Slm Corporation · NASDAQ:SLM
Slm — Debt Investor Presentation (2009)
87 slides from Slm's debt investor presentation, 2009
Slide 1: SLM Corporation 3Q 2009 Investor Presentation
SLM CORPORATION 3Q 2009 Investor Presentation
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS This Presentation contains forward-looking statements and information based on management‟s current expectations as of the date of this document. Statements that are not historical facts, including statements about our beliefs or expectations and statements that assume or
Slide 3: SLM Corporation Overview
SLM CORPORATION OVERVIEW 3
Slide 4: SLM Corporation
SLM CORPORATION ► #1 originator of student loans in the U.S. education lending market ► #1 servicer and collector of student loans in the U.S. currently servicing $190 billion in assets including $9 billion for third parties ► Fully independent private sector company with scale and a broad franchise
Slide 5: Life Stage Customer Strategy
LIFE STAGE CUSTOMER STRATEGY ► Sallie Mae offers an unmatched, integrated suite of Saving, Planning, and Paying for College SM products and services 5
Slide 6: SLM Corporation Update
SLM CORPORATION UPDATE ► Managed student loans outstanding increased to $192 billion in Q3 Originated $6.9 billion in federal student loans, a 25% increase over prior year period Launched new private education loan product in Q2 and originated $893 million private education loans in Q3 ► “Core E
Slide 7: A Brief Corporate History
A BRIEF CORPORATE HISTORY SLM Corporate Debt Ratings • Congress creates the Guaranteed Student Loan 1965 Program1 Moody’s S&P Fitch Long- • Congress establishes, as a GSE, the Student Ba1 BBB- BBB- Loan Marketing Association or “Sallie Mae” Term 1972 Short- Not-Prime A-3 F3 • Privatization of Sallie
Slide 8: What Makes SLM Corporation Unique
WHAT MAKES SLM CORPORATION UNIQUE Credit Risk 82% of managed student loans carry an explicit U.S. government guarantee of at least 97% Managed student loan losses were 0.76% for the nine months ending Q3 2009 Interest Rate and Economic Cycles Interest rate sensitivities of floating rate assets cl
Slide 9: Q309 Core Earnings Summary
Q309 “CORE EARNINGS” SUMMARY ($ millions), except per share amounts Q309 Q209 Q308 EPS (Reported) $0.26 $0.31 $0.19 Economic Floor Income EPS not reported in "Core Earnings” $0.05 $0.17 - Net Income $164 $170 $117 Net Interest Income $690 $457 $712 Net Interest Margin 1.32% 0.91% 1.52% Loan Loss Pro
Slide 10: Q309 Core Earnings Summary
Q309 “CORE EARNINGS” SUMMARY EPS Breakdown Q309 Q209 Q308 Reported "Core Earnings" $0.26 $0.31 $0.19 Non-Recurring: Gains on Debt Repurchases $0.10 $0.44 $0.02 Induced Conversion of Series C Preferred Stock ($0.04) - - Cumulative accounting change of premium amortization expense on loans $0.07 - $0.
Slide 11: CP Yield – 3M LIBOR
CP YIELD – 3M LIBOR -0.70 -0.66 -0.63 -0.60 -0.52 -0.50 -0.46 -0.40 -0.37 -0.30 -0.28 -0.20 -0.18 -0.13 -0.07 -0.07 Historical -0.10 Average 0.00 • CP-LIBOR – still volatile but reverting to long-term mean 11
Slide 12: Fee Income & Other Income
FEE INCOME & OTHER INCOME Nine months ended ► Contingency Inventory of September 30, 2009 $1,168 Million* $10.7 Billion Contingency Fee $230 ► Collecting on behalf of the Dept of Education for close to ten years Collections - Other ** Non-Mortgage $557 $88 ► Upromise – largest private source of 529
Slide 13: Lending Segment Earnings Detail
LENDING SEGMENT EARNINGS DETAIL ($ millions) Q309 Q308 % Change FFELP Originations $6,940 $5,534 25% Private Originations $893 $2,117 -58% Total Originations $7,833 $7,651 2% Average Managed Student Loans $191,459 $175,470 9% Net Student Loan Spread 1.56% 1.90% - Economic Floor Income not included i
Slide 14: Dept. of Education / Government Programs
DEPT. OF EDUCATION / GOVERNMENT PROGRAMS ► Kennedy-Miller Legislation – Signed by President 05/07/08 ECASLA - Broad authority to purchase loans from 10/01/03 – 07/01/09 ECASLA Extension – Signed by President 10/07/08 • Extended purchase authority for 2009 – 2010 Academic Year ► Loan Purchase Com
Slide 15: Federal Student Loan Policy Alternatives
FEDERAL STUDENT LOAN POLICY ALTERNATIVES ► President‟s Budget Proposal and House Legislation Convert all federal student loans to federal funding by July 2010 Use savings to substantially increase Pell Grants Use limited number of private sector firms to service ► Industry/Community Proposed M
Slide 16: Political Developments
POLITICAL DEVELOPMENTS ► Congressional Budget Office (CBO) Scores the “Community Proposal” as generating substantial savings Confirms mandatory savings ($87 B) which is equivalent to the Administration‟s proposal, H.R. 3221. Debate is on best origination and default management strategy for the g
Slide 17: Political Developments
POLITICAL DEVELOPMENTS ► House of Representatives passed legislation (H.R. 3221) which ends private sector role in loan originations, but there are many steps remaining in the process H.R. 3221 passed the House of Representatives as freestanding (non- reconciliation) legislation Senate leadershi
Slide 18: Federal Student Loan Market
FEDERAL STUDENT LOAN MARKET ► Outstanding Government Student ► Top 10 Holders of FFELP Loans Loan Market Distribution 2/28/09 FFYE 9/30/08 Outstanding % Lender Name ($ in Billions) Total FDLP – Direct Lending Sallie Mae $141 35% Citibank /Student Loan Corp 31 8% Wells Fargo/Wachovia 27 7% $117 Billi
Slide 19: Office of the Chief Executive Officer
OFFICE OF THE CHIEF EXECUTIVE OFFICER Al Lord, Chief Executive Officer Jack Remondi, Vice Mark Heleen, EVP & Joe DePaulo, EVP & Jack Hewes, Sr. EVP & Chair & General Counsel Chief Marketing Officer Chief Lending Officer Chief Financial Officer David West, SVP & Jim Truitt, SVP & Kara West, VP Risk C
Slide 20: The U.S. Student Loan Market
THE U.S. STUDENT LOAN MARKET SLM Corporation 20
Slide 21: Favorable Student Loan Market Trends
FAVORABLE STUDENT LOAN MARKET TRENDS Enrollment Growth + Rising Tuitions + Education Value = Increasing Loan Demand Higher Education Enrollment (millions) Annual Cost of Education ($ thousands) Public Private 20.6 20.3 20.4 19.7 19.9 20.1 $34.2 $35.6 19.5 $32.3 19.0 19.1 19.3 $28.7 $30.5 18.7 $26.1
Slide 22: College Grads Experience Lower Levels of Unemployment
COLLEGE GRADS EXPERIENCE LOWER LEVELS OF UNEMPLOYMENT 12.0 10.0 8.0 6.0 4.0 2.0 0.0 Total Unemployment Rate Unemployment Rate with a Bachelor's Degree or Higher Source: U.S. Department of Labor, Bureau of Labor Statistics 22
Slide 23: The Federal Family Education Loan Program or FFELP
THE FEDERAL FAMILY EDUCATION LOAN PROGRAM OR “FFELP” ► Provides lenders an explicit U.S. government guarantee of at least 97% and a fixed yield on student loans made pursuant to the FFELP program ► Loan pricing, terms and maximum borrowing limits set by Congress ► Available to undergraduate students
Slide 24: FFELP Student Loan Market Share
FFELP STUDENT LOAN MARKET SHARE FFELP Loan Originations (Gross Commitments) $ in Billions Rank Lender 2008 Mkt Share 2008 1 Sallie Mae $19.6 31% 2 Wells Fargo $9.1 14% 3 Citibank $6.2 10% 4 Bank of America $4.3 7% 5 JP Morgan Chase $3.4 5% 6 US Bank $2.3 4% 7 PNC Bank $2.2 3% 8 EdAmerica $1.6 3% 9 S
Slide 25: FFELP Loan Originations
FFELP LOAN ORIGINATIONS $10.0 $8.0 ($ in billions) $6.0 $4.0 $2.0 $0.0 FFELP Originations ► Originated Nearly $7 billion of loans in the quarter a 25% increase over the prior year ► Originated $727 million of loans for third-party servicing clients in the quarter ► Put approximately $840 million of
Slide 26: Private Loan Originations
PRIVATE LOAN ORIGINATIONS $2.5 $2.0 ($ in billions) $1.5 $1.0 $0.5 $0.0 Private Originations ► Increases in Federal Student Loans, tighter underwriting standards, and conservative consumer behavior dampened demand for private education loans. 26
Slide 27: The Private Education Loan Market
THE PRIVATE EDUCATION LOAN MARKET Private Education Loans ► 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 increa
Slide 28: SLM's Private Education Loan Portfolio
SLM’S PRIVATE EDUCATION LOAN PORTFOLIO ► Private Education Loan Portfolio Characteristics(1) 35 billion of managed outstandings at Q3 2009 18% of SLM‟s managed student loan portfolio Risk-based pricing Approximately 56.5% of portfolio has a cosigner, typically a parent Higher education loa
Slide 29: SLM's New Private Education Loan Product
SLM’S NEW PRIVATE EDUCATION LOAN PRODUCT ► Smart Option Product Launched 3/23/09 Eliminates negative amortization during the school and grace period while reducing the average life from 9.5 years to 5.5 years Strategies to achieve a 90% cosigned rate have been deployed Repayment term is driv
Slide 30: 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 1999-2000 Cost of College AY 2009-2010 Based on a Four-Year Term Based on a Four-Year Ter
Slide 31: Private Credit Originations
PRIVATE CREDIT ORIGINATIONS SLM vs. Industry Chart Originations Title $24.0 $22.0 $20.0 $18.0 $16.0 $14.0 $12.0 $10.0 $8.0 $6.0 $4.0 $2.0 $0.0 03-04 04-05 05-06 06-07 07-08 08-09 09-10* SLM Total Market Source: College Board, Trends in Higher Education Series (2009). 2008-2009 industry data is preli
Slide 32: Credit Quality
CREDIT QUALITY SLM Corporation 32
Slide 33: Loan Losses
LOAN LOSSES Charge-Offs (1) Total Charge-Offs (1) = 0.06% = 0.76% Charge-Offs (1) = 3.72% + = U.S. Government Total Managed Private Education Guaranteed Loans Student Loan Loans 82% Portfolio 18% (1) All data as of September 30, 2009. Managed FFELP charge-offs as a percentage of average managed FFEL
Slide 34: FFELP Education Loan Portfolio
FFELP EDUCATION LOAN PORTFOLIO "Core Earnings" FFELP Loan Spread vs. Charge-Offs 1.8% 1.59% 1.6% 1.39% 1.4% 1.25% 1.2% 1.0% 0.96% 0.83% 0.8% 0.6% 0.56% 0.4% 0.2% 0.02% 0.03% 0.06% 0.06% 0.00% 0.01% 0.0% 2004 2005 2006 2007 2008 2009 to date Charge-Offs FFELP Education Loan Spread (1) “Core Earnings”
Slide 35: Private Education Loan Portfolio
PRIVATE EDUCATION LOAN PORTFOLIO "Core Earnings" Private Education Loan Spread vs. Charge-Offs (1) 7.0% 6.30% 6.0% 5.13% 5.12% 5.09% 4.62% 5.0% 4.54% 4.22% 4.0% 2.85% 3.0% 2.46% 2.0% 1.52% 1.60% 1.44% 1.0% 0.0% 2004 2005 2006 2007 2008 2009 Charge-Offs Private Education Loan Spread (1) “Core Earning
Slide 36: SLM Private Credit Default Emergence Profile
SLM PRIVATE CREDIT DEFAULT EMERGENCE PROFILE PAYMENTS MADE Loss Emergence Timing Sallie Mae Signature Standard Loans 14.0% 12.0% Percent of Original Loan Balance 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 0-12 13-24 25-36 37-48 49-60 61-72 73-84 85-96 97-108 109-120 121-132 133-144 145-156 Payments Made Traditi
Slide 37: Charge-Off Trends – Traditional vs. Non-Traditional
CHARGE-OFF TRENDS – MIX OF TRADITIONAL VS. NON-TRADITIONAL Charge-off Rate as a % of Avg Repay Charge-Offs ($) Balance 300 0.3 250 0.25 200 0.2 Millions 150 0.15 100 0.1 50 0.05 0 0 2006 2007 2008 Q109 Q209 Q309 2006 2007 2008 Q109 Q209 Q309 Traditional Non- Traditional Traditional Non- Traditional
Slide 38: Private Education Loan Portfolio Performance
PRIVATE EDUCATION LOAN PORTFOLIO PERFORMANCE ► Non-traditional loans represent only 13% of the Private Education loan portfolio but account for 50% of charge-offs Q309 Q209 Q109 Q408 Q308 Loans Outstanding - Traditional Portfolio $32,891 $32,326 $32,137 $31,101 $30,177 Loans Outstanding- Non-Traditi
Slide 39: Private Education Loan Portfolio Performance
PRIVATE EDUCATION LOAN PORTFOLIO PERFORMANCE Traditional Loans with a Cosigner Q309 Q209 Q109 Q408 Q308 Outstanding Balance as a % of Total 53% 52% 52% 51% 50% 90+ Delinquency as a % of Repayment 3.6% 3.8% 3.2% 1.9% 1.7% Forbearance as a % of Repayment & Forbearance 5.1% 5.8% 6.0% 6.4% 10.6% Charge-
Slide 40: Improving Portfolio Quality
IMPROVING PORTFOLIO QUALITY Characteristics of Loans Entering Repayment Year Entering Avg FICO Score at % Traditional % Cosigned Repayment Origination 2006 83% 51% 709 2007 84% 54% 712 2008 86% 55% 711 2009 89% 63% 720 2010 90% 60% 717 2011 91% 65% 719 2012 93% 69% 723 40
Slide 41: Portfolio Quality Improving
PORTFOLIO QUALITY IMPROVING Non-Traditional Loans Entering Repayment Non-cosigned Loans Entering Repayment ($ in millions) ($ in millions) $1,000 $4,000 $800 $3,000 $600 $2,000 $400 $1,000 $200 $0 $0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2004 2005 2006 2007 2008 2009 2010 2011 2012 Non-Tradit
Slide 42: Private Education Loan Portfolio Performance
PRIVATE EDUCATION LOAN PORTFOLIO PERFORMANCE ► Tightening of forbearance policies and the economic downturn have adversely impacted the performance of our Managed Private Education Loan portfolio ► Delinquency trends have improved, as the impact of forbearance tightening passed through the system. 1
Slide 43: Servicing: A Competitive Advantage
SERVICING: A COMPETITIVE ADVANTAGE SLM Corporation 43
Slide 44: Servicing
SERVICING ► #1 servicer and collector of student loans in the U.S. currently servicing $190 billion in assets including $9 billion for third parties ► Awarded ED servicing contract in June 2009 Servicing under contract initiated in August 2009 Contract to span 5 years with one, five-year renewal
Slide 45: SLM's Competitive Advantage
SLM’S COMPETITIVE ADVANTAGE ► SLM has a distinct competitive advantage in all facets of the education loan market. Economies of Scale $190B of Loans Serviced, 10 million Best in Class State-of-the-Art Customers Vertically Integrated Loan Delivery Platform Origination/ Servicing/Collections Singular
Slide 46: Operations Locations
OPERATIONS LOCATIONS Wilkes-Barre, PA Newark, DE Fishers & Muncie, IN Reston, VA Lynn Haven, FL Killeen, TX Corporate Headquarters 46
Slide 47: Funding Diversity and Liquidity
FUNDING DIVERSITY AND LIQUIDITY SLM Corporation 47
Slide 48: Capital Markets Summary
CAPITAL MARKETS SUMMARY ► Realized gains of $74.4 million on debt repurchases in Q309 ► Bank ABCP facility reduced to $9.4 billion outstanding ► Completed $1.1 billion TALF Eligible Private Credit ABS – July 14, 2009 ► Completed $1.7 billion TALF Eligible Private Credit ABS – August 13, 2009 ► Funde
Slide 49: Recent ABS Transactions
RECENT ABS TRANSACTIONS Transaction: April May May FFELP Consolidation SLT 2009-I SLT 2009-1 SLT 2009-2 Issuance Size: $1.027 B $2.179 B $1.845 B Registration Type: 144A Public Public Indicative Pricing: L + 280 L + 225 L + 225 Transaction: May 2009-B July 2009-C August 2009-D Private Credit Issuanc
Slide 50: Liquidity Position Detail
LIQUIDITY POSITION DETAIL ($ in billions) 9/30/2009 6/30/2009 3/31/2009 Sources of Primary Liquidity: ED Purchase and Participation Program Unlimited Unlimited Unlimited Unrestricted Cash & Liquid Investments $6.2 $7.3 $3.7 Unused Commercial Paper and Bank Lines of Credit 3.5 3.5 5.2 2008 FFELP ABCP
Slide 51: High Percentage of Student Loans Funded to Term
HIGH PERCENTAGE OF STUDENT LOANS FUNDED TO TERM $192 Billion Managed Student Loan $178 Billion Managed Student Loan Portfolio as of September 30, 2009 Portfolio as of September 30, 2008 Fixed Spread Liabilities Avg. Life of 4.4 Fixed Spread years, 9% Liabilities Avg. Funded to Funded to Life of 4.6
Slide 52: Funding Distribution
FUNDING DISTRIBUTION At September 30, 2009, total managed debt borrowings was $208.5 billion. Unsecured Debt, $29.2 ED Participation, $22.9 Straight-A, $14.2 Term ABS, Bank ABCP Conduit $125.2 , $9.4 Bank Brokered Deposits, $6.1 Other, $1.5 52
Slide 53: SLM Corporate Debt and ABS Issuance
SLM CORPORATE DEBT AND ABS ISSUANCE SLM has issued $142 billion of long-term, corporate debt and asset- backed securities since 2005, across a broad range of maturities New Issuance Volume ($ in billions) 2005 2006 2007 2008 Q109 Q209 Q309 Corporate Debt Issuance $10 $12 $1.6 $2.5 $0.0 $0.0 $0.0 Ter
Slide 54: SLM ABS Issuance Volume
SLM ABS ISSUANCE VOLUME SLM ABS Term Issuance Volume (1) ($ in billions) 2005 2006 2007 2008 Q109 Q209 Q309 Non-Consolidation FFELP ABS $ 6.6 $ 5.1 $ 9.1 $18.5 $ 0.0 $ 0.0 $ 0.0 Consolidation FFELP ABS 17.1 22.9 15.0 0.0 0.0 5.1 0.0 Private Credit ABS 3.4 5.7 2.2 0.0 1.5 2.6 2.8 Total ABS Issuance $
Slide 55: SLM Corporate Debt Issuance Volume
SLM CORPORATE DEBT ISSUANCE VOLUME SLM Corporate Term Debt Issuance Volume ($ billions) Issuance Type 2005 2006 2007 2008 Q109 Q209 Q309 US$ Global & Medium Term Notes $4.5 $5.8 $1.4 $2.5 $0.0 $0.0 $0.0 Foreign Currency Denominated(1) 4.0 3.9 0.2 0.0 0.0 0.0 0.0 Extendible Notes 1.0 1.5 0.0 0.0 0.0
Slide 56: Unsecured Debt Maturities
UNSECURED DEBT MATURITIES As of September 30, 2009 (par value, $ in billions) 15.0 11.4 10.0 6.6 5.0 2.8 2.2 1.8 2.2 1.2 0.5 0.5 0.0 ► Repurchased $2.7 billion of debt in 2009 ► Remaining unsecured debt maturities in 2009 total $483 million Note: Does not include Sallie Mae Bank or Subsidiary fundin
Slide 57: Unencumbered Assets & Unsecured Debt
UNENCUMBERED ASSETS & UNSECURED DEBT ($ in billions) 12/31/08 3/31/09 6/30/09 9/30/2009 FFELP Stafford and Plus Loans, net $ 3.8 $ 4.5 $ 2.7 $ 2.1 FFELP Consolidation Loans, net 1.6 0.6 0.5 0.6 Private Education Loans, net 15.7 14.1 16.0 13.3 Other Loans 0.7 0.7 0.5 0.5 Available Cash & Investments
Slide 58: Sallie Mae Bank
SALLIE MAE BANK ► Bank charter Utah based ILC regulated by FDIC and Utah Department of Financial Institutions (UDFI) Charter granted October 2005 ► Current bank activity Originates Sallie Mae‟s private education loans Funded through affiliate and brokered deposits 25.1% Total Risk-based Ca
Slide 59: Sallie Mae Bank Brokered Deposits
SALLIE MAE BANK BROKERED DEPOSITS $7,000 35 $6,000 30 $5,000 25 Average Remaining Life (in months) Brokered Deposits (in millions) $4,000 20 $3,000 15 $2,000 10 $1,000 5 $- 0 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Brokered CDs Brokered MMDAs Avg Rem Life* *Avera
Slide 60: Sallie Mae Bank – Deposits
SALLIE MAE BANK – DEPOSITS Bank Deposits ($ millions) Dec 07 Dec 08 Mar 09 Jun 09 Sep 09 Brokered CDs $254 $2,256 $3,281 $6,100 $5,891 Brokered MMDAs $- $- $- $264 $221 Other Deposits* $431 $458 $433 $420 $543 Total Deposits $685 $2,714 $3,714 $6,784 $6,655 *Primarily affiliate demand deposit accoun
Slide 61: Sallie Mae Bank – Capital
SALLIE MAE BANK – CAPITAL Regulatory Capital Ratios Ratio Dec 07 Dec 08 Mar 09 Jun 09 Sep 09 Tier 1 Leverage 23.2% 40.7% 24.5% 17.9% 14.2% Tier 1 Risk Based 24.4% 45.9% 29.6% 26.2% 24.2% Total Risk Based 24.4% 46.3% 30.2% 26.9% 25.1% 61
Slide 62: Risk-Adjusted Capitalization
RISK-ADJUSTED CAPITALIZATION SLM Corporation 62
Slide 63: Capitalization
CAPITALIZATION SLM Corp 2006 2007 2008 3Q YTD Tangible Equity/Managed Assets(1) 1.8% 2.0% 1.8% 1.7% Tangible Equity/Charge-Offs(2) 18x 9X 7x 3x (1) GAAP tangible stockholders’ equity as a percentage of total managed assets. (2) Average GAAP tangible equity including preferred stock to charge-offs. S
Slide 64: Capital Allocation
CAPITAL ALLOCATION SLM allocates capital internally based on the risk of the assets it supports Government SLM Corp Guaranteed Loan Assets Cash, Private Investments, Education Other Assets 72% of Loans & Total Managed Intangibles Assets Assets 16% of 12% of Total Managed Total Managed Assets Assets
Slide 65: FFELP Appendix
FFELP APPENDIX SLM Corporation 65
Slide 66: SLM FFELP ABS Issue Characteristics
SLM FFELP ABS ISSUE CHARACTERISTICS Typical SLM FFELP ABS Transaction Features Unique Characteristics of FFELP Loan ABS ► Historical issue size of $1.0B to ► Explicit U.S. government guarantee $5.0(+)B of underlying collateral insulates bondholders from virtually any loss ► Tranches denominated in U
Slide 67: SLM Stafford/PLUS ABS Trusts
SLM STAFFORD/PLUS ABS TRUSTS PREPAYMENT ANALYSIS ► Annualized CPRs for SLM Stafford/PLUS ABS Trusts have decreased significantly as incentives for borrowers to consolidate have declined Historical SLM Stafford/PLUS ABS CPRs 50.0% 45.0% Average CPR* 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0%
Slide 68: SLM Consolidation ABS Trusts
SLM CONSOLIDATION ABS TRUSTS PREPAYMENT ANALYSIS ► CPRs for SLM Consolidation ABS Trusts have declined significantly following legislation that prevented in-school and re-consolidation of borrowers‟ loans Historical Consolidation ABS CPRs 20.0% Average CPR* 17.5% 15.0% 12.5% 10.0% 7.5% 5.0% 2.5% 0.0
Slide 69: Private Credit Appendix
PRIVATE CREDIT APPENDIX SLM Corporation 69
Slide 70: Private Credit Loan Collections
PRIVATE CREDIT LOAN COLLECTIONS ► Sallie Mae services and collects the loans in its managed private loan portfolio ► Private credit collections are conducted by a stand-alone consumer credit collections unit, not the company‟s FFELP collections operations ► Managed by individuals with prior experien
Slide 71: Forbearance
FORBEARANCE ► A collections tool used to provide borrowers time to improve their ability to repay Between graduation and start of first job Economic hardship ► Provides borrower with time to obtain employment and income to support their obligations ► Applied most frequently in the first two year
Slide 72: Private Credit Trust Delinquency and Forbearance Seasoning Trends
PRIVATE CREDIT TRUST DELINQUENCY AND FORBEARANCE SEASONING TRENDS ► Delinquency and forbearance are highest when loans enter repayment, and diminish as loans season ► As the trust loans season, delinquency and forbearance are expected to decline 90+ Day Delinquencies, % of Loans in Forbearance, % of
Slide 73: Private Credit Trust Default Emergence by Years in Repayment
PRIVATE CREDIT TRUST DEFAULT EMERGENCE BY YEARS IN REPAYMENT ► Defaults in SLM Private Credit ABS Trusts increase as loans first enter repayment, then diminish steadily over time Expected Loss Emergence Timing 97% 98% 99% 100% 100.0% 95% 92% 89% 84% 80.0% 76% 66% Percent of Total Defaults 60.0% 55%
Slide 74: Private Credit Trust Default Emergence by Payments Made
PRIVATE CREDIT TRUST DEFAULT EMERGENCE BY PAYMENTS MADE ► The probability of default substantially diminishes as the number of payments made increases Expected Loss Emergence Timing 100% 100% 98% 99% 99% 100% 100% 100.0% 96% 94% 90% 86% 79% 80.0% 69% Percent of Total Defaults 60.0% 55% 40.0% 30% 30%
Slide 75: SLM Private Education Loan Gross Defaults
SLM PRIVATE EDUCATION LOAN GROSS DEFAULTS ACTUAL-TO-DATE Actual-to-Date Cumulative Gross Defaults, including Bankruptcy Information All Trust Loans 18.0% 16.0% 14.0% Percent of Original Pool Balance 12.0% Bankruptcy or death - other (3) Bankruptcy or death - now current or paid off (2) 10.0% Gross P
Slide 76: SLM Private Credit Gross Defaults
SLM PRIVATE CREDIT GROSS DEFAULTS CONSTRAINING RATING AGENCY STRESS LEVELS AT ISSUANCE Constraining Rating Agency Stress Levels at Issuance for 'AAA’ 80.0% 70.0% 60.0% 54.8% Percent of Original Pool Balance 50.0% 46.5% 45.4% 44.4% 40.0% 36.6% 33.8% 29.4% 30.0% 27.2% 27.1% 27.7% 27.7% 27.6% 26.0% 25.
Slide 77: Private Credit ABS Trusts Forbearance
PRIVATE CREDIT ABS TRUSTS FORBEARANCE ► Forbearance usage is typically highest when loans enter repayment, and declines as loans season ► Use of forbearance as a collection tool peaked in early 2008, and has since declined, as a result of changes in the forbearance strategy ► The decline in forbeara
Slide 78: Private Credit ABS Trusts – 31-60 Day Delinquencies
PRIVATE CREDIT ABS TRUSTS – 31-60 DAY DELINQUENCIES ► Early delinquencies increased as forbearance policies tightened and have recently declined 31-60 Day Delinquencies as a Percent of Loans in Repayment All Loans in SLM Trusts by Year of Issuance 5.0% Percent of Rpmt Balance 4.0% 3.0% 2.0% 1.0% 0.0
Slide 79: Private Credit ABS Trusts – 61-90 Day Delinquencies
79 Percent of Rpmt Balance Percent of Rpmt Balance No 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% v- 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 02 1 Fe b- 03 2 M ay -0 3 3 Au g- 03 4 No v- 03 5 Fe b- 04 6 M ay -0 4 7 Au g- 04 8 61-90 DAY DELINQUENCIES No v- 2002 04 9 Fe b- 10 05 M ay -0 11 5 2003 Au g- 12 05 No v- 13 05 2004
Slide 80: Private Credit ABS Trusts – 90+ Day Delinquencies
PRIVATE CREDIT ABS TRUSTS - 90+ DAY DELINQUENCIES ► As expected, later stage delinquency has increased due to tightening of Forbearance and the current economic environment 90+ Day Delinquencies as a Percent of Loans in Repayment All Loans in SLM Trusts by Year of Issuance 8.0% Percent of Rpmt Balan
Slide 81: Private Credit ABS Trusts – Annualized Gross Charge-Offs
PRIVATE CREDIT ABS TRUSTS - ANNUALIZED GROSS CHARGE-OFFS ► Charge-off levels first increased in 2007 and have remained elevated through the economic downturn ► As is typical, more recent Trusts with a greater percentage of borrowers first entering repayment continue to exhibit higher charge-offs Ann
Slide 82: Private Credit ABS Trusts – Historical Cumulative Gross Charge-Offs
PRIVATE CREDIT ABS TRUSTS - HISTORICAL CUMULATIVE GROSS CHARGE-OFFS(1) Cumulative Gross Charge-Offs as a Percent of Original Pool Balance All Loans in SLM Trusts by Year of Issuance Percent of Original Pool Balance 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Au 3 Au 4 Au 5 Au 6 Au 7 Au 8 Au 9 Fe 2 N
Slide 83: SLM Private Credit ABS Trusts – Prepayment Analysis
SLM PRIVATE CREDIT ABS TRUSTS - PREPAYMENT ANALYSIS ► Constant prepayment rates increased in 2007 due to the introduction of Private Credit Consolidation loans, but then declined accordingly following SLM‟s decision to suspend its consolidation loan program Historical SLM Private Credit ABS CPRs 15.
Slide 84: Appendix
Dream. Invest. Succeed: APPENDIX 84
Slide 85: GAAP to Core Earnings Reconciliation
GAAP TO CORE EARNINGS RECONCILIATION ($ in thousands, except per share amounts) Quarters Ended September 30, 2009 September 30, 2008 Dollars Diluted EPS Dollars Diluted EPS GAAP net income (loss) attributable to SLM Corporation $ 159,110 $ 0.25 $ (158,541) $ (0.40) Adjustment from GAAP to "Core Earn
Slide 86: Additional Information Available at www.salliemae.com
ADDITIONAL INFORMATION AVAILABLE AT WWW.SALLIEMAE.COM 86
Slide 87: Debt Investor Relations Contact Information
DEBT INVESTOR RELATIONS CONTACT INFORMATION Kenneth Fischbach Senior Vice President Corporate Finance Sallie Mae, Inc. 12061 Bluemont Way Reston, VA 20190 703-984-6310 kenneth.fischbach@salliemae.com 87