Slm Corporation · NASDAQ:SLM
Slm — Q1 2019 Earnings Presentation
35 slides from Slm's earnings presentation, 2019
Slide 1: Sallie Mae Investor Presentation First Quarter 2019
SALLIE MAE INVESTOR PRESENTATION First Quarter 2019
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 January 23, 2019 (unless otherwise noted) and should be read in connection with the press release of SLM Corporation (the “Company”) announcing its financial resu
Slide 3: Sallie Mae Opportunity: Creating shareholder value
Sallie Mae Opportunity: Creating shareholder value by growing a unique and sustainable financial franchise 3
Slide 4: Putting the pieces together
Putting the pieces together Market Competitive Leading Product Brand Offering Quality Growth Strong Through Financial Rigorous Returns Underwriting 4
Slide 5: Market leading brand, products and best-in-class service drives our success
Market leading brand, products and best-in-class service drives our success • 40 years of leadership in the education Market Conservative lending market Leading Funding and Brand Underwriting • Top ranked brand • Industry leading 55% market share1 • Over 2,400 actively managed university Strong Cons
Slide 6: Private Student Loan Industry
Private Student Loan Industry • Private education loans represent Other 2% of the overall spend in higher $18 education annually Federal Loans Private • Total spend on higher education $94 Education Loans grows 2-3% annually primarily due Grants $11 to increases in cost of attendance $129 $441 Billi
Slide 7: Higher Education Value Proposition
Higher Education Value Proposition Unemployment rates and earnings by educational attainment, 2017 2 Unemployment rate Median usual weekly earnings Doctoral Degree 1.5% $1,743 Professional Degree 1.5% $1,836 Master's Degree 2.2% $1,401 Bachelor's Degree 2.5% $1,173 Associate's degree 3.4% $836 Some
Slide 8: Product suite tailored to meet the needs of undergrad and grad students
Product suite tailored to meet the needs of undergrad and grad students Market Conservative • Smart Option Student Loan Leading Funding and Brand Underwriting • Introduced in 2009 • Flexible repayment options while in school • Fixed and Variable rates Strong Consistent Financial Credit • Differentia
Slide 9: Product Overview
Product Overview Undergraduate Medical Law Parent Dental Health Professions MBA General Studies Undergraduate Graduate Parent Rate Type Variable & Fixed Variable & Fixed Variable & Fixed Variable: LIBOR + 2.00% - LIBOR + 9.88% Variable: LIBOR + 2.25% - LIBOR + 7.88% Variable: LIBOR + 3.50% - LIBOR +
Slide 10: Consistent underwriting has contributed to better than model credit performance
Consistent underwriting has contributed to better than model credit performance • Proprietary Scorecard built with Experian Market Conservative Decision Analytics Leading Funding and Brand Underwriting • Initial credit screen removes applicants with low FICO scores or prior derogatory trades on file
Slide 11: Consistent high quality originations growth
Consistent high quality originations growth6 $5,500 $5,315 11% $5,000 $4,800 $4,666 3% 8% $4,500 $4,330 $4,076 6% $4,000 Originations ($MM) $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 2014 2015 2016 2017 2018 Private Education Loan Originations Originations Statistics ($) 2014 2015 2016 2017 2
Slide 12: High Quality, Predictable Credit Program
High Quality, Predictable Credit Program8,9,10 Smart Option Cumulative Gross Defaults by P&I Repayment Vintage and Years Since First P&I Repayment Period Disbursed Principal Entering P & I Repayment 10% Cumulative Defaults as a % of 9% 8% 7% 7.2% 6% 6.6% 5.7% 5% 5.3% 4% 5.4% 4.7% 3% 3.2% 2% 1.6% 1%
Slide 13: High Quality Portfolio Growth
High Quality Portfolio Growth Projected Balance Sheet Growth 2018-2021 $35 $30 $25 $20 $15 $10 $5 $0 2018 2021 Private FFELP Other (Personal and Credit Card) • 78% of Private Education Loan Originations have FICO scores > 7007 • 52% of Private Education Loan Borrowers make payments while in school •
Slide 14: Conservative funding optimizes net interest margin
Conservative funding optimizes net interest margin Secured Debt Retail 19% MMDA & CD 22% Brokered $10.3b Retail $8.6b Retail Secured Debt $4.3b Brokered H.S.A. & 529 Variable 15% 27% Brokered Fixed 17% 14
Slide 15: Strong financial results translate to predictable returns to shareholders
Strong financial results translate to predictable returns to shareholders Market Conservative Leading Funding and • Consistent earnings per share growth Brand Underwriting • High return on equity • Stable net interest margin Strong Consistent • Introducing capital return programs Financial Credit Re
Slide 16: Clear Capital Priorities
Clear Capital Priorities Invest in High ROE Growth Continue to focus on high-quality Private Education Loan originations, including deeper penetration of the graduate Quarterly school market Dividend Testing Personal Loan market Invest in Offer credit cards to our high-quality Share High ROE custome
Slide 17: CECL Update
CECL Update • The Financial Accounting Standards Board’s (FASB) Current Expected Credit Loss impairment standard will require “life of loan” estimates of losses to be recorded at origination and is set to take effect in January 2020. • There will be an initial build of the loan loss allowance that w
Slide 18: Guidance
Guidance 2019 Targets Diluted “Core Earnings” Per Share: $1.22 - $1.26 Private Education Loan Originations: $5.7 billion Non-GAAP Efficiency Ratio: 35-36%11 Long-Term Targets Prudently grow balance sheet without sacrificing quality Continue to leverage operating platform and limit operating expense
Slide 19: Sallie Mae Opportunity: Creating Value while Growing
Sallie Mae Opportunity: Creating Value while Growing Market Conservative Leading Funding and Brand Underwriting Strong Consistent Financial Credit Returns Performance 19
Slide 20: ABS Supplement
ABS SUPPLEMENT 20
Slide 21: 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 • The Smart Option loan program consists of: Typical Co-signer Parent $10,000 avg orig bal, 5 to 15 yr te
Slide 22: Sallie Mae Bank ABS Summary
Sallie Mae Bank ABS Summary 14-A 15-A 15-B 15-C 16-A 16-B 16-C 17-A 17-B 18-A 18-B 18-C Issuance Date 8/7/2014 4/23/2015 7/30/2015 10/27/2015 5/26/2016 7/21/2016 10/12/2016 2/8/2017 11/8/2017 3/21/2018 6/20/2018 9/19/2018 Total Bond Amount ($mil) $382 $704 $714 $701 $551 $657 $674 $772 $676 $670 $68
Slide 23: Sallie Mae Bank ABS Structures
Sallie Mae Bank ABS Structures SMB 2018-C SMB 2018-B SMB 2018-A Size $544.0MM $686.5MM $670.0MM Pricing Date September 12, 2018 June 13, 2018 March 14, 2018 Smart Option Smart Option Smart Option Collateral Private Education Loans Private Education Loans Private Education Loans Servicer Sallie Mae B
Slide 24: Sallie Mae Bank Servicing Policies
Sallie Mae Bank Servicing Policies Policy Pre-Spin, Legacy SLM Serviced Post-Spin, Sallie Mae Bank Serviced 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 emphas
Slide 25: Sallie Mae Bank 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 26: Sallie Mae Bank 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 Loans16 Borrower Student Student or Parent Co-signer None Typically a parent Lender Eligible banks and pri
Slide 27: Appendix
APPENDIX 27
Slide 28: Enhancing franchise value through a deeper relationship with clients
Enhancing franchise value through a deeper relationship with clients Distribution of Sallie Mae Borrowers by Product and Age 100% 93% 95% 91% 90% 87% 83% 80% 79% 73% 70% 64% % of Borrowers 60% % with a Credit Card 54% 50% % with a Personal Loan 42% 40% 30% 29% 30% 30% 27% 25% 21% 22% 20% 18% 15% 11%
Slide 29: High Quality Private Education Loan Portfolio
High Quality Private Education Loan Portfolio Customer FICO at Original Approval 7 Smart Option Payment Type <700 Interest Only 21% 780+ 22% 29% Deferred 700 - 740 48% 27% 740 - 780 Fixed Pay 30% 23% Weighted Average FICO: 744 Smart Option Loans: $19.5 billion Portfolio by Originations Vintage Portf
Slide 30: Sallie Mae vs Federal Student Loans
Sallie Mae vs Federal Student Loans Sallie Mae Federal Student Loan Program 17 Federal Direct Loan Loan Program Smart Option Student Loan Parent Plus (Subsidized & Unsubsidized) Yr 1 - $5,500 ($3,500 > subsidized) $1,000 - Cost of Attendance Yr 2 - $6,500 ($4,500 > subsidized) Undergraduate Loan Lim
Slide 31: "Core Earnings" to GAAP Reconciliation
“Core Earnings” to GAAP Reconciliation Quarters Ended Year Ended Dec. 31 Sept 30, Dec. 31, Dec. 31 Dec. 31 2018 2018 2017 2018 2017 (Dollars in thousands, except per share am ounts) “Core Earnings” adjustments to GAAP: GAAP net income……….….…….........………………… $ 147,512 $ 103,878 $ 47,003 $ 487,476 $
Slide 32: 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 33: 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 34: Smart Option Loan Program Cohort Default Curves
Smart Option Loan Program Cohort Default Curves Terms and calculations used in the cohort default curves are defined below: First P&I Repayment Period – The month during which a borrower is first required to make a full principal and interest payment on a loan. P&I Repayment Vintage – The calend
Slide 35: Footnotes
Footnotes: 1. Source: MeasureOne CBA Report as of December 2017 2. U.S. Bureau of Labor Statistics, Current Population Survey 3. Source: Trends in Student Aid,© 2017 The College Board, www.collegeboard.org, U.S. Department of Education 2017 4. Source: U.S. Bureau of Labor Statistics- “More education
SLM Corporation (Sallie Mae) — Q1 2019 Earnings Presentation on 6ix