Slm Corporation · NASDAQ:SLM
Slm — IPO Roadshow (February 2010)
83 slides from Slm's IPO roadshow presentation, Feb 26, 2010
Slide 1: SLM Corporation 4Q 2009 Investor Presentation
SLM Corporation 4Q 2009 Investor Presentation
Slide 2: Forward-looking statements
This presentation contains forward-looking statements and information based on management's current expectations as of the date of this document. Statements that are not historical facts, including statements about our beliefs or expectations and statements that assume or are dependent upon future e
Slide 3: SLM Corporation Overview
SLM Corporation Overview 3
Slide 4: SLM Corporation
SLM Corporation #1 originator of student loans in the U.S. education lending market #1 servicer and collector of student loans in the U.S. currently servicing 194.2 billion in assets including $26.3 billion for third parties and $19.2 billion for the Department of Education (ED) Fully independent pr
Slide 5: Life stage Customer Strategy
Life stage Customer Strategy Sallie Mae offers an unmatched, integrated suite of Saving, Planning, and Paying for College SM products and services 5
Slide 6: SLM Corporation Update
SLM Corporation Update Managed student loans outstanding decreased to $176 billion in Q4 Originated $4.5 billion in federal student loans, a 14% increase over prior year period Sold approximately $18.5 B to ED Launched new private education loan product in Q2 and originated $381 million private educ
Slide 7: A Brief Corporate History
A Brief Corporate History 1 Currently known as the Federal Family Education Loan Program (FFELP). SLM Corporate Debt Ratings SLM Corporate Debt Ratings SLM Corporate Debt Ratings SLM Corporate Debt Ratings Moody's S & P Fitch Long-Term Ba1 BBB- BBB- Short-Term Not-Prime A-3 F3 Outlook Neg. Neg. Stab
Slide 8: Q409 Core Earnings Summary
Q409 "Core Earnings" Summary ($ millions), except per share amounts 2009 2008 Q409 Q408 EPS (Reported) $0.96 $0.89 $0.41 $0.08 Economic Floor Income EPS not included in "Core Earnings" $0.43 $0.12 $0.03 $0.01 Net Income $597 $526 $249 $65 Net Interest Income $2,261 $2,419 $686 $553 Net Interest Marg
Slide 9: Q409 Core Earnings Summary EPS Breakdown
Q409 "Core Earnings" Summary EPS Breakdown 2009 2008 Q409 Q408 Reported "Core Earnings" $0.96 $0.89 $0.41 $0.08 Impacted by: Gains on Debt Repurchases $0.72 $0.09 $0.09 $0.04 Induced Conversion of Series C Preferred Stock ($0.11) - ($0.06) - Cumulative accounting change of premium amortization expen
Slide 10: Fee Income & Other Income
Fee Income & Other Income Initiated servicing under ED Servicing Contract Currently 2 million accounts Collecting on behalf of the Dept of Education for close to ten years Contingency Inventory of $10 billion Upromise - largest private source of 529 plans Guarantor Servicing for student loans APG is
Slide 11: Lending Segment Earnings Detail
Lending Segment Earnings Detail 11 ($ millions) 2009 2008 Q409 Q408 FFELP Originations $21,746 $17,907 $4,462 $3,926 Private Originations $3,176 $6,336 $381 $851 Total Originations $24,922 $24,243 $4,843 $4,777 Average Managed Student Loans $186,105 $174,244 $179,241 $180,990 Net Student Loan Spread
Slide 12: Dept. of Education / Government Programs
Dept. of Education / Government Programs Kennedy-Miller Legislation - Signed by President 05/07/08 ECASLA - Broad authority to purchase loans from 10/01/03 - 07/01/09 ECASLA Extension - Signed by President 10/07/08 Extended purchase authority for 2009 - 2010 Academic Year Loan Purchase Commitment Pr
Slide 13: Federal Student Loan Policy Alternatives
Federal Student Loan Policy Alternatives President's Budget Proposal and House Legislation Convert all federal student loans to federal funding by July 2010 Use savings to substantially increase Pell Grants, other education initiatives, & deficit reductions Use limited number of private sector firms
Slide 14: Political Developments
Political Developments Congressional Budget Office (CBO) Scores the "Community Proposal" as generating substantial savings Confirms mandatory savings ($87 B) which is equivalent to the Administration's proposal, H.R. 3221. Debate is on best origination and default management strategy for the governm
Slide 15: Political Developments
Political Developments House of Representatives passed legislation (H.R. 3221) which ends private sector role in loan originations, but there are many steps remaining in the process H.R. 3221 passed the House of Representatives as freestanding (non- reconciliation) legislation Senate leadership has
Slide 16: Federal Student Loan Market Outstanding
Federal Student Loan Market Outstanding Government Student Loan Market Distribution 2/28/09 Loan Market Distribution 2/28/09 Loan Market Distribution 2/28/09 Top 10 Holders of FFELP Loans FFYE 9/30/08 FFYE 9/30/08 FFYE 9/30/08 Source: US Department of Education Report 2/28/09 16
Slide 17: Office of the Chief Executive Officer
Office of the Chief Executive Officer Al Lord, Chief Executive Officer Jack Hewes, Sr. EVP & Chief Lending Officer Jim Truitt, SVP & Chief Compliance Officer David West, SVP & Chief Credit Officer Jack Remondi, Vice Chair & Chief Financial Officer Kara West, VP Risk Assessment Mark Heleen, EVP & Gen
Slide 18: The U.S. Student Loan Market
The U.S. Student Loan Market SLM Corporation 18
Slide 19: Favorable Student Loan Market Trends
Favorable Student Loan Market Trends Source: College Board Note: Academic years, average published tuition, fees, room and board charges at four-year institutions; enrollment-weighted Enrollment Growth + Rising Tuitions + Education Value = Increasing Loan Demand (CHART) Higher Education Enrollment (
Slide 20: College Grads Experience Lower Levels of Unemployment
College Grads Experience Lower Levels of Unemployment (CHART) Source: U.S. Department of Labor, Bureau of Labor Statistics as of 12/31/2009 20
Slide 21: The Federal Family Education Loan Program (FFELP)
The Federal Family Education Loan Program or "FFELP" Provides lenders an explicit U.S. government guarantee of at least 97% and a fixed yield on student loans made pursuant to the FFELP program Loan pricing, terms and maximum borrowing limits set by Congress Available to undergraduate students, grad
Slide 22: FFELP Student Loan Market Share
FFELP Student Loan Market Share Notes: Wells Fargo includes Wachovia volumes, Bank of America includes Fleet and LaSalle Bank volumes, JP Morgan Chase includes Bank One volumes, PNC Bank includes National City Bank volumes Source: http://www.fp.ed.gov FFELP Loan Originations (Gross Commitments) $ in
Slide 23: SLM FFELP Loan Originations
SLM FFELP Loan Originations SLM FFELP Loan Originations Originated over $4.4 billion of loans in Q4, a 14% increase over the prior year Originated over $21.7 billion of loans in 2009, a 21% increase over the prior year Sold approximately $17.6 billion of loans to ED in the Q4 of 2009 Sold approximat
Slide 24: SLM Private Education Loan Originations
Private Education Loans declined as a result of a continued tightening of our underwriting criteria, an increase in guaranteed student loan limits and a shift of students attending lower cost educational institutions in the current economic environment SLM Private Education Loan Originations SLM Pri
Slide 25: The Private Education Loan Market
The Private Education Loan Market Consumer loans made to students and parents specifically to fund the cost of undergraduate, graduate and other forms of post- secondary education Typically used to bridge the funding gap between grants, aid and FFELP loans, and the increasing cost of higher educatio
Slide 26: SLM's Private Education Loan Portfolio
SLM's Private Education Loan Portfolio Private Education Loan Portfolio Characteristics 35 billion of managed outstandings at Q4 2009 20% of SLM's managed student loan portfolio Risk-based pricing Approximately 57% of portfolio has a cosigner, typically a parent Higher education loans typically non-
Slide 27: SLM's New Private Education Loan Product
SLM's New Private Education Loan Product Smart Option Product - Launched 3/23/09 Eliminates negative amortization during the school and grace period while reducing the average life from 9.5 years to 5.5 years Repayment term is driven by cumulative amount borrowed and grade level Requires interest on
Slide 28: Private Education Loan Market Demand
(CHART) Private Education Loan Market Demand Private education loans help bridge the gap between funding available through government-sponsored programs and the increasing cost of education (CHART) Cost of College AY 2009-2010 Based on a Four-Year Term FFELP Limit $31,000 Cost of attendance gap FFEL
Slide 29: Private Credit Originations
Private Credit Originations 2008-09 academic year market share estimated at 44% (CHART) Source: College Board, Trends in Higher Education Series (2009). 2008-2009 industry data is preliminary. Data reported by academic year, SLM quarterly data converted to academic year basis. *3Q & 4Q 2009 data onl
Slide 30: Credit Quality
Credit Quality SLM Corporation 30
Slide 31: Loan Losses
Loan Losses Loan Losses Loan Losses (CHART) + = Private Education Loans 20% U.S. Government Guaranteed Loans 80% Charge-Offs (1) = 0.07% Charge-Offs (1) = 3.60% Total Charge-Offs (1) = 0.75% (1) All data as of December 31, 2009. Managed FFELP charge-offs as a percentage of average managed FFELP asse
Slide 32: FFELP Education Loan Portfolio
FFELP Education Loan Portfolio (1) "Core Earnings" FFELP Loan spread, before provision. Charge-offs as a percentage of average Managed FFELP Loans . 32 32
Slide 33: Private Education Loan Portfolio
Private Education Loan Portfolio Private Education Loan Portfolio (1) "Core Earnings" Private Education Loan spread, before provision. Charge-offs as a percentage of average Managed Private Education Loans in repayment. 33
Slide 34: SLM Private Credit Default Emergence Profile
SLM Private Credit Default Emergence Profile Payments Made (CHART) 34
Slide 35: Charge-offs driven by Non-Traditional loans
Charge-offs driven by Non-Traditional loans Non-Traditional loans represent 12% of the Private Education Loan portfolio Higher quality loans are entering repayment in 2009 and 2010 Charge-off Trends - Mix of Traditional vs. Non-Traditional 35 (CHART) (CHART)
Slide 36: Managed Private Education Loan Portfolio Performance
(1) Charge-offs as a percentage of average loans in repayment annualized for the quarters presented Managed Private Education Loan Portfolio Performance Non-traditional loans represent only 12% of the Private Education loan portfolio but account for 45% of charge-offs 36 Q409 Q309 Q209 Q109 Q408 Cha
Slide 37: Managed Private Education Loan Portfolio Performance
(1) Charge-offs as a percentage of average loans in repayment annualized for the quarters presented Managed Private Education Loan Portfolio Performance 37 Traditional Loans with a Cosigner Q409 Q309 Q209 Q109 Q408 Outstanding Balance as a % of Total 54% 53% 52% 52% 51% 90+ Delinquency as a % of Rep
Slide 38: Improving Portfolio Quality
Improving Portfolio Quality Characteristics of Loans Entering Repayment Characteristics of Loans Entering Repayment Characteristics of Loans Entering Repayment Characteristics of Loans Entering Repayment Characteristics of Loans Entering Repayment Characteristics of Loans Entering Repayment Characte
Slide 39: Portfolio Quality Improving
Portfolio Quality Improving Non-Traditional charge-off rate is 4x to 5x greater than Traditional Amount of non-traditional loans entering repayment have begun to decline 88% of Q409 loan originations had cosigners, up from 74% in Q408. The aggregate portfolio is migrating to a higher cosigner percen
Slide 40: Private Education Loan Portfolio Performance
Private Education Loan Portfolio Performance Tightening of forbearance policies and the economic downturn have adversely impacted the performance of our Managed Private Education Loan portfolio Delinquency trends have improved, as the impact of forbearance tightening passed through the system. (CHAR
Slide 41: Servicing: A Competitive Advantage
Servicing: A Competitive Advantage SLM Corporation 41
Slide 42: SLM Servicing
SLM Servicing #1 servicer and collector of student loans in the U.S. currently servicing $194.2 billion in assets including $26.3 billion for third parties Awarded ED servicing contract in June 2009 Servicing under contract initiated in August 2009 Contract to span 5 years with one, five-year renewa
Slide 43: SLM's Competitive Advantage
SLM's Competitive Advantage SLM has a distinct competitive advantage in all facets of the education loan market. Best in Class Vertically Integrated Origination/ Servicing/Collections Strongest National Brand in Education with Consumers and Schools State-of-the-Art Loan Delivery Platform Largest & M
Slide 44: Operations Locations
Operations Locations Killeen, TX Fishers & Muncie, IN Lynn Haven, FL Wilkes-Barre, PA Newark, DE Reston, VA Corporate Headquarters 44
Slide 45: Funding Diversity and Liquidity
Funding Diversity and Liquidity SLM Corporation 45
Slide 46: 2009 Capital Markets Summary
2009 Capital Markets Summary Realized gains of $536 million on $3.45 billion of debt repurchases in 2009 Debt repurchase activities continued into 2010 Closed on tender offer in early January Repurchased $0.8 billion at a gain of $45 million Issued $7.5 billion of Private Credit ABS Issued $5.9 bill
Slide 47: Recent ABS Transactions
Recent ABS Transactions Recent ABS Transactions 47 Transaction: Private Credit TALF-Eligible May 2009-B TALF-Eligible July 2009-C TALF-Eligible Aug 2009-D TALF-Eligible Nov 2009- CT Issuance Size: $2.593 B $1.027 B $1.680 B $ .589 B Registration Type: 144A 144A 144A 144A Indicative Pricing: 1 mo. L
Slide 48: Liquidity Position Detail
*SLM has $3.5 billion in unsecured revolving credit facilities. The Company has never drawn on these facilities. $1.9 billion of our unsecured revolving facilities matures in October 2010 and $1.6 billion matures in October 2011. Liquidity Position Detail Note: Numbers may not add due to rounding 48
Slide 49: Conservative long-term funding model
Employ conservative long-term funding model * Funded to Term includes 13% or $23.6 billion and 4% or $7.6 billion of advances outstanding under the ED Purchase and Participation Program and Straight A Funding Facility as of December 31, 2009 and December 31, 2008, respectively. (CHART) High Percenta
Slide 50: Funding Distribution
Funding Distribution Funding Distribution At December 31, 2009, total managed debt borrowing was $191.6 billion. 50
Slide 51: SLM Corporate Debt and ABS Issuance
SLM Corporate Debt and ABS Issuance SLM has issued $142 billion of long-term, corporate debt and asset- backed securities since 2005, across a broad range of maturities (1) YTD. Excludes short-term issuance under SLM's asset-backed commercial paper programs. (2) Reported at quarter closing dates, ne
Slide 52: SLM ABS Issuance Volume
SLM ABS Issuance Volume SLM ABS Term Issuance Volume (1) (1) Excludes outstandings under SLM's asset-backed commercial paper program. Totals may not add due to rounding. 52 ($ in billions) Q409 Q309 Q209 Q109 2008 2007 2006 Non-Consolidation FFELP ABS $ 0.0 $ 0.0 $ 0.0 $ 0.0 $18.5 $ 9.1 $ 5.1 Consol
Slide 53: SLM Corporate Debt Activity
SLM Corporate Debt Activity SLM Corporate Term Debt Issuance Volume ($ billions) US$ equivalent at the time of issuance. 53 (2) Face value amounts repurchased. SLM Corporate Term Debt Repurchases($ millions) SLM Corporate Term Debt Repurchases($ millions) Denomination Q409 Q309 Q209 Q109 2008 2007 2
Slide 54: Unsecured Debt Maturities
Unsecured Debt Maturities Unsecured Debt Maturities Repurchased $3.4 billion of debt in 2009 $0.6 billion of debt maturing in 2011 was repurchased as part of tender offer in January 54 Note: Does not include Sallie Mae Bank or Subsidiary funding
Slide 55: Unencumbered Assets & Unsecured Debt
Unencumbered Assets & Unsecured Debt ($ in billions) 12/31/09 9/30/09 6/30/09 3/31/09 12/31/08 FFELP Stafford and Plus Loans, net $1.6 $ 2.1 $ 2.7 $ 4.5 $ 3.8 FFELP Consolidation Loans, net 0.5 0.6 0.5 0.6 1.6 Private Education Loans, net 12.5 13.3 16.0 14.1 15.7 Other Loans 0.4 0.5 0.5 0.7 0.7 Avai
Slide 56: Sallie Mae Bank
Sallie Mae Bank Bank charter Utah based ILC regulated by FDIC and Utah Department of Financial Institutions (UDFI) Charter granted October 2005 Current bank activity Originates Sallie Mae's private education loans Funded through affiliate and brokered deposits 25.4% Total Risk-based Capital at Decem
Slide 57: Sallie Mae Bank - Capital & Deposits
Sallie Mae Bank - Capital & Deposits *Primarily affiliate demand deposit accounts with no stated maturities 57 Bank Deposits ( $in millions) Bank Deposits ( $in millions) Bank Deposits ( $in millions) Bank Deposits ( $in millions) Bank Deposits ( $in millions) Bank Deposits ( $in millions) Bank Depo
Slide 58: Risk-Adjusted Capitalization
Risk-Adjusted Capitalization SLM Corporation 58
Slide 59: Capitalization
Capitalization SLM Corp GAAP tangible stockholders' equity as a percentage of total managed assets. Average GAAP tangible equity including preferred stock to charge-offs. SLM charge-offs based on total managed loans, annualized. 59 2009 2008 2007 2006 Tangible Equity/Managed Assets(1) 2.0% 1.8% 2.0%
Slide 60: Capital Allocation
Capital Allocation 0.50% 8.00% SLM allocates capital internally based on the risk of the assets it supports SLM Corp Assets Capital Allocation As of December 31, 2009 0% - 25% Cash, Investments, Other Assets & Intangibles 13% of Total Managed Assets Private Education Loans 17% of Total Managed Asset
Slide 61: Appendix
Appendix SLM Corporation 61
Slide 62: SLM FFELP ABS Issue Characteristics
SLM FFELP ABS Issue Characteristics Historical issue size of $1.0B to $5.0(+)B Tranches denominated in US$ or Euros 'Aaa/AAA/AAA' rated senior tranches make up 97% of issue structure Floating rate tied to 3 mo. LIBOR, with occasional fixed rate issuance Amortizing tranches, with 1 to 15(+) year aver
Slide 63: SLM Stafford/PLUS ABS Trusts Prepayment Analysis
SLM Stafford/PLUS ABS Trusts Prepayment Analysis Prepayment Analysis Prepayment Analysis Annualized CPRs for SLM Stafford/PLUS ABS Trusts have decreased significantly as incentives for borrowers to consolidate have declined Historical SLM Stafford/PLUS ABS CPRs Average CPR is the simple (non-weighte
Slide 64: SLM Consolidation ABS Trusts Prepayment Analysis
SLM Consolidation ABS Trusts Prepayment Analysis Prepayment Analysis Prepayment Analysis Historical Consolidation ABS CPRs * Average CPR is the simple (non-weighted) average of four Quarterly CPR calculations for years ended December 31, 2009. Quarterly CPR assumes School and Grace loans are not sch
Slide 65: Private Credit Appendix
Private Credit Appendix SLM Corporation 65
Slide 66: Private Credit Loan Collections
Private Credit Loan Collections Sallie Mae services and collects the loans in its managed private loan portfolio Private credit collections are conducted by a stand-alone consumer credit collections unit, not the company's FFELP collections operations Managed by individuals with prior experience man
Slide 67: Forbearance
Forbearance A collections tool used to provide borrowers time to improve their ability to repay Between graduation and start of first job Economic hardship Provides borrower with time to obtain employment and income to support their obligations Applied most frequently in the first two years of repay
Slide 68: Private Credit Trust Delinquency and Forbearance Seasoning Trends
Note: Based on historical data through December 31, 2009. Does not include data for 2009 trusts which have not had time to become 90 days delinquent Private Credit Trust Delinquency and Forbearance Seasoning Trends Delinquency and forbearance are highest when loans enter repayment, and diminish as l
Slide 69: Private Credit Trust Default Emergence By Years in Repayment
Private Credit Trust Default Emergence By Years in Repayment Default Emergence By Years in Repayment Default Emergence By Years in Repayment Based on assumptions in effect as of December 31, 2009 Defaults in SLM Private Credit ABS Trusts increase as loans first enter repayment, then diminish steadil
Slide 70: Private Credit Trust Default Emergence By Payments Made
Private Credit Trust Default Emergence By Payments Made Default Emergence By Payments Made Default Emergence By Payments Made Based on assumptions in effect as of December 31, 2009 Excludes months in forbearance. Includes months of delinquency prior to chargeoff The probability of default substantia
Slide 71: SLM Private Education Loan Gross Defaults
SLM Private Education Loan Gross Defaults Actual-To-Date Actual-To-Date Actual-To-Date For SLM Private Education Loan Trusts issued prior to 2005-B, the servicer has the option, but not the obligation, to repurchase loans that (i) become 180+ days delinquent and/or (ii) have a borrower who filed for
Slide 72: SLM Private Credit Gross Defaults
SLM Private Credit Gross Defaults Constraining Rating Agency Stress Levels at Issuance As of December 31, 2009 (CHART) 72
Slide 73: Private Credit ABS Trusts Forbearance
Private Credit ABS Trusts Forbearance Forbearance usage is typically highest when loans enter repayment, and declines as loans season Use of forbearance as a collection tool peaked in early 2008, and has since declined, as a result of changes in the forbearance strategy The decline in forbearance ha
Slide 74: Private Credit ABS Trusts - 31-60 Day Delinquencies
Private Credit ABS Trusts - 31-60 Day Delinquencies Early delinquencies increased as forbearance policies tightened and have recently declined 74
Slide 75: Private Credit ABS Trusts - 61-90 Day Delinquencies
Private Credit ABS Trusts - 61-90 Day Delinquencies 75
Slide 76: Private Credit ABS Trusts - 90+ Day Delinquencies
Private Credit ABS Trusts - 90+ Day Delinquencies As expected, later stage delinquency increased during the first half of 2009 due to tightening of forbearance, before declining to current levels 76
Slide 77: Private Credit ABS Trusts - Annualized Gross Charge-offs
Private Credit ABS Trusts - Annualized Gross Charge-offs (1) For SLM Private Credit Student Loan Trusts issued prior to 2005-B, the servicer has the option, but not the obligation, to repurchase loans that (i) become 180+ days delinquent and/or (ii) have a borrower who filed for bankruptcy or died .
Slide 78: Private Credit ABS Trusts - Historical Cumulative Gross Charge-Offs
Private Credit ABS Trusts - Historical Cumulative Gross Charge-Offs(1) (1) For SLM Private Credit Student Loan Trusts issued prior to 2005-B, the servicer has the option, but not the obligation, to repurchase loans that (i) become 180+ days delinquent and/or (ii) have a borrower who filed for bankru
Slide 79: SLM Private Credit ABS Trusts - Prepayment Analysis
SLM Private Credit ABS Trusts - Prepayment Analysis Historical SLM Private Credit ABS CPRs Constant prepayment rates increased in 2007 due to the introduction of Private Credit Consolidation loans, but then declined accordingly following SLM's decision to suspend its consolidation loan program 11/30
Slide 80: Appendix
Appendix 80
Slide 81: GAAP to Core Earnings Reconciliation
GAAP to Core Earnings Reconciliation 81
Slide 82: Additional Information Available at www.salliemae.com
Additional Information Available at www.salliemae.com 82
Slide 83: Debt Investor Relations Contact Information
Debt Investor Relations Contact Information Debt Investor Relations Contact Information Debt Investor Relations Contact Information 83