The Student Loan Corporation (NYSE:STU) today reported net income of $15 million, or $0.76 per share, for the quarter ended March 31, 2008, a decrease of $29 million (65%) compared to net income of $44 million, or $2.20 per share, reported in same quarter of 2007. This decrease was primarily driven by a $655 million reduction in loan sales volume due to market conditions during the first quarter of 2008 which resulted in a $10 million after-tax decrease in associated gains. In addition, the provision for loan losses increased by $9 million (after-tax) due primarily to seasoning of the uninsured CitiAssist® loan portfolio.
“The student loan industry has experienced significant regulatory changes in the recent months, coupled with the continuation of a challenging credit market. We continue our disciplined approach to managing risk, and in light of the current environment, are very pleased with our results. We are focused on growing our most profitable origination activities and believe we are well positioned to gain market share in these areas,” said CEO Mike Reardon.
During the first quarter of 2008, the Company completed approximately $1.6 billion of debt financing through securitization. “Our ability to complete a transaction of this magnitude in the current environment clearly demonstrates our ability to successfully access funding even in the most trying markets,” said CEO Mike Reardon.
During the twelve-month period ended March 31, 2008, the Company’s managed student loan portfolio grew by $3.7 billion (10%) to $39.1 billion reflecting the Company’s continued strong origination performance. The managed portfolio includes $24.5 billion of Company owned loan assets and $14.6 billion of loans serviced on behalf of securitization trusts or other lenders. Originations for the quarter included retail FFELP Stafford and PLUS originations of $1.9 billion, a 25% increase from the same quarter of 2007. The Company also made new CitiAssist loan commitments of $0.6 billion, down 9% compared to the same quarter of last year, due in part to a shift in volume to the Graduate PLUS loan product, which was introduced in July of 2006. Loan consolidation and other secondary market activities contributed approximately $0.5 billion of loans to the Company’s loan portfolio.
Net interest income of $81 million for the first quarter of 2008 was $12 million (13%) lower than the same quarter of 2007. The net interest margin for the quarter was 1.36%, a 29 basis point decrease from the same quarter of 2007. This decrease was primarily driven by rapidly declining interest rates, which impacted assets more quickly than liabilities, and also included a $2 million reduction in interest income due to the enactment of the College Cost Reduction and Access Act. This decrease was partially offset by higher average loan balances.
The Company’s other income of $13 million for the first quarter of 2008 was $20 million (60%) lower than the same quarter of 2007. This decrease was primarily attributable to the Company’s reduction in loan sales and a decrease in the associated gains.
Total operating expenses for the quarter were $44 million, which was unchanged from the same quarter of 2007. The Company’s operating expense ratio (total operating expenses as a percentage of average managed student loans) for the first quarter of 2008 was 0.46%, three basis points lower than the same quarter of 2007, reflecting disciplined expense controls.
The Company’s allowance for loan losses at March 31, 2008, was $55 million compared to $21 million at March 31, 2007. This increase includes $22 million related to the uninsured CitiAssist portfolio driven by continued seasoning of the portfolio as well as an increase in the amount of higher risk loans made to students attending proprietary schools entering repayment. In addition, the elimination of the Exceptional Performer program as of October 1, 2007 increased the allowance for loan losses by $8 million.
The Company’s first quarter 2008 return on average equity decreased to 3.8% from 11.4% in the same quarter of 2007, primarily driven by lower earnings.
On April 16, 2008, the Company’s Board of Directors declared a regular quarterly dividend on the Company’s common stock of $1.43 per share. The dividend will be paid June 2, 2008 to shareholders of record on May 16, 2008.
The Student Loan Corporation is one of the nation’s leading originators and holders of FFELP program and private education loans. Citibank, N.A., a subsidiary of Citigroup Inc., is the largest shareholder in the Company with an 80% interest.
For information or inquiries regarding student loan accounts, please call 1-800-967-2400. Hearing impaired customers with Telecommunication Devices for the Deaf (TDD) may call 1-800-846-1298. Information is also available on the Company’s Web site at http://www.studentloan.com.
FORWARD-LOOKING STATEMENTS
Certain statements in this document are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act. These statements are based on management’s current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from those included in these statements due to a variety of factors. More information about these factors is contained in the Company’s filings with the Securities and Exchange Commission.
| THE STUDENT LOAN CORPORATION CONSOLIDATED BALANCE SHEET (Dollars in thousands, except per share amounts) |
| | | | | |
| | | March 31, | | December 31, |
| | | | 2008 | | 2007 |
| | | Unaudited | | |
| ASSETS | | | | |
| | Federally insured student loans | | $ | 17,867,877 | | $ | 16,244,273 |
| | Private education loans | | | 5,522,037 | | | 4,696,337 |
| | Deferred origination and premium costs | | | 721,954 | | | 668,082 |
| | Allowance for loan losses | | | (54,752) | | | (42,115) |
| | Student loans, net | | | 24,057,116 | | | 21,566,577 |
| | Other loans and lines of credit | | | 26,803 | | | 87,437 |
| | Loans held for sale | | | 417,923 | | | 337,790 |
| | Cash | | | 2,552 | | | 25 |
| | Residual interests in securitized loans | | | 694,839 | | | 633,074 |
| | Other assets | | | 1,290,121 | | | 1,154,956 |
| | | | | | |
| | Total Assets | | $ | 26,489,354 | | $ | 23,779,859 |
| | | | | | |
| | | | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | | |
| | Short-term borrowings, payable to principal stockholder | | $ | 15,880,600 | | $ | 13,373,000 |
| | Long-term borrowings, payable to principal stockholder | | | 6,600,000 | | | 8,100,000 |
| | Long-term secured borrowings | | | 1,579,320 | | | - |
| | Deferred income taxes | | | 289,490 | | | 287,462 |
| | Other liabilities | | | 529,077 | | | 395,174 |
| | | | | | |
| | Total Liabilities | | | 24,878,487 | | | 22,155,636 |
| | | | | | |
| | Common stock, $0.01 par value; authorized 50,000,000 shares; 20,000,000 shares issued and outstanding | | | 200 | | | 200 |
| | Additional paid-in capital | | | 141,365 | | | 141,355 |
| | Retained earnings | | | 1,469,302 | | | 1,482,668 |
| | | | | | |
| | Total Stockholders' Equity | | | 1,610,867 | | | 1,624,223 |
| | | | | | |
| | Total Liabilities and Stockholders' Equity | | $ | 26,489,354 | | $ | 23,779,859 |
| THE STUDENT LOAN CORPORATION CONSOLIDATED STATEMENT OF INCOME (Dollars in thousands, except per share amounts) |
| |
| | | Three months ended |
| | | March 31, |
| | | 2008 | | 2007 |
| | | Unaudited | | Unaudited |
| NET INTEREST INCOME | | | | |
| Interest income | | $ | 329,747 | | $ | 378,647 |
| Interest expense | | | 248,300 | | | 284,890 |
| Net interest income | | | 81,447 | | | 93,757 |
| Provision for loan losses | | | (25,312) | | | (10,528) |
| Net interest income after provision for loan losses | | | 56,135 | | | 83,229 |
| | | | | |
| OTHER INCOME | | | | |
| Gains on loans sold | | | 1,455 | | | 17,774 |
| Fees and other (loss) income | | | 11,459 | | | 14,863 |
| Total other income | | | 12,914 | | | 32,637 |
| | | | | |
| OPERATING EXPENSES | | | | |
| Salaries and employee benefits | | | 15,469 | | | 14,450 |
| Other expenses | | | 28,666 | | | 29,748 |
| Total operating expenses | | | 44,135 | | | 44,198 |
| | | | | |
| Income before income taxes | | | 24,914 | | | 71,668 |
| Income taxes | | | 9,680 | | | 27,645 |
| NET INCOME | | $ | 15,234 | | $ | 44,023 |
| | | | | |
| DIVIDENDS DECLARED AND PAID | | $ | 28,600 | | $ | 26,000 |
| | | | | |
| BASIC AND DILUTED EARNINGS | | | | |
| PER COMMON SHARE | | | | |
| (based on 20 million average shares outstanding) | | $ | 0.76 | | $ | 2.20 |
| | | | | |
| DIVIDENDS DECLARED AND PAID PER COMMON SHARE | | $ | 1.43 | | $ | 1.30 |
Certain prior period balances have been reclassified to conform to the current period’s presentation.
The Student Loan Corporation
Press:
Mark Rodgers, 212-559-1719
or
Investor Relations:
Bradley Svalberg, 203-975-6320
