Sallie Mae 2013 Annual Report Download - page 61

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with our consolidated financial
statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion and
analysis also contains forward-looking statements and should also be read in conjunction with the disclosures
and information contained in “Forward-Looking and Cautionary Statements” and Item 1A. “Risk Factors” in
this Annual Report on Form 10-K.
Through this discussion and analysis, we intend to provide the reader with some narrative context for how
our management views our consolidated financial statements, additional context within which to assess our
operating results, and information on the quality and variability of our earnings, liquidity and cash flows.
Overview
The following discussion and analysis presents a review of our business and operations as of and for the
year ended December 31, 2013.
In May 2013, we announced plans to separate our consumer banking and education loan management
operations into two separate businesses and complete the Spin-Off in the first half of 2014. See Item 1.
“Business” for a further discussion of the Spin-Off.
We monitor and assess our ongoing operations and results based on the following four reportable segments:
(1) Consumer Lending; (2) Business Services; (3) FFELP Loans; and (4) Other.
Consumer Lending Segment
In this segment, we originate, acquire, finance and service Private Education Loans. The Private Education
Loans we make are primarily to bridge the gap between the cost of higher education and the amount funded
through financial aid, federal loans or customers’own financial resources. In this segment, we earn net interest
income on the Private Education Loan portfolio (after provision for loan losses) as well as servicing fees,
primarily late fees.
Business Services Segment
Our Business Services segment generates the majority of its revenue from servicing our FFELP Loan
portfolio. We also provide servicing, loan default aversion and defaulted loan collection services for loans on
behalf of Guarantors of FFELP Loans and other institutions, including ED. We also operate a consumer savings
network that provides financial rewards on everyday purchases to help families save for college.
FFELP Loans Segment
Our FFELP Loans segment consists of our FFELP Loan portfolio and underlying debt and capital funding
these loans. Even though FFELP Loans are no longer originated we continue to seek to acquire FFELP Loan
portfolios to leverage our servicing scale to generate incremental earnings and cash flow. This segment is
expected to generate significant amounts of cash as the FFELP Loan portfolio amortizes.
Other
Our Other segment primarily consists of activities of our holding company, including the repurchase of
debt, the corporate liquidity portfolio and all overhead. We also include results from certain smaller wind-down
and discontinued operations within this segment.
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