Slm Corporation · NASDAQ:SLM
Slm — Q1 2020 Earnings Presentation
33 slides from Slm's earnings presentation, 2020
Slide 1: Investor Presentation First Quarter 2020
Investor Presentation First Quarter 2020 Confidential and proprietary information. © 2019 Sallie Mae Bank. All rights reserved.
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: 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 • Industry leading 54% market
Slide 4: 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 5: Higher Education Value Proposition
Higher Education Value Proposition Unemployment rates and earnings by educational attainment, 2017 2 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 D
Slide 6: 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 7: 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 8: High Quality Private Education Loan Portfolio
High Quality Private Education Loan Portfolio Customer FICO at Original Approval7 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 Vintage6 Portf
Slide 9: 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 9
Slide 10: 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 11: 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 11
Slide 12: 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 13: High Quality, Predictable Credit Program
High Quality, Predictable Credit Program8,9,10 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 14: 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 14
Slide 15: Optimizing our Portfolio
Optimizing our Portfolio25 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 16: CECL Update
CECL Update24,25 • 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 17: 2020 Guidance
2020 Guidance25 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 - $5
Slide 18: 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 sheet25 of CECL
Slide 19: Committed to Returning Capital to Shareholders
Committed to Returning Capital to Shareholders25 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 • Pa
Slide 20: 3-Year Horizon
3-Year Horizon25 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 C
Slide 21: ABS Supplement
sallie ABS Supplement
Slide 22: 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 23: Sallie Mae Bank ABS Summary
Sallie Mae Bank ABS Summary 23
Slide 24: Sallie Mae Bank ABS Structures
Sallie Mae Bank ABS Structures SMB 2019-B SMB 2019-A SMB 2018-C SIZE $657.0MM $453.0MM $544.0MM PRICING DATE June 4, 2019 March 5, 2019 September 12, 2018 Smart Option Smart Option Smart Option COLLATERAL Private Education Loans Private Education Loans Private Education Loans SERVICER Sallie Mae Ban
Slide 25: Appendix
sallie . mae’ Appendix
Slide 26: Quarterly Financial Highlights
Quarterly Financial Highlights 26
Slide 27: Annual Financial Highlights
Annual Financial Highlights 27
Slide 28: Sallie Mae vs Federal Student Loans
Sallie Mae vs Federal Student Loans 28
Slide 29: "Core Earnings" to GAAP Reconciliation
“Core Earnings” to GAAP Reconciliation 29
Slide 30: 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 31: 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 32: 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 33: Footnotes
Footnotes 1. Source: MeasureOne CBA Report as of September 2019 2. U.S. Bureau of Labor Statistics, Current Population Survey 3. Source: Trends in Student Aid,© 2019 The College Board, www.collegeboard.org, U.S. Department of Education 2019 4. Source: U.S. Bureau of Labor Statistics- “More education