Slm Corporation · NASDAQ:SLM
Slm — Q1 2023 Earnings Presentation
29 slides from Slm's earnings presentation, Apr 26, 2023
Slide 1: Investor Presentation 1st Quarter 2023
Investor Presentation 1st Quarter 2023
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 April 26, 2023 (unless otherwise noted) and should be read in connection with the press release of SLM Corporation (the “Company”) announcing its financial result
Slide 3: Sallie Mae is an Outstanding Franchise
Sallie Mae is an Outstanding Franchise Sallie Mae is the market-leading brand for private education loans driven by brand recognition, rigorous underwriting methodology and industry- leading customer service. Top ranked and highly recognized brand 2,100+ actively managed university relationships acr
Slide 4: Balance Sheet & Capital Allocation; Revenue; Total Operating Expenses
Balance Sheet & Capital Allocation 1st Quarter 2023 • Paid common stock dividend of $0.11 per share in Q1 2023. Highlights • Sallie Mae Bank remains well capitalized with 13.3% Total risk-based capital ratio and CET1 capital ratio of 12.0%. • On May 3, 2023, the company sold approximately $2.0 billi
Slide 5: Private Education Loan Originations – Strong Start to 2023
Private Education Loan Originations13 – Strong Start to 2023 • First quarter 2023 originations at $2.4 $5,975 $6,000 $5,625 10 % billion, 12% higher than (5%) $5,321 $5,423 2% the year-ago period. $5,000 • Q1 2023 originations marked our highest level Forecast of originations in the $4,000 company’s
Slide 6: Credit Performance; Funding & Liquidity
Key Credit Credit Performance Metrics • Q1 2023 net charge-offs for Private Education Loans totaled $83 million. for Q1 2023 • Q1 2023 Private Education Loans delinquent 30+ days were 3.40% of loans in repayment, an improvement from both Q4 2022 as well as the year-ago quarter. • For Q1 2023, we saw
Slide 7: High Quality Private Education Loan Portfolio
Originations Vintage Smart Option Payment Type 2023 Pre 2014 2014 4% 3% 3% 2015 5% 2016 5% High Quality Interest Only 19% 2022 26% 2017 6% Private Education Loans Deferred Loans 47% Loan Portfolio 2018 $19.5B $21.9B 7% 2019 Fixed 2021 10% 34% 20% 2020 11% Customer FICO at Portfolio Original Approval
Slide 8: Conservative Funding Optimizes Net Interest Margin
Conservative Funding Optimizes Net Interest Margin Long-Term Funding • Outstanding borrowings consist of unsecured debt and 16% 20% secured borrowings issued through our term asset- backed securitization program, totaling $1 billion and $4.5 billion, respectively, as of March 31, 2023. Total Funding
Slide 9: Simple But Powerful Investment Thesis
Simple But Powerful Investment Thesis • Consistent earnings expansion is driven by top line growth and efficiency At t ra c t ive Ea rn in g s Pro file • Sallie Mae is the leader in the private education loan market • Well-proven and disciplined underwriting model leveraging data and Ma n a g e a b
Slide 10: Clear Strategy to Prove this Investment Thesis
Clear Strategy to Prove this Investment Thesis Strategic Imperatives: 1. 2. 3. 4. Maximize the Maximize the Better inform Maintain a profitability value of our the external rigorous and and growth of brand and narrative about predictable our core attractive private student capital business customer
Slide 11: Maximize the Profitability and Growth of the Core Business
Maximize the Profitability and Growth of the Core Business Maximize Revenue Manage Unit Costs Drive penetration at all schools Strong fixed cost discipline Drive towards reducing both the unit Increase market share by fully cost of servicing and the unit cost of meeting student funding needs acquisi
Slide 12: Higher Education Value Proposition Remains Attractive
Higher Education Value Proposition Remains Attractive4 Expanding Addressable Market • Private Education Loans represent 2-3% of the overall spend in higher education annually. Private Federal Loans • Total spend on higher education grows ~2% annually, while Sallie Education Loans Other $79B Mae Priv
Slide 13: Enable Successful Outcomes
Sallie Mae’s Core Product Contains Customer Friendly Provisions That Enable Successful Outcomes Sallie Mae Smart Option Student Loan Sallie Mae Student Borrowers Benefits from school through repayment In-School Repayment 92% of Sallie Mae student loan borrowers • Competitive variable & fixed rates •
Slide 14: Optimize the Value of the Brand and Attractive Client Base
Optimize the Value of the Brand and Attractive Client Base We know our customers’ finances, payment patterns and indebtedness We have the relationships and knowledge to assist our customers with their next step: post-graduation plans, jobs, future financial needs We are there for our customers durin
Slide 15: Political Environment
Political Environment New congressional make-up complements our strategic approach of better informing the narrative of private student lending and Sallie Mae. We expect our business to perform well in the current environment which has a focus on the federal student loan program and targeted assista
Slide 16: Maintain Rigorous Capital Allocation and Return Program
Maintain Rigorous Capital Allocation and Return Program Invest in High ROE Growth Share Repurchase • Continue to focus on high-quality • From January 1, 2020, through March 31, 2023, we Private Education Loan originations, repurchased 44% of common shares outstanding including deeper penetration of
Slide 17: Diverse Student Loan Portfolio Driving Increased Shareholder Value
Diverse Student Loan Portfolio Driving Increased Shareholder Value Un d e rg ra d u a t e Gra d u a t e RATE TYPE Variable & Fixed Variable & Fixed He a lt h Variable: SOFR + Variable: SOFR + Me d ic a l De n t a l 1.250% - SOFR + 1.750% - SOFR + Pro fe s s io n s INTEREST RATE 12.375% 11.625% RANGE
Slide 18: Our Approach to ESG
Our Approach to ESG Our ESG approach is grounded in our mission and where we can make the most impact: powering confidence in students and families on their unique higher education journey. 1
Slide 19: ABS Supplement
ABS Supplement Confidential and proprietary information. © 2021 Sallie Mae Bank. All rights reserved.
Slide 20: 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 changed after selected at origination program consists of: • Fixed-rate loans or variable-rate loans • Consumer credit und
Slide 21: Sallie Mae Bank ABS Summary
Sallie Mae Bank ABS Summary17 19 19 6 6 6 6 6 6 21
Slide 22: Sallie Mae Bank ABS Structures
Sallie Mae Bank ABS Structures 20 21 6 22
Slide 23: Appendix
Appendix Confidential and proprietary information. © 2021 Sallie Mae Bank. All rights reserved.
Slide 24: Commitments vs Disbursements
Commitments vs Disbursements 2022 Actuals Commitments vs Disbursements 51% 39% 37% 24% 16% 14% 10% 9% Q1 2022 Q2 2022 Q3 2022 Q4 2022 Commitments Disbursements Provision for New Loans Additional Provision Impacts Unfunded Commitments • Directly impacted by the timing of • New Loans, DCF accretion, l
Slide 25: CECL Update
CECL Update Adopted on January 1, 2020. • The company’s 2020 financial results reflected a transition adjustment that increased the allowance for credit losses by $1.1 billion, increased the liability representing its off-balance sheet exposure for unfunded commitments by $116 million and increased
Slide 26: Quarterly Financial Highlights
Quarterly Financial Highlights Q1 Q4 Q1 Q1 Q4 Q1 2023 2022 2022 2023 2022 2022 Income Statement ($ Millions) Key Performance Metrics Total interest income $638 $584 $465 Net Interest Margin 5.70% 5.37% 5.29% Total interest expense 233 202 90 Yield—Total Interest-earning assets 8.97% 8.21% 6.56% Net
Slide 27: Sallie Mae vs Federal Student Loans
Sallie Mae vs Federal Student Loans 22 As of 5/2/23 27
Slide 28: Non-GAAP "Core Earnings" to GAAP Reconciliation
Non-GAAP “Core Earnings” to GAAP Reconciliation Quarters Ended ($ Thousands except per share amounts) Mar. 31, 2023 Dec. 31, 2022 Mar. 31, 2022 Non-GAAP “Core Earnings” adjustments to GAAP: GAAP net income (loss) $118,518 ($77,043) $128,812 Preferred stock dividends $4,063 $3,466 $1,275 GAAP net inc
Slide 29: Footnotes
Footnotes 1. Source: Enterval CBA Report as of December 2022. Based on Full Market. 2. Based on internal Company statistics. 3. The information on this page constitutes forward-looking statements. See page 2 of this Presentation for a cautionary note regarding forward-looking statements. 4. Source:
SLM Corporation (Sallie Mae) — Q1 2023 Earnings Presentation on 6ix