Sallie Mae Collection Revenue Up to $65.5 million in Q1

Sallie Mae, officially known as SLM Corporation (NYSE: SLM), today reported first-quarter 2007 earnings and performance results.  For the first three months of the year, the student loan leader reported $65.5 million in collections revenue, up significantly from last quarter and the year-ago period.

Overall, Sallie Mae saw its earnings slide in Q1 compared to the first quarter in 2006.  On both a GAAP and “core earnings” basis, the company reported lower income on higher provisions for loan losses and net charge-offs of loans, which ballooned from 1.3% in Q1 2006 to 3.4% in Q1 2007.  "Core earnings" net income for the quarter was $251 million, or $.57 per diluted share, compared to $287 million, or $.65 per diluted share in the year-ago quarter.

In its Consolidated Statements of Income table in the release, Sallie Mae breaks out revenue by business unit.  Collections revenue for the quarter was $65.5 million, a 15.7% increase over the revenues from collections in the first quarter a year ago.  It also represents a large increase over the $57.9 million in collection revenue the company reported in the fourth quarter of 2006.

With Sallie Mae announcing last week its intention to sell the company to private equity for $25 billion, it is still unclear what will become of the debt collection business Sallie has been building through acquisition in the past several years.  The Financial Times ran an article late last week speculating on just that.  Also of interesting note is the fact that the firm that will control 50.2% of Sallie Mae in the acquisition, J.C. Flowers, also made news yesterday as the firm that is snapping up a 25% in debt purchaser Encore Capital Group.