Slm Corporation · NASDAQ:SLM
Slm — Investor Presentation (October 2015)
43 slides from Slm's investor presentation, Oct 30, 2015
Slide 1: Sallie Mae Investor Presentation Fourth Quarter 2015
SALLIE MAE Investor Presentation FOURTH QUARTER 2015
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 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 qua
Slide 3: The Sallie Mae Brand
3 ► #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% market share(1) ► Over
Slide 4: Sallie Mae Highlights
4 ► 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 million in Q3 2015 and $1
Slide 5: Sallie Mae Summary
5 ($B as of 9/30/15) Assets 14.5 - FFELP Loans 1.1 - Private Loans 10.8 - Deposits 10.6 - Preferred Equity 0.6 - Common Equity 1.4 - - National sales and marketing - Largest salesforce in the industry - Specialized underwriting capability - Capital markets expertise Private Education Loan - Originat
Slide 6: Favorable Student Loan Market Trends
6 $17 $17 $93 $28 AY 2004-2005 $110 $46 Full-Time Private School Full-Time Public School $27 $27 $143 $49 AY 2014-2015 $168 $76 Full-Time Private School Full-Time Public School $17 $17 $27 $27 $93 $28 $143 $49 Full-Time Private School Full-Time Public School Full-Time Private School Full-Time Public
Slide 7: Higher Education Value Proposition
7 Higher Education Value Proposition Relationship Between Higher Education, Income and Employment(1) 0% 2% 4% 6% 8% 10% 12% 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 Less than H.S. High school Some college Associate Bachelor's Master's Doctorate Professional Unemployment Average weekly income
Slide 8: Smart Option Overview
8 ► 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 educational expenses ►
Slide 9: High Quality Private Student Loan Originations Growth
9 9 High Quality Private Student Loan Originations Growth $2,737 $3,342 $3,795 $4,076 $3,756 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 $5,000 2011 2012 2013 2014 2015 Or igi na tio ns ( $M M) Private Education Loan Originations 7% 14% 22% 5% 7% YTD $4,300 Originations Statistic
Slide 10: Analytical Approach to Credit
10 Analytical Approach to Credit Student Initial Screen ► $1,000 minimum loan ► Minimum FICO of 640 ► No existing SLM 30+ day past dues ► No student loans 90+ day past dues ► No recent bankruptcy ► 2+ trades for cosigners and 4+ trades for non-cosigner ► Asset expertise and rigorous underwriting dri
Slide 11: High Quality Private Education Portfolio
11 High Quality Private Education Portfolio Customer FICO at Origination Smart Option Payment Type Portfolio Interest Rate Type Variable 81% Fixed 19% 780+ 30% 740 - 780 23% 700 - 740 26% <700 21% Weighted Average FICO: 747 Portfolio by Originations Vintage Interest Only 21% Fixed Pay 32% Deferred 4
Slide 12: Conservative Funding and Liquidity
12 ► Low cost deposit base with no branch overhead — 80% of retail deposits are savings accounts — Brokered deposits used as alternative funding source ► Term funding / securitizations will augment deposit funding for future growth — Experienced capital markets team — Capacity to securitize $2 – $3b
Slide 13: Cumulative Defaults by P&I Repayment Vintage
13 Cumulative Defaults by P&I Repayment Vintage(1),(2),(3) Smart Option Cumulative Gross Defaults by P&I Repayment Vintage and Years in P&I Repayment As of September 30, 2015 (1) For important information regarding historical performance data, see pages 19 and 20. (2) Loans in ‘P&I Repayment’ includ
Slide 14: Smart Option Delinquency and Default Performance
14 14 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% % of P& I R ep ay me nt Ba lan ce Legacy SLM: 31-60 Delinquency SLM Bank: 31-60 Delinquency 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% % of P& I R ep ay me nt Ba lan ce Legacy SLM: 61-90 Delinquency SLM Bank: 61-90 Delinquency 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% % of P& I R ep ay
Slide 15: Core Earnings to GAAP Reconciliation
15 15 “Core Earnings” to GAAP Reconciliation (Dollars in thousands, except per share amounts) Sept 30, June 30, Sept 30, Sept 30, Sept 30, 2015 2015 2014 2015 2014 “Core Earnings” adjustments to GAAP: GAAP net income attributable to SLM Corporation….…….…..……….…….........………………… 45,724$ 91,016$ 82,92
Slide 16: Financial Review
16 Financial Review ► Private Education Loan portfolio growth of 38% ► Conservatively funded with 14.1% risk based capital at the end of Q3 2015 ► Stable deposit base coupled with term funding from securitizations ► Net interest margin expected to be 5.5% for 2015 ► ROE and ROA expected to be 18% an
Slide 17: Sallie Mae Bank
17 ► 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 trajectory and exce
Slide 18: Smart Option Student Loan Historical Performance Data
18 SALLIE MAE BANK Smart Option Student Loan Historical Performance Data Period ended September 30, 2015
Slide 19: Spin-Off background and data notes
19 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 Corporation (“Navient”), and a consumer banking business called SLM
Slide 20: Types of Smart Option Loan Portfolio Data
20 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 Bank. Information in this category is presented on a combined basis for
Slide 21: Smart Option Serviced Portfolio: 31-60 Day Delinquencies
21 Smart Option Serviced Portfolio: 31-60 Day Delinquencies 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% De c -0 9 M a r- 1 0 J u n -1 0 S e p -1 0 De c -1 0 M a r- 1 1 J u n -1 1 S e p -1 1 De c -1 1 M a r- 1 2 J u n -1 2 S e p -1 2 De c -1 2 M a r- 1 3 J u n -1 3 S e p -1 3 De c -1 3 M a r- 1 4 J u n -1 4 S e p
Slide 22: Smart Option Serviced Portfolio: 61-90 Day Delinquencies
22 Smart Option Serviced Portfolio: 61-90 Day Delinquencies 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% De c -0 9 M a r- 1 0 J u n -1 0 S e p -1 0 De c -1 0 M a r- 1 1 J u n -1 1 S e p -1 1 De c -1 1 M a r- 1 2 J u n -1 2 S e p -1 2 De c -1 2 M a r- 1 3 J u n -1 3 S e p -1 3 De c -1 3 M a r- 1 4 J u n -1 4 S e p
Slide 23: Smart Option Serviced Portfolio: 91+ Day Delinquencies
23 Smart Option Serviced Portfolio: 91+ Day Delinquencies 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% De c -0 9 M a r- 1 0 J u n -1 0 S e p -1 0 De c -1 0 M a r- 1 1 J u n -1 1 S e p -1 1 De c -1 1 M a r- 1 2 J u n -1 2 S e p -1 2 De c -1 2 M a r- 1 3 J u n -1 3 S e p -1 3 De c -1 3 M a r- 1 4 J u n -1 4 S e p -
Slide 24: Smart Option Serviced Portfolio: Forbearance
24 Smart Option Serviced Portfolio: Forbearance (1) Loans in ‘P&I Repayment’ include only those loans for which scheduled principal and interest payments are due. (2) On June 1, 2015 the FDIC published FIL-23-2015, which encouraged lenders to work constructively with borrowers impacted by the floods
Slide 25: Smart Option Serviced Portfolio: Annualized Gross Defaults
25 Smart Option Serviced Portfolio: Annualized Gross Defaults (1) Loans in ‘P&I Repayment’ include only those loans for which scheduled principal and interest payments are due. Defaults occurring prior to ‘P&I Repayment’ are not represented in the data. (2) SLM Bank 2010 ‘P&I Repayment’ vintage not
Slide 26: Smart Option Vintage Data: Cumulative Gross Default by Loan Type
26 Smart Option Vintage Data: Cumulative Gross Default by Loan Type 5.8% 4.9% 3.5% 2.6% 1.5% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 0 1 2 3 4 5 6 7 8 9 10 11 C u m u la ti ve D ef au lt R at e as a % o f O ri gi n al B al an ce Years in P&I Repayment Smart Option Student Loans - Ser
Slide 27: Smart Option Vintage Data: Voluntary Prepayments
27 Smart Option Vintage Data: Voluntary Prepayments 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 % C P R Quarters Since Disbursement Smart Option Student Loans - Serviced Portfolio Voluntary CPR by Origination Vintage (1) Interest Only, Fixed Payment and Deferred Produ
Slide 28: Smart Option Vintage Data: Total Prepayments
28 Smart Option Vintage Data: Total Prepayments ► Following the first year after disbursement, total prepayments have generally ranged around 4% (1) Data for all loans from initial disbursement, whether or not scheduled payments are due. Total CPR includes both voluntary prepayments and defaults. (2
Slide 29: Smart Option: Cumulative Recoveries
29 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 (1) Certain data used in the charts above was provided by Navient under a data sharing agreement. Sall
Slide 30: Cohort default triangle definitions
30 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 default triangles are defined below: P&I Repaymen
Slide 31: Cohort Default Triangles – Smart Option Combined
31 Cohort Default Triangles – Smart Option Combined (IO, Fixed & Deferred) Data as of 9/30/2015. (1) Private education loans marketed under the Smart Option Student Loan brand. (2) Periodic Defaults for the most recent calendar Year in P& I Repayment are for a partial year. (3) Numerator is the amou
Slide 32: Cohort Default Triangles – Smart Option Interest Only
32 Cohort Default Triangles – Smart Option Interest Only Smart Option IO (P&I Repayment Status - No Co-Signer) Smart Option IO (P&I Repayment Status - Co-Signer) Smart Option IO (P&I Repayment Status - Total) P&I Repayment Year Disbursed Principal Entering P&I Repayment ($m) Periodic Defaults by Yea
Slide 33: Cohort Default Triangles – Smart Option Fixed Payment
33 Cohort Default Triangles – Smart Option Fixed Payment Smart Option Fixed Payment (P&I Repayment Status – No Co-Signer) Smart Option Fixed Payment (P&I Repayment Status - Co-Signer) Smart Option Fixed Payment (P&I Repayment Status - Total) P&I Repayment Year Disbursed Principal Entering Periodic D
Slide 34: Cohort Default Triangles – Smart Option Deferred Payment
34 Cohort Default Triangles – Smart Option Deferred Payment Smart Option Deferred (P&I Repayment Status – No Co-Signer) Smart Option Deferred (P&I Repayment Status - Co-Signer) Smart Option Deferred (P&I Repayment Status - Total) P&I Repayment Disbursed Principal Entering P&I Periodic Defaults by Ye
Slide 35: ABS Supplement
35 ABS Supplement
Slide 36: Sallie Mae's Smart Option Loan Product Overview
36 Sallie Mae’s Smart Option Loan Product Overview The Smart Option loan product was introduced by Sallie Mae in 2009 The Smart Option loan program consists of: Smart Option Interest Only loans - require full interest payments during in-school, grace, and deferment periods Smart Option Fixed
Slide 37: SMB vs. Legacy SLM Private Education Loan ABS Summary
37 SMB vs. Legacy SLM Private Education Loan 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. 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 A
Slide 38: Sallie Mae Bank Servicing Policy
38 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 owned by Sallie Mae Bank sold to legacy SLM after becoming 90+ days past due Sallie Mae Bank collects delinquent loans
Slide 39: Sallie Mae Bank Collections
39 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 40: Recovery Operations
40 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 the option of selling o
Slide 41: Private Education Loan Characteristics
41 ► 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 Education, or any other entity ► Simil
Slide 42: FFELP vs. Sallie Mae Bank Smart Option Loan Comparison
42 Sallie Mae Bank Smart Option Private Education Loans FFELP vs. Sallie Mae Bank Smart Option Private Education Loan Comparison FFELP Stafford Loans Sallie Mae Bank Smart Option Private Education Loans(1) Borrower Student Student or Parent Co-signer None Typically a parent Lender Eligible banks and
Slide 43: Private Education Loan Lifecycle for Deferred Loans
43 Private Education Loan Lifecycle for Deferred Loans Loan made to borrower/ co-signer In School Status (Additional Borrowing) Grace Status After graduation (generally 6 months) P&I Repayment Status Deferment Status (back to school) (up to 48 months) Default (120+ days delinquent) IN SCHOOL AND GRA