Slm Corporation · NASDAQ:SLM
Slm — Q4 2015 Earnings Presentation
43 slides from Slm's earnings presentation, 2015
Slide 1: Sallie Mae Investor Presentation Fourth Quarter 2015
SALLIE MAE Investor Presentation FOURTH QUARTER 2015
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 21, 2015 (unless otherwise noted) and should be read in connection with the Quarterly Report of SLM Corporation (the “Company”) on Form 10-Q for the quart
Slide 3: 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: 54% mark
Slide 4: Sallie Mae Highlights
Sallie Mae Highlights ► Originated $4.1 billion of high quality Private Education Loans in 2014 (+7% vs. 2013), $3.8 billion in 2015 YTD (+7% vs. 2014 YTD) ► Grew Private Education Loan portfolio 38% from Q3 2014 to Q3 2015 ► Grew market share in 2014 and 2015 (54%) ► Generated Earnings of $46 milli
Slide 5: Sallie Mae Summary Strategic Overview
Sallie Mae Summary - Leading private education Private Education Loan - loan franchise Originator and Servicer - Conservative credit and Deposits - funding Upromise Rewards - - Expanding consumer Credit Card - finance product suite Strategic Key Overview Businesses - National sales and ($B as of 9/3
Slide 6: 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 7: Higher Education Value Proposition
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 $ 15,780 10% 1,400 Unemployment $ 14,245 1,200 8% $
Slide 8: Smart Option Overview
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 ed
Slide 9: High Quality Private Student Loan Originations Growth
High Quality Private Student Loan Originations Growth $5,000 $4,500 $4,300 $4,076 5% $4,000 $3,795 7% $3,756 7% $3,500 $3,342 14% YTD Originations ($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
Slide 10: Analytical Approach to Credit
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 concerns v
Slide 11: High Quality Private Education Portfolio
High Quality Private Education Portfolio Customer FICO at Origination Smart Option Payment Type <700 Interest 21% 780+ Only 30% 21% Deferred 700 - 740 47% Fixed Pay 26% 740 - 780 32% 23% Weighted Average FICO: 747 Smart Option Loans: $10.4bn Portfolio by Originations Vintage Portfolio Interest Rate
Slide 12: Conservative Funding Approach
Conservative Funding Approach ► Low cost deposit base with no branch overhead — 80% of retail deposits are savings accounts 2015 Target — Brokered deposits used as alternative funding source ► Term funding / securitizations will augment deposit funding 11% for future growth — Experienced capital mar
Slide 13: Cumulative Default Rate
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% 5.8% 5.0% 4.9% 4.0% 3.5% 3.0% 2.6% 2.0% 1.5% 1.0% 0.0% 0 1 2 3 4 5 6 7 Years
Slide 14: Smart Option Delinquency and Default Performance
Smart Option Delinquency and Default Performance (As a % of Loans in P&I Repayment)(1),(2),(3) 10.0% 31-60 Day Delinquency 10.0% 61-90 Day Delinquency % of P&I Repayment Balance % of P&I Repayment Balance 8.0% 8.0% 6.0% 6.0% 4.0% 4.0% 2.0% 2.0% 0.0% 0.0% Legacy SLM: 31-60 Delinquency SLM Bank: 31-60
Slide 15: "Core Earnings" to GAAP Reconciliation
“Core Earnings” to GAAP Reconciliation Quarters Ended Nine Months Ended (Dollars in thousands, except per share amounts) Sept 30, June 30, Sept 30, Sept 30, Sept 30, 2015 2015 2014 2015 2014 “Core Earnings” adjustments to GAAP: GAAP net income attributable to SLM Corporation….…….…..……….…….........……
Slide 16: Financial Review: Income Statement
Financial Review (in millions) Q3 2015 Q3 2014 Variance PSL $ 10,867 $ 7,839 $ 3,027 PSL Reserve (100) (60) (40) FFELP 1,147 1,322 (175) ► Private Education Loan portfolio growth of 38% FFELP Reserve / Other (4) (6) 2 Total Loans 11,909 $ 9,095 2,814 Balance Sheet Cash 1,282 1,570 (289) Other Assets
Slide 17: Sallie Mae Bank
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 trajec
Slide 18: Smart Option Student Loan Historical Performance Data
SALLIE MAE BANK Smart Option Student Loan Historical Performance Data Period ended September 30, 2015 18
Slide 19: 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 20: 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 21: Smart Option Serviced Portfolio: 31-60 Day Delinquencies
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 thru
Slide 22: Smart Option Serviced Portfolio: 61-90 Day Delinquencies
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) 61-90 Day Delinquencies as a % of Loans in P&I Repayment (1) Data for Legacy SLM thru
Slide 23: Smart Option Serviced Portfolio: 91+ Day Delinquencies
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 April
Slide 24: Smart Option Serviced Portfolio: Forbearance
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 Legacy SLM
Slide 25: Smart Option Serviced Portfolio: Annualized Gross Defaults
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 SLM t
Slide 26: 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 27: Smart Option Vintage Data: Voluntary Prepayments
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 Option
Slide 28: Smart Option Vintage Data: Total Prepayments
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 Origination
Slide 29: Smart Option: Cumulative Recoveries
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 Vint
Slide 30: 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 31: Cohort Default Triangles – Smart Option Combined
Cohort Default Triangles – Smart Option Combined (IO, 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 $440 1.0% 1.2% 1.1% 1.0% 0.
Slide 32: Cohort Default Triangles – Smart Option Interest Only
Cohort Default Triangles – Smart Option Interest Only Smart Option IO (P&I Repayment Status - Total) P&I Disbursed Principal Periodic Defaults by Years in P&I Repayment (1), (2), (3) Repayment Entering P&I Year Repayment ($m) 0 1 2 3 4 5 Total 2010 $439 1.1% 1.2% 1.1% 1.0% 0.9% 0.5% 5.8% 2011 $785 0
Slide 33: Cohort Default Triangles – Smart Option Fixed Payment
Cohort Default Triangles – Smart Option Fixed Payment Smart Option Fixed Payment (P&I Repayment Status - Total) P&I Disbursed Principal Repayment Entering Periodic Defaults by Years in P&I Repayment (1), (2), (3) Year P&I Repayment ($m) 0 1 2 3 4 Total 2011 $230 0.3% 1.2% 1.5% 1.4% 1.2% 5.5% 2012 $5
Slide 34: Cohort Default Triangles – Smart Option Deferred Payment
Cohort Default Triangles – Smart Option Deferred Payment Smart Option Deferred (P&I Repayment Status - Total) Disbursed Principal P&I Repayment Entering P&I Periodic Defaults by Years in P&I Repayment (1), (2),(3) Year Repayment ($m) 0 1 2 3 Total 2012 $253 0.0% 1.2% 1.4% 1.5% 4.2% 2013 $657 0.0% 1.
Slide 35: ABS Supplement
ABS Supplement 35
Slide 36: 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 $10,000 avg orig bal, 5 to 15 yr te
Slide 37: SMB vs. Legacy SLM Private Education Loan ABS Summary
SMB vs. Legacy SLM Private Education Loan ABS Summary Legacy SLM Navient Sallie Mae Bank 11-A 11-B 11-C 12-A 12-B 12-C 12-D 12-E 13-A 13-B 13-C 14-A 14-A 15-A 15-B 14-A 15-A 15-B 15-C Total Bond Amount ($mil) 562 825 721 547 891 1,135 640 976 1,108 1,135 624 676 664 689 700 382 704 714 701 Initial A
Slide 38: 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 39: 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 40: Post-Default Recoveries
Post-Default Recoveries Recovery Operations ► In the near term, Sallie Mae Bank plans to collect its charged-off loans internally following charge-off at 120+ days past due ► Previously, sold the majority of charged-off loans beginning in December 2014 through September 2015 ► Sallie Mae Bank has th
Slide 41: 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 42: FFELP vs. Smart Option Private Education Loan Comparison
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 43: Private Education Loan Lifecycle for Deferred Loans
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 (gen
SLM Corporation (Sallie Mae) — Q4 2015 Earnings Presentation on 6ix