Slide 1: Sallie Mae Investor Presentation April 2015
SALLIE MAE Investor Presentation April 2015 1
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 1, 2015 (unless otherwise noted) and should be read in connection with SLM Corporation’s Annual Report on Form 10-K for the year ended December 31, 2014 (fi
Slide 3: Historical Smart Option Loan Performance
Historical Smart Option Loan Performance 3
Slide 4: Important Information Regarding Historical Loan Performance Data
Important Information Regarding Historical Loan Performance Data 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 Corpo
Slide 5: Important Information Regarding Historical Loan Performance Data (cont.)
Important Information Regarding Historical Loan Performance Data (cont.) Types of Smart Option 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 Ba
Slide 6: Historical Smart Option Loan Performance
Historical Smart Option Loan Performance 6
Slide 7: Smart Option Gross Defaults During Interim Repayment
Smart Option Gross Defaults During Interim Repayment (1) ► Smart Option loans have very low incidence of delinquency, forbearance or default until after a borrower’s graduation or separation, when full principal and interest payments become due Smart Option Student Loans - Serviced Portfolio Cumulat
Slide 8: Smart Option Serviced Portfolio: 31-60 Day Delinquencies
Smart Option Serviced Portfolio: 31-60 Day Delinquencies Smart Option Student Loans - Serviced Portfolio 31-60 Days Delinquencies as a % of Loans in P&I Repayment(1) Data for Legacy SLM thru April 30, 2014 and Sallie Mae Bank since May 1, 2014 12.0% 10.0% Percent of P&I Repayment Balance 8.0% 6.0% 4
Slide 9: Smart Option Serviced Portfolio: 61-90 Day Delinquencies
Smart Option Serviced Portfolio: 61-90 Day Delinquencies Smart Option Student Loans - Serviced Portfolio 61-90 Days Delinquencies as a % of Loans in P&I Repayment(1) Data for Legacy SLM thru April 30, 2014 and Sallie Mae Bank since May 1, 2014 12.0% 10.0% Percent of P&I Repayment Balance 8.0% 6.0% 4
Slide 10: Smart Option Serviced Portfolio: 91+ Day Delinquencies
Smart Option Serviced Portfolio: 91+ Day Delinquencies Smart Option Student Loans - Serviced Portfolio 91+ Days Delinquencies as a % of Loans in P&I Repayment(1) Data for Legacy SLM thru April 30, 2014 and Sallie Mae Bank since May 1, 2014 12.0% 10.0% Percent of P&I Repayment Balance 8.0% 6.0% 4.0%
Slide 11: Smart Option Serviced Portfolio: Forbearance
Smart Option Serviced Portfolio: Forbearance Smart Option Student Loans - Serviced Portfolio Forbearance as a % of Loans in P&I Repayment and Forbearance(1) Data for Legacy SLM thru April 30, 2014 and Sallie Mae Bank since May 1, 2014 Percent of P&I Repayment and Forbearance Balance 12.0% 10.0% 8.0%
Slide 12: Smart Option Serviced Portfolio: Annualized Gross Defaults
Smart Option Serviced Portfolio: Annualized Gross Defaults Smart Option Student Loans - Serviced Portfolio Annualized Gross Defaults as a % of Loans in P&I Repayment(1) Data for Legacy SLM thru April 30, 2014 and Sallie Mae Bank since May 1, 2014 12.0% Percent of P&I Repayment Balance 10.0% 8.0% 6.0
Slide 13: Smart Option Vintage Data: Cumulative Gross Default by Loan Type
Smart Option Vintage Data: Cumulative Gross Default by Loan Type Smart Option Student Loans - Serviced Portfolio: All Products Smart Option Student Loans - Serviced Portfolio: Interest Only Cumulative Defaults by P&I Repayment Vintage Cumulative Defaults by P&I Repayment Vintage and Years in P&I Rep
Slide 14: Smart Option Vintage Data: Prepayments by Vintage
Smart Option Vintage Data: Prepayments by Vintage ► Following the first year after disbursement, total prepayments have generally ranged around 4% Smart Option Student Loans - Serviced Portfolio Smart Option Student Loans - Serviced Portfolio Voluntary CPR by Origination Vintage and Product (1) Tota
Slide 15: Smart Option Vintage Data: Prepayments
Smart Option Vintage Data: Prepayments ► Following the first year after disbursement, voluntary prepayments have generally ranged from between 2-3% for the Smart Option Deferred loan product, to 5-6% for the Interest Only product Smart Option Student Loans - Serviced Portfolio Smart Option Student L
Slide 16: Sallie Mae Bank
Sallie Mae Bank 16
Slide 17: 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 ► Industry leading 53% market share in private education lending ► Over 2,400 actively managed university relationships across the U.S. ► Complementary consumer pro
Slide 18: 2014 Sallie Mae Highlights
2014 Sallie Mae Highlights ► Completed legal separation from Navient on April 30, 2014 ► Generated “Core Earnings” of $195 million for the year ended December 31, 2014 ► Originated $4.1 billion of high quality private education loans in 2014, a 7% increase over 2013 ► Grew private education loan por
Slide 19: Sallie Mae's Private Student Loan Originations Growth
Sallie Mae’s Private Student Loan Originations Growth Sallie Mae Smart Option Student Loan Originations $4,500 $4,076 $4,000 $3,795 7% $3,500 $3,342 14% Originations ($MM) $3,000 $2,737 22% $2,500 $2,000 $1,500 $1,000 $500 $0 2011 2012 2013 2014 Private Education Loan Originations Originations Stati
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 Smart Option Loan Program Sallie Mae in 2009 Origination Channel School Typical Borrower Student Typical Co-signer Parent The Smart Option loan program consists of: $10,000 avg orig bal, 5 to 15 yr te
Slide 21: Smart Option Loan Projected Gross Default Timing
Smart Option Loan Projected Gross Default Timing ► Defaults on private education loans are generally front-loaded ► Approximately two-thirds of projected gross charge-offs are expected to occur within three years after loans enter full principal and interest repayment Sallie Mae Bank Smart Option St
Slide 22: Conservative Funding Approach
Conservative Funding Approach ► Low cost deposit base with no branch overhead 2014 Target — 90% of retail deposits are savings accounts — Brokered deposits used as alternative funding source Retail deposits ► Term funding / securitizations will augment deposit Brokered deposits funding for future gr
Slide 23: SMB vs. Legacy SLM Private Education Loan ABS Summary
SMB vs. Legacy SLM Private Education Loan ABS Summary Legacy SLM Navient SMB 11-A 11-B 11-C 12-A 12-B 12-C 12-D 12-E 13-A 13-B 13-C 14-A 14-A 15-A 14-A Total Bond Amount ($mil) 562 825 721 547 891 1,135 640 976 1,108 1,135 624 676 664 689 382 Initial AAA Enhancement (%) 21% 18% 24% 27% 26% 25% 25% 2
Slide 24: SMB Trust Collateral Characteristics Comparison
SMB Trust Collateral Characteristics Comparison Cosigner Rate FICO Legacy SLM NAVSL SMB Legacy SLM NAVSL SMB 100% 93% 750 747 Loans with Cosigner, % of Cutoff Bal 741 742 90% 82% 740 740 740 739 79% 80% 80% 80% 80% 81% 79% 80% 740 737 737 75% 77% 736 735 736 80% 72% 75% 71% 733 733 731 70% 730 60% 5
Slide 25: Collections, Charge-off and Recovery Policy
Collections, Charge-off and Recovery Policy 25
Slide 26: Servicing Policy
Sallie Mae Bank Servicing Policy Policy Pre-Spin, Legacy SLM Serviced Post-Spin, Sallie Mae Bank Serviced(1) 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 empha
Slide 27: Collections
Sallie Mae Bank Collections 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 collectio
Slide 28: Post-Default Recoveries
Post-Default Recoveries Recovery Operations ► In the near term, Sallie Mae Bank plans to sell charged-off loans to third parties following charge-off at 120+ days past due – Recoveries realized immediately – Practical and predictable economics – Manageable compliance and vendor oversight requirement
Slide 29: Smart Option: Cumulative Recoveries
Smart Option: Cumulative Recoveries ► Recoveries of charged-off Smart Option loans historically have occurred over a longer period and have been higher than for many other types of unsecured consumer credit Smart Option Loan Cumulative Recovery Rate for Charge-Off Vintages Since 2011 Data for Legacy
Slide 30: Private Education Loan Market Background
Private Education Loan Market Background 30
Slide 31: Private Education Loan Characteristics
Private Education Loan Characteristics ► Unsecured consumer loans made to qualified borrowers and co-signers to fund the cost of undergraduate, graduate and other forms of post-secondary education ► Unlike FFELP Loans, private education loans are not guaranteed against losses by the Department of Ed
Slide 32: Smart Option Private Education Loans
Sallie Mae Bank Smart Option Private Education Loans FFELP vs. Sallie Mae Bank Smart Option Private Education Loan Comparison Sallie Mae Bank Smart Option FFELP Stafford Loans Private Education Loans(1) Borrower Student Student or Parent Co-signer None Typically a parent Lender Eligible banks and pr
Slide 33: Favorable Student Loan Market Trends
Favorable Student Loan Market Trends Enrollment at Four-Year Degree Granting Institutions(1) Annual Cost of Education(2) Public Private (millions) (thousands) $41 $42 $38 $39 13.5 13.5 13.7 $35 $36 13.3 $32 $34 12.9 $29 $30 12.1 $19 $16 $17 $18 $18 $13 $14 $14 $15 $12 2008 2009 2010 2011 2012 2013 2
Slide 34: Higher Education Value Proposition
Higher Education Value Proposition Relationship Between Higher Education, Widening Earnings Gap of Young Adults Payment to Income Ratio(3) Income and Employment(1) by Educational Attainment(2) 1,800 12% $ 17,500 1,600 Average weekly income 10% $ 15,780 Unemployment 1,400 $ 14,245 1,200 8% 1,000 $ 9,
Slide 35: Average Indebtedness Remains Manageable
Average Indebtedness Remains Manageable Average outstanding student loan balance per borrower = $25,361. 40% owe less than $10,000 4% owe more than $100,000 4% 9% Less than $25,000 18% $25,000 to $50,000 $50,000 to $100,000 Over $100,000 69% Source: College Board, “Trends in Student Aid, 2014” (http
Slide 36: Private Education Loan Lifecycle
Private Education Loan Lifecycle IN SCHOOL AND GRACE REPAYMENT Forbearance Status (3 month increments; up to 12 months) Loan made to Grace Status In School Status On Time borrower/ After graduation Repayment Status PAID IN FULL (Additional Borrowing) Payment co-signer (generally 6 months) Deferment
Slide 37: Cohort Default Triangles
Cohort Default Triangles 37
Slide 38: Smart Option Loan Program Cohort Default Triangles
Smart Option Loan Program Cohort Default Triangles The following cohort default triangles provide loan performance information for Legacy SLM, Navient and Sallie Mae Bank serviced Smart Option loans combined, thru the most recent period indicated (1) Terms and calculations used in the cohort def
Slide 39: Cohort Default Triangles – Smart Option Combined (IO, Fixed & Deferred)
Cohort Default Triangles – Smart Option Combined (IO, Fixed & Deferred) Smart Option Combined (P&I Repayment Status - Total) Disbursed Principal Periodic Defaults by Years in P&I Repayment (1), (2), (3) Repayment Entering P&I Year Repayment ($m) 0 1 2 3 4 5 Total 2011 $942 0.9% 1.1% 1.3% 1.0% 0.3% 4
Slide 40: Cohort Default Triangles – Smart Option Interest Only
Cohort Default Triangles – Smart Option Interest Only Smart Option IO (P&I Repayment Status - Total) Disbursed Principal Periodic Defaults by Years in P&I Repayment (1), (2), (3) Repayment Entering P&I Year Repayment ($m) 0 1 2 3 4 5 Total 2011 $671 1.1% 1.1% 1.3% 0.9% 0.3% 4.8% 2012 $805 0.8% 0.7%
Slide 41: Cohort Default Triangles – Smart Option Fixed Payment
Cohort Default Triangles – Smart Option Fixed Payment Smart Option Fixed Payment (P&I Repayment Status - Total) Disbursed Principal Repayment Entering Periodic Defaults by Years in P&I Repayment (1), (2), (3) Year P&I Repayment ($m) 0 1 2 3 4 Total 2011 $271 0.3% 1.1% 1.2% 1.0% 0.2% 3.8% 2012 $598 0
Slide 42: Cohort Default Triangles – Smart Option Deferred Payment
Cohort Default Triangles – Smart Option Deferred Payment Smart Option Deferred (P&I Repayment Status - Total) Disbursed Principal Repayment Entering Periodic Defaults by Years in P&I Repayment (1), (2),(3) Year Repayment ($m) 0 1 2 3 Total 2012 $229 0.0% 1.4% 1.4% 0.3% 3.1% 2013 $627 0.0% 1.6% 0.5%