10-Q 1 slm-1q_2016x10xq.htm 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)

þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2016
or

¨ | 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)

Delaware | 52-2013874
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.)
300 Continental Drive, Newark, Delaware | 19713
(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)
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 is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer | þ |  | Accelerated filer | ¨
Non-accelerated filer | ¨ | (Do not check if a smaller reporting company) | Smaller reporting company | ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes þ No ¨
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 number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Class | Outstanding at March 31, 2016
Common Stock, $0.20 par value | 427,915,514 shares

SLM CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
INDEX

Part I. Financial Information |  |  |
Item 1. | Financial Statements |  | 2 |
Item 1. | Notes to the Financial Statements |  | 9 |
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations |  | 36 |
Item 3. | Quantitative and Qualitative Disclosures about Market Risk |  | 60 |
Item 4. | Controls and Procedures |  | 64 |
PART II. Other Information |  |
Item 1. | Legal Proceedings |  | 65 |
Item 1A. | Risk Factors |  | 66 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |  | 66 |
Item 3. | Defaults Upon Senior Securities |  | 66 |
Item 4. | Mine Safety Disclosures |  | 66 |
Item 5. | Other Information |  | 66 |
Item 6. | Exhibits |  | 67 |

1

SLM CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)

|  | March 31, |  | December 31,
|  | 2016 |  | 2015
Assets |  |  |  |
Cash and cash equivalents |  | $ | 938,480 |  |  | $ | 2,416,219 |
Available-for-sale investments at fair value (cost of $201,585 and $196,402, respectively) |  | 203,597 |  |  | 195,391 |
Loans held for investment (net of allowance for losses of $126,249 and $112,507, respectively) |  | 13,108,425 |  |  | 11,630,591 |
Restricted cash and investments |  | 24,612 |  |  | 27,980 |
Other interest-earning assets |  | 58,451 |  |  | 54,845 |
Accrued interest receivable |  | 650,813 |  |  | 564,496 |
Premises and equipment, net |  | 81,261 |  |  | 81,273 |
Acquired intangible assets, net |  | 1,485 |  |  | 1,745 |
Tax indemnification receivable |  | 187,156 |  |  | 186,076 |
Other assets |  | 70,493 |  |  | 55,482 |
Total assets |  | $ | 15,324,773 |  |  | $ | 15,214,098 |
Liabilities |  |  |  |
Deposits |  | $ | 11,543,355 |  |  | $ | 11,487,707 |
Short-term borrowings |  | 526,500 |  |  | 500,175 |
Long-term borrowings |  | 558,513 |  |  | 579,101 |
Income taxes payable, net |  | 142,410 |  |  | 166,662 |
Upromise related liabilities |  | 263,899 |  |  | 275,384 |
Other liabilities |  | 146,171 |  |  | 108,746 |
Total liabilities |  | 13,180,848 |  |  | 13,117,775 |
Commitments and contingencies |  |  |  |
Equity |  |  |  |
Preferred stock, par value $0.20 per share, 20 million shares authorized |  |  |  |
Series A: 3.3 million and 3.3 million shares issued, respectively, at stated value of $50 per share |  | 165,000 |  |  | 165,000 |
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: 433.4 million and 430.7 million shares issued, respectively |  | 86,684 |  |  | 86,136 |
Additional paid-in capital |  | 1,142,502 |  |  | 1,135,860 |
Accumulated other comprehensive loss (net of tax benefit of $18,089 and $9,949, respectively) |  | (29,269 | ) |  | (16,059 | )
Retained earnings |  | 426,986 |  |  | 366,609 |
Total SLM Corporation stockholders' equity before treasury stock |  | 2,191,903 |  |  | 2,137,546 |
Less: Common stock held in treasury at cost: 5.5 million and 4.4 million shares, respectively |  | (47,978 | ) |  | (41,223 | )
Total equity |  | 2,143,925 |  |  | 2,096,323 |
Total liabilities and equity |  | $ | 15,324,773 |  |  | $ | 15,214,098 |

See accompanying notes to consolidated financial statements.
2

SLM CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)

|  | Three Months Ended
|  | March 31,
|  | 2016 |  | 2015
Interest income: |  |  |  |
Loans |  | $ | 245,230 |  |  | $ | 197,856 |
Investments |  | 2,591 |  |  | 2,720 |
Cash and cash equivalents |  | 1,634 |  |  | 780 |
Total interest income |  | 249,455 |  |  | 201,356 |
Interest expense: |  |  |  |
Deposits |  | 34,012 |  |  | 29,570 |
Interest expense on short-term borrowings |  | 2,163 |  |  | 832 |
Interest expense on long-term borrowings |  | 3,415 |  |  | — |
Other interest expense |  | 2 |  |  | — |
Total interest expense |  | 39,592 |  |  | 30,402 |
Net interest income |  | 209,863 |  |  | 170,954 |
Less: provisions for credit losses |  | 32,602 |  |  | 16,618 |
Net interest income after provisions for credit losses |  | 177,261 |  |  | 154,336 |
Non-interest income: |  |  |  |
(Losses) gains on derivatives and hedging activities, net |  | (354 | ) |  | 3,292 |
Other |  | 21,028 |  |  | 8,007 |
Total non-interest income |  | 20,674 |  |  | 11,299 |
Expenses: |  |  |  |
Compensation and benefits |  | 50,209 |  |  | 41,203 |
Other operating expenses |  | 42,676 |  |  | 39,984 |
Total operating expenses |  | 92,885 |  |  | 81,187 |
Acquired intangible asset amortization expense |  | 260 |  |  | 370 |
Restructuring and other reorganization expenses |  | — |  |  | 4,657 |
Total expenses |  | 93,145 |  |  | 86,214 |
Income before income tax expense |  | 104,790 |  |  | 79,421 |
Income tax expense |  | 38,875 |  |  | 31,722 |
Net income attributable to SLM Corporation |  | 65,915 |  |  | 47,699 |
Preferred stock dividends |  | 5,139 |  |  | 4,823 |
Net income attributable to SLM Corporation common stock |  | $ | 60,776 |  |  | $ | 42,876 |
Basic earnings per common share attributable to SLM Corporation |  | $ | 0.14 |  |  | $ | 0.10 |
Average common shares outstanding |  | 427,111 |  |  | 424,428 |
Diluted earnings per common share attributable to SLM Corporation |  | $ | 0.14 |  |  | $ | 0.10 |
Average common and common equivalent shares outstanding |  | 430,903 |  |  | 432,302 |

See accompanying notes to consolidated financial statements.
3

SLM CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)

|  | Three Months Ended
|  | March 31,
|  | 2016 |  | 2015
Net income attributable to SLM Corporation |  | $ | 65,915 |  |  | $ | 47,699 |
Other comprehensive income (loss): |  |  |  |
Unrealized gains on investments |  | 3,024 |  |  | 673 |
Unrealized losses on cash flow hedges |  | (24,374 | ) |  | (15,689 | )
Total unrealized losses |  | (21,350 | ) |  | (15,016 | )
Income tax benefit |  | 8,140 |  |  | 5,825 |
Other comprehensive loss, net of tax benefit |  | (13,210 | ) |  | (9,191 | )
Total comprehensive income attributable to SLM Corporation |  | $ | 52,705 |  |  | $ | 38,508 |

See accompanying notes to consolidated financial statements.
4

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

|  |  |  | Common Stock Shares |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Preferred Stock Shares |  | Issued |  | Treasury |  | Outstanding |  | Preferred Stock |  | Common Stock |  | Additional Paid-In Capital |  | Accumulated Other Comprehensive Income (Loss) |  | Retained Earnings |  | Treasury Stock |  | Total SLM Corporation Equity
Balance at December 31, 2014 |  | 7,300,000 |  |  | 424,804,125 |  |  | (1,365,277 | ) |  | 423,438,848 |  |  | $ | 565,000 |  |  | $ | 84,961 |  |  | $ | 1,090,511 |  |  | $ | (11,393 | ) |  | $ | 113,066 |  |  | $ | (12,187 | ) |  | $ | 1,829,958 |
Net income |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 47,699 |  |  | — |  |  | 47,699 |
Other comprehensive income, net of tax |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (9,191 | ) |  | — |  |  | — |  |  | (9,191 | )
Total comprehensive income (loss) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 38,508 |
Cash dividends: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Preferred Stock, series A ($.87 per share) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (2,875 | ) |  | — |  |  | (2,875 | )
Preferred Stock, series B ($.49 per share) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,948 | ) |  | — |  |  | (1,948 | )
Dividend equivalent units related to employee stock-based compensation plans |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,118 |  |  | — |  |  | (1,118 | ) |  |  |  | — |
Issuance of common shares |  | — |  |  | 3,130,839 |  |  | — |  |  | 3,130,839 |  |  | — |  |  | 626 |  |  | 4,050 |  |  | — |  |  | — |  |  | — |  |  | 4,676 |
Tax benefit related to employee stock-based compensation |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 4,596 |  |  | — |  |  | — |  |  | — |  |  | 4,596 |
Stock-based compensation expense |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 6,140 |  |  | — |  |  | — |  |  | — |  |  | 6,140 |
Shares repurchased related to employee stock-based compensation plans |  | — |  |  | — |  |  | (1,389,096 | ) |  | (1,389,096 | ) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (13,142 | ) |  | (13,142 | )
Balance at March 31, 2015 |  | 7,300,000 |  |  | 427,934,964 |  |  | (2,754,373 | ) |  | 425,180,591 |  |  | $ | 565,000 |  |  | $ | 85,587 |  |  | $ | 1,106,415 |  |  | $ | (20,584 | ) |  | $ | 154,824 |  |  | $ | (25,329 | ) |  | $ | 1,865,913 |

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 Shares |  | Issued |  | Treasury |  | Outstanding |  | Preferred Stock |  | Common Stock |  | Additional Paid-In Capital |  | Accumulated Other Comprehensive Income (Loss) |  | Retained Earnings |  | Treasury Stock |  | Total SLM Corporation Equity
Balance at December 31, 2015 |  | 7,300,000 |  |  | 430,677,434 |  |  | (4,374,190 | ) |  | 426,303,244 |  |  | $ | 565,000 |  |  | $ | 86,136 |  |  | $ | 1,135,860 |  |  | $ | (16,059 | ) |  | $ | 366,609 |  |  | $ | (41,223 | ) |  | $ | 2,096,323 |
Net income |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 65,915 |  |  | — |  |  | 65,915 |
Other comprehensive loss, net of tax |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (13,210 | ) |  | — |  |  | — |  |  | (13,210 | )
Total comprehensive income |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 52,705 |
Cash dividends: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Preferred Stock, series A ($0.87 per share) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (2,875 | ) |  | — |  |  | (2,875 | )
Preferred Stock, series B ($0.56 per share) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (2,264 | ) |  | — |  |  | (2,264 | )
Dividend equivalent units related to employee stock-based compensation plans |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 399 |  |  | — |  |  | (399 | ) |  | — |  |  | — |
Issuance of common shares |  | — |  |  | 2,740,979 |  |  |  |  | 2,740,979 |  |  | — |  |  | 548 |  |  | 2,159 |  |  | — |  |  | — |  |  | — |  |  | 2,707 |
Tax benefit related to employee stock-based compensation |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (2,132 | ) |  | — |  |  | — |  |  | — |  |  | (2,132 | )
Stock-based compensation expense |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 6,216 |  |  | — |  |  | — |  |  | — |  |  | 6,216 |
Shares repurchased related to employee stock-based compensation plans |  | — |  |  | — |  |  | (1,128,709 | ) |  | (1,128,709 | ) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (6,755 | ) |  | (6,755 | )
Balance at March 31, 2016 |  | 7,300,000 |  |  | 433,418,413 |  |  | (5,502,899 | ) |  | 427,915,514 |  |  | $ | 565,000 |  |  | $ | 86,684 |  |  | $ | 1,142,502 |  |  | $ | (29,269 | ) |  | $ | 426,986 |  |  | $ | (47,978 | ) |  | $ | 2,143,925 |

See accompanying notes to consolidated financial statements.
6

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

|  | Three Months Ended
|  | March 31,
|  | 2016 |  | 2015
Operating activities |  |  |  |
Net income |  | $ | 65,915 |  |  | $ | 47,699 |
Adjustments to reconcile net income to net cash used in operating activities: |  |  |  |
Provisions for credit losses |  | 32,602 |  |  | 16,618 |
Income tax expense |  | 38,875 |  |  | 31,722 |
Amortization of brokered deposit placement fee |  | 2,615 |  |  | 2,695 |
Amortization of ABCP Facility upfront fee |  | 122 |  |  | — |
Amortization of deferred loan origination costs and fees, net |  | 1,223 |  |  | 641 |
Net amortization of discount on investments |  | 342 |  |  | 324 |
Interest income on tax indemnification receivable |  | (1,080 | ) |  | (1,754 | )
Depreciation of premises and equipment |  | 2,104 |  |  | 1,659 |
Amortization of acquired intangibles |  | 260 |  |  | 370 |
Stock-based compensation expense |  | 6,216 |  |  | 6,140 |
Unrealized (gains)/losses on derivative and hedging activities, net |  | 832 |  |  | (2,417 | )
Other adjustments to net income, net |  | 250 |  |  | — |
Changes in operating assets and liabilities: |  |  |  |
Net decrease in loans held for sale |  | — |  |  | 55 |
Origination of loans held for sale |  | — |  |  | (55 | )
Increase in accrued interest receivable |  | (147,257 | ) |  | (121,815 | )
Decrease in restricted cash and investments - other |  | 6,778 |  |  | 1,046 |
(Increase) decrease in other interest-earning assets |  | (3,606 | ) |  | 13,854 |
Decrease in tax indemnification receivable |  | — |  |  | 14,908 |
Increase in other assets |  | (11,391 | ) |  | (2,079 | )
Decrease in income tax payable, net |  | (54,987 | ) |  | (23,049 | )
Increase in accrued interest payable |  | 9,079 |  |  | 6,541 |
Increase (decrease) in payable due to entity that is a subsidiary of Navient |  | 1,169 |  |  | (1,655 | )
Increase (decrease) in other liabilities |  | 2,159 |  |  | (10,629 | )
Total adjustments |  | (113,695 | ) |  | (66,880 | )
Total net cash used in operating activities |  | (47,780 | ) |  | (19,181 | )
Investing activities |  |  |  |
Loans acquired and originated |  | (1,806,583 | ) |  | (1,663,149 | )
Net proceeds from sales of loans held for investment |  | 3,365 |  |  | 6,387 |
Proceeds from claim payments |  | 18,528 |  |  | 46,442 |
Net decrease (increase) in loans held for investment |  | 332,414 |  |  | 243,990 |
Increase in restricted cash and investments - variable interest entities |  | (3,410 | ) |  | — |
Purchases of available-for-sale securities |  | (12,090 | ) |  | (8,178 | )
Proceeds from sales and maturities of available-for-sale securities |  | 6,566 |  |  | 6,630 |
Total net cash used in investing activities |  | (1,461,210 | ) |  | (1,367,878 | )
Financing activities |  |  |  |
Brokered deposit placement fee |  | (2,759 | ) |  | — |
Net decrease in certificates of deposit |  | (209,411 | ) |  | (74,457 | )
Net increase (decrease) increase in other deposits |  | 245,893 |  |  | (22,415 | )
Borrowings collateralized by loans in securitization trusts - repaid |  | (20,276 | ) |  | — |
Borrowings under ABCP facility |  | 26,325 |  |  | — |
Fees paid on ABCP facility |  | (1,250 | ) |  | — |
Excess tax (expense) benefit from the exercise of stock-based awards |  | (2,132 | ) |  | 4,596 |

7

Preferred stock dividends paid |  | (5,139 | ) |  | (4,823 | )
Net cash provided by (used in) financing activities |  | 31,251 |  |  | (97,099 | )
Net decrease in cash and cash equivalents |  | (1,477,739 | ) |  | (1,484,158 | )
Cash and cash equivalents at beginning of period |  | 2,416,219 |  |  | 2,359,780 |
Cash and cash equivalents at end of period |  | $ | 938,480 |  |  | $ | 875,622 |
Cash disbursements made for: |  |  |  |
Interest |  | $ | 32,766 |  |  | $ | 25,368 |
Income taxes paid |  | $ | 56,077 |  |  | $ | 17,811 |

See accompanying notes to consolidated financial statements.
8

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, 2016 are not necessarily indicative of the results for the year ending December 31, 2016 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, 2015 (the “2015 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.
Recently Issued but Not Yet Adopted Accounting Pronouncements
On February 25, 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases,” a comprehensive new lease standard which will supersede 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 are currently evaluating the impact of the adoption of this standard on our consolidated financial statements and related disclosures.
On March 30, 2016, the FASB issued ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” which amends the current stock compensation guidance. The amendments simplify the accounting for the taxes related to stock based compensation, including adjustments to how excess tax benefits and a company's payments for tax withholdings should be classified. The standard is effective for fiscal periods beginning after December 15, 2016, with early adoption permitted. We are currently evaluating the impact of the adoption of this standard on our consolidated financial statements.
9

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
2. Loans Held for Investment
Loans Held for Investment consist of Private Education Loans and FFELP Loans. 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”).
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 generally carry a variable rate indexed to LIBOR. As of March 31, 2016, 81 percent 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 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.
Loans held for investment are summarized as follows:

|  | March 31, |  | December 31,
|  | 2016 |  | 2015
Private Education Loans |  | $ | 12,111,870 |  |  | $ | 10,596,437 |
Deferred origination costs |  | 31,772 |  |  | 27,884 |
Allowance for loan losses |  | (122,620 | ) |  | (108,816 | )
Total Private Education Loans, net |  | 12,021,022 |  |  | 10,515,505 |
FFELP Loans |  | 1,088,026 |  |  | 1,115,663 |
Unamortized acquisition costs, net |  | 3,006 |  |  | 3,114 |
Allowance for loan losses |  | (3,629 | ) |  | (3,691 | )
Total FFELP Loans, net |  | 1,087,403 |  |  | 1,115,086 |
Loans held for investment, net |  | $ | 13,108,425 |  |  | $ | 11,630,591 |

The estimated weighted average life of education loans in our portfolio was approximately 6.2 years at both March 31, 2016 and December 31, 2015, respectively.
10

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

2. | Loans Held for Investment (Continued) |

The average balance and the respective weighted average interest rates of education loans in our portfolio are summarized as follows:

|  | Three Months Ended
|  | March 31,
|  | 2016 |  | 2015
|  | Average Balance |  | Weighted Average Interest Rate |  | Average Balance |  | Weighted Average Interest Rate
Private Education Loans |  | $ | 11,817,708 |  |  | 8.03 | % |  | $ | 9,454,579 |  |  | 8.07 | %
FFELP Loans |  | 1,103,253 |  |  | 3.42 |  |  | 1,234,682 |  |  | 3.19 |
Total portfolio |  | $ | 12,920,961 |  |  |  |  | $ | 10,689,261 |  |  |

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SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
3. Allowance for Loan Losses
Our provision for loan losses represents the periodic expense of maintaining an allowance sufficient to absorb incurred probable 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 probable losses incurred in the loan portfolios.
Allowance for Loan Losses Metrics

|  | Allowance for Loan Losses
|  | Three Months Ended March 31, 2016
|  | FFELP Loans |  | Private Education Loans |  | Total
Allowance for Loan Losses |  |  |  |  |  |
Beginning balance |  | $ | 3,691 |  |  | $ | 108,816 |  |  | $ | 112,507 |
Total provision |  | 321 |  |  | 33,839 |  |  | 34,160 |
Net charge-offs: |  |  |  |  |  |
Charge-offs |  | (383 | ) |  | (19,004 | ) |  | (19,387 | )
Recoveries |  | — |  |  | 1,044 |  |  | 1,044 |
Net charge-offs |  | (383 | ) |  | (17,960 | ) |  | (18,343 | )
Loan sales(1) |  | — |  |  | (2,075 | ) |  | (2,075 | )
Ending Balance |  | $ | 3,629 |  |  | $ | 122,620 |  |  | $ | 126,249 |
Allowance: |  |  |  |  |  |
Ending balance: individually evaluated for impairment |  | $ | — |  |  | $ | 49,212 |  |  | $ | 49,212 |
Ending balance: collectively evaluated for impairment |  | $ | 3,629 |  |  | $ | 73,408 |  |  | $ | 77,037 |
Loans: |  |  |  |  |  |
Ending balance: individually evaluated for impairment |  | $ | — |  |  | $ | 318,094 |  |  | $ | 318,094 |
Ending balance: collectively evaluated for impairment |  | $ | 1,088,026 |  |  | $ | 11,793,776 |  |  | $ | 12,881,802 |
Net charge-offs as a percentage of average loans in repayment (annualized)(2) |  | 0.19 | % |  | 0.95 | % |  |
Allowance as a percentage of the ending total loan balance |  | 0.33 | % |  | 1.01 | % |  |
Allowance as a percentage of the ending loans in repayment(2) |  | 0.45 | % |  | 1.56 | % |  |
Allowance coverage of net charge-offs (annualized) |  | 2.37 |  |  | 1.71 |  |  |
Ending total loans, gross |  | $ | 1,088,026 |  |  | $ | 12,111,870 |  |  |
Average loans in repayment(2) |  | $ | 804,690 |  |  | $ | 7,534,234 |  |  |
Ending loans in repayment(2) |  | $ | 803,378 |  |  | $ | 7,843,076 |  |  |

____________
(1) Represents fair value adjustments on loans sold.
(2) Loans in repayment include loans on which borrowers are making interest only and fixed payments as well as loans that have entered full principal and interest repayment status.
12

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

3. | Allowance for Loan Losses (Continued) |

|  | Allowance for Loan Losses
|  | Three Months Ended March 31, 2015
|  | FFELP Loans |  | Private Education Loans |  | Total
Allowance for Loan Losses |  |  |  |  |  |
Beginning balance |  | $ | 5,268 |  |  | $ | 78,574 |  |  | $ | 83,842 |
Total provision |  | 435 |  |  | 16,183 |  |  | 16,618 |
Net charge-offs: |  |  |  |  |  |
Charge-offs |  | (1,134 | ) |  | (8,727 | ) |  | (9,861 | )
Recoveries |  | — |  |  | 1,387 |  |  | 1,387 |
Net charge-offs |  | (1,134 | ) |  | (7,340 | ) |  | (8,474 | )
Loan sales(1) |  | — |  |  | (2,181 | ) |  | (2,181 | )
Ending Balance |  | $ | 4,569 |  |  | $ | 85,236 |  |  | $ | 89,805 |
Allowance: |  |  |  |  |  |
Ending balance: individually evaluated for impairment |  | $ | — |  |  | $ | 20,105 |  |  | $ | 20,105 |
Ending balance: collectively evaluated for impairment |  | $ | 4,569 |  |  | $ | 65,131 |  |  | $ | 69,700 |
Loans: |  |  |  |  |  |
Ending balance: individually evaluated for impairment |  | $ | — |  |  | $ | 122,120 |  |  | $ | 122,120 |
Ending balance: collectively evaluated for impairment |  | $ | 1,208,977 |  |  | $ | 9,646,641 |  |  | $ | 10,855,618 |
Net charge-offs as a percentage of average loans in repayment (annualized)(2) |  | 0.50 | % |  | 0.51 | % |  |
Allowance as a percentage of the ending total loan balance |  | 0.38 | % |  | 0.87 | % |  |
Allowance as a percentage of the ending loans in repayment(2) |  | 0.52 | % |  | 1.42 | % |  |
Allowance coverage of net charge-offs (annualized) |  | 1.01 |  |  | 2.90 |  |  |
Ending total loans, gross |  | $ | 1,208,977 |  |  | $ | 9,768,761 |  |  |
Average loans in repayment(2) |  | $ | 898,360 |  |  | $ | 5,705,067 |  |  |
Ending loans in repayment(2) |  | $ | 872,579 |  |  | $ | 5,995,121 |  |  |

____________
(1) Represents fair value adjustments on loans sold.
(2) Loans in repayment include loans on which borrowers making interest only and fixed payments as well as loans that have entered full principal and interest repayment status.
13

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

3. | 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 modify the terms of loans for certain borrowers when we believe such modifications may increase the ability and willingness of a borrower to make payments and thus increase the ultimate overall amount collected on a loan. These modifications generally take the form of a forbearance, a temporary interest rate reduction or an 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. Approximately 22 percent and 23 percent of the loans granted forbearance as of March 31, 2016 and December 31, 2015, respectively, have been classified as TDRs due to their forbearance status. For additional information, see Note 6, “Allowance for Loan Losses” in our 2015 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, 2016 and December 31, 2015, 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 Investment |  | Unpaid Principal Balance |  | Allowance
March 31, 2016 |  |  |  |  |  |
TDR Loans |  | $ | 322,744 |  |  | $ | 318,094 |  |  | $ | 49,212 |
December 31, 2015 |  |  |  |  |  |
TDR Loans |  | $ | 269,628 |  |  | $ | 265,831 |  |  | $ | 43,480 |

The following table provides the average recorded investment and interest income recognized for our TDR loans.

|  | Three Months Ended |  | Three Months Ended
|  | March 31, 2016 |  | March 31, 2015
|  | Average Recorded Investment |  | Interest Income Recognized |  | Average Recorded Investment |  | Interest Income Recognized
TDR Loans |  | $ | 297,315 |  |  | $ | 5,583 |  |  | $ | 88,120 |  |  | $ | 2,396 |

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

3. | Allowance for Loan Losses (Continued) |

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

|  | March 31, |  | December 31,
|  | 2016 |  | 2015
|  | Balance |  | % |  | Balance |  | %
TDR loans in in-school/grace/deferment(1) |  | $ | 10,738 |  |  |  |  | $ | 6,869 |  |  |
TDR loans in forbearance(2) |  | 42,699 |  |  |  |  | 43,756 |  |  |
TDR loans in repayment(3) and percentage of each status: |  |  |  |  |  |  |  |
Loans current |  | 232,720 |  |  | 88.0 | % |  | 185,936 |  |  | 86.4 | %
Loans delinquent 31-60 days(4) |  | 13,610 |  |  | 5.1 |  |  | 14,948 |  |  | 6.9 |
Loans delinquent 61-90 days(4) |  | 11,109 |  |  | 4.2 |  |  | 9,239 |  |  | 4.3 |
Loans delinquent greater than 90 days(4) |  | 7,218 |  |  | 2.7 |  |  | 5,083 |  |  | 2.4 |
Total TDR loans in repayment |  | 264,657 |  |  | 100.0 | % |  | 215,206 |  |  | 100.0 | %
Total TDR loans, gross |  | $ | 318,094 |  |  |  |  | $ | 265,831 |  |  |

_____

(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 and fixed payments as well as loans that have entered full principal and interest repayment status.

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

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

3. | Allowance for Loan Losses (Continued) |

The following table provides the amount of modified loans (which includes 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 |  | Three Months Ended
|  | March 31, 2016 |  | March 31, 2015
|  | Modified Loans(1) |  | Charge-offs |  | Payment- Default |  | Modified Loans(1) |  | Charge-offs |  | Payment- Default
TDR Loans |  | $ | 61,006 |  |  | $ | 4,968 |  |  | $ | 25,671 |  |  | $ | 122,120 |  |  | $ | 930 |  |  | $ | 4,785 |

_____

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

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

3. | Allowance for Loan Losses (Continued) |

Key Credit Quality Indicators
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 origination and periodically refreshed/updated through the loan's term. The following table highlights the gross principal balance of our Private Education Loan portfolio stratified by key credit quality indicators.

|  | Private Education Loans
|  | Credit Quality Indicators
|  | March 31, 2016 |  | December 31, 2015
Credit Quality Indicators: |  | Balance(1) |  | % of Balance |  | Balance(1) |  | % of Balance
Cosigners: |  |  |  |  |  |  |  |
With cosigner |  | $ | 10,914,736 |  |  | 90 | % |  | $ | 9,515,136 |  |  | 90 | %
Without cosigner |  | 1,197,134 |  |  | 10 |  |  | 1,081,301 |  |  | 10 |
Total |  | $ | 12,111,870 |  |  | 100 | % |  | $ | 10,596,437 |  |  | 100 | %
FICO at Origination: |  |  |  |  |  |  |  |
Less than 670 |  | $ | 781,804 |  |  | 6 | % |  | $ | 700,779 |  |  | 7 | %
670-699 |  | 1,768,651 |  |  | 15 |  |  | 1,554,959 |  |  | 15 |
700-749 |  | 3,909,444 |  |  | 32 |  |  | 3,403,823 |  |  | 32 |
Greater than or equal to 750 |  | 5,651,971 |  |  | 47 |  |  | 4,936,876 |  |  | 46 |
Total |  | $ | 12,111,870 |  |  | 100 | % |  | $ | 10,596,437 |  |  | 100 | %
Seasoning(2): |  |  |  |  |  |  |  |
1-12 payments |  | $ | 3,664,441 |  |  | 30 | % |  | $ | 3,059,901 |  |  | 29 | %
13-24 payments |  | 2,255,999 |  |  | 19 |  |  | 2,096,412 |  |  | 20 |
25-36 payments |  | 1,171,202 |  |  | 10 |  |  | 1,084,818 |  |  | 10 |
37-48 payments |  | 549,855 |  |  | 4 |  |  | 513,125 |  |  | 5 |
More than 48 payments |  | 443,041 |  |  | 4 |  |  | 414,217 |  |  | 4 |
Not yet in repayment |  | 4,027,332 |  |  | 33 |  |  | 3,427,964 |  |  | 32 |
Total |  | $ | 12,111,870 |  |  | 100 | % |  | $ | 10,596,437 |  |  | 100 | %

(1) | Balance represents gross Private Education Loans.

(2) | 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.

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

3. | Allowance for Loan Losses (Continued) |

The following table provides information regarding the loan status of our Private Education Loans. Loans in repayment include loans making interest only and fixed payments as well as loans that have entered full principal and interest repayment status.

|  | Private Education Loans |
|  | March 31, |  | December 31, |
|  | 2016 |  | 2015 |
|  | Balance |  | % |  | Balance |  | % |
Loans in-school/grace/deferment(1) |  | $ | 4,027,332 |  |  |  |  | $ | 3,427,964 |  |  |  |
Loans in forbearance(2) |  | 241,462 |  |  |  |  | 241,207 |  |  |  |
Loans in repayment and percentage of each status: |  |  |  |  |  |  |  |  |
Loans current |  | 7,678,446 |  |  | 97.9 | % |  | 6,773,095 |  |  | 97.8 | % |
Loans delinquent 31-60 days(3) |  | 78,242 |  |  | 1.0 |  |  | 91,129 |  |  | 1.3 |  |
Loans delinquent 61-90 days(3) |  | 56,906 |  |  | 0.7 |  |  | 42,048 |  |  | 0.6 |  |
Loans delinquent greater than 90 days(3) |  | 29,482 |  |  | 0.4 |  |  | 20,994 |  |  | 0.3 |  |
Total Private Education Loans in repayment |  | 7,843,076 |  |  | 100.0 | % |  | 6,927,266 |  |  | 100.0 | % |
Total Private Education loans, gross |  | 12,111,870 |  |  |  |  | 10,596,437 |  |  |  |
Private Education Loans deferred origination costs |  | 31,772 |  |  |  |  | 27,884 |  |  |  |
Total Private Education Loans |  | 12,143,642 |  |  |  |  | 10,624,321 |  |  |  |
Private Education Loans allowance for losses |  | (122,620 | ) |  |  |  | (108,816 | ) |  |  |
Private Education Loans, net |  | $ | 12,021,022 |  |  |  |  | $ | 10,515,505 |  |  |  |
Percentage of Private Education Loans in repayment |  |  |  | 64.8 | % |  |  |  | 65.4 | % |
Delinquencies as a percentage of Private Education Loans in repayment |  |  |  | 2.1 | % |  |  |  | 2.2 | % |
Loans in forbearance as a percentage of Private Education Loans in repayment and forbearance |  |  |  | 3.0 | % |  |  |  | 3.4 | % |

(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.

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

3. | Allowance for Loan Losses (Continued) |

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. 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 Loan
|  | Accrued Interest Receivable
|  | Total Interest Receivable |  | Greater Than 90 Days Past Due |  | Allowance for Uncollectible Interest
March 31, 2016 |  | $ | 619,226 |  |  | $ | 1,034 |  |  | $ | 3,074 |
December 31, 2015 |  | $ | 542,919 |  |  | $ | 791 |  |  | $ | 3,332 |

19

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
4. Deposits
The following table summarizes total deposits at March 31, 2016 and December 31, 2015.

|  | March 31, |  | December 31, |
|  | 2016 |  | 2015 |
Deposits - interest bearing |  | $ | 11,542,392 |  |  | $ | 11,487,006 |  |
Deposits - non-interest bearing |  | 963 |  |  | 701 |  |
Total deposits |  | $ | 11,543,355 |  |  | $ | 11,487,707 |  |

Interest Bearing
Interest bearing deposits as of March 31, 2016 and December 31, 2015 consisted of non-maturity savings and money market deposits, brokered and retail certificates of deposit (“CDs”), and brokered money market deposits (“MMDAs”). Included in these accounts are what we consider to be core deposits from various sources. 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 $2.6 million and $2.7 million in the three months ended March 31, 2016 and 2015, respectively. Fees paid to third-party brokers related to these CDs were $2.8 million for the three months ended March 31, 2016. There were no such fees paid in the three months ended March 31, 2015.
Interest bearing deposits at March 31, 2016 and December 31, 2015 are summarized as follows:

|  | March 31, 2016 |  | December 31, 2015 |
|  | Amount |  | Qtr.-End Weighted Average Stated Rate(1) |  | Amount |  | Year-End Weighted Average Stated Rate(1) |
Money market |  | $ | 5,125,507 |  |  | 1.22 | % |  | $ | 4,886,299 |  |  | 1.19 | % |
Savings |  | 679,511 |  |  | 0.82 |  |  | 669,254 |  |  | 0.82 |  |
Certificates of deposit |  | 5,737,374 |  |  | 1.19 |  |  | 5,931,453 |  |  | 0.98 |  |
Deposits - interest bearing |  | $ | 11,542,392 |  |  |  |  | $ | 11,487,006 |  |  |  |  |

____________
(1) Includes the effect of interest rate swaps in effective hedge relationships.
As of March 31, 2016 and December 31, 2015, there were $251.5 million and $709.9 million, respectively, of deposits exceeding Federal Deposit Insurance Corporation (“FDIC”) insurance limits. Accrued interest on deposits was $24.6 million and $15.7 million at March 31, 2016 and December 31, 2015, respectively.
Non-Interest Bearing
Non-interest bearing deposits were $1.0 million and $0.7 million as of March 31, 2016 and December 31, 2015, respectively. For both periods, these were comprised of money market accounts related to our Employee Stock Purchase Plan account.
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SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
5. Borrowings
Outstanding borrowings consist of secured borrowings issued through our term asset-backed securitization (“ABS”) program and our asset-backed commercial paper (“ABCP”) funding facility (the “ABCP Facility”). The following table summarizes our secured borrowings at March 31, 2016 and December 31, 2015.

|  | March 31, 2016 |  | December 31, 2015
|  | Short-Term |  | Long-Term |  | Total |  | Short-Term |  | Long-Term |  | Total
Secured borrowings: |  |  |  |  |  |  |  |  |  |  |  |
Private Education Loan term securitization |  | $ | — |  |  | $ | 558,513 |  |  | $ | 558,513 |  |  | $ | — |  |  | $ | 579,101 |  |  | $ | 579,101 |
ABCP Facility |  | 526,500 |  |  | — |  |  | 526,500 |  |  | 500,175 |  |  | — |  |  | 500,175 |
Total |  | $ | 526,500 |  |  | $ | 558,513 |  |  | $ | 1,085,013 |  |  | $ | 500,175 |  |  | $ | 579,101 |  |  | $ | 1,079,276 |

Short-term Borrowings
Asset-Backed Commercial Paper Funding Facility
On December 19, 2014, we closed on a $750.0 million ABCP Facility. We retained a 5 percent or $37.5 million participation interest in the ABCP Facility, resulting in $712.5 million of funds available for us to draw under the ABCP Facility. During 2015, we incurred financing costs under the ABCP Facility of approximately 0.40 percent on average on unused borrowing capacity and approximately 3 month LIBOR plus 0.80 percent on outstandings under the ABCP Facility.
On February 25, 2016, we amended and extended the maturity of our ABCP Facility. The amended ABCP Facility is a $750.0 million ABCP Facility, in which we no longer hold a participation interest. As a result, the full $750.0 million is available for us to draw. We hold 100 percent of the residual interest in the ABCP Facility trust. Under the amended ABCP Facility, we incur financing costs of between 0.35 percent and 0.45 percent on unused borrowing capacity and approximately 3 month LIBOR plus 1.00 percent on outstandings. The amended ABCP Facility extends the revolving period, during which we may borrow, repay and reborrow funds, until February 23, 2017. The scheduled amortization period, during which amounts outstanding under the ABCP Facility must be repaid, ends on February 23, 2018 (or earlier, if certain material adverse events occur). At March 31, 2016, $526.5 million was outstanding under the ABCP Facility. At March 31, 2016, $902.0 million of our Private Education Loans were encumbered to support outstandings under the ABCP Facility.
Short-term borrowings have a remaining term to maturity of one year or less. The ABCP Facility's contractual maturity is two years from the date of inception or renewal (one year revolving period plus a one year amortization period); however, we classify advances under our ABCP Facility as short-term borrowings because it is our intention to repay those advances within one-year.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

5. | Borrowings (Continued)

Long-term Borrowings
Secured Financings at Issuance

Issue |  | Date Issued |  | Total Issued To Third Parties |  | Weighted Average Cost of Funds(1) |  | Weighted Average Life
Private Education: |  |  |  |  |  |
2015-B |  | July 2015 |  | $ | 630,800 |  |  | 1 month LIBOR plus 1.53% |  | 4.82
Total notes issued in 2015 |  | $ | 630,800 |  |  |  |  |
Total loan amount securitized at inception of the above on-balance sheet term securitization |  | $ | 745,580 |  |  |  |  |

____________
(1) Represents LIBOR equivalent cost of funds for floating and fixed rate bonds, excluding issuance costs.
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, 2016 and December 31, 2015, respectively:

|  | March 31, 2016
|  | 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 securitization |  | $ | — |  |  | $ | 558,513 |  |  | $ | 558,513 |  |  | $ | 671,603 |  |  | $ | 10,281 |  |  | $ | 46,305 |  |  | $ | 728,189 |
ABCP Facility |  | 526,500 |  |  | — |  |  | 526,500 |  |  | 902,049 |  |  | 15,567 |  |  | 91,713 |  |  | 1,009,329 |
Total |  | $ | 526,500 |  |  | $ | 558,513 |  |  | $ | 1,085,013 |  |  | $ | 1,573,652 |  |  | $ | 25,848 |  |  | $ | 138,018 |  |  | $ | 1,737,518 |

____
(1) Other assets primarily represents accrued interest receivable.
22

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

5. | Borrowings (Continued)

|  | December 31, 2015
|  | 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 securitization |  | $ | — |  |  | $ | 579,101 |  |  | $ | 579,101 |  |  | $ | 687,298 |  |  | $ | 9,996 |  |  | $ | 45,566 |  |  | $ | 742,860 |
ABCP Facility |  | 500,175 |  |  | — |  |  | 500,175 |  |  | 923,687 |  |  | 12,443 |  |  | 58,095 |  |  | 994,225 |
Total |  | $ | 500,175 |  |  | $ | 579,101 |  |  | $ | 1,079,276 |  |  | $ | 1,610,985 |  |  | $ | 22,439 |  |  | $ | 103,661 |  |  | $ | 1,737,085 |

____
(1) Other assets primarily represents accrued interest receivable.
Other Borrowing Sources
We maintain discretionary uncommitted Federal Funds lines of credit with various correspondent banks, which totaled $100 million at March 31, 2016. 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, 2016 and in the year ended December 31, 2015.
We established an account at the Federal Reserve Bank (“FRB”) to meet eligibility requirements for access to the Primary Credit borrowing facility at the 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, 2016 and December 31, 2015, the value of our pledged collateral at the FRB totaled $1.5 billion and $1.7 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, 2016 and in the year ended December 31, 2015.
23

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
6. Derivative Financial Instruments
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 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 liabilities 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 11, “Derivative Financial Instruments” in our 2015 Form 10-K for a full discussion of our risk management strategy.
Although we use derivatives to reduce the risk of interest rate changes, the use of derivatives does expose us to both market and credit risk. Market risk is the chance of financial loss resulting from changes in interest rates and market liquidity. Credit risk is the risk that a counterparty will not perform its obligations under a contract and it is limited to the loss of the fair value gain in a derivative that the counterparty owes us less collateral held and/or plus collateral posted. When the fair value of a derivative contract less collateral held and/or plus collateral posted is negative, we owe the counterparty and, therefore, we have no credit risk exposure to the counterparty; however, the counterparty has exposure to us. We minimize the credit risk in derivative instruments by entering into transactions with highly rated counterparties that are reviewed regularly by our Credit Department. We also maintain a policy of requiring that all derivative contracts be governed by an International Swaps and Derivative Association Master Agreement. Depending on the nature of the derivative transaction, bilateral collateral arrangements are required as well. When we have more than one outstanding derivative transaction with the counterparty, and there exists legally enforceable netting provisions with the counterparty (i.e., a legal right to offset receivable and payable derivative contracts), the “net” mark-to-market exposure, less collateral held and/or plus collateral posted, represents exposure with the counterparty. When there is a net negative exposure, we consider our exposure to the counterparty to be zero.
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. As of March 31, 2016, $5.5 billion notional of our derivative contracts were cleared on the Chicago Mercantile Exchange and the London Clearing House. All derivative contracts cleared through an exchange require collateral to be exchanged based on the fair value of the derivative. 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, 2016 and December 31, 2015, 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 $60.0 million and $50.1 million, respectively.
24

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

6. | Derivative Financial Instruments (Continued) |

Summary of Derivative Financial Statement Impact
The following tables summarize the fair values and notional amounts of all derivative instruments at March 31, 2016 and December 31, 2015, and their impact on earnings and other comprehensive income for the three months ended March 31, 2016 and 2015. Please refer to Note 11, “Derivative Financial Instruments” in our 2015 Form 10-K for a full discussion of cash flow hedges, fair value hedges, and trading activities.
Impact of Derivatives on the Consolidated Balance Sheet

|  |  | Cash Flow Hedges |  | Fair Value Hedges |  | Trading |  | Total
|  |  | March 31, |  | December 31, |  | March 31, |  | December 31, |  | March 31, |  | December 31, |  | March 31, |  | December 31,
|  |  | 2016 |  | 2015 |  | 2016 |  | 2015 |  | 2016 |  | 2015 |  | 2016 |  | 2015
Fair Values(1) | Hedged Risk Exposure |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derivative Assets:(2) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps | Interest rate |  | $ | — |  |  | $ | — |  |  | $ | 50,782 |  |  | $ | 15,231 |  |  | $ | 1,225 |  |  | $ | 83 |  |  | $ | 52,007 |  |  | $ | 15,314 |
Derivative Liabilities:(2) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps | Interest rate |  | (51,955 | ) |  | (27,512 | ) |  | (160 | ) |  | (2,339 | ) |  | (135 | ) |  | (646 | ) |  | (52,250 | ) |  | (30,497 | )
Total net derivatives |  |  | $ | (51,955 | ) |  | $ | (27,512 | ) |  | $ | 50,622 |  |  | $ | 12,892 |  |  | $ | 1,090 |  |  | $ | (563 | ) |  | $ | (243 | ) |  | $ | (15,183 | )

___________

(1) | Fair values reported are exclusive of collateral held and pledged and accrued interest. 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,
|  | 2016 |  | 2015 |  | 2016 |  | 2015
Gross position(1) |  | $ | 52,007 |  |  | $ | 15,314 |  |  | $ | (52,250 | ) |  | $ | (30,497 | )
Impact of master netting agreement |  | (14,205 | ) |  | (9,278 | ) |  | 14,205 |  |  | 9,278 |
Derivative values with impact of master netting agreements (as carried on balance sheet) |  | 37,802 |  |  | 6,036 |  |  | (38,045 | ) |  | (21,219 | )
Cash collateral (held) pledged |  | (19,692 | ) |  | (1,070 | ) |  | 58,451 |  |  | 54,845 |
Net position |  | $ | 18,110 |  |  | $ | 4,966 |  |  | $ | 20,406 |  |  | $ | 33,626 |

__________

(1) | Gross position amounts are exclusive of accrued interest.

25

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

6. | Derivative Financial Instruments (Continued) |

|  |  | Cash Flow |  | Fair Value |  | Trading |  | Total
|  |  | March 31, |  | December 31, |  | March 31, |  | December 31, |  | March 31, |  | December 31, |  | March 31, |  | December 31,
|  |  | 2016 |  | 2015 |  | 2016 |  | 2015 |  | 2016 |  | 2015 |  | 2016 |  | 2015
Notional Values |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps |  |  | $ | 1,106,847 |  |  | $ | 1,109,933 |  |  | $ | 3,808,016 |  |  | $ | 3,080,167 |  |  | $ | 1,215,900 |  |  | $ | 1,305,757 |  |  | $ | 6,130,763 |  |  | $ | 5,495,857 |

Impact of Derivatives on the Consolidated Statements of Income

|  | Three Months Ended
|  | March 31,
|  | 2016 |  | 2015
Fair Value Hedges |  |  |  |
Interest rate swaps: |  |  |  |
Hedge ineffectiveness gains (losses) recorded in earnings(1) |  | $ | (2,416 | ) |  | $ | 427 |
Realized gains recorded in interest expense |  | 7,258 |  |  | 7,491 |
Total |  | $ | 4,842 |  |  | $ | 7,918 |
Cash Flow Hedges |  |  |  |
Interest rate swaps: |  |  |  |
Hedge ineffectiveness gains (losses) recorded in earnings(1) |  | $ | (278 | ) |  | $ | (304 | )
Realized losses recorded in interest expense |  | (4,621 | ) |  | (5,353 | )
Total |  | $ | (4,899 | ) |  | $ | (5,657 | )
Trading |  |  |  |
Interest rate swaps: |  |  |  |
Interest reclassification |  | $ | 688 |  |  | $ | 1,023 |
Change in fair value of future interest payments recorded in earnings |  | 1,653 |  |  | 2,146 |
Total(1) |  | 2,341 |  |  | 3,169 |
Total |  | $ | 2,284 |  |  | $ | 5,430 |

________

(1) | Amounts included in “(losses) gains on derivatives and hedging activities, net” in the consolidated statements of income.

26

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

6. | Derivative Financial Instruments (Continued) |

Impact of Derivatives on the Statements of Changes in Stockholders' Equity

|  | Three Months Ended
|  | March 31,
|  | 2016 |  | 2015
Amount of loss recognized in other comprehensive income |  | $ | (28,995 | ) |  | $ | (21,042 | )
Less: amount of loss reclassified in interest expense(1) |  | (4,621 | ) |  | (5,353 | )
Total change in other comprehensive income for unrealized losses on derivatives, before income tax benefit |  | $ | (24,374 | ) |  | $ | (15,689 | )

___________
(1) Amounts included in “realized gains (losses) recorded in interest expense” in the “Impact of Derivatives on the Consolidated Statements of Income” table.
Cash Collateral
Cash collateral held related to derivative exposure between the Company and its derivatives counterparties was $19.7 million and $1.1 million at March 31, 2016 and December 31, 2015, respectively. Collateral held is recorded in “Other Liabilities” on the consolidated balance sheets. Cash collateral pledged related to derivative exposure between the Company and its derivatives counterparties was $58.5 million and $54.8 million at March 31, 2016 and December 31, 2015, respectively. Collateral pledged is recorded in “Other interest-earning assets” on the consolidated balance sheets.
27

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
7. Stockholders' Equity
The following table summarizes our common share repurchases and issuances.

|  | Three Months Ended March 31,
(Shares and per share amounts in actuals) |  | 2016 |  | 2015
Shares repurchased related to employee stock-based compensation plans(1)(2) |  | 1,128,709 |  |  | 1,389,096 |
Average purchase price per share |  | $ | 5.98 |  |  | $ | 9.46 |
Common shares issued(3) |  | 2,740,979 |  |  | 3,130,839 |

__________________

(1) | 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.

(2) | At the present time, we do not intend to initiate a publicly announced share repurchase program.

(3) | Common shares issued under our various compensation and benefit plans.

The closing price of our common stock on March 31, 2016 was $6.36.
28

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
8. 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) |  | 2016 |  | 2015
Numerator: |  |  |  |
Net income attributable to SLM Corporation |  | $ | 65,915 |  |  | $ | 47,699 |
Preferred stock dividends |  | 5,139 |  |  | 4,823 |
Net income attributable to SLM Corporation common stock |  | $ | 60,776 |  |  | $ | 42,876 |
Denominator: |  |  |  |
Weighted average shares used to compute basic EPS |  | 427,111 |  |  | 424,428 |
Effect of dilutive securities: |  |  |  |
Dilutive effect of stock options, restricted stock and restricted stock units and Employee Stock Purchase Plan ("ESPP") (1)(2) |  | 3,792 |  |  | 7,874 |
Weighted average shares used to compute diluted EPS |  | 430,903 |  |  | 432,302 |
Basic earnings per common share attributable to SLM Corporation |  | $ | 0.14 |  |  | $ | 0.10 |
Diluted earnings per common share attributable to SLM Corporation |  | $ | 0.14 |  |  | $ | 0.10 |

_________________

(1) | Includes the potential dilutive effect of additional common shares that are issuable upon exercise of outstanding stock options, restricted stock, restricted 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, 2016 and 2015, securities covering approximately 6 million and 2 million shares, respectively, were outstanding but not included in the computation of diluted earnings per share because they were anti-dilutive.

29

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
9. Fair Value Measurements
We use estimates of fair value in applying various accounting standards for our 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 2015 Form 10-K.
During the three months ended March 31, 2016, 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, 2016 |  | December 31, 2015
|  | Level 1 |  | Level 2 |  | Level 3 |  | Total |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities |  | $ | — |  |  | $ | 203,597 |  |  | $ | — |  |  | $ | 203,597 |  |  | $ | — |  |  | $ | 195,391 |  |  | $ | — |  |  | $ | 195,391 |
Derivative instruments |  | — |  |  | 52,007 |  |  | — |  |  | 52,007 |  |  | — |  |  | 15,314 |  |  | — |  |  | 15,314 |
Total |  | $ | — |  |  | $ | 255,604 |  |  | $ | — |  |  | $ | 255,604 |  |  | $ | — |  |  | $ | 210,705 |  |  | $ | — |  |  | $ | 210,705 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derivative instruments |  | $ | — |  |  | $ | (52,250 | ) |  | $ | — |  |  | $ | (52,250 | ) |  | $ | — |  |  | $ | (30,497 | ) |  | $ | — |  |  | $ | (30,497 | )
Total |  | $ | — |  |  | $ | (52,250 | ) |  | $ | — |  |  | $ | (52,250 | ) |  | $ | — |  |  | $ | (30,497 | ) |  | $ | — |  |  | $ | (30,497 | )

30

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

9. | Fair Value Measurements (Continued) |

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

|  | March 31, 2016 |  | December 31, 2015
|  | Fair Value |  | Carrying Value |  | Difference |  | Fair Value |  | Carrying Value |  | Difference
Earning assets |  |  |  |  |  |  |  |  |  |  |  |
Loans held for investment, net |  | $ | 13,911,665 |  |  | $ | 13,108,425 |  |  | $ | 803,240 |  |  | $ | 12,343,726 |  |  | $ | 11,630,591 |  |  | $ | 713,135 |
Cash and cash equivalents |  | 938,480 |  |  | 938,480 |  |  | — |  |  | 2,416,219 |  |  | 2,416,219 |  |  | — |
Available-for-sale investments |  | 203,597 |  |  | 203,597 |  |  | — |  |  | 195,391 |  |  | 195,391 |  |  | — |
Accrued interest receivable |  | 650,813 |  |  | 650,813 |  |  | — |  |  | 564,496 |  |  | 564,496 |  |  | — |
Tax indemnification receivable |  | 187,156 |  |  | 187,156 |  |  | — |  |  | 186,076 |  |  | 186,076 |  |  | — |
Derivative instruments |  | 52,007 |  |  | 52,007 |  |  | — |  |  | 15,314 |  |  | 15,314 |  |  | — |
Total earning assets |  | $ | 15,943,718 |  |  | $ | 15,140,478 |  |  | $ | 803,240 |  |  | $ | 15,721,222 |  |  | $ | 15,008,087 |  |  | $ | 713,135 |
Interest-bearing liabilities |  |  |  |  |  |  |  |  |  |  |  |
Money-market and savings accounts |  | $ | 5,805,018 |  |  | $ | 5,805,018 |  |  | $ | — |  |  | $ | 5,556,254 |  |  | $ | 5,556,254 |  |  | $ | — |
Certificates of deposit |  | 5,757,232 |  |  | 5,737,374 |  |  | (19,858 | ) |  | 5,928,450 |  |  | 5,931,453 |  |  | 3,003 |
Short-term borrowings |  | 526,500 |  |  | 526,500 |  |  | — |  |  | 500,175 |  |  | 500,175 |  |  | — |
Long-term borrowings |  | 555,365 |  |  | 558,513 |  |  | 3,148 |  |  | 567,468 |  |  | 579,101 |  |  | 11,633 |
Accrued interest payable |  | 25,464 |  |  | 25,464 |  |  | — |  |  | 16,385 |  |  | 16,385 |  |  | — |
Derivative instruments |  | 52,250 |  |  | 52,250 |  |  | — |  |  | 30,497 |  |  | 30,497 |  |  | — |
Total interest-bearing liabilities |  | $ | 12,721,829 |  |  | $ | 12,705,119 |  |  | $ | (16,710 | ) |  | $ | 12,599,229 |  |  | $ | 12,613,865 |  |  | $ | 14,636 |
Excess of net asset fair value over carrying value |  |  |  |  |  | $ | 786,530 |  |  |  |  |  |  | $ | 727,771 |

Please refer to Note 15, “Fair Value Measurements” in our 2015 Form 10-K for a full discussion of the methods and assumptions used to estimate the fair value of each class of financial instruments.
31

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
10. Arrangements with Navient Corporation
In connection with the separation of Navient Corporation (“Navient”) from SLM Corporation (the “Spin-Off”), we entered into a separation and distribution agreement and other ancillary agreements with Navient. Please refer to Note 16, “Arrangements with Navient Corporation” in our 2015 Form 10-K for a full discussion of these agreements.
Amended Loan Participation and Purchase Agreement
Prior to the Spin-Off, Sallie Mae Bank, a Utah industrial bank subsidiary of the Company (the “Bank”), sold substantially all its Private Education Loans to several former affiliates, now subsidiaries of Navient (collectively, the “Purchasers”), pursuant to a Loan Participation and Purchase Agreement. This agreement predated the Spin-Off, but was significantly amended and reduced in scope in connection with the Spin-Off. Post-Spin-Off, the Bank retains only the right to require the Purchasers to purchase loans (at fair value) for which the borrower also has a separate lending relationship with Navient (“Split Loans”) when the Split Loans either (1) are more than 90 days past due; (2) have been restructured; (3) have been granted a hardship forbearance or more than six months of administrative forbearance; or (4) have a borrower or cosigner who has filed for bankruptcy. At March 31, 2016, we held approximately $82 million of Split Loans.
During the three months ended March 31, 2016, the Bank sold loans to the Purchasers in the amount of $5.5 million in principal and $0.1 million in accrued interest income. During the three months ended March 31, 2015, the Bank sold loans to the Purchasers in the amount of $8.7 million in principal and $0.2 million in accrued interest income.
There was no gain as a result of the loans sold to the Purchasers in the three months ended March 31, 2016 and March 31, 2015. Total write-downs to fair value for loans sold with a fair value lower than par totaled $2.1 million and $2.2 million in the three months ended March 31, 2016 and March 31, 2015, respectively. Navient is the servicer for all of these loans.
32

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
11. Regulatory Capital
The Bank is subject to various regulatory capital requirements administered by federal and state banking authorities. Failure to meet minimum capital requirements 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 operation and financial condition. Under 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 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.
As of January 1, 2015, the Bank was required to report regulatory capital and ratios in accordance with U.S. Basel III. Among other things, U.S. Basel III establishes Common Equity Tier 1 as a new tier of capital, modifies methods for calculating risk-weighted assets, introduces a new capital conservation buffer, and revises the capital thresholds of the prompt corrective action framework, including the “well capitalized” standard.
“Well capitalized” regulatory requirements are the quantitative measures established by regulation to ensure capital adequacy. To qualify as “well capitalized,” the Bank must maintain minimum amounts and ratios (set forth in the table below) of Common Equity Tier 1, Tier 1 and Total capital to risk-weighted assets and of Tier 1 capital to average assets. The following capital amounts and ratios are based upon the Bank's assets.

|  | Actual |  | "Well Capitalized" Regulatory Requirements
|  | Amount | Ratio |  | Amount |  | Ratio
As of March 31, 2016: |  |  |  |  |  |  |
Common Equity Tier 1 Capital (to Risk-Weighted Assets) |  | $ | 1,800,069 |  | 13.4 | % |  | $ | 871,494 |  | > | 6.5 | %
Tier 1 Capital (to Risk-Weighted Assets) |  | $ | 1,800,069 |  | 13.4 | % |  | $ | 1,072,608 |  | > | 8.0 | %
Total Capital (to Risk-Weighted Assets) |  | $ | 1,926,465 |  | 14.4 | % |  | $ | 1,340,761 |  | > | 10.0 | %
Tier 1 Capital (to Average Assets) |  | $ | 1,800,069 |  | 11.9 | % |  | $ | 758,944 |  | > | 5.0 | %
As of December 31, 2015: |  |  |  |  |  |  |
Common Equity Tier 1 Capital (to Risk-Weighted Assets) |  | $ | 1,734,315 |  | 14.4 | % |  | $ | 781,638 |  | > | 6.5 | %
Tier 1 Capital (to Risk-Weighted Assets) |  | $ | 1,734,315 |  | 14.4 | % |  | $ | 962,017 |  | > | 8.0 | %
Total Capital (to Risk-Weighted Assets) |  | $ | 1,848,528 |  | 15.4 | % |  | $ | 1,202,521 |  | > | 10.0 | %
Tier 1 Capital (to Average Assets) |  | $ | 1,734,315 |  | 12.3 | % |  | $ | 704,979 |  | > | 5.0 | %

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 no dividends for the three months ended March 31, 2016 and March 31, 2015.
33

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
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 origination, 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). At March 31, 2016, we had $429 million of outstanding contractual loan commitments which we expect to fund during the remainder of the 2015/2016 academic year. At March 31, 2016, we had a $0.1 million reserve recorded in "Other Liabilities" to cover expected losses that we conclude are probable to occur during the one year loss emergence period on these unfunded commitments.
Regulatory Matters
At the time of this filing, the Bank remains subject to a Consent Order, Order to Pay Restitution and Order to Pay Civil Money Penalty dated May 13, 2014 issued by the FDIC (the “FDIC Consent Order”). On May 13, 2014, the Bank reached settlements with the FDIC and the Department of Justice (the “DOJ”) regarding disclosures and assessments of certain late fees, as well as compliance with the Servicemembers Civil Relief Act (“SCRA”). The DOJ Consent Order (the “DOJ Consent Order”) was approved by the U.S. District Court for the District of Delaware on September 29, 2014. Under the FDIC Consent Order, the Bank agreed to pay $3.3 million in fines and oversee the refund of up to $30 million in late fees assessed on loans owned or originated by the Bank since its inception in November 2005.
Under the terms of the Separation and Distribution Agreement between the Company and Navient, Navient is responsible for funding all liabilities under the regulatory orders, other than fines directly levied against the Bank in connection with these matters. Under the DOJ Consent Order, Navient is solely responsible for reimbursing SCRA benefits and related compensation on behalf of both its subsidiary, Navient Solutions, Inc., and the Bank.
As required by the FDIC Consent Order and the DOJ Consent Order, the Bank has implemented new SCRA policies, procedures and training, has updated billing statement disclosures, and is taking additional steps to ensure its third-party service providers are also fully compliant in these regards. The FDIC Consent Order also requires the Bank to have its current compliance with consumer protection regulations and its compliance management system audited by independent qualified audit personnel. The Bank is focused on sustaining timely and comprehensive remediation of each item contained in the orders and on further enhancing its policies and practices to promote responsible financial practices, customer experience and compliance.
In May 2014, the Bank received a Civil Investigative Demand (“CID”) from the Consumer Financial Protection Bureau (the “CFPB”) as part of the CFPB’s separate investigation relating to customer complaints, fees and charges assessed in connection with the servicing of student loans and related collection practices of pre-Spin-Off SLM Corporation (“pre-Spin-Off SLM”) by entities now subsidiaries of Navient during a time period prior to the Spin-Off. Two state attorneys general have provided the Bank identical CIDs and others have become involved in the inquiry over time. To the extent requested, we have been cooperating fully with the CFPB and the attorneys general but are not in a position at this time to predict the duration or outcome of the investigation. Given the timeframe covered by this demand and the focus on practices and procedures previously conducted by Navient and its servicing subsidiaries, Navient is leading the response to this investigation and has accepted responsibility for all costs, expenses, losses or remediation that may arise from this investigation.
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SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

12. | Commitments, Contingencies and Guarantees (Continued) |

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 damage 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.
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

The following information is current as of April 20, 2016 (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, 2015 (filed with the SEC on February 26, 2016) (the “2015 Form 10-K”), and subsequent reports filed with the Securities and Exchange Commission (the “SEC”). Definitions for capitalized terms used in this report not defined herein can be found in the 2015 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 the Company’s beliefs, opinions or expectations and statements that assume or are dependent upon future events, are forward-looking statements. 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 Company’s 2015 Form 10-K and subsequent filings with the SEC; increases in financing costs; limits on liquidity; increases in costs associated with compliance with laws and regulations; changes in accounting standards and the impact of related changes in significant accounting estimates; any adverse outcomes in any significant litigation to which the Company is a party; credit risk associated with the Company’s exposure to third-parties, including counterparties to the Company’s 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). The Company could also be affected by, among other things: changes in its funding costs and availability; reductions to its credit ratings; failures or breaches of its operating systems or infrastructure, including those of third-party vendors; damage to its reputation; failures to successfully implement cost-cutting and restructuring initiatives and adverse effects of such initiatives on the Company’s business; risks associated with restructuring initiatives; 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 the Company’s customers; changes in the general interest rate environment, including the rate relationships among relevant money-market instruments and those of the Company’s earning assets versus the Company’s funding arrangements; rates of prepayment on the loans that the Company makes; changes in general economic conditions and the Company’s ability to successfully effectuate any acquisitions; and other strategic initiatives. The preparation of the Company’s consolidated financial statements also requires management 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. The Company does not undertake any obligation to update or revise these forward-looking statements to conform such statements to actual results or changes in its expectations.
The Company reports financial results on a GAAP basis and also provides certain core earnings performance measures. The difference between the Company’s “Core Earnings” and GAAP results for the periods presented were the unrealized, mark-to-market 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. The Company provides “Core Earnings” measures because this is what management uses when making management decisions regarding the Company’s performance and the allocation of corporate resources. The Company’s “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 Financial Measures” and “GAAP Consolidated Earnings Summary - 'Core Earnings' ” in this Form 10-Q for the quarter ended March 31, 2016 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.
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Selected Financial Information and Ratios

|  | Three Months Ended March 31,
(In thousands, except per share data and percentages) |  | 2016 |  | 2015
Net income attributable to SLM Corporation common stock |  | $ | 60,776 |  |  | $ | 42,876 |
Diluted earnings per common share attributable to SLM Corporation |  | $ | 0.14 |  |  | $ | 0.10 |
Weighted average shares used to compute diluted earnings per share |  | 430,903 |  |  | 432,302 |
Return on assets |  | 1.7 | % |  | 1.5 | %
Operating efficiency ratio(1) |  | 40.4 | % |  | 44.7 | %
Other Operating Statistics |  |  |  |
Ending Private Education Loans, net |  | $ | 12,021,022 |  |  | $ | 9,701,152 |
Ending FFELP Loans, net |  | 1,087,403 |  |  | 1,207,862 |
Ending total education loans, net |  | $ | 13,108,425 |  |  | $ | 10,909,014 |
Average education loans |  | $ | 12,920,961 |  |  | $ | 10,689,261 |
(1) Our efficiency ratio is calculated as total expense, excluding restructuring and other reorganization expenses, divided by net interest income (before provisions for credit losses) and other income, excluding gains on sales of loans, net.

Overview
The following discussion and analysis presents a review of our business and operations as of and for the three months ended March 31, 2016.
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, net; allowance for loan losses; charge-offs and delinquencies; operating expenses; and “Core Earnings”) can be found in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2015 Form 10-K.
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2016 Management Objectives
For 2016, we have set out the following major goals for ourselves: (1) prudently grow our Private Education Loan assets and revenues; (2) maintain our strong capital position; (3) enhance our customers’ experience by further improving the delivery of our products and services; (4) sustain the consumer protection improvements we have made to our policies, procedures and compliance management system since the Spin-Off and further enhance our risk oversight infrastructure; (5) successfully launch one or more complementary new products to increase the level of engagement we have with our customers; and (6) manage operating expenses while improving efficiency. Here is how we plan to achieve these objectives:
Prudently Grow Private Education Loan Assets and Revenues
We will continue to pursue managed growth in our Private Education Loan portfolio in 2016 by leveraging our Sallie Mae and Upromise brands and our relationship with more than two thousand colleges and universities. We recently expanded our campus-focused sales force to provide deeper support for universities in all regions of the United States and, as a result, we expect to be able to continue to increase originations through this effort. We are determined to maintain overall credit quality and cosigner rates in our Smart Option Student Loan originations. In 2016, we expect to introduce a Private Education Loan product permitting parents to borrow and fund their children's education without a student co-borrower (“Parent Loans”). As our business, capital and balance sheet continue to grow, we also expect to be able to achieve our annual Private Education Loan origination targets for the year without having to sell loans to third-parties. Originations were 8.5 percent higher in the first three months of 2016 compared with the year-ago period. The average FICO scores at origination and the cosigner rates for originations in the three months ended March 31, 2016 were 748 and 90.1 percent, compared with 749 and 90.1 percent in the three months ended March 31, 2015, respectively.
Maintain Our Strong Capital Position
We intend to maintain levels of capital at the Bank that significantly exceed those necessary to be considered “well capitalized” by the FDIC. The Company is a source of strength for the Bank and will obtain or provide additional capital as, and if, necessary to the Bank. We regularly evaluate the quality of assets, stability of earnings, and adequacy of our allowance for loan losses, and we continue to believe our existing capital levels are sufficient to support the Bank’s plan for significant growth over the next several years while remaining “well capitalized.” As our balance sheet grows in 2016, these ratios will decline but will remain significantly in excess of the capital levels required to be considered “well capitalized” by our regulators. As of March 31, 2016, the Bank had a Common Equity Tier 1 risk-based capital ratio of 13.4 percent, a Tier 1 risk-based capital ratio of 13.4 percent, a Total risk-based capital ratio of 14.4 percent and a Tier 1 leverage ratio of 11.9 percent, all exceeding the current regulatory guidelines for "well capitalized" institutions by a significant amount. We do not plan to pay a common stock dividend or repurchase shares in 2016 (except to repurchase common stock acquired as a result of taxes withheld in connection with award exercises and vesting under our employee stock based compensation plans).
Enhance Customers' Experience By Further Improving Delivery of Products and Services
The Spin-Off provided us the opportunity to redesign our processes, procedures and customer experiences exclusively around our Private Education Loan products, rather than accommodating the servicing of those products as well as FFELP and Direct Student Loans serviced under direction of the Department of Education. In 2016, we will again focus on our new servicing platform and processes to specifically target further simplifications regarding important transitions in the life cycle of our customers’ Private Education Loan experience, including:

• | Procedures followed and technology used by our customer service agents;

• | Online functionality available to our customers;

• | Communications to our customers to increase awareness and satisfaction; and

• | All servicing will be conducted by in-house Sallie Mae associates.

We continue to expand our customer feedback process and gain insights from key points in the customer's experience.
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Sustain Consumer Protection Improvements Made Since the Spin-Off and Further Enhance Our Risk Oversight Infrastructure
Since the Spin-Off, we have continued to undertake significant work to establish that all customer protection policies, procedures and compliance management systems are sufficient to meet or exceed currently applicable regulatory standards. Our redesigned SCRA processes and procedures have now received the approval of the DOJ and we expect all required restitution activities under the FDIC Consent Order and DOJ Consent Order will be completed in 2016. In 2014, we engaged a third-party firm to conduct independent audits of consumer protection processes and procedures, including our own compliance management system. At this time, that engagement is ongoing and we are beginning our second full cycle of those audits. To date, these audits have produced no high risk findings. Our goal is to sustain the improvements implemented to date and consistently comply with or exceed regulatory standards while continuing to improve our customers’ experience and satisfaction levels.
We continue to make progress on embedding the Enterprise Risk Management disciplines, including the risk and control self-assessment, model risk management and supporting the upcoming DFAST submission.
Successfully Launch One or More Complementary New Products to Increase Level of Engagement With Customers.
In 2015, our management team began to consider expanding the suite of products we provide to customers. Given our limited time and experience with our new originations platform and servicing capabilities, we prioritized opportunities to focus first on those that can leverage our core competencies and capabilities, rather than require the development or acquisition of new or alternative ones. For example, in the first quarter of 2016, we leveraged our experience with our Smart Option Student Loan products by launching a Parent Loan program designed for parents who wish to separately finance their children’s education, rather than cosign loans with their children. We believe there is a market for this product that is separate from the Smart Option Student Loan market, and we believe our product will be a competitive alternative to PLUS loans being offered by the Department of Education. This product complements our portfolio of Private Education Loan offerings, but is not expected to have a material impact on 2016 earnings.
We will also be exploring other product opportunities in 2016. In this process, we also place a high premium on designing and launching products that will be easily understood and attractive to our customers. Any activity in 2016 will focus on success of implementation, and we are not forecasting significant contributions to our originations, revenues or net income from any potential new products in 2016.
Manage Operating Expenses While Improving Efficiency
We will continue to measure our effectiveness in managing operating expenses by monitoring our efficiency ratio. Our efficiency ratio will be calculated by dividing our total expenses, excluding restructuring costs and other reorganization expenses, by net interest income (before provision for credit losses) and other income, excluding gains on sales of loans, net. This ratio was 40.4 percent for the first three months of 2016, compared with 44.7 percent for the first three months of 2015. The large improvement in the efficiency ratio in the first quarter of 2016 was partially due to the one-time $10 million change in reserve estimates related to our Upromise rewards business. We expect this ratio to decline steadily from the full-year 2015 efficiency ratio of 46.8 percent over the next several years as the number of loans on which we earn either net interest income or servicing revenue grows to a level commensurate with our loan origination platform and we control the growth of our expense base.
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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 Statements of Income (Unaudited)

|  | Three Months Ended March 31, |  | Increase (Decrease)
(In millions, except per share data) |  | 2016 |  | 2015 |  | $ |  | %
Interest income: |  |  |  |  |  |  |  |
Loans |  | $ | 245 |  |  | $ | 198 |  |  | $ | 47 |  |  | 24 | %
Investments |  | 3 |  |  | 2 |  |  | 1 |  |  | 50 |
Cash and cash equivalents |  | 2 |  |  | 1 |  |  | 1 |  |  | 100 |
Total interest income |  | 250 |  |  | 201 |  |  | 49 |  |  | 24 |
Total interest expense |  | 40 |  |  | 30 |  |  | 10 |  |  | 33 |
Net interest income |  | 210 |  |  | 171 |  |  | 39 |  |  | 23 |
Less: provisions for credit losses |  | 33 |  |  | 17 |  |  | 16 |  |  | 94 |
Net interest income after provisions for credit losses |  | 177 |  |  | 154 |  |  | 23 |  |  | 15 |
Non-interest income: |  |  |  |  |  |  |  |
(Losses) gains on derivatives and hedging activities, net |  | — |  |  | 3 |  |  | (3 | ) |  | (100 | )
Other income |  | 21 |  |  | 8 |  |  | 13 |  |  | 163 |
Total non-interest income |  | 21 |  |  | 11 |  |  | 10 |  |  | 91 |
Expenses: |  |  |  |  |  |  |  |
Operating expenses |  | 93 |  |  | 81 |  |  | 12 |  |  | 15 |
Acquired intangible asset amortization expense |  | — |  |  | — |  |  | — |  |  | — |
Restructuring and other reorganization expenses |  | — |  |  | 5 |  |  | (5 | ) |  | (100 | )
Total expenses |  | 93 |  |  | 86 |  |  | 7 |  |  | 8 |
Income before income tax expense |  | 105 |  |  | 79 |  |  | 26 |  |  | 33 |
Income tax expense |  | 39 |  |  | 31 |  |  | 8 |  |  | 26 |
Net income |  | 66 |  |  | 48 |  |  | 18 |  |  | 38 |
Preferred stock dividends |  | 5 |  |  | 5 |  |  | — |  |  | — |
Net income attributable to SLM Corporation common stock |  | $ | 61 |  |  | $ | 43 |  |  | $ | 18 |  |  | 42 | %
Basic earnings per common share attributable to SLM Corporation |  | $ | 0.14 |  |  | $ | 0.10 |  |  | $ | 0.04 |  |  | 40 | %
Diluted earnings per common share attributable to SLM Corporation |  | $ | 0.14 |  |  | $ | 0.10 |  |  | $ | 0.04 |  |  | 40 | %

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GAAP Consolidated Earnings Summary
Three Months Ended March 31, 2016 Compared with Three Months Ended March 31, 2015
For the three months ended March 31, 2016, net income was $66 million, or $.14 diluted earnings per common share, compared with net income of $48 million, or $.10 diluted earnings per common share for the three months ended March 31, 2015. Net income was affected by a $39 million increase in net interest income and a $13 million increase in other income that included a one-time $10 million change in reserve estimates related to our Upromise rewards business, which were partially offset by a $16 million increase in provisions for credit losses, a $7 million increase in total expenses and a $7 million increase in income tax expense.
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 increased by $39 million in the current quarter compared with the year-ago quarter primarily due to a $2.4 billion increase in average Private Education Loans outstanding and a 17 basis point increase in net interest margin. Net interest margin increased primarily as a result of an increase in the ratio of higher yielding Private Education Loans relative to our other interest earning assets, which more than offset a 9 basis point increase in our cost of funds. Our cost of funds increased primarily as a result of an increase in LIBOR rates that occurred in late 2015.
•Provisions for credit losses increased $16 million compared with the year-ago quarter. This increase was primarily the result of an additional $1.8 billion of loans in repayment in the first quarter of 2016, an increase in the delinquency rate as a percentage of loans in repayment from 1.7 percent at March 31, 2015 to 2.1 percent at March 31, 2016, and a $53 million increase in loans classified as troubled debt restructurings (“TDRs”) (where we provide for life-of-loan losses).
•(Losses) gains on derivatives and hedging activities, net, resulted in a net loss of $0.3 million in the first quarter of 2016 compared with a net gain of $3 million in the year-ago quarter. The primary factors affecting the change were interest rates and whether derivatives qualified for hedge accounting treatment. In the first quarter of 2016, we used fewer derivatives to economically hedge risk that did not qualify for hedge accounting treatment than in the year-ago quarter.
•Other income increased $13 million compared with the year-ago quarter. Of this increase, $10 million relates to a one-time gain resulting from a change in reserve estimates for our Upromise rewards program.
•First-quarter 2016 operating expenses (including acquired intangible asset amortization expense) were $93 million compared with $81 million in the year-ago quarter. The increase in operating expenses is primarily the result of increased personnel and technology costs, largely driven by growth in our loan portfolio. Total expenses were $93 million compared with $86 million in the year-ago quarter. In the first quarter of 2015, we had included $5 million of restructuring and other reorganization expenses.
•Income tax expense increased $7 million compared with the year-ago quarter. The decrease in the first quarter effective tax rate to 37.1 percent from 39.9 percent in the year-ago quarter was primarily as a result of lower state tax rates.
“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.” While pre-Spin-Off SLM also reported a metric by that name, what we now report and what we describe below is significantly different and should not be compared to any Core Earnings reported by pre-Spin-Off SLM. The difference between our “Core Earnings” and GAAP results for periods presented generally is driven by the unrealized, mark-to-market 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 and eliminates the earnings impact associated with hedge ineffectiveness and derivatives we use as an economic hedge but which do not qualify for hedge accounting treatment. We enter into derivatives 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. Hedge ineffectiveness related to these derivatives is recorded in “Gains (losses) on derivatives and
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hedging activities, net.” 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 derivative 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 derivative and hedging activities, net.”
The adjustments required to reconcile from our “Core Earnings” results to our GAAP results of operations, net of tax, relate to differing treatments for our use of derivative instruments to hedge our economic risks that do not qualify for hedge accounting treatment or do qualify for hedge accounting treatment but result in ineffectiveness, net of tax. The amount recorded in “Gains (losses) on derivative and hedging activities, net” includes the accrual of the current payment on the interest rate swaps that do not qualify for hedge accounting treatment as well as the change in fair values related to future expected cash flows for derivatives that do not qualify for hedge accounting and ineffectiveness on derivatives that receive hedge accounting treatment. For purposes of “Core Earnings”, we are including in GAAP earnings the current period accrual amounts (interest reclassification) on the swaps and exclude the remaining ineffectiveness. “Core Earnings” 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 “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 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 “(Losses) 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) |  | 2016 |  | 2015
Hedge ineffectiveness (losses) gains |  | $ | (2,695 | ) |  | $ | 123 |
Unrealized gains (losses) on instruments not in a hedging relationship |  | 1,653 |  |  | 2,146 |
Interest reclassification |  | 688 |  |  | 1,023 |
(Losses) gains on derivatives and hedging activities, net |  | $ | (354 | ) |  | $ | 3,292 |

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The following table reflects adjustments associated with our derivative activities.

|  | Three Months Ended
|  | March 31,
(Dollars in thousands, except per share amounts) |  | 2016 |  | 2015
“Core Earnings” adjustments to GAAP: |  |  |  |
GAAP net income attributable to SLM Corporation |  | $ | 65,915 |  |  | $ | 47,699 |
Preferred stock dividends |  | 5,139 |  |  | 4,823 |
GAAP net income attributable to SLM Corporation common stock |  | $ | 60,776 |  |  | $ | 42,876 |
Adjustments: |  |  |  |
Net impact of derivative accounting(1) |  | 1,042 |  |  | (2,269 | )
Net tax effect(2) |  | 399 |  |  | (873 | )
Total “Core Earnings” adjustments to GAAP |  | 643 |  |  | (1,396 | )
“Core Earnings” attributable to SLM Corporation common stock |  | $ | 61,419 |  |  | $ | 41,480 |
GAAP diluted earnings per common share |  | $ | 0.14 |  |  | $ | 0.10 |
Derivative adjustments, net of tax |  | — |  |  | — |
“Core Earnings” diluted earnings per common share |  | $ | 0.14 |  |  | $ | 0.10 |

______
(1) Derivative Accounting: “Core Earnings” exclude periodic unrealized gains and losses caused by the mark-to-market valuations on derivatives that do not qualify for hedge accounting treatment under GAAP, as well as the periodic unrealized gains and losses that are a result of ineffectiveness recognized related to effective hedges under GAAP. 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.
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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,
|  | 2016 |  | 2015
(Dollars in thousands) |  | Balance |  | Rate |  | Balance |  | Rate
Average Assets |  |  |  |  |  |  |  |
Private Education Loans |  | $ | 11,817,708 |  |  | 8.03 | % |  | $ | 9,454,579 |  |  | 8.07 | %
FFELP Loans |  | 1,103,253 |  |  | 3.42 |  |  | 1,234,682 |  |  | 3.19 |
Taxable securities |  | 385,005 |  |  | 2.71 |  |  | 406,545 |  |  | 2.71 |
Cash and other short-term investments |  | 1,318,320 |  |  | 0.50 |  |  | 1,277,386 |  |  | 0.25 |
Total interest-earning assets |  | 14,624,286 |  |  | 6.86 | % |  | 12,373,192 |  |  | 6.60 | %
Non-interest-earning assets |  | 704,602 |  |  |  |  | 607,473 |  |  |
Total assets |  | $ | 15,328,888 |  |  |  |  | $ | 12,980,665 |  |  |
Average Liabilities and Equity |  |  |  |  |  |  |  |
Brokered deposits |  | $ | 7,095,826 |  |  | 1.28 | % |  | $ | 6,684,629 |  |  | 1.19 | %
Retail and other deposits |  | 4,470,357 |  |  | 1.01 |  |  | 3,818,342 |  |  | 0.94 |
Other interest-bearing liabilities(1) |  | 1,091,725 |  |  | 2.14 |  |  | 4,555 |  |  | 172.67 |
Total interest-bearing liabilities |  | 12,657,908 |  |  | 1.26 | % |  | 10,507,526 |  |  | 1.17 | %
Non-interest-bearing liabilities |  | 556,153 |  |  |  |  | 629,406 |  |  |
Equity |  | 2,114,827 |  |  |  |  | 1,843,733 |  |  |
Total liabilities and equity |  | $ | 15,328,888 |  |  |  |  | $ | 12,980,665 |  |  |
Net interest margin |  |  |  | 5.77 | % |  |  |  | 5.60 | %

_________________

(1) | For the three months ended March 31, 2016, i ncludes the average balance of our secured borrowings and amortization expense of transaction costs related to our ABCP Facility. For the three months ended March 31, 2015, includes the amortization expense of transaction costs related to our ABCP Facility, under which nothing had been drawn as of March 31, 2015.

44

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 (Decrease) |  | Change Due To(1)
| Rate |  | Volume
Three Months Ended March 31, 2016 vs. 2015 |  |  |  |  |  |
Interest income |  | $ | 48,099 |  |  | $ | 8,283 |  |  | $ | 39,816 |
Interest expense |  | 9,190 |  |  | 2,329 |  |  | 6,861 |
Net interest income |  | $ | 38,909 |  |  | $ | 5,312 |  |  | $ | 33,597 |

_________________

(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.

Summary of Our Education Loan Portfolio
Ending Education Loan Balances, net

|  | March 31, 2016 |  | December 31, 2015
(Dollars in thousands) |  | Private Education Loans |  | FFELP Loans |  | Total Portfolio |  | Private Education Loans |  | FFELP Loans |  | Total Portfolio
Total education loan portfolio: |  |  |  |  |  |  |  |  |  |  |  |
In-school(1) |  | $ | 3,323,957 |  |  | $ | 558 |  |  | $ | 3,324,515 |  |  | $ | 2,823,035 |  |  | $ | 582 |  |  | $ | 2,823,617 |
Grace, repayment and other(2) |  | 8,787,913 |  |  | 1,087,468 |  |  | 9,875,381 |  |  | 7,773,402 |  |  | 1,115,081 |  |  | 8,888,483 |
Total, gross |  | 12,111,870 |  |  | 1,088,026 |  |  | 13,199,896 |  |  | 10,596,437 |  |  | 1,115,663 |  |  | 11,712,100 |
Deferred origination costs and unamortized premium |  | 31,772 |  |  | 3,006 |  |  | 34,778 |  |  | 27,884 |  |  | 3,114 |  |  | 30,998 |
Allowance for loan losses |  | (122,620 | ) |  | (3,629 | ) |  | (126,249 | ) |  | (108,816 | ) |  | (3,691 | ) |  | (112,507 | )
Total education loan portfolio |  | $ | 12,021,022 |  |  | $ | 1,087,403 |  |  | $ | 13,108,425 |  |  | $ | 10,515,505 |  |  | $ | 1,115,086 |  |  | $ | 11,630,591 |
% of total |  | 92 | % |  | 8 | % |  | 100 | % |  | 90 | % |  | 10 | % |  | 100 | %

____________
(1) Loans for customers still attending school and who are not yet required to make payments on the loan.
(2) Includes loans in deferment or forbearance.
45

Average Education Loan Balances (net of unamortized premium/discount)

(Dollars in thousands) |  | Three Months Ended March 31, 2016 |  | Three Months Ended March 31, 2015
Private Education Loans |  | $ | 11,817,708 |  |  | 91 | % |  | $ | 9,454,579 |  |  | 88 | %
FFELP Loans |  | 1,103,253 |  |  | 9 |  |  | 1,234,682 |  |  | 12 |
Total portfolio |  | $ | 12,920,961 |  |  | 100 | % |  | $ | 10,689,261 |  |  | 100 | %

Education Loan Activity

|  | Three Months Ended March 31, 2016 |  | Three Months Ended March 31, 2015
(Dollars in thousands) |  | Private Education Loans |  | FFELP Loans |  | Total Portfolio |  | Private Education Loans |  | FFELP Loans |  | Total Portfolio
Beginning balance |  | $ | 10,515,505 |  |  | $ | 1,115,086 |  |  | $ | 11,630,591 |  |  | $ | 8,246,647 |  |  | $ | 1,263,139 |  |  | $ | 9,509,786 |
Acquisitions and originations |  | 1,806,583 |  |  | — |  |  | 1,806,583 |  |  | 1,663,150 |  |  | — |  |  | 1,663,150 |
Capitalized interest and deferred origination cost premium amortization |  | 50,527 |  |  | 9,219 |  |  | 59,746 |  |  | 38,727 |  |  | 10,786 |  |  | 49,513 |
Sales |  | (3,365 | ) |  | — |  |  | (3,365 | ) |  | (6,387 | ) |  | — |  |  | (6,387 | )
Loan consolidation to third parties |  | (42,086 | ) |  | (10,304 | ) |  | (52,390 | ) |  | (4,533 | ) |  | (10,480 | ) |  | (15,013 | )
Repayments and other |  | (306,142 | ) |  | (26,598 | ) |  | (332,740 | ) |  | (236,452 | ) |  | (55,583 | ) |  | (292,035 | )
Ending balance |  | $ | 12,021,022 |  |  | $ | 1,087,403 |  |  | $ | 13,108,425 |  |  | $ | 9,701,152 |  |  | $ | 1,207,862 |  |  | $ | 10,909,014 |

Private Education Loan Originations
The following table summarizes our Private Education Loan originations.

|  | Three Months Ended
|  | March 31,
(Dollars in thousands) |  | 2016 |  | % |  | 2015 |  | %
Smart Option - interest only(1) |  | $ | 462,932 |  |  | 26 | % |  | $ | 417,722 |  |  | 25 | %
Smart Option - fixed pay(1) |  | 565,862 |  |  | 31 |  |  | 507,664 |  |  | 31 |
Smart Option - deferred(1) |  | 774,395 |  |  | 43 |  |  | 736,913 |  |  | 44 |
Smart Option - principal and interest |  | 715 |  |  | — |  |  | 571 |  |  | — |
Total Private Education Loan originations |  | $ | 1,803,904 |  |  | 100 | % |  | $ | 1,662,870 |  |  | 100 | %
Percentage of loans with a cosigner |  | 90.12 | % |  |  |  | 90.13 | % |  |
Average FICO at origination |  | 748 |  |  |  |  | 749 |  |  |

_____________
(1) Interest only, fixed pay and deferred describe the payment option while in school or in grace period.
46

Allowance for Loan Losses
Education Loan Allowance for Loan Losses Activity

|  | Three Months Ended March 31,
|  | 2016 |  | 2015
(Dollars in thousands) |  | Private Education Loans |  | FFELP Loans |  | Total Portfolio |  | Private Education Loans |  | FFELP Loans |  | Total Portfolio
Beginning balance |  | $ | 108,816 |  |  | $ | 3,691 |  |  | $ | 112,507 |  |  | $ | 78,574 |  |  | $ | 5,268 |  |  | $ | 83,842 |
Less: |  |  |  |  |  |  |  |  |  |  |  |
Charge-offs(1) |  | (19,004 | ) |  | (383 | ) |  | (19,387 | ) |  | (8,727 | ) |  | (1,134 | ) |  | (9,861 | )
Loan sales |  | (2,075 | ) |  | — |  |  | (2,075 | ) |  | (2,181 | ) |  | — |  |  | (2,181 | )
Plus: |  |  |  |  |  |  |  |  |  |  |  |
Recoveries |  | 1,044 |  |  | — |  |  | 1,044 |  |  | 1,387 |  |  | — |  |  | 1,387 |
Provision for loan losses |  | 33,839 |  |  | 321 |  |  | 34,160 |  |  | 16,183 |  |  | 435 |  |  | 16,618 |
Ending balance |  | $ | 122,620 |  |  | $ | 3,629 |  |  | $ | 126,249 |  |  | $ | 85,236 |  |  | $ | 4,569 |  |  | $ | 89,805 |
Troubled debt restructurings(2) |  | $ | 318,094 |  |  | $ | — |  |  | $ | 318,094 |  |  | $ | 123,702 |  |  | $ | — |  |  | $ | 123,702 |

_________

(1) | Represents fair value adjustments on loans sold.

(2) | Represents the recorded investment of loans classified as troubled debt restructuring.

47

Private Education Loan Allowance for Loan Losses
In establishing the allowance for Private Education Loan losses as of March 31, 2016, 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 Loan provision for loan losses increased $18 million compared with the year-ago period. This increase was primarily the result of a an additional $1.8 billion loans in repayment in the first quarter of 2016, an increase in the delinquency rate as a percentage of loans in repayment from 1.7 percent at March 31, 2015 to 2.1 percent at March 31, 2016, and a $53 million increase in loans classified as TDRs for which we hold a life-of-loan allowance.
Total loans delinquent (as a percentage of loans in repayment) have increased to 2.10 percent in the first quarter of 2016 from 1.65 percent in the year-ago period. Loans in forbearance (as a percentage of loans in repayment and forbearance) have increased to 2.99 percent in the first quarter of 2016 from 2.76 percent in the year-ago period. The increase in the delinquency rate and loans in forbearance was primarily due to the significant increase in loans in full principal and interest repayment status, which increased to 32 percent of our total portfolio at March 31, 2016 from 27 percent of our total portfolio at March 31, 2015.
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, 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 2015 Form 10-K.
Prior to the Spin-Off, the Bank sold substantially all its Private Education Loans to several former affiliates, now subsidiaries of Navient (collectively, the “Purchasers”), pursuant to a Loan Participation and Purchase Agreement. In connection with the Spin-Off, the agreement under which the Bank previously made loan sales was amended so the Bank now only has the right to require the Purchasers to purchase loans (at fair value) where (a) the borrower has a lending relationship with both the Bank and Navient (“Split Loans”) and (b) the Split Loans either (1) are more than 90 days past due; (2) have been restructured; (3) have been granted a hardship forbearance or more than six months of administrative forbearance; or (4) have a borrower or cosigner who has filed for bankruptcy. At March 31, 2016, we held approximately $82 million of Split Loans.
48

The table below presents our Private Education Loan delinquency trends. Loans in repayment include loans making interest only and 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,
|  | 2016 |  | 2015
(Dollars in thousands) |  | Balance |  | % |  | Balance |  | %
Loans in-school/grace/deferment(1) |  | $ | 4,027,332 |  |  |  |  | $ | 3,603,478 |  |  |
Loans in forbearance(2) |  | 241,462 |  |  |  |  | 170,162 |  |  |
Loans in repayment and percentage of each status: |  |  |  |  |  |  |  |
Loans current |  | 7,678,446 |  |  | 97.9 | % |  | 5,896,132 |  |  | 98.4 | %
Loans delinquent 31-60 days(3) |  | 78,242 |  |  | 1.0 |  |  | 54,883 |  |  | 0.9 |
Loans delinquent 61-90 days(3) |  | 56,906 |  |  | 0.7 |  |  | 31,202 |  |  | 0.5 |
Loans delinquent greater than 90 days(3) |  | 29,482 |  |  | 0.4 |  |  | 12,904 |  |  | 0.2 |
Total Private Education Loans in repayment |  | 7,843,076 |  |  | 100.0 | % |  | 5,995,121 |  |  | 100.0 | %
Total Private Education Loans, gross |  | 12,111,870 |  |  |  |  | 9,768,761 |  |  |
Private Education Loan deferred origination costs |  | 31,772 |  |  |  |  | 17,627 |  |  |
Total Private Education Loans |  | 12,143,642 |  |  |  |  | 9,786,388 |  |  |
Private Education Loan allowance for losses |  | (122,620 | ) |  |  |  | (85,236 | ) |  |
Total Private Education Loans, net |  | $ | 12,021,022 |  |  |  |  | $ | 9,701,152 |  |  |
Percentage of Private Education Loans in repayment |  |  |  | 64.8 | % |  |  |  | 61.4 | %
Delinquencies as a percentage of Private Education Loans in repayment |  |  |  | 2.1 | % |  |  |  | 1.7 | %
Loans in forbearance as a percentage of Private Education Loans in repayment and forbearance |  |  |  | 3.0 | % |  |  |  | 2.8 | %

________

(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 their 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.

At March 31, 2016 and March 31, 2015, 32 percent and 27 percent, respectively, of our portfolio of Private Education Loans have entered full principal and interest repayment status after any applicable grace periods.
49

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) |  | 2016 |  | 2015
Allowance at beginning of period |  | $ | 108,816 |  |  | $ | 78,574 |
Provision for Private Education Loan losses |  | 33,839 |  |  | 16,183 |
Net charge-offs: |  |  |  |
Charge-offs |  | (19,004 | ) |  | (8,727 | )
Recoveries |  | 1,044 |  |  | 1,387 |
Net charge-offs |  | (17,960 | ) |  | (7,340 | )
Loan sales(1) |  | (2,075 | ) |  | (2,181 | )
Allowance at end of period |  | $ | 122,620 |  |  | $ | 85,236 |
Allowance as a percentage of ending total loans |  | 1.01 | % |  | 0.87 | %
Allowance as a percentage of ending total loans in repayment |  | 1.56 | % |  | 1.42 | %
Allowance coverage of net charge-offs (annualized) |  | 1.71 |  |  | 2.90 |
Net charge-offs as a percentage of average loans in repayment (annualized)(2) |  | 0.95 | % |  | 0.51 | %
Delinquencies as a percentage of ending loans in repayment(2) |  | 2.10 | % |  | 1.65 | %
Loans in forbearance as a percentage of ending loans in repayment and forbearance(2) |  | 2.99 | % |  | 2.76 | %
Ending total loans, gross |  | $ | 12,111,870 |  |  | $ | 9,768,761 |
Average loans in repayment(2) |  | $ | 7,534,234 |  |  | $ | 5,705,067 |
Ending loans in repayment(2) |  | $ | 7,843,076 |  |  | $ | 5,995,121 |

_______

(1) | Represents fair value adjustments on loans sold.

(2) | Loans in repayment include loans on which borrowers are making interest only and fixed payments as well as loans that have entered full principal and interest repayment status.

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 charge-offs ratio; the allowance as a percentage of total loans and of loans in repayment; and delinquency and forbearance percentages. The allowance as a percentage of ending total loans and ending loans in repayment increased at March 31, 2016 compared with March 31, 2015 because of an increase in the relative size of the loan portfolio, an increase in our TDRs (for which we hold a life-of-loan allowance) and an increase in the percentage of loans in full principal and interest repayment.
50

Use of Forbearance as a Private Education Loan Collection Tool
Forbearance involves granting the customer a temporary cessation of payments (or temporary acceptance of smaller than scheduled payments) for a specified period of time. Using forbearance extends the original term of the loan. Forbearance does not grant any reduction in the total repayment obligation (principal or interest). While in forbearance status, interest continues to accrue and is capitalized to principal when the loan re-enters repayment status. Our forbearance policies include limits on the number of forbearance months granted consecutively and the total number of forbearance months granted over the life of the loan. In some instances, we require good-faith payments before granting forbearance. Exceptions to forbearance policies are permitted when such exceptions are judged to increase the likelihood of collection of the loan. Forbearance as a collection tool is used most effectively when applied based on a customer’s unique situation, including historical information and judgments. 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 mitigating the overall risk of the portfolio as well as encouraging cash resolution of delinquent loans.
Forbearance may be granted to customers who are exiting their grace period to provide additional time to obtain employment and income to support their obligations, or to current customers who are faced with a hardship 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 customers will enter repayment status as current and are expected to begin making their scheduled monthly payments on a go-forward basis.
Forbearance may also be granted to customers who are delinquent in their payments. If specific requirements are met, 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.
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). Active repayment status includes loans on which borrowers are making interest only and 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 decreases the longer the loans have been in active repayment status. At March 31, 2016, loans in forbearance status as a percentage of total loans in repayment and forbearance were 2 percent for Private Education Loans that have been in active repayment status for fewer than 25 months. Approximately 78 percent of our Private Education Loans in forbearance status have been in active repayment status fewer than 25 months.
51

(Dollars in millions) March 31, 2016 |  | 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 |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 4,027 |  |  | $ | 4,027 |
Loans in forbearance |  | 149 |  |  | 39 |  |  | 26 |  |  | 16 |  |  | 11 |  |  | — |  |  | 241 |
Loans in repayment - current |  | 3,427 |  |  | 2,186 |  |  | 1,124 |  |  | 522 |  |  | 420 |  |  | — |  |  | 7,679 |
Loans in repayment - delinquent 31-60 days |  | 40 |  |  | 17 |  |  | 10 |  |  | 5 |  |  | 6 |  |  | — |  |  | 78 |
Loans in repayment - delinquent 61-90 days |  | 31 |  |  | 10 |  |  | 7 |  |  | 5 |  |  | 4 |  |  | — |  |  | 57 |
Loans in repayment - delinquent greater than 90 days |  | 18 |  |  | 4 |  |  | 4 |  |  | 2 |  |  | 2 |  |  | — |  |  | 30 |
Total |  | $ | 3,665 |  |  | $ | 2,256 |  |  | $ | 1,171 |  |  | $ | 550 |  |  | $ | 443 |  |  | $ | 4,027 |  |  | 12,112 |
Deferred origination costs |  |  |  |  |  |  |  |  |  |  |  |  |  | 32 |
Allowance for loan losses |  |  |  |  |  |  |  |  |  |  |  |  |  | (123 | )
Total Private Education Loans, net |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 12,021 |
Loans in forbearance as a percentage of total Private Education Loans in repayment and forbearance |  | 1.85 | % |  | 0.48 | % |  | 0.32 | % |  | 0.20 | % |  | 0.14 | % |  | — | % |  | 2.99 | %

(Dollars in millions) March 31, 2015 |  | 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 |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 3,603 |  |  | $ | 3,603 |
Loans in forbearance |  | 102 |  |  | 29 |  |  | 20 |  |  | 14 |  |  | 6 |  |  | — |  |  | 171 |
Loans in repayment - current |  | 2,873 |  |  | 1,602 |  |  | 782 |  |  | 392 |  |  | 247 |  |  | — |  |  | 5,896 |
Loans in repayment - delinquent 31-60 days |  | 30 |  |  | 11 |  |  | 6 |  |  | 4 |  |  | 3 |  |  | — |  |  | 54 |
Loans in repayment - delinquent 61-90 days |  | 19 |  |  | 5 |  |  | 3 |  |  | 2 |  |  | 2 |  |  | — |  |  | 31 |
Loans in repayment - delinquent greater than 90 days |  | 9 |  |  | 2 |  |  | 1 |  |  | 1 |  |  | 1 |  |  | — |  |  | 14 |
Total |  | $ | 3,033 |  |  | $ | 1,649 |  |  | $ | 812 |  |  | $ | 413 |  |  | $ | 259 |  |  | $ | 3,603 |  |  | 9,769 |
Unamortized discount |  |  |  |  |  |  |  |  |  |  |  |  |  | 17 |
Allowance for loan losses |  |  |  |  |  |  |  |  |  |  |  |  |  | (85 | )
Total Private Education Loans, net |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 9,701 |
Loans in forbearance as a percentage of total Private Education Loans in repayment and forbearance |  | 1.65 | % |  | 0.47 | % |  | 0.32 | % |  | 0.22 | % |  | 0.10 | % |  | — | % |  | 2.76 | %

52

Private Education Loan Types
The following table provides information regarding the repayment balance by loan type at March 31, 2016 and December 31, 2015.

|  | March 31, 2016
(Dollars in thousands) |  | Signature and Other |  | Smart Option |  | Career Training |  | Total
$ in repayment(1) |  | $ | 155,849 |  |  | $ | 7,672,385 |  |  | $ | 14,842 |  |  | $ | 7,843,076 |
$ in total |  | $ | 305,792 |  |  | $ | 11,790,881 |  |  | $ | 15,197 |  |  | $ | 12,111,870 |

|  | December 31, 2015
(Dollars in thousands) |  | Signature and Other |  | Smart Option |  | Career Training |  | Total
$ in repayment(1) |  | $ | 141,900 |  |  | $ | 6,769,788 |  |  | $ | 15,578 |  |  | $ | 6,927,266 |
$ in total |  | $ | 302,949 |  |  | $ | 10,277,517 |  |  | $ | 15,971 |  |  | $ | 10,596,437 |

_______

(1) | Loans in repayment include loans on which borrowers are making interest only and fixed payments as well as loans that have entered full principal and interest repayment status.

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. The allowance for uncollectible interest exceeds the amount of accrued interest on our 90 days past due portfolio for all periods presented.

|  | Private Education Loan
|  | Accrued Interest Receivable
(Dollars in thousands) |  | Total Interest Receivable |  | Greater Than 90 Days Past Due |  | Allowance for Uncollectible Interest
March 31, 2016 |  | $ | 619,226 |  |  | $ | 1,034 |  |  | $ | 3,074 |
December 31, 2015 |  | $ | 542,919 |  |  | $ | 791 |  |  | $ | 3,332 |
March 31, 2015 |  | $ | 512,501 |  |  | $ | 473 |  |  | $ | 2,634 |

53

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 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, the macroeconomic environment and the impact they have on the availability of funding sources in the marketplace.
Sources of Liquidity and Available Capacity
Ending Balances

(Dollars in thousands) |  | March 31, 2016 |  | December 31, 2015
Sources of primary liquidity: |  |  |  |
Unrestricted cash and liquid investments: |  |  |  |
Holding Company and other non-bank subsidiaries |  | $ | 27,359 |  |  | $ | 9,817 |
Sallie Mae Bank(1) |  | 911,121 |  |  | 2,406,402 |
Available-for-sale investments |  | 203,597 |  |  | 195,391 |
Total unrestricted cash and liquid investments |  | $ | 1,142,077 |  |  | $ | 2,611,610 |

____
(1) This amount will be used primarily to originate Private Education Loans at the Bank.
Average Balances

|  | Three Months Ended March 31,
(Dollars in thousands) |  | 2016 |  | 2015
Sources of primary liquidity: |  |  |  |
Unrestricted cash and liquid investments: |  |  |  |
Holding Company and other non-bank subsidiaries |  | $ | 16,040 |  |  | $ | 14,179 |
Sallie Mae Bank(1) |  | 1,275,679 |  |  | 1,236,714 |
Available-for-sale investments |  | 198,290 |  |  | 169,667 |
Total unrestricted cash and liquid investments |  | $ | 1,490,009 |  |  | $ | 1,420,560 |

____
(1) This amount will be used primarily to originate Private Education Loans at the Bank.
54

Deposits
The following table summarizes total deposits.

|  | March 31, |  | December 31, |
(Dollars in thousands) |  | 2016 |  | 2015 |
Deposits - interest bearing |  | $ | 11,542,392 |  |  | $ | 11,487,006 |  |
Deposits - non-interest bearing |  | 963 |  |  | 701 |  |
Total deposits |  | $ | 11,543,355 |  |  | $ | 11,487,707 |  |

Our total deposits of $11.5 billion were comprised of $6.8 billion in brokered deposits and $4.7 billion in retail and other deposits at March 31, 2016, compared to $11.5 billion, which were comprised of $7.3 billion in brokered deposits and $4.2 billion in retail and other deposits, at December 31, 2015.
Interest Bearing
Interest bearing deposits as of March 31, 2016 and December 31, 2015 consisted of non-maturity savings and money market deposits, brokered and retail CDs, and brokered MMDAs. Included in these accounts are what we consider to be core deposits from various sources. 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 $2.6 million and $2.7 million in the three months ended March 31, 2016 and 2015, respectively. Fees paid to third-party brokers related to these CDs were $2.8 million for the three months ended March 31, 2016. There were no such fees paid in the three months ended March 31, 2015.
Interest bearing deposits at March 31, 2016 and December 31, 2015 are summarized as follows:

|  | March 31, 2016 |  | December 31, 2015 |
(Dollars in thousands) |  | Amount |  | Qtr.-End Weighted Average Stated Rate(1) |  | Amount |  | Year-End Weighted Average Stated Rate(1) |
Money market |  | $ | 5,125,507 |  |  | 1.22 | % |  | $ | 4,886,299 |  |  | 1.19 | % |
Savings |  | 679,511 |  |  | 0.82 |  |  | 669,254 |  |  | 0.82 |  |
Certificates of deposit |  | 5,737,374 |  |  | 1.19 |  |  | 5,931,453 |  |  | 0.98 |  |
Deposits - interest bearing |  | $ | 11,542,392 |  |  |  |  | $ | 11,487,006 |  |  |  |  |

____________
(1) Includes the effect of interest rate swaps in effective hedge relationships.
As of March 31, 2016 and December 31, 2015, there were $251.5 million and $709.9 million, respectively, of deposits exceeding FDIC insurance limits. Accrued interest on deposits was $24.6 million and $15.7 million at March 31, 2016 and December 31, 2015, respectively.
Non-Interest Bearing
Non-interest bearing deposits were $1.0 million and $0.7 million as of March 31, 2016 and December 31, 2015, respectively. For both periods, these were comprised of money market accounts related to our Employee Stock Purchase Plan account.
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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 Federal Reserve on an overnight basis or in the Federal Reserve’s Term Deposit Facility, minimizing counterparty exposure on cash balances.
Our investment portfolio includes a small portfolio of mortgage-backed securities issued by government agencies and government-sponsored enterprises that are purchased to meet Community Reinvestment Act 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. (“ISDA”) 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 such 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 intermediaries to reduce counterparty risk. As of March 31, 2016, $5.5 billion notional of our derivative contracts were cleared on the Chicago Mercantile Exchange and the London Clearing House. This represents 89.5 percent of our total notional derivative contracts of $6.1 billion. All derivative contracts cleared through an exchange require collateral to be exchanged based on the fair value of the derivative. Our exposure is limited to the value of the derivative contracts in a gain position, less collateral held by us and plus collateral posted with the counterparty.
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.
The table below highlights exposure related to our derivative counterparties as of March 31, 2016.

(Dollars in thousands) |  | SLM Corporation and Sallie Mae Bank Contracts
Exposure, net of collateral |  | $ | 59,963 |
Percent of exposure to counterparties with credit ratings below S&P AA- or Moody’s Aa3 |  | 33.40 | %
Percent of exposure to counterparties with credit ratings below S&P A- or Moody’s A3 |  | 0.31 | %

Regulatory Capital
The Bank is subject to various regulatory capital requirements administered by federal and state banking authorities. Failure to meet minimum capital requirements 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 operation and financial condition. Under 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 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.
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“Well capitalized” regulatory requirements are the quantitative measures established by regulation to ensure capital adequacy. To qualify as “well capitalized,” the Bank must maintain minimum amounts and ratios (set forth in the table below) of Common Equity Tier 1, Tier 1 and Total capital to risk-weighted assets and of Tier 1 capital to average assets. The following capital amounts and ratios are based upon the Bank's assets.

|  | Actual |  | "Well Capitalized" Regulatory Requirements
(Dollars in thousands) |  | Amount | Ratio |  | Amount |  | Ratio
As of March 31, 2016: |  |  |  |  |  |  |
Common Equity Tier 1 Capital (to Risk-Weighted Assets) |  | $ | 1,800,069 |  | 13.4 | % |  | $ | 871,494 |  | > | 6.5 | %
Tier 1 Capital (to Risk-Weighted Assets) |  | $ | 1,800,069 |  | 13.4 | % |  | $ | 1,072,608 |  | > | 8.0 | %
Total Capital (to Risk-Weighted Assets) |  | $ | 1,926,465 |  | 14.4 | % |  | $ | 1,340,761 |  | > | 10.0 | %
Tier 1 Capital (to Average Assets) |  | $ | 1,800,069 |  | 11.9 | % |  | $ | 758,944 |  | > | 5.0 | %
As of December 31, 2015: |  |  |  |  |  |  |
Common Equity Tier 1 Capital (to Risk-Weighted Assets) |  | $ | 1,734,315 |  | 14.4 | % |  | $ | 781,638 |  | > | 6.5 | %
Tier 1 Capital (to Risk-Weighted Assets) |  | $ | 1,734,315 |  | 14.4 | % |  | $ | 962,017 |  | > | 8.0 | %
Total Capital (to Risk-Weighted Assets) |  | $ | 1,848,528 |  | 15.4 | % |  | $ | 1,202,521 |  | > | 10.0 | %
Tier 1 Capital (to Average Assets) |  | $ | 1,734,315 |  | 12.3 | % |  | $ | 704,979 |  | > | 5.0 | %

Capital Management
The Bank seeks to remain “well capitalized” at all times with sufficient capital to support asset growth, operating needs, unexpected credit risks and to protect the interests of depositors and the FDIC - administered Deposit Insurance Fund (the “DIF”). The Bank is required by its regulators, the Utah Department of Financial Institutions (“UDFI”) and the FDIC, to comply with mandated capital ratios. We intend to maintain levels of capital at the Bank that significantly exceed the levels of capital necessary to be considered “well capitalized” by the FDIC. The Company is a source of strength for the Bank and will provide additional capital if necessary. 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. We currently believe that current and projected capital levels are appropriate for 2016. As our balance sheet continues to grow in 2016, these ratios will decline but will remain significantly in excess of the capital levels required to be considered “well capitalized” by our regulators. We do not plan to pay dividends on our common stock. We do not intend to initiate share repurchase programs as a means to return capital to shareholders. We only expect to repurchase common stock acquired in connection with taxes withheld in connection with award exercises and vesting under our employee stock-based compensation plans. Our Board of Directors will periodically reconsider these matters.
As of January 1, 2015, the Bank was required to comply with U.S. Basel III, which is aimed at increasing both the quantity and quality of regulatory capital and, among other things, establishes Common Equity Tier 1 as a new tier of capital and modifies methods for calculating risk-weighted assets. Certain aspects of U.S. Basel III, including new deductions from and adjustments to regulatory capital and a new capital conservation buffer, are being phased in over several years. The Bank’s Capital Policy requires management to monitor the new capital standards. The Bank is subject to the 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 a Tier 1 leverage ratio of 4.0 percent. In addition, the Bank is subject to a Common Equity Tier 1 capital conservation buffer, which will be phased in over three years beginning January 1, 2016: 0.625 percent of risk-weighted assets for 2016, 1.25 percent for 2017, and 1.875 percent for 2018, with the fully phased-in level of greater than 2.5 percent effective as of January 1, 2019. 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, by January 1, 2019, the Bank will be required to maintain the following
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minimum capital ratios: 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.
U.S. Basel III also revised the capital thresholds for the prompt corrective action framework for insured depository institutions. Effective January 1, 2015, in order to qualify as “well capitalized,” 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.
As of March 31, 2016, the Bank had a Common Equity Tier 1 risk-based capital ratio of 13.4 percent, a Tier 1 risk-based capital ratio of 13.4 percent, a Total risk-based capital ratio of 14.4 percent and a Tier 1 leverage ratio of 11.9 percent, which are each well in excess of the current “well capitalized” standard for insured depository institutions. If calculated today based on the fully phased-in U.S. Basel III standards, our ratios would also exceed the capital levels required under U.S. Basel III and the “well capitalized” standard.
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 no dividends for the three months ended March 31, 2016 and March 31, 2015. For the foreseeable future, we expect the Bank to only pay dividends to the Company as may be necessary to provide for regularly scheduled dividends payable on the Company’s Series A and Series B Preferred Stock.
Borrowings
Outstanding borrowings consist of secured borrowings executed through our term ABS program and our ABCP funding facility. The issuing entities for those secured borrowings are VIEs and are consolidated for accounting purposes. The following table summarizes our secured borrowings at March 31, 2016 and December 31, 2015, respectively.

|  | March 31, 2016 |  | December 31, 2015
(Dollars in thousands) |  | Short-Term |  | Long-Term |  | Total |  | Short-Term |  | Long-Term |  | Total
Secured borrowings: |  |  |  |  |  |  |  |  |  |  |  |
Private Education Loan term securitizations |  | $ | — |  |  | $ | 558,513 |  |  | $ | 558,513 |  |  | $ | — |  |  | $ | 579,101 |  |  | $ | 579,101 |
ABCP Facility |  | 526,500 |  |  | — |  |  | 526,500 |  |  | 500,175 |  |  | — |  |  | 500,175 |
Total |  | $ | 526,500 |  |  | $ | 558,513 |  |  | $ | 1,085,013 |  |  | $ | 500,175 |  |  | $ | 579,101 |  |  | $ | 1,079,276 |

Borrowed Funds
The Bank maintains discretionary uncommitted Federal Funds lines of credit with various correspondent banks, which totaled $100 million at March 31, 2016. The interest rate charged to the Bank on these lines of credit is priced at Fed Funds plus a spread at the time of borrowing, and is payable daily. The Bank did not utilize these lines of credit in the three months ended March 31, 2016 and for the year ended December 31, 2015.
The Bank established an account at the FRB to meet eligibility requirements for access to the Primary Credit borrowing facility at the 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, 2016 and December 31, 2015, the value of our pledged collateral at the FRB
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totaled $1.5 billion and $1.7 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, 2016 and in the year ended December 31, 2015.
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 origination, 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). At March 31, 2016, we had $429 million of outstanding contractual loan commitments which we expect to fund during the remainder of the 2015/2016 academic year. At March 31, 2016, we had a $0.1 million reserve recorded in "Other Liabilities" to cover expected losses that we conclude are probable to occur during the one year loss emergence period on these unfunded commitments.
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 generally accepted accounting principles in the United States of America ("GAAP"). A discussion of our critical accounting policies, which include allowance for loan losses, fair value measurement, transfers of financial assets and the VIE consolidation model, and derivative accounting, can be found in our 2015 Form 10-K. There were no significant changes to these critical accounting policies during the first quarter of 2016.
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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. The majority of the Bank’s 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, with 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 table summarizes the potential effect on earnings over the next 24 months and the potential effect on fair values of balance sheet assets and liabilities at March 31, 2016 and 2015, based upon a sensitivity analysis performed by management assuming a hypothetical increase in market interest rates of 100 basis points and 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 account new assets, liabilities or hedging instruments that may arise in the future.
In the first quarter of 2016, we made a minor change to our interest rate sensitivity model. As the result of an evaluation of historical data, correlation coefficients between certain short-term rate indices to 1-month LIBOR were increased for interest rate risk modeling purposes, increasing our measured sensitivity to changes in market rates. These rate indices included the Fed Funds effective rate, Prime rate and the 3-month Treasury rate, among others. We believe using higher coefficients will provide improved modeling accuracy. The most significant impact of this change was the impact on the treatment of our cash balances, which are placed at the Federal Reserve as excess deposits, earning the Fed Funds discount rate. This change resulted in a slightly higher measure of sensitivity to interest rate changes in the first quarter of 2016.

| March 31,
| 2016 |  | 2015
| +300 Basis Points |  | +100 Basis Points |  | +300 Basis Points |  | +100 Basis Points
EAR - Shock | +6.3% |  | +2.0% |  | +7.1% |  | +2.2%
EAR - Ramp | +5.2% |  | +1.6% |  | +5.9% |  | +1.9%
EVE | -3.4% |  | -1.6% |  | -5.9% |  | -2.7%

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 rate debt versus floating rate assets.
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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 provides 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 in turn includes 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. Partially offsetting this asset sensitive position, 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 a portion of our fixed-rate loans that have not been fully match-funded through derivative transactions and fixed-rate funding from asset securitization. The overall slightly asset-sensitive position will generally cause net interest income to increase somewhat when interest rates rise.
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.
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Asset and Liability Funding Gap
The table below presents our assets and liabilities (funding) arranged by underlying indices as of March 31, 2016. In the following GAAP presentation, the funding gap only includes derivatives that qualify as effective hedges (those derivatives which are reflected in net interest margin, 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 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
3-month Treasury bill |  | weekly |  | $ | 158.8 |  |  | $ | — |  |  | $ | 158.8 |
Prime |  | monthly |  | 7.4 |  |  | — |  |  | 7.4 |
3-month LIBOR |  | quarterly |  | — |  |  | 399.2 |  |  | (399.2 | )
1-month LIBOR |  | monthly |  | 9,852.9 |  |  | 6,179.8 |  |  | 3,673.1 |
1-month LIBOR |  | daily |  | 929.2 |  |  | — |  |  | 929.2 |
Non-Discrete reset(2) |  | daily/weekly |  | 963.1 |  |  | 2,611.4 |  |  | (1,648.3 | )
Fixed Rate(3) |  |  |  | 3,413.4 |  |  | 6,134.4 |  |  | (2,721.0 | )
Total |  |  |  | $ | 15,324.8 |  |  | $ | 15,324.8 |  |  | $ | — |

______________________

(1) | Funding (by index) includes the impact of all derivatives that qualify as 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 MMDA's swapped to fixed rates and stockholders' equity.

The “Funding Gap” in the above table shows primarily mismatches in the 1-month LIBOR, fixed-rate, 3-month LIBOR and Non-Discrete categories. As changes in 1-month and 3-month LIBOR are generally quite highly correlated, the funding gap associated with 3-month LIBOR is expected to partially offset the 1-month LIBOR gaps. We consider the overall risk to be moderate since the funding in the Non-Discrete bucket is our liquid retail portfolio, which we have significant flexibility to reprice at any time, and the funding in the fixed-rate bucket includes $1.7 billion of equity and $0.6 billion of non-interest bearing liabilities. In addition, the fixed-rate funding position includes $1.2 billion of brokered CDs, which have been swapped to 1-month LIBOR, but do not qualify for hedge accounting.
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.
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Weighted Average Life
The following table reflects the weighted average lives of our earning assets and liabilities at March 31, 2016.

| Weighted
| Average
(Averages in Years) | Life
Earning assets |
Education loans | 6.21 |
Cash and investments | 0.88 |
Total earning assets | 5.76 |
Deposits |
Short-term deposits | 0.09 |
Long-term deposits | 2.64 |
Total deposits | 0.85 |
Borrowings |
Short-term borrowings | 1.82 |
Long-term borrowings | 4.75 |
Total borrowings | 3.34 |

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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, 2016. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of March 31, 2016, 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, 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION

Item 1. | Legal Proceedings

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.
Pursuant to the terms of the Spin-Off and applicable law, Navient assumed responsibility for all liabilities (whether accrued, contingent or otherwise and whether known or unknown) arising out of or resulting from the conduct of pre-Spin-Off SLM and its subsidiaries’ businesses prior to the Spin-Off, other than certain specifically identified liabilities relating to the conduct of our consumer banking business. Nonetheless, given the prior usage of the Sallie Mae and SLM names by entities now owned by Navient, we and our subsidiaries may from time to time be improperly named as defendants in legal proceedings where the allegations at issue are the legal responsibility of Navient. Most of these legal proceedings involve matters that arose in whole or in part in the ordinary course of business of pre-Spin-Off SLM. Likewise, as the period of time since the Spin-Off increases, so does the likelihood any allegations that may be made may be in part for our own actions in a post-Spin-Off time period and in part for Navient’s conduct in a pre-Spin-Off time period. We will not be providing information on these proceedings unless there are material issues of fact or disagreement with Navient as to the bases of the proceedings or responsibility therefor that we believe could have a material, adverse impact on our business, assets, financial condition, liquidity or outlook if not resolved in our favor.
For a description of these and other litigation or regulatory proceedings to which we are a party, and for which we have no current updates, see our 2015 Form 10-K.
Regulatory Update
At the time of this filing, the Bank remains subject to the FDIC Consent Order. On May 13, 2014, the Bank reached settlements with the FDIC and the DOJ regarding disclosures and assessments of certain late fees, as well as compliance with the SCRA. Under the FDIC Consent Order, the Bank agreed to pay $3.3 million in fines and oversee the refund of up to $30 million in late fees assessed on loans owned or originated by the Bank since its inception in November 2005.
Under the terms of the Separation and Distribution Agreement, Navient is responsible for funding all liabilities under the regulatory orders, other than fines directly levied against the Bank in connection with these matters. Under the DOJ Consent Order, Navient is solely responsible for reimbursing SCRA benefits and related compensation on behalf of both its subsidiary, Navient Solutions, Inc., and the Bank.
As required by the FDIC Consent Order and the DOJ Consent Order, the Bank has implemented new SCRA policies, procedures and training, has updated billing statement disclosures, and is taking additional steps to ensure its third-party service providers are also fully compliant in these regards. The FDIC Consent Order also requires the Bank to have its current compliance with consumer protection regulations and its compliance management system audited by independent qualified audit personnel. The Bank is focused on sustaining timely and comprehensive remediation of each item contained in the orders and on further enhancing its policies and practices to promote responsible financial practices, customer experience and compliance.
In May 2014, the Bank received a CID from the CFPB as part of the CFPB’s separate investigation relating to customer complaints, fees and charges assessed in connection with the servicing of student loans and related collection practices of pre-Spin-Off SLM by entities now subsidiaries of Navient during a time period prior to the Spin-Off. Two state attorneys general have provided the Bank identical CIDs and others have become involved in the inquiry over time. To the extent requested, we have been cooperating fully with the CFPB and the attorneys general but are not in a position at this time to predict the duration
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or outcome of the investigation. Given the timeframe covered by this demand and the focus on practices and procedures previously conducted by Navient and its servicing subsidiaries, Navient is leading the response to this investigation and has accepted responsibility for all costs, expenses, losses or remediation that may arise from this investigation.
Item 1A. Risk Factors
Our business activities involve a variety of risks. Readers should carefully consider the risk factors disclosed in Item 1A. "Risk Factors" of our 2015 Form 10-K.
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, 2016.

(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, 2016 | 55,112 |  |  | $ | 6.21 |  |  | — |  |  | — |
February 1 - February 29, 2016 | 855,300 |  |  | $ | 5.94 |  |  | — |  |  | — |
March 1 - March 31, 2016 | 218,297 |  |  | $ | 6.09 |  |  | — |  |  | — |
Total first-quarter 2016 | 1,128,709 |  |  | $ | 5.98 |  |  | — |  |  |

_________

(1) | All shares purchased are the 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 and restricted stock units.

(2) | At the present time, the Company does not have a publicly announced share repurchase plan or program.

The closing price of our common stock on the NASDAQ Global Select Market on March 31, 2016 was $6.36.

Item 3. | Defaults Upon Senior Securities

Nothing to report.

Item 4. | Mine Safety Disclosures

Not applicable.

Item 5. | Other Information

Nothing to report.
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Item 6. | Exhibits

The following exhibits are furnished or filed, as applicable:

10.1 | Form of SLM Corporation 2012 Omnibus Incentive Plan, Bonus Restricted Stock Unit Term Sheet (one-year restriction), 2015 Management Incentive Plan Award.
10.2 | Form of SLM Corporation 2012 Omnibus Incentive Plan, Bonus Restricted Stock Unit Term Sheet (two-year restriction), 2015 Management Incentive Plan Award.
10.3 | Form of SLM Corporation 2012 Omnibus Incentive Plan, Bonus Restricted Stock Unit Term Sheet (three-year restriction), 2015 Management Incentive Plan Award.
10.4 | Form of SLM Corporation 2012 Omnibus Incentive Plan, Restricted Stock Unit Term Sheet - 2016
10.5 | Form of SLM Corporation 2012 Omnibus Incentive Plan, Performance Stock Unit Term Sheet - 2016
12.1 | Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends.
31.1 | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS | XBRL Instance Document.
101.SCH | XBRL Taxonomy Extension Schema Document.
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB | XBRL Taxonomy Extension Label Linkbase Document.
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document.

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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 20, 2016
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