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DES MOINES, Iowa – SLM Corp., better known as Sallie Mae, said Tuesday investment losses pushed it to a loss for the second quarter.
The nation's largest student lender reported a loss of $123 million, or 32 cents per share, compared with profit of $266 million, or 50 cents a share, a year earlier.
The loss was primarily due to a $484 million unrealized loss on derivative and hedging activities.
The company also set aside a $278 million provision for loan losses, compared with $143 million a year earlier.
Sallie Mae said its "core," or adjusted profit, in the latest quarter was $170 million, or 31 cents per common share, compared with $156 million, or 27 cents a share, a year earlier.
Core earnings exclude treatment for student loans bundled together as securities and derivatives, financial instruments used as a hedge against swings in interest rates.
Analysts surveyed by Thomson Reuters expected a profit of 6 cents per share, on average. They typically exclude certain one-time losses.
Sallie Mae reported earnings after its shares fell 28 cents, or about 3 percent, to close at $9.51. In after-market trading, shares lost 74 cents and fell 7.8 percent to $8.77. The stock has traded between its 52-week range of $3.11 to $19.47.
The Reston, Va.-based company said that at the conclusion of the 2008-2009 academic lending season it originated nearly $20 billion in loans, an 11 percent increase over $18 billion in the previous year.
CEO Albert L. Lord said the company expects to handle another large increase this year.
During the quarter, the company originated $3.7 billion in federal student loans, compared with $2.4 billion in the year-earlier quarter, a 53-percent increase. The company implemented its new private education loan product, the SMART Option Student Loan, raised credit quality standards and originated $387 million in private education loans in the quarter.
Sallie Mae charged off $355 million of managed private education loans in the quarter. About half of the charged-off loans were non-traditional private education loans, a market segment that the company discontinued 18 months ago.
While 90-day plus delinquencies rose during the quarter, early stage delinquencies declined.
The loan loss allowance totaled nearly $2 billion at the end of the second-quarter 2009 and covers expected charge-offs for the next two years.
Core earnings fee income, which consists primarily of fees earned from guarantor servicing and collection activity, was $201 million in the second quarter, compared with $221 million in the year-earlier quarter.
Operating expenses were $305 million for the quarter, a decrease from $339 million in the year-ago quarter.
