Slm Corporation · NASDAQ:SLM
Slm — Q3 2022 Earnings Presentation
28 slides from Slm's earnings presentation, Oct 26, 2022
Slide 1: Investor Presentation Quarter ended September 30, 2022
Investor Presentation Quarter ended September 30, 2022
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 October 26, 2022 (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 is an Outstanding Franchise
Sallie Mae is an Outstanding Franchise Sallie Mae is the market-leading brand for private education loans driven by brand recognition, rigorous underwriting methodology and industry- leading customer service. Top ranked and highly recognized brand 2,300+ actively managed university relationships Ind
Slide 4: Strong Peak Season Results; Strong Strategic Execution; Loan Sale Strategy
Strong Peak Season Results • Highest peak season application volume in the last 3 years as a result of the strong return to campus post-pandemic. 13.2% year-to-dateA increase in total applications as compared to the year-ago period. • Specifically, underclassmen applications, typically with a higher
Slide 5: Revenue, Total Operating Expenses, Earnings/Capital
1. Revenue • GAAP Net Income of $75 million in Q3 2022, compared to $73 million in Q3 2021. • Originated $2.35 billion of Private Education Loans in Q3 2022 (13% increase vs. Q3 Maximize the 2021). profitability and growth of Total Operating Expenses our core • Total operating expenses of $150 milli
Slide 6: Private Education Loan Originations
Private Education Loan Originations23 Sallie Mae Annual Originations ($ millions) 6% $5,625 (5%) $5,315 $5,321 2% $5,423 $5,155 10% $4,686 Actual Forecast Originations Statistics ($) 2018 2019 2020 2021 Q3 2022 Q3 2021 % Cosigned 87% 87% 86% 86% 89% 88% % In School P ayment 57% 58% 60% 59% 53% 52% A
Slide 7: Higher Education Value Proposition Remains Attractive
Higher Education Value Proposition Remains Attractive5 Expanding Addressable Market • Private Education Loans represent 2-3% of the overall spend in Federal Loans Private higher education annually. $84B Education Loans Other $11B • Total spend on higher education grows ~2% annually, while Private $1
Slide 8: High Quality Private Education Loan Portfolio
Customer FICO at Original Approval Smart Option Payment Type <700 780+ Interest Only High Quality 23% 27% 19% Private Weighted Deferred Loans Average 48% $17.8B FICO: 743 Education 700-739 740 - 780 Fixed Pay Loan Portfolio 27% 23% 33% Portfolio by Originations Vintage Portfolio Interest Rate Type P
Slide 9: Conservative Funding Optimizes Net Interest Margin
Conservative Funding Optimizes Net Interest Margin Secured Debt Retail 21% MMDA & CD 21% Retail $11.1B Brokered $10.2B Retail Brokered Secured Debt $4.5B H.S.A. Variable & 529 18% 17% Brokered Fixed 23% As of 9/30/22 9
Slide 10: Simple But Powerful Investment Thesis
Simple But Powerful Investment Thesis • Consistent earnings expansion is driven by top line growth and efficiency Attractive • Sallie Mae is the leader in the private education loan market that is growing Earnings Profile 6+% a year • Well-proven and disciplined underwriting model leveraging data an
Slide 11: Clear Strategy to Prove this Investment Thesis
Clear Strategy to Prove this Investment Thesis Strategic Imperatives: 1. 2. 3. 4. Maximize the Maximize the Better inform Maintain a profitability value of our the external rigorous and and growth of brand and narrative about predictable our core attractive private student capital business customer
Slide 12: Maximize the Profitability and Growth of the Core Business
Maximize the Profitability and Growth of the Core Business Maximize Revenue Manage Unit Costs Drive penetration at all schools Strong fixed cost discipline Increase market share by fully Efficiency effectiveness across all meeting student funding needs areas Enhanced risk-adjusted pricing and Improv
Slide 13: Optimize the Value of the Brand and Attractive Client Base
Optimize the Value of the Brand and Attractive Client Base 2M 91% We know our customers’ finances, Borrowers and Customers complete payment patterns and indebtedness cosigners their program7 We have the relationships and knowledge to assist our customers Graduates who benefit from the investment7 wi
Slide 14: Changing the Narrative
Changing the Narrative In the current environment, there are two main areas of focus from third parties that include debt forgiveness and bankruptcy reform. We expect our business to perform well even under leading reform proposals.4 Debt Forgiveness Broad student debt forgiveness has ben replaced b
Slide 15: Maintain Rigorous Capital Allocation and Return Program
Maintain Rigorous Capital Allocation and Return Program Invest in High ROE Growth Share Repurchase • Continue to focus on high-quality • Repurchased 1 million shares of common stock in Private Education Loan originations, Q3 2022. Repurchased 31 million shares year-to- including deeper penetration o
Slide 16: Diverse Student Loan Portfolio Driving Increased Shareholder Value
Diverse Student Loan Portfolio Driving Increased Shareholder Value Undergraduate Graduate RATE TYPE Variable & Fixed Variable & Fixed Health Variable: SOFR + Variable: SOFR + Medical Dental 1.250% - SOFR + 1.750% - SOFR + Professions INTEREST RATE 12.375% 11.625% RANGES Fixed: 4.750% - Fixed: 5.500%
Slide 17: Sallie Mae is an ESG Company
Sallie Mae is an ESG Company Providing Financial Education Serving our Customers & Assistance • Free Scholarship Search tool listing more than 6 million scholarships worth • Helped more than 1.8 million student and families finance higher education up to $30 billion since 2014 • Committed $4.5 milli
Slide 18: ABS Supplement
ABS Supplement Confidential and proprietary information. © 2021 Sallie Mae Bank. All rights reserved.
Slide 19: Sallie Mae's Smart Option Loan Product Overview
Sallie Mae’s Smart Option Loan Product Overview The Smart Option loan product was introduced by Sallie Mae in 2009 • Smart Option payment option may not be The Smart Option loan changed after selected at origination program consists of: • Fixed-rate loans or variable-rate loans • Consumer credit und
Slide 20: Sallie Mae Bank ABS Summary
Sallie Mae Bank ABS Summary28 14-A 15-A 15-B 15-C 16-A 16-B 16-C 17-A 17-B 18-A 18-B 18-C 19-A 19-B 20-A 20-B 21-B 21-D 21-E 22-C Issuance Date 8/7/201 4 4/23/201 5 7/30/201 5 1 0/27/201 5 5/26/201 6 7/21 /201 6 1 0/1 2/201 6 2/8/201 7 1 1 /8/201 7 3/21 /201 8 6/20/201 8 9/1 9/201 8 3/1 3/201 9 6/1
Slide 21: Sallie Mae Bank ABS Structures
Sallie Mae Bank ABS Structures SMB 2022-C SMB 2021-E SMB 2021-D SIZE $575.0MM $534.0MM $527.0MM PRICING DATE August 2, 2022 November 2, 2021 August 10, 2021 Smart Option Smart Option Smart Option COLLATERAL Private Education Loans Private Education Loans Private Education Loans SERVICER Sallie Mae B
Slide 22: Appendix
Appendix Confidential and proprietary information. © 2021 Sallie Mae Bank. All rights reserved.
Slide 23: Commitments vs Disbursements
Commitments vs Disbursements 2021 Actuals Commitments vs Disbursements 52% 38% 38% 23% 15% 14% 10% 10% Q1 2021 Q2 2021 Q3 2021 Q4 2021 Commitments Disbursements Provision for New Loans Additional Provision Impacts Unfunded Commitments • Directly impacted by the timing of • New Loans, DCF accretion,
Slide 24: CECL Update
CECL Update13 Adopted on January 1, 2020. • The company’s 2020 financial results reflect a transition adjustment that increased the allowance for loan losses by $1.1 billion, increased the liability representing its off-balance sheet exposure for unfunded commitments by $116 million and increased th
Slide 25: Quarterly Financial Highlights
Quarterly Financial Highlights14, 15 Q3 Q2 Q3 Q3 Q2 Q3 2022 2022 2021 2022 2022 2021 Income Statement ($ Millions) Key Performance Metrics Total interest income $520 $463 $448 Net Interest Margin 5.27% 5.29% 5.03% Total interest expense 150 100 90 Yield—Total Interest-earning assets 7.42% 6.75% 6.30
Slide 26: Sallie Mae vs Federal Student Loans
Sallie Mae vs Federal Student Loans Sallie Mae Federal Student Loan Program21 Federal Direct Loan Loan Program Smart Option Student Loan20 Parent Plus (Subsidized & Unsubsidized) Yr 1 - $5,500 ($3,500 > subsidized) $1,000 - Cost of Attendance Yr 2 - $6,500 ($4,500 > subsidized) Undergraduate Loan Li
Slide 27: Non-GAAP Core Earnings to GAAP Reconciliation
Non-GAAP “Core Earnings” to GAAP Reconciliation Quarters Ended ($ in thousands, except per share amounts) Sep. 30, 2022 Jun. 30, 2022 Sep. 30, 2021 Non-GAAP “Core Earnings” adjustments to GAAP: GAAP net income $75,172 $342,073 $72,840 Preferred stock dividends $2,531 $1,757 $1,166 GAAP net income at
Slide 28: Footnotes
Footnotes 1. J.D. Power 2019 Certified Customer Service Program recognition is based on successful completion of an evaluation and exceeding a customer satisfaction benchmark through a survey of recent servicing interactions. For more information, visit www.jdpower.com/ccc. 2. Source: Enterval CBA R
SLM Corporation (Sallie Mae) — Q3 2022 Earnings Presentation on 6ix