Slm Corporation · NASDAQ:SLM
Slm — Q1 2019 Earnings Presentation
35 slides from Slm's earnings presentation, Apr 29, 2019
Slide 1: Sallie Mae Investor Presentation Second Quarter 2019
Exhibit 99.1 SALLIE MAE INVESTOR PRESENTATION Second Quarter 2019
Slide 2: Forward-Looking Statements and Disclaimer
Forward-Looking Statements and Disclaimer Cautionary Note Regarding Forward-Looking Statements The following information is current as of April 17, 2019 (unless otherwise noted) and should be read in connection with the press release of SLM Corporation (the “Company”) announcing its financial result
Slide 3: Sallie Mae Opportunity: Creating shareholder value
Sallie Mae Opportunity: Creating shareholder value by growing a unique and sustainable financial franchise 3
Slide 4: Putting the pieces together
Putting the pieces together Market Competitive Leading Product Brand Offering Quality Growth Strong Through Financial Rigorous Returns Underwriting 4
Slide 5: Market leading brand, products and best-in-class service drive our success
Market leading brand, products and best-in-class service drive our success • 40 years of leadership in the education Market Conservative lending market Leading Funding and Brand Underwriting • Top ranked brand • Industry leading 55% market share1 • Over 2,400 actively managed university Strong Consi
Slide 6: Private Student Loan Industry
Private Student Loan Industry • Private education loans represent Other 2% of the overall spend in higher $18 education annually • Total spend on higher education Federal Loans Private $94 Education Loans grows 2-3% annually primarily due Grants $11 to increases in cost of attendance $129 $441 Billi
Slide 7: Higher Education Value Proposition
Higher Education Value Proposition Unemployment rates and earnings by educational attainment, 2017 2 Unemployment rate Median usual weekly earnings Doctoral Degree 1.5% $1,743 Professional Degree 1.5% $1,836 Master's Degree 2.2% $1,401 Bachelor's Degree 2.5% $1,173 Associate's degree 3.4% $836 Some
Slide 8: Product suite tailored to undergraduate and graduate students
Product suite tailored to meet the needs of undergraduate and graduate students Market Conservative • Smart Option Student Loan Leading Funding and Brand Underwriting • Introduced in 2009 • Flexible repayment options while in school • Fixed and Variable rates Strong Consistent Financial Credit • Dif
Slide 9: Product Overview
Product Overview Undergraduate Medical Law Parent Dental Health Professions MBA General Studies Undergraduate Graduate Parent Rate Type Variable & Fixed Variable & Fixed Variable & Fixed Variable: LIBOR + 2.00% - LIBOR + 9.88% Variable: LIBOR + 2.25% - LIBOR + 7.88% Variable: LIBOR + 3.50% - LIBOR +
Slide 10: Consistent underwriting has contributed to better than model credit performance
Consistent underwriting has contributed to better than model credit performance • Proprietary Scorecard built with Experian Market Conservative Decision Analytics Leading Funding and Brand Underwriting • Initial credit screen removes applicants with low FICO scores or prior derogatory trades on file
Slide 11: Consistent high quality originations growth
Consistent high quality originations growth6 $6,000 $5,700 7% $5,500 $5,315 11% $5,000 $4,666 3% $4,800 8% $4,500 $4,330 $4,000 $3,500 $3,000 $2,500 8% $2,131 Originations($MM) $2,000 $1,972 $1,500 $1,000 $500 $0 2015 2016 2017 2018 2019 Private Education Loan Originations 11
Slide 12: High Quality, Predictable Credit Program
High Quality, Predictable Credit Program8,9,10 Smart Option Cumulative Gross Defaults by P&I Repayment Vintage and Years Since First P&I Repayment Period 10% 9% 8% 7% Cumulative Defaults as a % asofa Defaults% Cumulative 6% Disbursed Principal Entering P & I Repayment I & Entering P Principal Disbur
Slide 13: High Quality Portfolio Growth
High Quality Portfolio Growth Projected Balance Sheet Growth 2018-2021 $35 $30 $25 $20 $15 $10 $5 $0 2018 2021 Private FFELP Other (Personal and Credit Card) As of 3/31/19: • 78% of Private Education Loans have FICO score at approval > 7007 • 52% of Private Education Loan Borrowers make payments whi
Slide 14: Conservative funding optimizes net interest margin
Conservative funding optimizes net interest margin Secured Debt Retail 18% MMDA & CD 23% Brokered $10.6b Retail $9.1b Secured Debt $4.3b Retail Brokered H.S.A. & 529 Variable 15% 27% Brokered Fixed 17% As of 3/31/19 14
Slide 15: Strong financial results translate to predictable returns to shareholders
Strong financial results translate to predictable returns to shareholders Market Conservative Leading Funding and • Consistent earnings per share growth Brand Underwriting • High return on equity • Stable net interest margin Strong Consistent • Introducing capital return programs Financial Credit Re
Slide 16: Clear Capital Priorities
Clear Capital Priorities Invest in High ROE Growth Continue to focus on high-quality Private Education Loan originations, including deeper penetration of the graduate school market Testing Personal Loan market Quarterly Dividend Offer credit cards to our high-quality customer base Invest in Share Hi
Slide 17: CECL Update
CECL Update • The Financial Accounting Standards Board’s (FASB) Current Expected Credit Loss impairment standard will require “life of loan” estimates of losses to be recorded at origination and is set to take effect in January 2020. • There will be an initial build of the loan loss allowance that w
Slide 18: Guidance
Guidance 2019 Targets Diluted “Core Earnings” Per Share: $1.23 - $1.26 Private Education Loan Originations: $5.7 billion Non-GAAP Efficiency Ratio: 35-36%11 Long-Term Targets Prudently grow balance sheet without sacrificing quality Continue to leverage operating platform and limit operating expense
Slide 19: Sallie Mae Opportunity: Creating Value while Growing
Sallie Mae Opportunity: Creating Value while Growing Market Conservative Leading Funding and Brand Underwriting Strong Consistent Financial Credit Returns Performance 19
Slide 20: ABS Supplement
ABS SUPPLEMENT 20
Slide 21: Sallie Mae's Smart Option Loan Product Overview
Sallie Mae’s Smart Option Loan Product Overview • The Smart Option loan product was introduced by Sallie Mae in 2009 • The Smart Option loan program consists of: – Smart Option Interest Only loans - require full interest payments during in-school, grace, and deferment periods – Smart Option Fixed Pa
Slide 22: Sallie Mae Bank ABS Summary
Sallie Mae Bank ABS Summary 14-A 15-A 15-B 15-C 16-A 16-B 16-C 17-A 17-B 18-A 18-B 18-C 19-A Issuance Date 8/7/2014 4/23/2015 7/30/2015 10/27/2015 5/26/2016 7/21/2016 10/12/2016 2/8/2017 11/8/2017 3/21/2018 6/20/2018 9/19/2018 3/13/2019 Total Bond Amount ($mil) $382 $704 $714 $701 $551 $657 $674 $77
Slide 23: Sallie Mae Bank ABS Structures
Sallie Mae Bank ABS Structures SMB 2019-A SMB 2018-C SMB 2018-B Size $453.0MM $544.0MM $686.5MM Pricing Date March 5, 2019 September 12, 2018 June 13, 2018 Smart Option Smart Option Smart Option Collateral Private Education Loans Private Education Loans Private Education Loans Servicer Sallie Mae Ba
Slide 24: Sallie Mae Bank Servicing Policies
Sallie Mae Bank Servicing Policies Policy Pre-Spin, Legacy SLM Serviced Post-Spin, Sallie Mae Bank Serviced Delinquencies All loans serviced by an affiliate of legacy SLM; loan Sallie Mae Bank collects delinquent loans thru charge-off, placing owned by Sallie Mae Bank sold to legacy SLM after emphas
Slide 25: Sallie Mae Bank Collections
Sallie Mae Bank Collections Each customer is approached individually, and the account manager is educated and empowered to identify optimal resolution • Co-borrowers are contacted and collected with similar efforts as the primary borrower Sallie Mae Bank employs a front-loaded, stage based collectio
Slide 26: Appendix
APPENDIX 26
Slide 27: Quarterly Financial Highlights
Quarterly Financial Highlights 1Q 2019 4Q 2018 1Q 2018 Income Statement ($ millions) Total interest income $566 $538 $437 Total interest expense 164 155 104 Net interest income 402 383 333 Less: provisions for credit losses 64 58 54 Total non-interest income 16 13 13 Total non-interest expenses 140
Slide 28: Enhancing franchise value through a deeper relationship with clients
Enhancing franchise value through a deeper relationship with clients Distribution of Sallie Mae Borrowers by Product and Age 100% 93% 95% 91% 90% 87% 83% 80% 79% 73% 70% 64% 60% % with a Credit Card 54% 50% % with a Personal Loan 42% % of Borrowers of % 40% 30% 29% 30% 30% 27% 25% 21% 22% 20% 18% 15
Slide 29: High Quality Private Education Portfolio
High Quality Private Education Portfolio Customer FICO at Original Approval7 Smart Option Payment Type <700 Interest Only 780+ 22% 22% 28% Deferred 700 - 740 48% 27% 740 - 780 Fixed Pay 23% 30% Weighted Average FICO: 744 Smart Option Loans: $20.6 billion Portfolio by Originations Vintage Portfolio I
Slide 30: Sallie Mae vs Federal Student Loans
Sallie Mae vs Federal Student Loans 30
Slide 31: "Core Earnings" to GAAP Reconciliation
“Core Earnings” to GAAP Reconciliation 31
Slide 32: Important Information Regarding Historical Loan Performance Data
Important Information Regarding Historical Loan Performance Data On April 30, 2014 (the “Spin-Off Date”), the former SLM Corporation legally separated (the “Spin-Off”) into two distinct publicly-traded entities: an education loan management, servicing and asset recovery business called Navient Corpo
Slide 33: Important Information Regarding Historical Loan Performance Data (cont.)
Important Information Regarding Historical Loan Performance Data (cont.) Types of Smart Option Student Loan Portfolio Data The portfolio data we used in this report comes from two separate sources of information: (1) Combined Smart Option Student Loan Portfolio Data for Legacy SLM, Navient and Salli
Slide 34: Smart Option Loan Program Cohort Default Curves
Smart Option Loan Program Cohort Default Curves Terms and calculations used in the cohort default curves are defined below: First P&I Repayment Period – The month during which a borrower is first required to make a full principal and interest payment on a loan. P&I Repayment Vintage – The calend
Slide 35: Footnotes
Footnotes: 1. Source: MeasureOne CBA Report as of December 2017 2. U.S. Bureau of Labor Statistics, Current Population Survey 3. Source: Trends in Student Aid,© 2017 The College Board, www.collegeboard.org, U.S. Department of Education 2017 4. Source: U.S. Bureau of Labor Statistics- “More education