Slide 1: SLM Corporation Investor Presentation ABS Vegas 2020
SLM CORPORATION INVESTOR PRESENTATION ABS VEGAS 2020 February 24-25, 2020
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 22, 2020 (unless otherwise noted) and should be read in connection with the press release of SLM Corporation (the “Company”) announcing its financial resu
Slide 3: Table of Contents
TABLE OF CONTENTS Corporate Overview Page 4-7 Smart Option Student Loan Program Page 8-19 Funding and ABS Overview Page 20-32 Additional Information Page 33-37
Slide 4: Well-Positioned for Long-Term Success and Value Creation
Well-Positioned for Long-Term Success and Value Creation MARKET LEADING BRAND ATTRACTIVE PRODUCTS EXCEPTIONAL SERVICE • Leader of the education • Products designed to provide • Largest salesforce in the finance market customers success through industry higher education • Complaints per customer • In
Slide 5: Serving Customers in an Attractive and Growing Market
Serving Customers in an Attractive and Growing Market Expanding Addressable Market • Private Education Loans represent 2-3% of Other the overall spend in higher education annually $17 Federal Loans • Total spend on higher education grows 2-3% $93 annually primarily due to increases in cost of Grants
Slide 6: Higher Education Value Proposition
Higher Education Value Proposition Unemployment rates and earnings by educational attainment, 2017(1) Unemployment Rate Median Usual Weekly Earnings Unemployment Rate Median Usual Weekly Earnings Doctoral Degree 1.50% $1,743 Doctoral Degree 1.50% $1,743 Professional Degree 1.50% $1,836 Professional
Slide 7: Sallie Mae is an ESG Company
Sallie Mae is an ESG Company Serving our Customers Providing Financial Education & Assistance • Financing assistance to 1.2 million families since 2014 • Free Scholarship Search tool with 5 million to provide access to postsecondary education and scholarships worth more than $25 billion opportunitie
Slide 8: Product suite tailored to meet the needs of undergraduate and graduate students
Product suite tailored to meet the needs of undergraduate and graduate students • Introduced Smart Option Student Loan in 2009 • Flexible repayment options while in school • Fixed and Variable rates for repayment • Differentiated products for undergraduates and graduate students 8
Slide 9: 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 program changed after selected at origination consists of: • Fixed-rate loans or variable-rate loans indexed to LIBOR • Co
Slide 10: Diverse Product Portfolio Driving Increased Shareholder Value
Diverse Product Portfolio Driving Increased Shareholder Value Undergraduate Graduate Parent RATE TYPE Variable & Fixed Variable & Fixed Variable & Fixed Medical Health Dental Variable: LIBOR + Variable: LIBOR + Variable: LIBOR + Professions 1.250% - LIBOR + 2.25% - LIBOR + 3.50% - LIBOR + INTEREST 9
Slide 11: Conservative underwriting has contributed to consistent credit performance
Conservative underwriting has contributed to consistent credit performance • Proprietary Scorecard built with Experian Decision Analytics • Initial credit screen removes applicants with low FICO scores or prior derogatory trades on file • Manually review ~8% of applications • Through-the-cycle data
Slide 12: Successfully Executing Strategy and Growing Originations
Successfully Executing Strategy and Growing Originations PRIVATE EDUCATION LOANS OUTSTANDING, NET ORIGINATIONS CAGR: 22% CAGR: 6.8% $22.9 $5,625 $4,330 $10.5 2015 2019 2015 2019 Expect to maintain momentum and continue originations growth in 2020 Confidential and proprietary information. © 2020 Sall
Slide 13: Delivering Strong Financial Results
Delivering Strong Financial Results GAAP DILUTED EPS NET INTEREST INCOME PRIVATE EDUCATION LOAN YIELD BPS Improvement: CAGR: 22% CAGR: 23% 139bps $1.30 $1,623M 9.32% $0.59 $702M 7.93% 2015 2019 2015 2019 2015 2019 2019 Financial Highlights (Compared to 2018) • 2019 GAAP diluted EPS increased 21% to
Slide 14: High Quality Private Education Loan Portfolio
High Quality Private Education Loan Portfolio Customer FICO at Original Approval(1) Smart Option Payment Type <700 780+ Interest 23% 28% Only 21% Deferred 48% 700 - 740 27% 740 - 780 22% Fixed Pay 31% Weighted Average FICO: 743 Smart Option Loans: $20.6 billion Portfolio by Originations Vintage(2) P
Slide 15: High Quality, Predictable Credit Program
High Quality, Predictable Credit Program(1,2,3) Smart Option Cumulative Gross Defaults by P&I Repayment Vintage and Years Since First P&I Repayment Period 10% 9% 8% Disbursed Principal Entering P & I Repayment 7% Cumulative Defaults as a % of 6% 5% 5.6% 4% 4.1% 3% 3.0% 2% 1% 1.5% 0.3% 0% 0 1 2 3 4 5
Slide 16: 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 Since Firs
Slide 17: Smart Option Vintage Data: Voluntary Prepayments
Smart Option Vintage Data: Voluntary Prepayments ► Voluntary prepay speeds trend up as more loans enter P&I repayment. Smart Option Student Loans - Serviced Portfolio: All Products Smart Option Student Loans - Serviced Portfolio: Interest Only Voluntary CPR by Disbursement Vintage (1), (2), (3) Volu
Slide 18: 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 19: 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 20: Conservative Funding Optimizes Net Interest Margin
Conservative Funding Optimizes Net Interest Margin Secured Debt 15% Retail MMDA & CD 23% Brokered $13.8b Retail $10.5b Secured Debt $4.4b Retail H.S.A. & 529 Brokered 14% Variable 37% Brokered Fixed 11% As of 12/31/19 Confidential and proprietary information. © 2020 Sallie Mae Bank. All rights reser
Slide 21: Optimizing our Portfolio
Optimizing our Portfolio(1) Continue to Focus on High- Quality Private Education Loan LOAN SALES CONTINUE TO INVEST IN Originations CREDIT CARD • Expect to grow • Expect to sell ~$3B in • Launched new credit originations 6% in loans in 2020, dependent card in October 2019 2020 upon market conditions
Slide 22: Sallie Mae Bank ABS Summary
Sallie Mae Bank ABS Summary (1) Smart Option loans considered in ‘P&I Repayment’ only if borrowers are subject to full principal and interest payments on the loan. (2) Represents the higher credit score of the cosigner or the borrower. Note: Pool characteristics as of the Statistical Cutoff Date for
Slide 23: Sallie Mae Bank ABS Structures
Sallie Mae Bank ABS Structures SMB 2020-A SMB 2019-B SMB 2019-A SIZE $636.0MM $657.0MM $453.0MM PRICING DATE February 4, 2020 June 4, 2019 March 5, 2019 Smart Option Smart Option Smart Option COLLATERAL Private Education Loans Private Education Loans Private Education Loans SERVICER Sallie Mae Bank
Slide 24: SMB 2020-A Structure
SMB 2020-A Structure • Sallie Mae Bank is the loan servicer and transaction sponsor • SMB 2020-A utilizes a sequential structure Pct of Total Expected Wtd Avg Life Principal Expected Bond Class Bond Ratings Index to Call Window to Maturity to Legal Maturity Balance Balance (M/S) (8% CPR)(1) Call(1)
Slide 25: SMB 2020-A Cashflow
SMB 2020-A Cashflow WAL to Call (yrs)(1) Projected Credit Deal Credit Enhancement(2)(4) Reserve Principal Window to Call(1) (8% CPR) Enhancement(3) Class A Class B Target (3)(5) Floor(5) Non-declining A-1 A-2A/B(6) B A-1 A-2A/B(6) B 12mo 24mo 36mo 60mo SMB 2020-A 15% 8% 25% 10% 0.25% 0.99 5.38 9.64
Slide 26: LIBOR Language
LIBOR Language LIBOR Determination for the LIBOR Rate for the 2020-A Transaction is as follows: • If such rate for such related LIBOR Determination Date does not appear on Reuters Screen LIBOR01 Page or on such comparable service as is customarily used to quote LIBOR, and the administrator has not m
Slide 27: 2020 Guidance
2020 Guidance(1) Metrics 2020 Full-Year Guidance Diluted “Core Earnings27” per share $1.85 - $1.91 Provisions for credit losses $285 million - $305 million Total portfolio net charge-offs $275 million - $285 million Private Education Loan originations growth 6% Non-interest expenses $570 million - $
Slide 28: Strong Balance Sheet
Strong Balance Sheet Entering 2020, Total Common Equity Tier Risk-Based Capital 1 Risk-Based Capital ratio was at ratio of 13.4% 12.2% Planned loan Expect the balance sheet asset sales of to be flat over the next ~$3B 3 years will provide flexibility to despite the impact the balance sheet(1) of CEC
Slide 29: Committed to Returning Capital to Shareholders
Committed to Returning Capital to Shareholders(1) INVEST IN HIGH ROE GROWTH • Continue to focus on high-quality Private Education Loan originations, including deeper penetration of graduate school market • Offer credit cards to high-quality customer base QUARTERLY COMMON STOCK DIVIDEND INCREASED • P
Slide 30: 3-Year Horizon
3-Year Horizon(1) Originations ~6% growth per year Loan Sales ~$3B per year contingent on market conditions Balance Sheet Remains at ~$32B due to loan sales Earnings Per Share Significant increase in 2020 driven by loan sales and share repurchases, followed by mid single digit EPS growth thereafter
Slide 31: CECL Update
CECL Update(1,2) • Financial Accounting Standards Board’s Current Expected Credit Loss (“CECL”) impairment standard will require “life of loan” estimates of losses to be recorded at origination and became effective for the Company on January 1, 2020. • CECL requires the Company to measure its allowa
Slide 32: Sallie Mae Investor Relations Website
Sallie Mae Investor Relations Website www.salliemae.com/investors/asset-backed-securities/ • SMB Private Education Loan Trust • Monthly Servicing and Distribution Reports • Current Distribution Factors • Current Rates • Current Replines • SMB Private Education Loan Performance Data • Reg AB Static P
Slide 33: 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 34: Important Information Regarding Historical Loan Performance Data (cont.)
Important Information Regarding Historical Loan Performance Data (cont.) Types of Smart Option Student 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 Salli
Slide 35: Smart Option Loan Program Cohort Default Triangles
Smart Option Loan Program Cohort Default Triangles Terms and calculations used in the cohort default triangles 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
Slide 36: Smart Option Loan Program: Prepayment Methodology
Smart Option Loan Program: Prepayment Methodology The Constant Prepayment Rate (CPR) represents an annualized rate of prepayment speed measuring the reduction in the principal balance of a pool of loans in excess of the scheduled pool amortization. The rate can be positive or negative depending on w
Slide 37: Smart Option Loan Program: Prepayment Methodology
Smart Option Loan Program: Prepayment Methodology Calculations Examples(1) 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑡𝑡 = 𝐸𝐸𝐸𝐸𝐸𝐸𝑡𝑡 − 𝐴𝐴𝐴𝐴𝐴𝐴𝑡𝑡 t PMTt ACTt EXPt Prepaymentt SMMt SRt CPR 𝑆𝑆𝑆𝑆𝑆𝑆𝑡𝑡 = 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑡𝑡 ⁄𝐸𝐸𝐸𝐸𝐸𝐸𝑡𝑡 0 $10,000…