Slm Corporation · NASDAQ:SLM
Slm — Q1 2016 Earnings Presentation
46 slides from Slm's earnings presentation, 2016
Slide 1: Sallie Mae Investor Presentation First Quarter 2016
SALLIE MAE INVESTOR PRESENTATION FIRST QUARTER 2016
Slide 2: Forward-Looking Statements and Disclaimer
| 2 Forward-Looking Statements and Disclaimer Cautionary Note Regarding Forward-Looking Statements The following information is current as of January 20, 2016 (unless otherwise noted) and should be read in connection with the press release of SLM Corporation (the “Company”) announcing its financial
Slide 3: Sallie Mae Brand
| 3 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: 54% mark
Slide 4: Sallie Mae Highlights
| 4 Sallie Mae Highlights • Originated $4.3 billion of high quality Private Education Loans in 2015 (+6% vs. 2014) • Grew Private Education Loan portfolio 28% from 2014 to 2015 • Grew market share in 2014 and 2015 to 54% • Generated earnings1 of $255 million in 2015, up 40% from 2014 • Completed $1.
Slide 5: Sallie Mae Summary
| 5 Sallie Mae Summary - Leading private education Private Education Loan - loan franchise Originator and Servicer - Conservative credit and Deposits - funding Upromise Rewards - - Expanding consumer Credit Card - finance product suite Strategic Key Overview Businesses - National sales and Competiti
Slide 6: Favorable Student Loan Market Trends
| 6 Favorable Student Loan Market Trends Academic Year Enrollment at Four-Year Degree Granting Institutions(1) Annual Cost of Education(2) Public Private (millions) (thousands) $42 $44 $39 $41 $36 $38 13.4 13.5 13.4 13.5 $34 $35 13.3 $32 12.9 $17 $18 $18 $19 $20 $14 $15 $16 $14 2009 2010 2011 2012 2
Slide 7: Higher Education Value Proposition
| 7 Higher Education Value Proposition Relationship Between Higher Education, Incremental Earnings From a College Degree Has Increased For Generations(2) Payment to Income Ratio(4) Income and Employment(1) 1,800 12% $ 17,500 1,600 Average weekly income 10% $ 15,780 1,400 Unemployment $ 14,245 1,200
Slide 8: Smart Option Overview
| 8 Smart Option Overview Product Features – Offers three repayment options while in school, which include Interest Only, $25 Fixed Payment and Deferred Repayment – Variable and Fixed Interest Rate Options – All loans are certified by the school’s financial aid office to ensure all proceeds are for
Slide 9: High Quality Private Education Loan Originations Growth
| 9 High Quality Private Education Loan Originations Growth $5,000 $4,500 $4,330 $4,076 6% $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 $0 2011 2012 2013 2014 2015 Private Education Loan Originations Originations Statistics ($) 2011 2012 20
Slide 10: Analytical Approach to Credit
| 10 Analytical Approach to Credit Student Initial Screen Manual Review ► $1,000 minimum loan ► ~8% of applications ► Minimum FICO of 640 ► Asset expertise and rigorous ► Pass risk scores, but require further underwriting driven by large ► No existing SLM 30+ day past dues review due to credit conce
Slide 11: High Quality Private Education Portfolio
| 11 High Quality Private Education Portfolio Customer FICO at Origination Smart Option Payment Type <700 Interest Only 21% 780+ 21% 30% Deferred 700 - 740 47% 26% Fixed Pay 740 - 780 32% 23% Weighted Average FICO: 746 Smart Option Loans: $10.2bn Portfolio by Originations Vintage Portfolio Interest
Slide 12: Conservative Funding Approach
| 12 Conservative Funding Approach 2015 Target Low cost deposit base with no branch overhead — 80% of retail deposits are savings accounts 8% — Brokered deposits used as alternative funding source 30% Term funding / securitizations will augment deposit funding for future growth — Experienced capital
Slide 13: Delinquency and Default Performance
| 13 Delinquency and Default Performance 10.0% 10.0% (As a % of Loans in P&I Repayment)(1),(2),(3) Repayment Balance Repayment Balance 8.0% 8.0% 31-60 Day Delinquency 61-90 Day Delinquency 10.0% 10.0% 6.0% 6.0% % of P&I Balance % of P&I Balance 8.0% 8.0% 4.0% 4.0% % of P&I Repayment % of P&I Repayme
Slide 14: Cumulative Default Rate
| 14 Cumulative Defaults by P&I Repayment Vintage(1),(2),(3) Smart Option Cumulative Gross Defaults by P&I Repayment Vintage and Years in P&I Repayment 10.0% as a % of Original Balance Cumulative Default Rate 9.0% 8.0% 7.0% 6.0% 6.0% 5.0% 5.0% 4.0% 3.6% 3.0% 2.6% 2.0% 1.7% 1.0% 0.0% 0 1 2 3 4 5 6 7
Slide 15: Financial Review
| 15 Financial Review (in millions) Q4 2015 Q4 2014 Variance 2015 2014 Variance PSL $ 10,624 $ 8,325 $ 2,299 $ 10,624 $ 8,325 $ 2,299 PSL Reserve (109) (79) (30) (109) (79) (30) FFELP 1,119 1,268 (150) 1,119 1,268 (150) FFELP Reserve (4) (5) 2 (4) (5) 2 • Private Education Loan Total Loans 11,631 9,
Slide 16: Sallie Mae Bank
| 16 Sallie Mae Bank • Market share leader in private student loan industry • High quality assets and conservatively funded balance sheet • Predictable balance sheet growth for the next several years • Strong capital position and funding capabilities • A financial services company with high growth t
Slide 17: Smart Option Student Loan Historical Performance Data
| 17 Smart Option Student Loan Historical Performance Data Period ended December 31, 2015
Slide 18: Important Information Regarding Historical Loan Performance Data
| 18 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
Slide 19: Important Information Regarding Historical Loan Performance Data (cont.)
| 19 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 three separate sources of information: (1) Combined Smart Option Student Loan Portfolio Data for Legacy SLM, Navient and Sallie
Slide 20: Smart Option Serviced Portfolio: 31-60 Day Delinquencies
| 20 Smart Option Serviced Portfolio: 31-60 Day Delinquencies Smart Option Student Loans - Serviced Portfolio Smart Option Student Loans - Serviced Portfolio 31-60 Day Delinquencies as a % of Loans in P&I Repayment (1) 31-60 Day Delinquencies as a % of Loans in P&I Repayment (1) Data for Legacy SLM
Slide 21: Smart Option Serviced Portfolio: 61-90 Day Delinquencies
| 21 Smart Option Serviced Portfolio: 61-90 Day Delinquencies Smart Option Student Loans - Serviced Portfolio Smart Option Student Loans - Serviced Portfolio 61-90 Day Delinquencies as a % of Loans in P&I Repayment (1) 31-60 Day Delinquencies as a % of Loans in P&I Repayment (1) Data for Legacy SLM
Slide 22: Smart Option Serviced Portfolio: 91+ Day Delinquencies
| 22 Smart Option Serviced Portfolio: 91+ Day Delinquencies Smart Option Student Loans - Serviced Portfolio Smart Option Student Loans - Serviced Portfolio 91+ Day Delinquencies as a % of Loans in P&I Repayment (1) 91+ Day Delinquencies as a % of Loans in P&I Repayment (1) Data for Legacy SLM thru A
Slide 23: Smart Option Serviced Portfolio: Forbearance
| 23 Smart Option Serviced Portfolio: Forbearance Smart Option Student Loans - Serviced Portfolio Smart Option Student Loans - Serviced Portfolio Forbearance as a % of Loans in P&I Repayment and Forbearance (1), (2) Forbearance as a % of Loans in P&I Repayment and Forbearance (1), (2) Data for Legac
Slide 24: Smart Option Serviced Portfolio: Annualized Gross Defaults
| 24 Smart Option Serviced Portfolio: Annualized Gross Defaults Smart Option Student Loans - Serviced Portfolio Smart Option Student Loans - Serviced Portfolio Annualized Gross Defaults as a % of Loans in P&I Repayment(1) Annualized Gross Defaults as a % of Loans in P&I Repayment(1) Data for Legacy
Slide 25: Smart Option Vintage Data: Cumulative Gross Default by Loan Type
| 25 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&
Slide 26: Smart Option Vintage Data: Voluntary Prepayments
| 26 Smart Option Vintage Data: Voluntary 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 O
Slide 27: Smart Option Vintage Data: Total Prepayments
| 27 Smart Option Vintage Data: Total Prepayments ► 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 Total CPR by Origination Vintage (1) Total CPR by Origina
Slide 28: Smart Option: Cumulative Recoveries
| 28 Smart Option: Cumulative Recoveries ► Recoveries of charged-off Smart Option Student Loans® historically have occurred over a longer period than for many other types of unsecured consumer credit Smart Option Loan Cumulative Recovery Rate Smart Option Loan Cumulative Recovery Rate For Charge-Off
Slide 29: Smart Option Loan Program Cohort Default Triangles
| 29 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 cohor
Slide 30: Cohort Default Triangles – Smart Option Combined
| 30 Cohort Default Triangles – Smart Option Combined (Interest Only, Fixed & Deferred) Smart Option Combined (P&I Repayment Status - Total) P&I 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 2010 $430 1.1% 2
Slide 31: Cohort Default Triangles – Smart Option Interest Only
| 31 Cohort Default Triangles – Smart Option Interest Only Smart Option IO (P&I Repayment Status - Total) P&I Disbursed Principal Periodic Defaults by Years in P&I Repayment (1), (2), (3) Repayment Entering P&I Year Repayment ($m) 0 1 2 3 4 5 Total 2010 $428 1.1% 2.4% 3.5% 4.5% 5.5% 6.0% 6.0% 2011 $
Slide 32: Cohort Default Triangles – Smart Option Fixed Payment
| 32 Cohort Default Triangles – Smart Option Fixed Payment Smart Option Fixed Payment (P&I Repayment Status - Total) P&I 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 Total 2011 $225 0.3% 1.5% 3.0% 4.4% 5.8% 5.8% 20
Slide 33: Cohort Default Triangles – Smart Option Deferred Payment
| 33 Cohort Default Triangles – Smart Option Deferred Payment Smart Option Deferred (P&I Repayment Status - Total) P&I Disbursed Principal Periodic Defaults by Years in P&I Repayment (1), (2), (3) Repayment Entering P&I Year Repayment ($m) 0 1 2 3 Total 2012 $253 0.1% 1.4% 2.8% 4.4% 4.4% 2013 $636 0
Slide 34: ABS Supplement
| 34 ABS Supplement
Slide 35: Sallie Mae's Smart Option Loan Product Overview
| 35 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 • The Smart Option loan program consists of: Typical Co-signer Parent $10,000 avg orig bal, 5 to 15
Slide 36: SMB vs. Legacy SLM Private Education Loan ABS Summary
| 36 SMB vs. Legacy SLM Private Education Loan ABS Summary Legacy SLM Navient Sallie Mae Bank 11-A 11-B 11-C 12-A 12-B 12-C 12-D 12-E 13-A 13-B 13-C 14-A 14-A 15-A 15-B 15-C 14-A 15-A 15-B 15-C Total Bond Amount ($mil) 562 825 721 547 891 1,135 640 976 1,108 1,135 624 676 664 689 700 359 382 704 714
Slide 37: Sallie Mae Bank ABS Structures
| 37 Sallie Mae Bank ABS Structures SMB 2015-B SMB 2015-C Size $630.8MM(1) $701.0MM Pricing Date July 23, 2015 October 19, 2015 Smart Option Smart Option Collateral Private Education Loans Private Education Loans Servicer Sallie Mae Bank Sallie Mae Bank Overcollateralization (2) 13% 14% Pricing Prep
Slide 38: SMB 2015-C Structure
| 38 SMB 2015-C Structure(1) ► Sallie Mae Bank is the loan originator, loan servicer, and transaction sponsor ► SMB 2015-C utilizes a sequential structure Pct of Total Bond Wtd Avg Life to Call Principal Window to Call Expected Maturity to Class Bond Balance Balance Ratings (M/S) Index (4% CPR)(2) (
Slide 39: SMB 2015-C Structure
| 39 SMB 2015-C Structure Projected Class A Deal Credit Enhancement(2,4) Reserve WAL to Call(1) (4% CPR) Principal Window to Call(1) Credit Enhancement(3) Non- Class A Class B Target(3)(5) Floor(5) A1 A2 A3 B C A1 A2 A3 B C 12 mo 24 mo 36 mo 60 mo declining SMB 23% 14% 30% 11% 0.25% 1.23 4.97 8.20 9
Slide 40: SMB 2015-C Collateral Detail by Loan Type
| 40 SMB 2015-C Collateral Detail by Loan Type Smart Option Smart Option Smart Option TOTAL ► Smart Option Interest Only and Fixed Pay loans Interest Only Fixed Pay Deferred require interest only payments or $25 fixed Outstanding Principal Balance $149,950,824 $224,381,746 $326,222,912 $700,555,482
Slide 41: Servicing Policies
| 41 Sallie Mae Bank Servicing Policies 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 afte
Slide 42: Collections
| 42 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 coll
Slide 43: Smart Option Private Education Loans
| 43 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 a
Slide 44: Private Education Loan Lifecycle for Deferred Loans
| 44 Private Education Loan Lifecycle for Deferred Loans IN SCHOOL AND GRACE P&I REPAYMENT Forbearance Status (3 month increments; up to 12 months) Loan made to Grace Status In School Status P&I Repayment On Time borrower/ After graduation PAID IN FULL (Additional Borrowing) Status Payment co-signer
Slide 45: Appendix
| 45 APPENDIX
Slide 46: “Core Earnings” to GAAP Reconciliation
| 46 “Core Earnings” to GAAP Reconciliation Quarters Ended Years Ended December 31, December 31, 2015 2014 2015 2014 (Dollars in thousands, except per share amounts) “Core Earnings” adjustments to GAAP: GAAP net income attributable to SLM Corporation……….………….…….........………………… $ 89,845 $ 19,717 $ 27
SLM Corporation (Sallie Mae) — Q1 2016 Earnings Presentation on 6ix