Sallie Mae 2014 Annual Report Download - page 43

Complete Necessary Steps to Permit the Bank to Independently Originate Private Education Loans
At the time of this filing, the Bank continues to be reliant on Navient for its loan origination capabilities provided under a
transition services agreement entered into with Navient in connection with the Spin-Off. While the Bank is not at risk of losing
access to Navient originations applications for 2015 and beyond, completing the full separation of the Bank’s operations from
Navient resources is one of our top goals. The key project remaining to complete the Bank’s full separation from Navient is the
separation of these origination functions. We are currently in the process of completing and testing a new loan origination
platform. Our objectives are to implement, complete and begin use of the new loan originations platform in the first half of
2015.
Continue to Expand the Bank’s Capabilities and Enhance Risk Oversight and Internal Controls
In preparation for and subsequent to the Spin-Off we have undertaken significant work to establish that all functions,
policies and procedures transferred to the Bank in the Spin-Off are sufficient to meet currently applicable bank regulatory
standards. We must continue to prepare for our expected growth and designation of the Bank as a “large bank,” which will
entail enhanced regulatory scrutiny. For 2015, the following key initiatives remain to be completed or are underway.
• Complete the build-out of our Enterprise Risk Management team under the Chief Risk Officer and conduct our initial
internal stress testing exercises in preparation for our initial 2016 regulatory required stress testing and report.
• Continue to make significant changes and enhancements to our compliance management system and program and
related consumer protection processes and procedures. Our redesigned SCRA processing processes and procedures
have now received the approval of the DOJ. In 2014, we engaged a third-party firm to conduct independent audits of
certain key consumer protection processes and procedures, including our compliance management system, receiving
no high risk findings. In 2015, the third-party firm will conduct additional independent audits over the remainder of
those processes and procedures.
• In 2015 we will further enhance our internal controls over financial reporting through adoption of the COSO 2013
framework.
Manage Operating Expenses While Improving Efficiency and Customer Experience
We will continue to measure our effectiveness in managing operating expenses by monitoring our efficiency ratio,
excluding restructuring costs associated with the Spin-Off. Our efficiency ratio is calculated as operating expense, excluding
restructuring and reorganization expenses, divided by total interest income and other income. For fiscal year 2014 this ratio was
43 percent. We expect this ratio to decline steadily over the next several years as the number of loans we service grows to a
level commensurate with our loan origination platform and we control the growth of our expense base. We intend for the Bank
to retain servicing of all Private Education Loans we originate, regardless of whether we hold them in our portfolio or sell all or
portions of these Private Education Loans via loan sales and ABS transactions.
In 2015, the Company will focus on further enhancing a culture that values customer satisfaction and the efficient
delivery of its products and services. We understand the challenges of simplifying and carefully considering our customers’
requests, personal circumstances and requirements. In 2015 we will onshore our loan sales call center to provide more tailored
service for our customers. We will also invest in technology that we expect to improve our mobile application and loan
management capabilities to deliver to our customers the access they expect from their financial service providers. We expect
these investments will result in increased customer satisfaction, higher loan originations and a more efficient operation.
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