Slide 1: SLM Corporation Investor Presentation Fourth Quarter 2017
SLM CORPORATION INVESTOR PRESENTATION Fourth Quarter 2017
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 18, 2017 (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: 54% market
Slide 4: Sallie Mae Overview
4 Sallie Mae Overview Sallie Mae Key Statistics for Q3 2017 − $0.17 “Core Earnings” Diluted Earnings Per Common Share 1,2 − Portfolio of $17.0 billion of high quality Private Education Loans − 89% of Private Education Loans disbursed in Q3 are cosigned, 90% in Q3 2016 − Average Q3 Private Education
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) Public Private (millions) (thousands) $44 $45 $41 $42 $38 $39 13.4 13.5 $35 $36 13.3 13.5 13.4 12.9 $18 $18 $19 $20 $20 $15 $16 $17 09/10 10/11 11/12 12/13 13/14 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) 2,000 9% 1,800 Average weekly income 8% $ 17,500 1,600 Unemployment $ 15,780 7% $ 14,245 1,400 6% 1,200 5% 1,000 $ 9,690 4
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: High Quality Private Education Loan Growth
9 High Quality Private Education Loan Growth $5,000 $4,800 3% $4,666 8% $4,500 $4,330 6% 3% $4,166 $4,076 $4,059 $4,000 7% $3,795 Disbursements ($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
Slide 10: Analytical Approach to Credit
10 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 cred
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% 30% Deferred 700 - 740 47% 26% 740 - 780 Fixed Pay 23% 31% Weighted Average FICO: 746 Smart Option Loans: $16.4 billion Portfolio by Originations Vintage Portfolio
Slide 12: Conservative Funding Approach
12 Conservative Funding Approach 3Q 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 —
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% 6.8% 6.2% 5% 5.1% 4% 4.4% 3% 4.2% 2% 3.3% 1
Slide 15: Income Statement
15 Financial Review (in millions) Q3 2017 Q3 2016 Variance PSL $ 17,186 $ 13,889 $ 3,297 PSL Reserve (227) (163) (64) FFELP 952 1,037 (85) • Private Education Loan portfolio FFELP Reserve (1) (2) 1 PLOAN 132 1 131 growth of 24% in Q3 2017 vs. Q3 2016 PLOAN Reserve (1) (0) (1) Total Loans 18,041 14,7
Slide 16: Celebrating Sallie Mae: Q3 2017 awards and recognition
16 Celebrating Sallie Mae Q3 2017 awards and recognition https://www.advisoryhq.com/articles/best-college-savings-calculators/
Slide 17: Sallie Mae Bank
17 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 18: ABS Supplement
18 ABS Supplement
Slide 19: Sallie Mae's Smart Option Loan Product Overview
19 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 $10,000 avg orig bal, 5 to 15 yr
Slide 20: Sallie Mae Bank ABS Summary
20 Sallie Mae Bank ABS Summary 14-A 15-A 15-B 15-C 16-A 16-B 16-C 17-A Issuance Date 8/7/2014 4/23/2015 7/30/2015 10/27/2015 5/26/2016 7/21/2016 10/12/2016 2/8/2017 Total Bond Amount ($mil) $382 $704 $714 $701 $551 $657 $674 $772 Initial AAA Enhancement (%) 21% 23% 22% 23% 20% 19% 16% 17% Initial Cl
Slide 21: Sallie Mae Bank ABS Structures
21 Sallie Mae Bank ABS Structures SMB 2017-A SMB 2016-C Size $772.0MM $674.0MM Pricing Date January 31, 2017 October 5, 2016 Smart Option Smart Option Collateral Private Education Loans Private Education Loans Servicer Sallie Mae Bank Sallie Mae Bank Overcollateralization (1) 11% 10% Pricing Prepaym
Slide 22: Sallie Mae Bank Servicing Policies
22 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 23: Sallie Mae Bank Collections
23 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 24: Sallie Mae Bank Smart Option Private Education Loans
24 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 25: Appendix
25 Appendix
Slide 26: "Core Earnings" to GAAP Reconciliation
26 “Core Earnings” to GAAP Reconciliation Quarters Ended Sept 30, June 30, Sept 30, 2017 2017 2016 (Dollars in thousands, except per share amounts) “Core Earnings” adjustments to GAAP: GAAP net income……….….…….........………………… $ 76,371 $ 70,617 $ 56,965 Preferred stock dividends ………....….........……………
Slide 27: Important Information Regarding Historical Loan Performance Data
27 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 28: Important Information Regarding Historical Loan Performance Data (cont.)
28 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 29: Smart Option Loan Program Cohort Default Curves
29 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