Slm Corporation · NASDAQ:SLM
Slm — IPO Roadshow (June 2008)
50 slides from Slm's IPO roadshow presentation, Jun 2, 2008
Slide 1: SLM Corporation Global ABS Investor Presentation June 1-4, 2008
SLM Corporation Global ABS Investor Presentation June 1-4, 2008
Slide 2: Forward-looking statements
This presentation contains forward-looking statements and information that are based on management's current expectations as of the date of this document. When used in this report, the words "anticipate," "believe," "estimate," "intend" and "expect" and similar expressions are intended to identify f
Slide 3: Non-GAAP Financial Measures and additional information
Non-GAAP Financial Measures - The following presentation includes non-GAAP performance measures. A presentation of the most comparable GAAP financial measures and a reconciliation of the non-GAAP performance measures to the most directly comparable GAAP financial measures are included in our most re
Slide 4: Contents
Page I. SLM Corporation Update 5 II. U.S. DOE Student Loan Liquidity Plan 9 III. Higher Education Industry Update 11 IV. SLM Business Fundamentals 14 V. Liquidity and Capital Markets Access 17 VI. US Government Guaranteed Student Loan ABS 23 VII. Private Credit Student Loan ABS 29 VIII. Additional I
Slide 5: SLM Corporation Update
SLM Corporation Update ; SallieMae Chapin or ihr Eton
Slide 6: SLM Corp Overview
SLM Corp Overview (1) After the impact of Interim ABCP Facility Fees, before Provision for Losses and including the Wholesale Consolidation Loans. (2) Based on annual "Core Earnings" Net Income Top originator, servicer and collector of student loans More than 10 million customers Relationships with
Slide 7: SLM Corp Update
SLM remains solidly profitable and its performance is on track Private education loan portfolio performance remains solid, with delinquency and charge offs comparing favorably to prior year levels SLM's liquidity and capital markets access remain strong, with $9.9B of term ABS raised YTD thru May 30
Slide 8: Positive Momentum
Positive Momentum Sallie Mae has successfully maneuvered through the credit crunch More selective in its student loan origination activities Completed public offerings of $2.0B common stock and $1.0B mandatory convertible preferred stock and eliminated its equity forward position Issued $1.6B in FFE
Slide 9: U.S. Department of Education Student Loan Liquidity Plan
U.S. Department of Education Student Loan Liquidity Plan
Slide 10: Department of Education student loan liquidity plan outline
On May 21, 2008, pursuant to the Ensuring Continued Access to Student Loans Act of 2008, the Department of Education outlined its student loan liquidity plan DOE will enter into agreements to purchase Stafford/PLUS/GradPLUS loans made for academic year 2008-09 from lenders at (i) par, plus (ii) accr
Slide 11: Higher Education Industry Update
Higher Education Industry Update
Slide 12: Higher Education Enrollment and Annual Cost of Education
Column 1 Column 3 Column 4 Column 5 Column 6 Column 7 Column 8 Column 9 Column 10 Column 11 Column 12 Column 13 Column 14 Column 15 Column 16 1/1/2000 15.312 1/1/2001 15.928 1/1/2002 16.612 1/1/2003 16.901 1/1/2004 17.272 1/1/2005 17.428 1/1/2006 17.672 1/1/2007 17.958 1/1/2008 18.264 1/1/2009 18.56
Slide 13: Private Education Loan Market Growth
Private College Public College Private College Public College 73428 28568 0 141496 75198 FFELP Funds Available 17125 17125 0 19000 19000 Private Education Loan Market Growth Private credit loans fund the gap between student aid, federal loans and the rising cost of education Source: College Board. C
Slide 14: SLM Business Fundamentals
SLM Business Fundamentals “ SallieMae
Slide 15: Fundamentals of SLM Business Model Remain Unchanged
FFELP Stafford and PLUS loans Private Credit Loans Fee-Based Businesses Originated primarily through schools' financial aid offices Marketed under Sallie Mae brands plus those of strategic lender partners Loans originated, serviced and collected by SLM's servicing operations Originated through both
Slide 16: SLM Competitive Advantage and Market Position
SLM Competitive Advantage and Market Position Vertically Integrated Origination/ Servicing/Collections Strong National and Regional Brands Integrated, Web-Based Technology Largest and Most Experienced Sales Team Breadth of Products and Services $169B managed loans 10 million customers Economies of S
Slide 17: Liquidity and Capital Markets Access
Liquidity and Capital Markets Access
Slide 18: Liquidity Position Update
Liquidity Position Update At March 31, 2008, SLM maintained $18.4B of primary liquidity Sources of Primary Liquidity: Mar 31, 2008 Unrestricted Cash & Liquid Investments $4.9B(1) Unused Bank Lines of Credit 6.5B 2008 ABCP Facilities 6.9B Total Sources of Primary Liquidity $18.4B Stand-by Liquidity:
Slide 19: Current Funding Sources
Current Funding Sources Term ABS Fixed Spread Liabilities with Average Life of 4.1 Yrs ABCP Funding Sources 0.65 0.2 0.15 $169 Billion Managed Student Loan Portfolio The vast majority of SLM's assets are term-funded with either corporate debt or term ABS As of March 31, 2008
Slide 20: Diversified Funding Strategy
Diversified Funding Strategy Fund new FFELP originations primarily through the new DOE liquidity program Fund new private loan originations primarily through the company's ABCP facility Continue to regularly access the FFELP ABS market Re-establish corporate unsecured debt program Re-establish priva
Slide 21: SLM's Student Loan ABS Program
SLM's Student Loan ABS Program Sallie Mae is among the largest issuers of ABS globally $9.9B of term ABS funding raised YTD through May 30, 2008, although at significantly higher spreads than in the past Only large, well known student loan issuers have been able to tap the ABS markets in 2008 Recent
Slide 22: ABS Issuance by Issuer rankings
Note: Totals may not add due to rounding Source: Credit Suisse ABS Issuer Rankings 2007 US$ ABS Issuance by Issuer ($bn) 2007 Student Loan ABS by Issuer ($bn) YTD 2008 Student Loan ABS by Issuer ($bn) YTD 2008 US$ ABS Issuance by Issuer ($bn) As of: 5/28/08 Rank Issuer Proceeds % total 1 Citigroup $
Slide 23: US Government Guaranteed Student Loan ABS
US Government Guaranteed Student Loan ABS
Slide 24: 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 25: Recent FFELP ABS Structures
Recent FFELP ABS Structures 1 Estimated based on a variety of assumptions concerning loan repayment behavior, as more fully described in the related prospectus, which may be obtained at http://www2.salliemae.com/investors/debtasset/slmsltrusts/. Actual average life may vary significantly from estima
Slide 26: Spread Tightening in the FFELP Student Loan ABS Market
3 Year AAA Spread Migration Across Asset Classes from January 2007 - May 2008 (bps) Spread Tightening in the FFELP Student Loan ABS Market Source: JPMorgan Research Note: Data as of 5/30/08 'AAA' FFELP ABS spreads have recently tightened by 20 to 30 b.p. across the maturity spectrum 70 135 70 Credit
Slide 27: SLM 'AAA' FFELP vs. U.S. Agencies
SLM ABS (floating rate issuance) Agency debenture (fixed rate issuance) 1 -3 -16 2 60 -26.6 3 70 -23.3 5 90 -12.6 7 130 -0.2 10 175 10.2 'AAA' FFELP ABS 1 U.S. Agency Debt 1 Average life (yrs.) 93bps 130bps 103bps 87bps Sallie Mae 'AAA' FFELP ABS offer significantly wider new issue spreads than U.S.
Slide 28: SLM's Auction Rate Securities and Reset Rate Notes
SLM's Auction Rate Securities and Reset Rate Notes Auction Rate Securities (ARS) represent less than 5% of Sallie Mae's overall funding The limited exposure Sallie Mae has to the ARS market is not expected to materially impact Sallie Mae ABS issuance, structures or ratings To date, Sallie Mae has su
Slide 29: Private Credit Student Loan ABS
Private Credit Student Loan ABS
Slide 30: SLM Private Credit ABS Issue Characteristics
SLM Private Credit ABS Issue Characteristics Historical issue size of $1.0B to $2.5(+)B US$ denominated Student loan collateral not guaranteed by the U.S. Government 'Aaa/AAA/AAA' rated class A senior tranches, 'Aa2/AA-/AA' rated Class B and 'A2/A/A' rated class C subordinate tranches Floating rate
Slide 31: SLM Private Credit Student Loan Trust 2007-A
SLM Private Credit Student Loan Trust 2007-A The structure of SLM 2007-A is similar to prior Sallie Mae Private Credit ABS issues (1) Estimated based on a variety of assumptions concerning loan repayment behavior. Actual average life and repayment characteristics may vary significantly from estimate
Slide 32: Sallie Mae's Private Credit Student Loan Program
Sallie Mae's Private Credit Student Loan Program (1) With a Co-Signer, maximum aggregate loan indebtedness is permitted to be up to the cost of education less any other aid. (2) Minimum FICO score for the standard program. Custom programs have been negotiated with certain schools in which the FICO c
Slide 33: SLM Private Credit ABS Relative Value
SLM Private Credit ABS Relative Value Prior to the ABS market disruption, spreads on SLM Private Credit ABS were trading somewhat wider than comparable credit card ABS Source: JPMorgan Research Date Private Credit Cards Line 3 Line 4 Line 5 Line 6 Line 7 Line 8 Line 9 Line 10 Line 11 Line 12 Line 13
Slide 34: Private Credit ABS Trusts Delinquent Loans
SLM Private Credit ABS Trusts 61- 90 and 90+ Day Delinquent Loans 61-90 Day Delinquencies 90+ Day Delinquencies Despite the downturn in the U.S. economy, delinquencies in SLM Private Credit ABS Trusts have performed exceptionally well. 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00
Slide 35: Historical Cumulative Gross Charge-Off Experience
SLM Private Credit ABS Trusts Historical Cumulative Gross Charge-Off Experience (1) Cumulative gross charge-off experience for SLM Private Credit ABS Trusts remains consistent with initial expectations For SLM Private Credit Student Loan ABS issued prior to 2005-B, the servicer has the option, but n
Slide 36: Expected cumulative gross charge-off by trust
6.98% 6.00% 5.49% 5.71% 6.04% 5.63% 6.10% 6.12% 5.60% 5.81% 5.44% 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 become 180+ days delinquent. To date, the servicer has exercised this option and actual c
Slide 37: SLM Private Credit ABS Prepayment Analysis
SLM Private Credit ABS Prepayment Analysis Historical SLM Private Credit ABS CPRs Constant prepayment rates for SLM Private Credit ABS Trusts have increased recently due to the introduction of Private Credit Consolidation loans to the industry 0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00 N
Slide 38: Rating Actions on SLM Private Credit Student Loan ABS
Rating Actions on SLM Private Credit Student Loan ABS Due to better-than-anticipated performance of the underlying collateral... In September 2007, Fitch upgraded the ratings of subordinate tranches of SLM's 2002-A Private Credit ABS issue to 'AA+' and 'A+' from their original ratings of 'A' and 'BB
Slide 39: Additional Information
Additional Information 29 SallieMae odileMde
Slide 40: Outlook
Outlook SLM is consistently profitable Dominant player in the student loan market with strong brand recognition Student loan industry demographics are very positive Business model is not dependent on FFELP lending to drive earnings Traditional private loan growth, pricing power and asset quality rem
Slide 41: Business Strategy
Business Strategy Focus Private and FFELP lending activities on traditional schools and borrowers Curtail unprofitable originations with little strategic value High default rate non-traditional schools and borrowers Lower tier credit borrowers Wholesale FFELP Consolidation Loan acquisitions Adjust p
Slide 42: Asset Quality
Net Charge Offs East 0.9989 0.0011 Private Credit Loans Net Charge Offs East 0.9903 0.0097 Asset Quality FFELP Loans Net Charge Offs 0.9993 0.0007 + = Private Education Loans 18% U.S. Government Guaranteed Loans 82% Net Charge-Offs (1) = 0.05% Net Charge-Offs (1) = 1.56% Total Net Charge-Offs (1) =
Slide 43: Traditional vs. Non-Traditional Private Loan Performance Update
Traditional vs. Non-Traditional Private Loan Performance Update Reserve coverage of annualized net charge-offs totaled 2.2x and 3.0x for Traditional and Non-Traditional loans respectively for the first quarter of 2008 3/31/2008 12/31/2007 9/30/2007 6/30/2007 3/31/2007 Traditional Loans Outstanding $
Slide 44: Forbearance - Effective Debt Management Tool
Forbearance - Effective Debt Management Tool * Tracked 36 months after first month-end forbearance, or 36 months after repayment begin date Tracking by First Forbearance Occurrence Compared to All Loans Entering Repayment Status distribution 36 months after ending month in forbearance for the first
Slide 45: Risk-Adjusted Capital Allocation
Risk-Adjusted Capital Allocation Total Managed Assets ~2.0% Total Capital = SLM allocates capital internally based on the risk of the assets it supports SLM Corp + Assets Capital Allocation Note: Figures as of March 31, 2008. Cash, Investments, Other Assets & Intangibles 15% of Total Managed Assets
Slide 46: 1Q2008 and Full Year 2007 Earnings Summary
1Q2008 and Full Year 2007 Earnings Summary ($ millions) 1Q 2008 1Q 2007 Full Year 2007 Full Year 2006 "Core Earnings" Net Income (1) $188 $251 $560 $1,253 Stafford/PLUS Originations ($B) $6.3 $5.6 $17.4 $16.0 Private Education Loan Originations ($B) $2.5 $2.4 $7.9 $7.4 Managed FFELP Loans Outstandin
Slide 47: "Core Earnings" Presentation
"Core Earnings" Presentation Used by SLM's management in developing financial plans, tracking results, establishing corporate performance targets Used by securities analysts, credit rating agencies and debt capital providers to measure the company's business performance Treat securitizations as long
Slide 48: GAAP to "Core Earnings" EPS Reconciliation
GAAP to "Core Earnings" EPS Reconciliation ($ in thousands, except per share amounts) Quarters Ended March 31, 2008 December 31, 2007 March 31, 2007 Dollars Diluted EPS Dollars Diluted EPS Dollars Diluted EPS GAAP net income (loss) (103,804) $ (0.28) $ (1,635,258) $ (3.98) $ 116,153 $ 0.26 $ Adjustm
Slide 49: Investors information web page
About us | Investors | News | Working@SallieMae | Contact us ? FIND Home > Investors Investors Stockholder information Debt/Asset-backed securities Plan for college Apply for a loan Manage your loans Find a job More financial services Just for parents Investors Stockholder information Information fo
Slide 50: Debt Investor Relations Contact Information
Debt Investor Relations Contact Information Guido van der Ven Senior Vice President, Corporate Finance Sallie Mae, Inc. 36 Leitch Avenue Skaneateles, NY 13152 315-685-9825 guido.e.vanderven@slma.com Leo Subler Vice President, Corporate Finance Sallie Mae, Inc. 12061 Bluemont Way Reston, VA 20190 703