Slide 1: SLM Corporation Investor Presentation First Quarter 2018
SLM CORPORATION INVESTOR PRESENTATION First Quarter 2018
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 17, 2018 (unless otherwise noted) and should be read in connection with the press release of SLM Corporation (the “Company”) announcing its financial re
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: 55% market
Slide 4: Sallie Mae Overview
4 Sallie Mae Overview Sallie Mae Key Statistics for Q4 2017 − $0.10 GAAP diluted earnings per share for Q4 2017 and $0.62 for full year 2017 − $0.19 Core Earnings diluted earnings per share for Q4 2017, absent impact of Tax Act; $0.72 for full year 2017, absent impact of Tax Act1,2,3 − Portfolio of
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 Competitive
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) (Millions) (Thousands) Estimated Total Cost of Education – 2016 / 2017 AY(3) Cost of College (Based on a Four-Year Term)(4) (billions) (thousands) AY 07/08 AY 17/1
Slide 7: Higher Education Value Proposition
7 Higher Education Value Proposition Relationship Between Higher Education, Incremental Earnings From a College Degree Have Increased Income and Employment(1) For Generations(2) Average weekly income Unemployment Key Statistics • The unemployment rate for individuals age 25 and older with four-year
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 ed
Slide 9: Analytical Approach to Credit
9 Analytical Approach to Credit Borrower/Cosigner 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 • No existing SLM 30+ day past dues underwriting driven by large review due to credi
Slide 10: High Quality Private Education Loan Growth
10 High Quality Private Education Loan Growth $5,000 3% $4,800 $4,666 8% $4,500 $4,330 6% $4,076 7% $4,000 $3,795 Disbursements ($MM) $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 2013 2014 2015 2016 2017 Private Education Loan Disbursements Disbursement Statistics ($) 2013 2014 2015 2016 2017 %
Slide 11: High Quality Private Education Portfolio
11 High Quality Private Education Portfolio Customer FICO at Original Approval Smart Option Payment Type <700 Interest Only 21% 780+ 22% 29% Deferred 700 - 740 47% 27% Fixed Pay 740 - 780 31% 23% Weighted Average FICO: 745 Smart Option Loans: $16.7 billion Portfolio by Originations Vintage Portfolio
Slide 12: Conservative Funding Approach
12 Conservative Funding Approach 2017 Target Stable deposit base with no branch overhead — Diversified mix of retail and other core savings, MMDA and CDs 17% 20% — Brokered deposits used as alternative funding source Term funding / securitizations will augment deposit funding for future growth — Exp
Slide 13: Delinquency and Default Performance
13 Delinquency and Default Performance (As a % of Loans in P&I Repayment)(1),(2),(3) 10.0% 10.0% 9.0% 31-60 Day Delinquency 9.0% 61-90 Day Delinquency % of P&I Repayment Balance % of P&I Repayment Balance 8.0% 8.0% 7.0% 7.0% 6.0% 6.0% 5.0% 5.0% 4.0% 4.0% 3.0% 3.0% 2.0% 2.0% 1.0% 1.0% 0.0% 0.0% 10.0%
Slide 14: Cumulative Defaults by P&I Repayment Vintage
14 Cumulative Defaults by P&I Repayment Vintage(1),(2),(3) Smart Option Cumulative Gross Defaults by P&I Repayment Vintage and Years Since First P&I Repayment Period 10% 9% Disbursed Principal Entering P & I Repayment 8% Cumulative Defaults as a % of 7% 6% 6.9% 6.3% 5% 5.3% 4% 4.6% 3% 4.4% 2% 3.7% 1
Slide 15: Income Statement / Financial Review
15 Financial Review (in millions) Q4 2017 Q4 2016 Variance 2017 2016 Variance PSL $ 17,489 $ 14,296 $ 3,193 $ 17,489 $ 14,296 $ 3,193 PSL Reserve (244) (182) (62) (244) (182) (62) FFELP 930 1,014 (84) 930 1,014 (84) FFELP Reserve (1) (2) 1 (1) (2) 1 PLOAN / Other 402 14 388 402 14 388 PLOAN / Other
Slide 16: Enhance Franchise and Diversify Revenue
16 Enhance Franchise and Diversify Revenue Distribution of Sallie Mae Borrowers by Product and Age Goal: 100% • Develop relevant and innovative Consumer 93% 95% 91% Lending products to deepen customer 90% 87% 83% engagement, attract new-to-firm customers 79% 80% and diversify revenue at attractive r
Slide 17: Celebrating Sallie Mae: Q4 2017 awards and recognition
17 Celebrating Sallie Mae Q4 2017 awards and recognition
Slide 18: 2018 Guidance Update
18 2018 Guidance Update • Full-year Diluted Core EPS: $0.97-$1.01 • Full-year Private Education Loan Originations: $5.0 billion • Full-year Non-GAAP Operating Efficiency Ratio: 37% - 38% The company plans to make investments in 2018 that will accelerate the diversification of its consumer lending pl
Slide 19: Sallie Mae Bank
19 Sallie Mae Bank • Market share leader in private student loan industry • High quality assets and conservatively funded balance sheet • Predictable balance sheet growth • Strong capital position and funding capabilities • A financial services company with high growth trajectory and excellent retur
Slide 20: ABS Supplement
20 ABS Supplement
Slide 21: Sallie Mae's Smart Option Loan Product Overview
21 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 $10,000 avg orig bal, 5 to 15 yr
Slide 22: Sallie Mae Bank ABS Summary
22 Sallie Mae Bank ABS Summary 14-A 15-A 15-B 15-C 16-A 16-B 16-C 17-A 17-B Issuance Date 8/7/2014 4/23/2015 7/30/2015 10/27/2015 5/26/2016 7/21/2016 10/12/2016 2/8/2017 11/8/2017 Total Bond Amount ($mil) $382 $704 $714 $701 $551 $657 $674 $772 $676 Initial AAA Enhancement (%) 21% 23% 22% 23% 20% 19
Slide 23: Sallie Mae Bank ABS Structures
23 Sallie Mae Bank ABS Structures SMB 2017-B SMB 2017-A Size $676.0MM $772.0MM Pricing Date October 31, 2017 January 31, 2017 Smart Option Smart Option Collateral Private Education Loans Private Education Loans Servicer Sallie Mae Bank Sallie Mae Bank Overcollateralization (1) 11% 11% Pricing Prepay
Slide 24: Sallie Mae Bank Servicing Policies
24 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 emp
Slide 25: Sallie Mae Bank Collections
25 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 collec
Slide 26: Sallie Mae Bank Smart Option Private Education Loans
26 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
Slide 27: Appendix
27 Appendix
Slide 28: Reconciliation of the Effect of the Tax Act on GAAP Statements of Income
28 Reconciliation of the Effect of the Tax Act on the GAAP Consolidated Statements of Income Quarter Ended Year Ended December 31, 2017 December 31, 2017 Tax Act Adjusted Tax Act Adjusted (Dollars in thousands, except per share amounts) As Reported Adjustments (Non-GAAP) As Reported Adjustments (Non
Slide 29: "Core Earnings" to GAAP Reconciliation
29 “Core Earnings” to GAAP Reconciliation (1) Derivative Accounting: “Core Earnings” exclude periodic unrealized gains and losses caused by the mark-to-market valuations on derivatives that do not qualify for hedge accounting treatment under GAAP, as well as the periodic unrealized gains and losses
Slide 30: Important Information Regarding Historical Loan Performance Data
30 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 Co
Slide 31: Important Information Regarding Historical Loan Performance Data (cont.)
31 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 M
Slide 32: Smart Option Loan Program Cohort Default Curves
32 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 cal