Sallie Mae 2008 Annual Report Download - page 211

20. Segment Reporting (Continued)
on “Core Earnings” net income. Accordingly, information regarding the Company’s reportable segments is
provided based on a “Core Earnings” basis. The Company’s “Core Earnings” performance measures are not
defined terms within GAAP and may not be comparable to similarly titled measures reported by other
companies. “Core Earnings” net income reflects only current period adjustments to GAAP net income as
described below. Unlike financial accounting, there is no comprehensive, authoritative guidance for manage-
ment reporting. The 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, 2008, 2007 and 2006. USA Funds is the Company’s largest customer in both the APG
and Corporate and Other segments. During the years ended December 31, 2008, 2007 and 2006, USA Funds
accounted for 46 percent, 35 percent and 31 percent, respectively, of the aggregate revenues generated by the
Company’s APG and Corporate and Other business 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 operating segment, the Company originates and acquires both FFELP loans
and Private Education Loans. As of December 31, 2008, the Company managed $180.4 billion of student
loans, of which $146.9 billion or 81 percent are federally insured, and has 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 the year ended December 31, 2008, the Company originated
$205 million in mortgage and consumer loans and its mortgage and consumer loan portfolio totaled
$503 million at December 31, 2008.
Private Education Loans 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 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 historical
risk-performance underwriting strategies, the addition of qualified cosigners 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, and
sub-performing and non-performing mortgage loans. The Company’s APG operating segment serves the student
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SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts, unless otherwise stated)