The Student Loan Corporation Announces Second Quarter Earnings

Business Wire, July 21, 2003

Business Editors/Education Writers

STAMFORD, Conn.--(BUSINESS WIRE)--July 21, 2003

The Student Loan Corporation (NYSE:STU) today reported net income of $46.1 million ($2.31 basic earnings per share) for the second quarter of 2003, an increase of $3.9 million (9%) compared to net income of $42.2 million ($2.11 basic earnings per share) for the same period of 2002.

The improvement is primarily attributable to portfolio growth of 16% over the previous twelve months and increased floor income earned on both Consolidation and Stafford Loan assets. The results also reflect a $10.4 million net of tax charge taken to reflect the acceleration of the amortization of the premiums associated with purchased Stafford Loans as a result of faster than expected principal prepayments due to historically low interest rates.

From June 30, 2002 to June 30, 2003, the Company's student loan assets grew by $3.0 billion (16%) to $22.3 billion. Combined Federal Family Education Loan Program (FFELP) Stafford and PLUS disbursements and new CitiAssist Loan commitments of $419 million were up $65 million (18%) for the second quarter of 2003 compared to the same period of 2002. These second quarter 2003 disbursements were composed of FFELP Stafford and PLUS disbursements of $329 million, up $50 million (18%). Second quarter 2003 disbursements also included new CitiAssist Loan commitments of $90 million, up $15 million (20%) compared to the same period last year. Secondary market loan activities also added approximately $221 million of FFELP loans to the Company's student loan portfolio during the second quarter of 2003. More than 80% of the secondary market volume is comprised of FFELP Consolidation Loans.

The net interest margin for the second quarter of 2003 was 1.94%, down 18 basis points from 2.12% for the same period of 2002. The decline was due to the charge discussed above, partially offset by increased floor income resulting from the Company's ability to take advantage of favorable funding opportunities. Should short-term interest rates increase above their present level, the floor income benefit could decline materially.

The Company's expense ratio (expenses as a percentage of average student loan assets) for the second quarter of 2003 was 0.54%, seven basis points lower than the second quarter 2002 ratio. Operating expenses of $29.9 million for the second quarter of 2003 were $0.9 million (3%) higher than those expenses for the same period of 2002. This increase reflects the incremental costs incurred to service and administer the larger loan portfolio and ongoing infrastructure investments.

The Company's provision for loan losses for the second quarter 2003 was $4.2 million, an increase of $0.9 million over the second quarter 2002 provision of $3.3 million. This increase was due to changes in product mix and a 21% increase in loans moving to repayment since June 30, 2002.

The Company's return on equity for the quarter ended June 30, 2003 decreased to 22.1%, down 2.0% compared to 24.1% for the same period of 2002.

For the six months ended June 30, 2003, the Company earned $107.6 million ($5.38 basic earnings per share), an increase of 17% from $91.8 million ($4.59 basic earnings per share) for the same period of 2002. Increased floor income and portfolio growth accounted for substantially all of this improvement.

The Company's Board of Directors declared a regular quarterly dividend on the Company's common stock of $0.77 per share. The dividend will be paid September 2, 2003 to shareholders of record on August 15, 2003.

The Student Loan Corporation is one of the nation's largest originators and holders of insured student loans. Citibank (New York State), a subsidiary of Citigroup Inc., remains the largest shareholder in the Company with an 80% interest.

For information or inquiries regarding student loan accounts, please call 1-800-967-2400. Hearing impaired customers with Telecommunication Devices for the Deaf (TDD) may call 1-800-846-1298. Information is also available on the Company's Web site at http://www.studentloan.com.

FORWARD-LOOKING STATEMENTS

Certain statements contained herein that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. The Company's actual results may differ materially from those suggested by the forward-looking statements, which are typically identified by the words or phrases "believe", "expect", "anticipate", "intend", "estimate", "target", "may increase", "may fluctuate", "may result in", "are projected", "will", "should", "would", "could" and similar expressions. These forward-looking statements involve risks and uncertainties including, but not limited to, general economic conditions, including the performance of financial markets and interest rates; and the effects of future legislative and regulatory changes, including those affecting the interest rates borrowers pay on certain loans and the magnitude of certain loan subsidies, which will determine the floor income benefit to the Company on Stafford Loans.