippi a petition for interlocutory appeal. The Mississippi Attorney General filed an opposition to the petition for interlocutory appeal on September 19, 2019. On October 16, 2019, the Supreme Court of Mississippi granted the Bank’s petition for interlocutory appeal and stayed the trial court proceedings.The Mississippi Attorney General has since agreed to dismiss with prejudice all claims against the Bank in the underlying case.On March 31, 2020, the Mississippi Attorney General and the Bank filed a Joint Motion to Dismiss Interlocutory Appeal with the Supreme Court of Mississippi.On April 10, 2020, the Mississippi Attorney General filed with the trial court a Notice of Voluntary Dismissal with Prejudice as to the Bank.
For additional information regarding our legal proceedings, see Part I, Item 3. “Legal Proceedings” in our 20182019 Form 10-K.

101

Item 1A. Risk Factors
Our business activities involve a variety of risks. ReadersIn addition to the risk factor below, readers should carefully consider the risk factors disclosed in Part I, Item 1A. “Risk Factors” of our 20182019 Form 10-K.


The pandemic of respiratory disease caused by a novel coronavirus, coronavirus 2019 or COVID-19 (“COVID-19 pandemic”), could have a materially adverse impact on our business, results of operations, financial condition and/or cash flows. The extent of the impact of the COVID-19 pandemic will depend on future developments, which are highly uncertain and largely beyond our control, including, among others: the scope and duration of the pandemic; the number of our employees, customers, and vendors adversely affected by the pandemic; the impact of the pandemic on colleges and universities, student enrollment, and the need for Private Education Loans; the broader public health and economic dislocations resulting from the pandemic; the actions taken by governmental authorities to limit the public health, financial and economic impacts of the COVID-19 pandemic; any legislative or regulatory changes that suspend or reduce payments or cancel or discharge obligations for Private Education Loan borrowers; any reputational damage related to the broader reception and perception of our response to the COVID-19 pandemic; and the impact of the pandemic on local, U.S., and world economies.

The COVID-19 pandemic has caused significant disruption to the U.S. and world economies, including the closing of many schools and businesses for extended periods of time, significantly higher unemployment and underemployment, significantly lower interest rates and equity market valuations, and extreme volatility in the U.S. and world financial markets. We expect the impact of COVID-19 pandemic on the U.S. economy will be significant during the remainder of 2020 and that it could materially adversely affect our operations, our regulatory capital and liquidity position, the credit performance of our Private Education Loans and other assets, the number of borrowers seeking payment relief, our results of operations and financial condition, and/or our cash flows.
As described in Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Impact of COVID-19 on Sallie Mae — Customers and Credit Performance,” in this quarterly report on Form 10-Q, we have so far experienced a significant increase in disaster forbearance grants, higher delinquencies, and an increase in borrowers opting out of automated payments. Also, our application volumes have begun to decrease and our expectation is that our Private Education Loan origination volumes will decline further in 2020.
In addition, our employees have had to move to a work-from-home environment. We have never had to run our operations entirely remotely for an extended period of time, and it is possible we will encounter significant challenges to running our business. Our operations rely on the efficient and secure collection, processing, storage and transmission of personal, confidential, and other information in a significant number of customer transactions on a continuous basis through our computer systems and networks and those of our third-party service providers. Unanticipated issues arising from handling personal, confidential and other information from a less efficient work-from-home environment could adversely impact our operations and lead to greater risk for us.
The extent to which the COVID-19 pandemic impacts our business, results of operations, financial condition and/or cash flows will depend on future developments, which are highly uncertain and largely beyond our control, including, among others: the scope and duration of the pandemic; the number of our employees, customers, and vendors adversely affected by the pandemic; the impact of the pandemic on colleges and universities, student enrollment, and the need for Private Education Loans; the broader public health and economic dislocations resulting from the pandemic; the actions taken by governmental authorities to limit the public health, financial and economic impacts of the COVID-19 pandemic; any legislative or regulatory changes that suspend or reduce payments or cancel or discharge obligations for Private Education Loan borrowers; any reputational damage related to the broader reception and perception of our response to the COVID-19 pandemic; and the impact of the COVID-19 pandemic on local, U.S., and world economies. However, as with many other businesses, the impact of COVID-19 on our business could be material and adverse.


102


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 March 31, 2019.2020.
(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, 2019683
 $10.80
 —
 $200,000
February 1 - February 28, 20194,082
 $11.15
 3,499
 $161,000
March 1 - March 31, 20191,960
 $10.83
 1,936
 $140,000
Total first-quarter 20196,725
 $11.02
 5,435
  
(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, 20201,279  $10.98  200  $631,000  
February 1 - February 29, 20202,688  $11.62  2,665  $600,000  
March 1 - March 31, 202044,875  
(3)
$9.54  44,872  $75,000  
Total first-quarter 202048,842  $9.69  47,737   
_________
(1)
The total number of shares purchased 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 performance stock units.
(2)
In January 2019, our Board of Directors authorized us to repurchase shares of our common stock up to an aggregate repurchase price not to exceed $200 million. The share repurchase program expires on January 22, 2021.

(1)The total number of shares purchased includes: (i) shares purchased under the stock repurchase programs 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 performance stock units.
(2)On January 23, 2019, our Board of Directors authorized us to repurchase shares of our common stock up to an aggregate repurchase price not to exceed $200 million under the 2019 Share Repurchase Program. At the end of January 2020, $31 million of capacity remained under the 2019 Share Repurchase Program; with the purchase of 2.7 million shares in February 2020, we utilized all remaining capacity under the 2019 Share Repurchase Program. On January 22, 2020, our Board of Directors authorized us to repurchase shares of our common stock up to an aggregate repurchase price not to exceed $600 million under the 2020 Share Repurchase Program. The 2020 Share Repurchase Program expires on January 21, 2022.
(3) In the first-quarter of 2020, we paid $525 million under an ASR agreement and received an initial delivery of 44.9 million shares. See Note 8. “Stockholders’ Equity” to our consolidated financial statements for further discussion.
The closing price of our common stock on the Nasdaq Global Select Market on March 29, 201931, 2020 was $9.91.$7.19.


Item 3.Defaults Upon Senior Securities
Nothing to report.
Item 4.Mine Safety Disclosures
Not applicable.

Item 3.Defaults Upon Senior Securities


Item 5.Other Information
Nothing to report.

Item 4.Mine Safety Disclosures
Not applicable.
Item 6.Exhibits

103

Item 5.Other Information
Nothing to report.

Item 6.Exhibits
The following exhibits are furnished or filed, as applicable:
10.1
10.1
10.2
10.2
Form of SLM Corporation 2012 Omnibus Incentive Plan, 20192020 Performance Stock Unit Term Sheet.
10.3
10.4
10.531.1
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
32.1
32.2
101.INSXBRL Instance Document.Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHXBRL Taxonomy Extension Schema Document.
101.CALXBRL Taxonomy Extension Calculation Linkbase Document.
101.DEFXBRL Taxonomy Extension Definition Linkbase Document.
101.LABXBRL Taxonomy Extension Label Linkbase Document.
101.PREXBRL Taxonomy Extension Presentation Linkbase Document.
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
 







104

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: April 17, 201922, 2020



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