Slm Corporation · NASDAQ:SLM
Slm — Q2 2020 Earnings Presentation
25 slides from Slm's earnings presentation, Jul 22, 2020
Slide 1: Investor Presentation Third Quarter 2020
Investor Presentation Third Quarter 2020 Confidential and proprietary information. © 2020 Sallie Mae Bank. All rights reserved.
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 July 22, 2020 (unless otherwise noted) and should be read in connection with the press release of SLM Corporation (the “Company”) announcing its financial results
Slide 3: Overview
Overview Track Record of Long-Term Success and Value Creation Commitment to Supporting Stakeholders During COVID-19 Robust Financial Profile with Ample Capital and Liquidity Conservative Underwriting has Contributed to Consistent Credit Performance Diverse Student Loan Portfolio Driving Increased Sh
Slide 4: Well-Positioned for Long-Term Success and Value Creation
Well-Positioned for Long-Term Success and Value Creation MARKET LEADING ATTRACTIVE EXCEPTIONAL STRONG BRAND PRODUCTS SERVICE FINANCIAL PROFILE • Leader of the education • Products designed to • Largest salesforce in the • Robust financial profile finance market provide customers industry with ample
Slide 5: Higher Education Value Proposition Remains Attractive
Higher Education Value Proposition Remains Attractive20 Expanding Addressable Market Other • Private Education Loans represent 2-3% $17 Federal of the overall spend in higher education Loans annually $93 Grants • Total spend on higher education grows 2- $136 Private Education 3% annually primarily d
Slide 6: COVID-19 Effects on our Business
COVID-19 Effects on our Business18 Return to School • 78% of our top schools have announced plans for the 2020/2021 Academic Year2 • 40% on campus, 4% remote, and 56% hybrid programs to be utilized2 Originations • Full-year impact of COVID-19 expected to reduce 2020 originations by $700 million - $1
Slide 7: Robust Financial Profile with Ample Capital and Liquidity
Robust Financial Profile with Ample Capital and Liquidity 2020 Actions to Optimize Liquidity Position $19.8B Private Education Loans $636M Completed ABS transaction 13.7% Total Risk-Based Capital Ratio $2B Upsized secured borrowing facility 12.4% Common Equity Tier 1 Risk-Based Capital Ratio $3.1B 2
Slide 8: Committed to Returning Significant Capital to Shareholders
Committed to Returning Significant Capital to Shareholders18 INVEST IN HIGH ROE GROWTH • Continue to focus on high-quality Private Education Loan originations, including deeper penetration of graduate school market • Offer credit cards to high-quality customer base INCREASED QUARTERLY COMMON STOCK D
Slide 9: High Quality, Predictable Credit Program
High Quality, Predictable Credit Program Designed a program in 2009 to Private Education Loans, Annualized % sustain challenging environments • During 2008 financial crisis, SLM had peak of 2.7% Net Charge-Off Rate on loans with 12.1 similar characteristics 10.1 • Through-the-cycle data used to deve
Slide 10: High Quality Private Education Loan Portfolio
High Quality Private Education Loan Portfolio Customer FICO at Original Approval5 Smart Option Payment Type <700 780+ Interest 23% 28% Only 21% Deferred 48% 700 - 740 27% 740 - 780 22% Fixed Pay 31% Weighted Average FICO: 743 Smart Option Loans: $19.6 billion Portfolio by Originations Vintage4 Portf
Slide 11: Conservative Funding Optimizes Net Interest Margin
Conservative Funding Optimizes Net Interest Margin Secured Debt 16% Retail MMDA & CD 23% Brokered $12.8b Retail $10.8b Secured Debt $4.3b Retail Brokered H.S.A. & 529 Variable 16% 35% Brokered Fixed 10% Consistent underwriting over the last 11 years will strengthen future portfolio performance 11 As
Slide 12: Diverse Student Loan Portfolio Driving Increased Shareholder Value
Diverse Student Loan Portfolio Driving Increased Shareholder Value Undergraduate Graduate Parent RATE TYPE Variable & Fixed Variable & Fixed Variable & Fixed Medical Health Dental Variable: LIBOR + Variable: LIBOR + Variable: LIBOR + Professions 1.250% - LIBOR + 2.250% - LIBOR + 3.500% - LIBOR + INT
Slide 13: Sallie Mae is an ESG Company
Sallie Mae is an ESG Company Providing Financial Education Serving our Customers & Assistance • Financing assistance to 1.2 million families since 2014 to provide • Free Scholarship Search tool with 5 million scholarships worth access to postsecondary education and opportunities for success more tha
Slide 14: ABS Supplement
sallie ABS Supplement
Slide 15: Sallie Mae's Smart Option Loan Product Overview
Sallie Mae’s Smart Option Loan Product Overview The Smart Option loan product was introduced by Sallie Mae in 2009 • Smart Option payment option may not be The Smart Option loan program changed after selected at origination consists of: • Fixed-rate loans or variable-rate loans indexed to LIBOR • Co
Slide 16: Sallie Mae Bank ABS Summary
Sallie Mae Bank ABS Summary 14-A 15-A 15-B 15-C 16-A 16-B 16-C 17-A 17-B 18-A 18-B 18-C 19-A 19-B 20-A Issuance Date 8/7/2014 4/23/2015 7/30/2015 10/27/2015 5/26/2016 7/21/2016 10/12/2016 2/8/2017 11/8/2017 3/21/2018 6/20/2018 9/19/2018 3/13/2019 6/12/2019 2/12/2020 Total Bond Amount ($mil) $382 $70
Slide 17: Sallie Mae Bank ABS Structures
Sallie Mae Bank ABS Structures SMB 2020-A SMB 2019-B SMB 2019-A SIZE $636.0MM $657.0MM $453.0MM PRICING DATE February 4, 2020 June 4, 2019 March 5, 2019 Smart Option Smart Option Smart Option COLLATERAL Private Education Loans Private Education Loans Private Education Loans SERVICER Sallie Mae Bank
Slide 18: Appendix
sallie mae’ Appendix
Slide 19: Accelerated Share Repurchase ("ASR") Agreement
Accelerated Share Repurchase (“ASR”) Agreement Sallie Mae entered into a $525 million Accelerated Share Repurchase Agreement in March 2020 • Under this agreement, Sallie Mae receives shares at the beginning and the end of the agreement, optimizing the accretive impact of the agreement. • The counter
Slide 20: Commitments vs Disbursements
Commitments vs Disbursements 2019 Actuals Commitments vs Disbursements 52% 38% 40% 22% 13% 14% 13% 9% Q1 2019 Q2 2019 Q3 2019 Q4 2019 Commitments Disbursements Provision for New Loans Additional Provision Impacts Unfunded Commitments • Directly impacted by the timing of • New Loans, DCF accretion, l
Slide 21: CECL Update
CECL Update18 Adopted on January 1, 2020. • The company’s first-quarter 2020 financial results reflect a transition adjustment that increased the allowance for loan losses by $1.1 billion, increased the liability representing its off-balance sheet exposure for unfunded commitments by $116 million, a
Slide 22: Quarterly Financial Highlights
Quarterly Financial Highlights 2Q 1Q 2Q 2Q 1Q 2Q 2020 2020 2019 2020 2020 2019 Income Statement ($ Millions) Key Performance Metrics Total interest income $485 $575 $574 Net Interest Margin 4.55% 5.08% 5.88% Total interest expense 136 175 177 Net Interest Income 349 400 397 Yield—Total Interest-earn
Slide 23: Sallie Mae vs Federal Student Loans
Sallie Mae vs Federal Student Loans 23
Slide 24: "Core Earnings" to GAAP Reconciliation
“Core Earnings” to GAAP Reconciliation Quarters Ended June 30, 2020 March 31, 2020 June 30, 2019 Dollars in thousands, except per share amounts “Core Earnings” adjustments to GAAP: GAAP net income (loss) ($85,211) $362,173 $150,277 Preferred stock dividends $2,478 $3,464 $4,331 GAAP net income (loss
Slide 25: Footnotes
Footnotes 1. Source: MeasureOne CBA Report as of March 2020. 2. Based on internal Company statistics. 3. Source: Trends in Student Aid,© 2019 The College Board, www.collegeboard.org, U.S. Department of Education 2019. 4. Originations represent loans that were funded or acquired during the period pre
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