Slide 1: ABS Investor Presentation
SALLIE MAE ABS Investor Presentation August 2015
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 August 24, 2015 (unless otherwise noted) and should be read in connection with the press release of SLM Corporation (the “Company”) announcing its financial resul
Slide 3: Sallie Mae Bank
Sallie Mae Bank 3
Slide 4: The Sallie Mae Brand
The Sallie Mae Brand ► #1 saving, planning and paying for education company with 40-years of leadership in the education lending market ► Top ranked brand: 6 out of 10 consumers of education finance recognize the Sallie Mae brand ► Industry leading market share in private education lending: 54% mark
Slide 5: Sallie Mae Summary
Sallie Mae Summary - Leading private education Private Education Loan - loan franchise Originator and Servicer - Conservative credit and Deposits - funding Upromise Rewards - - Expanding consumer Credit Card - finance product suite Strategic Key Overview Businesses - National sales and ($B as of 6/3
Slide 6: Sallie Mae Highlights
Sallie Mae Highlights ► Over one year since legal separation from Navient on April 30, 2014 ► Completed the roll out of independent servicing and customer support capabilities October 13, 2014 ► Generated Earnings of $91 million in Q2 2015 and $139 million YTD ► Originated $4.1 billion of high quali
Slide 7: Sallie Mae's Smart Option Loan Product Overview
Sallie Mae’s Smart Option Loan Product Overview The Smart Option loan product was introduced by Smart Option Loan Program Sallie Mae in 2009 Origination Channel School Typical Borrower Student The Smart Option loan program consists of: Typical Co-signer Parent $10,000 avg orig bal, 5 to 15 yr te
Slide 8: High Quality Private Student Loan Originations Growth
High Quality Private Student Loan Originations Growth $5,000 $4,500 $4,300 $4,076 5% $4,000 $3,795 7% $3,500 $3,342 14% Originations ($MM) $3,000 $2,737 22% $2,500 $2,047 $1,902 YTD $2,000 8% $1,500 $1,000 $500 $0 2011 2012 2013 2014 2015 Private Education Loan Originations Originations Statistics (
Slide 9: High Quality Private Education Loan Portfolio
High Quality Private Education Loan Portfolio Customer FICO at Origination Smart Option Payment Type <700 Interest 21% 780+ Only 30% 21% Deferred 700 - 740 47% Fixed Pay 26% 740 - 780 32% 23% Weighted Average FICO: 746 Smart Option Loans: $8.9bn Portfolio by Originations Vintage Portfolio Interest R
Slide 10: Conservative Funding Approach
Conservative Funding Approach ► Low cost deposit base with no branch overhead — 90% of retail deposits are savings accounts 2014 Target — Brokered deposits used as alternative funding source ► Term funding / securitizations will augment deposit Retail deposits funding for future growth Brokered depo
Slide 11: Sallie Mae Bank vs. Legacy SLM Private Education Loan ABS Summary
Sallie Mae Bank vs. Legacy SLM Private Education Loan ABS Summary Legacy SLM Navient Sallie Mae Bank 11-A 11-B 11-C 12-A 12-B 12-C 12-D 12-E 13-A 13-B 13-C 14-A 14-A 15-A 15-B 14-A 15-A 15-B Total Bond Amount ($mil) 562 825 721 547 891 1,135 640 976 1,108 1,135 624 676 664 689 700 382 704 714 Initia
Slide 12: ABS Structures
Sallie Mae Bank ABS Structures SMB 2015-B SMB 2015-A Size $630.80MM(1) $704MM Pricing Date July 23, 2015 April 15, 2015 Smart Option Smart Option Collateral Private Education Loans Private Education Loans Servicer Sallie Mae Bank Sallie Mae Bank Overcollateralization (2) 13% 13% Prepayment Speed (3)
Slide 13: Private Education Loan Market Background
Private Education Loan Market Background 13
Slide 14: Higher Education Value Proposition
Higher Education Value Proposition Relationship Between Higher Education, Incremental Earnings From a College Income and Employment(1) Degree Has Increased For Generations(2) Payment to Income Ratio(4) 1,800 12% 1,600 Average weekly income $ 17,500 Unemployment 10% $ 15,780 1,400 $ 14,245 1,200 8% 1
Slide 15: Favorable Student Loan Market Trends
Favorable Student Loan Market Trends Enrollment at Four-Year Degree Granting Institutions(1) Annual Cost of Education(2) Public Private (millions) (thousands) $41 $42 $38 $39 13.5 13.5 13.7 $35 $36 13.3 $32 $34 12.9 $29 $30 12.1 $19 $16 $17 $18 $18 $13 $14 $14 $15 $12 2008 2009 2010 2011 2012 2013 2
Slide 16: Smart Option Private Education Loans
Sallie Mae Bank Smart Option Private Education Loans FFELP vs. Sallie Mae Bank Smart Option Private Education Loan Comparison Sallie Mae Bank Smart Option FFELP Stafford Loans Private Education Loans(1) Borrower Student Student or Parent Co-signer None Typically a parent Lender Eligible banks and pr
Slide 17: Collections, Charge-off and Recovery Policy
Collections, Charge-off and Recovery Policy 17
Slide 18: Servicing Policy
Sallie Mae Bank Servicing Policy Policy Pre-Spin, Legacy SLM Serviced Post-Spin, Sallie Mae Bank Serviced(1) 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 empha
Slide 19: 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 20: Post-Default Recoveries
Post-Default Recoveries Recovery Operations ► In the near term, Sallie Mae Bank plans to sell the majority of the charged-off loans to third parties following charge-off at 120+ days past due – Recoveries realized immediately – Practical and predictable economics – Manageable compliance and vendor o
Slide 21: Historical Smart Option Loan Performance
Historical Smart Option Loan Performance 21
Slide 22: 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 23: Important Information Regarding Historical Loan Performance Data (cont.)
Important Information Regarding Historical Loan Performance Data (cont.) Types of Smart Option 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 Sallie Mae Ba
Slide 24: Smart Option Vintage Data: Cumulative Gross Default by Loan Type
Smart Option Vintage Data: Cumulative Gross Default by Loan Type Smart Option Student Loans - Serviced Portfolio: All Products Smart Option Student Loans - Serviced Portfolio: Interest Only Cumulative Defaults by P&I Repayment Vintage Cumulative Defaults by P&I Repayment Vintage and Years in P&I Rep
Slide 25: Smart Option Serviced Portfolio: 31-60 Day Delinquencies
Smart Option Serviced Portfolio: 31-60 Day Delinquencies Smart Option Student Loans - Serviced Portfolio Smart Option Student Loans - Serviced Portfolio 31-60 Day Delinquencies as a % of Loans in P&I Repayment (1) 31-60 Day Delinquencies as a % of Loans in P&I Repayment (1) Data for Legacy SLM thru
Slide 26: Smart Option Serviced Portfolio: 61-90 Day Delinquencies
Smart Option Serviced Portfolio: 61-90 Day Delinquencies Smart Option Student Loans - Serviced Portfolio Smart Option Student Loans - Serviced Portfolio 61-90 Day Delinquencies as a % of Loans in P&I Repayment (1) 61-90 Day Delinquencies as a % of Loans in P&I Repayment (1) Data for Legacy SLM thru
Slide 27: Smart Option Serviced Portfolio: 91+ Day Delinquencies
Smart Option Serviced Portfolio: 91+ Day Delinquencies Smart Option Student Loans - Serviced Portfolio Smart Option Student Loans - Serviced Portfolio 91+ Day Delinquencies as a % of Loans in P&I Repayment (1) 91+ Day Delinquencies as a % of Loans in P&I Repayment (1) Data for Legacy SLM thru April
Slide 28: Smart Option Serviced Portfolio: Forbearance
Smart Option Serviced Portfolio: Forbearance Smart Option Student Loans - Serviced Portfolio Smart Option Student Loans - Serviced Portfolio Forbearance as a % of Loans in P&I Repayment and Forbearance (1), (2) Forbearance as a % of Loans in P&I Repayment and Forbearance (1), (2) Data for Legacy SLM
Slide 29: Smart Option Serviced Portfolio: Annualized Gross Defaults
Smart Option Serviced Portfolio: Annualized Gross Defaults Smart Option Student Loans - Serviced Portfolio Smart Option Student Loans - Serviced Portfolio Annualized Gross Defaults as a % of Loans in P&I Repayment(1) Annualized Gross Defaults as a % of Loans in P&I Repayment(1) Data for Legacy SLM t
Slide 30: Smart Option Vintage Data: Voluntary Prepayments
Smart Option Vintage Data: Voluntary Prepayments ► Following the first year after disbursement, voluntary prepayments have generally ranged from between 2-3% for the Smart Option Deferred loan product, to 5-6% for the Interest Only product Smart Option Student Loans - Serviced Portfolio Smart Option
Slide 31: Smart Option Vintage Data: Total Prepayments
Smart Option Vintage Data: Total Prepayments ► Following the first year after disbursement, total prepayments have generally ranged around 4% Smart Option Student Loans - Serviced Portfolio Smart Option Student Loans - Serviced Portfolio Total CPR by Origination Vintage (1) Total CPR by Origination
Slide 32: Smart Option: Cumulative Recoveries
Smart Option: Cumulative Recoveries ► Recoveries of charged-off Smart Option Student Loans® historically have occurred over a longer period than for many other types of unsecured consumer credit Smart Option Loan Cumulative Recovery Rate Smart Option Loan Cumulative Recovery Rate For Charge-Off Vint
Slide 33: Cohort Default Triangles
Cohort Default Triangles 33
Slide 34: Smart Option Loan Program Cohort Default Triangles
Smart Option Loan Program Cohort Default Triangles The following cohort default triangles provide loan performance information for Legacy SLM, Navient and Sallie Mae Bank serviced Smart Option loans combined, thru the most recent period indicated (1) Terms and calculations used in the cohort def
Slide 35: Cohort Default Triangles – Smart Option Combined (IO, Fixed & Deferred)
Cohort Default Triangles – Smart Option Combined (IO, Fixed & Deferred) Smart Option Combined (P&I Repayment Status - Total) P&I Disbursed Principal Periodic Defaults by Years in P&I Repayment (1), (2), (3) Repayment Entering P&I Year Repayment ($m) 0 1 2 3 4 5 Total 2010 $440 1.0% 1.2% 1.1% 1.0% 0.
Slide 36: Cohort Default Triangles – Smart Option Interest Only
Cohort Default Triangles – Smart Option Interest Only Smart Option IO (P&I Repayment Status - Total) P&I Disbursed Principal Periodic Defaults by Years in P&I Repayment (1), (2), (3) Repayment Entering P&I Year Repayment ($m) 0 1 2 3 4 5 Total 2010 $439 1.1% 1.2% 1.1% 1.0% 0.9% 0.4% 5.7% 2011 $785 0
Slide 37: Cohort Default Triangles – Smart Option Fixed Payment
Cohort Default Triangles – Smart Option Fixed Payment Smart Option Fixed Payment (P&I Repayment Status - Total) P&I Disbursed Principal Repayment Entering Periodic Defaults by Years in P&I Repayment (1), (2), (3) Year P&I Repayment ($m) 0 1 2 3 4 Total 2011 $230 0.3% 1.2% 1.5% 1.4% 0.9% 5.3% 2012 $5
Slide 38: Cohort Default Triangles – Smart Option Deferred Payment
Cohort Default Triangles – Smart Option Deferred Payment Smart Option Deferred (P&I Repayment Status - Total) Disbursed Principal P&I Repayment Entering P&I Periodic Defaults by Years in P&I Repayment (1), (2),(3) Year Repayment ($m) 0 1 2 3 Total 2012 $253 0.0% 1.2% 1.4% 1.2% 3.9% 2013 $657 0.0% 1.