SLM Corp 10-K

Item 9A. Controls and Procedures Disclosure Controls and Procedures Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of December 31, 2020. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of December 31, 2020, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (a) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (b) accumulated and communicated to our management, including our principal executive officer and principal financial officer as appropriate, to allow timely decisions regarding required disclosure. Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we assessed the effectiveness of our internal control over financial reporting as of December 31, 2020. In making this assessment, our management used the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our assessment and those criteria, management concluded that, as of December 31, 2020, our internal control over financial reporting is effective. KPMG LLP, an independent registered public accounting firm, audited the effectiveness of the Company’s internal control over financial reporting as of December 31, 2020, as stated in their report listed under the heading “(a) 1.A. Financial Statements” of Item 15 hereof. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Changes in Internal Control over Financial Reporting There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information Nothing to report. 103 PART III. Item 10. Directors, Executive Officers and Corporate Governance The information contained in the 2021 Proxy Statement, including information appearing in the sections titled “Proposal 1 — Election of Directors,” “Executive Officers,” “Compensation Discussion and Analysis — Other Arrangements, Policies and Practices Related to Executive Compensation Programs — Section 16(a) Beneficial Ownership Reporting Compliance,” and “Corporate Governance” in the 2021 Proxy Statement, is incorporated herein by reference. Item 11. Executive Compensation The information contained in the 2021 Proxy Statement, including information appearing in the sections titled “Executive Compensation” and “Director Compensation” in the 2021 Proxy Statement, is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information contained in the 2021 Proxy Statement, including information appearing in the sections titled “Equity Compensation Plan Information,” “Ownership of Common Stock by 5 Percent or More Holders” and “Ownership of Common Stock by Directors and Executive Officers” in the 2021 Proxy Statement, is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions, and Director Independence The information contained in the 2021 Proxy Statement, including information appearing under “Corporate Governance — Related Party Transactions” and “Corporate Governance — Director Independence” in the 2021 Proxy Statement, is incorporated herein by reference. Item 14. Principal Accounting Fees and Services The information contained in the 2021 Proxy Statement, including information appearing under “Independent Registered Public Accounting Firm” in the 2021 Proxy Statement, is incorporated herein by reference. 104 PART IV. Item 15. Exhibits, Financial Statement Schedules (a) 1. Financial Statements A. The following consolidated financial statements of SLM Corporation and the Report of the Independent Registered Public Accounting Firm thereon are included in Item 8 above: Report of Independent Registered Public Accounting Firm F- 2 Report of Independent Registered Public Accounting Firm F- 6 Consolidated Balance Sheets as of December 31, 20 20 and 201 9 F- 8 Consolidated Statements of Income for the years ended December 31, 20 20 , 201 9 and 201 8 F- 9 Consolidated Statements of Comprehensive Income for the years ended December 31, 20 20 , 201 9 and 201 8 F- 10 Consolidated Statements of Changes in Equity for the years ended December 31, 20 20 , 201 9 and 201 8 F- 11 Consolidated Statements of Cash Flows for the years ended December 31, 20 20 , 201 9 and 201 8 F- 14 Notes to Consolidated Financial Statements F- 16 2. Financial Statement Schedules All schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto. 3. Exhibits The exhibits listed in the accompanying index to exhibits are filed or incorporated by reference as part of this Annual Report on Form 10-K. We will furnish at cost a copy of any exhibit filed with or incorporated by reference into this Annual Report on Form 10-K. Oral or written requests for copies of any exhibits should be directed to the Corporate Secretary. 105 (b) Exhibits 2.2 Form of Separation and Distribution Agreement by and among SLM Corporation, New BLC Corporation and Navient Corporation, dated as of April 28, 2014 (incorporated by reference to Exhibit 2.2 of the Company’s Current Report on Form 8-K filed on May 2, 2014). 3.1 Restated Certificate of Incorporation of the Company, dated February 25, 2015 (incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K filed on February 26, 2015). 3.2 Amended and Restated By-Laws of the Company effective June 25, 2015 (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K filed on June 29, 2015). 4.1 Indenture, dated as of June 17, 2015, between SLM Corporation and Deutsche Bank National Trust Company, as Trustee (incorporated by reference to Exhibit 4.3 of the Company’s Registration Statement on Form S-3 filed on June 17, 2015). 4.2 First Supplemental Indenture dated as of April 5, 2017 between SLM Corporation and Deutsche Bank National Trust Company, as Trustee (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed on April 5, 2017). 4.3 Second Supplemental Indenture dated as of October 29, 2020 between SLM Corporation and Deutsche Bank National Trust Company, as Trustee (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed on October 29, 2020). 4.4 Form of Senior Note due 2025 (incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K filed on October 29, 2020). 4.5 Description of SLM Corporation’s Common Stock (incorporated by reference to Exhibit 4.3 to the Company’s Annual Report on Form 10-K filed on February 28, 2020). 4.6 Description of SLM Corporation’s Floating-Rate Non-Cumulative Preferred Stock, Series B (incorporated by reference to Exhibit 4.4 to the Company’s Annual Report on Form 10-K filed on February 28, 2020). 10.1† Form of SLM Corporation Omnibus Incentive Plan, Bonus Restricted Stock Unit Term Sheet (one-year restriction), 2014 Management Incentive Plan Award (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed on April 22, 2015). 10.2† Form of SLM Corporation Omnibus Incentive Plan, Bonus Restricted Stock Unit Term Sheet (two-year restriction), 2014 Management Incentive Plan Award (incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q filed on April 22, 2015). 10.3† Form of SLM Corporation Omnibus Incentive Plan, Bonus Restricted Stock Unit Term Sheet (three-year restriction), 2014 Management Incentive Plan Award (incorporated by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q filed on April 22, 2015). 10.4† Form of SLM Corporation Omnibus Incentive Plan, Bonus Restricted Stock Unit Term Sheet (one-year restriction), 2015 Management Incentive Plan Award (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed on April 20, 2016). 10.5† Form of SLM Corporation Omnibus Incentive Plan, Bonus Restricted Stock Unit Term Sheet (two-year restriction), 2015 Management Incentive Plan Award (incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q filed on April 20, 2016). 10.6† Form of SLM Corporation Omnibus Incentive Plan, Bonus Restricted Stock Unit Term Sheet (three-year restriction), 2015 Management Incentive Plan Award (incorporated by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q filed on April 20, 2016). 10.7† Form of SLM Corporation 2012 Omnibus Incentive Plan, Restricted Stock Unit Term Sheet - 2015 (incorporated by reference to Exhibit 10.4 of the Company’s Quarterly Report on Form 10-Q filed on April 22, 2015). 10.8† Form of SLM Corporation 2012 Omnibus Incentive Plan, Restricted Stock Unit Term Sheet - 2016 (incorporated by reference to Exhibit 10.4 of the Company’s Quarterly Report on Form 10-Q filed on April 20, 2016). 10.9† Form of SLM Corporation 2012 Omnibus Incentive Plan, Performance Stock Unit Term Sheet - 2016 (incorporated by reference to Exhibit 10.5 of the Company’s Quarterly Report on Form 10-Q filed on April 20, 2016). 10.10† Form of SLM Corporation 2012 Omnibus Incentive Plan, Independent Director Restricted Stock Agreement 2015 (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed on July 22, 2015). 10.11† Form of SLM Corporation 2012 Omnibus Incentive Plan, Independent Director Restricted Stock Agreement - 2016 (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed on July 20, 2016). 106 10.12† SLM Corporation Executive Severance Plan for Senior Officers, including amendments as of June 25, 2015 (incorporated by reference to Exhibit 10.6 of the Company’s Annual Report on Form 10-K filed on February 26, 2016). 10.13† SLM Corporation Change in Control Severance Plan for Senior Officers, including amendments as of June 25, 2015 (incorporated by reference to Exhibit 10.7 of the Company’s Annual Report on Form 10-K filed on February 26, 2016). 10.14† Form of Director’s Indemnification Agreement (incorporated by reference to Exhibit 10.24 of the Company’s Annual Report on Form 10-K filed on February 27, 2012). 10.15† Sallie Mae Supplemental 401(k) Savings Plan, as Amended and Restated as of June 25, 2015 (incorporated by reference to Exhibit 10.9 of the Company’s Annual Report on Form 10-K filed on February 26, 2016). 10.16† Amendment to Sallie Mae Supplemental 401(k) Savings Plan (Effective as of March 5, 2019) (incorporated by reference to Exhibit 10.5 of the Company’s Quarterly Report on Form 10-Q filed on April 17, 2019). 10.17† SLM Deferred Compensation Plan for Key Employees, as Established Effective May 1, 2014 and Amended June 25, 2015 (incorporated by reference to Exhibit 10.10 of the Company’s Annual Report on Form 10-K filed on February 26, 2016). 10.18† Amendment to SLM Corporation Deferred Compensation Plan for Key Employees (Effective as of March 5, 2019) (incorporated by reference to Exhibit 10.6 of the Company’s Quarterly Report on Form 10-Q filed on April 17, 2019). 10.19† SLM Corporation Deferred Compensation Plan for Directors, as Established Effective May 1, 2014 and Amended June 25, 2015 (incorporated by reference to Exhibit 10.11 of the Company’s Annual Report on Form 10-K filed on February 26, 2016). 10.20† Amended and Restated SLM Corporation Incentive Plan (incorporated by reference to Exhibit 10.24 of the Company’s Current Report on Form 8-K (file no. 001-13251) filed on May 25, 2005). 10.21† Director’s Stock Plan (incorporated by reference to Exhibit 10.25 of the Company’s Current Report on Form 8-K (file no. 001-13251) filed on May 25, 2005). 10.22† Form of SLM Corporation Incentive Stock Plan Stock Option Agreement, Net-Settled, Performance Vested Options, 2009 (incorporated by reference to Exhibit 10.32 of the Company’s Annual Report on Form 10-K filed on March 2, 2009). 10.23† SLM Corporation Directors Equity Plan (incorporated by reference to Exhibit 10.1 of the Company’s Registration Statement on Form S-8 (File No. 333-159447) filed on May 22, 2009). 10.24† SLM Corporation 2009-2012 Incentive Plan (incorporated by reference to Exhibit 10.2 of the Company’s Registration Statement on Form S-8 (File No. 333-159447) filed on May 22, 2009). 10.25† Form of SLM Corporation Directors Equity Plan Non-Employee Director Stock Option Agreement - 2009 (incorporated by reference to Exhibit 10.6 of the Company’s Quarterly Report on Form 10-Q filed on November 5, 2009). 10.26† Form of SLM Corporation 2009-2012 Incentive Plan Stock Option Agreement, Net Settled, Time Vested Options - 2010 (incorporated by reference to Exhibit 10. 7 of the Company’s Quarterly Report on Form 10-Q filed on May 6, 2010). 10.27† Form of SLM Corporation 2009-2012 Incentive Plan Performance Stock Award Term Sheet, Time Vested - 2010 (incorporated by reference to Exhibit 10.8 of the Company’s Quarterly Report on Form 10-Q filed on May 6, 2010). 10.28† Amendment to Stock Option and Restricted/Performance Stock Terms (incorporated by reference to Exhibit 10.49 of the Company’s Annual Report on Form 10-K filed on February 28, 2011). 10.29† Form of SLM Corporation 2009-2012 Incentive Plan Stock Option Agreement, Net Settled, Time Vested Options - 2011 (incorporated by reference to Exhibit 10.50 of the Company’s Annual Report on Form 10-K filed on February 28, 2011). 10.30† Form of SLM Corporation 2009-2012 Incentive Plan Restricted Stock and Restricted Stock Unit Term Sheet, Time Vested - 2011 (incorporated by reference to Exhibit 10.51 of the Company’s Annual Report on Form 10-K filed on February 28, 2011). 10.31† Form of SLM Corporation 2009-2012 Incentive Plan, Performance Stock Unit Term Sheet - 2012 (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed on May 4, 2012). 10.32† Form of SLM Corporation 2009-2012 Incentive Plan, Bonus Restricted Stock Unit Term Sheet - 2012 (incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q filed on May 4, 2012). 10.33† Form of SLM Corporation 2009-2012 Incentive Plan, Stock Option Agreement, Net Settled Options - 2012 (incorporated by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q filed on May 4, 2012). 10.34† SLM Corporation 2012 Omnibus Incentive Plan (incorporated by reference to Appendix A of the Company’s Definitive Proxy Statement for the 2017 Annual Meeting of Shareholders filed on April 27, 2017). 107 10.35† Form of SLM Corporation 2012 Omnibus Incentive Plan, Performance Stock Unit Term Sheet - 2013 (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed on May 3, 2013). 10.36† Form of SLM Corporation 2012 Omnibus Incentive Plan, Bonus Restricted Stock Unit Term Sheet - 2013 (incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q filed on May 3, 2013). 10.37† Form of SLM Corporation 2012 Omnibus Incentive Plan, Stock Option Agreement, Net Settled Options-2013 (incorporated by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q filed on May 3, 2013). 10.38† Form of SLM Corporation 2012 Omnibus Incentive Plan, Independent Director Restricted Stock Agreement - 2013 (incorporated by reference to Exhibit 10.4 of the Company’s Quarterly Report on Form 10-Q filed on May 3, 2013). 10.39† Form of SLM Corporation 2012 Omnibus Incentive Plan, Independent Director Stock Option Agreement - 2013 (incorporated by reference to Exhibit 10.5 of the Company’s Quarterly Report on Form 10-Q filed on May 3, 2013). 10.40† Form of SLM Corporation 2012 Omnibus Incentive Plan, Restricted Stock Unit Term Sheet - 2013 (incorporated by reference to Exhibit 10.36 of the Company’s Annual Report on Form 10-K filed on February 19, 2014). 10.41† Letter Agreement, dated January 15, 2014 with Raymond J. Quinlan (incorporated by reference to Exhibit 10.38 of the Company’s Annual Report on Form 10-K filed on February 19, 2014). 10.42† SLM Corporation 2012 Omnibus Incentive Plan, Restricted Stock Unit Term Sheet - Raymond J. Quinlan Signing Award (incorporated by reference to Exhibit 10.39 of the Company’s Annual Report on Form 10-K filed on February 19, 2014). 10.43† Form of SLM Corporation 2012 Omnibus Incentive Plan, Bonus Restricted Stock Unit Term Sheet - 2014 (incorporated by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q filed on May 12, 2014). 10.44† Form of SLM Corporation 2012 Omnibus Incentive Plan, Restricted Stock Unit Term Sheet - 2014 (incorporated by reference to Exhibit 10.4 of the Company’s Quarterly Report on Form 10-Q filed on May 12, 2014). 10.45† Employment Agreement, dated April 21, 2014 between Laurent C. Lutz and the Company (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed on July 24, 2014). 10.46† Sallie Mae Employee Stock Purchase Plan, Amended and Restated as of June 24, 2014, Including Amendments as of June 25, 2015 (incorporated by reference to Exhibit 10.39 of the Company’s Annual Report on Form 10-K filed on February 26, 2016). 10.47† Form of SLM Corporation 2012 Omnibus Incentive Plan, Independent Director Restricted Stock Agreement (incorporated by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q filed on July 24, 2014). 10.48† Letter Agreement, dated April 24, 2014, with Jeffrey Dale (incorporated by reference to Exhibit 10.41 to the Company’s Annual Report on Form 10-K filed on February 26, 2015). 10.49† Sallie Mae 401(k) Savings Plan (Effective as of April 30, 2014) (incorporated by reference to Exhibit 10.44 to the Company’s Annual Report on Form 10-K filed on February 26, 2015). 10.50† Restatement of the Sallie Mae 401(k) Savings Plan (Effective as of January 1, 2018) (incorporated by reference to Exhibit 10.50 of the Company’s Annual Report on Form 10-K filed on February 28, 2020). 10.51† Amendment to Sallie Mae 401(k) Savings Plan (Effective as of January 1, 2019) (incorporated by reference to Exhibit 10.51 of the Company’s Annual Report on Form 10-K filed on February 28, 2020). 10.52† Amendment to Sallie Mae 401(k) Savings Plan (Effective as of March 5, 2019) (incorporated by reference to Exhibit 10.4 of the Company’s Quarterly Report on Form 10-Q filed on April 17, 2019). 10.53 Tax Sharing Agreement between Navient Corporation and New BLC Corporation, dated as of April 29, 2014 (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed on May 2, 2014). 10.54 Amended and Restated Loan Servicing and Administration Agreement between Sallie Mae Bank and Navient Solutions, Inc., dated as of April 30, 2014 (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed on May 2, 2014). 10.55† Form of SLM Corporation 2012 Omnibus Incentive Plan, Bonus Restricted Stock Unit Term Sheet (Three-Year Restriction), 2016 Management Incentive Plan Award (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed on April 19, 2017). 10.56† Form of SLM Corporation 2012 Omnibus Incentive Plan, 2017 Restricted Stock Unit Term Sheet (incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q filed on April 19, 2017). 10.57† Form of SLM Corporation 2012 Omnibus Incentive Plan, 2017 Performance Stock Unit Term Sheet (incorporated by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q filed on April 19, 2017). 108 10.58† Form of SLM Corporation 2012 Omnibus Incentive Plan, 2017 Independent Director Restricted Stock Agreement (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed on July 19, 2017). 10.59† Agreement and Release, dated as of March 20, 2018, between the Company and the Personal Representatives of the Estate of Charles P. Rocha (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed on April 23, 2018). 10.60† Form of SLM Corporation 2012 Omnibus Incentive Plan, 2018 Restricted Stock Unit Term Sheet (incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q filed on April 23, 2018). 10.61† Form of SLM Corporation 2012 Omnibus Incentive Plan, 2018 Performance Stock Unit Term Sheet (incorporated by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q filed on April 23, 2018). 10.62† Form of SLM Corporation 2012 Omnibus Incentive Plan, 2018 Bonus Restricted Stock Unit Term Sheet (Three-Year Restriction), 2017 Management Incentive Plan Award (incorporated by reference to Exhibit 10.4 of the Company’s Quarterly Report on Form 10-Q filed on April 23, 2018). 10.63† Form of SLM Corporation 2012 Omnibus Incentive Plan, Independent Director Restricted Stock Agreement - 2018 (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed on July 24, 2018). 10.64† Form of SLM Corporation 2012 Omnibus Incentive Plan, 2019 Restricted Stock Unit Term Sheet (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed on April 17, 2019). 10.65† Form of SLM Corporation 2012 Omnibus Incentive Plan, 2019 Performance Stock Unit Term Sheet (incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q filed on April 17, 2019). 10.66† Form of SLM Corporation 2012 Omnibus Incentive Plan, Bonus Restricted Stock Unit Term Sheet (Three-Year Restriction), 2018 Management Incentive Plan Award (incorporated by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q filed on April 17, 2019). 10.67† Form of SLM Corporation 2012 Omnibus Incentive Plan, Independent Director Restricted Stock Agreement - 2019 (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed on July 24, 2019). 10.68† Form of SLM Corporation 2012 Omnibus Incentive Plan, 2020 Restricted Stock Unit Term Sheet (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed on April 22, 2020). 10.69† Form of SLM Corporation 2012 Omnibus Incentive Plan, 2020 Performance Stock Unit Term Sheet (incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q filed on April 22, 2020). 10.70† Offer Letter between Jonathan W. Witter and the Company dated March 4, 2020 (incorporated by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q filed on April 22, 2020). 10.71 Fixed Dollar Uncollared ASR Master Confirmation and Form of Supplement (incorporated by reference to Exhibit 10.4 of the Company’s Quarterly Report on Form 10-Q filed on April 22, 2020). 10.72† Form of SLM Corporation 2012 Omnibus Incentive Plan, Independent Director Restricted Stock Agreement – 2020 (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed on July 22, 2020). 10.73† Separation Agreement between Raymond J. Quinlan and the Company effective April 19, 2020 (incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q filed on July 22, 2020). 10.74† Jonathan W. Witter Sign-On Equity Grant - 2020 Restricted Stock Unit Term Sheet (incorporated by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q filed on July 22, 2020). 10.75† Offer Letter between Donna F. Vieira and the Company dated September 18, 2018 (incorporated by reference to Exhibit 10.4 of the Company’s Quarterly Report on Form 10-Q filed on July 22, 2020). 10.76† Separation Agreement between Paul Thome and the Company effective August 10, 2020 (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed on October 21, 2020). 21.1* List of Subsidiaries. 23.1* Consent of KPMG LLP. 31.1* Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2* Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1* Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2* Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 109 101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. 101.SCH XBRL Taxonomy Extension Schema Document. 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB XBRL Taxonomy Extension Label Linkbase Document. 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document. 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). † Management Contract or Compensatory Plan or Arrangement * Filed herewith 110 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: February 25, 2021 SLM CORPORATION By: / S / JONATHAN W. WITTER Jonathan W. Witter Chief Executive Officer and Director Pursuant to the requirement of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /S/ JONATHAN W. WITTER Jonathan W. Witter Chief Executive Officer and Director (Principal Executive Officer) February 25, 2021 /S/ STEVEN J. MCGARRY Steven J. McGarry Executive Vice President and Chief Financial Officer (Principal Financial Officer) February 25, 2021 /S/ JONATHAN R. BOYLES Jonathan R. Boyles Senior Vice President and Controller (Principal Accounting Officer) February 25, 2021 /S/ MARY CARTER WARREN FRANKE Mary Carter Warren Franke Chair of the Board of Directors February 25, 2021 /S/ PAUL G. CHILD Paul G. Child Director February 25, 2021 /S/ EARL A. GOODE Earl A. Goode Director February 25, 2021 /S/ MARIANNE M. KELER Marianne M. Keler Director February 25, 2021 /S/ MARK L. LAVELLE Mark L. Lavelle Director February 25, 2021 /S/ JIM MATHESON Jim Matheson Director February 25, 2021 111 /S/ FRANK C. PULEO Frank C. Puleo Director February 25, 2021 /S/ VIVIAN C. SCHNECK-LAST Vivian C. Schneck-Last Director February 25, 2021 /S/ WILLIAM N. SHIEBLER William N. Shiebler Director February 25, 2021 /S/ ROBERT S. STRONG Robert S. Strong Director February 25, 2021 /S/ KIRSTEN O. WOLBERG Kirsten O. Wolberg Director February 25, 2021 112 CONSOLIDATED FINANCIAL STATEMENTS INDEX Page Report of Independent Registered Public Accounting Firm F- 2 Report of Independent Registered Public Accounting Firm F- 6 Consolidated Balance Sheets F- 8 Consolidated Statements of Income F- 9 Consolidated Statements of Comprehensive Income F- 10 Consolidated Statements of Changes in Equity F- 11 Consolidated Statements of Cash Flows F- 14 Notes to Consolidated Financial Statements F- 16 F-1 Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors SLM Corporation: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of SLM Corporation and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2020 and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 25, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Change in Accounting Principle As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for the recognition and measurement of credit losses as of January 1, 2020 due to the adoption of ASC Topic 326, Financial Instruments – Credit Losses . Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. F-2 Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Assessment of the Allowance for Credit Losses related to Private Education Loans Evaluated on a Collective Basis As discussed in Note 2 to the consolidated financial statements, the Company adopted ASU No. 2016-13, Financial instruments – Credit Losses (ASC Topic 326), as of January 1, 2020. The total allowance for credit losses as of January 1, 2020 was $1,585.0 million, a portion of which related to the Company’s allowance for credit losses on private education loans evaluated on a collective basis (the January 1, 2020 ACL). As discussed in Notes 2 and 7 to the consolidated financial statements, the Company’s total allowance for credit losses as of December 31, 2020 was $1,361.7 million, of which $1,251.6 million related to the Company’s allowance for credit losses on private education loans evaluated on a collective basis (the December 31, 2020 ACL). For all loans carried at amortized cost, upon loan origination, the Company is required to measure the allowance for credit losses based on the estimate of all current expected credit losses over the remaining contractual term of the loans. In determining the lifetime expected credit losses on the private education loan portfolio, the Company uses a discounted cash flow model. This method requires the Company to project future principal and interest cash flows on the loans in this portfolio. The Company estimated the future expected cash flows following a vintage-based model that considers life of loan loss expectations, prepayments (both voluntary and involuntary), defaults, recoveries, and any other adjustments deemed necessary, to determine the adequacy of the allowance for credit losses. In determining the loss rates used for the vintage-based approach, the Company starts with historical loss rates, stratifies the loans within each vintage, and then adjusts the loss rates based upon exogenous factors over a reasonable and supportable forecast period. At the end of the reasonable and supportable forecast period, the forecast is immediately reverted to historical averages. The cash flows are then discounted at the loan’s effective interest rate to calculate the present value of those cash flows. In estimating current expected credit losses, the Company uses a combination of expected economic scenarios, which are weighted based upon the current economic conditions and the Company’s view of the risks of alternate outcomes. In addition to this modeling approach, the Company also takes certain qualitative factors, including but not limited to, changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off and recovery practices not already included in the analysis, and the effect of other external factors such as legal and regulatory requirements on the level of estimated current expected credit losses into consideration when calculating the January 1, 2020 ACL and December 31, 2020 ACL. F-3 We identified the assessment of the January 1, 2020 ACL and December 31, 2020 ACL as a critical audit matter. A high degree of audit effort, including specialized skills and knowledge, and subjective and complex auditor judgment was involved in the assessment of the ACL due to significant measurement uncertainty. Specifically, the assessment of the ACL methodology encompassed the evaluation of the development and mathematical accuracy of the discounted cash flow model and the model’s key factors and assumptions, including (1) the economic scenarios, (2) probabilities assigned to each economic scenario weighting (3) the reasonable and supportable forecast periods, (4) the immediate reversion assumption after the reasonable and supportable forecast period, (5) prepayment rates, and (6) the qualitative factors. The assessment also included an evaluation of the conceptual soundness and performance of the discounted cash flow model. In addition, auditor judgement was required to evaluate the sufficiency of audit evidence obtained. The following are the primary procedures we performed to address the critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s measurement of the ACL estimates, including controls over the: • development of the ACL methodology • development of the discounted cash flow model • performance monitoring of the discounted cash flow for the December 31, 2020 ACL • determination and measurement of the significant assumptions used in the model • development of the qualitative factors • calculation of the ACL estimate • analysis of the ACL results, trends, and ratios. We evaluated the Company’s process to develop the ACL estimates by testing certain sources of data, factors, and assumptions that the Company used, and considered the relevance and reliability of such data, factors, and assumptions. In addition, we involved credit risk professionals with specialized skills and knowledge, who assisted in: • evaluating the Company’s ACL methodology for compliance with U.S. generally accepted accounting principles • evaluating judgments made by the Company relative to the development and performance testing of the discounted cash flow model by comparing them to the relevant Company-specific metrics and trends • assessing the conceptual soundness and performance testing of the discounted cash flow model by inspecting the model documentation to determine whether the model is suitable for its intended use • evaluating the methodology used to develop the economic scenarios and underlying assumptions by comparing it to the Company’s business environment and relevant industry practices • assessing the economic scenarios through comparison to publicly available forecasts and the probabilities assigned to each weighting. • testing the reasonable and supportable forecast periods to evaluate the length of each period by comparing to specific portfolio risk characteristics and trends • evaluating the methodology used to develop the qualitative factors and the effect of those factors on the ACL compared with relevant credit risk factors and consistency with credit trends and identified limitations of the underlying quantitative discounted cash flow model • testing the mathematical accuracy of certain computations of the estimate. F-4 We also assessed the sufficiency of the audit evidence obtained related to the January 1, 2020 ACL and December 31, 2020 ACL by evaluating the cumulative results of the audit procedures and potential bias in the accounting estimates. /s/ KPMG LLP We have served as the Company’s auditor since 2013. McLean, Virginia February 25, 2021 F-5 Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors SLM Corporation: Opinion on Internal Control Over Financial Reporting We have audited SLM Corporation and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes (collectively, the consolidated financial statements), and our report dated February 25, 2021 expressed an unqualified opinion on those consolidated financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of F-6 unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ KPMG LLP McLean, Virginia February 25, 2021 F-7 SLM CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts) December 31, 2020 2019 Assets Cash and cash equivalents $ 4,455,292 $ 5,563,877 Investments: Trading investments at fair value (cost of $ 12,551 ) 16,923 — Available-for-sale investments at fair value (cost of $ 1,986,957 and $ 485,756 , respectively) 1,996,634 487,669 Other investments 80,794 84,420 Total investments 2,094,351 572,089 Loans held for investment (net of allowance for losses of $ 1,361,723 and $ 441,912 , respectively) 19,183,143 24,667,792 Loans held for sale 2,885,640 — Restricted cash 154,417 156,883 Other interest-earning assets 42,874 52,564 Accrued interest receivable 1,387,305 1,392,725 Premises and equipment, net 154,670 134,749 Income taxes receivable, net 374,706 88,844 Tax indemnification receivable 18,492 27,558 Other assets 19,533 29,398 Total assets $ 30,770,423 $ 32,686,479 Liabilities Deposits $ 22,666,039 $ 24,283,983 Short-term borrowings — 289,230 Long-term borrowings 5,189,217 4,354,037 Upromise member accounts — 192,662 Other liabilities 352,332 254,731 Total liabilities 28,207,588 29,374,643 Commitments and contingencies Equity Preferred stock, par value $ 0.20 per share, 20 million shares authorized: Series B: 2.5 million and 4 million shares issued, respectively, at stated value of $ 100 per share 251,070 400,000 Common stock, par value $ 0.20 per share, 1.125 billion shares authorized: 456.7 million and 453.6 million shares issued, respectively 91,346 90,720 Additional paid-in capital 1,331,247 1,307,630 Accumulated other comprehensive loss (net of tax benefit of $( 10,908 ) and $( 3,995 ), respectively) ( 34,200 ) ( 12,367 ) Retained earnings 1,722,365 1,850,512 Total SLM Corporation stockholders’ equity before treasury stock 3,361,828 3,636,495 Less: Common stock held in treasury at cost: 81.4 million and 32.5 million shares, respectively ( 798,993 ) ( 324,659 ) Total equity 2,562,835 3,311,836 Total liabilities and equity $ 30,770,423 $ 32,686,479 See accompanying notes to consolidated financial statements. F-8 SLM CORPORATION CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) Years Ended December 31, 2020 2019 2018 Interest income: Loans $ 1,989,004 $ 2,249,169 $ 1,894,687 Investments 11,743 7,607 6,162 Cash and cash equivalents 20,913 74,256 34,503 Total interest income 2,021,660 2,331,032 1,935,352 Interest expense: Deposits 393,194 547,746 389,349 Interest expense on short-term borrowings 14,459 6,193 5,833 Interest expense on long-term borrowings 134,014 153,778 127,106 Total interest expense 541,667 707,717 522,288 Net interest income 1,479,993 1,623,315 1,413,064 Less: provisions for credit losses 93,133 354,249 244,864 Net interest income after provisions for credit losses 1,386,860 1,269,066 1,168,200 Non-interest income (loss): Gains on sales of loans, net 238,315 — 2,060 Losses on sales of securities, net — — ( 1,549 ) Gains (losses) on derivatives and hedging activities, net 49,544 17,825 ( 87 ) Other income (loss) 43,590 31,102 ( 52,319 ) Total non-interest income (loss) 331,449 48,927 ( 51,895 ) Non-interest expenses: Compensation and benefits 282,497 278,229 252,346 FDIC assessment fees 21,956 32,852 32,786 Other operating expenses 233,635 263,172 271,844 Total operating expenses 538,088 574,253 556,976 Restructuring expenses 26,215 — — Total non-interest expenses 564,303 574,253 556,976 Income before income tax expense 1,154,006 743,740 559,329 Income tax expense 273,316 165,464 71,853 Net income 880,690 578,276 487,476 Preferred stock dividends 9,734 16,837 15,640 Net income attributable to SLM Corporation common stock $ 870,956 $ 561,439 $ 471,836 Basic earnings per common share attributable to SLM Corporation $ 2.27 $ 1.31 $ 1.08 Average common shares outstanding 383,705 427,292 435,054 Diluted earnings per common share attributable to SLM Corporation $ 2.25 $ 1.30 $ 1.07 Average common and common equivalent shares outstanding 387,195 430,674 439,681 Declared dividends per common share attributable to SLM Corporation $ 0.12 $ 0.12 $ — See accompanying notes to consolidated financial statements. F-9 SLM CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) Years Ended December 31, 2020 2019 2018 Net income $ 880,690 $ 578,276 $ 487,476 Other comprehensive income (loss): Unrealized gains (losses) on investments 7,764 7,993 ( 2,561 ) Unrealized gains (losses) on cash flow hedges ( 36,511 ) ( 38,414 ) 11,907 Total unrealized gains (losses) ( 28,747 ) ( 30,421 ) 9,346 Income tax (expense) benefit 6,914 7,431 ( 2,333 ) Other comprehensive income (loss), net of tax (expense) benefit ( 21,833 ) ( 22,990 ) 7,013 Total comprehensive income $ 858,857 $ 555,286 $ 494,489 See accompanying notes to consolidated financial statements. F-10 SLM CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In thousands, except share and per share amounts) Common Stock Shares Preferred Stock Shares Issued Treasury Outstanding Preferred Stock Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income Retained Earnings Treasury Stock Total SLM Corporation Equity Balance at December 31, 2017 4,000,000 443,463,587 ( 11,087,337 ) 432,376,250 $ 400,000 $ 88,693 $ 1,222,277 $ 2,748 $ 868,182 $ ( 107,644 ) $ 2,474,256 Net income — — — — — — — — 487,476 — 487,476 Other comprehensive income, net of tax — — — — — — — 7,013 — — 7,013 Total comprehensive income — — — — — — — — — — 494,489 Reclassification resulting from the adoption of ASU No. 2018-02 — — — — — — — 592 ( 592 ) — — Reclassification resulting from the adoption of ASU No. 2017-12 — — — — — — — 270 591 — 861 Cash dividends: Preferred Stock, series B ($ 3.91 per share) — — — — — — — — ( 15,640 ) — ( 15,640 ) Issuance of common shares — 6,392,634 6,392,634 — 1,279 20,834 — — — 22,113 Stock-based compensation expense — — — — — — 31,524 — — — 31,524 Shares repurchased related to employee stock-based compensation plans — — ( 3,087,396 ) ( 3,087,396 ) — — — — — ( 34,947 ) ( 34,947 ) Balance at December 31, 2018 4,000,000 449,856,221 ( 14,174,733 ) 435,681,488 $ 400,000 $ 89,972 $ 1,274,635 $ 10,623 $ 1,340,017 $ ( 142,591 ) $ 2,972,656 See accompanying notes to consolidated financial statements. F-11 SLM CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In thousands, except share and per share amounts) Common Stock Shares Preferred Stock Shares Issued Treasury Outstanding Preferred Stock Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income Retained Earnings Treasury Stock Total Equity Balance at December 31, 2018 4,000,000 449,856,221 ( 14,174,733 ) 435,681,488 $ 400,000 $ 89,972 $ 1,274,635 $ 10,623 $ 1,340,017 $ ( 142,591 ) $ 2,972,656 Net income — — — — — — — — 578,276 — 578,276 Other comprehensive loss, net of tax — — — — — — — ( 22,990 ) — — ( 22,990 ) Total comprehensive income — — — — — — — — — — 555,286 Cash dividends: Common Stock ($ 0.12 per share) — — — — — — — — ( 51,114 ) — ( 51,114 ) Preferred Stock, series B ($ 4.21 per share) — — — — — — — — ( 16,837 ) — ( 16,837 ) Dividend equivalent units related to employee stock-based compensation plans — — — — — — 5 — ( 5 ) — — Issuance of common shares — 3,743,705 3,743,705 — 748 2,627 — — — 3,375 Stock-based compensation expense — — — — — — 30,363 — 175 — 30,538 Common stock repurchased — — ( 16,962,199 ) ( 16,962,199 ) — — — — — ( 167,201 ) ( 167,201 ) Shares repurchased related to employee stock-based compensation plans — — ( 1,369,630 ) ( 1,369,630 ) — — — — — ( 14,867 ) ( 14,867 ) Balance at December 31, 2019 4,000,000 453,599,926 ( 32,506,562 ) 421,093,364 $ 400,000 $ 90,720 $ 1,307,630 $ ( 12,367 ) $ 1,850,512 $ ( 324,659 ) $ 3,311,836 See accompanying notes to consolidated financial statements. F-12 SLM CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In thousands, except share and per share amounts) Common Stock Shares Preferred Stock Shares Issued Treasury Outstanding Preferred Stock Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Loss Retained Earnings Treasury Stock Total Equity Balance at December 31, 2019 4,000,000 453,599,926 ( 32,506,562 ) 421,093,364 $ 400,000 $ 90,720 $ 1,307,630 $ ( 12,367 ) $ 1,850,512 $ ( 324,659 ) $ 3,311,836 Cumulative adjustment for the adoption of ASU No. 2016-13 (CECL) — — — — — — — — ( 952,639 ) — ( 952,639 ) Balance at January 1, 2020 4,000,000 453,599,926 ( 32,506,562 ) 421,093,364 400,000 90,720 1,307,630 ( 12,367 ) 897,873 ( 324,659 ) 2,359,197 Net income — — — — — — — — 880,690 — 880,690 Other comprehensive loss, net of tax — — — — — — — ( 21,833 ) — — ( 21,833 ) Total comprehensive income — — — — — — — — — — 858,857 Cash dividends declared: Common Stock ($ 0.12 per share) — — — — — — — — ( 46,351 ) — ( 46,351 ) Preferred Stock, series B ($ 2.56 per share) — — — — — — — — ( 9,734 ) — ( 9,734 ) Repurchase of Preferred Stock, series B ( 1,489,304 ) — — — ( 148,930 ) — 80,875 — — — ( 68,055 ) Dividend equivalent units related to employee stock-based compensation plans — — — — — — 271 — ( 281 ) — ( 10 ) Issuance of common shares — 3,129,325 3,129,325 — 626 2,976 — — — 3,602 Stock-based compensation expense — — — — — — 36,418 — 168 — 36,586 Common stock repurchased — — ( 47,736,847 ) ( 47,736,847 ) — — ( 96,923 ) — — ( 461,244 ) ( 558,167 ) Shares repurchased related to employee stock-based compensation plans — — ( 1,197,843 ) ( 1,197,843 ) — — — — — ( 13,090 ) ( 13,090 ) Balance at December 31, 2020 2,510,696 456,729,251 ( 81,441,252 ) 375,287,999 $ 251,070 $ 91,346 $ 1,331,247 $ ( 34,200 ) $ 1,722,365 $ ( 798,993 ) $ 2,562,835 See accompanying notes to consolidated financial statements. F-13 SLM CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Years Ended December 31, 2020 2019 2018 Operating activities Net income $ 880,690 $ 578,276 $ 487,476 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Provisions for credit losses 93,133 354,249 244,864 Deferred tax provision (benefit) 72,776 ( 9,714 ) ( 63,301 ) Amortization of brokered deposit placement fee 19,401 17,788 13,055 Amortization of Secured Borrowing Facility upfront fee 2,976 1,117 1,128 Amortization of deferred loan origination costs and loan premium/(discounts), net 24,152 13,049 10,905 Net amortization of discount on investments 6,350 2,069 1,712 Reduction of tax indemnification receivable 9,066 11,649 92,815 Depreciation of premises and equipment 15,066 14,669 13,829 Stock-based compensation expense 36,464 30,600 31,524 Unrealized (gains) losses on derivative and hedging activities, net ( 10,333 ) ( 19,046 ) ( 1,353 ) Gains on sale of loans, net ( 238,315 ) — ( 2,060 ) Losses on sales of securities, net — — 1,549 Gain on sale of Upromise subsidiary, net ( 11,331 ) — — Other adjustments to net income, net 8,810 3,724 7,446 Changes in operating assets and liabilities: Increase in accrued interest receivable ( 876,703 ) ( 963,885 ) ( 864,461 ) Increase in non-marketable securities ( 839 ) ( 10,700 ) ( 5,000 ) Decrease (increase) in other interest-earning assets 9,690 ( 25,407 ) ( 5,571 ) Decrease in tax indemnification receivable — — 35,989 Increase in other assets ( 50,454 ) ( 3,091 ) ( 64,777 ) Decrease in income tax payable, net ( 45,611 ) ( 30,191 ) ( 79,693 ) (Decrease) increase in accrued interest payable ( 14,602 ) 13,817 25,979 Decrease in Upromise member accounts due to sale ( 193,840 ) — — Increase in other liabilities 80,785 5,386 15,204 Total adjustments ( 1,063,359 ) ( 593,917 ) ( 590,217 ) Total net cash used in operating activities ( 182,669 ) ( 15,641 ) ( 102,741 ) Investing activities Loans acquired and originated ( 5,378,283 ) ( 6,138,105 ) ( 6,493,367 ) Net proceeds from sales of loans held for investment 3,875,737 — 44,832 Proceeds from claim payments 28,709 42,869 54,659 Net decrease in loans held for investment 3,832,991 4,094,021 3,076,992 Purchases of available-for-sale securities ( 2,083,261 ) ( 356,414 ) ( 15,876 ) Proceeds from sales and maturities of available-for-sale securities 654,515 50,915 77,897 Proceeds for sale of Upromise subsidiary, net 16,922 — — Total net cash provided by (used in) investing activities 947,330 ( 2,306,714 ) ( 3,254,863 ) Financing activities Brokered deposit placement fee ( 4,810 ) ( 27,978 ) ( 25,785 ) Net (decrease) increase in certificates of deposit ( 2,428,094 ) 4,349,741 2,525,040 Net increase in other deposits 704,382 923,793 918,420 Issuance costs for collateralized borrowings ( 1,402 ) — — Borrowings collateralized by loans in securitization trusts - issued 1,338,641 1,105,594 1,891,027 Borrowings collateralized by loans in securitization trusts - repaid ( 1,003,327 ) ( 1,042,892 ) ( 888,640 ) Borrowings under Secured Borrowing Facility — 297,800 300,000 Repayment of borrowings under Secured Borrowing Facility ( 289,230 ) ( 8,570 ) ( 300,000 ) Fees paid - Secured Borrowing Facility ( 3,256 ) ( 1,116 ) ( 1,098 ) Issuance costs for unsecured debt offering ( 1,309 ) — — F-14 Unsecured debt issued 495,000 — — Preferred stock dividends paid ( 9,734 ) ( 16,837 ) ( 15,640 ) Repurchase of Series B Preferred Stock ( 68,055 ) — — Common stock dividends paid ( 46,351 ) ( 51,114 ) — Common stock repurchased ( 558,167 ) ( 167,201 ) — Net cash (used in) provided by financing activities ( 1,875,712 ) 5,361,220 4,403,324 Net (decrease) increase in cash, cash equivalents and restricted cash ( 1,111,051 ) 3,038,865 1,045,720 Cash, cash equivalents and restricted cash at beginning of year 5,720,760 2,681,895 1,636,175 Cash, cash equivalents and restricted cash at end of year $ 4,609,709 $ 5,720,760 $ 2,681,895 Cash disbursements made for: Interest $ 517,444 $ 666,018 $ 472,459 Income taxes paid $ 248,122 $ 201,792 $ 228,074 Income taxes refunded $ ( 6,219 ) $ ( 853 ) $ ( 13,449 ) Reconciliation of the Consolidated Statements of Cash Flows to the Consolidated Balance Sheets: Cash and cash equivalents $ 4,455,292 $ 5,563,877 $ 2,559,106 Restricted cash 154,417 156,883 122,789 Total cash, cash equivalents and restricted cash $ 4,609,709 $ 5,720,760 $ 2,681,895 See accompanying notes to consolidated financial statements. F-15 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, unless otherwise noted) 1. Organization and Business SLM Corporation (“Sallie Mae,” “SLM,” the “Company,” “we,” “our” or “us”) is a holding company that operates through a number of subsidiaries and is the premier brand for college and continuous education. While the Sallie Mae name has existed for more than 40 years, the company that operates as Sallie Mae today, SLM Corporation, was formed in late 2013 and includes its wholly-owned subsidiary, Sallie Mae Bank, an industrial bank established in 2005 (the “Bank”). On April 30, 2014, we legally separated (the “Spin-Off”) from another public company that is now named Navient Corporation (“Navient”),which is in the education loan management, servicing, asset recovery, and consolidation loan business. We are a consumer banking business and did not retain any assets or liabilities generated prior to the Spin-Off other than those explicitly retained by us. We sometimes refer to the company that existed prior to the Spin-Off as “pre-Spin-Off SLM.” The Bank was formed in 2005 to fund and originate Private Education Loans (as hereinafter defined) on behalf of pre-Spin-Off SLM. While the Bank first originated Private Education Loans in February 2006, pre-Spin-Off SLM continued to purchase a portion of its Private Education Loans from third-party lending partners through mid-2009. With some minor exceptions, the Bank became the sole originator of Private Education Loans for pre-Spin-Off SLM beginning with the 2009-2010 academic year, the first academic year following the launch of the Bank’s Smart Option Student Loan program in mid-2009. Our primary business is to originate and service loans we make to students and their families to finance the cost of their education. We use “Private Education Loans” to mean education loans to students or their families that are not made, insured or guaranteed by any state or federal government. Private Education Loans do not include loans insured or guaranteed under the Federal Family Education Loan Program (“FFELP Loans”). The core of our marketing strategy is to generate Private Education Loan originations by promoting our products on campuses through the financial aid offices as well as through online and direct marketing to students and their families. The Bank is regulated by the Utah Department of Financial Institutions (the “UDFI”), the Federal Deposit Insurance Corporation (the “FDIC”) and the Consumer Financial Protection Bureau (the “CFPB”). F-16 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 2. Significant Accounting Policies Use of Estimates and Assumptions The financial reporting and accounting policies of SLM Corporation conform to generally accepted accounting principles in the United States of America (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Key accounting policies that include significant judgments and estimates include the valuation of allowance for credit losses and derivative accounting. Consolidation The consolidated financial statements include the accounts of SLM Corporation and its majority-owned and controlled subsidiaries after eliminating the effects of intercompany accounts and transactions. We consolidate any variable interest entity (“VIE”) where we have determined we are the primary beneficiary. The primary beneficiary is the entity which has both: (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (2) the obligation to absorb losses or receive benefits of the entity that could potentially be significant to the VIE. Cash and Cash Equivalents Cash and cash equivalents include cash held in the Federal Reserve Bank of San Francisco (the “FRB”) and commercial bank accounts, and other short-term liquid instruments with original maturities of three months or less. Fees associated with investing cash and cash equivalents are amortized into interest income using the effective interest rate method. Trading Investments In March 2020, we sold approximately $ 1.7 billion of Private Education Loans through securitization transactions where we were required to retain a 5 percent vertical risk retention interest (i.e., 5 percent of each class issued in the securitizations). We classified those vertical risk retention interests related to the transactions as available-for-sale investments, except for the interest in the residual classes, which we classified as trading investments recorded at fair value with changes recorded through earnings. Available-for-Sale Investments Investments consisted of mortgage-backed securities, Utah Housing Corporation bonds and U.S. government-sponsored enterprises and Treasury securities. We record our investment purchases and sales on a trade date basis. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts, which are amortized using the effective interest rate method. Our investments are classified as available-for-sale and reported at fair value. Unrealized gains or losses on available-for-sale investments are recorded in equity and reported as a component of other comprehensive income (loss), net of applicable income taxes, unless a decline in the investment’s value is considered to be other-than-temporary, in which case the loss is recorded directly to earnings. Management reviews all investments at least quarterly to determine whether any impairment is other-than-temporary. Impairment is evaluated by considering several factors, including the length of time and extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability to retain the investment to F-17 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 2. Significant Accounting Policies (Continued) allow for an anticipated recovery in fair value. If, based on the analysis, it is determined that the impairment is other-than-temporary, the investment is written down to fair value and a loss is recognized through earnings. Other Investments We hold investments in non-marketable securities and account for these investments at cost, less impairment, plus or minus observable price changes of identical or similar securities of the same issuer. We also invest in affordable housing projects that qualify for the low income housing tax credit (“LIHTC”), which is designed to promote private development of low income housing. These investments generate a return mostly through realization of federal tax credits. Loans Held for Investment Loans, consisting of Private Education Loans, FFELP Loans, and our suite of credit cards (“Credit Cards”) that we have the ability and intent to hold for the foreseeable future, are classified as held for investment, and are carried at amortized cost. Amortized cost includes the unamortized premiums, discounts, and capitalized origination costs and fees, all of which are amortized to interest income as discussed under “Loan Interest Income.” Loans which are held for investment are reported net of an allowance for credit losses. Loans Held for Sale Any loans we have not classified as held for investment are classified as held-for-sale and are carried at the lower of cost or fair value. Loans are classified as held-for-sale when we have the intent and ability to sell such loans. Loans which are held-for-sale do not have the associated premium, discount, and capitalized origination costs and fees amortized into interest income. When a decision has been made to sell loans not previously classified as held for sale, such loans are transferred into the held-for-sale classification and carried at the lower of amortized cost basis (which excludes any allowance for credit losses) or fair value. At the time of the transfer to the held-for-sale classification, any amount by which the amortized cost basis exceeds fair value is accounted for as a valuation allowance. In addition, once a loan is classified as held-for-sale, we reverse any allowance for loan loss applicable to these loans. As market conditions permit, we may sell or securitize loans as a source of financing for other loans. Due to varying structuring terms, certain transactions may qualify for sale treatment while others do not qualify for sale treatment and are recorded as financings. All of our education loans are initially categorized as held for investment. It is only when we have selected the loans to sell or securitize and the transaction qualifies as a sale that we transfer the loans into the held-for-sale classification and carry them at the lower of cost or fair value. If we anticipate recognizing a gain related to the impending securitization or sale, then the fair value of the loans is higher than their respective cost basis and no valuation allowance is recorded. Restricted Cash Restricted cash primarily includes amounts held in student loan securitization trusts and other secured borrowings. This cash must be used to make payments related to trust obligations. Amounts on deposit in these accounts are primarily the result of timing differences between when principal and interest is collected on the trust assets and when principal and interest is paid on trust liabilities. F-18 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 2. Significant Accounting Policies (Continued) Allowance for Credit Losses 2020 We maintain an allowance for credit losses for the lifetime expected credit losses on loans in our portfolios, as well as for future loan commitments, at the reporting date. In determining the lifetime expected credit losses on our Private Education Loan portfolio loan segments, we use a discounted cash flow model. This method requires us to project future principal and interest cash flows on our loans in those portfolios. To estimate the future expected cash flows, we use a vintage-based model that considers life of loan loss expectations, prepayments (both voluntary and involuntary), defaults, recoveries, and any other adjustments deemed necessary, to determine the adequacy of the allowance at each balance sheet date. These cash flows are discounted at the loan’s effective interest rate to calculate the present value of those cash flows. Management adjusts the effective interest rate used to discount expected cash flows to incorporate expected prepayments. The difference between the present value of those cash flows and the amortized cost basis of the underlying loans is the allowance for credit losses. Entities that measure credit losses based on the present value of expected future cash flows are permitted to report the entire change in present value as credit loss expense, but may alternatively report the change in present value due to the passage of time as interest income. We have elected to report the entire change in present value as credit loss expense. In determining the loss rates used for the vintage-based approach, we start with our historical loss rates, stratify the loans within each vintage, and then adjust the loss rates based upon economic factors forecasted over a reasonable and supportable forecast period. The reasonable and supportable forecast period is meant to represent the period in which we believe we can estimate the impact of forecasted economic factors in our expected losses. At the end of the reasonable and supportable forecast period, we immediately revert our forecast of expected losses to our historical averages. We use a two-year reasonable and supportable forecast period, although this period is subject to change as our view evolves on our ability to reasonably forecast economic conditions to estimate future losses. In estimating our current expected credit losses, we use a combination of expected economic scenarios coupled with our historical experience to derive a base case adjusted for any qualitative factors (as described below). We also develop an adverse and favorable economic scenario. At each reporting date, we determine the appropriate weighting of these alternate scenarios based upon the current economic conditions and our view of the risks of alternate outcomes. This weighting of expectations is used in calculating our current expected credit losses recorded each period. In estimating recoveries, we use both estimates of what we would receive from the sale of defaulted loans as well as historical borrower payment behavior to estimate the timing and amount of future recoveries on charged-off loans. We use historical experience and economic forecasts to estimate future prepayment speeds. As with our loss forecasts, at the end of the two-year reasonable and supportable forecast for prepayments, we immediately revert to our historical long-term prepayment rates. In addition to the above modeling approach, we also take certain other qualitative factors into consideration when calculating the allowance for credit losses. These qualitative factors include, but are not limited to, changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off and recovery practices not already included in the analysis, and the effect of other external factors such as legal and regulatory requirements on the level of estimated current expected credit losses. The evaluation of the allowance for credit losses is inherently subjective, as it requires material estimates that may be susceptible to significant changes. If actual future performance in delinquency, charge-offs, and recoveries is significantly different than estimated, or management assumptions or practices were to change, this could materially affect the estimate of the allowance for credit losses, the timing of when losses are recognized, and the related provision for credit losses on our consolidated statements of income. F-19 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 2. Significant Accounting Policies (Continued) When calculating our allowance for credit losses and liability for unfunded commitments, we incorporate several inputs that are subject to change period to period. These include, but are not limited to, CECL model inputs and any overlays deemed necessary by management. The most impactful CECL model inputs include: • Economic forecasts; • Weighting of economic forecasts; • Prepayment speeds; • New loan volume, including commitments made but not yet disbursed; and • Loan sales. Management overlays can encompass a broad array of factors not captured by model inputs, such as changes in servicing policies. Below we describe in further detail our policies and procedures for the allowance for credit losses as they relate to our Private Education Loan, Credit Card, and FFELP Loan portfolios. During the third quarter of 2020, we sold our entire Personal Loan portfolio. Allowance for Private Education Loan Losses In addition to the key assumptions/estimates described above, some estimates are unique to our Private Education Loan portfolio. Estimates are made on our Private Education Loans regarding when each borrower will separate from school. The cash flow timing of when a borrower will begin making full principal and interest payments is dependent upon when the student either graduates or leaves school. These dates can change based upon many factors. We receive information regarding projected graduation dates from a third-party clearinghouse. The separation from school date will be updated quarterly based on updated information received from the clearinghouse. Additionally, when we have a contractual obligation to fund a loan or a portion of a loan at a later date, we make an estimate regarding the percentage of this obligation that will be funded. This estimate is based on historical experience. For unfunded commitments, we recognize the related life of loan allowance as a liability. Once the loan is funded, that liability transfers to the allowance for Private Education Loan losses. Key Credit Quality Indicators - Private Education Loans We determine the collectability of our Private Education Loan portfolio by evaluating certain risk characteristics. We consider credit score at original approval and periodically refreshed/updated credit scores through the loan’s term, existence of a cosigner, loan status, and loan seasoning as the key credit quality indicators because they have the most significant effect on the determination of the adequacy of our allowance for credit losses. Credit scores are an indicator of the creditworthiness of borrowers and the higher the credit scores the more likely it is the borrowers will be able to make all of their contractual payments. Loan status affects the credit risk because a past due loan is more likely to result in a credit loss than a current loan. Additionally, loans in the deferred payment status have different credit risk profiles compared with those in current pay status. Loan seasoning affects credit risk because a loan with a history of making payments generally has a lower incidence of default than a loan with a history of making infrequent or no payments. The existence of a cosigner lowers the likelihood of default as well. We monitor and update these credit quality indicators in the analysis of the adequacy of our allowance for credit losses on a quarterly basis. We collect on defaulted loans through a mix of in-house collectors, third-party collectors and sales to third-parties. For December 31, 2020 and 2019, we used both an estimate of recovery rates from in-house collections as well as expectations of future sales of defaulted loans to estimate the timing and amount of future recoveries on charged-off loans. Private Education Loans generally do not require borrowers to begin principal and interest repayment until at least six months after the borrowers have graduated or otherwise separated from school. Consequently, the loss estimates for these loans are generally low while the borrower is in school and then increase upon the end of the grace period after separation from F-20 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 2. Significant Accounting Policies (Continued) school. At December 31, 2020 and 2019, 24 percent and 25 percent, respectively, of the principal balance of the Private Education Loan portfolio was related to borrowers who are in an in-school (fully deferred), grace, or other deferment status and not required to make payments. Our collection policies for Private Education Loans allow for periods of nonpayment for certain borrowers requesting an extended grace period upon leaving school or experiencing temporary difficulty meeting payment obligations. This is referred to as forbearance and is considered in estimating the allowance for credit losses. As part of concluding on the adequacy of the allowance for credit losses for Private Education Loans, we review key allowance and loan metrics. The most relevant of these metrics considered are the allowance as a percentage of ending total loans, delinquency percentages, and forbearance percentages. We consider a Private Education Loan to be delinquent if the borrower has not made a required payment prior to the 31st day after such payment was contractually due. Troubled Debt Restructurings (“TDRs”) In estimating the expected defaults for our Private Education Loans that are considered TDRs, we follow the same discounted cash flow process described above but use the historical loss rates related to past TDR loans. The appropriate gross loss rates are determined for each individual loan by evaluating loan maturity, risk characteristics, and macroeconomic conditions. The allowance for our TDR portfolio is included in our overall allowance for Private Education Loans. Our TDR portfolio is comprised mostly of loans with interest rate reductions and loans with forbearance usage greater than three months, as further described below. We adjust the terms of loans for certain borrowers when we believe such changes will help our customers manage their student loan obligations, achieve better student outcomes, and increase the collectability of the loans. These changes generally take the form of a temporary forbearance of payments, a temporary interest rate reduction, a temporary interest rate reduction with a permanent extension of the loan term, and/or a short-term extended repayment alternative. When we give a borrower facing financial difficulty an interest rate reduction, we temporarily reduce the rate (currently to 4.0 percent) for a two-year period and, in the vast majority of cases, permanently extend the final maturity of the loan. The combination of these two loan term changes helps reduce the monthly payment due from the borrower and increases the likelihood the borrower will remain current during the interest rate modification period as well as when the loan returns to its original contractual interest rate. We classify a loan as a TDR due to forbearance using a two-step process. The first step is to identify a loan that was in full principal and interest repayment status and received more than three months of forbearance in a 24 -month period; however, during the first nine months after a loan had entered full principal and interest repayment status, we do not count up to the first six months of forbearance received during that period against the three-month policy limit. The second step is to evaluate the creditworthiness of the loan by examining its most recent refreshed FICO score. Loans that have met the criteria in the first test and have a FICO score above a certain threshold (based on the most recent quarterly FICO score refresh) will not be classified as TDRs. Loans that have met the criteria in the first test and have a FICO score under the threshold (based on the most recent quarterly FICO score refresh) will be classified as TDRs. A loan also becomes a TDR when it is modified to reduce the interest rate on the loan (regardless of when such modification occurs and/or whether such interest rate reduction is temporary). Once a loan qualifies for TDR status, it remains a TDR for allowance purposes for the remainder of its life. About half our loans that are considered TDRs involve a temporary forbearance of payments and do not change the contractual interest rate of the loan. As of December 31, 2020 and 2019, approximately 47 percent and 50 percent, respectively, of TDRs were classified as such due to their forbearance status. For additional information, see Note 7, “Allowance for Credit Losses.” During the first quarter of 2020, the pandemic caused by coronavirus 2019 or COVID-19 (“COVID-19”) began to spread worldwide and has caused significant disruptions to the U.S. and world economies. F-21 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 2. Significant Accounting Policies (Continued) On March 27, 2020, then President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which, among other things, allows us to (i) elect to suspend the requirements under GAAP for loan modifications related to COVID-19 that would otherwise be categorized as TDRs, and (ii) suspend any determination of a loan modified as a result of the effects of COVID-19 as being a TDR, including impairment for accounting purposes. Furthermore, on December 27, 2020, the Consolidated Appropriations Act, 2021 (the “CAA”) was signed into law. The CAA provides for additional COVID-19 focused relief and extends certain provisions of the CARES Act. We have elected to suspend TDR accounting for both forbearance and interest rate modifications of loans that occur as a result of COVID-19 for the applicable period of the CARES Act and CAA relief. The relief from TDR guidance applies to modifications of loans that were not more than 30 days past due as of December 31, 2019, and that occur during the period beginning on March 1, 2020, and ending on the earlier of (i) sixty days after the date on which the national emergency related to the COVID-19 outbreak is terminated, or (ii) January 1, 2022. We are continuing to apply TDR accounting to those loans that were more than 30 days past due as of December 31, 2019 and were subsequently modified. Off-Balance Sheet Exposure for Contractual Loan Commitments When we approve a Private Education Loan at the beginning of an academic year, that approval may cover the borrowing for the entire academic year. As such, we do not always disburse the full amount of the loan at the time of such approval, but instead have a commitment to fund a portion of the loan at a later date (usually the start of the second semester or subsequent trimesters). We estimate expected credit losses over the contractual period in which we are exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by us. The discounted cash flow approach described above includes expected future contractual disbursements. The portion of the allowance for credit losses related to future disbursements is shown as a liability on the face of the balance sheet, and related provision for credit losses is reflected on the income statement. Uncollectible Interest The majority of the total accrued interest receivable on our Private Education Loan portfolio represents accrued interest on deferred loans where no payments are due while the borrower is in school and on fixed-pay loans where the borrower makes a $25 monthly payment that is smaller than the interest accrued on the loan in that month. The accrued interest on these loans will be capitalized and increase the unpaid principal balance of the loans when the borrower exits the grace period after separation from school. The discounted cash flow approach described above considers both the collectability of principal as well as this portion of accrued interest that is expected to capitalize to the balance of the loan. Therefore, the allowance for this portion of accrued interest balance is included in our allowance for credit losses. The discounted cash flow approach does not consider interest accrued on loans that are in a full principal and interest repayment status or in interest-only repayment status. We separately capture the amount of expected uncollectible interest associated with these loans using historical experience to estimate the uncollectible interest for the next four months at each period-end date. This amount is recorded as a reduction of interest income. Accrued interest receivable is separately disclosed on the face of the balance sheet. Allowance for Credit Card Loans We use the gross loss approach when estimating the allowance for credit losses for our Credit Card portfolio. Because our Credit Card portfolio is new and we do not have historical loss experience, we use estimated loss rates reported by other financial institutions to estimate our allowance for credit losses for Credit Cards, net of expected recoveries. In addition, we use a model that utilizes purchased credit card information with risk characteristics similar to those of our own portfolio as a challenger model. We then consider any qualitative factors that may change our future expectations of losses. As all of our Credit Card loans are unconditionally cancelable by us, the issuer, we do not record any estimate of credit losses for unused portions of our Credit Card commitments. F-22 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 2. Significant Accounting Policies (Continued) Allowance for FFELP Loan Losses FFELP Loans are insured as to their principal and accrued interest in the event of default, subject to a risk-sharing level based on the date of loan disbursement. These insurance obligations are supported by contractual rights against the United States. For loans disbursed on or after July 1, 2006, we receive 97 percent reimbursement on all qualifying claims. For loans disbursed after October 1, 1993, and before July 1, 2006, we receive 98 percent reimbursement on all qualifying claims. For loans disbursed prior to October 1, 1993, we receive 100 percent reimbursement. Because we bear a maximum of three percent loss exposure due to this federal guarantee, our allowance for credit losses for FFELP Loans and related periodic provision expense are relatively small. We use the gross loss approach when estimating the allowance for credit losses for the unguaranteed portion of our FFELP Loans. We maintain an allowance for credit losses for our FFELP Loans at a level sufficient to cover lifetime expected credit losses. The allowance for FFELP Loan losses uses historical experience of customer default behavior. We apply the default rate projections, net of applicable risk sharing, to our FFELP Loans for the current period to perform our quantitative calculation. Once the quantitative calculation is performed, we review the adequacy of the allowance for credit losses and determine if qualitative adjustments need to be considered. Allowance for Credit Losses 2019 Prior to January 1, 2020, we maintained an allowance for credit losses at an amount sufficient to absorb probable losses incurred in our portfolios, as well as regarding future loan commitments, at the reporting date based on a projection of estimated probable credit losses incurred in the portfolio. We considered a loan to be impaired when, based on current information, a loss had been incurred and it was probable that we would not receive all contractual amounts due. When making our assessment as to whether a loan was impaired, we also took into account more than insignificant delays in payment. We generally evaluated impaired loans on an aggregate basis by grouping similar loans. We analyzed our portfolios to determine the effects that the various stages of delinquency and forbearance had on borrower default behavior and ultimate charge off. We estimated the allowance for credit losses for our loan portfolios using a roll rate analysis of delinquent and current accounts. A “roll rate analysis” is a technique used to estimate the likelihood that a loan receivable may progress through the various delinquency stages and ultimately charge off. We also took into account the current and future economic environment and certain other qualitative factors when calculating the allowance for credit losses. The evaluation of the allowance for credit losses is inherently subjective, as it required material estimates that may be susceptible to significant changes. Our default estimates were based on a loss emergence period of one year for Private Education Loans, Personal Loans and Credit Cards and two years for FFELP Loans. A loss emergence period represents the expected period between the first occurrence of an event likely to cause a loss on a loan and the date the loan is expected to be charged off, taking into consideration account management practices that affect the timing of a loss, such as the usage of forbearance. The loss emergence period underlying the allowance for credit losses was subject to a number of assumptions. If actual future performance in delinquency, charge-offs and recoveries was significantly different than estimated, or account management assumptions or practices were to change, this could materially affect the estimate of the allowance for credit losses, the timing of when losses were recognized, and the related provision for credit losses on our consolidated statements of income. We utilized various models to determine an appropriate allowance for credit losses. Changes to model inputs were made as deemed necessary. The models were reviewed and validated periodically. Below we describe in further detail our policies and procedures for the allowance for credit losses in 2019 as they relate to our Private Education Loan, Personal Loan, FFELP Loan portfolios and Credit Cards. F-23 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 2. Significant Accounting Policies (Continued) Allowance for Private Education Loan Losses 2019 Prior to January 1, 2020, in determining the allowance for credit losses on our Private Education Loans that are not TDRs, we estimated the principal amount of loans that would default over the next year (one year being the expected period between a loss trigger event and default) using a roll rate model and how much we expected to recover over the same one-year period related to the defaulted amount. The expected defaults less our expected recoveries adjusted for any qualitative factors (discussed below) equaled the allowance related to this portfolio. Our historical experience indicates that, on average, the time between the date that a customer experiences a default causing event (i.e., the loss trigger event) and the date that we charge off the unrecoverable portion of that loan is one year. In estimating both the non-TDR and TDR allowance amounts, we started with historical experience of customer delinquency and default behavior. We made judgments about which historical period to start with and then made further judgments about whether that historical experience was representative of future expectations and whether additional adjustments may be needed to those historical default rates. We also took certain other qualitative factors into consideration when calculating the allowance for credit losses. These qualitative factors include, but were not limited to, changes in the economic environment, changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off and recovery practices not already included in the analysis, and the effect of other external factors, such as legal and regulatory requirements, on the level of estimated credit losses. Certain Private Education Loans do not require borrowers to begin repayment until at least six months after they have graduated or otherwise left school. Consequently, the loss estimates for these loans was generally low while the borrower is in school. At December 31, 2019, 25 percent of the principal balance in the Private Education Loan portfolio was related to borrowers who were in an in-school (fully deferred), grace, or deferment status and not required to make payments. As this population of borrowers leaves school, they will be required to begin payments on their loans, and the allowance for losses could change accordingly. Similar to the rules governing FFELP payment requirements, our collection policies allow for periods of nonpayment for borrowers requesting additional payment grace periods upon leaving school or experiencing temporary difficulty meeting payment obligations. This is referred to as forbearance status and was considered separately in the allowance for credit losses. The loss emergence period was in alignment with the typical collection cycle and took into account these periods of nonpayment. As part of concluding on the adequacy of the allowance for credit losses, we reviewed key allowance and loan metrics. The most relevant of these metrics considered are the allowance coverage of net charge-offs ratio; the allowance as a percentage of ending total loans and of ending loans in repayment; and delinquency and forbearance percentages. We consider a loan to be delinquent if the borrower has not made a required payment prior to the 31st day after such payment was contractually due. We used a model to estimate the amount of uncollectible accrued interest on Private Education Loans and reserved for that amount against current period interest income. Our non-TDR allowance for credit losses was estimated using an analysis of delinquent and current accounts. Our roll rate model was used to estimate the likelihood that a loan receivable may progress through the various delinquency stages and ultimately charge off. Once a charge-off forecast was estimated, a recovery assumption was layered on top. In estimating recoveries, we used both estimates of what we would receive from the sale of defaulted loans as well as historical borrower payment behavior to estimate the timing and amount of future recoveries on charged-off loans. The roll rate analysis model was based upon actual experience using the 120 day charge-off default aversion strategies. Once the quantitative calculation was performed, we reviewed the adequacy of the allowance for credit losses and determined if qualitative adjustments needed to be considered. F-24 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 2. Significant Accounting Policies (Continued) Allowance for Personal Loans 2019 Prior to January 1, 2020, we maintained an allowance for Personal Loan losses at an amount sufficient to absorb losses estimated and viewed at the reporting date as probable credit losses to be incurred in the portfolio. In determining the allowance for credit losses on our Personal Loan portfolio that were not TDRs, we estimated the principal amount of the loans that would default over the next twelve months (twelve months being the expected period between a loss trigger event and default) and how much we expected to recover over the same twelve-month period related to the defaulted amounts. The expected defaults less our expected recoveries adjusted for any qualitative factors equaled the allowance related to this portfolio. At December 31, 2019, there were no Personal Loans classified as TDRs. Troubled Debt Restructurings 2019 Separately, for our TDR portfolio, we estimated an allowance amount sufficient to cover life-of-loan expected losses through an impairment calculation based on the difference between the loan’s basis and the present value of expected future cash flows (which would include life-of-loan default and recovery assumptions) discounted at the loan’s original effective interest rate. Our TDR portfolio is comprised mostly of loans with interest rate reductions and loans with forbearance usage greater than three months during a 24-month period, as further described above. Allowance for FFELP Loan Losses 2019 FFELP Loans are insured as to their principal and accrued interest in the event of default subject to a risk-sharing level based on the date of loan disbursement. These insurance obligations are supported by contractual rights against the United States. For loans disbursed on or after July 1, 2006, we receive 97 percent reimbursement on all qualifying claims. For loans disbursed after October 1, 1993, and before July 1, 2006, we receive 98 percent reimbursement. For loans disbursed prior to October 1, 1993, we receive 100 percent reimbursement. The 2019 allowance for FFELP Loan losses used historical experience of customer default behavior and a two-year loss emergence period to estimate the credit losses incurred in the loan portfolio at the reporting date. We applied the default rate projections, net of applicable risk sharing, to each category for the relevant period to perform our quantitative calculation. Once the quantitative calculation was performed, we reviewed the adequacy of the allowance for credit losses and determined if qualitative adjustments needed to be considered. Allowance for Credit Cards 2019 The 2019 allowance for Credit Card losses was management’s estimate of credit losses inherent in the Credit Card portfolio at the relevant balance sheet date. The allowance for Credit Card losses used historical loss rates for accounts with similar characteristics (based on industry data) as a reasonable basis to estimate future losses. At December 31, 2019, there were no Credit Cards classified as TDRs. Deposits Our retail deposit accounts are principally certificates of deposit (“CDs”), money market deposit accounts (“MMDAs”) and high-yield savings (“HYS”) accounts. CDs are accounts that have a stipulated maturity and interest rate. Retail CDs may be withdrawn early, but a penalty is assessed. MMDA and HYS accounts are both interest and non-interest bearing accounts that have no maturity or expiration date. For retail MMDA and HYS accounts, the depositor may be required to give written notice of any intended withdrawal not less than seven days before the withdrawal is made. The Bank also includes brokered CDs in its funding base. Early withdrawal of brokered CDs is prohibited (except in the case of death or legal incapacity). Other deposit accounts include large interest-bearing omnibus accounts deposited in the Bank by commercial entities having custodial responsibilities for many underlying accounts. These omnibus accounts may be structured with or without fixed maturities, and may have fixed or variable interest rates. F-25 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 2. Significant Accounting Policies (Continued) Fair Value Measurement We use estimates of fair value in applying various accounting standards for our financial statements. Fair value measurements are used in one of four ways: • In the consolidated balance sheet with changes in fair value recorded in the consolidated statement of income; • In the consolidated balance sheet with changes in fair value recorded in the accumulated other comprehensive income section of the consolidated statement of changes in equity; • In the consolidated balance sheet for instruments carried at lower of cost or fair value with impairment charges recorded in the consolidated statement of income; and • In the notes to the consolidated financial statements. Fair value is defined as the price to sell an asset or transfer a liability in an orderly transaction between willing and able market participants. In general, our policy in estimating fair value is to first look at observable market prices for identical assets and liabilities in active markets, where available. When these are not available, other inputs are used to model fair value such as prices of similar instruments, yield curves, volatilities, prepayment speeds, default rates and credit spreads (including for our liabilities), relying first on observable data from active markets. Depending on current market conditions, additional adjustments to fair value may be based on factors such as liquidity, credit, and bid/offer spreads. Transaction costs are not included in the determination of fair value. When possible, we seek to validate the model’s output to market transactions. Depending on the availability of observable inputs and prices, different valuation models could produce materially different fair value estimates. The values presented may not represent future fair values and may not be realizable. We categorize our fair value estimates based on a hierarchical framework associated with three levels of price transparency utilized in measuring financial instruments at fair value. Classification is based on the lowest level of input that is significant to the fair value of the instrument. The three levels are as follows: • Level 1 — Quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access at the measurement date. The types of financial instruments included in level 1 are highly liquid instruments with quoted prices. • Level 2 — Inputs from active markets, other than quoted prices for identical instruments, are used to determine fair value. Significant inputs are directly observable from active markets for substantially the full term of the asset or liability being valued. • Level 3 — Pricing inputs significant to the valuation are unobservable. Inputs are developed based on the best information available. However, significant judgment is required by us in developing the inputs. Loan Interest Income For all loans, including impaired loans, classified as held for investment, we recognize interest income as earned, adjusted for the amortization of deferred direct origination and acquisition costs. Deferred fees or costs are required to be recognized as yield adjustments over the life of the related loans and are recognized by the interest method. The objective of the interest method is to arrive at periodic interest income (including recognition of fees and costs) at a constant effective yield on the net investment in the receivable (i.e., the principal amount of the receivable adjusted by unamortized fees or costs, purchase premium or discount, and any hedging activity—these unamortized costs will collectively be referred to as “basis adjustments”). The difference between the periodic interest income so determined and the interest income determined by applying the stated interest rate to the outstanding principal amount of the receivable is the amount of periodic amortization of deferred direct origination and acquisition costs. For the amortization of the basis adjustments, we determine the constant effective yield necessary to apply the interest method based upon the contractual terms of the loan contract, with no consideration given to expected prepayments. F-26 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 2. Significant Accounting Policies (Continued) For fixed-rate loans, when a prepayment occurs the unamortized balance of the basis adjustments is adjusted so that future amortization (based upon the contractual terms of the loan) will result in a constant effective yield equal to the original effective interest rate. Prepayments do not result in a change in the effective interest rate of the loan. We determine the contractual payments on a pool basis; as such, when a prepayment occurs, future contractual payments will be determined assuming the pool will make smaller payments through the original term of the contract. The adjustment to the unamortized basis adjustment balance is recorded in interest income. For variable-rate loans, the effective interest rate at the time of origination is the loan’s effective interest rate assuming all future contractual payments. The effective interest rate remains the same for that loan until the loan rate changes. If there is no prepayment and no change in the stated interest rate, the periodic amortization of the basis adjustments is equal to the difference between the effective interest rate multiplied by the book basis and the contractual interest due. We determine the contractual payments on a pool basis; as such, when a prepayment occurs, future contractual payments will be determined assuming the pool will make smaller payments through the original term of the contract. The adjustment to the unamortized basis adjustment balance is recorded in interest income. When the interest rate on a variable-rate loan changes, the effective interest rate is recalculated using the same methodology described in the previous paragraph; however, the future contractual payments are changed to reflect the new interest rate. There is no forecasting of future expected changes in interest rates. The accounting basis used to determine the effective interest rate of the cash flows is equal to the balances of the unpaid principal balance and unamortized basis adjustments at the time of the rate change. We also pay to the U.S. Department of Education (the “DOE”) an annual 105 basis point Consolidation Loan Rebate Fee on FFELP consolidation loans, which is netted against loan interest income. Additionally, interest earned on education loans reflects potential non-payment adjustments in accordance with our uncollectible interest recognition policy. We do not amortize any adjustments to the basis of loans when they are classified as held-for-sale. With the adoption of CECL on January 1, 2020, we continue to analyze the collectability of accrued interest associated with loans not currently in full principal and interest repayment status or interest-only repayment status as discussed above; however, we have changed the recognition of the allowance for this portion of uncollectible interest (amounts to be capitalized after separation from school and the expiration of the grace period) to the provisions for credit losses from our historical practice of recording it as a reduction of interest income, as well as classifying this allowance as part of our allowance for credit losses as opposed to our historical practice of recording it as a reduction of accrued interest income receivable. The allowance for the portion of uncollectible interest on loans making full interest payments will continue to be recorded as a reduction of interest income. We recognize certain fee income (primarily late fees) on all loans when earned according to the contractual provisions of the promissory notes, as well as our expectation of collectability. Fee income is recorded when earned in “other non-interest income” in the accompanying consolidated statements of income. Interest Expense Interest expense is based upon contractual interest rates adjusted for the amortization of issuance costs. We incur interest expense on interest bearing deposits comprised of non-maturity savings deposits, brokered and retail CDs, and brokered and retail MMDAs, as well as on unsecured and secured financings. Interest expense is recognized when amounts are contractually due to deposit and debt holders and is adjusted for net payments/receipts related to interest rate swap agreements that qualify and are designated hedges of interest-bearing liabilities. Interest expense also includes the amortization of deferred gains and losses on closed hedge transactions that qualified as hedges. Amortization of debt issuance costs, premiums, discounts and terminated hedge-basis adjustments are recognized using the effective interest rate method. We incur certain fees related to our Private Education Loan multi-lender secured borrowing facility (the “Secured Borrowing Facility,” which was previously called the asset-backed commercial paper facility or ABCP Facility), including an unused Secured Borrowing Facility fee, and also incur fees related to our term asset-backed securities (“ABS”). These fees are included in interest expense. Refer to Note 10, “Deposits,” and Note 11, “Borrowings” for further details of our interest-bearing liabilities. F-27 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 2. Significant Accounting Policies (Continued) Gains on Sale of Loans, Net We may participate and sell loans to third-parties and affiliates, including entities that were related parties prior to the Spin-Off. These sales may occur through whole loan sales or securitization transactions that qualify for sales treatment. If a transfer of loans qualifies as a sale, we derecognize the loan and recognize a gain or loss as the difference between the carry basis of the loan sold and liabilities retained and the compensation received. We recognize the results of a transfer of loans based upon the settlement date of the transaction. These loans were initially recorded as held for investment and were transferred to held-for-sale immediately prior to sale or securitization. In the first quarter of 2020, we recognized a $ 239 million gain from the sale of approximately $ 3.1 billion of our Private Education Loans, including $ 2.9 billion of principal, $ 199 million in capitalized interest, and $ 12 million in accrued interest, to unaffiliated third parties. In the second quarter of 2018, we sold our remaining $ 43 million portfolio of Split Loans (as hereinafter defined) (both current and non-current loans) to Navient and recognized a net gain of $ 2 million. See Note 17, “Arrangements with Navient Corporation,” for further discussion regarding loan purchase agreements. We did not sell loans in 2019. Other Income Our Upromise subsidiary had a number of programs that encouraged consumers to save for the cost of college education. We had established a consumer savings network, which was designed to promote college savings by consumers who were members of this program by encouraging them to purchase goods and services from the merchants that participate in the program. Participating merchants generally paid Upromise fees based on member purchase volume, either online or in stores, depending on the contractual arrangement with the merchant. We recognized revenue as marketing and administrative services are rendered, based upon contractually determined rates and member purchase volumes. On May 31, 2020, we sold our Upromise subsidiary to a third party, resulting in the loss of revenue from that business for the second half of 2020. Also included in other income are late fees on both Private Education Loans and FFELP Loans, which we recognize when the cash has been received, fees related to our Credit Card program, income for servicing private student loans for third-parties and changes to our tax indemnification receivable from Navient. Securitization Accounting Our securitization transactions use a two-step structure with a special purpose entity VIE that legally isolates the transferred assets from us in the event of bankruptcy or receivership. Transactions receiving sale treatment are also structured to ensure that the holders of the beneficial interests issued are not constrained from pledging or exchanging their interests, and that we do not maintain effective control over the transferred assets. If these criteria are not met, then the transaction is accounted for as an on-balance sheet secured borrowing. If a securitization qualifies as a sale, we then assess whether we are the primary beneficiary of the securitization trust and are required to consolidate such trust. We are considered the primary beneficiary if we have both: (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (2) the obligation to absorb losses or receive benefits of the entity that could potentially be significant to the VIE. There can be considerable judgment as it relates to determining the primary beneficiary of the VIEs. There are no “bright line” tests. Rather, the assessment of who has the power to direct the activities of the VIE that most significantly affect the VIE’s economic performance and who has the obligation to absorb losses or receive benefits of the entity that could potentially be significant to the VIE can be very qualitative and judgmental in nature. If we are the primary beneficiary, then no gain or loss is recognized. We have determined that as the servicer of Sallie Mae securitization trusts, we meet the first primary beneficiary criterion because we have the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance. Irrespective of whether a securitization receives sale or on-balance sheet treatment, our continuing involvement with our securitization trusts is generally limited to: • Owning the equity certificates of certain trusts; • The servicing of the student loan assets within the securitization trusts, on both a pre- and post-default basis; F-28 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 2. Significant Accounting Policies (Continued) • Our acting as administrator for the securitization transactions we sponsored; • Our responsibilities relative to representation and warranty violations; and • The option to exercise the clean-up call and purchase the student loans from the trust when the pool balance is 10 percent or less of the original pool balance. In 2020 and 2019, we executed several secured financing transactions. Based upon our relationships with these securitizations, we believe the consolidation assessment is straightforward. We consolidated our secured financing transactions because either we did not meet the accounting criterion for sales treatment or we determined we were the primary beneficiary of the VIE because we retained (a) the residual interest in the securitization and therefore had the obligation to absorb losses or receive benefits of the entity that could potentially be significant to the VIE, as well as (b) the power to direct the activities of the VIE in our role as servicer. The investors in our securitization trusts have no recourse to our other assets should there be a failure of the trust to pay when due. Generally, the only recourse the securitization trusts have to us is in the event we breach a seller representation or warranty or our duties as master servicer and servicer, in which event we are obligated to repurchase the related loans from the trust. From time to time, we also engage in certain transactions that are not consolidated on our balance sheet due to the transaction having met the criterion for sales treatment. In these transactions, we remove loans from our consolidated balance sheet and recognize any assets retained and liabilities assumed at fair value, and record a gain or loss on the transferred loans. Our continuing involvement in these securitization transactions mainly consists of acting as the primary servicer and holding certain retained interests. We provide additional information regarding these types of activities in, Note 11, “Borrowings — Unconsolidated VIEs.” Derivative Accounting We account for our derivatives, consisting of interest rate swaps, at fair value on the consolidated balance sheets as either an asset or liability. Derivative positions are recorded as net positions by counterparty based on master netting arrangements (see Note 12, “Derivative Financial Instruments”), exclusive of accrued interest and cash collateral held or pledged. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) requires all standardized derivatives, including most interest rate swaps, to be submitted for clearing to central counterparties to reduce counterparty risk. Two of the central counterparties we use are the Chicago Mercantile Exchange (the “CME”) and the London Clearing House (the “LCH”). All variation margin payments on derivatives cleared through the CME and LCH are accounted for as legal settlement. As of December 31, 2020, $ 8.2 billion notional of our derivative contracts were cleared on the CME and $ 0.4 billion were cleared on the LCH. The derivative contracts cleared through the CME and LCH represent 95.3 percent and 4.7 percent, respectively, of our total notional derivative contracts of $ 8.6 billion at December 31, 2020. For derivatives cleared through the CME and LCH, the net gain (loss) position includes the variation margin amounts as settlement of the derivative and not collateral against the fair value of the derivative. The amount of variation margin included as settlement as of December 31, 2020 was $( 179 ) million and $ 19 million for the CME and LCH, respectively. Changes in fair value for derivatives not designated as hedging instruments are presented as realized gains (losses). We determine the fair value for our derivative contracts primarily using pricing models that consider current market conditions and the contractual terms of the derivative contracts. These pricing models consider interest rates, time value, forward interest rate curves, and volatility factors. Inputs are generally from active financial markets. The accounting for derivative instruments requires that every derivative instrument, including certain derivative instruments embedded in other contracts, be recorded on the balance sheet as either an asset or liability measured at fair value. Our derivative instruments are classified and accounted for by us as fair value hedges, cash flow hedges, and trading hedges. F-29 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 2. Significant Accounting Policies (Continued) On July 1, 2018, we adopted the Financial Accounting Standards Board’s (the “FASB”) Accounting Standards Update (“ASU”) No. 2017-12, “Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities.” Under the standard, we are no longer required to separately measure and report hedge ineffectiveness, which was previously recorded in “gains (losses) on derivatives and hedging activities, net” in our consolidated statements of income. In accordance with the standard, certain provisions were required to be applied on a modified retrospective basis, which requires a cumulative effect adjustment to accumulated other comprehensive income with a corresponding adjustment to retained earnings as of the beginning of the fiscal year of adoption, or January 1, 2018 in our case. As a result of the cumulative effect of applying the hedging standard to our fair value hedges on July 1, 2018, we recorded a $ 2 million basis increase to our hedged deposit balances with a corresponding increase to retained earnings of approximately $ 0.8 million, net of taxes and a $ 3 million loss to “gains (losses) on derivatives and hedging activities, net” in our consolidated statements of income to adjust the life-to-date ineffectiveness. To reflect the adoption of the hedging standard on our cash flow hedging relationships at July 1, 2018, we recorded a $ 0.2 million, net of taxes decrease to retained earnings and a corresponding $ 0.3 million increase to accumulated other comprehensive income. Each derivative is designated to a specific (or pool of) liability(ies) on the consolidated balance sheets, and is designated as either a “fair value” hedge or a “cash flow” hedge. Fair value hedges are designed to hedge our exposure to the changes in fair value of a fixed-rate liability. For effective fair value hedges, both the hedge and the hedged item (for the risk being hedged) are recorded at fair value with any difference reflecting ineffectiveness recorded immediately in the consolidated statements of income. Cash flow hedges are designed to hedge our exposure to variability in cash flows related to variable-rate deposits. The assessment of the hedge’s effectiveness is performed at inception and on an ongoing basis, using regression testing. For hedges of a pool of liabilities, tests are performed to demonstrate the similarity of individual instruments of the pool. When it is determined that a derivative is not currently an effective hedge, ineffectiveness is recognized for the full change in fair value of the derivative with no offsetting amount from the hedged item since the last time it was effective. If it is also determined the hedge will not be effective in the future, we discontinue the hedge accounting prospectively and begin amortization of any basis adjustments that exist related to the hedged item. On March 12, 2020, FASB issued Accounting Standards Update ASU No. 2020-04, “Reference Rate Reform (“Topic 848”): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” On January 7, 2021, the FASB issued Accounting Standards Update ASU No. 2021-01, “Reference Rate Reform (“Topic 848”): Scope” that clarified the scope of Topic 848. Topic 848 contains temporary optional expedients and exceptions for applying GAAP to contract modifications, hedging relationships, and other transactions affected by reference rate reform. Our derivative portfolio is made up of interest rate swaps that are centrally cleared through either the CME or the LCH. On October 16, 2020, both the CME and the LCH changed the price alignment interest and discount rate applied when valuing these transactions to the Secured Overnight Financing rate (“SOFR”). The ISDA 2020 IBOR Fallbacks Protocol (the “ISDA Fallback Protocol”) was made available for adherence on October 23, 2020, with an effective date of January 25, 2021. Once adhered to by both counterparties in a bilateral relationship and the effective date is reached, the ISDA Fallback Protocol represents a change to the contractual terms of derivatives governed by each respective ISDA agreement between the Company and a derivative counterparty. We have elected the option provided in Topic 848 to not reassess previous accounting determinations as well as the option to not dedesignate a hedging relationship due to a current or future change in a critical or contractual term related to reference rate reform, including changes in the discount rate. As our liabilities may begin to use alternatives to LIBOR before LIBOR is no longer published, for cash flow hedges of forecasted LIBOR based payments, we have elected the expedient offered in Topic 848 to disregard the potential change in the designated hedged interest rate risk that may occur because of reference rate reform when we assesses whether the hedged forecasted transactions are probable, in accordance with the requirements of “Derivatives and Hedging” Topic 815. We have also elected the expedient provided by Topic 848 to assume the reference rate will not be replaced for the remainder of the hedging relationship when assessing hedge effectiveness. F-30 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 2. Significant Accounting Policies (Continued) Topic 848 allows for different elections to be made at different points in time. We intend to reassess our elections of optional expedients and exceptions included within Topic 848 when changes or additions are necessary. Stock-Based Compensation We recognize stock-based compensation cost in our consolidated statements of income using the fair value method. Under this method, we determine the fair value of the stock-based compensation at the time of the grant and recognize the resulting compensation expense over the vesting period of the stock-based grant. We do not apply a forfeiture rate to our stock-based compensation expense, but rather record forfeitures when they occur. We record all excess tax benefits/deficiencies related to the settlement of employee stock-based compensation to the income tax expense line item on our consolidated statements of income. Restructuring Activities During the third quarter of 2020, we initiated a restructuring program to reduce costs and improve operating efficiencies by better aligning our organizational structure with our new corporate strategic imperatives. In conjunction with these restructuring plans, involuntary benefit arrangements, and certain other costs that are incremental and incurred as a direct result of our restructuring plans, are classified as restructuring expenses in the accompanying consolidated statements of income. Restructuring expenses of $ 26 million were recorded in the year ended December 31, 2020. Of that total, $ 20 million related to severance benefits and $ 6 million related to other related costs, primarily legal and consulting fees. There were no restructuring expenses recorded in the years ended December 31, 2019 and 2018. We sponsor employee severance plans that provide severance benefits in the event of termination of our full-time employees and part-time employees who work at least 24 hours per week. The severance plans establish specified benefits based on base salary, job level immediately preceding termination, and years of service upon termination of employment due to involuntary termination or a job abolishment, as defined in the severance plans. The benefits payable under the severance plans relate to past service. Accordingly, we recognize severance costs to be paid pursuant to the severance plans when payment of such benefits is probable and reasonably estimable. Such benefits, including severance pay calculated based on the severance plan, medical and dental benefits, outplacement services and continuation pay, have been incurred during the year ended December 31, 2020, as a direct result of our restructuring initiative. Accordingly, such costs are classified as restructuring expenses in the accompanying consolidated statements of income. We finalized this restructuring plan and while we expect to record additional restructuring expenses in the first quarter of 2021, we expect those amounts to be immaterial. The majority of these restructuring expenses incurred through December 31, 2020 and expected to be incurred in future periods are severance costs related to the elimination of approximately 165 positions, or approximately 9 percent of the workforce that existed as of December 31, 2019. Income Taxes We account for income taxes under the asset and liability approach, which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and tax basis of our assets and liabilities. To the extent tax laws change, deferred tax assets and liabilities are adjusted in the period that the tax change is enacted. “Income tax expense (benefit)” includes (i) deferred tax expense (benefit), which represents the net change in the deferred tax asset or liability balance during the year when applicable, and (ii) current tax expense (benefit), which represents the amount of tax currently payable to or receivable from a tax authority plus amounts accrued for unrecognized tax benefits. Income tax expense (benefit) excludes the tax effects related to adjustments recorded in equity. An uncertain tax position is recognized only if it is more likely than not to be sustained upon examination based on the technical merits of the position. The amount of tax benefit recognized in the consolidated financial statements is the largest amount of benefit that is more than fifty percent likely of being sustained upon ultimate settlement of the uncertain tax position. We recognize interest and penalties related to unrecognized tax benefits in income tax expense (benefit). F-31 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 2. Significant Accounting Policies (Continued) In connection with the Spin-Off, we recorded a liability related to uncertain tax positions of $ 27 million for which we are indemnified by Navient. If there is an adjustment to the indemnified uncertain tax liability, an offsetting adjustment to the indemnification receivable will be recorded as pre-tax adjustment to other income in the income statement. As of the date of the Spin-Off on April 30, 2014, we recorded liabilities related to deferred taxes and uncertain tax positions and an indemnification receivable of $ 291 million. As of December 31, 2020, with respect to those amounts recorded at the Spin-Off, the remaining liability balance is $ 7 million (related to uncertain tax positions) and the remaining indemnification receivable balance is $ 7 million (related to uncertain tax positions). Recently Issued and Adopted Accounting Pronouncements ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which became effective for us on January 1, 2020 (“CECL”). This ASU eliminated the previous accounting guidance for the recognition of credit impairment. Under the new guidance, for all loans carried at amortized cost, upon loan origination we are required to measure our allowance for credit losses based on our estimate of all current expected credit losses over the remaining contractual term of the assets. Updates to that estimate each period will be recorded through provision expense. The estimate of loan losses must be based on historical experience, current conditions, and reasonable and supportable forecasts. The ASU does not mandate the use of any specific method for estimating credit loss, permitting companies to use judgment in selecting the approach that is most appropriate in their circumstances. In addition, Topic 326 made changes to the accounting for available-for-sale debt securities. One such change is to require an assessment of unrealized losses on available-for-sale debt securities that we have the ability and intent to hold for a period of time sufficient to recover the amortized cost of the security, for the purpose of determining credit impairment. If any credit impairment exists, an allowance for losses must be established for the amount of the unrealized loss that is determined to be credit-related. Adoption of the standard had a material impact on how we record and report our financial condition and results of operations, and on regulatory capital. The following table illustrates the impact of the cumulative effect adjustment made upon adoption of CECL on January 1, 2020: F-32 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 2. Significant Accounting Policies (Continued) January 1, 2020 As reported under CECL Pre-CECL Adoption Impact of CECL Adoption Assets: Allowance for credit losses: Private Education Loans $ 1,435,130 $ 374,300 $ 1,060,830 FFELP Loans 4,485 1,633 2,852 Personal Loans 145,060 65,877 79,183 Credit Cards 290 102 188 Total $ 1,584,965 $ 441,912 $ 1,143,053 Deferred tax asset $ 415,540 $ 109,369 $ 306,171 Liabilities: Allowance for credit losses: Off-balance sheet exposures $ 118,239 $ 2,481 $ 115,758 Equity: Retained Earnings $ 897,873 $ 1,850,512 $ ( 952,639 ) This transition adjustment is inclusive of qualitative adjustments incorporated into our CECL allowance as necessary, to address any limitations in the models used. On August 26, 2020, the federal banking agencies published a final rule that provides those banking organizations that adopt CECL during the 2020 calendar year with the option to delay for two years, and then phase in over the following three years, the effects on regulatory capital of CECL relative to the incurred loss methodology. We have elected to use this option. Under this final rule, because we have elected to use the deferral option, the regulatory capital impact of our transition adjustments recorded on January 1, 2020 from the adoption of CECL will be deferred for two years. In addition, from January 1, 2020 through the end of the two-year deferral period, 25 percent of the ongoing impact of CECL on our allowance for credit losses, retained earnings, and average total consolidated assets, each as reported for regulatory capital purposes, will be added to the deferred transition amounts (“adjusted transition amounts”) and deferred for the two -year period. At the conclusion of the two -year period (i.e., beginning January 1, 2022), the adjusted transition amounts will be phased in for regulatory capital purposes at a rate of 25 percent per year, with the phased-in amounts included in regulatory capital at the beginning of each year. For additional information, see Note 18, “Regulatory Capital.” 3. Cash and Cash Equivalents As of December 31, 2020, cash and cash equivalents include cash due from the FRB of $ 4.4 billion and cash due from depository institutions of $ 73 million. As of December 31, 2019, cash and cash equivalents include cash due from the FRB of $ 5.5 billion and cash due from depository institutions of $ 93 million. As of December 31, 2020 and 2019, we had no outstanding cash equivalents. The FRB Term Deposit Facility program is used to facilitate the conduct of monetary policy by providing a tool that may be used to manage the aggregate quantity of reserve balances held by depository institutions. Under this program, the FRB F-33 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 3. Cash and Cash Equivalents (Continued) accepts deposits for a stated maturity at a rate of interest determined via auction. The funds are removed from the accounts of participating institutions for the life of the term deposit. We did not participate in these auctions in 2020, resulting in no interest reported. Participation in 2019 resulted in interest income of $ 0.3 million. As of December 31, 2020 and 2019, no funds were on deposit with the FRB under this program. 4. Investments Trading Investments In March 2020, we sold approximately $ 1.7 billion of Private Education Loans through securitization transactions where we were required to retain a 5 percent vertical risk retention interest (i.e., 5 percent of each class issued in the securitizations). We classified those vertical risk retention interests related to the transactions as available-for-sale investments, except for the interest in the residual classes, which we classified as trading investments recorded at fair value with changes recorded through earnings. At December 31, 2020, we had $ 17 million classified as trading investments. Available-for-Sale Investments The amortized cost and fair value of securities available for sale are as follows: December 31, 2020 Amortized Cost Allowance for credit losses (1) Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Available for sale: Mortgage-backed securities $ 308,913 $ — $ 6,095 $ ( 134 ) $ 314,874 Utah Housing Corporation bonds 12,357 — 210 — 12,567 U.S. government-sponsored enterprises and Treasuries 1,596,890 — 3,395 — 1,600,285 Other securities 68,797 — 462 ( 351 ) 68,908 Total $ 1,986,957 $ — $ 10,162 $ ( 485 ) $ 1,996,634 December 31, 2019 Amortized Cost Allowance for credit losses (1) Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Available for sale: Mortgage-backed securities $ 215,888 $ — $ 1,895 $ ( 658 ) $ 217,125 Utah Housing Corporation bonds 19,474 — 145 ( 83 ) 19,536 U.S. government-sponsored enterprises 250,394 — 635 ( 21 ) 251,008 Total $ 485,756 $ — $ 2,675 $ ( 762 ) $ 487,669 ___________ (1) Represents the amount of impairment that has resulted from credit-related factors, and that was recognized in the consolidated balance sheets (as a credit loss expense on available-for-sale securities). The amount excludes unrealized losses related to non-credit factors. F-34 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 4. Investments (Continued) The following table summarizes the amount of gross unrealized losses for our available-for-sale securities and the estimated fair value for securities having gross unrealized loss positions, categorized by length of time the securities have been in an unrealized loss position: Less than 12 months 12 months or more Total Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses Estimated Fair Value As of December 31, 2020: Mortgage-backed securities $ ( 134 ) $ 46,011 $ — $ — $ ( 134 ) $ 46,011 Utah Housing Corporation bonds — — — — — — U.S. government-sponsored enterprises and Treasuries — — — — — — Other securities ( 351 ) 30,441 — — ( 351 ) 30,441 Total $ ( 485 ) $ 76,452 $ — $ — $ ( 485 ) $ 76,452 As of December 31, 2019: Mortgage-backed securities $ ( 218 ) $ 25,624 $ ( 440 ) $ 42,448 $ ( 658 ) $ 68,072 Utah Housing Corporation bonds — — ( 83 ) 11,097 ( 83 ) 11,097 U.S. government-sponsored enterprises ( 21 ) 14,977 — — ( 21 ) 14,977 Total $ ( 239 ) $ 40,601 $ ( 523 ) $ 53,545 $ ( 762 ) $ 94,146 For available-for-sale debt securities in an unrealized loss position, we first assess whether we intend to sell, or it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. If either of these criteria is met, the security’s amortized cost basis is written down to fair value through income. For securities in an unrealized loss position that do not meet these criteria, we evaluate whether the decline in fair value has resulted from credit loss or other factors. In making this assessment, we consider the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, adverse conditions specifically related to the security, as well as any guarantees (e.g., guarantees by the U.S. Government) that may be applicable to the security. If this assessment indicates a credit loss exists, the credit-related portion of the loss is recorded as an allowance for losses on the security. Our investment portfolio is comprised primarily of mortgage-backed securities issued by Ginnie Mae, Fannie Mae and Freddie Mac, with amortized costs of $ 32 million, $ 80 million, and $ 197 million, respectively, at December 31, 2020. We own these securities to meet our requirements under the Community Reinvestment Act. In the second quarter of 2018, we elected to sell nine securities totaling $ 41 million to better align the portfolio with the Community Reinvestment Act requirements, and we recognized a $ 2 million loss upon the sale of those securities. As of December 31, 2020, six of the separate mortgage-backed securities in our investment portfolio had unrealized losses. Approximately 32 percent of our mortgage-backed securities were issued under Ginnie Mae programs that carry a full faith and credit guarantee from the U.S. Government. The remaining securities in a net loss position carry a principal and interest guarantee by Fannie Mae or Freddie Mac, respectively. We have the intent and ability to hold these bonds for a period of time sufficient for the market price to recover to at least the adjusted amortized cost of the security. As of December 31, 2019, 33 of the 107 separate mortgage-backed securities in our investment portfolio had unrealized losses, and 18 of the 33 securities in a net loss position were issued under Ginnie Mae programs that carry a full faith and credit guarantee from the U.S. Government. The remainder carried a principal and interest guarantee by Fannie Mae or Freddie Mac, respectively. F-35 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 4. Investments (Continued) We invest in Utah Housing Corporation bonds for the purpose of complying with the Community Reinvestment Act. These bonds are Aa3 rated by Moody’s Investors Service. The amortized cost of the investment on the consolidated balance sheet at December 31, 2020 and December 31, 2019 was $ 12 million and $ 19 million, respectively. We invest in U.S. Treasuries and U.S. government-sponsored enterprise securities issued by the Federal Home Loan Bank, Freddie Mac and the Federal Farm Credit Bank. As of December 31, 2020, none of the 30 securities had unrealized losses and as of December 31, 2019, 1 of the 14 securities had unrealized losses. We have the intent and ability to hold each of these bonds for a period of time sufficient for the market price to recover to at least the adjusted amortized cost of the security. These bonds are rated Aaa by Standard and Poor’s or AA+ by Moody’s Investors Service. Based on this qualitative analysis, we have determined that no credit impairment exists. In March 2020, we sold approximately $ 1.7 billion of Private Education Loans through a securitization transaction where we were required to retain a 5 percent vertical risk retention interest. We classify the non-residual vertical retention interests as available-for-sale investments. As of December 31, 2020, eight out of 10 of these investments had unrealized losses. We have the intent and ability to hold each of these bonds for a period of time sufficient for the market price to recover to at least the adjusted amortized cost of the security. We expect to receive all contractual cash flows related to these investments and do not consider a credit impairment to exist. As of December 31, 2020, the amortized cost and fair value of securities, by contractual maturities, are summarized below. Contractual maturities versus actual maturities may differ due to the effect of prepayments. Year of Maturity Amortized Cost Estimated Fair Value 2021 $ 454,193 $ 455,185 2022 978,017 979,802 2023 164,680 165,299 2038 170 195 2039 2,032 2,249 2042 4,767 4,769 2043 8,745 9,153 2044 11,586 12,139 2045 9,739 10,133 2046 15,292 15,748 2047 25,056 25,574 2048 6,466 6,743 2049 44,711 46,681 2050 192,706 194,056 2054 68,797 68,908 Total $ 1,986,957 $ 1,996,634 Some of the mortgage-backed securities and a portion of the government securities have been pledged to the FRB as collateral against any advances and accrued interest under the Primary Credit lending program sponsored by the FRB. We had $ 815 million and $ 252 million par value of securities pledged to this borrowing facility at December 31, 2020 and 2019, respectively, as discussed further in Note 11, “Borrowings.” F-36 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 4. Investments (Continued) Other Investments Investments in Non-Marketable Securities We hold investments in non-marketable securities and account for these investments at cost, less impairment, plus or minus observable price changes of identical or similar securities of the same issuer. In the third quarter of 2019, we funded an additional investment, as part of a larger equity raise, in an issuer whose equity securities we purchased in the past. We used the valuation associated with the more recent securities investment to adjust the valuation of our previous investments and, as a result, recorded a gain of $ 8 million on our earlier equity securities investments. This gain was recorded in “other income” in the consolidated statements of income in 2019. At both December 31, 2020 and December 31, 2019, our total investment in the securities of this issuer was $ 26 million. Low Income Housing Tax Credit Investments We invest in affordable housing projects that qualify for the LIHTC, which is designed to promote private development of low income housing. We recognized $ 6 million, $ 6 million and $ 4 million of tax credits and other tax benefits associated with investments in affordable housing projects within income tax expense for the years ended December 31, 2020, 2019 and 2018, respectively. The amount of amortization of such investments reported in income tax expense was $ 5 million, $ 4 million and $ 4 million for the years ended December 31, 2020, 2019 and 2018, respectively. Total carrying value of the LIHTC investments was $ 54 million at December 31, 2020 and $ 58 million at December 31, 2019. We are periodically required to provide additional financial support during the investment period. Our liability for these unfunded commitments was $ 19 million at December 31, 2020 and $ 29 million at December 31, 2019. F-37 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 5. Loans Held for Investment Loans held for investment consist of Private Education Loans, FFELP Loans and Credit Cards. We use “Personal Loans” to mean those unsecured loans to individuals that may be used for non-educational purposes. We sold our entire Personal Loan portfolio in the third quarter of 2020. Our Private Education Loans are made largely to bridge the gap between the cost of higher education and the amount funded through financial aid, government loans, and customers’ resources. Private Education Loans bear the full credit risk of the customer. We manage this risk through risk-performance underwriting strategies and qualified cosigners. Private Education Loans may be fixed-rate or may carry a variable interest rate indexed to LIBOR, the London interbank offered rate, or another index in the future. As of December 31, 2020 and 2019, 55 percent and 58 percent, respectively, of our Private Education Loans were indexed to LIBOR. We provide incentives for customers to include a cosigner on the loan, and the vast majority of Private Education Loans in our portfolio are cosigned. We also encourage customers to make payments while in school. In connection with the Spin-Off, we retained the right to require Navient to purchase delinquent loans (at fair value) when the borrower has a lending relationship with both us and Navient. In the second quarter of 2018, we sold our remaining $ 43 million portfolio of Split Loans (both current and non-current loans) to Navient and recognized a net gain of $ 2 million. See Note 17, “Arrangements with Navient Corporation,” for further discussion regarding loan purchase agreements. FFELP Loans are insured as to their principal and accrued interest in the event of default, subject to a risk-sharing level based on the date of loan disbursement. These insurance obligations are supported by contractual rights against the United States. For loans disbursed on or after July 1, 2006, we receive 97 percent reimbursement on all qualifying claims. For loans disbursed after October 1, 1993, and before July 1, 2006, we receive 98 percent reimbursement on all qualifying claims. For loans disbursed prior to October 1, 1993, we receive 100 percent reimbursement on all qualifying claims. In the first quarter of 2020, we recognized a $ 239 million gain from the sale of approximately $ 3.1 billion of our Private Education Loans, including $ 2.9 billion of principal, $ 199 million in capitalized interest, and $ 12 million in accrued interest, to unaffiliated third parties. There were VIEs created in the execution of certain of these loan sales; however, based on our consolidation analysis, we are not the primary beneficiary of these VIEs. These transactions qualified for sale treatment and removed the balance of the loans from our balance sheet on the respective settlement dates. We remained the servicer of these loans pursuant to applicable servicing agreements executed in connection with the sales. In the third quarter of 2020, we sold our entire Personal Loan portfolio, including $ 697 million of principal and $ 7 million in accrued interest, which resulted in a $ 43 million reduction to our provision for credit losses. F-38 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 5. Loans Held for Investment (Continued) Loans held for investment are summarized as follows: December 31, 2020 2019 Private Education Loans: Fixed-rate $ 8,950,216 $ 9,830,301 Variable-rate 10,779,121 13,359,290 Total Private Education Loans, gross 19,729,337 23,189,591 Deferred origination costs and unamortized premium/ (discount) 63,475 81,224 Allowance for credit losses ( 1,355,844 ) ( 374,300 ) Total Private Education Loans, net 18,436,968 22,896,515 FFELP Loans 737,593 783,306 Deferred origination costs and unamortized premium/ (discount) 1,993 2,143 Allowance for credit losses ( 4,378 ) ( 1,633 ) Total FFELP Loans, net 735,208 783,816 Personal Loans (fixed-rate) — 1,049,007 Deferred origination costs and unamortized premium/ (discount) — 513 Allowance for credit losses — ( 65,877 ) Total Personal Loans, net — 983,643 Credit Cards (fixed-rate) 12,238 3,884 Deferred origination costs and unamortized premium/ (discount) 230 36 Allowance for credit losses ( 1,501 ) ( 102 ) Total Credit Cards, net 10,967 3,818 Loans held for investment, net $ 19,183,143 $ 24,667,792 The estimated weighted average life of education loans in our portfolio was approximately 5.4 years at both December 31, 2020 and 2019, respectively. F-39 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 5. Loans Held for Investment (Continued) The average balance and the respective weighted average interest rates of loans in our portfolio are summarized as follows: Years Ended December 31, 2020 2019 2018 Average Balance Weighted Average Interest Rate Average Balance Weighted Average Interest Rate Average Balance Weighted Average Interest Rate Private Education Loans $ 22,426,216 8.42 % $ 22,225,473 9.32 % $ 19,282,500 9.10 % FFELP Loans 757,953 3.76 814,198 4.79 888,301 4.57 Personal Loans 582,552 12.43 1,141,503 12.09 900,152 11.08 Total portfolio $ 23,766,721 $ 24,181,174 $ 21,070,953 Certain Collection Tools — Private Education Loans We adjust the terms of loans for certain borrowers when we believe such changes will help our customers manage their student loan obligations, achieve better student outcomes, and increase the collectability of the loan. These changes generally take the form of a temporary forbearance of payments, a temporary interest rate reduction, a temporary interest rate reduction with a permanent extension of the loan term, and/or a short-term extended repayment alternative. Forbearance is granted prospectively for borrowers who are current in their payments and may be granted retroactively for certain delinquent borrowers. Forbearance allows a borrower to temporarily not make scheduled payments or to make smaller than scheduled payments, in each case for a specified period of time. Using forbearance extends the original term of the loan by the term of forbearance taken. Forbearance does not grant any reduction in the total principal or interest repayment obligation. While a loan is in forbearance status, interest continues to accrue and is capitalized to principal when the loan re-enters repayment status (except as described below in the case of disaster forbearance). We grant forbearance through our servicing centers to borrowers who are current in their payments and through our collections centers to certain borrowers who are delinquent. Our forbearance policies and practices vary depending upon whether a borrower is current or delinquent at the time forbearance is requested, generally with stricter payment requirements for delinquent borrowers. We view the population of borrowers that use forbearance positively because the borrowers are either proactively reaching out to us to obtain assistance in managing their obligations or are working with our collections center to bring their loans current. Forbearance may be granted through our servicing centers to customers who are exiting their grace period, and to other customers who are current in their payments, to provide temporary payment relief. In these circumstances, a customer’s loan is placed into a forbearance status in limited monthly increments and is reflected in the forbearance status at month-end during this time. At the end of the forbearance period, the customer will enter repayment status as current and is expected to begin making scheduled monthly payments. Currently, we generally grant forbearance in our servicing centers if a borrower who is current requests it for increments of up to three months at a time, for up to 12 months. Forbearance may also be granted through our collections centers to customers who are delinquent in their payments. If specific payment requirements are met, the forbearance can cure the delinquency and the customer is returned to a current repayment status. Forbearance as a collection tool is used most effectively when applying historical experience and our F-40 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 5. Loans Held for Investment (Continued) judgment to a customer’s unique situation. We leverage updated customer information and other decision support tools to best determine who will be granted forbearance based on our expectations as to a customer’s ability and willingness to repay their obligation. This strategy is aimed at assisting customers while mitigating the risks of delinquency and default as well as encouraging resolution of delinquent loans. In all instances, we require one or more payments before granting forbearance to delinquent borrowers. The COVID-19 pandemic is having far reaching, negative impacts on individuals, businesses, and, consequently, the overall economy. Specifically, COVID-19 has materially disrupted business operations throughout the country, resulting in significantly higher levels of unemployment or underemployment. As a result, we expect many of our individual customers will experience financial hardship, making it difficult, if not impossible, to meet their payment obligations to us without temporary assistance. We are monitoring key metrics as early warning indicators of financial hardship, including changes in weekly unemployment claims, enrollment in auto-debit payments, requests for new forbearances, enrollment in hardship payment plans, and early delinquency metrics. As a result of the negative impact on employment from COVID-19, our customers are experiencing higher levels of financial hardship, which led initially to higher levels of forbearance. We expect such higher levels of financial hardship to lead to higher levels of delinquencies and defaults in the future, as borrowers who had received disaster forbearance from us re-enter repayment status. We expect that, left unabated, this deterioration in forbearance, delinquency, and default rates will persist until such time as the economy and employment return to relatively normal levels. For some students, going back to school in the fall was not an option because of the pandemic, or for other reasons. Therefore, some students are taking a “gap year” before returning to school. In 2020, for those students that had unexpectedly separated from school, we provided an extension of time through fall 2021 to re-enroll, before beginning their grace period that occurs prior to entering full principal and interest repayment status. At December 31, 2020, $ 1.0 billion of Private Education Loans were granted this extended period of time. See Note 7, “Allowance for Credit Losses — Delinquencies — Private Education Loans Held for Investment” for an additional breakout of these loans. We assist customers with an array of payment programs during periods of financial hardship as standard operating convention, including: forbearance, which defers payments during a short-term hardship; our Graduated Repayment Plan (“GRP”), which is an interest-only payment for 12 months; or a loan modification that, in the event of long-term hardship, reduces the interest rate on a loan to 4 percent for 24 months and/or permanently extends the maturity date of the loan. Historically, we have utilized disaster forbearance for material events, including hurricanes, wildfires, and floods. Disaster forbearance defers payments for as much as 90 days upon enrollment. We have invoked this same disaster forbearance program to assist our customers through COVID-19 and offer this program across our operations, including through mobile app and self-service channels such as chat and interactive voice response (“IVR”). Customers who receive a disaster forbearance will not progress in delinquency and will not be assessed late fees or other fees. During a disaster forbearance, a customer’s credit file will continue to reflect the status of the loan as it was immediately prior to granting the disaster forbearance. During the period of the disaster forbearance, interest will continue to accrue, but is not capitalized to the loan balance after the loan returns to repayment status. The first wave of disaster forbearance was granted primarily in 90-day increments. As these forbearances ended, we reduced the disaster forbearance to one-month increments and implemented additional discussions between our servicing agents and borrowers to encourage borrowers/cosigners to enter repayment. If the financial hardship extends beyond 90 days, additional assistance will be available for eligible customers. For example, for borrowers exiting disaster forbearance and not eligible for GRP, we may allow them to make interest only payments for 12 months before reverting to full principal and interest payments. Management continually monitors our credit administration practices and may periodically modify these practices based upon performance, industry conventions, and/or regulatory feedback. In light of these considerations, we previously announced that we plan to implement certain changes to our credit administration practices in the future. As discussed below, however, we postponed until the fourth quarter of 2020 the implementation of the announced credit administration practices changes due to the COVID-19 pandemic. F-41 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 5. Loans Held for Investment (Continued) Specifically, we previously announced that we plan to revise our credit administration practices limiting the number of forbearance months granted consecutively and the number of times certain extended or reduced repayment alternatives may be granted. For example, we currently grant forbearance to borrowers without requiring any period of prior principal and interest payments, meaning that, if a borrower satisfies all eligibility requirements, forbearance increments may be granted consecutively. We previously announced that, beginning in the second quarter of 2020, we would phase in a required six-month period between successive grants of forbearance and between forbearance grants and certain other repayment alternatives. We announced this required period will not apply, however, to forbearances granted during the first six months following a borrower’s grace period and will not be required for a borrower to receive a contractual interest rate reduction. In addition, we announced we would limit the participation of delinquent borrowers in certain short-term extended or interest-only repayment alternatives to once in 12 months and twice in five years. As previously announced, prior to full implementation of the credit administration practices changes described above, management will conduct a controlled testing program on randomly selected borrowers to measure the impact of the changes on our customers, our credit operations, and key credit metrics. The testing commenced in October 2019 for some of the planned changes on a very small percentage of our total portfolio and we originally expected to expand the number of borrowers in repayment who would be subject to the new credit administration practices. However, due to the COVID-19 pandemic, we postponed our efforts so that we can be more flexible in dealing with our customers’ financial hardship. In October 2020, we began to roll out in a methodical approach the implementation of the credit administration practices changes and related testing. Management now expects to have completed implementation of the planned credit administration practices changes by year-end 2022. However, we may modify or delay the contemplated practice changes, the proposed timeline, or the method of implementation as we learn more about the impacts of the program on our customers. We also offer rate and term modifications to customers experiencing more severe hardship. Currently, we temporarily reduce the contractual interest rate on a loan to 4.0 percent for a two -year period and, in the vast majority of cases, permanently extend the final maturity date of the loan. As part of demonstrating the ability and willingness to pay, the customer must make three consecutive monthly payments at the reduced payment to qualify for the program. The combination of the rate reduction and maturity extension helps reduce the monthly payment due from the borrower and increases the likelihood the borrower will remain current during the interest rate modification period as well as when the loan returns to its original contractual interest rate. At December 31, 2020 and December 31, 2019, 7.8 percent and 7.2 percent, respectively, of our Private Education Loans held for investment then currently in full principal and interest repayment status were subject to interest rate reductions made under our rate modification program. We currently have no plans to change the basic elements of the rate and term modifications we offer to our customers experiencing more severe hardship. While there are limitations to our estimate of the future impact of the credit administration practices changes described above, absent the effect of any mitigating measures, and based on an analysis of borrower behavior under our current credit administration practices, which may not be indicative of how borrowers will behave under revised credit administration practices, we expect that the credit administration practices changes described above will accelerate defaults and could increase life of loan defaults in our Private Education Loan held for investment portfolio by approximately 4 percent to 14 percent. Among the measures that we are planning to implement and expect may partly offset or moderate any acceleration of or increase in defaults will be greater focus on the risk assessment process to ensure borrowers are mapped to the appropriate program, better utilization of existing programs (e.g., GRP and rate modifications), and the introduction of a new program offering short-term payment reductions (permitting interest-only payments for up to six months) for certain early stage delinquencies. The full impact of these changes to our collections practices described above may only be realized over the longer term, however. In particular, when we calculate the allowance for credit losses under CECL, which became effective on January 1, 2020, our loan loss reserves increased materially because we expect the life of loan defaults on our overall Private Education Loan portfolio to increase, in part as a result of the planned changes to our credit administration practices. As we progress with the controlled testing program of the planned changes to our credit administration practices, we expect to learn more about how F-42 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 5. Loans Held for Investment (Continued) our borrowers are reacting to these changes and, as we analyze such reactions, we will continue to refine our estimates of the impact of those changes on our allowance for credit losses. The period of delinquency for loans is based on the number of days scheduled payments are contractually past due. As of December 31, 2020 and 2019, we had $ 81 million and $ 63 million, respectively, of Private Education Loans held for investment and $ 36 million and $ 48 million, respectively, of FFELP Loans held for investment which were more than 90 days delinquent that continue to accrue interest. At December 31, 2020 and 2019, we had no loans in nonaccrual status. Borrower-in-Custody Arrangements We maintain Borrower-in-Custody arrangements with the FRB. Under these arrangements, we can pledge FFELP Loans or Private Education Loans to the FRB to secure any advances and accrued interest generated under the Primary Credit program at the FRB. As of December 31, 2020 and 2019, we had $ 3.3 billion and $ 3.4 billion, respectively, of Private Education Loans pledged to this borrowing facility, as discussed further in Note 11, “Borrowings.” We did not have any FFELP consolidation loans pledged at December 31, 2020 or 2019. Loans Held for Investment by Region At December 31, 2020, 38.8 percent of total education loans were concentrated in the following states: 2020 New York 9.7 % California 9.6 Pennsylvania 8.0 New Jersey 6.2 Texas 5.3 38.8 % At December 31, 2019, 39.4 percent of total education loans were concentrated in the following states: 2019 New York 10.1 % California 9.4 Pennsylvania 8.4 New Jersey 6.6 Texas 4.9 39.4 % No other state had a concentration of total education loans in excess of 5 percent of the aggregate outstanding education loans held for investment. F-43 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, unless otherwise noted) 6. Loans Held for Sale We had $ 2.9 billion in loans held for sale at December 31, 2020 and no loans held for sale at December 31, 2019. At December 31, 2020, we reversed $ 206 million through the provisions for credit losses for the allowance related to these loans, when the loans were transferred from held for investment to held-for-sale. On January 8, 2021, we sold $ 3 billion of our Private Education Loans, including $ 2.8 billion of principal, $ 185 million in capitalized interest and $ 15 million in accrued interest to an unaffiliated third party. 7. Allowance for Credit Losses Our provision for credit losses represents the periodic expense of maintaining an allowance sufficient to absorb lifetime expected credit losses in the held for investment loan portfolios. The evaluation of the allowance for credit losses is inherently subjective, as it requires material estimates that may be susceptible to significant changes. We believe the allowance for credit losses is appropriate to cover lifetime expected losses incurred in the loan portfolios. See Note 2, “Significant Accounting Policies — Allowance for Credit Losses 2020 — Allowance for Private Education Loan Losses, — Allowance for FFELP Loan Losses, and — Allowance for Credit Cards” for a more detailed discussion. Allowance for Credit Losses Metrics F-44 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 7. Allowance for Credit Losses (Continued) Allowance for Credit Losses Year Ended December 31, 2020 FFELP Loans Private Education Loans Personal Loans Credit Cards Total Allowance for Credit Losses Beginning balance $ 1,633 $ 374,300 $ 65,877 $ 102 $ 441,912 Day 1 adjustment for the adoption of CECL 2,852 1,060,830 79,183 188 1,143,053 Balance at January 1, 2020 4,485 1,435,130 145,060 290 1,584,965 Transfer from unfunded commitment liability (1) — 320,808 — — 320,808 Provisions: Provision for current period 412 148,673 40,485 1,328 190,898 Loan sale reduction to provision — ( 161,793 ) ( 42,916 ) — ( 204,709 ) Loan transfer to held-for-sale — ( 205,669 ) — — ( 205,669 ) Total provisions (2) 412 ( 218,789 ) ( 2,431 ) 1,328 ( 219,480 ) Net charge-offs: Charge-offs ( 519 ) ( 205,326 ) ( 39,079 ) ( 119 ) ( 245,043 ) Recoveries — 24,021 4,984 2 29,007 Net charge-offs ( 519 ) ( 181,305 ) ( 34,095 ) ( 117 ) ( 216,036 ) Loan sales — — ( 108,534 ) — ( 108,534 ) Ending Balance $ 4,378 $ 1,355,844 $ — $ 1,501 $ 1,361,723 Allowance: Ending balance: individually evaluated for impairment $ — $ 104,265 $ — $ — $ 104,265 Ending balance: collectively evaluated for impairment $ 4,378 $ 1,251,579 $ — $ 1,501 $ 1,257,458 Loans: Ending balance: individually evaluated for impairment $ — $ 1,274,590 $ — $ — $ 1,274,590 Ending balance: collectively evaluated for impairment $ 737,593 $ 18,454,747 $ — $ 12,238 $ 19,204,578 Net charge-offs as a percentage of average loans in repayment (3) 0.09 % 1.17 % — % 1.26 % Allowance as a percentage of the ending total loan balance 0.59 % 6.87 % — % 12.27 % Allowance as a percentage of the ending loans in repayment (3) 0.76 % 9.48 % — % 12.27 % Allowance coverage of net charge-offs 8.44 7.48 — 12.83 Ending total loans, gross $ 737,593 $ 19,729,337 $ — $ 12,238 Average loans in repayment (3) $ 549,584 $ 15,518,851 $ — $ 9,286 Ending loans in repayment (3) $ 573,361 $ 14,304,821 $ — $ 12,238 ____________ (1) See Note 8, “Unfunded Loan Commitments,” for a summary of the activity in the allowance for and balance of unfunded loan commitments, respectively. F-45 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 7. Allowance for Credit Losses (Continued) (2) Below is a reconciliation of the provisions for credit losses reported in the consolidated statements of income. When a new loan commitment is made, we record the CECL allowance as a liability for unfunded loan commitments by recording a provision for credit losses. When the loan is funded, we transfer that liability to the allowance for credit losses. Consolidated Statements of Income Provisions for Credit Losses Reconciliation Year Ended December 31, 2020 Private Education Loan provisions for credit losses: Provisions for loan losses $ ( 218,789 ) Provisions for unfunded loan commitments 312,613 Total Private Education Loan provisions for credit losses 93,824 Other impacts to the provisions for credit losses: Personal Loans ( 2,431 ) FFELP Loans 412 Credit Cards 1,328 Total ( 691 ) Provisions for credit losses reported in consolidated statements of income $ 93,133 (3) Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period. F-46 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 7. Allowance for Credit Losses (Continued) Allowance for Credit Losses Year Ended December 31, 2019 FFELP Loans Private Education Loans Personal Loans Credit Cards Total Allowance for Credit Losses Beginning balance $ 977 $ 277,943 $ 62,201 $ — $ 341,121 Total provision 1,478 279,570 72,783 103 353,934 Net charge-offs: Charge-offs ( 822 ) ( 208,978 ) ( 74,313 ) ( 1 ) ( 284,114 ) Recoveries — 25,765 5,206 — 30,971 Net charge-offs ( 822 ) ( 183,213 ) ( 69,107 ) ( 1 ) ( 253,143 ) Ending Balance $ 1,633 $ 374,300 $ 65,877 $ 102 $ 441,912 Allowance: Ending balance: individually evaluated for impairment $ — $ 186,697 $ — $ — $ 186,697 Ending balance: collectively evaluated for impairment $ 1,633 $ 187,603 $ 65,877 $ 102 $ 255,215 Loans: Ending balance: individually evaluated for impairment $ — $ 1,581,966 $ — $ — $ 1,581,966 Ending balance: collectively evaluated for impairment $ 783,306 $ 21,607,625 $ 1,049,007 $ 3,884 $ 23,443,822 Net charge-offs as a percentage of average loans in repayment (1) 0.13 % 1.17 % 6.07 % 0.13 % Allowance as a percentage of the ending total loan balance 0.21 % 1.61 % 6.28 % 2.63 % Allowance as a percentage of the ending loans in repayment (1) 0.26 % 2.23 % 6.28 % 2.63 % Allowance coverage of net charge-offs 1.99 2.04 0.95 102.00 Ending total loans, gross $ 783,306 $ 23,189,591 $ 1,049,007 $ 3,884 Average loans in repayment (1) $ 631,029 $ 15,605,927 $ 1,138,887 $ 786 Ending loans in repayment (1) $ 617,646 $ 16,787,670 $ 1,049,007 $ 3,884 ____________ (1) Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period. F-47 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 7. Allowance for Credit Losses (Continued) Allowance for Credit Losses Year Ended December 31, 2018 FFELP Loans Private Education Loans Personal Loans Total Allowance for Credit Losses Beginning balance $ 1,132 $ 243,715 $ 6,628 $ 251,475 Total provision 980 169,287 74,317 244,584 Net charge-offs: Charge-offs ( 1,135 ) ( 154,701 ) ( 19,690 ) ( 175,526 ) Recoveries — 20,858 946 21,804 Net charge-offs ( 1,135 ) ( 133,843 ) ( 18,744 ) ( 153,722 ) Loan sales (1) — ( 1,216 ) — ( 1,216 ) Ending Balance $ 977 $ 277,943 $ 62,201 $ 341,121 Allowance: Ending balance: individually evaluated for impairment $ — $ 120,110 $ — $ 120,110 Ending balance: collectively evaluated for impairment $ 977 $ 157,833 $ 62,201 $ 221,011 Loans: Ending balance: individually evaluated for impairment $ — $ 1,257,856 $ — $ 1,257,856 Ending balance: collectively evaluated for impairment $ 846,487 $ 19,246,609 $ 1,190,091 $ 21,283,187 Net charge-offs as a percentage of average loans in repayment (2) 0.16 % 1.01 % 2.11 % Allowance as a percentage of the ending total loan balance 0.12 % 1.36 % 5.23 % Allowance as a percentage of the ending loans in repayment (2) 0.15 % 1.90 % 5.23 % Allowance coverage of net charge-offs 0.86 2.08 3.32 Ending total loans, gross $ 846,487 $ 20,504,465 $ 1,190,091 Average loans in repayment (2) $ 691,406 $ 13,303,801 $ 889,348 Ending loans in repayment (2) $ 665,807 $ 14,666,856 $ 1,190,091 ____________ (1) Represents fair value adjustments on loans sold. (2) Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period. F-48 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 7. Allowance for Credit Losses (Continued) Allowance for Credit Losses - Forecast Assumptions In determining the adequacy of the allowance for credit losses, we include forecasts of college graduate unemployment and the Consumer Price Index in our loss forecasting models. We obtain forecasts for these two inputs from Moody’s Analytics. Moody’s Analytics provides a range of forecasts for each of these inputs with various likelihoods of occurring. We determine which forecasts we will include in our estimation of allowance for credit losses and the associated weightings for each of these inputs. At both January 1, 2020 (the initial adoption date of CECL), and December 31, 2020, we used the Base (50th percentile likelihood of occurring)/S1 (stronger near-term growth scenario with 10 percent likelihood of occurring)/S3 (downside scenario with 10 percent likelihood of occurring) scenarios and weighted them 40 percent, 30 percent and 30 percent, respectively. Management reviews both the scenarios and their respective weightings each quarter in determining the allowance for credit losses. For the year ended December 31, 2020, we had total provisions for credit losses of $ 93 million. The provisions for credit losses for 2020 were affected primarily by $ 290 million in additional provisions for credit losses related to new commitments made in 2020, an additional $ 129 million due to deteriorating economic conditions during the year as a result of the COVID-19 pandemic, and $ 99 million caused by lower recovery rates and various overlays and other adjustments applied during the year. Offsetting these was a $ 206 million reduction in the provisions for credit losses as a result of $ 2.9 billion of loans transferred to held-for-sale from held for investment in the fourth quarter of 2020, the sale of $ 3.1 billion of Private Education Loans in the first quarter of 2020, which resulted in a reduction to our provision for credit losses of $ 162 million, a benefit of $ 121 million from faster prepayment speeds, and the sale of our entire Personal Loan portfolio, which resulted in a reduction to our provision for credit losses of $ 43 million. The benefit from faster prepayment speeds reflected actual loan prepayment speeds being higher than what our models were predicting due to the significant amount of COVID-19 related government stimulus. As COVID-19 continues to impact the economy, we could continue to experience significant changes in our allowance for credit losses in 2021. See Note 5, “Loans Held for Investment - Certain Collection Tools - Private Education Loans,” for additional information. Troubled Debt Restructurings All of our loans are collectively assessed for impairment, except for loans classified as TDRs (where we conduct individual assessments of impairment). We adjust the terms of loans for certain borrowers when we believe such changes will help our customers manage their student loan obligations, achieve better student outcomes, and increase the collectability of the loan. These changes generally take the form of a temporary forbearance of payments, a temporary interest rate reduction, a temporary interest rate reduction with a permanent extension of the loan term, and/or a short-term extended repayment alternative. When we give a borrower facing financial difficulty an interest rate reduction, we temporarily reduce the contractual interest rate on a loan to 4.0 percent for a two-year period and, in the vast majority of cases, permanently extend the final maturity date of the loan. The combination of these two loan term changes helps reduce the monthly payment due from the borrower and increases the likelihood the borrower will remain current during the interest rate modification period as well as when the loan returns to its original contractual interest rate. At December 31, 2020 and 2019, 7.8 percent and 7.2 percent, respectively, of our Private Education Loans held for investment then currently in full principal and interest repayment status were subject to interest rate reductions made under our rate modification program. Once a loan qualifies for TDR status, it remains a TDR for allowance purposes for the remainder of its life. As of December 31, 2020 and 2019, approximately 47 percent and 50 percent, respectively, of TDRs were classified as such due to their forbearance status. See Note 2, “Significant Accounting Policies — Allowance for Credit Losses 2020” for a more detailed discussion. Within the Private Education Loan portfolio, loans greater than 90 days past due are nonperforming. FFELP Loans are at least 97 percent guaranteed as to their principal and accrued interest by the federal government in the event of default and, therefore, we do not deem FFELP Loans as nonperforming from a credit risk perspective at any point in their life cycle prior to claim payment and continue to accrue interest on those loans through the date of claim. F-49 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 7. Allowance for Credit Losses (Continued) At December 31, 2020 and 2019, all of our TDR loans had a related allowance recorded. The following table provides the recorded investment, unpaid principal balance and related allowance for our TDR loans. Recorded Investment Unpaid Principal Balance Allowance December 31, 2020 TDR Loans $ 1,312,805 $ 1,274,590 $ 104,265 December 31, 2019 TDR Loans $ 1,612,896 $ 1,581,966 $ 186,697 The following table provides the average recorded investment and interest income recognized for our TDR loans. Years Ended December 31, 2020 2019 2018 Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized TDR Loans $ 1,546,908 $ 100,125 $ 1,434,137 $ 95,507 $ 1,141,993 $ 77,670 F-50 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 7. Allowance for Credit Losses (Continued) The following table provides information regarding the loan status and aging of TDR loans. December 31, December 31, 2020 2019 Balance % Balance % TDR loans in in-school/grace/deferment (1) $ 88,750 $ 87,749 TDR loans in forbearance (2) 76,704 99,054 TDR loans in repayment (3) and percentage of each status: Loans current 971,880 87.7 % 1,230,954 88.2 % Loans delinquent 31-60 days (4) 59,249 5.3 85,555 6.1 Loans delinquent 61-90 days (4) 43,576 3.9 49,626 3.6 Loans delinquent greater than 90 days (4) 34,431 3.1 29,028 2.1 Total TDR loans in repayment (3) 1,109,136 100.0 % 1,395,163 100.0 % Total TDR loans, gross $ 1,274,590 $ 1,581,966 _____ (1) Deferment includes customers who have returned to school or are engaged in other permitted educational activities and are not yet required to make payments on the loans (e.g., residency periods for medical students or a grace period for bar exam preparation). (2) Loans for customers who have requested extension of grace period generally during employment transition or who have temporarily ceased making full payments due to hardship or other factors, consistent with established loan program servicing policies and procedures. (3) Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period, (but, for purposes of the table, do not include those loans while they are in forbearance). (4) The period of delinquency is based on the number of days scheduled payments are contractually past due. F-51 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 7. Allowance for Credit Losses (Continued) The following table provides the amount of modified loans (which include forbearance and reductions in interest rates) that became TDRs in the periods presented. Additionally, for the periods presented, the table summarizes charge-offs occurring in the TDR portfolio, as well as TDRs for which a payment default occurred in the relevant period presented and within 12 months of the loan first being designated as a TDR. We define payment default as 60 days past due for this disclosure. Years Ended December 31, 2020 2019 2018 Modified Loans (1) Charge-offs Payment-Default Modified Loans (1) Charge-offs Payment-Default Modified Loans (1) Charge-offs Payment-Default TDR Loans $ 207,001 $ 71,267 $ 75,153 $ 515,398 $ 74,137 $ 111,810 $ 394,639 $ 52,823 $ 90,231 _______ (1) Represents the principal balance of loans that have been modified during the period and resulted in a TDR. Private Education Loans Held for Investment - Key Credit Quality Indicators FFELP Loans are at least 97 percent guaranteed as to their principal and accrued interest in the event of default; therefore, there are no key credit quality indicators associated with FFELP Loans. For Private Education Loans, the key credit quality indicators are FICO scores, the existence of a cosigner, the loan status and loan seasoning. The FICO scores are assessed at original approval and periodically refreshed/updated through the loan’s term. The following tables highlight the gross principal balance of our Private Education Loan portfolio (held for investment), by year of origination, stratified by key credit quality indicators. F-52 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 7. Allowance for Credit Losses (Continued) Private Education Loans Held for Investment - Credit Quality Indicators December 31, 2020 Year of Origination 2020 (1) 2019 (1) 2018 (1) 2017 (1) 2016 (1) 2015 and Prior (1) Total (1) % of Balance Cosigners: With cosigner $ 2,915,328 $ 3,467,219 $ 2,556,400 $ 2,262,635 $ 1,977,952 $ 4,198,748 $ 17,378,282 88 % Without cosigner 527,437 559,629 384,111 277,159 211,270 391,449 2,351,055 12 Total $ 3,442,765 $ 4,026,848 $ 2,940,511 $ 2,539,794 $ 2,189,222 $ 4,590,197 $ 19,729,337 100 % FICO at Origination (2) : Less than 670 $ 195,214 $ 290,711 $ 225,276 $ 197,948 $ 162,413 $ 369,609 $ 1,441,171 7 % 670-699 464,785 594,950 441,357 407,394 351,303 771,477 3,031,266 16 700-749 1,111,373 1,310,390 967,802 846,983 740,028 1,533,517 6,510,093 33 Greater than or equal to 750 1,671,393 1,830,797 1,306,076 1,087,469 935,478 1,915,594 8,746,807 44 Total $ 3,442,765 $ 4,026,848 $ 2,940,511 $ 2,539,794 $ 2,189,222 $ 4,590,197 $ 19,729,337 100 % FICO Refreshed (2)(3) : Less than 670 $ 240,154 $ 331,229 $ 301,784 $ 298,195 $ 293,077 $ 734,599 $ 2,199,038 11 % 670-699 438,665 493,135 336,966 283,906 231,759 504,779 2,289,210 12 700-749 1,102,666 1,248,806 871,677 734,222 603,160 1,220,468 5,780,999 29 Greater than or equal to 750 1,661,280 1,953,678 1,430,084 1,223,471 1,061,226 2,130,351 9,460,090 48 Total $ 3,442,765 $ 4,026,848 $ 2,940,511 $ 2,539,794 $ 2,189,222 $ 4,590,197 $ 19,729,337 100 % Seasoning (4) : 1-12 payments $ 2,068,517 $ 600,038 $ 469,143 $ 472,258 $ 381,197 $ 507,343 $ 4,498,496 23 % 13-24 payments 163 2,096,635 383,977 223,332 217,379 425,345 3,346,831 17 25-36 payments — — 1,353,567 370,250 181,940 439,337 2,345,094 12 37-48 payments — — — 965,476 351,433 402,552 1,719,461 9 More than 48 payments — — — — 729,510 2,310,905 3,040,415 15 Not yet in repayment 1,374,085 1,330,175 733,824 508,478 327,763 504,715 4,779,040 24 Total $ 3,442,765 $ 4,026,848 $ 2,940,511 $ 2,539,794 $ 2,189,222 $ 4,590,197 $ 19,729,337 100 % 2020 Current period (5) gross charge-offs $ ( 1,087 ) $ ( 10,940 ) $ ( 27,000 ) $ ( 35,851 ) $ ( 36,416 ) $ ( 94,032 ) $ ( 205,326 ) 2020 Current period (5) recoveries 42 636 2,274 3,585 4,284 13,200 24,021 2020 Current period (5) net charge-offs $ ( 1,045 ) $ ( 10,304 ) $ ( 24,726 ) $ ( 32,266 ) $ ( 32,132 ) $ ( 80,832 ) $ ( 181,305 ) Total accrued interest by origination vintage $ 90,438 $ 265,688 $ 252,251 $ 209,178 $ 141,094 $ 210,247 $ 1,168,896 ______ (1) Balance represents gross Private Education Loans, held for investment. (2) Represents the higher credit score of the cosigner or the borrower. (3) Represents the FICO score updated as of the fourth-quarter 2020. (4) Number of months in active repayment (whether interest only payment, fixed payment, or full principal and interest payment status) for which a scheduled payment was due. (5) Current period refers to period from January 1, 2020 through December 31, 2020. F-53 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 7. Allowance for Credit Losses (Continued) Private Education Loans Held for Investment - Credit Quality Indicators December 31, 2019 Year of Origination 2019 (1) 2018 (1) 2017 (1) 2016 (1) 2015 (1) 2014 and Prior (1) Total (1) % of Balance Cosigners: With cosigner $ 3,475,256 $ 4,303,772 $ 3,575,973 $ 3,112,873 $ 2,579,214 $ 3,662,547 $ 20,709,635 89 % Without cosigner 571,792 584,601 427,512 320,985 241,958 333,108 2,479,956 11 Total $ 4,047,048 $ 4,888,373 $ 4,003,485 $ 3,433,858 $ 2,821,172 $ 3,995,655 $ 23,189,591 100 % FICO at Origination (2) : Less than 670 $ 283,040 $ 343,613 $ 285,747 $ 236,457 $ 203,145 $ 313,587 $ 1,665,589 7 % 670-699 592,376 714,779 617,676 529,575 439,050 676,569 3,570,025 16 700-749 1,319,563 1,601,904 1,325,387 1,155,253 944,135 1,324,506 7,670,748 33 Greater than or equal to 750 1,852,069 2,228,077 1,774,675 1,512,573 1,234,842 1,680,993 10,283,229 44 Total $ 4,047,048 $ 4,888,373 $ 4,003,485 $ 3,433,858 $ 2,821,172 $ 3,995,655 $ 23,189,591 100 % FICO Refreshed (2)(3) : Less than 670 $ 401,979 $ 515,901 $ 475,007 $ 449,568 $ 419,308 $ 717,674 $ 2,979,437 13 % 670-699 582,256 645,422 497,497 397,889 308,607 451,451 2,883,122 13 700-749 1,284,867 1,506,849 1,199,564 994,309 772,205 1,048,808 6,806,602 29 Greater than or equal to 750 1,777,946 2,220,201 1,831,417 1,592,092 1,321,052 1,777,722 10,520,430 45 Total $ 4,047,048 $ 4,888,373 $ 4,003,485 $ 3,433,858 $ 2,821,172 $ 3,995,655 $ 23,189,591 100 % Seasoning (4) : 1-12 payments $ 2,376,404 $ 719,158 $ 705,181 $ 617,174 $ 462,946 $ 470,839 $ 5,351,702 23 % 13-24 payments — 2,588,702 424,953 305,078 285,513 399,905 4,004,151 17 25-36 payments — — 1,862,587 418,048 227,391 394,339 2,902,365 12 37-48 payments — — — 1,457,760 413,508 342,676 2,213,944 10 More than 48 payments — — — — 1,056,229 1,973,795 3,030,024 13 Not yet in repayment 1,670,644 1,580,513 1,010,764 635,798 375,585 414,101 5,687,405 25 Total $ 4,047,048 $ 4,888,373 $ 4,003,485 $ 3,433,858 $ 2,821,172 $ 3,995,655 $ 23,189,591 100 % 2019 gross charge-offs $ ( 1,697 ) $ ( 14,650 ) $ ( 29,119 ) $ ( 40,576 ) $ ( 41,141 ) $ ( 81,795 ) $ ( 208,978 ) 2019 recoveries 69 1,016 2,622 4,431 5,175 12,452 25,765 2019 net charge-offs $ ( 1,628 ) $ ( 13,634 ) $ ( 26,497 ) $ ( 36,145 ) $ ( 35,966 ) $ ( 69,343 ) $ ( 183,213 ) Total accrued interest by origination vintage $ 116,423 $ 321,568 $ 327,002 $ 261,083 $ 165,764 $ 174,318 $ 1,366,158 ______ (1) Balance represents gross Private Education Loans, held for investment. (2) Represents the higher credit score of the cosigner or the borrower. (3) Represents the FICO score updated as of the fourth-quarter 2019. (4) Number of months in active repayment (whether interest only payment, fixed payment, or full principal and interest payment status) for which a scheduled payment was due. F-54 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 7. Allowance for Credit Losses (Continued) Delinquencies - Private Education Loans Held for Investment The following tables provide information regarding the loan status of our Private Education Loans, held for investment, by year of origination. Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period, (but, for purposes of the following tables, do not include those loans while they are in forbearance). Private Education Loans Held for Investment - Delinquencies by Origination Vintage December 31, 2020 2020 2019 2018 2017 2016 2015 and Prior Total Loans in-school/grace/deferment (1)(2) $ 1,374,085 $ 1,330,175 $ 733,824 $ 508,478 $ 327,763 $ 504,715 $ 4,779,040 Loans in forbearance (1)(3) 16,159 92,677 110,319 118,946 109,073 198,302 645,476 Loans in repayment (1) : — Loans current 2,043,033 2,573,228 2,045,012 1,850,539 1,685,572 3,701,564 13,898,948 Loans delinquent 31-60 days (4) 6,400 16,983 26,934 30,771 33,040 91,400 205,528 Loans delinquent 61-90 days (4) 2,628 9,143 15,026 18,121 19,064 55,661 119,643 Loans delinquent greater than 90 days (4) 460 4,642 9,396 12,939 14,710 38,555 80,702 Total Private Education Loans in repayment 2,052,521 2,603,996 2,096,368 1,912,370 1,752,386 3,887,180 14,304,821 Total Private Education Loans, gross 3,442,765 4,026,848 2,940,511 2,539,794 2,189,222 4,590,197 19,729,337 Private Education Loans deferred origination costs and unamortized premium/(discount) 21,129 13,933 8,671 6,708 5,721 7,313 63,475 Total Private Education Loans 3,463,894 4,040,781 2,949,182 2,546,502 2,194,943 4,597,510 19,792,812 Private Education Loans allowance for losses ( 210,875 ) ( 298,776 ) ( 218,136 ) ( 184,265 ) ( 150,150 ) ( 293,642 ) ( 1,355,844 ) Private Education Loans, net $ 3,253,019 $ 3,742,005 $ 2,731,046 $ 2,362,237 $ 2,044,793 $ 4,303,868 $ 18,436,968 Percentage of Private Education Loans in repayment 59.6 % 64.7 % 71.3 % 75.3 % 80.0 % 84.7 % 72.5 % Delinquent Private Education Loans in repayment as a percentage of Private Education Loans in repayment 0.5 % 1.2 % 2.4 % 3.2 % 3.8 % 4.8 % 2.8 % Loans in forbearance as a percentage of loans in repayment and forbearance 0.8 % 3.4 % 5.0 % 5.9 % 5.9 % 4.9 % 4.3 % _______ (1) For some students, going back to school in the fall was not an option because of the pandemic, or for other reasons. Therefore, some students are taking a “gap year” before returning to school. In 2020, for those students that had unexpectedly separated from school, we provided an extension of time through fall 2021 to re-enroll, before beginning their grace period that occurs prior to entering full principal and interest repayment status. At December 31, 2020, the loans in the “in-school/grace/deferment” category above include $ 401 million of Private Education Loans whose borrowers did not return to school in the fall of 2020 and who received such extension of time from us to re-enroll before beginning their grace period. At December 31, 2020, the loans in the “in forbearance” category above include $ 30 million of Private Education Loans whose borrowers did not return to school in the fall of 2020 and who received such extension of time from us to re-enroll before beginning their grace period. At December 31, 2020, the loans in the “in repayment” category above include $ 609 million of Private Education Loans whose borrowers did not return to school in the fall of 2020 and who received such extension of time from us to re-enroll before beginning their grace period. (2) Deferment includes customers who have returned to school or are engaged in other permitted educational activities and are not yet required to make payments on the loans (e.g., residency periods for medical students or a grace period for bar exam preparation). (3) Loans for customers who have requested extension of grace period generally during employment transition or who have temporarily ceased making full payments due to hardship or other factors, consistent with established loan program servicing policies and procedures. (4) The period of delinquency is based on the number of days scheduled payments are contractually past due. F-55 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 7. Allowance for Credit Losses (Continued) Private Education Loans Held for Investment - Delinquencies by Origination Vintage December 31, 2019 2019 2018 2017 2016 2015 2014 and Prior Total Loans in-school/grace/deferment (1) $ 1,670,644 $ 1,580,513 $ 1,010,764 $ 635,798 $ 375,585 $ 414,101 $ 5,687,405 Loans in forbearance (2) 21,009 108,509 142,341 146,114 127,799 168,744 714,516 Loans in repayment: Loans current 2,340,221 3,159,878 2,781,132 2,566,815 2,225,721 3,241,884 16,315,651 Loans delinquent 31-60 days (3) 11,152 26,096 44,382 51,656 54,559 100,206 288,051 Loans delinquent 61-90 days (3) 3,087 9,527 17,048 21,161 24,562 45,917 121,302 Loans delinquent greater than 90 days (3) 935 3,850 7,818 12,314 12,946 24,803 62,666 Total Private Education Loans in repayment 2,355,395 3,199,351 2,850,380 2,651,946 2,317,788 3,412,810 16,787,670 Total Private Education Loans, gross 4,047,048 4,888,373 4,003,485 3,433,858 2,821,172 3,995,655 23,189,591 Private Education Loans deferred origination costs and unamortized premium/(discount) 23,661 17,699 13,843 12,304 8,564 5,153 81,224 Total Private Education Loans 4,070,709 4,906,072 4,017,328 3,446,162 2,829,736 4,000,808 23,270,815 Private Education Loans allowance for losses ( 3,013 ) ( 19,105 ) ( 44,858 ) ( 71,598 ) ( 80,974 ) ( 154,752 ) ( 374,300 ) Private Education Loans, net $ 4,067,696 $ 4,886,967 $ 3,972,470 $ 3,374,564 $ 2,748,762 $ 3,846,056 $ 22,896,515 Percentage of Private Education Loans in repayment 58.2 % 65.4 % 71.2 % 77.2 % 82.2 % 85.4 % 72.4 % Delinquent Private Education Loans in repayment as a percentage of Private Education Loans in repayment 0.6 % 1.2 % 2.4 % 3.2 % 4.0 % 5.0 % 2.8 % Loans in forbearance as a percentage of loans in repayment and forbearance 0.9 % 3.3 % 4.8 % 5.2 % 5.2 % 4.7 % 4.1 % ______ (1) Deferment includes customers who have returned to school or are engaged in other permitted educational activities and are not yet required to make payments on the loans (e.g., residency periods for medical students or a grace period for bar exam preparation). (2) Loans for customers who have requested extension of grace period generally during employment transition or who have temporarily ceased making full payments due to hardship or other factors, consistent with established loan program servicing policies and procedures. (3) The period of delinquency is based on the number of days scheduled payments are contractually past due. F-56 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 7. Allowance for Credit Losses (Continued) Private Education Loans Held for Investment - Delinquencies by Origination Vintage December 31, 2018 2018 2017 2016 2015 2014 2013 and Prior Total Loans in-school/grace/deferment (1) $ 1,602,476 $ 1,497,955 $ 975,796 $ 589,558 $ 314,393 $ 280,267 $ 5,260,445 Loans in forbearance (2) 14,543 93,018 127,389 133,023 101,285 107,906 577,164 Loans in repayment: Loans current 2,233,102 2,800,142 2,769,458 2,533,550 1,865,094 2,088,359 14,289,705 Loans delinquent 31-60 days (3) 10,263 22,219 41,788 49,762 43,291 63,893 231,216 Loans delinquent 61-90 days (3) 3,521 7,227 15,893 19,935 18,561 29,968 95,105 Loans delinquent greater than 90 days (3) 640 3,322 8,042 10,549 10,983 17,294 50,830 Total Private Education Loans in repayment 2,247,526 2,832,910 2,835,181 2,613,796 1,937,929 2,199,514 14,666,856 Total Private Education Loans, gross 3,864,545 4,423,883 3,938,366 3,336,377 2,353,607 2,587,687 20,504,465 Private Education Loans deferred origination costs and unamortized premium/(discount) 20,433 16,362 14,747 10,422 4,992 1,365 68,321 Total Private Education Loans 3,884,978 4,440,245 3,953,113 3,346,799 2,358,599 2,589,052 20,572,786 Private Education Loans allowance for losses ( 2,670 ) ( 15,469 ) ( 43,469 ) ( 63,442 ) ( 62,852 ) ( 90,041 ) ( 277,943 ) Private Education Loans, net $ 3,882,308 $ 4,424,776 $ 3,909,644 $ 3,283,357 $ 2,295,747 $ 2,499,011 $ 20,294,843 Percentage of Private Education Loans in repayment 58.2 % 64.0 % 72.0 % 78.3 % 82.3 % 85.0 % 71.5 % Delinquent Private Education Loans in repayment as a percentage of Private Education Loans in repayment 0.6 % 1.2 % 2.3 % 3.1 % 3.8 % 5.1 % 2.6 % Loans in forbearance as a percentage of loans in repayment and forbearance 0.6 % 3.2 % 4.3 % 4.8 % 5.0 % 4.7 % 3.8 % ______ (1) Deferment includes customers who have returned to school or are engaged in other permitted educational activities and are not yet required to make payments on the loans (e.g., residency periods for medical students or a grace period for bar exam preparation). (2) Loans for customers who have requested extension of grace period generally during employment transition or who have temporarily ceased making full payments due to hardship or other factors, consistent with established loan program servicing policies and procedures. (3) The period of delinquency is based on the number of days scheduled payments are contractually past due. F-57 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 7. Allowance for Credit Losses (Continued) Accrued Interest Receivable The following table provides information regarding accrued interest receivable on our Private Education Loans. The table also discloses the amount of accrued interest on loans greater than 90 days past due as compared to our allowance for uncollectible interest on loans making full interest payments. The majority of the total accrued interest receivable represents accrued interest on deferred loans where no payments are due while the borrower is in school and fixed-pay loans where the borrower makes a $ 25 monthly payment that is smaller than the interest accruing on the loan in that month. The accrued interest on these loans will be capitalized to the balance of the loans when the borrower exits the grace period upon separation from school. The allowance for this portion of interest is included in our loan loss reserve. The allowance for uncollectible interest exceeds the amount of accrued interest on our 90 days past due Private Education Loan portfolio for all periods presented. Private Education Loans Accrued Interest Receivable Total Interest Receivable Greater Than 90 Days Past Due Allowance for Uncollectible Interest December 31, 2020 $ 1,168,895 $ 4,354 $ 4,467 December 31, 2019 $ 1,366,158 $ 2,390 $ 5,309 F-58 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 8. Unfunded Loan Commitments When we approve a Private Education Loan at the beginning of an academic year, that approval may cover the borrowing for the entire academic year. As such, we do not always disburse the full amount of the loan at the time of such approval, but instead have a commitment to fund a portion of the loan at a later date (usually at the start of the second semester or subsequent trimesters). We estimate expected credit losses over the contractual period in which we are exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by us. See Note 2, “Significant Accounting Policies — Allowance for Credit Losses 2020 — Off-Balance Sheet Exposure for Contractual Loan Commitments” for additional information. At December 31, 2020, we had $ 1.7 billion of outstanding contractual loan commitments that we expect to fund during the remainder of the 2020/2021 academic year. The tables below summarize the activity in the allowance recorded to cover lifetime expected credit losses on the unfunded commitments, which is recorded in “Other Liabilities” on the consolidated balance sheets, as well as the activity in the unfunded commitments balance. Years Ended December 31, 2020 2019 2018 Allowance Unfunded Commitments Allowance Unfunded Commitments Allowance Unfunded Commitments Beginning Balance $ 2,481 $ 1,910,603 $ 2,165 $ 2,010,744 $ 1,885 $ 1,838,840 Day 1 adjustment for the adoption of CECL 115,758 — — — — — Balance January 1, 2020 118,239 1,910,603 2,165 2,010,744 1,885 1,838,840 Provision/New commitments - net (1) 312,613 5,070,175 6,533 5,513,790 5,611 5,474,284 Transfer - funded loans (2) ( 320,808 ) ( 5,307,760 ) ( 6,217 ) ( 5,613,931 ) ( 5,331 ) ( 5,302,380 ) Ending Balance $ 110,044 $ 1,673,018 $ 2,481 $ 1,910,603 $ 2,165 $ 2,010,744 ________________ (1) Net of expirations of commitments unused. (2) When a loan commitment is funded, its related liability for credit losses (which originally was recorded as a provision for unfunded commitments) is transferred to the allowance for credit losses. The unfunded commitments disclosed above represent the total amount of outstanding unfunded commitments at each period end. However, historically not all of these commitments are funded prior to the expiration of the commitments. We estimate the amount of commitments expected to be funded in calculating the reserve for unfunded commitments. The amount we expect to fund and use in our calculation of the reserve for unfunded commitments will change period to period based upon the loan characteristics of the underlying commitments. F-59 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 9. Premises and Equipment, net The following is a summary of our premises and equipment. December 31, 2020 2019 Land and land improvements $ 12,356 $ 12,356 Buildings and leasehold improvements 120,971 105,986 Furniture, fixtures and equipment 28,272 25,694 Software 76,500 70,191 Premises and equipment, gross 238,099 214,227 Accumulated depreciation ( 83,429 ) ( 79,478 ) Premises and equipment, net $ 154,670 $ 134,749 Depreciation expense for premises and equipment was $ 15 million, $ 15 million and $ 14 million for the years ended December 31, 2020, 2019 and 2018, respectively. 10. Deposits The following table summarizes total deposits at December 31, 2020 and 2019. December 31, 2020 2019 Deposits - interest bearing $ 22,664,899 $ 24,282,906 Deposits - non-interest bearing 1,140 1,077 Total deposits $ 22,666,039 $ 24,283,983 Our total deposits of $ 22.7 billion were comprised of $ 11.9 billion in brokered deposits and $ 10.8 billion in retail and other deposits at December 31, 2020, compared with total deposits of $ 24.3 billion, which were comprised of $ 13.8 billion in brokered deposits and $ 10.5 billion in retail and other deposits, at December 31, 2019. Interest bearing deposits as of December 31, 2020 and 2019 consisted of retail and brokered non-maturity savings deposits, retail and brokered non-maturity MMDAs and retail and brokered CDs. Interest bearing deposits include deposits from Educational 529 and Health Savings plans that diversify our funding sources and add deposits we consider to be core. These and other large omnibus accounts, aggregating the deposits of many individual depositors, represented $ 7.1 billion of our deposit total as of December 31, 2020, compared with $ 6.8 billion at December 31, 2019. Some of our deposit products are serviced by third-party providers. Placement fees associated with the brokered CDs are amortized into interest expense using the effective interest rate method. We recognized placement fee expense of $ 19 million, $ 18 million, and $ 13 million in the years ended December 31, 2020, 2019 and 2018, respectively. Fees paid to third-party brokers related to these CDs were $ 5 million, $ 28 million, and $ 26 million during the years ended December 31, 2020, 2019 and 2018, respectively. Interest bearing deposits at December 31, 2020 and 2019 are summarized as follows: F-60 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 10. Deposits (Continued) December 31, 2020 December 31, 2019 Amount Year-End Weighted Average Stated Rate (1) Amount Year-End Weighted Average Stated Rate (1) Money market $ 10,159,657 0.83 % $ 9,616,547 2.04 % Savings 907,976 0.55 718,616 1.71 Certificates of deposit 11,597,266 1.34 13,947,743 2.44 Deposits - interest bearing $ 22,664,899 $ 24,282,906 ___ (1) Includes the effect of interest rate swaps in effective hedge relationships. Certificates of deposit remaining maturities are summarized as follows: December 31, 2020 2019 One year or less $ 5,728,556 $ 4,934,933 After one year to two years 3,363,022 4,279,406 After two years to three years 1,603,229 2,807,297 After three years to four years 553,911 1,285,504 After four years to five years 300,346 548,492 After five years 48,202 92,111 Total $ 11,597,266 $ 13,947,743 As of December 31, 2020 and 2019, there were $ 571 million and $ 963 million, respectively, of deposits exceeding FDIC insurance limits. Accrued interest on deposits was $ 50 million and $ 68 million at December 31, 2020 and 2019, respectively. F-61 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 11. Borrowings Outstanding borrowings consist of unsecured debt and secured borrowings issued through our term ABS program and our Secured Borrowing Facility. The issuing entities for those secured borrowings are VIEs and are consolidated for accounting purposes. The following table summarizes our secured borrowings at December 31, 2020 and 2019. December 31, 2020 December 31, 2019 Short-Term Long-Term Total Short-Term Long-Term Total Unsecured borrowings: Unsecured debt (fixed-rate) $ — $ 692,879 $ 692,879 $ — $ 198,159 $ 198,159 Total unsecured borrowings — 692,879 692,879 — 198,159 198,159 Secured borrowings: Private Education Loan term securitizations: Fixed-rate — 3,261,233 3,261,233 — 2,629,902 2,629,902 Variable-rate — 1,235,105 1,235,105 — 1,525,976 1,525,976 Total Private Education Loan term securitizations — 4,496,338 4,496,338 — 4,155,878 4,155,878 Secured Borrowing Facility — — — 289,230 — 289,230 Total secured borrowings — 4,496,338 4,496,338 289,230 4,155,878 4,445,108 Total $ — $ 5,189,217 $ 5,189,217 $ 289,230 $ 4,354,037 $ 4,643,267 Short-term Borrowings Secured Borrowing Facility On February 19, 2020, we amended our Secured Borrowing Facility to, among other things, increase the amount that can be borrowed under the facility to $ 2 billion (from $ 750 million) and extend the maturity of the facility. We hold 100 percent of the residual interest in the Secured Borrowing Facility trust. Under the amended Secured Borrowing Facility, we incur financing costs on unused borrowing capacity and on outstanding advances. The amended Secured Borrowing Facility extended the revolving period, during which we may borrow, repay and reborrow funds, until February 17, 2021. On February 17, 2021, we further amended and extended the maturity of our Secured Borrowing Facility such that the revolving period now extends until February 16, 2022. The scheduled amortization period, during which amounts outstanding under the Secured Borrowing Facility must be repaid, now ends on February 16, 2023 (or earlier, if certain material adverse events occur). At December 31, 2020, there were no secured borrowings outstanding under the Secured Borrowing Facility, and at December 31, 2019, $ 289 million secured borrowings were outstanding under the Secured Borrowing Facility. For additional information, see Notes to Consolidated Financial Statements, Note 25, “Subsequent Events.” Short-term borrowings have a remaining term to maturity of one year or less. The following table summarizes the outstanding short-term borrowings, the weighted average interest rates at the end of the period and the related average balance and weighted average interest rates during the period. The Secured Borrowing Facility’s contractual maturity is two years from the date of inception or renewal (one-year revolving period plus a one-year amortization period); however, we classify advances under our Secured Borrowing Facility as short-term borrowings because it is our intention to repay those advances within one year. F-62 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 11. Borrowings (Continued) December 31, 2020 Year Ended December 31, 2020 Ending Balance Weighted Average Interest Rate Average Balance Weighted Average Interest Rate (1) Short-term borrowings: Secured Borrowing Facility $ — — % $ 45,820 24.99 % Maximum outstanding at any month end $ 289,230 December 31, 2019 Year Ended December 31, 2019 Ending Balance Weighted Average Interest Rate Average Balance Weighted Average Interest Rate Short-term borrowings: Secured Borrowing Facility $ 289,230 1.74 % $ 102,639 4.91 % Maximum outstanding at any month end $ 297,800 ___________ (1) The interest for the non-use fees is calculated based on the Secured Borrowing Facility’s maximum borrowing limit, which increased to $ 2 billion in 2020. Long-term Borrowings Unsecured Debt On April 5, 2017, we issued at par an unsecured debt offering of $ 200 million of 5.125 percent Senior Notes due April 5, 2022. At December 31, 2020, the outstanding balance was $ 199 million. On October 29, 2020, we issued at par an unsecured debt offering of $ 500 million of 4.20 percent Senior Notes due October 29, 2025. At December 31, 2020, the outstanding balance was $ 494 million. Secured Financings 2020 Transactions On February 12, 2020, we executed our $ 636 million SMB Private Education Loan Trust 2020-A term ABS transaction, which was accounted for as a secured financing. We sold $ 636 million of notes to third parties and retained a 100 percent interest in the residual certificates issued in the securitization, raising approximately $ 634 million of gross proceeds. The Class A and Class B notes had a weighted average life of 4.18 years and priced at a weighted average LIBOR equivalent cost of 1-month LIBOR plus 0.88 percent. At December 31, 2020, $ 605 million of our Private Education Loans, including $ 567 million of principal and $ 38 million in capitalized interest, were encumbered because of this transaction. On August 12, 2020, we executed our $ 707 million SMB Private Education Loan Trust 2020-B term ABS transaction, which was accounted for as a secured financing. We sold $ 707 million of notes to third parties and retained a 100 percent interest in the residual certificates issued in the securitization, raising approximately $ 705 million of gross proceeds. The Class A and Class B notes had a weighted average life of 4.14 years and priced at a weighted average LIBOR equivalent cost of 1-month LIBOR plus 1.30 percent. At December 31, 2020, $ 748 million of our Private Education Loans, including $ 701 million of principal and $ 47 million in capitalized interest, were encumbered because of this transaction. 2019 Transactions On March 13, 2019, we executed our $ 453 million SMB Private Education Loan Trust 2019-A term ABS transaction, which was accounted for as a secured financing. We sold $ 453 million of notes to third parties and retained a 100 percent interest in the residual certificates issued in the securitization, raising approximately $ 451 million of gross proceeds. The Class F-63 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 11. Borrowings (Continued) A and Class B notes had a weighted average life of 4.26 years and priced at a weighted average LIBOR equivalent cost of 1-month LIBOR plus 0.92 percent. At December 31, 2020, $ 377 million of our Private Education Loans, including $ 355 million of principal and $ 22 million in capitalized interest, were encumbered because of this transaction. On June 12, 2019, we executed our $ 657 million SMB Private Education Loan Trust 2019-B term ABS transaction, which was accounted for as a secured financing. We sold $ 657 million of notes to third parties and retained a 100 percent interest in the residual certificates issued in the securitization, raising approximately $ 655 million of gross proceeds. The Class A and Class B notes had a weighted average life of 4.41 years and priced at a weighted average LIBOR equivalent cost of 1-month LIBOR plus 1.01 percent. At December 31, 2020, $ 578 million of our Private Education Loans, including $ 542 million of principal and $ 36 million in capitalized interest, were encumbered because of this transaction. Pre-2019 Transactions Prior to 2019, we executed a total of $ 5.8 billion in ABS transactions that were accounted for as secured financings. At December 31, 2020, $ 3.7 billion of our Private Education Loans, including $ 3.5 billion of principal and $ 159 million in capitalized interest, were encumbered as a result of these transactions. The following table summarizes the outstanding long-term borrowings, the weighted average interest rates at the end of the period and the related average balance during the period. Rates reflect stated interest of borrowings and related discounts and premiums. The long-term borrowings amortize over time and mature serially from 2025 to 2053. December 31, 2020 Year Ended December 31, 2020 December 31, 2019 Year Ended December 31, 2019 Ending Balance Weighted Average Interest Rate Average Balance Ending Balance Weighted Average Interest Rate Average Balance Floating-rate borrowings $ 1,235,105 1.09 % $ 1,432,446 $ 1,525,976 2.61 % $ 1,731,675 Fixed-rate borrowings 3,954,112 3.08 3,316,425 2,828,061 3.31 2,752,183 Total long-term borrowings $ 5,189,217 2.60 % $ 4,748,871 $ 4,354,037 3.07 % $ 4,483,858 F-64 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 11. Borrowings (Continued) As of December 31, 2020, the stated maturity and maturity to call date of our brokered deposits and borrowings are summarized below. December 31, 2020 Stated Maturity (1) Maturity to Call Date Brokered Deposits Unsecured Debt Secured Borrowings Total Brokered Deposits Unsecured Debt Secured Borrowings Total Year of Maturity 2021 $ 3,691,601 $ — $ 612,195 $ 4,303,796 $ 3,691,601 $ — $ 612,195 $ 4,303,796 2022 2,918,823 200,000 567,540 3,686,363 2,918,823 200,000 567,540 3,686,363 2023 1,536,077 — 605,658 2,141,735 1,536,077 — 605,658 2,141,735 2024 499,112 — 596,843 1,095,955 499,112 — 596,843 1,095,955 2025 270,274 500,000 587,801 1,358,075 270,274 500,000 587,801 1,358,075 2026 and after 47,401 — 1,705,576 1,752,977 47,401 — 1,705,576 1,752,977 8,963,288 700,000 4,675,613 14,338,901 8,963,288 700,000 4,675,613 14,338,901 Hedge accounting adjustments 108,913 — — 108,913 108,913 — — 108,913 Total $ 9,072,201 $ 700,000 $ 4,675,613 $ 14,447,814 $ 9,072,201 $ 700,000 $ 4,675,613 $ 14,447,814 ____________ (1) We view our securitization trust debt as long-term based on the contractual maturity dates and projected principal paydowns based on our current estimates regarding loan prepayment speeds. The projected principal paydowns in year 2021 include $ 612 million related to the securitization trust debt. F-65 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 11. Borrowings (Continued) Secured Financings The following summarizes our secured financings issued in 2019 and 2020: Issue Date Issued Total Issued Weighted Average Cost of Funds (1) Weighted Average Life (in years) Private Education Loans: 2019-A March 2019 $ 453,000 1-month LIBOR plus 0.92 % 4.26 2019-B June 2019 657,000 1-month LIBOR plus 1.01 % 4.41 Total notes issued in 2019 $ 1,110,000 Total loan and accrued interest amount securitized at inception in 2019 $ 1,208,963 2020-A February 2020 $ 636,000 1-month LIBOR plus 0.88 % 4.18 2020-B August 2020 707,000 1-month LIBOR plus 1.30 % 4.14 Total notes issued in 2020 $ 1,343,000 Total loan and accrued interest amount securitized at inception in 2020 $ 1,463,230 ____________ (1) Represents LIBOR equivalent cost of funds for floating and fixed-rate bonds, excluding issuance costs. F-66 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 11. Borrowings (Continued) Consolidated Funding Vehicles We consolidate our financing entities that are VIEs as a result of our being the entities’ primary beneficiary. As a result, these financing VIEs are accounted for as secured borrowings. December 31, 2020 Debt Outstanding Carrying Amount of Assets Securing Debt Outstanding Short-Term Long-Term Total Loans Restricted Cash Other Assets (1) Total Secured borrowings: Private Education Loan term securitizations $ — $ 4,496,338 $ 4,496,338 $ 5,661,123 $ 154,417 $ 356,967 $ 6,172,507 Secured Borrowing Facility — — — — — 436 436 Total $ — $ 4,496,338 $ 4,496,338 $ 5,661,123 $ 154,417 $ 357,403 $ 6,172,943 December 31, 2019 Debt Outstanding Carrying Amount of Assets Securing Debt Outstanding Short-Term Long-Term Total Loans Restricted Cash Other Assets (1) Total Secured borrowings: Private Education Loan term securitizations $ — $ 4,155,878 $ 4,155,878 $ 5,246,986 $ 145,760 $ 333,173 $ 5,725,919 Secured Borrowing Facility 289,230 — 289,230 339,666 8,803 23,832 372,301 Total $ 289,230 $ 4,155,878 $ 4,445,108 $ 5,586,652 $ 154,563 $ 357,005 $ 6,098,220 ________ (1) Other assets primarily represent accrued interest receivable. Unconsolidated VIEs Student Loan Securitizations Our unconsolidated VIEs include variable interests that we hold in certain securitization trusts created by the sale of our Private Education Loans to unaffiliated third parties in the first quarter of 2020. The Company remained the servicer of these loans pursuant to applicable servicing agreements executed in connection with the sales, and is also the administrator of these trusts. Additionally, we own 5 percent of the securities issued by the trusts in order to meet risk retention requirements. We were not required to consolidate these entities because we do not have the power to direct the activities that most significantly impact their economic performance. Our maximum exposure to these entities is limited to the investment on our consolidated balance sheet of $ 86 million as of December 31, 2020. Other Borrowing Sources We maintain discretionary uncommitted Federal Funds lines of credit with various correspondent banks, which totaled $ 125 million at December 31, 2020. The interest rate we are charged on these lines of credit is priced at Fed Funds plus a F-67 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 11. Borrowings (Continued) spread at the time of borrowing, and is payable daily. We did not utilize these lines of credit in the years ended December 31, 2020 and 2019. We established an account at the FRB to meet eligibility requirements for access to the Primary Credit borrowing facility at the FRB’s Discount Window (the “Window”). The Primary Credit borrowing facility is a lending program available to depository institutions that are in generally sound financial condition. All borrowings at the Window must be fully collateralized. We can pledge asset-backed and mortgage-backed securities, as well as FFELP Loans and Private Education Loans, to the FRB as collateral for borrowings at the Window. Generally, collateral value is assigned based on the estimated fair value of the pledged assets. At December 31, 2020 and December 31, 2019, the value of our pledged collateral at the FRB totaled $ 3.8 billion and $ 3.2 billion, respectively. The interest rate charged to us is the discount rate set by the FRB. We did not utilize this facility in the years ended December 31, 2020 and 2019. 12. Derivative Financial Instruments Risk Management Strategy We maintain an overall interest rate risk management strategy that incorporates the use of derivative instruments to reduce the economic effect of interest rate changes. Our goal is to manage interest rate sensitivity by modifying the repricing frequency and underlying index characteristics of certain balance sheet assets or liabilities so any adverse impacts related to movements in interest rates are managed within low to moderate limits. As a result of interest rate fluctuations, hedged balance sheet positions will appreciate or depreciate in market value or create variability in cash flows. Income or loss on the derivative instruments linked to the hedged item will generally offset the effect of this unrealized appreciation or depreciation or volatility in cash flows for the period the item is being hedged. We view this strategy as a prudent management of interest rate risk. Although we use derivatives to reduce the risk of interest rate changes, the use of derivatives does expose us to both market and credit risk. Market risk is the chance of financial loss resulting from changes in interest rates and market liquidity. Credit risk is the risk that a counterparty will not perform its obligations under a contract and it is limited to the loss of the fair value gain in a derivative that the counterparty owes us less collateral held and plus collateral posted. When the fair value of a derivative contract less collateral held and plus collateral posted is negative, we owe the counterparty and, therefore, we have no credit risk exposure to the counterparty; however, the counterparty has exposure to us. We minimize the credit risk in derivative instruments by entering into transactions with reputable counterparties that are reviewed regularly by our Credit Department. We also maintain a policy of requiring that all derivative contracts be governed by an International Swaps and Derivatives Association, Inc. Master Agreement. Depending on the nature of the derivative transaction, bilateral collateral arrangements are required as well. When we have more than one outstanding derivative transaction with the counterparty, and there exists legally enforceable netting provisions with the counterparty (i.e., a legal right to offset receivable and payable derivative contracts), the “net” mark-to-market exposure, less collateral held and plus collateral posted, represents exposure with the counterparty. We refer to this as the “net position.” When there is a net negative exposure, we consider our exposure to the counterparty and the net position to be zero. Title VII of the Dodd-Frank Act requires all standardized derivatives, including most interest rate swaps, to be submitted for clearing to central counterparties to reduce counterparty risk. Two of the central counterparties we use are the CME and the LCH. All variation margin payments on derivatives cleared through the CME and LCH are accounted for as legal settlement. As of December 31, 2020, $ 8.2 billion notional of our derivative contracts were cleared on the CME and $ 0.4 billion were cleared on the LCH. The derivative contracts cleared through the CME and LCH represent 95.3 percent and 4.7 percent, respectively, of our total notional derivative contracts of $ 8.6 billion at December 31, 2020. For derivatives cleared through the CME and LCH, the net gain (loss) position includes the variation margin amounts as settlement of the derivative and not collateral against the fair value of the derivative. The amount of variation margin included as settlement as of December 31, 2020 was $( 179 ) million and $ 19 million for the CME and LCH, respectively. Changes in fair value for derivatives not designated as hedging instruments are presented as realized gains (losses). F-68 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 12. Derivative Financial Instruments (Continued) Our exposure is limited to the value of the derivative contracts in a gain position less any collateral held and plus any collateral posted. When there is a net negative exposure, we consider our exposure to the counterparty to be zero. At December 31, 2020 and 2019, we had a net positive exposure (derivative gain positions to us, less collateral held by us and plus collateral posted with counterparties) related to derivatives of $ 43 million and $ 52 million, respectively. Accounting for Derivative Instruments The accounting for derivative instruments requires that every derivative instrument, including certain derivative instruments embedded in other contracts, be recorded on the balance sheet as either an asset or liability measured at fair value. Our derivative instruments are classified and accounted for by us as fair value hedges, cash flow hedges, and trading hedges. We elected to early adopt ASU No. 2017-12 effective July 1, 2018. Under the standard, we are no longer required to separately measure and report hedge ineffectiveness, which was previously recorded in “gains (losses) on derivatives and hedging activities, net” in our consolidated statements of income. In accordance with the standard, certain provisions were required to be applied on a modified retrospective basis, which requires a cumulative effect adjustment to accumulated other comprehensive income with a corresponding adjustment to retained earnings as of the beginning of the fiscal year of adoption, or January 1, 2018 in our case. Fair Value Hedges We generally use fair value hedges to offset the exposure to changes in fair value of a recognized fixed-rate liability. We enter into interest rate swaps to economically convert fixed-rate liabilities into variable-rate liabilities. For fair value hedges, we generally consider all components of the derivative’s gain and/or loss when assessing hedge effectiveness and generally hedge changes in fair values due to interest rates. For fair value hedges, the entire change in the fair value of the hedging instrument included in the assessment of hedge effectiveness is recorded in the same line item in the consolidated statements of income that is used to present the earnings effect of the hedged component of the hedged item. The timing of recognition of the change in fair value of a hedging instrument included in the assessment of hedge effectiveness is the same as prior to the adoption of ASU No. 2017-12. Cash Flow Hedges We use cash flow hedges to hedge the exposure to variability in cash flows of floating-rate liabilities. This strategy is used primarily to minimize the exposure to volatility in cash flows from future changes in interest rates. In assessing hedge effectiveness, generally all components of each derivative’s gains or losses are included in the assessment. We hedge exposure to changes in cash flows due to changes in interest rates or total changes in cash flow. For cash flow hedges, the entire change in the fair value of the hedging instrument included in the assessment of hedge effectiveness is recorded in other comprehensive income (loss). Those amounts are subsequently reclassified to earnings, in the same line item in the consolidated statements of income as impacted by the hedged item, when the hedged item affects earnings. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on our variable-rate deposits. During the next twelve months, we estimate that $ 19 million will be reclassified as an increase to interest expense. Trading Activities When derivative instruments do not qualify for hedge accounting treatment, they are accounted for at fair value with all changes in fair value recorded through earnings. All of our derivative instruments entered into with maturities of less than 3 years are economically hedging risk, but do not receive hedge accounting treatment. Trading derivatives also include any hedges that originally received hedge accounting treatment, but lost hedge accounting treatment due to failed effectiveness testing, as well as the activity of certain derivatives prior to those derivatives receiving hedge accounting treatment. F-69 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 12. Derivative Financial Instruments (Continued) Summary of Derivative Financial Statement Impact The following tables summarize the fair values and notional amounts of all derivative instruments at December 31, 2020 and 2019, and their impact on earnings and other comprehensive income for the years ended December 31, 2020, 2019 and 2018. Impact of Derivatives on the Consolidated Balance Sheets Cash Flow Hedges Fair Value Hedges Trading Total December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2020 2019 2020 2019 2020 2019 2020 2019 Fair Values (1) Hedged Risk Exposure Derivative Assets: (2) Interest rate swaps Interest rate $ — $ 715 $ 594 $ — $ 135 $ — $ 729 $ 715 Derivative Liabilities: (2) Interest rate swaps Interest rate ( 287 ) — — ( 896 ) — ( 268 ) ( 287 ) ( 1,164 ) Total net derivatives $ ( 287 ) $ 715 $ 594 $ ( 896 ) $ 135 $ ( 268 ) $ 442 $ ( 449 ) __________ (1) Fair values reported include variation margin as legal settlement of the derivative contract. Assets and liabilities are presented without consideration of master netting agreements. Derivatives are carried on the balance sheet based on net position by counterparty under master netting agreements and classified in other assets or other liabilities depending on whether in a net positive or negative position. (2) The following table reconciles gross positions with the impact of master netting agreements to the balance sheet classification: Other Assets Other Liabilities December 31, December 31, December 31, December 31, 2020 2019 2020 2019 Gross position (1) $ 729 $ 715 $ ( 287 ) $ ( 1,164 ) Impact of master netting agreement ( 176 ) ( 519 ) 176 519 Derivative values with impact of master netting agreements (as carried on balance sheet) 553 196 ( 111 ) ( 645 ) Cash collateral pledged (2) 42,874 52,564 — — Net position $ 43,427 $ 52,760 $ ( 111 ) $ ( 645 ) __________ (1) Gross position amounts include accrued interest and variation margin as legal settlement of the derivative contract. (2) Cash collateral pledged excludes amounts that represent legal settlement of the derivative contracts. F-70 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 12. Derivative Financial Instruments (Continued) Cash Flow Fair Value Trading Total December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2020 2019 2020 2019 2020 2019 2020 2019 Notional Values Interest rate swaps $ 1,018,976 $ 1,150,518 $ 4,845,543 $ 5,031,429 $ 2,693,364 $ 3,744,917 $ 8,557,883 $ 9,926,864 As of December 31, 2020 and 2019, the following amounts were recorded on the consolidated balance sheet related to cumulative basis adjustments for fair value hedges: Line Item in the Balance Sheet in Which the Hedged Item is Included: Carrying Amount of the Hedged Assets/(Liabilities) Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets/(Liabilities) December 31, December 31, December 31, December 31, 2020 2019 2020 2019 Deposits $ ( 4,992,867 ) $ ( 5,085,426 ) $ ( 154,235 ) $ ( 63,148 ) F-71 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 12. Derivative Financial Instruments (Continued) Impact of Derivatives on the Consolidated Statements of Income Years Ended December 31, 2020 2019 2018 Fair Value Hedges Interest rate swaps: Interest recognized on derivatives $ 71,668 $ ( 8,806 ) $ ( 11,642 ) Hedged items recorded in interest expense ( 91,087 ) ( 77,350 ) ( 7,966 ) Derivatives recorded in interest expense 91,419 77,177 8,123 Total $ 72,000 $ ( 8,979 ) $ ( 11,485 ) Cash Flow Hedges Interest rate swaps: Amount of gain (loss) reclassified from accumulated other comprehensive income into interest expense $ ( 16,000 ) $ 2,299 $ ( 1,455 ) Total $ ( 16,000 ) $ 2,299 $ ( 1,455 ) Trading Interest rate swaps: Change in fair value of future interest payments recorded in earnings $ 10,164 $ 19,469 $ ( 1,400 ) Total 10,164 19,469 ( 1,400 ) Total $ 66,164 $ 12,789 $ ( 14,340 ) F-72 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 12. Derivative Financial Instruments (Continued) Impact of Derivatives on the Statements of Changes in Stockholders’ Equity Years Ended December 31, 2020 2019 2018 Amount of gain (loss) recognized in other comprehensive income (loss) $ ( 52,511 ) $ ( 36,115 ) $ 10,452 Less: Amount of gain (loss) reclassified in interest expense ( 16,000 ) 2,299 ( 1,455 ) Total change in other comprehensive income (loss) for unrealized gains (losses) on derivatives, before income tax (expense) benefit $ ( 36,511 ) $ ( 38,414 ) $ 11,907 Cash Collateral As of December 31, 2020, cash collateral held and pledged excludes amounts that represent legal settlement of the derivative contracts held with the CME and LCH. There was no cash collateral held by us related to derivative exposure between us and our derivatives counterparties at December 31, 2020 and 2019, respectively. Collateral held is recorded in “Other Liabilities” on the consolidated balance sheets. Cash collateral pledged related to derivative exposure between us and our derivatives counterparties was $ 43 million and $ 53 million at December 31, 2020 and 2019, respectively. Collateral pledged is recorded in “Other interest-earning assets” on the consolidated balance sheets. F-73 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 13. Stockholders’ Equity Preferred Stock At December 31, 2020, we had 2.5 million shares of Floating-Rate Non-Cumulative Preferred Stock, Series B (the “Series B Preferred Stock”) outstanding. The Series B Preferred Stock does not have a maturity date, but can be redeemed at our option. Redemption would include any accrued and unpaid dividends for the then current quarterly dividend period, up to the redemption date. The shares have no preemptive or conversion rights and are not exchangeable for any of our other securities or property. Dividends are not mandatory and are paid quarterly, when, as, and if declared by the Board of Directors. Holders of Series B Preferred Stock are entitled to receive quarterly dividends based on 3-month LIBOR plus 170 basis points per annum in arrears. Upon liquidation or dissolution of the Company, holders of the Series B Preferred Stock are entitled to receive $ 100 per share, plus an amount equal to accrued and unpaid dividends for the then current quarterly dividend period, pro rata, and before any distribution of assets is made to holders of our common stock. In October 2020, we initiated a cash tender offer to purchase up to 2,000,000 shares of our Series B Preferred Stock. On November 30, 2020, we accepted for purchase 1,489,304 shares of the Series B Preferred Stock at a purchase price of $ 45 per share plus an amount equal to accrued and unpaid dividends, for an aggregate purchase price of approximately $ 68 million. Common Stock Our shareholders have authorized the issuance of 1.125 billion shares of common stock (par value of $0 .20 ). At December 31, 2020, 375 million shares were issued and outstanding and 35 million shares were unissued but encumbered for outstanding stock options, restricted stock, restricted stock units, performance stock units and dividend equivalent units for employee compensation and remaining authority for stock-based compensation plans. Dividend and Share Repurchases In both the years ended December 31, 2020 and 2019, we paid a total common stock dividend of $ 0.12 per common share, respectively. We did no t pay common stock dividends for the year ended December 31, 2018. Common stock dividend declarations are subject to determination by, and the discretion of, our Board of Directors. We may change our common stock dividend policy at any time. We are dependent on funds obtained from the Bank to fund dividend payments. Regulatory and other legal restrictions may limit our ability to transfer funds freely, either to or from our subsidiaries. In particular, the Bank is subject to laws and regulations that authorize regulatory bodies to block or reduce the flow of funds to us, or that prohibit such transfers altogether in certain circumstances. These laws, regulations and rules may hinder our ability to access funds that we may need to make payments in respect of our stock or to satisfy our other responsibilities. The FDIC has the authority to prohibit or limit the payment of dividends by the Bank and SLM Corporation. The January 23, 2019 share repurchase program (the “2019 Share Repurchase Program”), which was effective upon announcement and expired on January 22, 2021, permitted us to repurchase from time to time shares of our common stock up to an aggregate repurchase price not to exceed $ 200 million. We have utilized all capacity under our 2019 Share Repurchase Program, having repurchased 17 million shares of common stock for $ 167 million in the year ended December 31, 2019 and 3 million shares of common stock for $ 33 million in the year ended December 31, 2020. On January 22, 2020, we announced a new share repurchase program (the “2020 Share Repurchase Program”), which was effective upon announcement and expires on January 21, 2022, and permits us to repurchase shares of common stock from time to time up to an aggregate repurchase price not to exceed $ 600 million. Under the authority of the 2020 Share Repurchase Program, on March 10, 2020, we entered into an accelerated share repurchase agreement (“ASR”) with a third-party financial institution under which we paid $ 525 million for an upfront delivery of our common stock and a forward agreement. On March 11, 2020, the third-party financial institution delivered to us approximately 44.9 million shares. The final total actual number of shares of common stock delivered to us pursuant to the forward agreement was based generally upon a discount to the Rule 10b-18 volume-weighted average price at which the shares of our common stock traded during the regular trading sessions on the NASDAQ Global Select Market during the term of the ASR. The transactions are accounted for as equity transactions and are included in treasury stock when the shares are received, F-74 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 13. Stockholders’ Equity (Continued) at which time there is an immediate reduction in the weighted average common shares calculation for basic and diluted earnings per share. On January 26, 2021, we completed the ASR and upon final settlement on January 28, 2021, we received an additional 13 million shares. In total, we repurchased 58 million shares under the ASR at an average price per share of $ 9.01 . For additional information, see Notes to Consolidated Financial Statements, Note 25, “Subsequent Events.” On January 27, 2021, we announced a new share repurchase program (the “2021 Share Repurchase Program”), which was effective upon announcement and expires on January 26, 2023, and permits us to repurchase shares of our common stock from time to time up to an aggregate repurchase price not to exceed $ 1.25 billion. On February 2, 2021, we announced the commencement of a tender offer (the “Tender Offer”) to purchase up to $ 1 billion in aggregate purchase price of our outstanding shares of common stock, par value $ 0.20 per share (the “Securities”) or such lesser aggregate purchase price of Securities as are properly tendered and not properly withdrawn, at a single per-Security price not greater than $ 15.00 nor less than $ 13.10 per share to the seller in cash, less any applicable withholding taxes and without interest. The Tender Offer may be amended from time to time, and will expire, upon the terms and conditions described in the relevant Tender Offer materials filed with the SEC. The results of the Tender Offer will be reflected in the Company’s financial results for the first fiscal quarter of 2021. For additional information, see Notes to Consolidated Financial Statements, Note 25, “Subsequent Events.” Repurchases under our share repurchase programs may occur from time to time and through a variety of methods, including tender offers, open market repurchases, repurchases effected through Rule 10b5-1 trading plans, negotiated block purchases, accelerated share repurchase programs, or other similar transactions. The timing and volume of any repurchases under the 2020 Share Repurchase Program and the 2021 Share Repurchase Program will be subject to market conditions, and there can be no guarantee that the Company will repurchase up to the limit of the programs or at all. For the year ended December 31, 2018, we only repurchased common stock acquired in connection with taxes withheld resulting from award exercises and vesting under our employee stock-based compensation plans. The following table summarizes our common share repurchases and issuances associated with these programs. Years Ended December 31, (Shares and per share amounts in actuals) 2020 2019 2018 Common stock repurchased under repurchase program (1)(2) 47,736,847 16,962,199 — Average purchase price per share (3) $ 9.66 $ 9.86 $ — Shares repurchased related to employee stock-based compensation plans (4) 1,197,843 1,369,630 3,087,396 Average purchase price per share $ 10.93 $ 10.85 $ 11.32 Common shares issued (5) 3,129,325 3,743,705 6,392,634 _________ (1) Common shares purchased under our share repurchase programs. $ 75 million of capacity under the 2020 Share Repurchase Program remained available as of December 31, 2020. (2) For the year ended December 31, 2020, the amount includes 44.9 million shares related to the initial delivery of shares under our accelerated share repurchase agreement, described above. (3) Average purchase price per share includes purchase commission costs. (4) Comprised of shares withheld from stock option exercises and vesting of restricted stock for employees’ tax withholding obligations and shares tendered by employees to satisfy option exercise costs. (5) Common shares issued under our various compensation and benefit plans. The closing price of our common stock on December 31, 2020 was $ 12.39 . F-75 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 14. Earnings per Common Share Basic earnings per common share (“EPS”) are calculated using the weighted average number of shares of common stock outstanding during each period. A reconciliation of the numerators and denominators of the basic and diluted EPS calculations follows. Years Ended December 31, (In thousands, except per share data) 2020 2019 2018 Numerator: Net income $ 880,690 $ 578,276 $ 487,476 Preferred stock dividends 9,734 16,837 15,640 Net income attributable to SLM Corporation common stock $ 870,956 $ 561,439 $ 471,836 Denominator: Weighted average shares used to compute basic EPS 383,705 427,292 435,054 Effect of dilutive securities: Dilutive effect of stock options, restricted stock, restricted stock units, performance stock units and Employee Stock Purchase Plan (“ESPP”) (1)(2) 3,490 3,382 4,627 Weighted average shares used to compute diluted EPS 387,195 430,674 439,681 Basic earnings per common share attributable to SLM Corporation $ 2.27 $ 1.31 $ 1.08 Diluted earnings per common share attributable to SLM Corporation $ 2.25 $ 1.30 $ 1.07 __________ (1) Includes the potential dilutive effect of additional common shares that are issuable upon exercise of outstanding stock options, restricted stock, restricted stock units, performance stock units and the outstanding commitment to issue shares under the ESPP, determined by the treasury stock method. (2) For the years ended December 31, 2020, 2019 and 2018, securities covering no shares, no shares and less than one million shares, respectively, were outstanding but not included in the computation of diluted earnings per share because they were anti-dilutive. F-76 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 15. Stock-Based Compensation Plans and Arrangements Plan Summaries As of December 31, 2020, we had one active stock-based compensation plan that provides for grants of equity awards to our employees and non-employee directors. We also maintained an Employee Stock Purchase Plan (the “ESPP”). Shares issued under these stock-based compensation plans may be either shares reacquired by us or shares that are authorized but unissued. The SLM Corporation 2012 Omnibus Incentive Plan was approved by shareholders on May 24, 2012. An amendment to the plan was approved and other material terms of the plan were re-approved by shareholders on June 22, 2017. At December 31, 2020, 13 million shares, as adjusted to reflect the effects of the Spin-Off, were authorized to be issued from this plan. An amendment to the ESPP was approved by shareholders on May 24, 2012 that authorized the issuance of 6 million shares under the plan and kept the terms of the plan substantially the same. The number of shares authorized under the plan was subsequently adjusted to 15 million shares on June 25, 2014, to reflect the effects of the Spin-Off. Stock-Based Compensation The total stock-based compensation cost recognized in the consolidated statements of income for the years ended December 31, 2020, 2019 and 2018 was $ 36 million, $ 31 million and $ 32 million, respectively. As of December 31, 2020, there was $ 17 million of total unrecognized compensation expense related to unvested restricted stock awards, restricted stock units, performance stock units and ESPP awards, which is expected to be recognized over a weighted average period of 1.4 years. We amortize compensation expense on a straight-line basis over the related vesting periods of each tranche of each award. Stock Options Stock options granted prior to 2012 expire 10 years after the grant date. The exercise price must be equal to or greater than the market price of our common stock on the grant date. We have granted time-vested, price-vested and performance-vested options to our employees and non-employee directors. Time-vested options granted to management and non-management employees generally vest over three years . Price-vested options granted to management employees vest upon our common stock reaching a targeted closing price for a set number of days. Performance-vested options granted to management employees vest one-third per year for three years based on corporate earnings-related performance targets. Options granted to non-employee directors vest upon the director’s election to the Board of Directors. There were no options granted in the years ended December 31, 2020, 2019 and 2018. F-77 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 15. Stock-Based Compensation Plans and Arrangements (Continued) The following table summarizes stock option activity for the year ended December 31, 2020. (Dollars in thousands, except per share data) Number of Options Weighted Average Exercise Price per Share Weighted Average Remaining Contractual Term Aggregate Intrinsic Value (1) Outstanding at December 31, 2019 789,846 $ 4.75 Granted — — Exercised (2)(3) ( 545,971 ) 4.51 Canceled ( 2,200 ) 3.70 Outstanding at December 31, 2020 (4) 241,675 $ 5.24 0.1 years $ 1,727 Exercisable at December 31, 2020 241,675 $ 5.24 0.1 years $ 1,727 ____________ (1) The aggregate intrinsic value represents the total intrinsic value (the aggregate difference between our closing stock price on December 31, 2020 and the exercise price of in-the-money options) that would have been received by the option holders if all in-the-money options had been exercised on December 31, 2020. (2) The total intrinsic value of options exercised was $ 3 million, $ 4 million, and $ 17 million for the years ended December 31, 2020, 2019 and 2018, respectively. (3) No cash was received from option exercises for the year ended December 31, 2020. The actual tax benefit realized for the tax deductions from option exercises totaled less than $ 1 million for the year ended December 31, 2020. (4) For net-settled options, gross number is reflected. F-78 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 15. Stock-Based Compensation Plans and Arrangements (Continued) Restricted Stock Restricted stock awards generally vest over one year . Outstanding restricted stock is entitled to dividend equivalent units that vest subject to the same vesting requirements or lapse of transfer restrictions, as applicable, as the underlying restricted stock award. The fair value of restricted stock awards is based on our stock price at the grant date. The following table summarizes restricted stock activity for the year ended December 31, 2020. (Shares and per share amounts in actuals) Number of Shares Weighted Average Grant Date Fair Value Non-vested at December 31, 2019 118,789 $ 9.26 Granted 143,033 7.69 Vested (1) ( 118,789 ) 9.26 Canceled — — Non-vested at December 31, 2020 (2) 143,033 $ 7.69 _________ (1) The total fair value of shares that vested during the years ended December 31, 2020, 2019 and 2018 was $ 1 million, $ 1 million and $ 1 million, respectively. (2) As of December 31, 2020, there was $ 1 million of unrecognized compensation cost related to restricted stock, which is expected to be recognized over a weighted average period of 0.5 years. F-79 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 15. Stock-Based Compensation Plans and Arrangements (Continued) Restricted Stock Units and Performance Stock Units Restricted stock units (“RSUs”) and performance stock units (“PSUs”) are equity awards granted to employees that entitle the holder to shares of our common stock when the award vests. RSUs may be time-vested over three years or vested at grant but subject to transfer restrictions, while PSUs vest based on corporate performance targets at the end of a three-year period. Outstanding RSUs and PSUs are entitled to dividend equivalent units that vest subject to the same vesting requirements or lapse of transfer restrictions, as applicable, as the underlying award. The fair value of RSUs is based on our stock price at the grant date. The following table summarizes RSU and PSU activity for the year ended December 31, 2020. (Shares and per share amounts in actuals) Number of RSUs/ PSUs Weighted Average Grant Date Fair Value Outstanding at December 31, 2019 5,179,217 $ 11.28 Granted 4,073,495 9.91 Vested and converted to common stock (1) ( 2,410,931 ) 10.79 Canceled ( 120,276 ) 11.05 Outstanding at December 31, 2020 (2) 6,721,505 $ 10.41 __________ (1) The total fair value of RSUs/PSUs that vested and converted to common stock during the years ended December 31, 2020, 2019 and 2018 was $ 26 million, $ 27 million and $ 25 million, respectively. (2) As of December 31, 2020, there was $ 16 million of unrecognized compensation cost related to RSUs/PSUs, which is expected to be recognized over a weighted average period of 1.5 years. Employee Stock Purchase Plan Employees may purchase shares of our common stock at the end of a 12 -month offering period at a price equal to the share price at the beginning of the 12-month period, less 15 percent, up to a maximum purchase price of $ 7,500 (whole dollars). The purchase price for each offering is determined at the beginning of the offering period on August 1. The fair values of the stock purchase rights of the ESPP offerings were calculated using a Black-Scholes option pricing model with the following weighted average assumptions: Years Ended December 31, (Dollars per share) 2020 2019 2018 Risk-free interest rate 0.12 % 1.87 % 2.44 % Expected volatility 49 % 29 % 27 % Expected dividend rate 1.76 % 1.34 % — % Expected life of the option 1 year 1 year 1 year Weighted average fair value of stock purchase rights $ 1.74 $ 1.77 $ 2.32 The expected volatility is based on implied volatility from publicly-traded options on our stock at the grant date and historical volatility of our stock consistent with the expected life. The risk-free interest rate is based on the U.S. Treasury bill F-80 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 15. Stock-Based Compensation Plans and Arrangements (Continued) rate at the grant date consistent with the expected life. The dividend yield was zero for the year ended December 31, 2018, as we did not pay dividends on our common stock in 2018. The fair values were amortized to compensation cost on a straight-line basis over a one -year vesting period. As of December 31, 2020, there was less than $ 1 million of unrecognized compensation cost related to the ESPP, which is expected to be recognized by July 2021. No shares were purchased for the years ended December 31, 2020 and 2019, as our stock price on both July 31, 2020 and 2019 was less than the offering price for the ESPP plan. During the year ended December 31, 2018, plan participants purchased 233,232 shares of our common stock. 16. Fair Value Measurements We use estimates of fair value in applying various accounting standards for the consolidated financial statements. We categorize our fair value estimates based on a hierarchal framework associated with three levels of price transparency utilized in measuring financial instruments at fair value. For additional information regarding our policies for determining fair value and the hierarchical framework, see Note 2, “Significant Accounting Policies — Fair Value Measurement.” The following table summarizes the valuation of our financial instruments that are marked-to-fair value on a recurring basis. Fair Value Measurements on a Recurring Basis December 31, 2020 December 31, 2019 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets Trading investments $ — $ — $ 16,923 $ 16,923 $ — $ — $ — $ — Available-for-sale investments — 1,996,634 — 1,996,634 — 487,669 — 487,669 Derivative instruments — 729 — 729 — 715 — 715 Total $ — $ 1,997,363 $ 16,923 $ 2,014,286 $ — $ 488,384 $ — $ 488,384 Liabilities Derivative instruments $ — $ ( 287 ) $ — $ ( 287 ) $ — $ ( 1,164 ) $ — $ ( 1,164 ) Total $ — $ ( 287 ) $ — $ ( 287 ) $ — $ ( 1,164 ) $ — $ ( 1,164 ) F-81 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 16. Fair Value Measurements (Continued) The following table summarizes the fair values of our financial assets and liabilities, including derivative financial instruments. December 31, 2020 December 31, 2019 Fair Value Carrying Value Difference Fair Value Carrying Value Difference Earning assets: Loans held for investment, net: Private Education Loans $ 22,124,171 $ 18,436,968 $ 3,687,203 $ 24,988,941 $ 22,896,515 $ 2,092,426 FFELP Loans 748,657 735,208 13,449 795,055 783,816 11,239 Personal Loans — — — 1,047,119 983,643 63,476 Credit Cards 12,249 10,967 1,282 3,818 3,818 — Loans held for sale 3,226,029 2,885,640 340,389 — — — Cash and cash equivalents 4,455,292 4,455,292 — 5,563,877 5,563,877 — Trading investments 16,923 16,923 — — — — Available-for-sale investments 1,996,634 1,996,634 — 487,669 487,669 — Accrued interest receivable 1,527,816 1,387,305 140,511 1,491,471 1,392,725 98,746 Tax indemnification receivable 18,492 18,492 — 27,558 27,558 — Derivative instruments 729 729 — 715 715 — Total earning assets $ 34,126,992 $ 29,944,158 $ 4,182,834 $ 34,406,223 $ 32,140,336 $ 2,265,887 Interest-bearing liabilities: Money-market and savings accounts $ 11,136,560 $ 11,067,633 $ ( 68,927 ) $ 10,363,691 $ 10,335,163 $ ( 28,528 ) Certificates of deposit 11,799,223 11,597,266 ( 201,957 ) 14,065,007 13,947,743 ( 117,264 ) Short-term borrowings — — — 289,230 289,230 — Long-term borrowings 5,398,309 5,189,217 ( 209,092 ) 4,434,323 4,354,037 ( 80,286 ) Accrued interest payable 60,272 60,272 — 75,158 75,158 — Derivative instruments 287 287 — 1,164 1,164 — Total interest-bearing liabilities $ 28,394,651 $ 27,914,675 $ ( 479,976 ) $ 29,228,573 $ 29,002,495 $ ( 226,078 ) Excess of net asset fair value over carrying value $ 3,702,858 $ 2,039,809 The methods and assumptions used to estimate the fair value of each class of financial instruments are as follows: Cash and Cash Equivalents Cash and cash equivalents are carried at cost. Carrying value approximated fair value for disclosure purposes. These are level 1 valuations. F-82 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 16. Fair Value Measurements (Continued) Investments Trading Investments classified as trading are carried at fair value in the consolidated financial statements. As such, these are level 3 valuations. Available-for-Sale Investments classified as available-for-sale are carried at fair value in the consolidated financial statements. Investments in mortgage-backed securities, U.S. government-sponsored enterprises and Treasury securities and Utah Housing Corporation bonds are valued using observable market prices of similar assets. As such, these are level 2 valuations. Loans Held For Investment and Accrued Interest Receivable Private Education Loans For Private Education Loans, fair value was determined by using observable quoted prices for similar assets in our most recent market transactions. Adjustments were then made to account for the value of loans in our portfolio that have materially different characteristics than those included in the most recent market transaction. These are considered level 2 valuations. A portion of the fair value that has been modeled is attributable to accrued interest receivable that has not yet been capitalized, and has been allocated to the accrued interest receivable line item. The remaining accrued interest receivable that will not be capitalized into the principal balance of the loan is carried at cost. FFELP Loans, Personal Loans, and Credit Cards For FFELP Loans, Personal Loans and Credit Cards, the fair value was determined by modeling expected loan level cash flows using stated terms of the assets and internally developed assumptions to determine aggregate portfolio yield, net present value and average life. The significant assumptions used to determine fair value are prepayment speeds, default rates, cost of funds and required return on equity. Significant inputs into the model are not observable. However, we do calibrate the model based on market transactions when appropriate. As such, these are level 3 valuations. Loans Held For Sale Our loans held for sale are accounted for at the lower of cost or market. The fair value was determined by using observable quoted prices for similar assets in our most recent market transactions. These are considered level 2 valuations. Tax Indemnification Receivable Tax indemnification receivable is carried at cost. The carrying value approximates fair value. This is a level 2 valuation. Money Market and Savings Accounts Some of our MMDAs are fixed-rate deposits that are subject to minimum balances for a specified period of time. The fair values of these deposits are estimated using discounted cash flows based on rates currently offered for deposits of similar maturities. These are level 2 valuations. The fair values of our remaining money market and savings accounts equal the amounts payable on demand at the balance sheet date and are reported at their carrying value. These are level 1 valuations. F-83 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 16. Fair Value Measurements (Continued) Certificates of Deposit The fair values of CDs are estimated using discounted cash flows based on rates currently offered for deposits of similar remaining maturities. These are level 2 valuations. Accrued Interest Payable Accrued interest payable is carried at cost. The carrying value approximates fair value due to its short-term nature. This is a level 1 valuation. Borrowings Borrowings are accounted for at cost in the consolidated financial statements. The carrying value of short-term borrowings approximated fair value for disclosure purposes, due to the short-term nature of those borrowings. This is a level 1 valuation. The fair value of long-term borrowings is estimated using current market prices. This is a level 2 valuation. Derivatives All derivatives are accounted for at fair value in the consolidated financial statements. The fair value of derivative financial instruments was determined by a standard derivative pricing and option model using the stated terms of the contracts and observable market inputs. It is our policy to compare the derivative fair values to those received from our counterparties in order to evaluate the model’s outputs. When determining the fair value of derivatives, we take into account counterparty credit risk for positions where we are exposed to the counterparty on a net basis by assessing exposure net of collateral held. When the counterparty has exposure to us under derivative contracts with the Company, we fully collateralize the exposure (subject to certain thresholds). Interest rate swaps are valued using a standard derivative cash flow model with a LIBOR swap yield curve, which is an observable input from an active market. These derivatives are level 2 fair value estimates in the hierarchy. The carrying value of borrowings designated as the hedged item in a fair value hedge is adjusted for changes in fair value due to changes in the benchmark interest rate (one-month LIBOR). These valuations are determined through standard pricing models using the stated terms of the borrowings and observable yield curves. 17. Arrangements with Navient Corporation In connection with the Spin-Off, we entered into a Separation and Distribution Agreement with Navient (the “Separation and Distribution Agreement”). We also entered into various other ancillary agreements with Navient to effect the Spin-Off and provide a framework for our relationship with Navient thereafter, such as a transition services agreement, a tax sharing agreement, an employee matters agreement, a loan servicing and administration agreement, a joint marketing agreement, a key services agreement, a data sharing agreement and a master sublease agreement. The majority of these agreements were transitional in nature with most having terms that have expired or will expire within the next year. We continue to have exposure to risks related to Navient’s creditworthiness. If we are unable to obtain indemnification payments from Navient, our results of operations and financial condition could be materially and adversely affected. Pursuant to the terms of the Spin-Off and applicable law, Navient is responsible for all liabilities (whether accrued, contingent or otherwise and whether known or unknown) arising out of or resulting from the conduct of pre-Spin-Off SLM and its subsidiaries’ businesses prior to the Spin-Off, other than certain specifically identified liabilities relating to the conduct of our consumer banking business for which the Bank is responsible. Nonetheless, given the prior usage of the Sallie Mae and SLM names by entities now owned by Navient, we and our subsidiaries may from time to time be improperly named as F-84 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 17. Arrangements with Navient Corporation (Continued) defendants in legal proceedings where the allegations at issue are the legal responsibility of Navient. Most of these legal proceedings involve matters that arose in whole or in part in the ordinary course of business of pre-Spin-Off SLM. Likewise, as the period of time since the Spin-Off increases, so does the likelihood any allegations that may be made may be in part for our own actions in a post-Spin-Off time period and in part for Navient’s conduct in a pre-Spin-Off time period. We will not be providing information on these proceedings unless there are material issues of fact or disagreement with Navient as to the bases of the proceedings or responsibility therefor that we believe could have a material, adverse impact on our business, assets, financial condition, liquidity or outlook if not resolved in our favor. We briefly summarize below some of the most significant agreements and relationships we continue to have with Navient. For additional information regarding the Separation and Distribution Agreement and the other ancillary agreements, see our Current Report on Form 8-K filed on May 2, 2014. Separation and Distribution Agreement The Separation and Distribution Agreement addresses, among other things, the following activities: • the obligation of each party to indemnify the other against liabilities retained or assumed by that party pursuant to the Separation and Distribution Agreement and in connection with claims of third-parties; • the allocation among the parties of rights and obligations under insurance policies; and • the creation of a governance structure by which matters related to the separation and other transactions contemplated by the Separation and Distribution Agreement are to be managed. The Separation and Distribution Agreement provides specific processes and procedures pursuant to which we may submit claims for indemnification to Navient. If for any reason Navient is unable or unwilling to pay claims made against it, our costs, operating expenses, cash flows and financial condition could be materially and adversely affected over time. Indemnification Obligations Pursuant to the terms of the Separation and Distribution Agreement, and as contemplated by the structure of the Spin-Off, Navient is legally obligated to indemnify the Bank against all claims, actions, damages, losses or expenses that may arise from the conduct of all activities of pre-Spin-Off SLM occurring prior to the Spin-Off, except for certain liabilities related to the conduct of the pre-Spin-Off consumer banking business that were specifically assumed by the Bank (and as to which the Bank is obligated to indemnify Navient). Some significant examples of the types of indemnification obligations Navient has under the Separation and Distribution Agreement and related ancillary agreements include: • Navient is required to indemnify the Company and the Bank for any liabilities, costs or expenses they may incur arising from any action or threatened action related to the servicing, operations and collections activities of pre-Spin-Off SLM and its subsidiaries with respect to Private Education Loans and FFELP Loans that were assets of the Bank or Navient at the time of the Spin-Off; provided that written notice was provided to Navient on or prior to April 30, 2017, the third anniversary date of the Spin-Off. Navient is not required to indemnify for changes in law or changes in prior existing interpretations of law that occur on or after April 30, 2014. • In connection with the Spin-Off, we recorded a liability related to uncertain tax positions of $ 27 million for which we are indemnified by Navient. As of December 31, 2020, the remaining balance of the indemnification receivable related to those uncertain tax positions was $ 7 million. F-85 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 17. Arrangements with Navient Corporation (Continued) Long-Term Arrangements The loan servicing and administration agreement governs the terms by which Navient provides servicing, administration and collection services for the Bank’s portfolio of FFELP Loans, as well as servicing history information with respect to Private Education Loans previously serviced by Navient and access to certain promissory notes in Navient’s possession. The term of the loan servicing and administration agreement has been extended to April 30, 2022. The data sharing agreement provided us the right to obtain from Navient certain post-Spin-Off performance data relating to Private Education Loans owned or serviced by Navient to support and facilitate ongoing underwriting, originations, forecasting, performance and reserve analyses. The term of the data sharing agreement expired on April 29, 2019, however. The tax sharing agreement governs the respective rights, responsibilities and obligations of us and Navient after the Spin-Off relating to taxes, including with respect to the payment of taxes, the preparation and filing of tax returns and the conduct of tax contests. Under this agreement, each party is generally liable for taxes attributable to its business. The agreement also addresses the allocation of tax liabilities that are incurred as a result of the Spin-Off and related transactions. Amended Loan Participation and Purchase Agreement Prior to the Spin-Off, the Bank sold substantially all of its Private Education Loans to several former affiliates, now subsidiaries of Navient (collectively, the “Purchasers”), pursuant to an amended loan participation and purchase agreement. The agreement predates the Spin-Off, but was significantly amended and reduced in scope in connection with the Spin-Off. Post-Spin-Off, the Bank retained only the right to require the Purchasers to purchase loans whose borrowers had a lending relationship with both the Bank and Navient (“Split Loans”) (at fair value) when the Split Loans either (1) were more than 90 days past due; (2) had been restructured; (3) had been granted a hardship forbearance or more than six months of administrative forbearance; or (4) had a borrower or cosigner who had filed for bankruptcy. In the second quarter of 2018, we sold our remaining $ 43 million portfolio of Split Loans (both current and non-current loans) to Navient and recognized a net gain of $ 2 million. F-86 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 18. Regulatory Capital The Bank is subject to various regulatory capital requirements administered by the FDIC and the UDFI. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material adverse effect on our business, results of operations and financial position. Under the FDIC’s regulations implementing the Basel III capital framework (“U.S. Basel III”) and the regulatory framework for prompt corrective action, the Bank must meet specific capital standards that involve quantitative measures of its assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and its classification under the prompt corrective action framework are also subject to qualitative judgments by the regulators about components of capital, risk weightings, and other factors. The Bank is subject to the following minimum capital ratios under U.S. Basel III: a Common Equity Tier 1 risk-based capital ratio of 4.5 percent, a Tier 1 risk-based capital ratio of 6.0 percent, a Total risk-based capital ratio of 8.0 percent, and a Tier 1 leverage ratio of 4.0 percent. In addition, the Bank is subject to a Common Equity Tier 1 capital conservation buffer of greater than 2.5 percent. Failure to maintain the buffer will result in restrictions on the Bank’s ability to make capital distributions, including the payment of dividends, and to pay discretionary bonuses to executive officers. Including the buffer, the Bank is required to maintain the following capital ratios under U.S. Basel III in order to avoid such restrictions: a Common Equity Tier 1 risk-based capital ratio of greater than 7.0 percent, a Tier 1 risk-based capital ratio of greater than 8.5 percent, and a Total risk-based capital ratio of greater than 10.5 percent. To qualify as “well capitalized” under the prompt corrective action framework for insured depository institutions, the Bank must maintain a Common Equity Tier 1 risk-based capital ratio of at least 6.5 percent, a Tier 1 risk-based capital ratio of at least 8.0 percent, a Total risk-based capital ratio of at least 10.0 percent, and a Tier 1 leverage ratio of at least 5.0 percent. On August 26, 2020, the FDIC and other federal banking agencies published a final rule that provides those banking organizations that adopt CECL during the 2020 calendar year with the option to delay for two years, and then phase in over the following three years, the effects on regulatory capital of CECL relative to the incurred loss methodology. We have elected to use this option. The final rule is substantially similar to an interim final rule issued on March 27, 2020. Under this final rule, because we have elected to use the deferral option, the regulatory capital impact of our transition adjustments recorded on January 1, 2020 from the adoption of CECL will be deferred for two years. In addition, from January 1, 2020 through the end of the two-year deferral period, 25 percent of the ongoing impact of CECL on our allowance for credit losses, retained earnings, and average total consolidated assets, each as reported for regulatory capital purposes, will be added to the deferred transition amounts (“adjusted transition amounts”) and deferred for the two -year period. At the conclusion of the two -year period (i.e., beginning January 1, 2022), the adjusted transition amounts will be phased in for regulatory capital purposes at a rate of 25 percent per year, with the phased-in amounts included in regulatory capital at the beginning of each year. Our January 1, 2020 CECL transition amounts increased the allowance for credit losses by $ 1.1 billion, increased the liability representing our off-balance sheet exposure for unfunded commitments by $ 116 million, and increased our deferred tax asset by $ 306 million, resulting in a cumulative effect adjustment that reduced retained earnings by $ 953 million. This transition adjustment was inclusive of qualitative adjustments incorporated into our CECL allowance as necessary, to address any limitations in the models used. F-87 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 18. Regulatory Capital (Continued) The following capital amounts and ratios are based upon the Bank’s average assets and risk-weighted assets, as indicated. Actual U.S. Basel III Minimum Requirements Plus Buffer (1)(2) Amount Ratio Amount Ratio As of December 31, 2020: Common Equity Tier 1 Capital (to Risk-Weighted Assets) $ 3,579,005 14.0 % $ 1,794,780 > 7.0 % Tier 1 Capital (to Risk-Weighted Assets) $ 3,579,005 14.0 % $ 2,179,375 > 8.5 % Total Capital (to Risk-Weighted Assets) $ 3,849,820 15.0 % $ 2,692,169 > 10.5 % Tier 1 Capital (to Average Assets) $ 3,579,005 11.3 % $ 1,264,424 > 4.0 % As of December 31, 2019: Common Equity Tier 1 Capital (to Risk-Weighted Assets) $ 3,264,309 12.2 % $ 1,876,050 > 7.0 % Tier 1 Capital (to Risk-Weighted Assets) $ 3,264,309 12.2 % $ 2,278,060 > 8.5 % Total Capital (to Risk-Weighted Assets) $ 3,600,668 13.4 % $ 2,814,074 > 10.5 % Tier 1 Capital (to Average Assets) $ 3,264,309 10.2 % $ 1,282,642 > 4.0 % ________________ (1) Reflects the U.S. Basel III minimum required ratio plus the applicable capital conservation buffer. (2) The Bank’s regulatory capital ratios also exceeded all applicable standards for the Bank to qualify as “well capitalized” under the prompt corrective action framework. Bank Dividends The Bank is chartered under the laws of the State of Utah and its deposits are insured by the FDIC. The Bank’s ability to pay dividends is subject to the laws of Utah and the regulations of the FDIC. Generally, under Utah’s industrial bank laws and regulations as well as FDIC regulations, the Bank may pay dividends from its net profits without regulatory approval if, following the payment of the dividend, the Bank’s capital and surplus would not be impaired. The Bank declared $ 579 million and $ 254 million in dividends to the Company for the years ended December 31, 2020 and 2019, respectively, with the proceeds primarily used to fund the 2020 and 2019 Share Repurchase Programs and stock dividends. The Bank paid no dividends on its common stock for the year ended December 31, 2018. In the future, we expect that the Bank will pay dividends to the Company as may be necessary to pay any declared dividends on its Series B Preferred Stock and common stock and to consummate any common share repurchases by the Company under its repurchase programs. 19. Defined Contribution Plans We participate in a defined contribution plan which is intended to qualify under section 401(k) of the Internal Revenue Code. The Sallie Mae 401(k) Savings Plan covers substantially all employees. After six months of service, we match 100 percent of the first 5 percent of contributions for eligible employees. For the years ended December 31, 2020, 2019 and 2018, we contributed $ 8 million, $ 7 million and $ 5 million, respectively, to this plan. F-88 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 20. Commitments, Contingencies and Guarantees Commitments When we approve a Private Education Loan at the beginning of an academic year, that approval may cover the borrowing for the entire academic year. As such, we do not always disburse the full amount of the loan at the time of such approval, but instead have a commitment to fund a portion of the loan at a later date (usually at the start of the second semester or subsequent trimesters). At December 31, 2020, we had $ 1.7 billion of outstanding contractual loan commitments which we expect to fund during the remainder of the 2020/2021 academic year. At December 31, 2020, we had a $ 110 million reserve recorded in “Other Liabilities” to cover expected losses that may occur during the one -year loss emergence period on these unfunded commitments. Regulatory Matters In May 2014, the Bank received a Civil Investigative Demand (“CID”) from the CFPB as part of the CFPB’s separate investigation relating to customer complaints, fees and charges assessed in connection with the servicing of student loans and related collection practices of pre-Spin-Off SLM by entities now subsidiaries of Navient during a time period prior to the Spin-Off (the “CFPB Investigation”). Two state attorneys general also provided the Bank identical CIDs and other state attorneys general have become involved in the inquiry over time (collectively, the “Multi-State Investigation”). To the extent requested, the Bank has been cooperating fully with the CFPB and the attorneys general conducting the Multi-State Investigation. Given the timeframe covered by the CIDs, the CFPB Investigation and the Multi-State Investigation, and the focus on practices and procedures previously conducted by Navient and its servicing subsidiaries prior to the Spin-Off, Navient is leading the response to these investigations. Consequently, we have no basis from which to estimate either the duration or ultimate outcome of these investigations. With regard to the CFPB Investigation, we note that on January 18, 2017, the CFPB filed a complaint in federal court in Pennsylvania against Navient, along with its subsidiaries, Navient Solutions, Inc. and Pioneer Credit Recovery, Inc. The complaint alleges these Navient entities, among other things, engaged in deceptive practices with respect to their historic servicing and debt collection practices. Neither SLM, the Bank, nor any of their current subsidiaries are named in, or otherwise a party to, the lawsuit and are not alleged to have engaged in any wrongdoing. The CFPB’s complaint asserts Navient’s assumption of these liabilities pursuant to the Separation and Distribution Agreement. On January 18, 2017, the Illinois Attorney General filed a lawsuit in Illinois state court against Navient - its subsidiaries Navient Solutions, Inc., Pioneer Credit Recovery, Inc., and General Revenue Corporation - and the Bank arising out of the Multi-State Investigation. On March 20, 2017, the Bank moved to dismiss the Illinois Attorney General action as to the Bank, arguing, among other things, the complaint failed to allege with sufficient particularity or specificity how the Bank was responsible for any of the alleged conduct, most of which predated the Bank’s existence. On July 10, 2018, the Court granted the Bank’s motion to dismiss without prejudice. On August 7, 2018, the Illinois Attorney General filed a First Amended Complaint and, on October 9, 2018, the Bank again moved to dismiss the action based on grounds similar to those raised in its March 20, 2017 motion. The Illinois Attorney General filed its response on November 21, 2018, and the Bank filed its reply on December 10, 2018. Oral argument on the motion took place on January 9, 2019. The Court took the motion under advisement. To date, four other state attorneys general (California, Washington, Pennsylvania, and New Jersey) have filed suits against Navient and one or more of its current subsidiaries related to matters arising from the Multi-State Investigation. Neither SLM, the Bank, nor any of their current subsidiaries are named in, or otherwise a party to, the California, Washington, Pennsylvania, or New Jersey lawsuits, and no claims are asserted against them. Each complaint asserts in its own fashion that Navient assumed responsibility under the Separation and Distribution Agreement for the alleged conduct in the complaints prior to the Spin-Off. On September 24, 2018, the Washington Attorney General served a third-party subpoena on the Bank calling for the production of certain records. The Bank has responded to the subpoena. F-89 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 20. Commitments, Contingencies and Guarantees (Continued) Additional lawsuits may arise from the Multi-State Investigation which may or may not name the Company, the Bank or any of their current subsidiaries as parties to these suits. Pursuant to the terms of the Separation and Distribution Agreement, and as contemplated by the structure of the Spin-Off, Navient is legally obligated to indemnify the Bank against all claims, actions, damages, losses or expenses that may arise from the conduct of all activities of pre-Spin-Off SLM occurring prior to the Spin-Off, except for certain liabilities related to the conduct of the pre-Spin-Off consumer banking business that were specifically assumed by the Bank (and as to which the Bank is obligated to indemnify Navient). Navient has acknowledged its indemnification obligations under the Separation and Distribution Agreement, in connection with the Multi-State Investigation and the related lawsuits in which the Bank has been named as a party. Navient has informed the Bank, however, that it believes that the Bank may be responsible to indemnify Navient against certain potential liabilities arising from the above-described lawsuits under the Separation and Distribution Agreement and/or a separate loan servicing agreement between the parties, and has suggested that the parties defer further discussion regarding indemnification obligations, and reimbursement of ongoing legal costs, in connection with the lawsuits until the lawsuits are resolved. The Bank disagrees with Navient’s position and the Bank has reiterated to Navient that Navient is responsible for promptly indemnifying the Bank against all liabilities arising out of the conduct of pre-Spin-Off SLM that are at issue in the Multi-State Investigation and in the above-described lawsuits. Contingencies In the ordinary course of business, we and our subsidiaries are routinely defendants in or parties to pending and threatened legal actions and proceedings, including actions brought on behalf of various classes of claimants. These actions and proceedings may be based on alleged violations of consumer protection, securities, employment and other laws. In certain of these actions and proceedings, claims for substantial monetary damage may be asserted against us and our subsidiaries. It is common for the Company, our subsidiaries and affiliates to receive information and document requests and investigative demands from state attorneys general, legislative committees, and administrative agencies. These requests may be for informational or regulatory purposes and may relate to our business practices, the industries in which we operate, or other companies with whom we conduct business. Our practice has been and continues to be to cooperate with these bodies and be responsive to any such requests. We are required to establish reserves for litigation and regulatory matters where those matters present loss contingencies that are both probable and estimable. When loss contingencies are not both probable and estimable, we do not establish reserves. Based on current knowledge, management does not believe there are loss contingencies, if any, arising from pending investigations, litigation or regulatory matters for which reserves should be established. F-90 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 21. Income Taxes Reconciliations of the statutory U.S. federal income tax rates to our effective tax rate for continuing operations follow: Years Ended December 31, 2020 2019 2018 Statutory rate 21.0 % 21.0 % 21.0 % State tax, net of federal benefit 2.9 3.9 3.8 Business tax credits ( 2.2 ) ( 3.5 ) ( 0.5 ) Reverse federal impact of indemnification adjustments 0.2 0.3 3.5 Unrecognized tax benefits, U.S. federal and state, net of federal benefit 0.7 ( 0.1 ) ( 15.9 ) Other, net 1.1 0.7 1.0 Effective tax rate 23.7 % 22.3 % 12.9 % The effective tax rate varies from the statutory U.S. federal rate of 21 percent primarily due to business tax credits and the impact of state taxes, net of federal benefit, for the year ended December 31, 2020 and 2019, respectively; and the reduction in uncertain tax positions related to statute of limitation expirations and the impact of state taxes, net of federal benefit, for the year ended December 31, 2018. Income tax expense consists of: December 31, 2020 2019 2018 Current provision: Federal $ 172,153 $ 150,800 $ 102,516 State 28,387 24,378 32,638 Total current provision 200,540 175,178 135,154 Deferred benefit: Federal 58,003 ( 8,240 ) ( 57,076 ) State 14,773 ( 1,474 ) ( 6,225 ) Total deferred benefit 72,776 ( 9,714 ) ( 63,301 ) Provision for income tax expense $ 273,316 $ 165,464 $ 71,853 F-91 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 21. Income Taxes (Continued) The tax effect of temporary differences that give rise to deferred tax assets and liabilities is summarized below. December 31, 2020 2019 Deferred tax assets: Loan reserves $ 356,296 $ 109,369 Stock-based compensation plans 10,914 10,022 Deferred revenue 1,441 1,017 Operating loss carryovers 83 — Accrued expenses not currently deductible 13,139 12,599 Net unrealized losses 9,047 2,124 Unrecorded tax benefits 6,997 6,049 Market value adjustments on student loans, investments and derivatives — — Other 1,003 874 Total deferred tax assets 398,920 142,054 Deferred tax liabilities: Fixed assets 11,098 10,475 Acquired intangible assets 7,767 5,453 Market value adjustments on student loans, investments and derivatives 5,651 3,175 Net unrealized gains — — Federal deferred for state receivable 7,456 5,368 Student loan premiums and discounts, net 11,336 3,398 Other 307 285 Total deferred tax liabilities 43,615 28,154 Net deferred tax assets $ 355,305 $ 113,900 Included in operating loss carryovers are state net operating losses of $ 277 million and $ 6 million as of December 31, 2020 and 2019, respectively. The Company has recorded a valuation allowance against these net operating losses of $ 277 million and $ 6 million, respectively. Also included in operating loss carryovers is a capital loss of $ 16 million and $ 0 as of December 31, 2020 and 2019, respectively. The Company has recorded a full valuation allowance against this capital loss. The valuation allowance is primarily attributable to deferred tax assets for state net operating losses and capital losses that management believes is more likely than not to expire prior to being realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income of the appropriate character (i.e., capital or ordinary) during the period in which the temporary differences become deductible. Management considers, among other things, the scheduled reversals of deferred tax liabilities and the history of positive taxable income in evaluating the realizability of the deferred tax assets. Management believes that it is more likely than not that the results of future operations will generate sufficient taxable income to realize our deferred tax assets (other than state net operating loss and capital loss carryovers as outlined above). F-92 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 21. Income Taxes (Continued) As of December 31, 2020, the state net operating loss carryforwards will begin to expire in 2029 and the capital loss will expire in 2025. Accounting for Uncertainty in Income Taxes The following table summarizes changes in unrecognized tax benefits: December 31, 2020 2019 2018 Unrecognized tax benefits at beginning of year $ 53,509 $ 52,159 $ 131,608 Increases resulting from tax positions taken during a prior period 12,723 12,333 4,121 Decreases resulting from tax positions taken during a prior period ( 817 ) ( 851 ) — Increases resulting from tax positions taken during the current period 7,815 4,572 3,169 Decreases related to settlements with taxing authorities ( 148 ) ( 8,670 ) ( 601 ) Reductions related to the lapse of statute of limitations ( 9,948 ) ( 6,034 ) ( 86,138 ) Unrecognized tax benefits at end of year $ 63,134 $ 53,509 $ 52,159 As of December 31, 2020, the gross unrecognized tax benefits are $ 63 million. Included in the $ 63 million are $ 56 million of unrecognized tax benefits that, if recognized, would favorably impact the effective tax rate. As a part of the Spin-Off, the Company recorded a liability related to uncertain tax positions for which it is indemnified by Navient. See Note 2, “Significant Accounting Policies — Income Taxes,” for additional details. Tax related interest and penalty expense is reported as a component of income tax expense. As of December 31, 2020, 2019 and 2018, the total amount of income tax-related accrued interest and penalties, net of related benefit, recognized in the consolidated balance sheets was $ 11 million, $ 12 million and $ 14 million, respectively. For the years ended December 31, 2020, 2019 and 2018, the total amount of income tax-related accrued interest, net of related tax benefit, recognized in the consolidated statements of income was $( 1 ) million, $( 1 ) million and $( 7 ) million, respectively. The Company or one of its subsidiaries files income tax returns at the U.S. federal level and in most U.S. states. U.S. federal income tax returns filed for years 2014 and prior are no longer subject to examination. Various combinations of subsidiaries, tax years, and jurisdictions remain open for review, subject to statute of limitations periods (typically 3 to 4 prior years). The Company’s federal income tax return for the year ended December 31, 2015 is currently under audit by the Internal Revenue Service. We do not expect the resolution of open audits to have a material impact on our unrecognized tax benefits. It is reasonably possible that the uncertain tax position reserve may decrease by as much as $ 3 million during the next 12 months due to the expiration of statutes of limitations primarily related to indemnified tax liabilities. The reduction in the uncertain tax position reserve would be reflected as a tax benefit. We recorded a tax indemnification receivable from Navient for the indemnified tax liabilities which are included in the uncertain tax position reserve. A portion of the tax benefit will be offset by an expense related to the write-down of the indemnification receivable. F-93 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 22. Concentrations of Risk Our business is primarily focused on helping students and their families save, plan and pay for college. We primarily originate, service and/or collect loans made to students and their families to finance the cost of their education. We provide funding, delivery and servicing support for education loans in the United States through our Private Education Loan program. Because of this concentration in one industry, we are exposed to credit, legislative/political/reputational, operational, regulatory, liquidity, capital, and interest rate risks associated with the student loan industry. Concentration Risk in the Revenues Associated with Private Education Loans We compete in the Private Education Loan market with banks and other consumer lending institutions, some with strong consumer brand name recognition and greater financial resources. We compete based on our products, origination capability and customer service. To the extent our competitors compete aggressively or more effectively, we could lose market share to them or subject our existing loans to refinancing risk. Our product offerings may not prove to be profitable and may result in higher than expected losses. We are a leading provider of saving- and paying-for-college products and programs. This concentration gives us a competitive advantage in the marketplace. This concentration also creates risks in our business, particularly in light of our concentration as a Private Education Loan lender. If population demographics result in a decrease in college-age individuals, if demand for higher education decreases, if the cost of attendance of higher education decreases, if public resistance to higher education costs strengthens, or if the demand for higher education loans decreases, our consumer lending business could be negatively affected. In addition, the federal government, through the Federal Direct Student Loan Program (the “DSLP”), poses significant competition to our private credit loan products. If loan limits under the DSLP increase, DSLP loans could be more widely available to students and their families and DSLP loans could increase, resulting in further decreases in the size of the Private Education Loan market and demand for our Private Education Loan products. F-94 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 23. Parent Only Statements The following parent company-only financial information should be read in conjunction with the other notes to the consolidated financial statements. The accounting policies for the parent company-only financial statements are the same as those used in the presentation of the consolidated financial statements, except that the parent company-only financial statements account for the parent company’s investments in its subsidiaries under the equity method. Parent Only Condensed Balance Sheets December 31, 2020 2019 Assets Cash and cash equivalents $ 539,074 $ 153,508 Total investments in subsidiaries (primarily Sallie Mae Bank) 2,689,027 3,326,578 Income taxes receivables, net 1,835 — Tax indemnification receivable 18,492 27,558 Due from subsidiaries, net 47,357 42,544 Other assets 2,457 2,579 Total assets $ 3,298,242 $ 3,552,767 Liabilities and Equity Liabilities Long-term borrowings $ 692,879 $ 198,159 Income taxes payable, net — 11,457 Payable due to Navient 8,531 9,064 Other liabilities 33,997 22,251 Total liabilities 735,407 240,931 Equity Preferred stock, par value $ 0.20 per share, 20 million shares authorized: Series B: 2.5 million and 4 million shares issued, respectively, at stated value of $ 100 per share 251,070 400,000 Common stock, par value $ 0.20 per share, 1.125 billion shares authorized: 456.7 million and 453.6 million shares issued, respectively 91,346 90,720 Additional paid-in capital 1,331,247 1,307,630 Accumulated other comprehensive loss (net of tax benefit of $( 10,908 ) and $( 3,995 ), respectively) ( 34,200 ) ( 12,367 ) Retained earnings 1,722,365 1,850,512 Total SLM Corporation stockholders’ equity before treasury stock 3,361,828 3,636,495 Less: Common stock held in treasury at cost: 81.4 million and 32.5 million shares, respectively ( 798,993 ) ( 324,659 ) Total equity 2,562,835 3,311,836 Total liabilities and equity $ 3,298,242 $ 3,552,767 F-95 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 23. Parent Only Statements (Continued) Parent Only Condensed Statements of Income Years Ended December 31, 2020 2019 2018 Interest income $ 452 $ 2,663 $ 4,693 Interest expense 14,896 11,060 11,059 Net interest loss ( 14,444 ) ( 8,397 ) ( 6,366 ) Non-interest income (loss) 2,820 ( 10,856 ) ( 93,176 ) Non-interest expenses 57,945 39,423 41,893 Loss before income tax benefit and equity in net income from subsidiaries ( 69,569 ) ( 58,676 ) ( 141,435 ) Income tax benefit ( 11,235 ) ( 25,260 ) ( 96,170 ) Equity in net income from subsidiaries (primarily Sallie Mae Bank) 939,024 611,692 532,741 Net income 880,690 578,276 487,476 Preferred stock dividends 9,734 16,837 15,640 Net income attributable to SLM Corporation common stock $ 870,956 $ 561,439 $ 471,836 F-96 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 23. Parent Only Statements (Continued) Parent Only Condensed Statements of Cash Flows Years Ended December 31, 2020 2019 2018 Cash flows from operating activities: Net income $ 880,690 $ 578,276 $ 487,476 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Undistributed earnings of subsidiaries ( 939,024 ) ( 611,692 ) ( 532,741 ) Dividends received from Sallie Mae Bank 579,400 254,000 — Reduction of tax indemnification receivable 9,066 11,649 92,815 Amortization of unsecured debt upfront fees 1,029 811 809 Gain on sale of Upromise subsidiary, net ( 11,331 ) — — Decrease in investment in subsidiaries, net 53,698 2,611 9,495 Decrease in tax indemnification receivable — — 35,989 (Increase) decrease in due from subsidiaries, net ( 4,813 ) 6,254 ( 11,277 ) Increase in other assets ( 10,504 ) ( 12,999 ) ( 18,040 ) Decrease in income taxes payable, net ( 13,292 ) ( 25,814 ) ( 123,083 ) Decrease in payable due to entity that is a subsidiary of Navient ( 533 ) ( 416 ) ( 1,089 ) Increase (decrease) in other liabilities 12,874 ( 5,796 ) 6,807 Total adjustments ( 323,430 ) ( 381,392 ) ( 540,315 ) Net cash provided by (used in) operating activities 557,260 196,884 ( 52,839 ) Cash flows from investing activities: Proceeds from the sale of Upromise subsidiary, net 16,922 — — Net cash provided by investing activities 16,922 — — Cash flows from financing activities: Unsecured debt issued 495,000 — — Issuance costs for unsecured debt offering ( 1,309 ) — — Repurchase of Series B Preferred Stock ( 68,055 ) — — Common stock dividends paid ( 46,351 ) ( 51,114 ) — Preferred stock dividends paid ( 9,734 ) ( 16,837 ) ( 15,640 ) Common stock repurchased ( 558,167 ) ( 167,201 ) — Net cash used in financing activities ( 188,616 ) ( 235,152 ) ( 15,640 ) Net increase (decrease) in cash and cash equivalents 385,566 ( 38,268 ) ( 68,479 ) Cash and cash equivalents at beginning of year 153,508 191,776 260,255 Cash and cash equivalents at end of year $ 539,074 $ 153,508 $ 191,776 F-97 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 24. Selected Quarterly Financial Information (unaudited) 2020 First Second Third Fourth (Dollars in thousands, except per share data) Quarter Quarter Quarter Quarter Net interest income $ 400,116 $ 348,775 $ 364,567 $ 366,537 Less: provisions for credit losses 61,258 351,887 ( 3,640 ) ( 316,372 ) Net interest income (loss) after provisions for credit losses 338,858 ( 3,112 ) 368,207 682,909 Gains (losses) on sales of loans, net 238,935 ( 369 ) ( 4 ) ( 247 ) Gains (losses) on derivative and hedging activities, net 45,672 3,751 ( 15 ) 136 Other income 7,487 25,412 9,646 1,043 Total operating expenses 147,298 141,557 127,490 121,743 Total restructuring expenses — — 24,127 2,088 Income tax expense (benefit) 121,481 ( 30,664 ) 55,189 127,310 Net income (loss) 362,173 ( 85,211 ) 171,028 432,700 Preferred stock dividends 3,464 2,478 2,058 1,734 Net income (loss) attributable to SLM Corporation common stock $ 358,709 $ ( 87,689 ) $ 168,970 $ 430,966 Basic earnings (loss) per common share attributable to SLM Corporation (1) $ 0.88 $ ( 0.23 ) $ 0.45 $ 1.15 Diluted earnings (loss) per common share attributable to SLM Corporation (1) $ 0.87 $ ( 0.23 ) $ 0.45 $ 1.13 Declared dividends per common share attributable to SLM Corporation $ 0.03 $ 0.06 $ — $ 0.03 ______ (1) Basic and diluted earnings per common share attributable to SLM Corporation are computed independently for each of the quarters presented. Therefore, the sum of quarterly basic and diluted earnings per common share information may not equal annual basic and diluted earnings per common share. F-98 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 24. Selected Quarterly Financial Information (unaudited) (Continued) 2019 First Second Third Fourth (Dollars in thousands, except per share data) Quarter Quarter Quarter Quarter Net interest income $ 402,281 $ 396,868 $ 405,065 $ 419,101 Less: provisions for credit losses 63,790 93,375 99,526 97,558 Net interest income after provisions for credit losses 338,491 303,493 305,539 321,543 Gains (losses) on derivative and hedging activities, net 2,763 16,736 1,961 ( 3,635 ) Other income (loss) 13,378 2,655 15,280 ( 211 ) Total non-interest expenses 140,147 138,806 153,621 141,679 Income tax expense 56,296 33,801 40,701 34,666 Net income 158,189 150,277 128,458 141,352 Preferred stock dividends 4,468 4,331 4,153 3,885 Net income attributable to SLM Corporation common stock $ 153,721 $ 145,946 $ 124,305 $ 137,467 Basic earnings per common share attributable to SLM Corporation (1) $ 0.35 $ 0.34 $ 0.29 $ 0.33 Diluted earnings per common share attributable to SLM Corporation (1) $ 0.35 $ 0.34 $ 0.29 $ 0.32 Declared dividends per common share attributable to SLM Corporation $ 0.03 $ 0.06 $ — $ 0.03 _____ (1) Basic and diluted earnings per common share attributable to SLM Corporation are computed independently for each of the quarters presented. Therefore, the sum of quarterly basic and diluted earnings per common share information may not equal annual basic and diluted earnings per common share. F-99 SLM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in thousands, unless otherwise noted) 25. Subsequent Events 2021 Loan Sales and 2021-A Securitization On January 8, 2021, we sold $ 3 billion of our Private Education Loans, including $ 2.8 billion in principal, $ 185 million in capitalized interest and $ 15 million in accrued interest to an unaffiliated third party. The transaction qualified for sale treatment and removed the balance of the loans from our balance sheet on the settlement date. We will continue to service these loans. On February 9, 2021, we closed an SMB Private Education Loan Trust 2021-A term ABS transaction (the “2021-A Transaction”), in which the unaffiliated third-party sold to the trust approximately $ 2.5 billion of Private Education Loans that the third-party seller previously purchased from us, as described above. In the 2021-A Transaction, we were the sponsor, servicer and administrator, and the seller of an additional approximately $ 130 million of Private Education Loans. The sale of such additional loans qualified for sale treatment and removed these loans from our balance sheet on the settlement date of the 2021-A Transaction. In connection with the 2021-A Transaction, we retained a 5 percent vertical risk retention interest (i.e., 5 percent of each class issued in the securitization). We classified those vertical risk retention interests related to the 2021-A Transaction as available-for-sale investments, except for the interest in the residual class, which we classified as a trading investment recorded at fair value with changes recorded through earnings. Final Settlement of ASR On January 26, 2021, we completed our ASR with a third-party financial institution and we received an additional 13 million shares. In total, we repurchased 58 million shares under the ASR at an average price per share of $ 9.01 . For additional information regarding this ASR, see Notes to Consolidated Financial Statements, Note 13, “Stockholders’ Equity.” Commencement of Common Stock Cash Tender Offer On February 2, 2021, we announced the commencement of a tender offer (the “Tender Offer”) to purchase up to $ 1 billion in aggregate purchase price of our outstanding shares of common stock, par value $ 0.20 per share (the “Securities”) or such lesser aggregate purchase price of Securities as are properly tendered and not properly withdrawn, at a single per-Security price not greater than $ 15.00 nor less than $ 13.10 per share to the seller in cash, less any applicable withholding taxes and without interest. The Tender Offer may be amended from time to time, and will expire, upon the terms and conditions described in the relevant Tender Offer materials filed with the SEC. The results of the Tender Offer will be reflected in the Company’s financial results for the first fiscal quarter of 2021. Amended and Increased Secured Borrowing Facility On February 17, 2021, we amended and extended the maturity of the Secured Borrowing Facility, discussed in Note 11, “Borrowings.” The amended Secured Borrowing Facility is a $ 2 billion Secured Borrowing Facility, under which the full $ 2 billion is available for us to draw. Under the amended Secured Borrowing Facility, we incur financing costs on unused borrowing capacity and on outstanding advances. The amended Secured Borrowing Facility extended the revolving period, during which we may borrow, repay and reborrow funds, until February 16, 2022. The scheduled amortization period, during which amounts outstanding under the Secured Borrowing Facility must be repaid, ends on February 16, 2023 (or earlier, if certain material adverse events occur). F-100