Slm Corporation · NASDAQ:SLM
Slm — Investor Presentation (July 2019)
32 slides from Slm's investor presentation, Jul 24, 2019
Slide 1: Investor Presentation Third Quarter 2019
Sa | | le Investor Presentation Mae Third Quarter 2019
Slide 2: Cautionary Note Regarding Forward-Looking Statements
Cautionary Note Regarding Forward-Looking Statements The following information is current as of July 24, 2019 (unless otherwise noted) and should be read in connection with the press release of SLM Corporation (the “Company”) announcing its financial results for the quarter ended June 30, 2019, the
Slide 3: 40 years of leadership in the education lending market
• 40 years of leadership in the education lending market • Top ranked brand • Industry leading 55% market share1 • Over 2,400 actively managed university relationships across the U.S. • Appear on 98% of preferred lender lists • Largest salesforce in the industry 3
Slide 4: $441 Billion Annually
• Private education loans represent Other 2% of the overall spend in higher $18 education annually Federal Loans Private • Total spend on higher education $94 Education Loans grows 2-3% annually primarily due Grants $11 to increases in cost of attendance $129 $441 Billion • Attainment of a four-year
Slide 5: Unemployment rate for college graduates vs high school graduates
2 • The unemployment rate for individuals age 25-34 with four-year college degrees was 2.3%, compared to 5.8% for high school graduates4 • 59% of students graduated with student loans in AY 2016-20175 • Of the 59% of bachelor’s degree recipients who graduated with student loans, the average debt amo
Slide 6: Product suite tailored to undergraduate and graduate students
Product suite tailored to meet the needs of undergraduate and graduate students • Smart Option Student Loan • Introduced in 2009 • Flexible repayment options while in school • Fixed and Variable rates • Differentiated products for undergraduates and graduate students 6
Slide 7: Undergraduate, Medical, Law, Parent and other loan segments
Undergraduate Medical Law Parent Dental Health Professions MBA General Studies 7
Slide 8: Conservative underwriting has contributed to consistent credit performance
Conservative underwriting has contributed to consistent credit performance • Proprietary Scorecard built with Experian Decision Analytics • Initial credit screen removes applicants with low FICO scores or prior derogatory trades on file • Manually review ~8% of applications • Through-the-cycle data
Slide 9: Originations ($MM)
$6,000 $5,700 7% $5,500 $5,315 11% $5,000 $4,800 $4,666 3% 8% $4,500 $4,330 $4,000 Originations ($MM) $3,500 $3,000 $2,663 8% $2,500 $2,459 $2,000 $1,500 $1,000 $500 $0 2015 2016 2017 2018 2019 Actuals Forecast 9
Slide 10: Cumulative Defaults as a % of Disbursed Principal Entering P&I Repayment
Smart Option Cumulative Gross Defaults by P&I Repayment Vintage and Years Since First P&I Repayment Period 10% 9% 8% Disbursed Principal Entering P & I Repayment 7% Cumulative Defaults as a % of 6% 5% 5.2% 4% 3.6% 3% 2.4% 2% 1% 0.8% 0% 0 1 2 3 4 5 6 7 8 Years Since First P&I Repayment Period 2010 20
Slide 11: Private Education Loan credit quality as of 6/30/19
YTD as of 6/30/19: • 78% of Private Education Loans have FICO score at approval > 7007 • 52% of Private Education Loan Borrowers make payments while in school • 62% of Private Education Loans are variable-rate, 38% fixed-rate 11
Slide 12: Funding sources: Brokered, Retail, Secured Debt
Secured Debt Retail 19% MMDA & CD 22% Brokered $11.8b Retail $9.4b Brokered Variable Secured Debt $4.7b Retail 18% H.S.A. & 529 15% Brokered Fixed 26% As of 6/30/19 12
Slide 13: Customer FICO and Smart Option portfolio composition
Customer FICO at Original Approval7 Smart Option Payment Type <700 Interest Only 22% 780+ 21% 28% Deferred 700 - 740 48% 27% 740 - 780 Fixed Pay 23% 31% Weighted Average FICO: 744 Smart Option Loans: $20.6 billion Portfolio by Originations Vintage Portfolio Interest Rate Type 2019 Pre 2012 5% 2% 201
Slide 14: Earnings growth, high ROE, stable net interest margin
• Consistent earnings per share growth • High return on equity • Stable net interest margin • Introducing capital return programs 14
Slide 15: Capital allocation: Quarterly Dividend, Growth, Share Repurchases
Invest in High ROE Growth Continue to focus on high-quality Private Education Loan originations, including deeper penetration of the graduate school market Testing Personal Loan market Quarterly Dividend Offer credit cards to our high-quality customer base Invest in Share High ROE Repurchases Quarte
Slide 16: CECL impairment standard impact
• The Financial Accounting Standards Board’s (FASB) Current Expected Credit Loss impairment standard will require “life of loan” estimates of losses to be recorded at origination and will become effective for us on January 1, 2020. • There will be an initial build of the loan loss allowance that wil
Slide 17: 2019 Targets and Long-Term Targets
2019 Targets Diluted “Core Earnings” Per Share18: $1.21 - $1.23 Private Education Loan Originations: $5.7 billion Non-GAAP Efficiency Ratio11: 35-36% Long-Term Targets Prudently grow balance sheet without sacrificing quality Continue to leverage operating platform and limit operating expense growth
Slide 18: ABS Supplement
sa I Se ABS Supplement
Slide 19: Smart Option loan program overview
• The Smart Option loan product was introduced by Sallie Mae in 2009 • The Smart Option loan program consists of: – Smart Option Interest Only loans - require full interest payments during in-school, grace, and deferment periods – Smart Option Fixed Pay loans - require $25 fixed payments during in-s
Slide 20: Sallie Mae Bank ABS Summary
Sallie Mae Bank ABS Summary 18-A 18-B 18-C 19-A 1 16-A 16-B 16-C 17-A 1 15-A 15-B 1 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 Total Bond Amount (Smil) $362 $704 $714 $701 $551 $657 $67
Slide 21: SMB 2019-B, 2019-A, 2018-C ABS deal terms
SMB 2019-B SMB 2019-A SMB 2018-C Size $657.0MM $453.0MM $544.0MM Pricing Date June 4, 2019 March 5, 2019 September 12, 2018 Smart Option Smart Option Smart Option Collateral Private Education Loans Private Education Loans Private Education Loans Servicer Sallie Mae Bank Sallie Mae Bank Sallie Mae Ba
Slide 22: Servicing policy pre-spin vs post-spin
Policy Pre-Spin, Legacy SLM Serviced Post-Spin, Sallie Mae Bank Serviced Delinquencies All loans serviced by an affiliate of legacy SLM; loan Sallie Mae Bank collects delinquent loans thru charge-off, placing owned by Sallie Mae Bank sold to legacy SLM after emphasis on returning loans to current st
Slide 23: Collections approach for co-borrowers and delinquent loans
Each customer is approached individually, and the account manager is educated and empowered to identify optimal resolution • Co-borrowers are contacted and collected with similar efforts as the primary borrower Sallie Mae Bank employs a front-loaded, stage based collections approach: • Early Stage L
Slide 24: Appendix
sallie nae Appendix
Slide 25: Quarterly Financial Highlights
Quarterly Financial Highlights 2Q2019 | 192019 | 2Q 2018 2Q2019 | 12019 | 202018 [ncome Statement ($ m 574 566 462 Key Performance Metrics Total interest expense al see my Net Interest Margin 5.88% | 6.28% | 6.14% Net interest income 397 402 341 Yield- Total interest-earning assets 8.50% 8.85% 8.33%
Slide 26: Distribution of Sallie Mae Borrowers by Product and Age
Distribution of Sallie Mae Borrowers by Product and Age 100% 93% 95% 91% 90% 87% 83% 80% 79% 73% 70% 64% % of Borrowers 60% % with a Credit Card 54% 50% % with a Personal Loan 42% 40% 30% 29% 30% 30% 27% 25% 21% 22% 20% 18% 15% 11% 10% 8% 5% 1% 2% 0% 18 19 20 21 22 23 24 25 26 27 28 29 As of 4/30/18
Slide 27: Sallie Mae vs Federal Student Loans
Sallie Mae vs Federal Student Loans Sallie Mae $1,000 - Cost of Attendance Federal Student Loan Program” Yr1 - $5,500 ($3,500 > subsidized) Yr2 - $6,500 ($4,500 > subsidized) $1,000 - Cost of Attendance (extended repayment 20 or 25 years) $20,500 Per Year ® Yr 3+ -$7,500 ($5,500 > subsidized) No Lim
Slide 28: Core Earnings to GAAP Reconciliation
“Core Earnings” to GAAP Reconciliation (Dollars in thousands, except per share amounts) “Core Earnings” adjustments to GAAP: GAAP net income................ce cee ceeeeeeeeeee cee eeeeeeeeeneeees Preferred stock dividends ................ccccsceeeeeeeeeee eee GAAP net income attributable to SLM Corp
Slide 29: Spin-Off of Navient and SLM Corporation
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 Corporation (“Navient”), and a consumer banking business called SLM Co
Slide 30: Types of Smart Option Student Loan Portfolio Data
Types of Smart Option Student 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 Bank. Information in this category is presented on a combined basis
Slide 31: Cohort default triangle definitions
Terms and calculations used in the cohort default triangles are defined below: First P&I Repayment Period – The month during which a borrower is first required to make a full principal and interest payment on a loan. P&I Repayment Vintage – The calendar year of a loan’s First P&I Repayment Perio
Slide 32: Sources and footnotes
1. Source: MeasureOne CBA Report as of December 2018 2. U.S. Bureau of Labor Statistics, Current Population Survey 3. Source: Trends in Student Aid,© 2018 The College Board, www.collegeboard.org, U.S. Department of Education 2018 4. Source: U.S. Bureau of Labor Statistics- “More education: Lower une