Slm Corporation · NASDAQ:SLM
Slm — Sallie Mae — Investor Presentation (April 2014)
25 slides from Slm's investor presentation, April 2014
Slide 1: Sallie Mae Investor Presentation
SALLIE MAE Investor Presentation APRIL 2014
Slide 2: Forward-Looking Statements
Forward-Looking Statements The following information is current as of April 17, 2014 (unless otherwise noted) and should be read in connection with the Annual Report on Form 10-K for the year ended December 31, 2013 filed by SLM Corporation (“Sallie Mae”) with the SEC on February 19, 2014 (the “2013
Slide 3: Separation Details
Separation Details ► Remaining Company: Sallie Mae (consumer banking business) Company ► Spin-Off Company: Navient (loan management and servicing company) ► Tax-free spin-off of Navient to Sallie Mae shareholders Transaction ► 1:1 distribution ratio ► Sallie Mae: NASDAQ / “SLM” Exchange Details ► Na
Slide 4: Strategic Separation Into Two Distinct Businesses
Strategic Separation Into Two Distinct Businesses Transaction Entity Remaining Company Spin-Off Company Strategic Focus Consumer banking including leading Leading education loan management, servicing private education loan franchise and asset recovery company Key Businesses ► Largest Private Educati
Slide 5: Sallie Mae Investment Highlights
Sallie Mae Investment Highlights Experienced management team ► Average of 30+ years of banking and financial services 1 with deep industry knowledge experience Leading brand in the education ► 40+ years serving the education lending market 2 lending market ► 50% private education lending market shar
Slide 6: Management Presenters
Management Presenters ► Experienced management team with extensive asset knowledge and industry expertise ► 30+ years of banking and financial services experience Raymond Quinlan ► Joined Sallie Mae in 2014 Chairman & Chief Executive Officer ► Previously Executive Vice President of Banking at CIT ►
Slide 7: Favorable Student Loan Market Trends
Favorable Student Loan Market Trends Enrollment at Four-Year Degree Granting Institutions Annual Cost of Education Public Private (millions) 15.3 ($ thousands) 14.4 $41 $38 $39 13.5 13.5 13.7 $35 $36 13.3 $32 $34 12.9 $29 $30 12.1 $16 $17 $18 $18 $13 $14 $14 $15 $12 2008 2009 2010 2011 2012 2013 201
Slide 8: Higher Education Value Proposition
Higher Education Value Proposition Relationship Between Higher Education, Widening Earnings Gap of Young Adults Most Graduates Say Income and Employment by Educational Attainment College Has Paid Off 100,000 14% Has Not / Will Not $ 17,500 Pay Off 90,000 Average annual income $ 15,780 12% 6% 80,000
Slide 9: 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; 50% mark
Slide 10: Full Suite of Private Education Products
Full Suite of Private Education Products Description Franchise ► Market, price, underwrite and disburse private education loans ► Focused on high quality credits at top tier institutions 700,000+ loans Private ► Smart Option is primary product (interest-only, fixed pay, deferred) ~500,000 active pri
Slide 11: Multifaceted Distribution Platform
Multifaceted Distribution Platform Commentary 2013 Originations ► Nationally recognized brand drives on-campus ► ~$1.9bn originations ► 50% of originations ► Actively manage over 2,400 college relationships On-Campus ► Represented on vast majority of college directed preferred lender lists ► Largest
Slide 12: Attractive Customer Base
Attractive Customer Base ► 82% of customers from non-profit 4 year institutions Top tier institutions ► 11% of customers from for profit 4 year institutions ► 78% of customers have FICOs >700 Strong credit history ► Average FICO of 746 at origination Co-signer involvement ► 90% of borrowers ha
Slide 13: Scale and Serialization Lead to Low Cost Delivery
Scale and Serialization Lead to Low Cost Delivery Scale Serialization ► Strong market share allows Sallie Mae to ► 40% of borrowers in 2013 had a Sallie Mae leverage fixed acquisition costs over significant loan in the prior year new account volume ► 90% of serial customers renew loans through ► Mar
Slide 14: Unique Smart Option Product Leads Private Education Lending Market
Unique Smart Option Product Leads Private Education Lending Market ► Smart Option student loan product first introduced in 2009 ► Offers three repayment options designed to help borrowers balance their goals and budget while in school – Interest Only: requires interest only payment during in-school
Slide 15: High Quality Private Education Portfolio
High Quality Private Education Portfolio Portfolio by Product Smart Option Payment Type Graduate Signature / Other 2% 2% Interest Only 19% Deferred 48% Smart Fixed Pay Option 33% 96% 4Q 2013 Private Education Loans: $6.9bn 4Q 2013 Smart Option Loans: $6.6bn Portfolio by Vintage Customer FICO at Orig
Slide 16: Analytical Approach to Credit
Analytical Approach to Credit Student Initial Screen Manual Review ► $1,000 minimum loan ► ~8% of applications ► Minimum FICO of 640 for non-profit ► Asset expertise and rigorous ► Pass risk scores, but require further schools and 670 for for-profit schools underwriting driven by large review due to
Slide 17: Smart Option Credit Outperforming
Smart Option Credit Outperforming ► Smart Option products outperform prior private education loan products due to more stringent underwriting standards and tailored product options ► Performance of newer vintage loans driven by focused marketing on high quality borrowers, better data and product man
Slide 18: Conservative Funding Approach
Conservative Funding Approach ► Low cost deposit base with no branch overhead 4Q 2013 Target — 74% of retail deposits are savings accounts — Brokered deposits used as alternative funding source Retail deposits ► Term funding / securitizations will augment deposit Brokered deposits funding for future
Slide 19: Significant Private Education Loan Growth
Significant Private Education Loan Growth ($ in millions) $6,563 $1,055 $5,508 $5,172 $336 $4,555 $617 Previous Year Loan Balance Net Loan Growth 2010 2011 2012 2013 Private Education Loans Originations $2,236 $2,699 $3,305 $3,762 % Outstanding 49% 52% 60% 57% Loan Sales 1 $1,820 $1,897 $2,639 $2,41
Slide 20: Strong Capital Position
Strong Capital Position ► Significant available capital resources, well in excess of regulatory minimums ► Long-term target of 14% Total RBC ratio at the bank subsidiary ► $565mm of preferred securities remain with SLM1 Bank Subsidiary (4Q 2013) Bank Holding Company (4Q 2013) 22.5% 21.6% 17.3% 16.4%
Slide 21: High Return Business Model – Illustrative Life of Loan Per Unit Economics
High Return Business Model – Illustrative Life of Loan Per Unit Economics Return on Assets Description Loan Yield 8.00 % ► Approximate average yield on future originations; ~85% variable / ~15% fixed rate Cost of Funds 1.70 % ► Expected life of loan cost of funds including deposit / ABS funding and
Slide 22: Financial Review – Pro Forma Sallie Mae
Financial Review – Pro Forma Sallie Mae ($ in millions) Pro Forma Balance Sheet Pro Forma Income Statement 2013 2012 2013 Assets Interest Income: Net Interest Income $ 410 $ 462 Cash and Investments $ 2,864 Less: Provisions on Loan Losses 66 69 Private Education Loans (net of allowance for losses of
Slide 23: Key Financial Targets
Key Financial Targets Target Annual Originations $4 bn + Asset Growth 15.0% – 17.5% Earnings Growth 20% + Annual Loan Sales $1.5 – $2.5 bn ROA 2.0% + ROE 15% + Total RBC 14% 23
Slide 24: Business Diversification Opportunities
Business Diversification Opportunities Lending Funding Personal Practice Banking Loan Secured Credit Cards Loans Loans Products Sales Funding ► Focused on ► Consumer term ► Medium ticket ► Continued focus ► Whole loan sales ► Experienced Upromise loan with credit secured loans on building to third p
Slide 25: Sallie Mae Investment Highlights
Sallie Mae Investment Highlights 1 ► Experienced management team with deep industry knowledge 2 ► Leading brand in the education lending market 3 ► Simple low cost delivery system 4 ► Attractive customer base 5 ► Disciplined approach to credit 6 ► Strong capital position and funding capabilities 7 ►