Message #7 From:
NewsBot Date: October 19, 2006 05:00:00 AM
STU News The Student Loan Corporation Announces Third Quarter Earnings
STAMFORD, Conn.--(BUSINESS WIRE)--The Student Loan Corporation (NYSE:STU) today reported net income of $78
million ($3.89 basic earnings per share) for the third quarter of 2006,
a decrease of $5 million (6%) compared to net income of $83 million
($4.15 basic earnings per share) for the same period of 2005. An
increase in other income of $15 million (after tax) only partially
offset reduced net interest income of $15 million (after tax) and $5
million (after tax) of higher expenses and loan loss provisions.
"We continue to be pleased with our performance particularly during this
quarter, having achieved a record level of originations. Our business
momentum remains strong despite challenges of the interest rate yield
curve," said CEO Mike Reardon. "We continue to expand our relationships
with schools and enhance our products. Our team's focus has both
increased the number of customers we serve and helped to deepen our
relationships with existing customers."
During the twelve-month period ending September 30, 2006, the Company’s
managed student loan portfolio grew by $3.0 billion (10%) to $33.3
billion. The managed portfolio includes $23.7 billion of Company owned
loan assets. Third quarter 2006 disbursements included FFELP Stafford
and PLUS disbursements of $1.3 billion, up $0.2 billion (20%) compared
to the same period last year. The Company also made new CitiAssist Loan
commitments of $682 million, up $60 million (10%) compared to the same
period last year. Secondary market and other loan procurement activities
contributed approximately $2.2 billion of FFELP loans to the Company’s
student loan portfolio during the 2006 third quarter. Substantially all
of this secondary market and other loan procurement volume was composed
of FFELP Consolidation Loans.
Net interest income of $98 million for the third quarter of 2006 was $25
million (20%) lower than the same period of 2005. The net interest
margin for the third quarter of 2006 was 1.54%, a decrease of 30 basis
points from the same period of 2005. The decrease in net interest income
and net interest margin was mainly the result of higher market interest
rates. The rate increases resulted in a decline in floor income of $12
million and caused changes in funding costs to exceed changes in
interest earned by $8 million. The relatively larger increase in funding
costs occurred as previously funded low cost fixed-rate debt matured and
was refinanced at higher current market rates. Floor income is a
non-GAAP financial measure that is described in more detail in the
Company’s 2005 Annual Report and Form 10-K.
The Company’s other income of $79 million for
the third quarter of 2006 was $24 million (45%) higher than the same
period of 2005. This was mainly attributable to increased gains of $37
million (pretax) on $2.5 billion of securitized loans in September of
2006. In a similar transaction in September of 2005, $1.0 billion of
loans were securitized. A decrease in gains on other loan sales of $6
million (pretax) and a decrease in fee and other income of $7 million
(pretax) partially offset the increase. The fee and other income
decrease was primarily the result of retained interest revaluations.
The Company’s total operating expense ratio
(total operating expenses as a percentage of average managed loans) for
the third quarter of 2006 was 0.53%, unchanged from the third quarter of
2005. Total operating expenses of $44 million for the third quarter of
2006 were up $4 million from the same 2005 period.
For the nine months ended September 30, 2006, the Company earned $226
million ($11.29 basic earnings per share), a decrease of $4 million (2%)
from $230 million ($11.50 basic earnings per share) for the same period
of 2005. The change is primarily attributable to a decrease in net
interest income and an increase in operating expenses, partially offset
by higher gains on securitization and other loan sales as well as higher
fee and other income.
The Company’s provision for loan losses for
the third quarter of 2006 was $7 million, $5 million higher than the
third quarter 2005 provision. The increase is due in part to the Deficit
Reduction Act, which imposes a 1% risk-sharing provision on claims filed
after June 30, 2006 by servicers with the Exceptional Performer
designation, and seasoning of the CitiAssist portfolio. The Exceptional
Performer designation is granted by the Department of Education in
recognition of an exceptional level of performance in servicing
federally guaranteed student loans. See the Company’s
2005 Annual Report and Form 10-K for further details.
The Company’s third quarter 2006 return on
average equity decreased to 20.8% from 25.9% in the third quarter of
2005, due primarily to the decrease in net income combined with higher
equity balances.
The Company’s Board of Directors declared a
regular quarterly dividend on the Company’s
common stock of $1.30 per share. The dividend will be paid December 1,
2006 to shareholders of record on November 15, 2006.
The Student Loan Corporation is one of the nation’s
leading originators and holders of insured student 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 contained herein that are not historical facts are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act. The Company’s actual
results may differ materially from those suggested by the
forward-looking statements, which are typically identified by the words
or phrases “believe”,
“expect”, “anticipate”,
“intend”, “estimate”,
“target”, “may
increase”, “may
fluctuate”, “may
result in”, “are
projected”, “will”,
“should”, “would”,
“could” and
similar expressions. These forward-looking statements involve risks and
uncertainties including, but not limited to, general economic
conditions, including the performance of financial markets and interest
rates; and the effects of future legislative and regulatory changes,
including those affecting the interest rates borrowers pay on certain
loans and the magnitude of certain loan subsidies, which will determine
the floor income benefit to the Company on Stafford Loans; and the
persistence of lower risk-sharing liabilities.
THE STUDENT LOAN CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars in thousands, except per share amounts)
(Unaudited)
September 30,
December 31,
September 30,
2006
2005
2005
ASSETS
Federally insured student loans
$ 16,675,850
$ 17,508,605
$ 18,916,342
Private education loans
3,647,499
4,812,443
4,733,121
Deferred origination and premium costs
662,049
706,736
737,692
Less: allowance for loan losses
(11,377)
(4,990)
(4,665)
Student loans, net
20,974,021
23,022,794
24,382,490
Other loans and lines of credit
104,816
50,085
43,043
Loans held for sale
2,614,727
2,067,937
1,567,867
Cash
27
1,152
742
Residual interests in securitized loans
382,963
188,454
133,825
Other assets
895,761
657,275
661,156
Total Assets
$ 24,972,315
$ 25,987,697
$ 26,789,123
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings, payable to principal shareholder
$ 11,384,800
$ 10,781,100
$ 13,139,000
Long-term borrowings, payable to principal shareholder
11,200,000
13,200,000
11,700,000
Deferred income taxes
290,289
289,843
281,104
Other liabilities
578,431
354,909
364,562
Total Liabilities
23,453,520
24,625,852
25,484,666
Common stock, $0.01 par value; authorized 50,000,000 shares;
20,000,000 shares issued and outstanding
200
200
200
Additional paid-in capital
141,312
139,383
139,355
Retained earnings
1,375,932
1,222,262
1,164,902
Accumulated other changes in equity from nonowner sources
1,351
-
-
Total Stockholders' Equity
1,518,795
1,361,845
1,304,457
Total Liabilities and Stockholders' Equity
$ 24,972,315
$ 25,987,697
$ 26,789,123
Certain prior period balances have been reclassified to conform to
the current period’s presentation.
THE STUDENT LOAN CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Dollars in thousands, except per share amounts)
(Unaudited)
Three months ended
Nine months ended
September 30,
September 30,
2006
2005
2006
2005
NET INTEREST INCOME
Interest income
$ 420,366
$ 340,890
$1,227,924
$ 946,232
Interest expense to principal shareholder
321,962
217,656
907,234
565,053
Net interest income
98,404
123,234
320,690
381,179
Less: provision for loan losses
(7,065)
(2,427)
(18,506)
(7,828)
Net interest income after provision for loan losses
91,339
120,807
302,184
373,351
OTHER INCOME
Gains on loans securitized
75,163
37,817
144,236
85,604
Gains on loan sales
5,904
11,902
26,103
12,151
Fee and other income
(2,433)
4,631
16,963
(5,106)
Total other income
78,634
54,350
187,302
92,649
OPERATING EXPENSES
Salaries and employee benefits
14,969
12,158
41,128
35,399
Other expenses
29,023
27,688
80,811
72,654
Total operating expenses
43,992
39,846
121,939
108,053
Income before income taxes and extraordinary item
125,981
135,311
367,547
357,947
Income taxes
48,170
52,353
141,771
133,412
Income before extraordinary item
77,811
82,958
225,776
224,535
Gain on extinguishment of trust, netof taxes of $3,448
