Slm Corporation · NASDAQ:SLM
Slm — IPO Roadshow (November 2009)
87 slides from Slm's IPO roadshow presentation, Nov 12, 2009
Slide 1: SLM Corporation 3Q Debt Investor Presentation
SLM Corporation 3Q Debt Investor Presentation
Slide 2: Forward-looking statements
This Presentation contains forward-looking statements and information based on management's current expectations as of the date of this document. Statements that are not historical facts, including statements about our beliefs or expectations and statements that assume or are dependent upon future e
Slide 3: SLM Corporation Overview
SLM Corporation Overview 3
Slide 4: SLM Corporation
SLM Corporation #1 originator of student loans in the U.S. education lending market #1 servicer and collector of student loans in the U.S. currently servicing $190 billion in assets including $9 billion for third parties Fully independent private sector company with scale and a broad franchise, trad
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 $192 billion in Q3 Originated $6.9 billion in federal student loans, a 25% increase over prior year period Launched new private education loan product in Q2 and originated $893 million private education loans in Q3 "Core Earnings"
Slide 7: A Brief Corporate History
A Brief Corporate History 7 1 Currently known as the Federal Family Education Loan Program (FFELP). SLM Corporate Debt Ratings SLM Corporate Debt Ratings SLM Corporate Debt Ratings SLM Corporate Debt Ratings Moody's S & P Fitch Long-Term Ba1 BBB- BBB- Short-Term Not-Prime A-3 F3 Outlook Watch Watch
Slide 8: What Makes SLM Corporation Unique
What Makes SLM Corporation Unique 8 8 .. * Through 9/30/09
Slide 9: Q309 Core Earnings Summary
Q309 "Core Earnings" Summary 9 ($ millions), except per share amounts Q309 Q209 Q308 EPS (Reported) $0.26 $0.31 $0.19 Economic Floor Income EPS not reported in "Core Earnings" $0.05 $0.17 - Net Income $164 $170 $117 Net Interest Income $690 $457 $712 Net Interest Margin 1.32% 0.91% 1.52% Loan Loss P
Slide 10: Q309 Core Earnings Summary EPS Breakdown
Q309 "Core Earnings" Summary 10 EPS Breakdown Q309 Q209 Q308 Reported "Core Earnings" $0.26 $0.31 $0.19 Non-Recurring: Gains on Debt Repurchases $0.10 $0.44 $0.02 Induced Conversion of Series C Preferred Stock ($0.04) - - Cumulative accounting change of premium amortization expense on loans $0.07 -
Slide 11: CP-LIBOR - still volatile but reverting to long-term mean
CP-LIBOR - still volatile but reverting to long-term mean Historical Average CP Yield - 3M LIBOR 11 11
Slide 12: Fee Income & Other Income
Fee Income & Other Income Contingency Inventory of $10.7 Billion Collecting on behalf of the Dept of Education for close to ten years Upromise - largest private source of 529 plans Guarantor Servicing for student loans APG is re-focused on student loan contingency and collections 12 * Does not inclu
Slide 13: Lending Segment Earnings Detail
Lending Segment Earnings Detail 13 ($ millions) Q309 Q308 % Change FFELP Originations $6,940 $5,534 25% Private Originations $893 $2,117 -58% Total Originations $7,833 $7,651 2% Average Managed Student Loans $191,459 $175,470 9% Net Student Loan Spread 1.56% 1.90% - Economic Floor Income not include
Slide 14: Dept. of Education / Government Programs
Dept. of Education / Government Programs Kennedy-Miller Legislation - Signed by President 05/07/08 ECASLA - Broad authority to purchase loans from 10/01/03 - 07/01/09 ECASLA Extension - Signed by President 10/07/08 Extended purchase authority for 2009 - 2010 Academic Year Loan Purchase Commitment Pr
Slide 15: Federal Student Loan Policy Alternatives
Federal Student Loan Policy Alternatives President's Budget Proposal and House Legislation Convert all federal student loans to federal funding by July 2010 Use savings to substantially increase Pell Grants Use limited number of private sector firms to service Industry/Community Proposed Modificatio
Slide 16: Political Developments
Political Developments House of Representatives passed legislation (H.R. 3221) which ends private sector role in loan originations, but there are many steps remaining in the process H.R. 3221 passed the House of Representatives as freestanding (non- reconciliation) legislation Senate leadership has
Slide 17: Political Developments
Political Developments The Senate has introduced no language and has taken no action. No hearings or legislative mark-ups yet scheduled Health care debate dictating timing and process New Chair on Senate HELP Committee - Tom Harkin, Iowa 2010 most likely timeframe for student loan bill in Senate Unc
Slide 18: Federal Student Loan Market
Federal Student Loan Market Outstanding Government Student Loan Market Distribution 2/28/09 Loan Market Distribution 2/28/09 Loan Market Distribution 2/28/09 Top 10 Holders of FFELP Loans FFYE 9/30/08 FFYE 9/30/08 FFYE 9/30/08 Source: US Department of Education 18
Slide 19: Office of the Chief Executive Officer
Office of the Chief Executive Officer 19 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 &
Slide 20: The U.S. Student Loan Market
The U.S. Student Loan Market SLM Corporation 20
Slide 21: Favorable Student Loan Market Trends
Favorable Student Loan Market Trends 21 Source: College Board Note: Academic years, average published tuition, fees, room and board charges at four-year institutions; enrollment-weighted Enrollment Growth + Rising Tuitions + Education Value = Increasing Loan Demand (CHART) Higher Education Enrollmen
Slide 22: College Grads Experience Lower Levels of Unemployment
College Grads Experience Lower Levels of Unemployment 22 (CHART) Source: U.S. Department of Labor, Bureau of Labor Statistics
Slide 23: The Federal Family Education Loan Program or FFELP
The Federal Family Education Loan Program or "FFELP" Provides lenders an explicit U.S. government guarantee of at least 97% and a fixed yield on student loans made pursuant to the FFELP program Loan pricing, terms and maximum borrowing limits set by Congress Available to undergraduate students, grad
Slide 24: FFELP Student Loan Market Share
FFELP Student Loan Market Share 24 Notes: Wells Fargo includes Wachovia volumes, Bank of America includes Fleet and LaSalle Bank volumes, JP Morgan Chase includes Bank One volumes, PNC Bank includes National City Bank volumes Source: http://www.fp.ed.gov FFELP Loan Originations (Gross Commitments) $
Slide 25: FFELP Loan Originations
FFELP Loan Originations Originated Nearly $7 billion of loans in the quarter a 25% increase over the prior year Originated $727 million of loans for third-party servicing clients in the quarter Put approximately $840 million of loans to ED in the third quarter Put approximately $17.6 billion of loan
Slide 26: Private Loan Originations
Private Loan Originations Private Loan Originations Increases in Federal Student Loans, tighter underwriting standards, and conservative consumer behavior dampened demand for private education loans. 26
Slide 27: 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 educatio
Slide 28: SLM's Private Education Loan Portfolio
SLM's Private Education Loan Portfolio Private Education Loan Portfolio Characteristics(1) 35 billion of managed outstandings at Q3 2009 18% of SLM's managed student loan portfolio Risk-based pricing Approximately 56.5% of portfolio has a cosigner, typically a parent Higher education loans typically
Slide 29: SLM's New Private Education Loan Product
SLM's New Private Education Loan Product Smart Option Product Launched 3/23/09 Eliminates negative amortization during the school and grace period while reducing the average life from 9.5 years to 5.5 years Strategies to achieve a 90% cosigned rate have been deployed Repayment term is driven by cumu
Slide 30: Private Education Loan Market Demand
(CHART) Private Education Loan Market Demand Private education loans help bridge the gap between funding available through government-sponsored programs and the rapidly increasing cost of education (CHART) Cost of College AY 2009-2010 Based on a Four-Year Term FFELP Limit $31,000 Cost of attendance
Slide 31: Private Credit Originations
Private Credit Originations 31 (CHART) Source: College Board, Trends in Higher Education Series (2009). 2008-2009 industry data is preliminary. Data reported by academic year, SLM quarterly data converted to academic year basis. *3Q 2009 data only
Slide 32: Credit Quality
Credit Quality SLM Corporation 32
Slide 33: Loan Losses
Loan Losses 33 33 33 (CHART) + = Private Education Loans 18% U.S. Government Guaranteed Loans 82% Charge-Offs (1) = 0.06% Charge-Offs (1) = 3.72% Total Charge-Offs (1) = 0.76% (1) All data as of September 30, 2009. Managed FFELP charge-offs as a percentage of average managed FFELP assets. Managed Pr
Slide 34: FFELP Education Loan Portfolio
FFELP Education Loan Portfolio FFELP Education Loan Portfolio 34 (1) "Core Earnings" FFELP Loan spread, before provision. Annualized charge-offs as a percentage of average Managed FFELP Loans .
Slide 35: Private Education Loan Portfolio
Private Education Loan Portfolio Private Education Loan Portfolio 35 (1) "Core Earnings" Private Education Loan spread, before provision. Annualized charge-offs as a percentage of average Managed Private Education Loans in repayment.
Slide 36: SLM Private Credit Default Emergence Profile
SLM Private Credit Default Emergence Profile Payments Made 36 (CHART)
Slide 37: Charge-offs driven by Non-Traditional loans
Charge-offs driven by Non-Traditional loans Non-Traditional loans represent less than 13% of the Private Education Loan portfolio Higher quality loans entering repayment in 2009 and 2010 Charge-off Trends - Mix of Traditional vs. Non-Traditional 37 (CHART) (CHART)
Slide 38: Private Education Loan Portfolio Performance
Private Education Loan Portfolio Performance Non-traditional loans represent only 13% of the Private Education loan portfolio but account for 50% of charge-offs 38 (1) Charge-offs as a percentage of average loans in repayment annualized for the quarters presented Q309 Q209 Q109 Q408 Q308 Loans Outst
Slide 39: Private Education Loan Portfolio Performance
(1) Charge-offs as a percentage of average loans in repayment annualized for the quarters presented Private Education Loan Portfolio Performance 39 Traditional Loans with a Cosigner Q309 Q209 Q109 Q408 Q308 Outstanding Balance as a % of Total 53% 52% 52% 51% 50% 90+ Delinquency as a % of Repayment 3
Slide 40: Improving Portfolio Quality
Improving Portfolio Quality 40 Characteristics of Loans Entering Repayment Characteristics of Loans Entering Repayment Characteristics of Loans Entering Repayment Characteristics of Loans Entering Repayment Characteristics of Loans Entering Repayment Characteristics of Loans Entering Repayment Chara
Slide 41: Portfolio Quality Improving
Portfolio Quality Improving Non-Traditional charge-off rate is 6x to 7x greater than Traditional Amount of non-traditional loans entering repayment have begun to decline 88% of Q309 loan originations had cosigners, up from 71% in Q308. The aggregate portfolio is migrating to a higher cosigner percen
Slide 42: Private Education Loan Portfolio Performance
Private Education Loan Portfolio Performance Tightening of forbearance policies and the economic downturn have adversely impacted the performance of our Managed Private Education Loan portfolio Delinquency trends have improved, as the impact of forbearance tightening passed through the system. 42
Slide 43: Servicing: A Competitive Advantage
Servicing: A Competitive Advantage SLM Corporation 43
Slide 44: Servicing
Servicing #1 servicer and collector of student loans in the U.S. currently servicing $190 billion in assets including $9 billion for third parties Awarded ED servicing contract in June 2009 Servicing under contract initiated in August 2009 Contract to span 5 years with one, five-year renewal option
Slide 45: SLM's Competitive Advantage
SLM's Competitive Advantage SLM has a distinct competitive advantage in all facets of the education loan market. 45 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
Slide 46: Operations Locations
Operations Locations 46 Killeen, TX Fishers & Muncie, IN Lynn Haven, FL Wilkes-Barre, PA Newark, DE Reston, VA Corporate Headquarters
Slide 47: Funding Diversity and Liquidity
Funding Diversity and Liquidity SLM Corporation 47
Slide 48: Capital Markets Summary
Capital Markets Summary Realized gains of $74.4 million on debt repurchases in Q309 Bank ABCP facility reduced to $9.4 billion outstanding Completed $1.1 billion TALF Eligible Private Credit ABS - July 14, 2009 Completed $1.7 billion TALF Eligible Private Credit ABS - August 13, 2009 Funded $14.2 bi
Slide 49: Recent ABS Transactions
Recent ABS Transactions Recent ABS Transactions Transaction: Private Credit May 2009-B July 2009-C August 2009-D Issuance Size: $2.593 B $1.027 B $1.680 B Registration Type: 144A 144A 144A Indicative Pricing: L + 600L + 366 to 30 mo call Prime + 125Prime-71 to 30 mo call Prime + 25Prime-55 to 48 mo
Slide 50: Liquidity Position Detail
SLM has $3.5 billion in unsecured revolving credit facilities. The Company has never drawn on these facilities. $1.9 billion of our unsecured revolving facilities matures in October 2010 and $1.6 billion matures in October 2011. Liquidity Position Detail 50 ($ in billions) 9/30/2009 6/30/2009 3/31/2
Slide 51: Employ conservative long-term funding model
Employ conservative long-term funding model * Funded to Term includes 19% or $37.0 billion and 2% or $3.6 billion of advances outstanding under the ED Purchase and Participation Program and Straight A Funding Facility as of September 30, 2009 and September 30, 2008, respectively. (CHART) High Percen
Slide 52: Funding Distribution
Funding Distribution Funding Distribution At September 30, 2009, total managed debt borrowings was $208.5 billion. 52
Slide 53: SLM Corporate Debt and ABS Issuance
SLM Corporate Debt and ABS Issuance 53 SLM has issued $142 billion of long-term, corporate debt and asset- backed securities since 2005, across a broad range of maturities backed securities since 2005, across a broad range of maturities backed securities since 2005, across a broad range of maturitie
Slide 54: SLM ABS Issuance Volume
SLM ABS Issuance Volume 54 SLM ABS Term Issuance Volume (1) (1) Excludes outstandings under SLM's asset-backed commercial paper program. Totals may not add due to rounding. ($ in billions) 2005 2006 2007 2008 Q109 Q209 Q309 Non-Consolidation FFELP ABS $ 6.6 $ 5.1 $ 9.1 $18.5 $ 0.0 $ 0.0 $ 0.0 Consol
Slide 55: SLM Corporate Debt Issuance Volume
SLM Corporate Debt Issuance Volume SLM Corporate Debt Issuance Volume Repurchased $1.4 B face value of debt generating $74.4 M in accounting gains 55 SLM Corporate Term Debt Issuance Volume ($ billions) US$ equivalent at the time of issuance. Q3 2009 Debt Repurchase Overview
Slide 56: Unsecured Debt Maturities
Unsecured Debt Maturities Unsecured Debt Maturities Repurchased $2.7 billion of debt in 2009 Remaining unsecured debt maturities in 2009 total $483 million 56 Note: Does not include Sallie Mae Bank or Subsidiary funding
Slide 57: Unencumbered Assets & Unsecured Debt
Unencumbered Assets & Unsecured Debt 57 ($ in billions) 12/31/08 3/31/09 6/30/09 9/30/2009 FFELP Stafford and Plus Loans, net $ 3.8 $ 4.5 $ 2.7 $ 2.1 FFELP Consolidation Loans, net 1.6 0.6 0.5 0.6 Private Education Loans, net 15.7 14.1 16.0 13.3 Other Loans 0.7 0.7 0.5 0.5 Available Cash & Investmen
Slide 58: 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 25.1% Total Risk-based Capital at Septe
Slide 59: Sallie Mae Bank Brokered Deposits
Sallie Mae Bank Brokered Deposits 59 (CHART) *Average remaining life includes the brokered CDs only.
Slide 60: Sallie Mae Bank - Deposits
Sallie Mae Bank - Deposits 60 *Primarily affiliate demand deposit accounts with no stated maturities Bank Deposits ($ millions) Bank Deposits ($ millions) Bank Deposits ($ millions) Bank Deposits ($ millions) Bank Deposits ($ millions) Bank Deposits ($ millions) Dec 07 Dec 08 Mar 09 Jun 09 Sep 09 Br
Slide 61: Sallie Mae Bank - Capital
Sallie Mae Bank - Capital Sallie Mae Bank - Capital 61
Slide 62: Risk-Adjusted Capitalization
Risk-Adjusted Capitalization SLM Corporation 62
Slide 63: Capitalization
Capitalization 63 63 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.
Slide 64: Capital Allocation
Capital Allocation 64 0.50% 8.00% SLM allocates capital internally based on the risk of the assets it supports SLM Corp Assets Capital Allocation As of September 30, 2009 0% - 25% Cash, Investments, Other Assets & Intangibles 12% of Total Managed Assets Private Education Loans 16% of Total Managed A
Slide 65: FFELP Appendix
FFELP Appendix SLM Corporation 65
Slide 66: 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 3 mo. LIBOR, with occasional fixed rate issuance Amortizing tranches, with 1 to 15(+) year aver
Slide 67: SLM Stafford/PLUS ABS Trusts Prepayment Analysis
SLM Stafford/PLUS ABS Trusts Prepayment Analysis Prepayment Analysis Prepayment Analysis Annualized CPRs for SLM Stafford/PLUS ABS Trusts have decreased significantly as incentives for borrowers to consolidate have declined 67 Historical SLM Stafford/PLUS ABS CPRs * Average CPR is the simple (non-we
Slide 68: SLM Consolidation ABS Trusts Prepayment Analysis
SLM Consolidation ABS Trusts Prepayment Analysis 68 68 Historical Consolidation ABS CPRs * Average CPR is the simple (non-weighted) average of four Quarterly CPR calculations for years ended September 30, 2009. Quarterly CPR assumes School and Grace loans are not scheduled to make payments. Defermen
Slide 69: Private Credit Appendix
Private Credit Appendix SLM Corporation 69
Slide 70: 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, not the company's FFELP collections operations Managed by individuals with prior experience man
Slide 71: Forbearance
Forbearance A collections tool used to provide borrowers time to improve their ability to repay Between graduation and start of first job Economic hardship Provides borrower with time to obtain employment and income to support their obligations Applied most frequently in the first two years of repay
Slide 72: Private Credit Trust Delinquency and Forbearance Seasoning Trends
Note: Based on historical data through September 30, 2009. Does not include data for 2009 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 73: Private Credit Trust Default Emergence By Years in Repayment
Private Credit Trust Default Emergence By Years in Repayment 73 73 Based on assumptions in effect as of September 30, 2009 Defaults in SLM Private Credit ABS Trusts increase as loans first enter repayment, then diminish steadily over time
Slide 74: Private Credit Trust Default Emergence By Payments Made
Private Credit Trust Default Emergence By Payments Made 74 74 Based on assumptions in effect as of September 30, 2009 Excludes months in forbearance. Includes months of delinquency prior to chargeoff The probability of default substantially diminishes as the number of payments made increases
Slide 75: SLM Private Education Loan Gross Defaults
SLM Private Education Loan Gross Defaults Actual-To-Date 75 75 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 bankruptcy or died . Pr
Slide 76: SLM Private Credit Gross Defaults
SLM Private Credit Gross Defaults Constraining Rating Agency Stress Levels at Issuance As of August 31, 2009 76 (CHART)
Slide 77: 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 ha
Slide 78: Private Credit ABS Trusts - 31-60 Day Delinquencies
Private Credit ABS Trusts - 31-60 Day Delinquencies 78 Early delinquencies increased as forbearance policies tightened and have recently declined
Slide 79: Private Credit ABS Trusts - 61-90 Day Delinquencies
Private Credit ABS Trusts - 61-90 Day Delinquencies 79
Slide 80: 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 80
Slide 81: 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 82: 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 83: 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 83 11
Slide 84: Appendix
Appendix 84
Slide 85: GAAP to Core Earnings Reconciliation
GAAP to Core Earnings Reconciliation 85
Slide 86: Additional Information Available at www.salliemae.com
Additional Information Available at www.salliemae.com 86
Slide 87: Debt Investor Relations Contact Information
Debt Investor Relations Contact Information Debt Investor Relations Contact Information Debt Investor Relations Contact Information 87