Sallie Mae 2007 Annual Report Download - page 199

20. Segment Reporting (Continued)
management reporting process measures the performance of the operating segments based on the management
structure of the Company and is not necessarily comparable with similar information for any other financial
institution. The Company’s operating segments are defined by the products and services they offer or the types
of customers they serve, and they reflect the manner in which financial information is currently evaluated by
management. Intersegment revenues and expenses are netted within the appropriate financial statement line
items consistent with the income statement presentation provided to management. Changes in management
structure or allocation methodologies and procedures may result in changes in reported segment financial
information.
The Company’s principal operations are located in the United States, and its results of operations and
long-lived assets in geographic regions outside of the United States are not significant. In the Lending
segment, no individual customer accounted for more than 10 percent of its total revenue during the years
ended December 31, 2007, 2006 and 2005. USA Funds is the Company’s largest customer in both the APG
and Corporate and Other segments. During the years ended December 31, 2007, 2006 and 2005, USA Funds
accounted for 35 percent, 31 percent and 36 percent, respectively, of the aggregate revenues generated by the
Company’s APG and Corporate and Other reportable segments. No other customers accounted for more than
10 percent of total revenues in those segments for the years mentioned.
Lending
In the Company’s Lending business segment, the Company originates and acquires both federally
guaranteed student loans, which are administered by ED, and Private Education Loans, which are not federally
guaranteed. Private Education Loans are primarily used by borrowers to supplement FFELP loans to meet the
rising cost of education. As of December 31, 2007, the Company manages $163.6 billion of student loans, of
which $135.2 billion or 83 percent are federally insured, and serves over 10 million student and parent
customers. In addition to education lending, the Company also originates mortgage and consumer loans with
the intent of selling the majority of such loans. In 2007, the Company originated $848 million in mortgage
and consumer loans and its mortgage and consumer loan portfolio totaled $545.4 million at December 31,
2007, of which $19.4 million pertains to mortgages in the held for sale portfolio.
In addition to its federally insured FFELP products, the Company originates and acquires Private
Education Loans which consist of two general types: (1) those that are designed to bridge the gap between the
cost of higher education and the amount financed through either capped federally insured loans or the
borrowers’ resources, and (2) those that are used to meet the needs of students in alternative learning programs
such as career training, distance learning and lifelong learning programs. Most higher education Private
Education Loans are made in conjunction with a FFELP Stafford loan and as such are marketed through the
same channel as FFELP loans by the same sales force. Unlike FFELP loans, Private Education Loans are
subject to the full credit risk of the borrower. The Company manages this additional risk through industry-
tested loan underwriting standards and a combination of higher interest rates and loan origination fees that
compensate the Company for the higher risk.
APG
The Company’s APG operating segment provides a wide range of accounts receivable and collections
services including student loan default aversion services, defaulted student loan portfolio management services,
contingency collections services for student loans and other asset classes, and accounts receivable management
and collection for purchased portfolios of receivables that are delinquent or have been charged off by their
original creditors as well as sub-performing and non-performing mortgage loans. The Company’s APG
operating segment serves the student loan marketplace through a broad array of default management services
F-78
SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts, unless otherwise stated)