Slm Corporation · NASDAQ:SLM
Slm — IPO Roadshow (October 2006)
71 slides from Slm's IPO roadshow presentation, Oct 31, 2006
Slide 1: Debt Investor Presentation Nine Months ended September 30, 2006
Debt Investor Presentation Nine Months ended September 30, 2006 Dated October 27, 2006 SLM Corporation
Slide 2: Forward Looking Statements
Forward Looking Statements Forward Looking Statements - This report contains forward-looking statements and information that are based on management's current expectations as of the date of this document. When used in this report, the words "anticipate," "believe," "estimate," "intend" and "expect"
Slide 3: SLM Corporation Overview
SLM Corporation Overview ; SallieMae
Slide 4: SLM Corporation
SLM Corporation #1 originator, servicer and collector of student loans in the vital and growing U.S. education lending market Fully independent private sector company, traded on the NYSE with a market capitalization of $21 billion(1) $137 billion managed student loan portfolio, 85% of which is U.S.
Slide 5: SLM Corporation Update
SLM Corporation Update Managed student loan outstandings increased to $137B, up 14% vs. the prior year "Core Earnings" net income increased to $907 million, up 15% vs. the prior year(1) New student loan legislation passed in February 2006 and effective July 1, 2006 has not had, and is not expected t
Slide 6: A Brief Corporate History
A Brief Corporate History (1) Currently known as the Federal Family Education Loan Program (FFELP). SLM Corporate Debt Ratings SLM Corporate Debt Ratings SLM Corporate Debt Ratings SLM Corporate Debt Ratings SLM Corporate Debt Ratings Moody's Moody's S&P Fitch Long-Term A2 A2 A A+ Short-Term P-1 P-1
Slide 7: Pre- and Post-GSE Wind-Down
Pre- and Post-GSE Wind-Down (1) SLM Preferred Channel market share based on federal fiscal year 1999 and 2005 total FFELP and FDLP net commitment figures. Source: U.S. Department of Education. (2) Weighted average cost of US$ LIBOR issuance for the period, including amortized issuance costs. 1999 fi
Slide 8: What Makes SLM Corporation Unique
What Makes SLM Corporation Unique Limited Credit Risk 85% of managed student loans carried a U.S. government guarantee as of September 30, 2006 Total student loan losses were only 0.11% of managed student loans YTD September 30, 2006 Limited Exposure to Interest Rate and Economic Cycles Interest rat
Slide 9: The U.S. Student Loan Market
The U.S. Student Loan Market ; SallieMae
Slide 10: Sources of Funding for Higher Education in the U.S.
Federal Loans Private Loans Scholarships, Grants Parent/Student Contributions Billions of Dollars 67 19 75 61 Source: Based on estimates by Octameron Associates, "Don't Miss Out," 29th Edition; College Board, "2005 Trends in Student Aid"; and Sallie Mae. Includes tuition, room, board, transportation
Slide 11: Trends in U.S. Higher Education Spending
Trends in U.S. Higher Education Spending 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Enrollment 14.262 14.368 14.502 14.507 14.791 15.312 15.928 16.612 16.901 17.272 17.428 17.647 17.916 18.202 18.48 18.746 18.955 19.182 19.439 19.682 19.8
Slide 12: Higher Education's Return on Investment
Source: Postsecondary Education Opportunity, U.S. Census Bureau. Unemployment data as of 2005. Average annual income figures for 2005. Represents average earnings for a full time, year-round worker over age 25. Higher Education's Return on Investment Less than H.S. High School Some College Associate
Slide 13: Education and Unemployment Over Time
Education and Unemployment Over Time Average = 5.41% Min = 3.8% Max = 7.8% Average = 2.41% Min = 1.5% Max = 3.4% The relationship between education and unemployment has been relatively constant over time Source: Bureau of Labor Statistics.
Slide 14: The Federal Family Education Loan Program (FFELP)
The Federal Family Education Loan Program or "FFELP" Provides banks and others an explicit U.S. government guarantee and a guaranteed yield on student loans made pursuant to the FFELP program Loan pricing, terms and maximum borrowing limits set by Congress Available to undergraduate students, gradua
Slide 15: Growth in Federally Supported Student Loan Originations
Growth in Federally Supported Student Loan Originations In 2005, more borrowers took out more FFELP loans with higher loan balances than ever before Total federal student loan originations, including both FFELP and FDLP loans(1), increased by 9% in 2005, following a 13% increase in 2004 The U.S. Dep
Slide 16: The Private Education Loan Market
The Private Education Loan Market Consumer loans made to students and parents specifically to fund the cost of undergraduate, graduate and other forms of post-secondary education Typically used to bridge the funding gap between grants, aid and FFELP loans, and the increasing cost of higher education
Slide 17: Private Education Loan Market Demand
Private Education Loan Market Demand Private education loans help bridge the gap between funding available through government- sponsored programs and the rapidly increasing cost of education Cost of College AY 2005-2006 Based on a Four-Year Term Full-Time Private School Full-Time Public School 12764
Slide 18: Private Education Loan Market Growth
As a result of strong demand for alternative sources of funding for higher education, private education loan originations have experienced consistent growth Private Education Loan Market Growth (1) Source: Estimates by The College Board, "Trends in Student Aid", and Sallie Mae. Figures for academic
Slide 19: Federal Student Loan Legislation
Federal Student Loan Legislation New student loan legislation passed in February 2006 and effective July 1, 2006 is not expected to have a material impact on SLM's growth or earnings Changes include... Modest increase in FFELP loan borrowing limits effective July 1, 2007 Eligibility of graduate stud
Slide 20: Political Change and SLM Earnings Growth
Political Change and SLM Earnings Growth Past legislation, no matter how radical, has not had a long-term impact on SLM's earnings Based on SLM Corporation "Core Earnings" net income 1996-2006, "core" net income 1993-1995 and GAAP net income for earlier periods. 2004 figure adjusted for costs associ
Slide 21: SLM Business Fundamentals
SLM Business Fundamentals 2 SallieMae Le aticitl
Slide 22: SLM "Core Earnings" Revenue Mix
SLM "Core Earnings" Revenue Mix Net interest income from student loans made up 65% of net revenue YTD 3Q 2006 The remaining 35% of net revenue was derived primarily from fee generating businesses Debt Management & Collections Operations, primarily related to student loans Guarantor Servicing for stu
Slide 23: SLM's Competitive Advantage
SLM's Competitive Advantage Vertically Integrated Origination/ Servicing/Collections Strong National and Regional Brands State-of-the-Art Loan Delivery Platform Largest and Most Experienced Sales Team Breadth of Products and Services $137B of managed loans Nearly 10 million customers Economies of Sc
Slide 24: Federal Student Loan Market Share
Federal Student Loan Market Share 1999 2000 2001 2002 2003 2004 2005 Sallie Mae 0.15 0.17 0.23 0.25 0.25 0.26 0.27 Federal Student Loan Originations (FFY 2004-2005) Federal Student Loan Originations (FFY 2004-2005) Federal Student Loan Originations (FFY 2004-2005) Federal Student Loan Originations (
Slide 25: SLM's Private Education Loan Portfolio
Higher Ed Tuition Answer Career Training Private Ed Loans 14.3 1.5 2.1 SLM's Private Education Loan Portfolio $21B outstanding at September 30, 2006 15% of SLM's managed student loan portfolio High average FICO scores Risk-based pricing Approximately 50% of loans with co-borrowers, typically parents
Slide 26: Private Education Loan Portfolio Trends
Private Education Loan Portfolio Trends Private Education Loan portfolio performance trends are very stable, in part as a result of sound underwriting, pricing, servicing and default management practices 2003 2004 2005 YTD 3Q Net Charge-Offs 0.0185 0.0192 0.0189 0.0151 Private Education Loan Spread
Slide 27: Debt Management, Guarantor Servicing and Other Income
Debt Management, Guarantor Servicing and Other Income Debt Management & Collections Operations - 21% of operating revenue (1) Variable cost, low overhead business Consistent, recurring earnings stream Guarantor Servicing - 4% of operating revenue (1) 29% share of the FFELP guarantor servicing market
Slide 28: What Makes SLM a Unique Credit
What Makes SLM a Unique Credit
Slide 29: Extremely Low Loan Losses
Net Charge Offs East 0.9989 0.0011 Private Credit Loans Net Charge Offs East 0.9903 0.0097 Extremely Low Loan Losses FFELP Loans Net Charge Offs 0.9998 0.0002 + = Private Education Loans U.S. Government Guaranteed Loans Net Charge-Offs (1) = 0.00% Net Charge-Offs (1) = 0.72% Total Net Charge-Offs (1
Slide 30: Limited Interest Rate Risk
Limited Interest Rate Risk Fund floating rate assets with floating rate liabilities of comparable duration Convert newly issued debt to US$ floating rates at the time of issue with interest rate swaps, currency swaps and interest rate caps Manage a limited amount of basis risk only, primarily betwee
Slide 31: Net Interest Margin
Net Interest Margin Extremely low loan losses and match funding of interest rate sensitivities of floating rate assets and floating rate liabilities make SLM's net interest margin highly stable Stable Net Interest Margin Note: Based on SLM Corporation "Core Earnings" results 1998-2005 and GAAP resul
Slide 32: Low Operating Expenses
Low Operating Expenses SLM's operating expenses stood at only 38% of operating revenue in 2005(1), following three years of steady improvement SLM's operating efficiency ratio far outdistanced that of its peers from 2001 through 2005 (1)(2) 2001 2002 2003 2004 2005 SLM Corp 0.4 0.37 0.36 0.36 0.38 S
Slide 33: Highly Stable and Predictable Earnings
Highly Stable and Predictable Earnings SLM has generated highly consistent earnings and cash flow since its inception in 1973 Steady growth in the student loan market, the guaranteed nature of SLM's assets and strict asset and liability management policy protect SLM from economic and interest rate c
Slide 34: Highly Stable Earnings
Highly Stable Earnings Between 2001 and 2005, SLM's "Core Earnings" ROA displayed less than 1/3 the average volatility of leading 'Aa' banks and 1/5 the average of highly rated finance companies(1) SLM's earnings have not in the past been subject to the significant operating risks - trading losses,
Slide 35: Strong Risk-Adjusted Capitalization
Strong Risk-Adjusted Capitalization
Slide 36: Strong Risk-Adjusted Capitalization
Strong Risk-Adjusted Capitalization 2005 Medians for 'Aa' U.S. Banks / Investment Grade Finance Cos.(4) 2004 2005 YTD 3Q 2006 2005 Medians for 'Aa' U.S. Banks / Investment Grade Finance Cos.(4) Tangible Equity/Managed Assets(1) 1.6% 1.9% 2.0% 4.9% / 7.3% Tangible Equity/Net Charge-Offs(2) 15x 16x 20
Slide 37: Funding Diversity and Liquidity
Funding Diversity and Liquidity
Slide 38: Funding Sources
Term ABS ABCP Commercial Paper Global MTNs Foreign Currency Extendibles Retail Notes Convertible Debt Other YE 2005 102.2 5 0 22.8 11 5.2 4 2 0 Funding Sources At September 30, 2006, ABS represented 70% and unsecured corporate debt 30% of SLM's $152 billion of total managed debt outstanding Note: To
Slide 39: SLM Corporate Debt and ABS Issuance
SLM has issued $163 billion of long-term, non-GSE corporate debt and asset- backed securities since 2003, across a broad range of maturities - New Issuance Volume 2003 2004 2005 YTD 3Q 2006 Corporate Debt Issuance (1) $15B $15B $10B $8B Term Asset-Backed Securities Issuance (1) $31B $30B $27B $27B T
Slide 40: YTD 3Q 2006 Funding Diversity
SLM YTD 3Q 2006 Total Managed Debt Issuance by Currency, Investor Geography and Issue Type YTD 3Q 2006, SLM had issued 33 term ABS and corporate debt securities in eight different currencies to approximately 350 institutional investors around the globe USD Euro Canadian Sterling Yen HDK Peso Krona 0
Slide 41: Excess Liquidity
Excess Liquidity At September 30, 2006, SLM maintained significant excess liquidity... Enough liquidity in unrestricted cash, investments and unused committed credit lines to repay 15 months' debt maturities Together with cash, investments and unused credit lines, enough additional liquidity in its
Slide 42: Dealers in SLM Corporate Debt and ABS
Dealers in SLM Corporate Debt and ABS SLM utilizes a broad base of dealers globally, promoting liquidity in its corporate bonds and ABS corporate bonds and ABS corporate bonds and ABS corporate bonds and ABS corporate bonds and ABS corporate bonds and ABS corporate bonds and ABS corporate bonds and
Slide 43: SLM Corporate Debt Program
SLM Corporate Debt Program 45 SallieMae oan.
Slide 44: SLM Corporate Debt Issuance Volume
SLM Corporate Debt Issuance Volume Issuance Type 2003 2004 2005 2005 YTD 3Q 2006 YTD 3Q 2006 US$ Global and Medium Term Notes $ 9.1 $ 6.4 $ 4.5 $ 4.5 $ 4.0 $ 4.0 Foreign Currency Denominated(2) 0.6 4.2 4.0 4.0 2.3 2.3 Extendible Notes 1.7 2.5 1.0 1.0 1.0 1.0 Retail Note Program 1.1 1.8 0.8 0.8 0.4 0
Slide 45: Consistent Credit Spread Performance
Consistent Credit Spread Performance SLM Corp 10 Year Bond Spreads vs. Leading 'Aa' Banks and Finance Companies SLM trades at spreads comparable to those of the leading 'Aa' U.S. banks Note: As of September 30, 2006. SLM Corp 10 yr spread for 4/02 thru 8/02 estimated based on 5 yr issue spreads. Ini
Slide 46: SLM Corporation ABS Program
SLM Corporation ABS Program 49 SallieMae ood.
Slide 47: SLM ABS Issuance Volume
SLM ABS Issuance Volume 2003 2004 2005 YTD 3Q 2006 Non-Consolidation FFELP ABS $ 5.8 $10.1 $ 6.6 $ 5.1 Consolidation FFELP ABS 21.0 17.4 17.1 16.1 Private Credit ABS 3.8 2.8 3.4 5.7 Total ABS Issuance $ 30.6 $ 30.3 $ 27.0 $ 26.9 SLM ABS Term Issuance Volume ($ billions) (1) - (1) Excludes outstandin
Slide 48: SLM ABS Structures
SLM ABS Structures Recent SLM new issue ABS Structures - Non-Consolidation FFELP Consolidation FFELP Private Education Loans Issue $2.6B SLM Trust 2006-3 $3.1B SLM Trust 2006-8 $1.2B SLM Trust 2006-C Pricing Date March 2, 2006 September 7, 2006 September 20, 2006 Collateral US Govt. Guaranteed FFELP
Slide 49: YTD 2006 ABS Issuer Rankings
Note: Totals may not add due to rounding. YTD 2006 ABS Issuer Rankings
Slide 50: SLM U.S. Government Guaranteed Student Loan ABS
SLM U.S. Government Guaranteed Student Loan ABS
Slide 51: SLM FFELP ABS Issue Characteristics
SLM FFELP ABS Issue Characteristics U.S. Government guaranteed collateral Issue size $2.0B to $4.0(+)B Tranches denominated in US$ or Euros 'Aaa/AAA/AAA' rated senior tranches make up 97% of issue structure 20% risk based capital weighting in most countries Floating rate tied to 3 mo. LIBOR, with oc
Slide 52: SLM FFELP ABS Reset Rate Notes
Shorter term "soft bullet" US$ fixed rate, Euro and Sterling tranches, backed by long- dated collateral Remarketed at a date certain prior to the expected maturity date, typically 3, 5 , 7 or 10 years from issuance Successful remarketing or call provides for full repayment of outstanding reset rate
Slide 53: SLM Trust 2004-10 Reset Rate Note Structure
Class A Notes pay sequentially A-4, A-5, A-6 and A-7 Reset Rate Note remarketing dates occur well in advance of expected amortization of underlying collateral SLM Trust 2004-10 Reset Rate Note Structure Amortization Illustration Outstanding Balance A-1 Description EUR FRN Soft Bullet USD FRN A-2 A-3
Slide 54: SLM FFELP ABS Relative Value
SLM FFELP ABS Relative Value SLM FFELP 'AAA' ABS spreads track 'AAA' prime credit card ABS, yet SLM FFELP ABS collateral is backed by an explicit U.S. government guarantee Source: Merrill Lynch Research. 3/28/2003 4/4/2003 4/11/2003 4/17/2003 4/25/2003 5/2/2003 5/9/2003 5/16/2003 5/22/2003 5/30/2003
Slide 55: SLM 'AAA' FFELP vs. US Agencies
SLM ABS (floating rate issuance) Agency debenture (fixed rate issuance) 1 -3 -18 2 -1 -18.5 3 0 -17.5 5 2 -17 7 7 -17 10 10 -17.5 SLM 'AAA' FFELP vs. US Agencies SLM 'AAA' FFELP ABS (1) US Agency Debt (1) Maturity (yrs.) 18bps 24bps 28bps 15bps 19bps (1) Spreads as of September 30, 2006. US Agency s
Slide 56: SLM 'AAA' FFELP ABS Spread Performance vs. Agencies
SLM 'AAA' FFELP ABS Spread Performance vs. Agencies SLM FNMA Current 2 -16 Max 12 6 Min 2 -20 Mean 7.6 -9.6 Std Dev 3 4 (1) 5-year unsecured Fannie Mae, rolling weekly average LIBOR equivalent pricing. Source: Various dealers. Spread to LIBOR on SLM 'AAA' FFELP ABS vs. U.S. Agencies Dec 2002 - Sep 2
Slide 57: SLM Private Credit Student Loan ABS Program
SLM Private Credit Student Loan ABS Program
Slide 58: SLM Private Credit ABS Issue Characteristics
SLM Private Credit ABS Issue Characteristics Issue size $1.0B to $2.0(+)B US$ denominated Student loan collateral not guaranteed by the U.S. Government 'Aaa/AAA/AAA' rated class A senior tranches, 'Aa2/AA-/AA' rated Class B and 'A2/A/A' rated class C subordinate tranches Floating rate tied to 3 mo.
Slide 59: SLM Private Credit Loan Underwriting
SLM Private Credit Loan Underwriting SLM Higher Education Loan Program Underwriting Standards - Minimum FICO score for standard programs. Prior to July 1, 2001, minimum FICO score for Sallie Mae branded loans was 630. Custom programs have been negotiated with certain schools in which the FICO cut-of
Slide 60: SLM Private Credit Cumulative ABS Issuance
SLM Private Credit Cumulative ABS Issuance(1) SLM Private Credit ABS Issuance SLM Managed Private Education Loans Outstanding(1)(2) YTD figures as of September 30, 2006. Gross outstandings for total managed portfolio, before deducting loan loss allowance and unamortized discount. 2001 2002 2003 2004
Slide 61: SLM Private Credit ABS Relative Value
SLM Private Credit ABS Relative Value 3/28/2003 4/4/2003 4/11/2003 4/17/2003 4/25/2003 5/2/2003 5/9/2003 5/16/2003 5/22/2003 5/30/2003 6/6/2003 6/13/2003 6/20/2003 6/27/2003 7/3/2003 7/11/2003 7/18/2003 7/25/2003 8/1/2003 8/8/2003 8/15/2003 8/22/2003 8/29/2003 9/5/2003 9/12/2003 9/19/2003 9/26/2003
Slide 62: SLM 2006-C Private Credit Student Loan ABS
SLM 2006-C Private Credit Student Loan ABS
Slide 63: SLM Private Credit Student Loan Trust 2006-C
SLM Private Credit Student Loan Trust 2006-C The structure of SLM 2006-C is similar to prior Sallie Mae Private Credit ABS issues(1) (1) Preliminary, subject to change. (2) Estimated based on a variety of assumptions concerning loan repayment behavior. Actual average life and repayment characteristi
Slide 64: SLM 2006-C Summary Pool Characteristics
SLM 2006-C Summary Pool Characteristics Loan Programs % Co-Borrower as Obligor Borrower Payment Status Pool Weighted Original Average FICO Score 714 Pool Weighted Current Average FICO Score 700 Average Borrower Indebtedness $10,999 Weighted Average Remaining Term 200 months No Co-Borrower Co-Borrowe
Slide 65: SLM 2006-C FICO Distribution at Loan Origination
SLM 2006-C FICO Distribution at Loan Origination(1) If there is a co-borrower, the co-borrower's FICO was used. Loans with FICO scores greater than zero and less than 630 represent less than 0.02% of the portfolio. Approximately 3.3% of the trust consists of student loans where no FICO scores were c
Slide 66: SLM Private Credit ABS Prepayment Analysis
SLM Private Credit ABS Prepayment Analysis
Slide 67: Additional Information
Additional Information n SallieMae
Slide 68: "Core Earnings" Presentation
"Core Earnings" Presentation Used by SLM's management in developing financial plans, tracking results, establishing corporate performance targets and determining incentive compensation Used by equity investors, credit rating agencies and debt capital providers to measure the company's business perfo
Slide 69: SLM Corporation - Summary Financial Performance
2001 2002 2003 2004 2005 YTD 3Q 2006 Stafford/PLUS 50 47.052 45.524 47 40.658 39.787 Consolidation 17 25.25 34.96 49 65.434 75.947 Private Education 4.416 5.822 8.305 11 16.437 21.201 Growth 0.142 0.14 0.14 0.15 $78 $89 $107 $123 SLM Corporation - Summary Financial Performance 2001 2002 2003 2004 20
Slide 70: Additional Information Available at www.salliemae.com
Additional Information Available at www.salliemae.com Additional Information Available at www.salliemae.com
Slide 71: Debt Investor Relations Contact Information
Debt Investor Relations Contact Information Guido van der Ven Vice President, Corporate Finance Sallie Mae, Inc. 36 Leitch Avenue Skaneateles, NY 13152 315-685-9825 guido.e.vanderven@slma.com Leo Subler Managing Director, Corporate Finance Sallie Mae, Inc. 12061 Bluemont Way Reston, VA 20190 703-984