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Segment Reporting (Tables)

3 Months Ended

Mar. 31, 2017

Segment Results and Reconciliations to GAAP

Segment Results and Reconciliations to GAAP

		Three Months Ended March 31, 2017
(Dollars in millions)		FFELP Loans				Private Education Loans				Business Services				Other				Eliminations(1)				Total “Core Earnings”				Adjustments												Total GAAP
																										Reclassifications				Additions/ (Subtractions)				Total Adjustments(2)
Interest income:
Education loans		$	623			$	374			$	—			$	—			$	—			$	997			$	20			$	(14	)		$	6			$	1,003
Other loans			—				—				—				5				—				5				—				—				—				5
Cash and investments			5				—				—				2				—				7				—				—				—				7
Total interest income			628				374				—				7				—				1,009				20				(14	)			6				1,015
Total interest expense			457				187				—				31				—				675				3				(3	)			—				675
Net interest income (loss)			171				187				—				(24	)			—				334				17				(11	)			6				340
Less: provisions for loan losses			10				95				—				2				—				107				—				—				—				107
Net interest income (loss) after provisions for loan losses			161				92				—				(26	)			—				227				17				(11	)			6				233
Other income (loss):
Servicing revenue			13				4				149				—				(90	)			76				—				—				—				76
Asset recovery and business processing revenue			—				—				100				—				—				100				—				—				—				100
Other income (loss)			—				—				—				5				—				5				(17	)			(12	)			(29	)			(24	)
Total other income (loss)			13				4				249				5				(90	)			181				(17	)			(12	)			(29	)			152
Expenses:
Direct operating expenses			93				40				126				7				(90	)			176				—				—				—				176
Overhead expenses			—				—				—				62				—				62				—				—				—				62
Operating expenses			93				40				126				69				(90	)			238				—				—				—				238
Goodwill and acquired intangible asset impairment and amortization			—				—				—				—				—				—				—				6				6				6
Total expenses			93				40				126				69				(90	)			238				—				6				6				244
Income (loss) before income tax expense (benefit)			81				56				123				(90	)			—				170				—				(29	)			(29	)			141
Income tax expense (benefit)(3)			30				21				46				(34	)			—				63				—				(10	)			(10	)			53
Net income (loss)		$	51			$	35			$	77			$	(56	)		$	—			$	107			$	—			$	(19	)		$	(19	)		$	88

⁽¹⁾  The eliminations in servicing revenue and direct operating expense represent the elimination of intercompany servicing revenue where the Business Services segment performs the loan servicing function for the FFELP Loans segment.

⁽²⁾  “Core Earnings” adjustments to GAAP:

		Three Months Ended March 31, 2017
(Dollars in millions)		Net Impact of Derivative Accounting				Net Impact of Goodwill and Acquired Intangible Assets				Total
Net interest income (loss) after provisions for loan losses		$	6			$	—			$	6
Total other income (loss)			(29	)			—				(29	)
Goodwill and acquired intangible asset impairment and amortization			—				6				6
Total “Core Earnings” adjustments to GAAP		$	(23	)		$	(6	)		$	(29	)
Income tax expense (benefit)											(10	)
Net income (loss)										$	(19	)

⁽³⁾  Income taxes are based on a percentage of net income before tax for the individual reportable segment.

		Three Months Ended March 31, 2016
(Dollars in millions)		FFELP Loans				Private Education Loans				Business Services				Other				Eliminations(1)				Total “Core Earnings”				Adjustments												Total GAAP
																										Reclassifications				Additions/ (Subtractions)				Total Adjustments(2)
Interest income:
Education loans		$	555			$	411			$	—			$	—			$	—			$	966			$	138			$	(59	)		$	79			$	1,045
Other loans			—				—				—				1				—				1				—				—				—				1
Cash and investments			3				1				—				1				—				5				—				—				—				5
Total interest income			558				412				—				2				—				972				138				(59	)			79				1,051
Total interest expense			358				172				—				26				—				556				9				—				9				565
Net interest income (loss)			200				240				—				(24	)			—				416				129				(59	)			70				486
Less: provisions for loan losses			7				104				—				—				—				111				—				—				—				111
Net interest income (loss) after provisions for loan losses			193				136				—				(24	)			—				305				129				(59	)			70				375
Other income (loss):
Servicing revenue			16				4				163				—				(101	)			82				—				—				—				82
Asset recovery and business processing revenue			—				—				90				—				—				90				—				—				—				90
Other income (loss)			—				—				1				3				—				4				(129	)			113				(16	)			(12	)
Total other income (loss)			16				4				254				3				(101	)			176				(129	)			113				(16	)			160
Expenses:
Direct operating expenses			104				43				134				6				(101	)			186				—				—				—				186
Overhead expenses			—				—				—				61				—				61				—				—				—				61
Operating expenses			104				43				134				67				(101	)			247				—				—				—				247
Goodwill and acquired intangible asset impairment and amortization			—				—				—				—				—				—				—				4				4				4
Total expenses			104				43				134				67				(101	)			247				—				4				4				251
Income (loss) before income tax expense (benefit)			105				97				120				(88	)			—				234				—				50				50				284
Income tax expense (benefit)(3)			39				36				45				(33	)			—				87				—				16				16				103
Net income (loss)		$	66			$	61			$	75			$	(55	)		$	—			$	147			$	—			$	34			$	34			$	181

⁽¹⁾  The eliminations in servicing revenue and direct operating expense represent the elimination of intercompany servicing revenue where the Business Services segment performs the loan servicing function for the FFELP Loans segment.

⁽²⁾  “Core Earnings” adjustments to GAAP:

		Three Months Ended March 31, 2016
(Dollars in millions)		Net Impact of Derivative Accounting				Net Impact of Goodwill and Acquired Intangible Assets				Total
Net interest income (loss) after provisions for loan losses		$	70			$	—			$	70
Total other income (loss)			(16	)			—				(16	)
Goodwill and acquired intangible asset impairment and amortization			—				4				4
Total “Core Earnings” adjustments to GAAP		$	54			$	(4	)			50
Income tax expense (benefit)											16
Net income (loss)										$	34

⁽³⁾  Income taxes are based on a percentage of net income before tax for the individual reportable segment.

Core Earnings Adjustments to GAAP

Summary of “Core Earnings” Adjustments to GAAP

		Three Months Ended March 31,
(Dollars in millions)		2017				2016
“Core Earnings” adjustments to GAAP:
Net impact of derivative accounting(1)		$	(23	)		$	54
Net impact of goodwill and acquired intangibles assets(2)			(6	)			(4	)
Net tax effect(3)			10				(16	)
Total “Core Earnings” adjustments to GAAP		$	(19	)		$	34

⁽¹⁾  Derivative accounting: “Core Earnings” exclude periodic unrealized gains and losses that are 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. These unrealized gains and losses occur in our FFELP Loans, Private Education Loans and Other business segments. Under GAAP, for our derivatives that are held to maturity, the cumulative net unrealized gain or loss over the life of the contract will equal $0 except for Floor Income Contracts where the cumulative unrealized gain will equal the amount for which we sold the contract. In our “Core Earnings” presentation, we recognize the economic effect of these hedges, which generally results in any net settlement cash paid or received being recognized ratably as an interest expense or revenue over the hedged item’s life.

⁽²⁾  Goodwill and acquired intangible assets: Our “Core Earnings” exclude goodwill and intangible asset impairment and amortization of acquired intangible assets.

⁽³⁾  Net tax effect: Such tax effect is based upon our “Core Earnings” effective tax rate for the year.

Assets [Member] | FFELP Loans Segment [Member]

Asset Information for Loans Segment

The following table includes GAAP basis asset information for our FFELP Loans segment.

(Dollars in millions)		March 31, 2017				December 31, 2016
FFELP Loans, net		$	85,284			$	87,730
Cash and investments(1)			3,265				3,212
Other			1,852				1,907
Total assets		$	90,401			$	92,849

⁽¹⁾  Includes restricted cash and investments.

Assets [Member] | Private Education Loans Segment [Member]

Asset Information for Loans Segment

The following table includes GAAP basis asset information for our Private Education Loans segment.

(Dollars in millions)		March 31, 2017				December 31, 2016
Private Education Loans, net		$	22,552			$	23,340
Cash and investments(1)			697				667
Other			1,428				1,567
Total assets		$	24,677			$	25,574

⁽¹⁾  Includes restricted cash and investments.

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