Regulatory Capital

9 Months Ended

Sep. 30, 2019

Banking and Thrift [Abstract]

Regulatory Capital

Regulatory Capital

Sallie Mae Bank (the “Bank”) is subject to various regulatory capital requirements administered by the FDIC and the Utah Department of Financial Institutions (the “UDFI”). Failure to meet minimum capital requirements and any applicable buffers 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 operation and financial condition. 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 regulatory 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.

Under U.S. Basel III, the Bank is required to maintain the following minimum regulatory capital ratios: 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, as of January 1, 2019, the Bank is subject to a fully phased-in Common Equity Tier 1 capital conservation buffer of greater than 2.5 percent. (As of December 31, 2018, the Bank was subject to a Common Equity Tier 1 capital conservation buffer of greater than 1.875 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. The Bank’s required and actual regulatory capital amounts and ratios under U.S. Basel III are shown in the following table.

	Actual					U.S. Basel III Regulatory Requirements(1)
	Amount		Ratio			Amount			Ratio
As of September 30, 2019:
Common Equity Tier 1 Capital (to Risk-Weighted Assets)	$	3,123,262	11.5	%		$	1,893,808	>	7.0	%
Tier 1 Capital (to Risk-Weighted Assets)	$	3,123,262	11.5	%		$	2,299,624	>	8.5	%
Total Capital (to Risk-Weighted Assets)	$	3,462,407	12.8	%		$	2,840,712	>	10.5	%
Tier 1 Capital (to Average Assets)	$	3,123,262	10.3	%	(2)	$	1,209,790	>	4.0	%
As of December 31, 2018:
Common Equity Tier 1 Capital (to Risk-Weighted Assets)	$	2,896,091	12.1	%		$	1,528,209	>	6.375	%
Tier 1 Capital (to Risk-Weighted Assets)	$	2,896,091	12.1	%		$	1,887,787	>	7.875	%
Total Capital (to Risk-Weighted Assets)	$	3,196,279	13.3	%		$	2,367,226	>	9.875	%
Tier 1 Capital (to Average Assets)	$	2,896,091	11.1	%		$	1,039,226	>	4.0	%

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⁽¹⁾  Required risk-based capital ratios include the capital conservation buffer.

⁽²⁾  The Bank’s Tier 1 leverage ratio exceeds the 5 percent well-capitalized standard for the Tier 1 leverage ratio 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 $20 million and $241 million in dividends to the Company for the three and nine months ended September 30, 2019, respectively, and no dividends for the three and nine months ended September 30, 2018. In the future, we expect that the Bank will pay dividends to the Company as may be necessary to enable the Company 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 share repurchase program.