Sallie Mae 2013 Annual Report Download - page 34

SLM BANKCO
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
YEAR ENDED DECEMBER 31, 2013
(In millions)
Stand-alone
SLM BankCo(1)
Separation
Adjustments
Pro Forma
SLM BankCo
Interest income:
Total interest income ...................................... $551 $— $551
Total interest expense ..................................... 89 — 89
Net interest income ....................................... 462 — 462
Less: provisions for loan losses ............................. 69 — 69
Net interest income after provisions for loan losses .............. 393 — 393
Other income:
Gains on sales of loans and investments(2) ................... 260 — 260
Other ................................................ 38 — 38
Total other income ....................................... 298 — 298
Expenses:
Operating expenses ..................................... 268 4(a) 272
Acquired intangible asset amortization expense ............... 3 — 3
Restructuring and other reorganization expenses .............. 2 — 2
Total expenses ........................................... 273 4 277
Income before tax expense ................................. 418 (4) 414
Income tax expense(3) ..................................... 159 (2) 157
Net income ............................................. 259 (2) 257
Less: net loss attributable to noncontrolling interest ............. (1) — (1)
Preferred stock dividends .................................. — 20(b) 20
Income available to common shareholders ..................... $260 $ (22) $238
(1) Represents the operations, assets, liabilities and equity of SLM BankCo, which will be comprised of Sallie Mae Bank, Upromise, Sallie
Mae Insurance Services, and the Private Education Loan origination functions. Included in these amounts are also certain general
corporate overhead expenses related to SLM BankCo. General corporate overhead of $77 million consisted of costs primarily associated
with accounting, finance, legal, human resources, certain information technology, stock-based compensation, executive management and
the Board of Directors.
(2) Gains on sales of loans and investments during the period represent $196 million of gains from the sale of loans to NewCo and $64
million from the sale of investments.
(3) The pro forma income tax expense rate of approximately 38 percent is based on historical statutory rates. However, SLM BankCo’s post-
spin effective tax rate will increase to approximately 40 percent. The increase is primarily driven by operations being moved into Sallie
Mae Bank. These operations are located in jurisdictions with higher tax rates than current Sallie Mae Bank operations. The rate increase
should have an immaterial impact on SLM BankCo’s equity.
Notes:
(a) Represents $21 million of personnel and information technology costs related to the servicing functions
moving out of NewCo and into SLM BankCo and $7 million in long-term service contracts with NewCo
(primarily related to servicing and sales and marketing) and is net of the $24 million intercompany
servicing fee historically paid to NewCo to service SLM BankCo’s Private Education Loans.
(b) In connection with the Spin-Off, SLM BankCo, by reason of a statutory merger, will succeed us as the
issuer of the Series A Preferred Stock and the Series B Preferred Stock. The adjustment reflects the effect
of the dividends on the Series A and B Preferred Stock.
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