SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
THE STUDENT LOAN CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 16-1427135
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
99 GARNSEY ROAD 14534
PITTSFORD, NEW YORK (Zip Code)
(Address of principal executive offices)
(716) 248-7187
(Registrant's telephone number, including area code)
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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 X No
On May 8, 1997, there were 20,000,000 shares of The Student Loan
Corporation's Common Stock outstanding.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
THE STUDENT LOAN CORPORATION
STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
Three months ended
March 31,
----------------------
1997 1996
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REVENUE
Interest income $142,779 $134,925
Interest expense 98,050 90,108
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Net interest income 44,729 44,817
Provision for loan losses 705 618
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Net interest income after provision for loan losses 44,024 44,199
Fee and other income 22 13
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Total revenue, net $44,046 $44,212
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OPERATING EXPENSES
Salaries and employee benefits $7,562 $7,971
Other expenses 8,559 8,343
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Total operating expenses $16,121 $16,314
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Income before income taxes $27,925 $27,898
Income taxes 11,110 11,387
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NET INCOME $16,815 $16,511
========== ==========
NET INCOME - Core (excluding floor income) $16,496 $16,240
========== ==========
NET INCOME -Floor $319 $271
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DIVIDENDS DECLARED $2,400 $1,200
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PER COMMON SHARE - based on 20 million average shares outstanding)
Net income - Core $0.82 $0.81
Net income - Floor $0.02 $0.02
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Net income $0.84 $0.83
========== ==========
Dividends declared $0.12 $0.06
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OPERATING RATIOS -
Net interest margin 2.54% 2.81%
Net interest margin - Core 2.51% 2.78%
Operating expense as a percentage of
average insured student loans 0.92% 1.02%
See accompanying notes to financial statements.
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THE STUDENT LOAN CORPORATION
BALANCE SHEETS
(Dollars in thousands)
March 31, December 31,
1997 1996
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ASSETS
Insured student loans $7,184,860 $6,894,291
Allowance for loan losses 1,744 1,570
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Insured student loans, net 7,183,116 6,892,721
Cash 318 567
Deferred tax benefits 37,820 39,243
Other assets 203,939 185,804
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Total Assets $7,425,193 $7,118,335
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings $5,393,439 $4,509,251
Long-term notes 1,510,000 2,075,000
Payable to principal stockholder 19,833 19,833
Other liabilities 125,370 152,270
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Total Liabilities $7,048,642 $6,756,354
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Common stock 200 200
Additional paid-in capital 134,264 134,109
Retained Earnings 242,087 227,672
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Total Stockholders' Equity 376,551 361,981
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Total Liabilities and Stockholders' Equity $7,425,193 $7,118,335
============= ============
AVERAGE INSURED STUDENT LOANS $7,139,994 $6,547,514
(year-to-date) ============= ============
See accompanying notes to financial statements.
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THE STUDENT LOAN CORPORATION
STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Three months ended
March 31,
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1997 1996
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Cash flows from operating activities:
Net income $16,815 $16,511
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 1,375 752
Provision for loan losses 705 618
Deferred tax provision 1,423 2,510
Increase in accrued interest receivable (11,901) (13,634)
(Increase) decrease in other assets (5,724) 840
Decrease in other liabilities (26,744) (41,056)
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Net cash used in operating activities (24,051) (33,459)
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Cash flows from investing activities:
Origination of loans (486,653) (497,967)
Sale of loans, net of purchases 5,686 10,268
Repayment of loans 188,942 177,099
Capital expenditures on premises and equipment (961) (351)
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Net cash used in investing activities (292,986) (310,951)
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Cash flows from financing activities:
Net increase in short-term borrowings 284,188 346,499
Proceeds from long-term borrowings 35,000 --
Dividends paid (2,400) (1,200)
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Net cash provided by financing activities 316,788 345,299
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Net (decrease) increase in cash (249) 889
Cash - beginning of period 567 579
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Cash - end of period $318 $1,468
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the periods for:
Interest $112,224 $109,884
Income taxes $3 $31,713
See accompanying notes to financial statements.
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THE STUDENT LOAN CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
1. SIGNIFICANT ACCOUNTING POLICIES
INTERIM FINANCIAL INFORMATION
The financial information of The Student Loan Corporation (the
"Company") as of March 31, 1997 and for the three-month period ended
March 31, 1997 includes all adjustments (consisting of normal recurring
accruals) which, in the opinion of management, are necessary to state
the Company's financial position and results of operations in accordance
with generally accepted accounting principles.
Certain amounts in the prior period's financial statements have been
reclassified to conform with the current period's presentation. Such
reclassification had no effect on the results of operations as
previously reported.
DEFINITIONS
Core net income represents net income excluding floor income,
attributable to the fixed minimum interest rates on certain loans in the
Company's portfolio.
2. COMMITMENTS AND CONTINGENCIES
REGULATORY IMPACTS
Provisions of the Omnibus Budget Reconciliation Act (the "1993
Amendments") included significant changes to the Federal Family
Education Loan ("FFEL") Program. The 1993 Amendments established the
Federal Direct Student Loan ("FDSL") Program under which the Federal
government lends directly to students ("direct lending") using U.S.
Treasury Funds, bypassing lenders such as the Company. In addition, the
1993 Amendments imposed additional costs on student loan originators and
holders in the form of origination fees and risk sharing assessments and
also reduced government interest subsidies earned on FFEL Program loans.
The Company estimates that direct lending accounted for approximately
35%, on a national basis, of all guaranteed student loans made in the
1995-96 academic year. The FDSL Program is authorized to originate up to
50% of all such loans in each of 1996-97 and 1997-1998, and at least 60%
in 1998-99. Any increases in direct lending would effectively reduce the
number of potential new loans available for origination under the FFEL
Program by lenders such as the Company. (See the Regulatory Impacts
section of Item 2, "Management's Discussion and Analysis," for further
information.)
3. RELATED PARTY TRANSACTIONS
Citibank (New York State) ("CNYS"), a subsidiary of Citicorp, owns 80%
of the outstanding common stock of the Company. A number of significant
transactions are carried out between the Company on the one hand and
Citicorp and its other subsidiaries on the other hand. At March 31,
1997, the Company had outstanding short-term borrowings of $4.8 billion
and long-term borrowings of $1.5 billion with CNYS, compared to
short-term and long-term borrowings of $4.0 billion and $1.5 billion,
respectively, with CNYS at December 31, 1996. For the first
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quarter of 1997, the Company incurred $83.9 million in interest expenses
payable to CNYS and its affiliates, compared to $74.9 million in
interest expenses payable to CNYS and its affiliates for the same period
in 1996. In addition, Citicorp and its subsidiaries provide various
services, including cash management, data processing, income tax
payments, employee benefits and facilities management, to the Company.
Management believes that the terms of these transactions are, in the
aggregate, no less favorable to the Company than those which could be
obtained from unaffiliated parties.
4. INTEREST RATE SWAP AGREEMENTS
The Company, from time to time, enters into interest rate swap
agreements with related and third parties solely to hedge interest rate
exposure on certain interest bearing liabilities. The swap agreements
are intended to reduce the risk caused by basis differences between
borrowing and lending rates. Entering into basis swap agreements to pay
interest based on the interest rate characteristics of the Company's
assets and to receive interest based on the characteristics of the
Company's liabilities effectively limits the risk of the potential
interest rate variability. The counterparty for all interest rate swap
agreements outstanding at March 31, 1997 was either CNYS, the majority
stockholder, or one of its affiliates.
Interest rate swap agreements with a carrying value of $0.7 million,
representing accrued interest payable, were determined to have an
estimated fair value of $1.1 million at March 31, 1997. At March 31,
1996, interest rate swap agreements with a carrying value of $0.4
million of interest payable had an estimated fair value of $3.3 million.
The fair values, based on approximate values obtained from the Company's
dealer in these financial instruments, represent the estimated amounts
which would be payable upon termination of the agreements. Market values
vary from period to period based on changes in such factors as LIBOR and
Treasury Bill interest rates and timing of contractual settlements. The
aggregate notional principal amounts outstanding at March 31, 1997 and
1996 totaled $2.2 billion and $2.0 billion, respectively.
5. SHORT AND LONG-TERM BORROWINGS
On March 1, 1997, a new credit agreement with CNYS was established,
replacing the prior agreement. Under the new agreement, all existing
debt remains unchanged until maturity. However, the terms of the new
agreement increase the amount of maximum credit allowable under
short-term borrowings to $4.5 billion, from $2.8 billion at December 31,
1996, and increase the total aggregate credit level to $8.0 billion from
$6.4 billion at December 31, 1996. Any unused credit within the $8.0
billion limit is eligible for long-term borrowings. In March 1997, $35.0
million in new long-term borrowings were made under the new credit
facility.
During the first quarter of 1997, $0.6 billion of long-term debt became
due within one year and was reclassified to short-term. Also, all of the
commercial paper that had been outstanding during the first quarter of
1997 under the Company's commercial paper program matured by March 31,
1997 and no new commercial paper was issued. This funding was replaced
with short-term funding from CNYS. Although there are currently no
outstanding borrowings under the commercial paper program, the program
remains open and available for future borrowings.
6. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
Effective January 1, 1997 the Company adopted the provisions of
Statement of Financial Accounting Standards (SFAS) No. 125, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities". Adoption of the standard had no material impact on the
Company.
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Also, during the first quarter of 1997 SFAS No. 128, "Earnings per
Share," was issued. The statement provides new standards for calculating
and presenting earnings per share. The standard will be effective for
year-end 1997. Adoption of the new standard is not expected to have a
material impact on the Company.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
FINANCIAL CONDITION
During the three months ended March 31, 1997, the insured student loan portfolio
of The Student Loan Corporation (the "Company") grew by $290.4 million (4%) to
nearly $7.2 billion from the balance at December 31, 1996. This growth was the
result of loan disbursements totaling $486.7 million in the first quarter of
1997, partially offset by $188.9 million in loan reductions (attributable to
repayments and claims paid by guarantors), loan sales, net of loan purchases, of
$5.7 million and other adjustments of $1.7 million. This compares to loan
disbursements of $498.0 million, loan reductions of $177.1 million, net loan
sales of $10.3 million and other adjustments of $1.0 million in the first
quarter of 1996.
The Company's new loan disbursements of $486.7 million for the first three
months of 1997 were $11.3 million less than those made in the same period of
1996. This decline is attributable primarily to the phase out of a special loan
consolidation program the Company maintained under various agreements with the
Department of Education and several of its subcontractors. Under this program,
$51.9 million in loan consolidations were made in the first quarter of 1996.
Since the program ended in mid-1996, no loan consolidations of this type will be
made in 1997. The decrease in consolidation loans was partially offset by
increases in the Federal Family Education Loan ("FFEL") Program disbursements.
FFEL Program disbursements of $484.5 million for the first quarter of 1997
reflected an increase of $40.5 million (9%) over the same period of 1996 despite
increased competition from the Federal Direct Student Loan ("FDSL") Program
maintained by the Department of Education. The Company estimates that the FDSL
Program accounted for approximately 35% of new loan volume nationally in the
1995-96 academic year. The FDSL Program's share of all guaranteed student loans
made nationally is authorized to increase to 50% for 1996-97 and 1997-98 and to
at least 60% in subsequent years. This increase in FDSL Program lending could
lead to declines in the Company's disbursements in future periods; such declines
could adversely affect the Company's net income. See "Regulatory Impacts" below.
During the first three months of 1997, the Company made $112.2 million in
interest payments, principally to CNYS or one of its affiliates, compared to the
$109.9 million paid in the same period in 1996. The difference is due to
increases in both the size of the borrowings and interest rates, as well as
timing of interest payments. The Company paid $3,000 in income taxes during the
first quarter of 1997, compared to $31,700,000 for the same period last year.
The difference in amount of taxes paid is primarily due to a timing difference
in making intercompany tax payments, and does not reflect any significant
changes in applicable income tax rates.
Other assets increased $18.1 million (10%) from the December 31, 1996 level,
principally as a result of additional interest receivable attributable to the
growth in the student loan portfolio and timing of interest receipts. Other
liabilities, principally comprised of accrued interest and income taxes payable,
decreased by $26.9 million (18%) from the December 31, 1996 level, primarily due
to reduced payables and timing differences for intercompany interest payments.
On March 1, 1997, a new credit agreement with CNYS was established, replacing
the prior agreement. Under the new agreement, all existing debt remains
unchanged until maturity. However, the terms of the new agreement increase the
amount of maximum credit allowable under short-term borrowings to $4.5 billion,
from $2.8 billion at December 31, 1996, and increase the total aggregate credit
level to $8.0 billion from $6.4 billion at December 31, 1996. Any unused credit
within the $8.0 billion limit is eligible for long-term borrowings. In March
1997, $35.0 million in new long-term borrowings were made under the new credit
facility.
During the first quarter of 1997, short-term borrowings increased by $0.9
billion, with $0.6 billion of the increase attributable to long-term debt which
became due within one year and was reclassified to
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short-term. Also, all of the commercial paper that had been outstanding during
the first quarter of 1997 under the Company's commercial paper program matured
by March 31, 1997 and no new commercial paper was issued. This funding was
replaced with short-term funding from CNYS. Although there are currently no
outstanding borrowings under the commercial paper program, the program remains
open and available for future borrowings at management's discretion.
The Company paid a quarterly dividend of $0.12 per common share on March 3,
1997. The Board of Directors has declared a regular quarterly dividend on the
Company's common stock of $0.12 per share to be paid on June 2, 1997 to
stockholders of record on May 15, 1997.
RESULTS OF OPERATIONS
Quarter Ended March 31, 1997
Core net income (excludes floor income) was $16.5 million ($0.82 per share) for
the first quarter of 1997, an increase of $0.3 million (2%) from income reported
for the same period last year. Higher interest income generated by growth of
$0.7 billion (11%) in the Company's student loan portfolio and a decrease of
$0.2 million in operating expenses from first quarter 1996 was partially offset
by lower net interest margins.
Total net income for the first quarter of 1997 was $16.8 million, or $0.84 per
share, an increase of $0.3 million (2%) over net income of $16.5 million, or
$0.83 per share, for the same period last year. The Company earned $0.3 million
($.02 per share) of net income from interest rate floors in the first quarter of
1997, consistent with that earned for the same period last year, due to a
generally stable interest rate environment.
Core net interest margin was 2.51% for the first quarter of 1997, 0.27% lower
than the 2.78% margin which occurred in the first quarter of 1996. The decline
is primarily the result of lower in-school revenue rates on the majority of the
Company's new loan originations and lower variable loan rates (relative to the
Company's funding costs) as of the July 1, 1996 reset date.
The $0.2 million decrease in operating expenses for the first quarter of 1997
compared to the first quarter of 1996 was attributable to non-recurring first
quarter 1996 expenses of $1.2 million related to the closing of the Company's
Customer Service Center in Sacramento, California, partially offset by increased
1997 volume-related expenses. Operating expenses as a percentage of average
insured student loans showed a 0.10% improvement, decreasing to 0.92% compared
to 1.02% for the first quarter of 1996.
During the second quarter of 1997, the Company expects an increase of
approximately $1 million in marketing expenses, compared to that incurred for
the same period in 1996. This increase is attributable to the rollout of a new
alternative loan product, labelled CitiAssist. CitiAssist loans are offered as a
means to fund the difference between college costs and the funds available
through traditional government-guaranteed loan products. CitiAssist loans are
not federally guaranteed, but are insured against loss by a private insurer.
The provision for loan losses represents the Company's estimate of the 2%
risk-sharing losses that the Company expects to incur as a result of the
provisions of the Omnibus Budget Reconciliation Act (the "1993 Amendments"). See
"Regulatory Impacts" below. The provision was $0.1 million higher for the first
quarter of 1997 than that recorded for the same period last year due to larger
amounts of loans disbursed on or after October 1, 1993 rolling into repayment
and becoming delinquent.
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INCOME TAXES
The Company's effective tax rate was approximately 40% for the first quarter of
1997, compared to 41% for the same period in 1996.
REGULATORY IMPACTS
The 1993 Amendments included significant changes to the FFEL Program. They
imposed additional costs and income restrictions on originators and holders of
FFEL Program loans and, also, instituted the FDSL Program. Under the FDSL
Program, the Federal government makes loans directly to students ("direct
lending") using U.S. Treasury Funds, bypassing lenders such as the Company.
The Company estimates that direct lending accounted for approximately 35% of all
guaranteed student loans made nationally for the 1995-96 school year. The FDSL
program is authorized to originate up to 50% of all such guaranteed loans in
each of 1996-97 and 1997-98, and at least 60% in 1998-99. Schools volunteer to
participate in direct lending and, at the discretion of the Department of
Education, may choose to participate in both the FDSL and the FFEL Programs.
The 1993 Amendments also included provisions by which some FFEL Program costs
were shifted from the Federal government to student loan originators and
holders. The costs imposed on originators and holders are in the form of
origination fees, risk sharing costs, and interest rate reductions on subsidized
loans. The provisions reduced interest rate subsidies paid by the Federal
government to holders of loans during in-school, grace and deferment periods
from 3.10% to 2.50% over the base rate for loans disbursed on or after July 1,
1995. In addition, lenders are required to pay a 0.5% origination fee on loans
disbursed on or after October 1, 1993 and holders of Federal Consolidation Loans
disbursed on or after October 1, 1993 are required to pay the Federal government
an annual fee of 1.05% of outstanding balances of such loans. Also, guaranteed
student loan holders are required to absorb a loss on loans disbursed on or
after October 1, 1993 that are paid through the claims process. This loss is
calculated as 2% of the sum of the outstanding loan balance and unpaid accrued
interest. Guarantors are subject to similar risk sharing provisions.
The Company has experienced a decline in net interest margin over the last few
years due to the provisions of the 1993 Amendments, as new loans with these
provisions were added to the portfolio and older, more profitable loans were
repaid. The interest spread for in-school, grace and deferment periods declined
for loans disbursed on or after July 1, 1995, with a full-year impact occurring
in 1996. Therefore, in order to maintain or improve its net income in future
years, the Company needs to substantially increase the size of its portfolio;
there is no assurance that the Company will be able to do so. Since 1994, the
Company has aggressively pursued both new and existing marketing programs,
expanded its guarantor relationships, and sought new ways to meet the education
finance needs of schools and students, including the implementation of
non-Federally guaranteed loan programs, such as CitiAssist, that are not
dependent on Federal funding and authorization. It is expected that further
reductions in FFEL Program loan subsidies may occur as part of future Federal
budget packages or as a component of the 1998 FFEL Program reauthorization.
CLAIM FOR SPECIAL ALLOWANCE BILLINGS
In a decision filed September 30, 1996, the U.S. District Court for the District
of Columbia entered judgement declaring that the Department of Education's
decision to deny special allowance payments to holders of certain FFELP loans
was contrary to the express provisions of the Higher Education Act. This action
was brought by nine lenders, including the Company. The effect of this decision
will be to allow full payment of special allowances on certain FFELP loans to
holders of those loans for certain past
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periods. The Department of Education has appealed the District Court's decision
to the U.S. Court of Appeals for the District of Columbia Circuit and oral
argument before the Court is scheduled for September 11, 1997. The Company is
seeking to recover approximately $3 million of denied special allowance
billings.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
10.8(e) Omnibus Credit Agreement, dated March 1, 1997 between the
Company and Citibank (New York State)
27. Financial Data Schedule
(b) Reports on Form 8-K: none.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: May 8, 1997
THE STUDENT LOAN CORPORATION
By /s/Michael S. Piemonte
-------------------------
Michael S. Piemonte
Vice President, Treasurer and
Chief Financial Officer
13
OMNIBUS CREDIT AGREEMENT
Dated as of March 1, 1997
Part I.
This Omnibus Credit Agreement dated as of March 1, 1997 between Citibank (New
York State), a banking corporation organized under the laws of the State of New
York ("CNYS") (the "Lender") and The Student Loan Corporation, a corporation
organized under the laws of the State of Delaware ("STU") (the "Borrower").
Certain terms used within this agreement shall have such meaning as defined in
Section 3.
1. This Omnibus Credit Agreement is intended to represent the rights,
obligations and duties of the respective parties and to provide various credit
facilities including Tranche A (A Line of Credit Facility), Tranche B (A
Multiple Term Note Credit Facility),and Tranche C (A Single Term Note Facility).
CNYS shall make available to STU as hereinafter described in an aggregate amount
of $8.0 Billion and in such increased amount, not to exceed in any event $10
Billion, upon which the parties may mutually agree as provided in Paragraph 1 a.
This Omnibus Credit Agreement does not supersede that certain agreement dated as
of March 30, 1995 between CNYS and STU which also provides certain credit
facilities. Advances under the March 30, 1995 agreement may continue to remain
outstanding subject to the terms and maturities of that agreement and the
respective promissory notes, provided however, that the aggregate credit
facilities provided by the March 30, 1995 and this Omnibus Credit Agreement
shall not exceed the maximum amount provided by this Omnibus Credit Agreement.
a. CNYS and STU agree that the maximum allowable advances under this
Omnibus Credit Agreement may be increased upon written amendment to this
agreement for mutually agreed upon terms, such that a maximum amount of advances
equal to $10 Billion shall be made available by CNYS to STU for the remaining
term of this agreement.
2. General Provisions. Interest on all LIBOR advances and Overnight Federal
Funds based advances shall be calculated on the basis of the actual number of
days outstanding and upon a year of 360 days. Interest on all Treasury based
advances shall be calculated on the basis of the actual number of days
outstanding and upon a year of 365 days, or 366 days in the case of a leap year.
All interest rates shall be rounded to five(5) decimal places (i.e. the nearest
hundred thousandth of one percent).
3. Definitions.
For purposes of definitions 3a and 3b below, references to pages in H.15 (519)
or the Telerate Screen shall be deemed to refer to any other page that may
replace the specified page for purposes of displaying the rate referred to, and
references to H.15 (519) shall be deemed to refer to any successor or
replacement publication.
a. "LIBOR" means with respect to any renewal maturity date, repricing date
or value date (each a determination date) the arithmetic mean of the offered
rates for deposits of not less than US $1 Million for a term corresponding to
the respective repricing term for any advance as displayed at Telerate page 3750
as of two (2) London Banking Days prior to any determination date for any
advance issued pursuant to this Agreement. If for any reason the LIBOR rate is
not available at such time, the rate shall be the corresponding LIBOR rate most
recently available prior to the determination date.
B. "Overnight Federal Funds Rate" means, with respect to any determination
date, the rate for Overnight Federal Funds as published on Telerate page 118
under the heading "Federal Funds (Effective)". In the event that such rate is
not so published by 9:00 A.M., New York City time, on the determination date,
the Overnight Federal Funds Rate shall be the most recently available rate prior
to the determination date.
C. "Involuntary Repayment Event" mean the earlier of the following events
or times:
1. The first day on which less than 50% of the voting equity interest of STU are
owned or controlled by CNYS or any subsidiary of Citicorp.
2. The day on which the primary banking regulator of CNYS determines, due to a
change in law,regulation or policy that the advances made under the Agreement
exceed the legal lending limit of CNYS or are otherwise prohibited or subject to
reduction by law, provided that repayment shall be required only to the extent
necessary such that the lending limit or other legal requirement shall be no
longer exceeded.
3. The first day after default in the payment of any principal or interest upon
any advance when same becomes due and payable.
4. The first day after default in the performance, or breach, of any covenant,
representation, or warranty of the Borrower in this Agreement or any Note issued
pursuant to this Agreement, and continuance of such default or breach for a
period of thirty (30) days after that has been given a written notice specifying
such default or breach and requiring it to be remedied.
5. The first day after the appointment under applicable Federal or state law of
a receiver,liquidator, assignee, trustee, conservator, sequestrator Or other
similar official) of the Borrower or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the continuance of
any such decree or order unstayed and in effect for a period of thirty (30)
consecutive days.
6. December 31, 2002
Except to the extent limited by 3 d.2. above, all outstanding advances made
available under the Omnibus Credit Agreement, together with interest thereon,
shall become due and payable upon any Involuntary Repayment Event. A prepayment
occasioned by an Involuntary Repayment Event shall not be subject to any
prepayment premium provided for in this Omnibus Credit Agreement. CNYS shall
give STU written notice and demand upon the occurrence of any Involuntary
Repayment Event other than 3 d.6.
4. CNYS may assign some or all of its rights or obligations hereunder to any
other affiliate of Citicorp, or may sell participation and other interests
therein to any other entity, whether or not affiliated with Citicorp; provided
that CNYS shall remain solely responsible to STU for the performance of its
obligations hereunder. STU may not assign any of its rights or obligations
hereunder without the express written consent of CNYS.
5. Advances under this Omnibus Credit Agreement shall be used solely by STU to
fund the business of STU, which shall be primarily to engage in student
education lending and related businesses.
6. This Omnibus Credit Agreement shall be governed by the laws of the State of
New York.
7. All notices to CNYS shall be addressed to Citibank (New York State), 99
Garnsey Road, Pittsford, NY 14534, Attention: Treasurer. All notices to STU
shall be addressed to The Student Loan Corporation, 99 Garnsey Road, Pittsford,
NY 14534, Attention: Funding Manager.
<PAGE>
Part II.
TRANCHE A
(A Line of Credit Facility)
8. CNYS agrees to lend to STU from time to time and for a term which shall not
exceed one year an amount up to a maximum of U.S. $4.50 Billion. The amounts
made available under this Facility may be advanced, repaid and readvanced
subject to the terms herein. Availability of advances under this Line of Credit
Facility shall be unconditional for a period of one year from the date of this
Omnibus Credit Agreement, subject to Paragraphs 9 and 10 below. The Facility may
be renewed for one year periods beginning on each anniversary date of this
Omnibus Credit Agreement, provided however, that STU must give CNYS written
notice of intent to renew no less than 1 day prior to the anniversary date, but
in no event shall this Line of Credit Facility or CNYS's obligation to advance
funds under it extend beyond December 31, 2002. There shall be no commitment fee
for this Line of Credit Facility.
9. All advances under this Line of Credit Facility shall be represented by a
promissory note in the form of Exhibit A. Interest shall be due and payable each
business day and upon maturity. Interest shall be due at the Overnight Federal
Funds Rate plus .15 of 1%.
Additional advances under this Facility may be made only upon the condition that
as of the last business day of each month the sum of daily average principal
amount of advances outstanding under (i) this Line of Credit Facility and (ii)
all outstanding commercial paper issued by STU as of that date shall not exceed
45% of the daily average of STU's student loans for that month. To the extent
that this borrowing limit is exceeded, STU shall immediately repay outstanding
advances under this Facility together with interest thereon so that the
principal balance outstanding does not exceed the borrowing limit.
10. CNYS reserves the right to terminate its obligation to make advances under
this Line of Credit Facility upon giving 60 days written notice to STU. Advances
outstanding under the Overnight Federal Funds Rate promissory note will be
immediately due upon effective date of such termination notice.
Part III
TRANCHE B
(The Multiple Term Note Credit Facility)
11. CNYS agrees to lend to STU from time to time amounts under this Facility up
to the maximum amount set forth in Paragraph 1 of this Agreement. Advances under
this Multiple Term Note Facility shall be repayable upon mutually agreed upon
dates, but no later than December 31, 2002 and shall be evidenced by promissory
notes substantially in the form of Exhibit B. Interest shall be due and payable
on the respective repricing date and the maturity date (or the next business day
if such date is not a business day)of each such advance at a rate equal to the
corresponding LIBOR plus .22 of 1%.
12. STU shall have the right to prepay advances under this Multiple Term Note
Facility, provided that such prepayment amount is accompanied by a liquidity and
prepayment premium equal to the sum of: a) an amount equal to .22 of 1% per
annum times the amount of the principal prepayment based upon the actual number
of days prepaid and a year of 360 days, and b) an amount equal to the difference
between the respective LIBOR rate in effect for the existing repricing term and
the then current LIBOR rate (as of the prepayment date) most closely
corresponding to the period remaining until the next repricing date times the
actual number of days in such remaining period times the prepayment amount
calculated on the basis of a 360 day year.
Part IV.
TRANCHE C
(Single Term Note Credit Facility)
13. CNYS agrees to lend to STU an amount equal to $500 Million at the earlier of
January 31, 1998 or the date STU refinances that certain $600 Million loan from
The Student Loan Marketing Association. This Facility shall be repayable upon
mutually agreed upon date or dates, but no later than December 31,2002.
14. The advance under this Single Term Loan Facility shall be evidenced by a
promissory note in the form of Exhibit C. Interest shall be due and payable on
the respective repricing date and the maturity date (or the next business day if
such day date is not a business day)of each advance at a rate equal to the
corresponding LIBOR plus 0.00 of 1%.
15. STU shall have no right to prepay the advance under this Single Term Note
Credit Facility.
Citibank (New York State) The Student Loan Corporation
By: _________________________ By: ________________________
Title: ______________________ Title: _____________________
Dated: ______________________ Dated: _____________________
<PAGE>
EXHIBIT A
PROMISSORY NOTE
(Line of Credit Facility)
(Overnight Federal Funds Rate Based)
FOR VALUE RECEIVED, the Student Loan Corporation (the "Borrower") promises to
pay Citibank (New York State)(the "Lender") the principal amount of up to
U.S.$4,500,000,000, or such lesser amount as may be outstanding from time to
time, (the "advance") on _______, 1997, 1998 (the initial maturity date)
together with all accrued interest to date of payment. The Borrower may extend
the maturity of this Promissory Note for one year from the date of maturity and
any subsequent maturity date(s) upon notice to Lender, but in no event shall its
maturity extend beyond December 31, 2002. The Borrower may repay the advance in
part of in full without premium or penalty, and may reborrow any or all of the
maximum amount until maturity.
The borrower promises to pay interest on the amount of the advance at a rate
equal to the Overnight Federal Funds Rate plus .15 of 1%. Interest shall accrue
from the date of the advance until such advance is paid in full. Interest shall
be due and payable on each business day and on the maturity date. In the event
that such interest payment date is not a business day, interest shall be paid on
the next following business day.
The Lender may demand payment in full of this promissory note at any time prior
to maturity by giving Borrower 60 days prior written notice of such demand for
payment.
This Promissory Note is issued pursuant to an Omnibus Credit Agreement dated as
of March 1, 1997 between the Lender and Borrower (the "Loan Agreement") and is
entitled to the benefits of and is subject to the terms contained in the Loan
Agreement as the same may be amended and modified from time to time. "Overnight
Federal Funds Rate" shall have the meaning set forth in the Loan Agreement. The
provisions of the Loan Agreement are hereby incorporated in this Promissory Note
to the same extent as if set forth at length herein.
IN WITNESS WHEREOF, Borrower has caused this Promissory Note to be executed in
its behalf by its officer thereunto duly authorized as of the _____day of
_____________________, ______.
THE STUDENT LOAN CORPORATION
BY:_________________________
NAME:_______________________
TITLE:______________________
<PAGE>
EXHIBIT B
PROMISSORY NOTE
(Multiple Term Note Facility)
(Term Note)
FOR VALUE RECEIVED, The Student Loan Corporation (the "Borrower") promises to
pay Citibank (New York State) (the "Lender") the principal amount of U.S.$_
______________ The "advance") on ____________________________________________
together with all accrued interest to date of payment. Interest shall be due and
payable on each repricing date and on the maturity date. In the event that such
interest payment date is not a business day, interest shall be paid on the
following business day.
Prepayments of this Note may be made at any time by the Borrower upon notice,
provided that such prepayments are accompanied by the prepayment premium
calculated in accordance with the provisions of the Loan Agreement.
The interest rate shall be established on this date (the "value date") and the
first day (each a "repricing date") of each _____month period thereafter (each a
"repricing term") until its maturity. Borrower promises to pay interest on the
principal amount of each advance from the date hereof on each reset date until
maturity at an interest rate per annum equal to the ______month LIBOR rate plus
.22 of 1%.
"LIBOR" shall have the meaning set forth in the Loan Agreement.
This Promissory Note is issued pursuant to an Omnibus Credit Agreement dated as
of March 1, 1997 between the Lender and Borrower (the "Loan Agreement") and is
entitled to the benefits of and is subject to the terms contained in the Loan
Agreement as the same may be amended and modified from time to time. The
provisions of the Loan Agreement are hereby incorporated in this Promissory Note
to the same extent as if set forth at length herein.
IN WITNESS WHEREOF, Borrower has caused this Promissory Note to be executed in
its behalf by its officer thereunto duly authorized as of the _____day of
_____________________, _____.
THE STUDENT LOAN CORPORATION
BY:_________________________
NAME:_______________________
TITLE:______________________
<PAGE>
EXHIBIT C
PROMISSORY NOTE
(Single Term Note Credit Facility)
(Term Note)
FOR VALUE RECEIVED, The Student Loan Corporation (the "Borrower") promises to
pay Citibank (New York State)(the "Lender") the principal amount of
U.S.$500,000,000(the "advance") on December 31, 2002 together with all accrued
interest to date of payment. Interest shall be due and payable on each repricing
date and on the maturity date. In the event that such interest payment date is
not a business day, interest shall be paid on the following business day.
The Borrower shall have no right to prepay the advance under this Single Term
Note Credit Facility.
The interest rate shall be established on this date (the "value date") and the
first day (each a "repricing date") of each _____month period thereafter (each a
"repricing term") until its maturity. Borrower promises to pay interest on the
principal amount of each advance from the date hereof on each reset date until
maturity at an interest rate per annum equal to the ______month LIBOR rate plus
0.00 of 1%.
"LIBOR" shall have the meaning set forth in the Loan Agreement.
This Promissory Note is issued pursuant to an Omnibus Credit Agreement dated as
of March 1, 1997 between the Lender and Borrower (the "Loan Agreement") and is
entitled to the benefits of and is subject to the terms contained in the Loan
Agreement as the same may be amended and modified from time to time. The
provisions of the Loan Agreement are hereby incorporated in this Promissory Note
to the same extent as if set forth at length herein.
IN WITNESS WHEREOF, Borrower has caused this Promissory Note to be executed in
its behalf by its officer thereunto duly authorized as of the _____day of
_____________________, ______.
THE STUDENT LOAN CORPORATION
BY:_________________________
NAME:_______________________
TITLE:______________________
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE STUDENT LOAN CORPORATION AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 318
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 7,184,860
<ALLOWANCE> 1,744
<TOTAL-ASSETS> 7,425,193
<DEPOSITS> 0
<SHORT-TERM> 5,393,439
<LIABILITIES-OTHER> 125,370
<LONG-TERM> 1,510,000
0
0
<COMMON> 200
<OTHER-SE> 376,351
<TOTAL-LIABILITIES-AND-EQUITY> 7,425,193
<INTEREST-LOAN> 142,779
<INTEREST-INVEST> 0
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 142,779
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 98,050
<INTEREST-INCOME-NET> 44,729
<LOAN-LOSSES> 705
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 16,121
<INCOME-PRETAX> 27,925
<INCOME-PRE-EXTRAORDINARY> 16,815
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,815
<EPS-PRIMARY> 0.84
<EPS-DILUTED> 0.84
<YIELD-ACTUAL> 0 <F1>
<LOANS-NON> 0 <F1>
<LOANS-PAST> 0 <F1>
<LOANS-TROUBLED> 0 <F1>
<LOANS-PROBLEM> 0 <F1>
<ALLOWANCE-OPEN> 0 <F1>
<CHARGE-OFFS> 0 <F1>
<RECOVERIES> 0 <F1>
<ALLOWANCE-CLOSE> 0 <F1>
<ALLOWANCE-DOMESTIC> 0 <F1>
<ALLOWANCE-FOREIGN> 0 <F1>
<ALLOWANCE-UNALLOCATED> 0 <F1>
<FN>
<F1> Not applicable.
</FN>
</TABLE>
