The Student Loan Corporation Announces Second Quarter Earnings

Business Wire, July 18, 2005

STAMFORD, Conn. -- The Student Loan Corporation (NYSE:STU) today reported net income of $80.9 million ($4.05 basic earnings per share) for the second quarter of 2005, an increase of $11.2 million (16%), compared to net income of $69.7 million ($3.48 basic earnings per share) for the same period of 2004. The increase in net income is primarily attributable to a gain on sale of $30.3 million (after tax) relating to the securitization of $2.0 billion in student loans. An extraordinary gain of $5.5 million (after tax) relating to the extinguishment of one of the Company's securitization trusts in the second quarter of 2005 also contributed to the net income growth. These gains were partially offset by a $8.9 million (after tax) reduction in floor income, a securitization impairment charge of $8.7 million (after tax) and increased operating expenses of $6.7 million (after tax) for the quarter, compared to the same quarter of 2004.

During the twelve month period ending June 30, 2005, the Company's managed student loan portfolio grew by $4.5 billion (18%) to $29.5 billion. Included in this amount are the Company's owned student loan assets of $26.1 billion, which grew by $1.5 billion (6%) from June 30, 2004. Combined Federal Family Education Loan Program (FFELP) Stafford and PLUS loan disbursements and new CitiAssist Loan commitments totaling $534 million were up $61 million (13%) for the second quarter of 2005 compared to the same period of 2004. These second quarter 2005 disbursements were composed of FFELP Stafford and PLUS disbursements of $394 million, up $18 million (5%), and included new CitiAssist Loan commitments of $140 million, up $43 million (44%) compared to the same period last year. Secondary market and other loan procurement activities also added approximately $1,050 million of FFELP loans to the Company's student loan portfolio during the second quarter of 2005. This represents a $574 million (123%) increase above the second quarter of 2004. Approximately 90% of the second quarter 2005 secondary market and other loan procurement volume was composed of FFELP Consolidation Loans.

The Company's total revenue of $163.3 million for the second quarter of 2005 was $19.7 million (14%) higher than total revenue of $143.6 million for the same period of 2004. Fee and other income increased $33.9 million, primarily due to the gain on securitization of $49.4 million (pretax), as described above, partially offset by a second quarter $14.2 million (pretax) securitization impairment charge. Net interest income of $129.1 million for the second quarter of 2005 was $12.5 million (9%) lower than for the same period of 2004. The net interest margin for the second quarter of 2005 was 1.92%, a decrease of 43 basis points from 2.35% for the same period of 2004. The decrease in net interest income and margin was primarily attributable to a $14.5 million (pretax) decrease in floor income. Floor income may be further reduced in future quarters should short-term interest rates continue to rise. Floor income is a non-GAAP financial measure that is described in more detail in the Company's 2004 Annual Report and Form 10-K.

The Company's operating expense ratio (operating expenses as a percentage of average managed student loans) for the second quarter of 2005 was 0.56%, seven basis points higher than that of 2004. Total operating expenses of $40.3 million for the second quarter of 2005 were $11.0 million (37%) higher than that of the same period of 2004. The increase is reflective of expenses related to portfolio growth and other ongoing infrastructure investments, including higher amortization costs related to software upgrades.

The Company's provision for loan losses for the second quarter of 2005 was $4.8 million, $1.7 million higher than the provision for the same period of 2004. The increase is attributable to a third party servicer that recently lost its Exceptional Performer designation as well as increases in the size of the CitiAssist portfolio.

The Company's second quarter 2005 return on equity decreased to 26.8% from 27.5% in the second quarter of 2004.

For the six months ended June 30, 2005, the Company earned $147.0 million ($7.35 basic earnings per share), an increase of $4.5 million (3 %) from $142.5 million ($7.13 basic earnings per share) for the same period of 2004. The improvement is primarily attributable to the second quarter 2005 securitization gains, partially offset by a $15.8 million (after tax) reduction in floor income compared with the first six months of 2004 and $12.4 million (after tax) securitization impairment charges taken in the first six months of 2005.

The Company's Board of Directors declared a regular quarterly dividend on the Company's common stock of $1.08 per share. The dividend will be paid September 1, 2005 to shareholders of record on August 15, 2005.

The Student Loan Corporation is one of the nation's leading originators and holders of insured student loans. Citibank, N.A., a subsidiary of Citigroup Inc., is the largest shareholder in the Company with an 80% interest.