The Student Loan Corporation Announces Year-End and Fourth Quarter Earnings

For the quarter ended December 31, 2009, net income was $38.1 million, or $1.90 per share, an increase of $25.8 million compared to net income of $12.3 million, or $0.62 per share, for the fourth quarter of 2008.

"I am extremely proud of The Student Loan Corporation's achievements over the past year despite the difficult market environment. We executed our strategy to secure new long-term structural liquidity while transforming the Company into a more efficient organization. We hope to build on this success as we enter what is anticipated to be another challenging year," said The Student Loan Corporation's Chairman, President and Chief Executive Officer, Michael Reardon.

During 2009, the Company leveraged its portfolio to secure $15.7 billion of long-term structural liquidity. This included $10.4 billion of funding from the U.S. Department of Education sponsored conduit, Straight-A Funding, LLC. The Company also executed four securitizations, including three FFEL Program securitizations which provided $3.9 billion of funding, and a private education loan securitization under the Term Asset-Backed Securities Loan Facility which contributed an additional $1.4 billion of funding.

The Department of Education's Loan Participation Purchase Program (the Participation Program) continued to be a significant source of funding throughout 2009. Since the inception of this program, the Company has funded $5.3 billion of FFEL Program Stafford and PLUS loan disbursements. During the fourth quarter of 2009, the Company completed $0.7 billion of loan sales to the Department of Education through the Loan Purchase Commitment Program (the Purchase Program) bringing cumulative sales to $3.0 billion. These proceeds were used to pay back funding previously received under the Participation Program.

The Company's managed student loan portfolio grew by $0.8 billion (2%) to $42.9 billion during 2009. The managed portfolio includes $28.3 billion of the Company's owned loan assets and $14.6 billion of loans serviced on behalf of securitization trusts or other lenders. Originations for the year ended December 31, 2009 included FFEL Program Stafford and PLUS loan originations of $5.8 billion, up modestly compared with the $5.7 billion originated in 2008. The Company also made new CitiAssist(R) loan commitments of $1.2 billion during 2009, which was 29% lower than 2008 reflecting the Company's refined origination strategy.

Net interest income of $277.6 million for the year ended December 31, 2009 was $53.7 million (16%) lower than 2008. Net interest margin of 0.97% for the year ended December 31, 2009 was 35 basis points lower than the same period of 2008. During 2009, the Company increased structural long-term funding by $15.7 billion. The average funding cost of these new borrowings is higher than that of the shorter-term borrowings which were replaced, which lowered the Company's net interest margin by 43 basis points and net interest income for the year by $123.6 million. Net interest margin was further compressed by the dislocation experienced during the first half of the year between the indices used to calculate a significant amount of the Company's interest revenue (Commercial Paper (CP) and prime) and LIBOR, the index used to determine most of the Company's interest expense. This dislocation decreased net interest income by $29.9 million. The decreases in net interest income were partially offset by higher loan balances, which increased net interest income by $41.6 million as well as by pricing changes on the Company's private education loans which increased net interest income by $20.8 million. Other factors which offset the decreases in net interest income include, among other things, a more stable interest rate environment in 2009 as compared with 2008 and lower amortization of deferred origination and premium costs as a result of a slow down in borrower prepayments.

Net interest income of $74.6 million for the fourth quarter ended December 31, 2009 was $27.6 million (59%) higher than the same quarter of 2008. Net interest margin of 1.01% was 29 basis points higher than the same period of 2008. This improvement reflects narrowing of the spreads between CP and LIBOR and prime and LIBOR, higher loan balances, and pricing changes on the Company's private education loans, which increased net interest income by $30.5 million, $14.0 million, and $10.0 million, respectively. Favorable changes in the interest rate environment during the fourth quarter of 2009 as compared to the same period in 2008 also contributed to the increase in net interest income. These increases were partially offset by higher funding costs which decreased net interest income by $33.2 million.


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