Slm Corporation · NASDAQ:SLM
Slm — IPO Roadshow (November 2010)
83 slides from Slm's IPO roadshow presentation, Nov 10, 2010
Slide 1: SLM Corporation Q3 2010 Investor Presentation
SLM Corporation Q3 2010 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 presentation. Statements that are not historical facts, including statements about our beliefs or expectations and statements that assume
Slide 3: SLM Corporation Overview
SLM Corporation Overview
Slide 4: SLM Corporation
SLM Corporation #1 saving and paying for college company with 40-years of leadership in the education lending market #1 servicer and collector of student loans in the U.S. currently servicing $202 billion in education loans, $27 billion for third parties, including $22 billion for the Department of
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 $182 billion at 9/30/2010 Originated $853 million in federal student loans in Q3 2010 Originated $835 million private education loans in Q3 2010 Announced an agreement to acquire $28 billion of securitized FFELP loans from STU, a
Slide 7: 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 Moody's S & P Fitch Long-Term Ba1 BBB- BBB- Short-Term Not-Prime A-3 F3 Outlook Neg. Neg. Stab
Slide 8: Q310 "Core Earnings" Summary
8 Q310 "Core Earnings" Summary
Slide 9: SLM Services Fee Income
SLM Services Fee Income Loan Servicing including ED Servicing Contract Largest collector of defaulted FFELP loans Collecting on behalf of ED for close to ten years Largest administrator of 529 plans Guarantor Servicing for student loans Tuition payment plans and other processing services for college
Slide 10: Lending Segment Earnings Detail
10 Lending Segment Earnings Detail
Slide 11: Three Distinct Aspects of the Business Model
SLM Corporation Three Distinct Aspects of the Business Model FFELP Loan Portfolio and Guarantor Collection and Servicing Existing portfolios generating substantial income and cash flow Servicing cash flows are super senior, residuals stable due to minimal credit risk Cash flow enhances the ability t
Slide 12: Federal Student Loan Market Outstanding
Federal Student Loan Market Outstanding Government Student Loan Market Distribution FFYE 9/30/2009 Market Distribution FFYE 9/30/2009 Market Distribution FFYE 9/30/2009 Top 10 Holders of FFELP Loans FFYE 9/30/09 FFYE 9/30/09 FFYE 9/30/09 Sources: US Department of Education Report 4/2010, Federal Bud
Slide 13: Office of the Chief Executive Officer
Office of the Chief Executive Officer Al Lord, Chief Executive Officer Jack Hewes, Sr. EVP & Chief Lending Officer Jim Truitt, SVP & Chief Compliance Officer David West, SVP & Chief Credit Officer Jack Remondi, Vice Chair & Chief Financial Officer Kara West, VP Risk Assessment Mark Heleen, EVP & Gen
Slide 14: The U.S. Student Loan Market
The U.S. Student Loan Market SLM Corporation
Slide 15: Favorable Student Loan Market Trends
Favorable Student Loan Market Trends Source: College Board Note: Academic years, average published tuition, fees, room and board charges at four-year institutions; enrollment-weighted (CHART) Higher Education Enrollment (millions) Source: National Center for Education Statistics Note: Total enrollme
Slide 16: College Grads Experience Lower Levels of Unemployment
College Grads Experience Lower Levels of Unemployment Source: U.S. Department of Labor, Bureau of Labor Statistics as of 9/30/2010 16 (CHART)
Slide 17: Private Education Loan Originations
17 Private Education Loans declined as result of an increase in federal student loan limits, an overall increase in the use of federal student loans as well as an increase in federal grants. Private Education Loan Originations Private Education Loan Originations
Slide 18: 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 19: SLM's Private Education Loan Portfolio
SLM's Private Education Loan Portfolio Private Education Loan Portfolio Characteristics $35.5 billion of managed outstandings at 9/30/2010 20% of SLM's managed student loan portfolio Risk-based pricing Approximately 59% of portfolio has a cosigner, typically a parent Higher education loans typically
Slide 20: SLM's New Private Education Loan Product: Smart Option
SLM's New Private Education Loan Product Smart Option Product - Launched 3/23/09 Requires interest only payment during in-school period with open option to pay P&I In school payments reduce the average life from 9.5 years to 5.5 years, reducing total interest paid Repayment term is driven by cumulat
Slide 21: SLM's New Private Education Loan Product: Fixed Pay
SLM's New Private Education Loan Product Fixed Pay Product - Launched 6/28/10 Another option for students and families who understand the value of making in-school payments but want more budgeting flexibility Requires $25.00 payments with the 1st payment beginning 30 days after disbursement Incents
Slide 22: Private Education Loan Market Opportunity
Private Education Loan Market Opportunity Private education loans help bridge the gap between funding available through ED programs and the increasing cost of education Higher education annual enrollment is 19 million students with an estimated total cost of $300 billion A 4% increase in the cost of
Slide 23: Private Credit Originations
Private Credit Originations 2009-10 academic year market share approximately 33% Source: College Board, Trends in Higher Education Series (2010). 2009-2010 industry data is preliminary. Data reported by academic year, SLM quarterly data converted to academic year basis. 23 (CHART)
Slide 24: Credit Quality
Credit Quality SLM Corporation
Slide 25: Loan Losses
Loan Losses Loan Losses Loan Losses (CHART) + = Private Education Loans(2) 20% U.S. Government Guaranteed Loans(2) 80% Charge-Offs (1) = 0.06% Charge-Offs (1) = 3.55% Total Charge-Offs (1) = 0.75% All data as of September 30, 2010. Annualized Managed FFELP charge-offs as a percentage of average Mana
Slide 26: FFELP Education Loan Portfolio
FFELP Education Loan Portfolio (1) "Core Earnings" FFELP Loan spread, before provision. Charge-offs as a percentage of average Managed FFELP Loans. 26 (CHART)
Slide 27: Private Education Loan Portfolio
Private Education Loan Portfolio (1) "Core Earnings" Private Education Loan spread, before provision. Charge-offs as a percentage of average Managed Private Education Loans in repayment. 27 (CHART)
Slide 28: SLM Private Credit Default Emergence Profile
SLM Private Credit Default Emergence Profile Payments Made (CHART) 28 1 Excludes Sallie Mae Smart Option, LAW, MED, MBA, & bar-study/residency loans
Slide 29: Charge-offs driven by Non-Traditional loans
Charge-offs driven by Non-Traditional loans Non-Traditional loans represent approximately 11% of the Private Education Loan portfolio but nearly 35% of charge-offs Charge-off Trends Mix of Traditional vs. Non-Traditional 29 (CHART) (CHART)
Slide 30: Managed Private Education Loan Portfolio Performance
30 Managed Private Education Loan Portfolio Performance (1) Charge-offs as a percentage of average loans in repayment annualized for the quarters presented Traditional Loans with a Cosigner Q310 Q210 Q110 Q409 Q309 Outstanding Balance as a % of Total 56% 55% 55% 54% 53% 90+ Delinquency as a % of Rep
Slide 31: Managed Private Education Loan Portfolio Performance
31 (1) Charge-offs as a percentage of average loans in repayment annualized for the quarters presented Managed Private Education Loan Portfolio Performance
Slide 32: Improving Portfolio Quality
Improving Portfolio Quality 32 * Projected Year Entering Repayment % Traditional % Cosigned Avg FICO Score at Origination 2006 83% 51% 709 2007 84% 54% 712 2008 86% 55% 711 2009 90% 65% 722 2010* 93% 69% 724 Higher quality loans entering repayment Loans with higher FICO scores and cosigners continue
Slide 33: Portfolio Quality Improving
Portfolio Quality Improving Non-Traditional charge-off rate is 4-5x greater than Traditional 92% of Q310 loan originations had cosigners, up from 88% in Q309. Non-cosigned loans charge off at more than twice the rate of cosigned loans Note: Amounts in years 2011-2015+ are projected Amounts shown abo
Slide 34: Private Loan Repayment Cycle
Private Loan Repayment Cycle 34 Major Repayment Wave occurs in the fourth quarter Early stage delinquencies follow in Q1 and decline in Q2 and Q3 Mid stage delinquencies follow in Q2 Seasonally, charge-offs peak in Q3 (CHART)
Slide 35: Loan Seasoning
35 Loan Seasoning The following tables demonstrate improved borrower performance as loans season 80% of loans that charge off make fewer than 12 payments "At risk" segment of portfolio is represented by severely delinquent segment of portfolio in 1-12 scheduled payment status Significant improvement
Slide 36: Quarterly Loan Seasoning
Quarterly Loan Seasoning 36
Slide 37: Quarterly Loan Seasoning
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Slide 38: Quarterly Loan Seasoning
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Slide 39: Private Education Loan Portfolio Performance
Private Education Loan Portfolio Performance Changes in SLM's forbearance policies and the economic downturn have adversely impacted the performance of our Managed Private Education Loan portfolio including accelerating the timing of charge-offs Delinquency trends have improved, as the impact of for
Slide 40: Servicing: A Competitive Advantage
Servicing: A Competitive Advantage SLM Corporation
Slide 41: SLM Servicing
SLM Servicing #1 servicer and collector of student loans in the U.S. currently servicing $202 billion in assets including $47 billion for third parties Includes $20 billion of FFELP assets sold to ED on October 11 SLM serves 10 million student and parent customers Awarded ED servicing contract in Ju
Slide 42: SLM's Competitive Advantage
SLM's Competitive Advantage SLM has a distinct competitive advantage in all facets of the education loan market. Best in Class Vertically Integrated Origination/ Servicing/Collections Strongest National Brand in Education with Consumers and Schools State-of-the-Art Loan Delivery Platform Largest & M
Slide 43: Operations locations
Operations locations 43 Fishers, Muncie, IN Collections Information Technology Servicing Fulfillment Reston, VA Finance Legal Information Technology Lynn Haven, FL Originations Call Center New York State Arcade, Perry, Horseheads, Collections Cincinnati, OH (GRC) Collections Niles, IL (AFS) Collecti
Slide 44: Funding Diversity and Liquidity
Funding Diversity and Liquidity SLM Corporation
Slide 45: Q310 Capital Markets Summary
45 Q310 Capital Markets Summary Repurchased $882 million of debt realizing a gain of $18 million Issued $760 million of FFELP ABS Issued $2.6 billion of Private Credit ABS ABCP borrowings reduced to $6.0 billion Straight "A "conduit program funding $15.2 billion of loans Additional $10 billion to be
Slide 46: Liquidity Position Detail
Liquidity Position Detail In addition to the above, SLM maintains a $10 billion facility with the FHLB to facilitate the financing of FFELP collateral. Availability under this line in contingent on pledging eligible collateral. SLM has $1.6 billion in unsecured revolving credit facilities. The Compa
Slide 47: Recent ABS Transactions
Recent ABS Transactions Recent ABS Transactions Transaction: Private Credit July 2010-B July 2010-C Issuance Size: $0.869 B $1.701 B Registration Type: 144A 144A Pricing: $303 M @ 1-mo LIBOR + 192Remainder funded at TRS facility $451 M @ 1-mo LIBOR + 165$209 M @ 1-mo LIBOR + 265Remainder funded at T
Slide 48: High Percentage of Student Loans Funded to Term
48 48 Employ conservative long-term funding model * Funded to Term includes 20% or $35.7 billion and 19% or $37.0 billion of student loans funded under the ED Purchase and Participation Program and Straight A Funding Facility as of September 30, 2010 and September 30, 2009, respectively. (CHART) Hig
Slide 49: Funding Distribution
Funding Distribution At Sept 30, 2010 total Managed borrowings were $194.4 billion 49 (CHART) *Other includes FHLB-DM facility borrowings, on-balance sheet indentured trusts, and other Managed borrowings as identified in the Q3 2010 SLM 10-Q.
Slide 50: SLM Asset-Backed Funding
SLM Asset-Backed Funding SLM ABS Term Issuance Volume Reported at quarter closing dates, net of paydowns. Balances inclusive of FFELP and legacy Private ABCP, legacy UBS Phoenix facility and FHLB Des Moines . 50 SLM Secured Funding
Slide 51: SLM Corporate Debt Activity
SLM Corporate Debt Activity SLM Corporate Debt Issuance Volume US$ equivalent at the time of issuance. (2) Face value amounts repurchased. SLM Corporate Debt Repurchases Note: Total may not foot due to rounding. 51
Slide 52: Unsecured Debt Maturities
UNSECURED DEBT MATURITIES $8 0 As of September 30, 2010 (par value, $ in billions) $7.1 $7.1 $5.4 $5.1 $4 4 $4.6 $6.6 $ 5.0 $6.0 $7.0 8.0 $2.3 $3.0 $1.2 $ 0.7 4.4 $2.1 $2.6 $2.0 $3.0 $4.0 $0.3 $0.2 $0.7 $0.2 $0.2 $0.0 $1.0 2010 2011 2012 2013 2014 2015 2016 2017 Debt Outstanding as of 1/1/2009 Unsec
Slide 53: Unencumbered Assets & Unsecured Debt
Unencumbered Assets & Unsecured Debt 53 * On 1/1/10 upon adopting ASC 810 the Retained Interests were removed from the consolidated balance sheet and the assets and liabilities of off-balance sheet ABS were consolidated onto the balance sheet. ** Amounts include loans, cash, and accrued interest rec
Slide 54: Secured Cash Flow
SECURED CASH FLOW YTD 2010 2009 2008 Servicing (Cash Paid) $ 402 $ 549 $ 525 Net Residual (Excess Distributions) 595 1 435 1 338 FFELP Term Securitized $ in Millions 1,435 1,338 Net Cash Flow 1,228 1,296 589 $ 2,225 $ 3,280 $ 2,452 Servicing (Cash Paid) $ 132 $ 130 $ 97 Other Secured FFELP Total FFE
Slide 55: Projected Cash Flows From FFELP Portfolio
Projected Cash Flows From FFELP Portfolio Assumptions CP/LIBOR = 10 basis points No Floor Income CPR/CDR = Stafford & Plus (7.0%), Consolidation (3.0%) Excel spreadsheet available upon request 55 ($ in Millions) Total Cash Flows from Projected Excess Spread = $9.0 Billion Total Cash Flows from Proje
Slide 56: Sallie Mae Bank
Sallie Mae Bank Bank charter Utah based ILC regulated by FDIC and Utah Department of Financial Institutions (UDFI) Charter granted October 2005 Current bank activity Originates Sallie Mae's private education loans Funded through affiliate and brokered deposits and a direct retail deposit program lau
Slide 57: Sallie Mae Bank - Capital & Deposits
Sallie Mae Bank - Capital & Deposits *Primarily affiliate deposits accounts with no stated maturities 57 Bank Deposits ($ millions) Bank Deposits ($ millions) Bank Deposits ($ millions) Bank Deposits ($ millions) Bank Deposits ($ millions) Bank Deposits ($ millions) Bank Deposits ($ millions) Sep 10
Slide 58: Risk-Adjusted Capitalization
Risk-Adjusted Capitalization SLM Corporation
Slide 59: Capitalization
Capitalization SLM Corp GAAP tangible stockholders' equity as a percentage of total Managed assets. Average GAAP tangible equity including preferred stock to charge-offs. SLM charge-offs based on total Managed loans, annualized. 59 Q3 10 Q2 10 Q1 10 2009 2008 Tangible Equity/Managed Assets(1) 2.0% 1
Slide 60: Capital Allocation
Capital Allocation 0.50% 8.00% SLM allocates capital internally based on the risk of the assets it supports SLM Corp Assets Capital Allocation As of Sept 30, 2010 0% - 25% Cash, Investments, Other Assets & Intangibles 12% of Total Managed Assets Private Education Loans 18% of Total Managed Assets Go
Slide 61: FFELP Appendix
FFELP Appendix SLM Corporation
Slide 62: SLM FFELP ABS Issue Characteristics
SLM FFELP ABS Issue Characteristics Historical issue size of $1.0B to $5.0(+)B Tranches denominated in US$ or Euros 'Aaa/AAA/AAA' rated senior tranches make up 97% of issue structure Floating rate tied to 1 mo./3 mo. LIBOR, with occasional fixed rate issuance Amortizing tranches, with 1 to 15(+) yea
Slide 63: SLM Stafford/PLUS ABS Trusts Prepayment Analysis
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 * Average CPR is the simple (non-weighted) average of four Quarterly CPR calcu
Slide 64: SLM Consolidation ABS Trusts Prepayment Analysis
SLM Consolidation ABS Trusts Prepayment Analysis Historical Consolidation ABS CPRs * Average CPR is the simple (non-weighted) average of four Quarterly CPR calculations for years ended June 30, 2010. Quarterly CPR assumes School and Grace loans are not scheduled to make payments. Deferment, Forbeara
Slide 65: Private Credit Appendix
Private Credit Appendix SLM Corporation
Slide 66: 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 Managed by individuals with prior experience in collections operations for consumer loan assets
Slide 67: Work Out Alternatives
Work Out Alternatives Forbearance A collections tool used to provide borrowers time to improve their ability to repay Between graduation and start of first job Temporary Economic hardship such as job loss Granted to current accounts for three month intervals, up to a maximum of 24 months Placing a l
Slide 68: Private Credit Trust Delinquency and Forbearance Seasoning Trends
Note: Based on historical data through September 30, 2010. Does not include data for 2010 trusts which have not had time to become 90 days delinquent Private Credit Trust Delinquency and Forbearance Seasoning Trends Delinquency and forbearance are highest when loans enter repayment, and diminish as
Slide 69: Private Credit Trust Default Emergence By Years in Repayment
Private Credit Trust Default Emergence By Years in Repayment Default Emergence By Years in Repayment Default Emergence By Years in Repayment Based on assumptions in effect as of September 30, 2010 Defaults in SLM Private Credit ABS Trusts increase as loans first enter repayment, then diminish steadi
Slide 70: Private Credit Trust Default Emergence By Payments Made
Private Credit Trust Default Emergence By Payments Made Default Emergence By Payments Made Default Emergence By Payments Made Based on assumptions in effect as of September 30, 2010 Excludes months in forbearance. Includes months of delinquency prior to chargeoff The probability of default substanti
Slide 71: SLM Private Education Loan Gross Defaults
SLM Private Education Loan Gross Defaults Actual-To-Date Actual-To-Date Actual-To-Date For SLM Private Education Loan Trusts issued prior to 2005-B, the servicer has the option, but not the obligation, to repurchase loans that (i) become 180+ days delinquent and/or (ii) have a borrower who filed for
Slide 72: SLM Private Credit Gross Defaults
SLM Private Credit Gross Defaults Constraining Rating Agency Stress Levels at Issuance As of September 30, 2010 (CHART) 72
Slide 73: 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 forbearance re
Slide 74: Private Credit ABS Trusts - 31-60 Day Delinquencies
Private Credit ABS Trusts - 31-60 Day Delinquencies 74 11/30/2002 2/28/2003 5/31/2003 8/31/2003 11/30/2003 2/29/2004 5/31/2004 8/31/2004 11/30/2004 2/28/2005 5/31/2005 8/31/2005 11/30/2005 2/28/2006 5/31/2006 8/31/2006 11/30/2006 2/28/2007 5/31/2007 8/31/2007 11/30/2007 2/29/2008 5/31/2008 8/31/2008
Slide 75: Private Credit ABS Trusts - 61-90 Day Delinquencies
Private Credit ABS Trusts - 61-90 Day Delinquencies 75 11/30/2002 2/28/2003 5/31/2003 8/31/2003 11/30/2003 2/29/2004 5/31/2004 8/31/2004 11/30/2004 2/28/2005 5/31/2005 8/31/2005 11/30/2005 2/28/2006 5/31/2006 8/31/2006 11/30/2006 2/28/2007 5/31/2007 8/31/2007 11/30/2007 2/29/2008 5/31/2008 8/31/2008
Slide 76: 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 76 11/30/2002 2/28/2003 5/31/2003 8/31/2003 11/30/2003 2/29/2004 5/31/2004 8/31/2004 11/30/2004 2/28/2005 5/31/2005 8/31/2005 11/
Slide 77: Private Credit ABS Trusts - Annualized Gross Charge-offs
Private Credit ABS Trusts - Annualized Gross Charge-offs (1) For SLM Private Credit Student Loan Trusts issued prior to 2005-B, the servicer has the option, but not the obligation, to repurchase loans that (i) become 180+ days delinquent and/or (ii) have a borrower who filed for bankruptcy or died .
Slide 78: Private Credit ABS Trusts - Historical Cumulative Gross Charge-Offs
Private Credit ABS Trusts - Historical Cumulative Gross Charge-Offs(1) (1) For SLM Private Credit Student Loan Trusts issued prior to 2005-B, the servicer has the option, but not the obligation, to repurchase loans that (i) become 180+ days delinquent and/or (ii) have a borrower who filed for bankru
Slide 79: SLM Private Credit ABS Trusts - Prepayment Analysis
SLM Private Credit ABS Trusts - Prepayment Analysis Historical SLM Private Credit ABS CPRs 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 11/30
Slide 80: SLM Appendix
SLM Appendix
Slide 81: GAAP to Core Earnings Reconciliation
GAAP to Core Earnings Reconciliation 81
Slide 82: Additional Information Available at www.salliemae.com
Additional Information Available at www.salliemae.com 82
Slide 83: Debt Investor Relations Contact Information
Debt Investor Relations Contact Information Debt Investor Relations Contact Information Debt Investor Relations Contact Information 83