Slide 1: SLM Corporation Investor Presentation ABS East 2019
SLM CORPORATION INVESTOR PRESENTATION ABS EAST 2019 September 23-24, 2019
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 July 24, 2019 (unless otherwise noted) and should be read in connection with the press release of SLM Corporation (the “Company”) announcing its financial results
Slide 3: Table of Contents
TABLE OF CONTENTS Corporate Overview Page 4-6 Smart Option Student Loan Program Page 7-19 Funding and ABS Overview Page 20-29 Additional Information Page 30-34
Slide 4: Market leading brand, products and best-in-class service drive our success
Market leading brand, products and best-in-class service drive our success • 40 years of leadership in the education lending market • Top ranked brand • Industry leading 55% market share(1) • Over 2,400 actively managed university relationships across the U.S. • Appear on 98% of preferred lender lis
Slide 5: Private Student Loan Industry
Private Student Loan Industry • Private education loans represent Other 2% of the overall spend in higher $18 education annually Federal Loans Private • Total spend on higher education $94 Education Loans grows 2-3% annually primarily due Grants $11 to increases in cost of attendance $129 $441 Billi
Slide 6: Higher Education Value Proposition
Higher Education Value Proposition (1) • The unemployment rate for individuals age 25-34 with four-year college degrees was 2.3%, compared to 5.8% for high school graduates(2) • 59% of students graduated with student loans in AY 2016-2017(3) • Of the 59% of bachelor’s degree recipients who graduated
Slide 7: Product suite tailored to meet the needs of undergraduate and graduate students
Product suite tailored to meet the needs of undergraduate and graduate students • Smart Option Student Loan • Introduced in 2009 • Flexible repayment options while in school • Fixed and Variable rates • Differentiated products for undergraduates and graduate students 7
Slide 8: 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 • 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 Pa
Slide 9: Product Overview
Product Overview Undergraduate Medical Law Parent Dental Health Professions MBA General Studies 9
Slide 10: 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 11: Private Student Loan Originations
Private Student Loan Originations (1) $6,000 $5,700 7% $5,500 $5,315 11% $5,000 $4,800 $4,666 3% 8% $4,500 $4,330 $4,000 Originations ($MM) $3,500 $3,000 $2,663 8% $2,500 $2,459 $2,000 $1,500 $1,000 $500 $0 2015 2016 2017 2018 2019 Actuals Forecast Originations Statistics Q2 2019 Q2 2018 Origination
Slide 12: High Quality Private Education Portfolio
High Quality Private Education Portfolio Customer FICO at Original Approval(1) Smart Option Payment Type <700 Interest Only 22% 780+ 21% 28% Deferred 700 - 740 48% 27% 740 - 780 Fixed Pay 23% 31% Weighted Average FICO: 744 Smart Option Loans: $20.6 billion Portfolio by Originations Vintage Portfolio
Slide 13: 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% 5.2% 4% 3.6% 3% 2% 2.4% 1% 0.8% 0% 0 1 2 3 4 5 6 7
Slide 14: 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 15: 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) Volun
Slide 16: Enhancing franchise value through a deeper relationship with clients
Enhancing franchise value through a deeper relationship with clients Distribution of Sallie Mae Borrowers by Product and Age 100% 95% 93% 91% 90% 87% 83% 80% 79% 73% 70% 64% % with a Credit Card % of Borrowers 60% 54% 50% % with a Personal Loan 42% 40% 30% 29% 30% 30% 27% 25% 21% 22% 20% 18% 15% 11%
Slide 17: High Quality Portfolio Growth
High Quality Portfolio Growth YTD as of 6/30/19: • 78% of Private Education Loans have FICO score at approval > 700(1) • 52% of Private Education Loan Borrowers make payments while in school • 62% of Private Education Loans are variable-rate, 38% fixed-rate (1) Represents the higher credit score of
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 Retail 19% MMDA & CD 22% Brokered $11.8b Retail $9.4b Brokered Variable Secured Debt $4.7b Retail 18% H.S.A. & 529 15% Brokered Fixed 26% As of 6/30/19 20
Slide 21: Sallie Mae Bank ABS Summary
Sallie Mae Bank ABS Summary 14-A 15-A 15-B 15-C 16-A 16-B 16-C 17-A 17-B 18-A 18-B 18-C 19-A 19-B Issuance Date 8/7/2014 4/23/2015 7/30/2015 10/27/2015 5/26/2016 7/21/2016 10/12/2016 2/8/2017 11/8/2017 3/21/2018 6/20/2018 9/19/2018 3/13/2019 6/12/2019 Total Bond Amount ($mil) $382 $704 $714 $701 $55
Slide 22: 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 23: SMB 2019-B Structure
SMB 2019-B Structure • Sallie Mae Bank is the loan servicer and transaction sponsor • SMB 2019-B 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 24: SMB 2019-B Cashflow
SMB 2019-B 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 2019-B 15% 8% 25% 10% 0.25% 1.00 5.43 9.88 1
Slide 25: LIBOR Language
LIBOR Language LIBOR Determination for the LIBOR Rate for the 2019-B 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 26: Strong financial results translate to predictable returns to shareholders
Strong financial results translate to predictable returns to shareholders • Consistent earnings per share growth • High return on equity • Stable net interest margin • Introducing capital return programs 26
Slide 27: Clear Capital Priorities
Clear Capital Priorities Invest in High ROE Growth Continue to focus on high-quality Private Education Loan originations, including deeper penetration of the graduate school market Testing Personal Loan market Quarterly Dividend Offer credit cards to our high-quality customer base Invest in Share Hi
Slide 28: CECL Update
CECL Update(1) • The Financial Accounting Standards Board’s (FASB) Current Expected Credit Loss impairment standard will require “life of loan” estimates of losses to be recorded at origination and will become effective for us on January 1, 2020. • There will be an initial build of the loan loss all
Slide 29: 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 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 three separate sources of information: (1) Combined Smart Option Student Loan Portfolio Data for Legacy SLM, Navient and Sal
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: 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 34: 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…