Slide 1: SLM Corporation Q2 2010 Investor Presentation
SLM Corporation Q2 2010 Investor Presentation
Slide 2: Forward-looking statements
This quarterly presentation contains forward-looking statements and information based on management's current expectations as of the date of this document. Statements that are not historical facts, including statements about our beliefs or expectations and statements that assume or are dependent upo
Slide 3: SLM Corporation Overview
SLM Corporation Overview 3
Slide 4: SLM Corporation
SLM Corporation #1 originator of student loans in the U.S. education lending market #1 servicer and collector of student loans in the U.S. currently servicing $201.0 billion in assets including $25.9 billion for third parties, including the Department of Education (ED) Fully independent private sect
Slide 5: Life stage Customer Strategy
Life stage Customer Strategy Sallie Mae offers an unmatched, integrated suite of Saving, Planning, and Paying for College SM products and services 5
Slide 6: SLM Corporation Update
SLM Corporation Update Student Loan Reform Passed with Health Care Reform-Signed into Law 3/24/2010 US Government will be sole originators of federal guaranteed student loans effective 7/1/2010 Managed student loans outstanding increased to $184 billion at 6/30/2010 Originated $3.1 billion in federa
Slide 7: A Brief Corporate History
A Brief Corporate History 1 Currently known as the Federal Family Education Loan Program (FFELP). SLM Corporate Debt Ratings SLM Corporate Debt Ratings SLM Corporate Debt Ratings SLM Corporate Debt Ratings Moody's S & P Fitch Long-Term Ba1 BBB- BBB- Short-Term Not-Prime A-3 F3 Outlook Neg. Neg. Stab
Slide 8: Q2 Core Earnings Summary
Q2 10 "Core Earnings" Summary ($ millions), except per share amounts Q2 10 Q1 10 Q2 09 EPS (Reported) $0.39 $0.39 $0.31 Economic Floor Income EPS not reported in "Core Earnings" $0.00 $0.01 $0.17 Net Income Attributable to SLM $209 $212 $170 Net Interest Income $759 $702 $457 Net Interest Margin 1.5
Slide 9: Fee Income & Other Income
Fee Income & Other Income APG is re-focused on student loan contingency and collections Loan Servicing including ED Servicing Contract Currently 2 million accounts Collecting on behalf of the Dept of Education for close to ten years Guarantor Servicing for student loans Contingency Inventory of $12
Slide 10: Lending Segment Earnings Detail
Lending Segment Earnings Detail ($ millions) Q2 10 Q1 10 Q2 09 FFELP Originations $3,110 $7,713 $3,706 Private Originations $219 $840 $387 Total Originations $3,329 $8,553 $4,093 Average Managed Student Loans $184,571 $181,533 $188,490 Net Interest Income after Provision - FFELP $333 $280 $39 Net In
Slide 11: Dept. of Education / Government Funding Programs
Dept. of Education / Government Funding Programs Loan Purchase Commitment Program - 5/21/08 Eligible collateral - certain 2008 - 2010 FFELP loans Funded at CP +50 bps Par put + $75/per loan fee and origination fee rebate Straight A Conduit Program Launched - Announced 11/08/08, Launched 5/11/09 Coll
Slide 12: Federal Student Loan Market
Federal Student Loan Market Outstanding Government Student Loan Market Distribution FFYE 9/30/2009 Market Distribution FFYE 9/30/2009 Market Distribution FFYE 9/30/2009 Top 10 Holders of FFELP Loans FFYE 9/30/09 FFYE 9/30/09 FFYE 9/30/09 Sources: US Department of Education Report 4/2010, Federal Bud
Slide 13: Three Distinct Aspects of the Business Model
SLM Corporation Three Distinct Aspects of the Business Model FFELP Loan Portfolio and Guarantor Collection and Servicing Existing portfolios generating substantial income and cash flow Cash strengthens balance sheet Servicing cash flows are super senior Residual cash flows are stable due to minimal
Slide 14: Office of the Chief Executive Officer
Office of the Chief Executive Officer Al Lord, Chief Executive Officer Jack Hewes, Sr. EVP & Chief Lending Officer Jim Truitt, SVP & Chief Compliance Officer David West, SVP & Chief Credit Officer Jack Remondi, Vice Chair & Chief Financial Officer Kara West, VP Risk Assessment Mark Heleen, EVP & Gen
Slide 15: The U.S. Student Loan Market
The U.S. Student Loan Market SLM Corporation 15
Slide 16: Favorable Student Loan Market Trends
Favorable Student Loan Market Trends Source: College Board Note: Academic years, average published tuition, fees, room and board charges at four-year institutions; enrollment-weighted (CHART) Higher Education Enrollment (millions) Source: National Center for Education Statistics Note: Total enrollme
Slide 17: College Grads Experience Lower Levels of Unemployment
College Grads Experience Lower Levels of Unemployment Source: U.S. Department of Labor, Bureau of Labor Statistics as of 6/30/2010 17 (CHART)
Slide 18: FFELP Loan Originations
Originated over $3.1 billion of loans in the quarter FFELP Loan Originations FFELP Loan Originations 18
Slide 19: Private Education Loan Originations
Private Education Loan originations declined as result of an increase in federal student loan limits, an overall increase in the use of federal student loans as well as an increase in federal grants. Private Education Loan Originations Private Education Loan Originations 19
Slide 20: The Private Education Loan Market
The Private Education Loan Market Consumer loans made to students and parents specifically to fund the cost of undergraduate, graduate and other forms of post-secondary education Typically used to bridge the funding gap between grants, aid and FFELP loans, and the increasing cost of higher education
Slide 21: SLM's Private Education Loan Portfolio
SLM's Private Education Loan Portfolio Private Education Loan Portfolio Characteristics $35 billion of managed outstandings at 6/30/2010 19% of SLM's managed student loan portfolio Risk-based pricing Approximately 58% of portfolio has a cosigner, typically a parent Higher education loans typically n
Slide 22: SLM's New Private Education Loan Product
SLM's New Private Education Loan Product Smart Option Product - Launched 3/23/09 Eliminates negative amortization during the school and grace period while reducing the average life from 9.5 years to 5.5 years Repayment term is driven by cumulative amount borrowed and grade level Requires interest on
Slide 23: Private Education Loan Market Opportunity
(CHART) Private Education Loan Market Opportunity Private education loans help bridge the gap between funding available through government-sponsored programs and the increasing cost of education (CHART) Cost of College AY 2009-2010 Based on a Four-Year Term ED Lending Limit $31,000 Cost of attendanc
Slide 24: Private Credit Originations
Private Credit Originations 2008-09 academic year market share approximately 44% Source: College Board, Trends in Higher Education Series (2009). 2008-2009 industry data is preliminary. Data reported by academic year, SLM quarterly data converted to academic year basis. 24 (CHART)
Slide 25: SLM Private Credit Lending Statistics
SLM Private Credit Lending Statistics (with PC Consolidation & Career Training Loans) 25 Note: Numbers may not add due to rounding * The 'other' category is comprised primarily of Career Training and Private Consolidation Loans.
Slide 26: Credit Quality
Credit Quality SLM Corporation 26
Slide 27: Loan Losses
Loan Losses Loan Losses Loan Losses (CHART) + = Private Education Loans(2) 19% U.S. Government Guaranteed Loans(2) 81% Charge-Offs (1) = 0.06% Charge-Offs (1) = 3.42% Total Charge-Offs (1) = 0.73% All data as of June 30, 2010. Annualized Managed FFELP charge-offs as a percentage of average managed F
Slide 28: FFELP Education Loan Portfolio
FFELP Education Loan Portfolio (1) "Core Earnings" FFELP Loan spread, before provision. Charge-offs as a percentage of average Managed FFELP Loans . 28 (CHART)
Slide 29: Private Education Loan Portfolio
Private Education Loan Portfolio (1) "Core Earnings" Private Education Loan spread, before provision. Charge-offs as a percentage of average Managed Private Education Loans in repayment. 29 (CHART)
Slide 30: SLM Private Credit Default Emergence Profile
SLM Private Credit Default Emergence Profile Payments Made (CHART) 30 1 Excludes Sallie Mae Smart Option, LAW, MED, MBA, & bar-study/residency loans
Slide 31: Charge-offs driven by Non-Traditional loans
Charge-offs driven by Non-Traditional loans Non-Traditional loans represent approximately 11% of the Private Education Loan portfolio Higher quality loans entering repayment in 2009 and 2010 Charge-off Trends Mix of Traditional vs. Non-Traditional 31 (CHART) (CHART)
Slide 32: Managed Private Education Loan Portfolio Performance
(1) Charge-offs as a percentage of average loans in repayment annualized for the quarters presented Managed Private Education Loan Portfolio Performance 32
Slide 33: Improving Portfolio Quality
Improving Portfolio Quality 33 * Projected
Slide 34: Portfolio Quality Improving
Portfolio Quality Improving Non-Traditional charge-off rate is 5x greater than Traditional 77% of Q2 10 loan originations had cosigners, an increase from 75% in Q2 09. Non-cosigned loans charge off at more than twice the rate of cosigned loans Amount of non-cosigned loans entering repayment have beg
Slide 35: Private Education Loan Portfolio Performance
Private Education Loan Portfolio Performance Changes in SLM's forbearance policies and the economic downturn have adversely impacted the performance of our Managed Private Education Loan portfolio including accelerating the timing of charge-offs Delinquency trends have improved, as the impact of for
Slide 36: Servicing: A Competitive Advantage
Servicing: A Competitive Advantage SLM Corporation 36
Slide 37: SLM Servicing
SLM Servicing #1 servicer and collector of student loans in the U.S. currently servicing $201.0 billion in assets including $25.9 billion for third parties SLM borrowers total 10 million Awarded ED servicing contract in June 2009 Servicing under contract initiated in August 2009 Contract to span 5 y
Slide 38: SLM's Competitive Advantage
SLM's Competitive Advantage SLM has a distinct competitive advantage in all facets of the education loan market. Best in Class Vertically Integrated Origination/ Servicing/Collections Strongest National Brand in Education with Consumers and Schools State-of-the-Art Loan Delivery Platform Largest & M
Slide 39: Operations locations
Operations locations 39 39 Fishers, Muncie, IN Collections Information Technology Servicing Fulfillment Reston Headquarters, VA Finance Legal Information Technology Lynn Haven, FL Originations Call Center New York State Arcade, Perry, Horseheads, Collections Cincinnati, OH (GRC) Collections Niles, I
Slide 40: Funding Diversity and Liquidity
Funding Diversity and Liquidity SLM Corporation 40
Slide 41: Q2 2010 Capital Markets Summary
Q2 2010 Capital Markets Summary Realized gains of $91 million on $1.4 billion debt repurchases Issued $1.2 billion of Stafford/PLUS FFELP ABS Concurrent offerings of $869 million 2010-B & $1.7 billion 2010-C Refinanced $1.5 billion SLM Private Education Loan Trust 2009-A ABS issue $875 million sold
Slide 42: Recent ABS Transactions
Recent ABS Transactions Recent ABS Transactions Transaction: Private Credit TALF-EligibleMarch 2010-A July 2010-B July 2010-C Issuance Size: $1.550 B $0.869 B $1.701 B Registration Type: 144A 144A 144A Indicative Pricing: 1-mo LIBOR + 325Prime - 5 $303 M @ 1-mo LIBOR + 192Remainder funded at TRS fac
Slide 43: Liquidity Position Detail
Liquidity Position Detail SLM has $1.6 billion in unsecured revolving credit facilities. The Company has never drawn on these facilities. $1.9 billion of our unsecured revolving facilities was due mature in October 2010, and was retired in May 2010, and $1.6 billion matures in October 2011 43 Note:
Slide 44: High Percentage of Student Loans Funded to Term
Employ conservative long-term funding model * Funded to Term includes 19% or $35.5 billion and 16% or $28.3 billion of student loans funded under the ED Purchase and Participation Program and Straight A Funding Facility as of June 30, 2010 and June 30, 2009, respectively. ** Fixed spread liabilities
Slide 45: Funding Distribution
Funding Distribution At June 30, 2010, total managed borrowing was $197.1 billion 45 (CHART) *Other includes FHLB-DM facility borrowings, on balance sheet indentured trusts, and other managed borrowings as identified in the Q2 2010 SLM 10-Q.
Slide 46: SLM Corporate Debt and ABS Issuance
SLM Corporate Debt and ABS Issuance SLM has issued $143 billion of long-term, corporate debt and asset- backed securities since 2005, across a broad range of maturities (1) YTD. Excludes short-term issuance under SLM's asset-backed commercial paper programs. (2) Reported at quarter closing dates, ne
Slide 47: SLM ABS Issuance Volume
SLM ABS Issuance Volume SLM ABS Term Issuance Volume (1) (1) Excludes outstandings under SLM's asset-backed commercial paper program. Totals may not add due to rounding. 47
Slide 48: SLM Corporate Debt Activity
SLM Corporate Debt Activity SLM Corporate Debt Issuance Volume US$ equivalent at the time of issuance. (2) Face value amounts repurchased. SLM Corporate Debt Repurchases Note: Total may not foot due to rounding. 48
Slide 49: Unsecured Debt Maturities
Unsecured Debt Maturities Unsecured Debt Maturities Repurchased $1.4 billion of debt in Q2 10 Note: Does not include Sallie Mae Bank or Subsidiary funding 2010 2011 2012 2013 2014 2015 2016 2017 Thereafter Change from Prior Quarter ($0.9) ($0.3) (0.1) ($0.1) ($0.4) - - - - 49
Slide 50: Unencumbered Assets & Unsecured Debt
Unencumbered Assets & Unsecured Debt 50 * On 1/1/10 upon adopting ASC 810 the Retained Interests were removed from the Consolidated balance sheet and the Assets and Liabilities of Off-balance sheet ABS were consolidated onto the Balance Sheet. ** Amounts include loans, cash, and accrued interest rec
Slide 51: Secured Cash Flow
Secured Cash Flow 51 Note: Totals may not add due to rounding * Net residual represents excess distribution, net of payments on floor contracts and receipts from basis swaps Interest to be capitalized not available for On-Balance Sheet Indentured Trust balance All APBs are 2-point averages of 1/1 an
Slide 52: Sallie Mae Bank
Sallie Mae Bank Bank charter Utah based ILC regulated by FDIC and Utah Department of Financial Institutions (UDFI) Charter granted October 2005 Current bank activity Originates Sallie Mae's private education loans Funded through affiliate and brokered deposits and a direct retail deposit program lau
Slide 53: Sallie Mae Bank - Capital & Deposits
Sallie Mae Bank - Capital & Deposits *Primarily affiliate demand deposit accounts with no stated maturities 53
Slide 54: Risk-Adjusted Capitalization
Risk-Adjusted Capitalization SLM Corporation 54
Slide 55: Capitalization
Capitalization SLM Corp GAAP tangible stockholders' equity as a percentage of total managed assets. Average GAAP tangible equity including preferred stock to charge-offs. SLM charge-offs based on total managed loans, annualized. 55 Q2 10 Q1 10 2009 2008 2007 Tangible Equity/Managed Assets(1) 1.9% 1.
Slide 56: Capital Allocation
Capital Allocation 0.50% 8.00% SLM allocates capital internally based on the risk of the assets it supports SLM Corp Assets Capital Allocation As of June 30, 2010 0% - 25% Cash, Investments, Other Assets & Intangibles 11% of Total Managed Assets Private Education Loans 18% of Total Managed Assets Go
Slide 57: FFELP Appendix
FFELP Appendix SLM Corporation 57
Slide 58: SLM FFELP ABS Issue Characteristics
SLM FFELP ABS Issue Characteristics Historical issue size of $1.0B to $5.0(+)B Tranches denominated in US$ or Euros 'Aaa/AAA/AAA' rated senior tranches make up 97% of issue structure Floating rate tied to 3 mo. LIBOR, with occasional fixed rate issuance Amortizing tranches, with 1 to 15(+) year aver
Slide 59: SLM Stafford/PLUS ABS Trusts Prepayment Analysis
SLM Stafford/PLUS ABS Trusts Prepayment Analysis Annualized CPRs for SLM Stafford/PLUS ABS Trusts have decreased significantly as incentives for borrowers to consolidate have declined Historical SLM Stafford/PLUS ABS CPRs * Average CPR is the simple (non-weighted) average of four Quarterly CPR calcu
Slide 60: SLM Consolidation ABS Trusts Prepayment Analysis
SLM Consolidation ABS Trusts Prepayment Analysis Historical Consolidation ABS CPRs * Average CPR is the simple (non-weighted) average of four Quarterly CPR calculations for years ended June 30, 2010. Quarterly CPR assumes School and Grace loans are not scheduled to make payments. Deferment, Forbeara
Slide 61: Private Credit Appendix
Private Credit Appendix SLM Corporation 61
Slide 62: Private Credit Loan Collections
Private Credit Loan Collections Sallie Mae services and collects the loans in its managed private loan portfolio Private credit collections are conducted by a stand-alone consumer credit collections unit Managed by individuals with prior experience managing collections operations for consumer loan a
Slide 63: Forbearance
Forbearance A collections tool used to provide borrowers time to improve their ability to repay Between graduation and start of first job Economic hardship Provides borrower with time to obtain employment and income to support their obligations Applied most frequently in the first two years of repay
Slide 64: Private Credit Trust Delinquency and Forbearance Seasoning Trends
Note: Based on historical data through June 30, 2010. Does not include data for 2010 trusts which have not had time to become 90 days delinquent Private Credit Trust Delinquency and Forbearance Seasoning Trends Delinquency and forbearance are highest when loans enter repayment, and diminish as loans
Slide 65: Private Credit Trust Default Emergence By Years in Repayment
Private Credit Trust Default Emergence By Years in Repayment Default Emergence By Years in Repayment Default Emergence By Years in Repayment Based on assumptions in effect as of June 30, 2010 Defaults in SLM Private Credit ABS Trusts increase as loans first enter repayment, then diminish steadily ov
Slide 66: Private Credit Trust Default Emergence By Payments Made
Private Credit Trust Default Emergence By Payments Made Default Emergence By Payments Made Default Emergence By Payments Made Based on assumptions in effect as of June 30, 2010 Excludes months in forbearance. Includes months of delinquency prior to chargeoff The probability of default substantially
Slide 67: SLM Private Education Loan Gross Defaults
SLM Private Education Loan Gross Defaults Actual-To-Date Actual-To-Date Actual-To-Date For SLM Private Education Loan Trusts issued prior to 2005-B, the servicer has the option, but not the obligation, to repurchase loans that (i) become 180+ days delinquent and/or (ii) have a borrower who filed for
Slide 68: SLM Private Credit Gross Defaults
SLM Private Credit Gross Defaults Constraining Rating Agency Stress Levels at Issuance As of June 30, 2009 (CHART) 68
Slide 69: Private Credit ABS Trusts Forbearance
Private Credit ABS Trusts Forbearance Forbearance usage is typically highest when loans enter repayment, and declines as loans season Use of forbearance as a collection tool peaked in early 2008, and has since declined, as a result of changes in the forbearance strategy The decline in forbearance ha
Slide 70: Private Credit ABS Trusts - 31-60 Day Delinquencies
Private Credit ABS Trusts - 31-60 Day Delinquencies 70 11/30/2002 2/28/2003 5/31/2003 8/31/2003 11/30/2003 2/29/2004 5/31/2004 8/31/2004 11/30/2004 2/28/2005 5/31/2005 8/31/2005 11/30/2005 2/28/2006 5/31/2006 8/31/2006 11/30/2006 2/28/2007 5/31/2007 8/31/2007 11/30/2007 2/29/2008 5/31/2008 8/31/2008
Slide 71: Private Credit ABS Trusts - 61-90 Day Delinquencies
Private Credit ABS Trusts - 61-90 Day Delinquencies 71 11/30/2002 2/28/2003 5/31/2003 8/31/2003 11/30/2003 2/29/2004 5/31/2004 8/31/2004 11/30/2004 2/28/2005 5/31/2005 8/31/2005 11/30/2005 2/28/2006 5/31/2006 8/31/2006 11/30/2006 2/28/2007 5/31/2007 8/31/2007 11/30/2007 2/29/2008 5/31/2008 8/31/2008
Slide 72: Private Credit ABS Trusts - 90+ Day Delinquencies
Private Credit ABS Trusts - 90+ Day Delinquencies As expected, later stage delinquency has increased due to tightening of Forbearance and the current economic environment 72 11/30/2002 2/28/2003 5/31/2003 8/31/2003 11/30/2003 2/29/2004 5/31/2004 8/31/2004 11/30/2004 2/28/2005 5/31/2005 8/31/2005 11/
Slide 73: Private Credit ABS Trusts - Annualized Gross Charge-offs
Private Credit ABS Trusts - Annualized Gross Charge-offs (1) For SLM Private Credit Student Loan Trusts issued prior to 2005-B, the servicer has the option, but not the obligation, to repurchase loans that (i) become 180+ days delinquent and/or (ii) have a borrower who filed for bankruptcy or died .
Slide 74: Private Credit ABS Trusts - Historical Cumulative Gross Charge-Offs
Private Credit ABS Trusts - Historical Cumulative Gross Charge-Offs(1) (1) For SLM Private Credit Student Loan Trusts issued prior to 2005-B, the servicer has the option, but not the obligation, to repurchase loans that (i) become 180+ days delinquent and/or (ii) have a borrower who filed for bankru
Slide 75: SLM Private Credit ABS Trusts - Prepayment Analysis
SLM Private Credit ABS Trusts - Prepayment Analysis Historical SLM Private Credit ABS CPRs Constant prepayment rates increased in 2007 due to the introduction of Private Credit Consolidation loans, but then declined accordingly following SLM's decision to suspend its consolidation loan program 11/30
Slide 76: SLM Appendix
SLM Appendix 76
Slide 77: GAAP to Core Earnings Reconciliation
GAAP to Core Earnings Reconciliation 77
Slide 78: Additional Information Available at www.salliemae.com
Additional Information Available at www.salliemae.com 78
Slide 79: Debt Investor Relations Contact Information
Debt Investor Relations Contact Information Debt Investor Relations Contact Information Debt Investor Relations Contact Information 79