The Student Loan Corporation Announces Third Quarter Earnings

Business Wire, Oct 17, 2005

STAMFORD, Conn. -- The Student Loan Corporation (NYSE:STU) today reported net income of $83.0 million ($4.15 basic earnings per share) for the third quarter of 2005, an increase of $13.3 million (19%), 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 gains on sale of student loans of $29.2 million (after tax) relating to $1.4 billion in securitization and other asset sales, net of securitization-related charges. This gain was partially offset by a $9.2 million (after tax) reduction in floor income, and increased operating expenses of $3.1 million (after tax) for the quarter, compared to the same quarter of 2004.

During the twelve month period ending September 30, 2005, the Company's managed student loan portfolio grew by $4.4 billion (17%) to $30.3 billion. For the third quarter of 2005, combined Federal Family Education Loan Program (FFELP) Stafford and PLUS loan disbursements and new CitiAssist Loan commitments totaling $1,701 million increased $125 million (8%) compared to the same period of 2004. These third quarter 2005 disbursements were composed of FFELP Stafford and PLUS disbursements of $1,079 million, an increase of $45 million (4%), and included new CitiAssist Loan commitments of $622 million, an increase of $80 million (15%) compared to the same period last year. Secondary market and other loan procurement activities also added approximately $2,185 million of FFELP Consolidation Loans to the Company's student loan portfolio during the third quarter of 2005.

The Company's total revenue of $175.2 million for the third quarter of 2005 was $26.0 million (17%) higher than total revenue of $149.1 million for the same period of 2004. Fee and other income increased $49.4 million, primarily attributable to gains on sale of student loans of $47.7 million (pretax) relating to securitization and other asset sales, as described above, net of securitization-related charges. Net interest income of $123.2 million for the third quarter of 2005 was $22.1 million (15%) lower than net income for the same period of 2004. The net interest margin for the third quarter of 2005 was 1.85%, a decrease of 46 basis points from 2.31% for the same period of 2004. The decreases in net interest income and margin were primarily attributable to a $15.0 million (pretax) decrease in floor income. Floor income, as defined by management, is the amount of additional interest income generated when interest margin exceeds the minimum expected spreads. It usually occurs in declining short-term interest rate environments when the Company's cost of funds declines while borrower and government subsidized interest rates remain fixed. 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 third quarter of 2005 was 0.52%, two basis points lower than that of the same period of 2004. Total operating expenses of $39.8 million for the third quarter of 2005 were $5.1 million (15%) higher than that of the same period of 2004. The increase is reflective of expenses related to portfolio growth and other ongoing infrastructure investments.

The Company's provision for loan losses for the third quarter of 2005 was $2.4 million, $1.2 million higher than the provision for the same period of 2004. The increase is primarily attributable to a third party servicer that lost its Exceptional Performer designation, as well as increases in the size of the CitiAssist Loan portfolio in repayment.

The Company's third quarter 2005 return on equity was 25.9%, the same as for the third quarter of 2004.

For the nine months ended September 30, 2005, the Company earned $230.0 million ($11.50 basic earnings per share), an increase of $17.8 million (8%) from $212.2 million ($10.61 basic earnings per share) for the same period of 2004. The improvement is primarily attributable to a $61.4 million (after tax) increase in year-to-date gains from securitizations and other student loan asset sales, partially offset by a $25.0 million (after tax) reduction in floor income and $14.9 million (after tax) of securitization impairment charges.

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 December 1, 2005 to shareholders of record on November 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.

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.