Sallie Mae 2013 Annual Report Download - page 49

We cannot predict the effect of the Spin-Off on the market value of SLM BankCo’s common stock and after
the Spin-Off its stock price may fluctuate significantly.
We cannot predict the prices at which shares of SLM BankCo’s common stock may trade after the Spin-Off.
We can also not predict the effect of the Spin-Off on the trading prices of SLM BankCo’s common stock or whether
the combined market value of the shares of SLM BankCo common stock and the shares of NewCo common stock
will be less than, equal to or greater than the market value of our common stock immediately prior to the Spin-Off.
The market price of shares of SLM BankCo common stock may fluctuate significantly due to a number of
factors, some of which may be beyond SLM BankCo’s control, including:
• Actual or anticipated fluctuations in SLM BankCo’s operating results;
• The smaller market capitalization of SLM BankCo;
• Changes in earnings estimated by securities analysts or SLM BankCo’s ability to meet those estimates;
• Uncertainty relating to the dividend policy between Sallie Mae Bank and SLM BankCo as a stand-alone
entity;
• The operating and stock price performance of comparable companies;
• Changes to the regulatory and legal environment under which SLM BankCo operates; and
• Domestic and worldwide economic conditions.
In addition, when the market price of a company’s common stock drops significantly, stockholders often
institute securities class action lawsuits against the company. A securities class action lawsuit against SLM
BankCo could cause it to incur substantial costs and could divert the time and attention of its management and
other resources, which could materially adversely affect SLM BankCo’s business, financing condition and results
of operations.
Sallie Mae Bank and SMI are currently subject to ongoing consumer regulation investigations. Sallie Mae
Bank is also subject to an ongoing 2008 cease and desist order jointly issued by the FDIC and the UDFI.
Though we are unaware of any applicable requirement that the FDIC, UDFI, or CFPB approve of the Spin-
Off, there can be no assurances that these or other federal or state consumer or financial regulators will not
seek to affect the timing, manner or terms of the Spin-Off, or prohibit the Spin-Off altogether.
Sallie Mae Bank is subject to state and FDIC regulation, oversight and regular examination, including by the
CFPB. The FDIC and state regulators have the authority to impose fines, penalties or other limitations on Sallie
Mae Bank’s operations should they conclude that its operations are not compliant with applicable laws and
regulations. Sallie Mae Bank is currently subject to a 2008 cease and desist order issued jointly by the FDIC and
the UDFI for weaknesses in its compliance function. Many of these weaknesses have previously been attributed
to Sallie Mae Bank’s oversight of significant activities performed outside Sallie Mae Bank by its affiliates,
including by companies that will become subsidiaries of NewCo. The Spin-Off is expected to ameliorate this
condition due to our separation into two, independent publicly-traded companies.
At the time of this filing, Sallie Mae Bank remains subject to a cease and desist order originally issued in
August 2008 by the FDIC and the UDFI. In July 2013, the FDIC notified us that it plans to replace the existing
cease and desist order on Sallie Mae Bank with a new formal enforcement action against Sallie Mae Bank that
would more specifically address certain cited violations of Section 5 of the FTC Act, including practices relating
to payment allocation practices and the disclosures and assessments of certain late fees, as well as alleged
violations under the SCRA. In November 2013, the FDIC notified us that the new formal enforcement action
would be against Sallie Mae Bank and an additional enforcement action would be against SMI, in its capacity as
a servicer of education loans for other financial institutions, and would include civil money penalties and
restitution. For additional information regarding these and related regulatory matters and the reserves we have
recorded in connection therewith, see Item 3. “Legal Proceedings—Regulatory Matters.”
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