SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM 10-Q
------------------
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
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)
750 WASHINGTON BLVD. 06901
STAMFORD, CONNECTICUT (Zip Code)
(Address of principal executive offices)
(203) 975-6292
(Registrant's telephone number, including area code)
------------------
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 7, 1999, there were 20,000,000 shares of The Student Loan
Corporation's Common Stock outstanding.
<PAGE>
Form 10-Q
Part I Financial Information
Page
----
Item 1 - Financial Statements (Unaudited)
Statements of Income for the Three Month Periods Ended
March 31, 1999 and 1998 . . . . . . . . . . . . . . . . . . . . 3
Balance Sheets as of March 31, 1999 and December 31, 1998 . . . 4
Statements of Cash Flows for the Three Month Periods Ended
March 31, 1999 and 1998 . . . . . . . . . . . . . . . . . . . . 5
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . 9-13
Part II Other Information
Item 6 - Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . 14
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
THE STUDENT LOAN CORPORATION
STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
(Unaudited)
Three months ended
March 31,
-------------------
1999 1998
-------- --------
REVENUE
Interest income $171,401 $156,835
Interest expense 114,559 111,451
-------- --------
Net interest income 56,842 45,384
Provision for loan losses 800 788
-------- --------
Net interest income after provision for loan losses 56,042 44,596
Fee and other income 948 362
-------- --------
Total revenue, net $ 56,990 $ 44,958
-------- --------
OPERATING EXPENSES
Salaries and employee benefits $ 5,945 $ 8,930
Other expenses 11,385 7,819
-------- --------
Total operating expenses $ 17,330 $ 16,749
-------- --------
Income before income taxes $ 39,660 $ 28,209
Income taxes 16,524 11,403
-------- --------
NET INCOME $ 23,136 $ 16,806
======== ========
DIVIDENDS DECLARED $ 6,000 $ 3,000
======== ========
BASIC AND DILUTED EARNINGS PER COMMON SHARE - $ 1.16 $ 0.84
======== ========
(based on 20 million average shares outstanding)
DIVIDENDS DECLARED PER COMMON SHARE $ 0.30 $ 0.15
======== ========
OPERATING RATIOS
Net interest margin 2.57% 2.33%
Operating expenses as a percentage of
average insured student loans 0.78% 0.86%
See accompanying notes to financial statements.
3
<PAGE>
THE STUDENT LOAN CORPORATION
BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
March 31, December 31,
1999 1998
------------- ----------------
ASSETS
Insured student loans $ 8,958,178 $ 8,636,343
Allowance for loan losses 2,405 2,370
------------- ----------------
Insured student loans, net 8,955,773 8,633,973
Cash 243 37
Deferred tax benefits 30,807 31,936
Other assets 252,071 237,196
------------- ----------------
Total Assets $ 9,238,894 $ 8,903,142
============= ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings $ 4,034,946 $ 3,908,046
Long-term notes 4,505,000 4,310,000
Payable to principal stockholder 13,244 13,957
Restructuring liabilities 6,264 7,611
Other liabilities 197,630 198,997
------------- ----------------
Total Liabilities 8,757,084 8,438,611
------------- ----------------
Common stock 200 200
Additional paid-in capital 134,523 134,380
Retained earnings 347,087 329,951
------------- ----------------
Total Stockholders' Equity 481,810 464,531
------------- ----------------
Total Liabilities and Stockholders' Equity $ 9,238,894 $ 8,903,142
============= ================
AVERAGE INSURED STUDENT LOANS $ 8,925,199 $ 8,111,639
============= ================
(year-to-date)
See accompanying notes to financial statements.
4
<PAGE>
THE STUDENT LOAN CORPORATION
STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Three months ended
March 31,
-------------------
1999 1998
--------- ---------
Cash flows from operating activities:
Net income $ 23,136 $ 16,806
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 1,808 1,314
Provision for loan losses 800 788
Deferred tax provision 1,129 1,081
Increase in accrued interest receivable (15,374) (10,780)
Decrease (Increase) in other assets 485 (2,758)
Decrease in other liabilities (1,937) (6,099)
Decrease in restructuring liabilities (1,347) (32)
--------- ---------
Net cash provided by operating activities 8,700 320
--------- ---------
Cash flows from investing activities:
Disbursements of loans (659,292) (609,855)
Repayment of loans 294,020 240,925
Purchase of loans (20,794) (428)
Sale of loans 61,714 17,050
Capital expenditures on furniture and equipment (42) (226)
--------- ---------
Net cash used in investing activities (324,394) (352,534)
--------- ---------
Cash flows from financing activities:
Net increase (decrease) in borrowings with
original maturities of one year or less 126,900 (566,631)
Proceeds from long-term borrowings 195,000 920,000
Dividends paid to stockholders (6,000) (3,000)
--------- ---------
Net cash provided by financing activities 315,900 350,369
--------- ---------
Net increase (decrease) in cash 206 (1,845)
Cash - beginning of period 37 2,108
--------- ---------
Cash - end of period $ 243 $ 263
========= =========
Supplemental disclosure of cash flow information:
Cash paid for:
Interest $121,360 $102,625
Income taxes $ 1,161 $ 7,308
See accompanying notes to financial statements.
5
<PAGE>
THE STUDENT LOAN CORPORATION
Notes to Financial Statements (Unaudited)
March 31, 1999
1. SIGNIFICANT ACCOUNTING POLICIES
INTERIM FINANCIAL INFORMATION
The financial information of The Student Loan Corporation (the
"Company") as of March 31, 1999 and for the three-month periods ended
March 31, 1999 and 1998 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
conformity with generally accepted accounting principles ("GAAP").
2. USE OF ESTIMATES
In preparing the financial statements in conformity with GAAP,
management has used a number of estimates and assumptions relating to
the reporting of assets and liabilities, the disclosure of contingent
assets and liabilities and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates and assumptions.
3. COMMITMENTS AND CONTINGENCIES
REGULATORY IMPACTS
The Company's loan portfolio is primarily comprised of loans
originated under the Federal Family Education Loan ("FFEL") program.
Since 1992, a series of amendments to the Higher Education Act of 1965
(the "Act"), which governs the FFEL program, has increased costs and
reduced interest payments to lenders. These legislative changes have
progressively reduced the net interest margin of the Company's
portfolio.
The 1993 amendments to the Act also introduced a competitor program,
the Federal Direct Student Loan program ("direct lending"), in which
private lenders such as the Company do not participate. Direct lending
currently accounts for approximately one- third of the student loans
originated under federally sponsored programs.
4. RESTRUCTURING PLAN
In the fourth quarter of 1997, the Company announced a restructuring
plan to realign its business and processing structure. The
restructuring plan included the outsourcing of various parts of the
Company's operations, which had been based in the Company's Pittsford,
New York office, to affiliated companies. The restructuring plan was
designed to take advantage of the larger economies of scale and more
global operating systems configurations being employed by those
affiliates. The Company expects to retain approximately 200
Pittsford-based employees, primarily in the technology and accounting
functions, and employ approximately 100 employees in administration,
6
<PAGE>
finance, marketing, sales and other activities in Stamford, Connecticut
and in field locations throughout the United States.
In connection with the restructuring plan, the Company recorded a $20.5
million pre-tax charge in the fourth quarter of 1997, including $16.2
million relating to severance benefits, $2.8 million relating to
furniture and equipment write-downs and $1.5 million relating to other
exit costs. Additional costs, including first quarter 1999 transition
costs of $3.3 million, did not qualify for recognition in the initial
$20.5 million charge and were expensed as incurred. These additional
costs are not expected to be material.
Of the $20.5 million restructuring reserve, $14.2 million has been used
through March 31, 1999, including $1.3 million used during the first
quarter of 1999. The $14.2 million includes $2.8 million in furniture
and equipment write-downs, $2.5 million in severance and outplacement
costs paid to the approximately 360 employees on job discontinuance,
$1.4 million in other exit costs, and a $7.5 million reduction in the
reserve. The reserve balance of $6.3 million at March 31, 1999
represents an estimate of the amount required for ongoing severance
benefits for the 360 terminated employees as well as benefits for those
employees yet to be placed on job discontinuance. It is currently
expected that approximately 65 more employees will be placed on job
discontinuance. Approximately 160 staff reductions were made in the
first quarter of 1999. The restructuring plan is expected to be
substantially complete by mid-1999.
The expectations of the Company relating to the restructuring plan are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act. See "Forward-Looking Statements" on page 9.
5. RELATED PARTY TRANSACTIONS
Citibank (New York State) ("CNYS"), a wholly-owned subsidiary of
Citicorp and Citigroup Inc., 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 Citigroup Inc. and its
affiliates on the other hand. At March 31, 1999, the Company had
outstanding short-term and long-term borrowings with CNYS of $4.0
billion and $4.5 billion, respectively, compared to short-term and
long-term borrowings with CNYS of $3.9 billion and $4.3 billion,
respectively, at December 31, 1998. For the three-month period ended
March 31, 1999, the Company incurred $114.3 million in interest
expense payable to CNYS and its affiliates, compared to $111.5 million
in interest expense payable to CNYS and its affiliates for the same
period in 1998. In addition, Citigroup Inc. and its subsidiaries
engage in other transactions and servicing activities with the
Company, including cash management, data processing, income tax
payments, loan servicing, employee benefits and facilities management.
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.
6. 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 differences
between borrowing and lending rates. Entering into 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 potential
interest rate variability. The counterparty for most of the interest
rate swap agreements outstanding at March 31, 1999 was Citibank, N.A.,
an affiliate of CNYS.
7
<PAGE>
Interest rate swap agreements with a net carrying value of $0.9
million, representing accrued interest receivable, were determined to
have an estimated fair value of $2.5 million receivable at March 31,
1999. At December 31, 1998, interest rate swap agreements with a
carrying value of $0.2 million of interest receivable had an estimated
fair value of $3.4 million receivable. The fair values were based on
approximate values obtained from Citibank, N.A., the Company's dealer
in these financial instruments, and represent the estimated amounts
which would be receivable upon termination of the agreements. Fair
values vary from period to period based on changes in such factors as
LIBOR and Treasury Bill interest rates and the timing of contractual
settlements. The aggregate notional principal amounts of swap
agreements outstanding at March 31, 1999 and December 31, 1998 were
$4.9 billion and $6.4 billion, respectively. For the first quarter of
1999, the Company recorded a $1.0 million reduction of interest
expense related to interest accrued on its swap agreements. The
Company recorded $0.2 million in additional interest expense related
to its swaps during the first quarter of 1998.
7. SHORT AND LONG-TERM BORROWINGS
In the first three months of 1999, short-term debt increased by $0.14
billion to $4.0 billion and $0.01 billion was repaid. Also, long-term
borrowings increased by $0.2 billion to $4.5 billion and none was
repaid during the first quarter of 1999.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this report that are not historical facts are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act. The Student Loan Corporation's (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," "may increase," "may result in,"
and similar expressions. These forward-looking statements involve risks and
uncertainties including, but not limited to, the following: the effects of
future legislative changes; actual credit losses experienced by the Company in
future periods compared to the estimates used in calculating reserves;
fluctuations in the interest rates paid by the Company for its funding and
received on its loan portfolio and the success of the Company's hedging
policies; the ability of the Company and third party vendors to modify computer
systems for the year 2000 date conversion in a timely manner; the ability of the
Company generally to achieve anticipated levels of cost-savings relating to its
restructuring plan; as well as general economic conditions, including the
performance of financial markets and the passage of regulatory changes.
RESTRUCTURING PLAN
In the fourth quarter of 1997, the Company announced a restructuring plan to
realign its business and processing structure. The restructuring plan included
the outsourcing of various parts of the Company's operations, which had been
based in the Company's Pittsford, New York office, to affiliated companies. The
restructuring plan was designed to take advantage of the larger economies of
scale and more global operating systems configurations being employed by those
affiliates. The Company expects to retain approximately 200 Pittsford-based
employees, primarily in the technology and accounting functions, and employ
approximately 100 employees in administration, finance, marketing, sales and
other activities in Stamford, Connecticut and in field locations throughout the
United States.
In connection with the restructuring plan, the Company recorded a $20.5 million
pre-tax charge in the fourth quarter of 1997, including $16.2 million relating
to severance benefits, $2.8 million relating to furniture and equipment
write-downs and $1.5 million relating to other exit costs. Additional costs,
including first quarter 1999 transition costs of $3.3 million, did not qualify
for recognition in the initial $20.5 million charge and were expensed as
incurred. These costs are not expected to be material.
Of the $20.5 million restructuring reserve, $14.2 million has been used through
March 31, 1999, including $1.3 million used during the first quarter of 1999.
The $14.2 million includes $2.8 million in furniture and equipment write-downs,
$2.5 million in severance and outplacement costs paid to the approximately 360
employees on job discontinuance, $1.4 million in other exit costs, and a $7.5
million reduction of the reserve. The reserve balance of $6.3 million at March
31, 1999 represents an estimate of the amount required for ongoing severance
benefits for the 360 terminated employees as well as benefits for those
employees yet to be placed on job discontinuance. It is currently expected that
approximately 65 more employees will be placed on job discontinuance.
Approximately 160 staff reductions were made in the first quarter of 1999. The
restructuring plan is expected to be substantially complete by mid-1999.
The expectations of the Company relating to the restructuring plan are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act. See "Forward-Looking Statements" on page 9.
9
<PAGE>
FINANCIAL CONDITION
During the three months ended March 31, 1999, the net insured student loan
portfolio of the Company grew by $321.8 million (4%) from the balance at
December 31, 1998. This growth was the result of loan disbursements totaling
$659.3 million and loan purchases of $20.8 million in the first three months of
1999, partially offset by $61.7 million in loan sales and $294.0 million in loan
reductions (attributable to repayments and claims paid by guarantors), and other
adjustments of $2.6 million. This compares to loan disbursements of $609.9
million, loan purchases of $0.4 million, loan reductions of $240.9 million, loan
sales of $17.0 million, and other adjustments of $2.2 million in the first three
months of 1998.
The Company's first quarter 1999 loan disbursements and CitiAssist loan
commitments of $736.4 million were $82.8 million (13%) more than those made in
the same period of 1998. This increase is attributable primarily to new Federal
Family Education Loan ("FFEL") program disbursements of $591.2 million in the
first three months of 1999 compared to $547.1 million during the same period of
1998. This increase of $44.1 million (8%) in FFEL program disbursements does not
include originations made under the Federal Loan Consolidation program.
Consolidation loan originations of $68.1 million for the first quarter of 1999
have increased $5.4 million (9%) compared to the same period of 1998. In
addition, during the first quarter of 1999 CitiAssist loan commitments increased
to $77.1 million, a $33.3 million (76%) increase from the same period last year.
During the first three months of 1999, the Company made $121.4 million in
interest payments, principally to CNYS or one of its affiliates, compared to
$102.6 million for the same period in 1998. The difference is due to changes in
both the size of the borrowings and interest rates, as well as timing of
interest payments. The Company paid $1.2 million in income taxes during the
first three months of 1999, compared to $7.3 million for the same period last
year. The difference in the 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 $14.9 million (6%) from December 31, 1998, principally as
a result of additional interest receivable attributable to the growth in the
student loan portfolio and timing of interest receipts.
In the first quarter of 1999, short-term debt increased by $0.14 billion and
$0.01 billion was repaid. Also, long-term borrowings increased by $0.2 billion
and none was repaid during the first quarter of 1999.
The Company paid a quarterly dividend of $0.30 per common share on March 1,
1999. The Board of Directors declared an increase in the quarterly dividend on
the Company's common stock to $0.45 per share to be paid on June 1, 1999 to
stockholders of record on May 14, 1999.
MARKET RISK
The Company's primary market risk exposure is to movements in interest rates
denominated in the U.S. dollar, the only currency in which the Company operates.
The Company manages interest rate risk exposure through the use of derivative
instruments in the form of interest rate swap agreements in order to better
match the interest rate characteristics of its liabilities with that of its
assets. Under these agreements, the Company receives interest payments based on
the characteristics of its liabilities
10
<PAGE>
and makes payments based on the interest rate characteristics of the Company's
assets. All of the Company's derivative agreements terminate within a year and
none are used for trading purposes.
Market risk is measured using various tools, including Earnings-at-Risk which
reflects repricing gaps in the position embedded in the portfolio. The Company
prepares Earnings-at-Risk calculations to measure the discounted pre-tax
earnings impact of a two standard deviation shift in a short-term interest rate
over the period required to defease the position. As of March 31, 1999 the rate
shift over the defeasance period applied to the interest yield curve for
purposes of calculating Earnings-at-Risk was 45 basis points. The table below
illustrates potential impacts of both a 45 basis point increase and a 45 basis
point decrease in the interest yield curve by year.
Earnings-at-Risk (on pre-tax earnings)
-----------------------------------------
(Dollars in millions) 2000 2001 2002 2003 2004 Total
-----------------------------------------
Two standard deviation increase $6.2 $5.0 $4.7 $4.1 $3.5 $23.5
Two standard deviation decrease ($4.6) ($4.0) ($3.8) ($3.3) ($2.8) ($18.5)
The Earnings-at-risk calculation is one measure of analyzing exposures based
upon the Company's positions at particular points in time. The Company, through
its Asset/Liability Management Committee, actively manages these risks and sets
Earnings-at-Risk limits to take appropriate actions if interest rates move
against the existing structure.
YEAR 2000
As described in its 1998 Annual Report and Form 10-K, the Company recognizes
that the arrival of the year 2000 poses a unique worldwide challenge to the
ability of computer systems to correctly interpret dates in the year 2000. The
Company has assessed and has substantially completed modifications to its
computer systems and business processes to provide for their continuing
functionality and is also assessing the readiness of third parties with which it
interfaces.
As part of year 2000 compliance work, systems are subjected to a validation
process that tests modified programs before they can be used in production. The
Company has substantially completed these year 2000 initiatives. Substantially
all of the lines of code in the Company's business applications are through the
modification phase and have been tested and certified. In addition, the Company
has replaced substantially all of the non-year 2000 compliant business
applications with compliant applications. The year 1999 is primarily being used
for testing of external interfaces, full integration testing and production
assurance.
The cumulative pre-tax cost associated with all of the required modifications
and conversions is expected to total approximately $5.2 million through 1999,
funded through a combination of a reprioritization of technology development
initiatives and incremental costs and is being expensed as incurred. Of the
total, approximately $3.8 million had been incurred through March 31, 1999,
including approximately $0.5 million in the first quarter of 1999.
The Company is also addressing other technology-related matters including
end-user computer applications, networks, data centers, applications
replacement, and desktops and these are similarly progressing towards timely
completion.
11
<PAGE>
The Company is also addressing year 2000 issues that may exist outside its own
technology activities. Substantially all of the Company's facilities and related
systems have been investigated and modification is nearing completion.
Significant third and related parties with which the Company has systems
interfaces include customers and counterparties, external service providers,
technology vendors, payment and clearing systems, and the utility infrastructure
upon which all corporations rely. Unreadiness by these parties would expose the
Company to the potential for loss and impairment of business processes and
activities. While these parties are generally engaged in efforts intended to
address and resolve their year 2000 issues on a timely basis, it is possible
that a series of failures by these parties could have a material adverse effect
on the Company's results of operations in future periods.
The Company is creating contingency plans intended to address perceived risks
associated with its year 2000 effort. These activities include planning to
mitigate any remaining risks associated with remediation of critical systems,
business resumption planning to address the possibility of systems failure, and
market resumption planning to address the possibility of the failure of systems
or processes outside the Company's control. Contingency planning and
preparations for the management of the date change will continue through 1999.
Notwithstanding these activities, the failure of efforts to address, in a timely
manner, the year 2000 issue, could have a material adverse effect on the
Company's results of operations in future periods.
The expectations of the Company relating to the ability of the Company and third
party vendors to modify computer systems for the year 2000 date conversion in a
timely manner are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act. See "Forward-Looking Statements" on page 9.
RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 1999
Net income was $23.1 million ($1.16 basic and diluted earnings per share) for
the first quarter of 1999. This was an increase of $6.3 million (38%) from
earnings for the same period last year. The increase in net income was
attributed to higher interest income generated by a billion dollar increase in
the loan portfolio from the same quarter last year, while funding and operating
expenses remained relatively consistent.
The net interest margin for the first quarter of 1999 was 2.57%, 0.24% higher
than the 2.33% margin for the first quarter of 1998. The increase in the margin
was generated primarily by locking in favorable funding rates in the second half
of 1998, contributing to better margins in the first quarter of 1999 despite the
legislated reduction of the lender yield on those FFEL program loans originated
on or after July 1, 1998.
Total operating expenses for the first quarter of 1999 were up $0.6 million (3%)
from the same period last year, attributable to higher outsourcing fees,
partially offset by reductions in salary and employee benefit costs related to
the restructuring. However, operating expenses as a percentage of average
insured student loans improved 0.08% to 0.78% from the first quarter of 1998
expense ratio of 0.86%. The decrease in the expense ratio is primarily
attributable to efficiencies in operational and administrative expenses.
The provision for loan losses was $0.8 million or 2% higher for the first
quarter of 1999, compared to that recorded for the same period last year. This
increase reflects the risk sharing loss estimates on greater potential future
default claims resulting from growth in the portion of the portfolio that is
subject to the 2% risk sharing provisions of the Federal Higher Education Act of
1965 ("the Act"), as amended.
12
<PAGE>
The Company's effective tax rate was approximately 41.7% for the first three
months of 1999, compared to 40.4% for the same period in 1998.
REGULATORY IMPACTS
The Company's loan portfolio is primarily comprised of loans originated under
the FFEL program. Since 1992, a series of amendments to the Act, which governs
the FFEL program, has increased costs and reduced interest payments to lenders.
These legislative changes have progressively reduced the net interest margin of
the Company's portfolio.
The 1993 amendments to the Act also introduced a competitor program, the Federal
Direct Student Loan program ("direct lending"), in which private lenders such as
the Company do not participate. Direct lending currently accounts for
approximately one-third of the student loans originated under federally
sponsored programs, approximately the same as the prior two years.
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
loan programs, such as the Company's CitiAssist product, that are not dependent
on Federal funding, guarantees and authorization.
13
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K: none.
14
<PAGE>
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 10, 1999
The Student Loan Corporation
By /s/ Yiannis Zographakis
-----------------------
Yiannis Zographakis
Vice President and
Chief Financial Officer
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE STUDENT
LOAN CORPORATION CURRENT REPORT ON FORM 10-Q FOR THE THREE MONTH PERIOD ENDED
MARCH 31, 1999 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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 243
<SECURITIES> 0
<RECEIVABLES> 8,958,178
<ALLOWANCES> 2,405
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,005
<DEPRECIATION> 544
<TOTAL-ASSETS> 9,238,894
<CURRENT-LIABILITIES> 0
<BONDS> 4,505,000
0
0
<COMMON> 200
<OTHER-SE> 481,610
<TOTAL-LIABILITY-AND-EQUITY> 9,238,894
<SALES> 171,401
<TOTAL-REVENUES> 172,349
<CGS> 0
<TOTAL-COSTS> 114,559
<OTHER-EXPENSES> 17,330
<LOSS-PROVISION> 800
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 39,660
<INCOME-TAX> 16,524
<INCOME-CONTINUING> 23,136
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,136
<EPS-PRIMARY> 1.16
<EPS-DILUTED> 1.16
</TABLE>
