Slm Corporation · NASDAQ:SLM
Slm — IPO Roadshow (April 2006)
75 slides from Slm's IPO roadshow presentation, Apr 28, 2006
Slide 1: SLM Corporation Debt Investor Presentation
SLM Corporation Debt Investor Presentation First Quarter ended March 31, 2006 April 21, 2006
Slide 2: Forward Looking Statements
Forward Looking Statements Forward Looking Statements - This report 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”
Slide 3: Disclosures
Disclosures 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 ta the most directly Comparable GAAP financial measures are included in
Slide 4: Disclosures
Disclosures Non-GAAP “Core Earnings” Performance Measures — + Used by SLM's management in developing financial plans, tracking results, establishing comporate performance targets and determining incentive compensation + Used by equity investors, credit rating agencies and debt capital providers to m
Slide 5: SLM Corporation Overview
SLM Corporation Overview npn fr Nahr aoe a
Slide 6: SLM Corporation
SLM Corporation Champions for Higher Education” + #1 originator, servicer and collector of student loans in the vital and growing U.S. education lending market + Fully independent private sector company, traded on the NYSE with a market capitalization of $21 billion!) + $127 billion managed student
Slide 7: A Brief Corporate History
A Brief Corporate History lLong-Tern = AZ Ae Short-Term = PA AMF outlook Stable Stable Stable FFELP Loans $109.0 Private Education 29 Total Portotio $126.9 un Foto 1% comers nar Ra EOE ‘student Loan Congress est | Marketing A | guaranteed st ‘Sallie Mae completes its (1) carry ran asthe Feral Fay au
Slide 8: Pre- and Post-GSE
Pre- and Post-GSE id-Down Pre- and Post GSE Wind-Down - Pre- Wind-Down Post- Wind-Down, 1999 2005 Moodys/S&P/Fitch Senior Debt Rating ASIASIA Market Share of Federal Student Loan Originations® 15% % of Loans Funded by the GSE 63% Wid. Average Life to Call of Managed Liabilities 2.0 yrs Wid. Average
Slide 9: What Makes SLM Unique
What Makes SLM Unique Limited Credit Risk » 86% of student loans carried a U.S. government guarantee as of March 31, 2008 > Total student loan losses were only 0.12% of managed student loans for the full year 2005 Limited Exposure to Interest Rate and Economic Cycles » Interest rate sensitivities of
Slide 10: The U.S. Student Loan Market
The U.S. Student Loan Market 10 SallieMae npn fr Nahr aoe
Slide 11: Sources of Funding for Higher Education
Sources of Funding for Higher Education Sources of Funding for College Attendance Academic Year 2005-2006 ($billions) Total Cost - $222 Billion Federal Student Parent/Student Loans Contributions Private Education Scholarships, Loans Grants, Other F SallieMae
Slide 12: Trends in Higher Education Spending
Trends in Higher Education Spending Student Enrollment Projections Average Cost of College Attendance Degree Granting Institutions Cumulative % Increase rnlions _ ro ot 8 Z o ” 6 * 5 » Whe ° © go gh 9597 97-98 98.99 98.00 00.01 01.02 02.03 03.01 0405 05.05, SIE SEE SLES 8 [Tuttion & Fees 4-Year Priv
Slide 13: Higher Education's Return on Investment
Higher Education’s Return on Investment + Income and employment are strongly correlated to educational attainment Relationship between Higher Education, Income and Employment $150000 7 8.4% $128,942 $42,963 $36,182 2RRLRRARASR (Average Annual Income —*-Unemployment susce: Poseecondr Eastin Cpponty,
Slide 14: Education and Unemployment Over Time
Education and Unemployment Over Time + The relationship between education and unemployment has remained relatively constant over time Historical U.S. Unemployment Rate for College Graduates versus the Overall U.S. Population 2 Average = 5.49% Min = 3.8% Unemployment Rate (' of labor force) Bod SP FP
Slide 15: The Federal Family Education Loan Program or FFELP
The Federal Family Education Loan Program or “FFELP” The Federal Family Education Loan Program (“FFELP”) — + Provides banks and others an explicit U.S. government guarantee on student loans + Loan pricing, terms and maximum borrowing limits set by Congress + Made to undergraduate students, graduate
Slide 16: Growth in FFELP Loan Originations
Growth in FFELP Loan Originations Stable, Long-Term Growth — In 2005, more borrowers took out more FFELP loans with higher loan balances than ever before Total federal student loan originations, including both FFELP and FOLP loans‘, increased by 9% in 2005, following a 13% increase in 2004 The U.S.
Slide 17: The Private Education Loan Market
The Private Education Loan Market Private Education Loans — + 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 incre
Slide 18: Private Education Loan Market Demand
Private Education Loan Market Demand + Private education loans help bridge the gap between funding available through government- sponsored programs and the rapidly increasing cost of education Cost of College AY 1995-1996 Cost of College AY 2005-2006 Based on a Four-Year Term Based ona Four-Year Ter
Slide 19: Private Education Loan Market Growth
Private Education Loan Market Growth + Asa result of strong demand for alternative sources of funding for higher education, private education loan originations have experienced consistent growth Private Education Loan Market Growth in Non-Federal Student Loan Originations xo es s ss (1) Source: xtma
Slide 20: Higher Education Act Reauthorization
Higher Education Act Reauthorization 20 SallieMae npn fr Nahr aoe
Slide 21: Higher Education Act Reauthorization
Higher Education Act Reauthorization + New student loan legislation effective July 1, 2006 is not expected to have a material impact on SLM’s business + Changes include... — Modest increase in FFELP loan borrowing limits effective July 1, 2007 — Eligibility of graduate students for PLUS Loans — Borr
Slide 22: Political Change and SLM Earnings Growth
Political Change and SLM Earnings Growth * Past legislation, no matter how radical, has not had a long-term impact on SL's earnings Impact of Changes in Student Loan Legislation ‘on SLM Net Income ‘990 1991" 4902 4003 4904 1995" 1905 1907 1998 1900 2000 2001 2002 2003 200+ 2005 2008 mma SLM Netincom
Slide 23: SLM Business Fundamentals
SLM Business Fundamentals 2 SallieMae Sango torhghr no
Slide 24: SLM's Loan Origination Model
SLM’s Loan Origination Model + Sallie Mae originates student loans primarily through schools’ financial aid offices, and services and collects those loans throughout their life cycle Sallie Mae’s Primary Loan Origination Model Preferred — — Channel_ _ _ [~~ Lending Y i Partners som, | Sallielae + Or
Slide 25: SLM's Competitive Advantage
SLM’s Competitive Advantage + SLM has a distinct competitive advantage in all facets of the education loan market Economies of Scale 278 of managed loans 9 million borrowers Over 6,000 schools Statecofthecart Vertically integrated Loan Delivery Platform pte Sie lay Servicing/Collections Singular Foc
Slide 26: Federal Student Loan Market Share
Federal Student Loan Market Share Federal Gowt Citbank Bank of America Wells Fargo 30%, 254, 20% 15% 108, 1999 2000 2001 2002 2003 2004 2005 ({) Sta Prete char mat shore beefed al e199 ns 005 lal FFELP eed FOLP ret commitment Sues, Al nts farts yer (roed Seton 90 Source US. Cepatnert f Essen or SSA
Slide 27: SLM's Private Education Loan Business
SLM’s Private Education Loan Business SLM's Private Education Loan Portfolio Private Education Loan Attributes® - 8 of December31, 2005" + High average FICO scores Higher Education Loans $14.38, * Higher education loans non-dischargeable in bankruptcy + ~ 50% of loans with co-borrowers, typically pa
Slide 28: Debt Management, Guarantor Servicing and Other Income
Debt Management, Guarantor Servicing and Other Income Fee & Other Income — Fee & Other Income Growth + Debt Management & Collections Operations — 2001 - 2005” — 17% of operating revenue (") — Variable cost, low overhead business — Consistent, recurring earnings stream g (% cf total operating revenue
Slide 29: Historically Stable and Predictable Earnings
Historically Stable and Predictable Earnings 2 SallieMae Sango torhghr no
Slide 30: Extremely Low Loan Losses
Extremely Low Loan Losses + SLM's net charge-offs represented 0.12% of managed student loans for the full year 2005, compared to the 2005 median of 0.83% for ‘Aa’ banks and 4.20% for highly rated finance companies (1) Net Charge-Offs Total Net Charge-Offs () = 0.00% = 0.12% Net Charge offs) =097% U.
Slide 31: Private Education Loan Portfolio Trends
Private Education Loan Portfolio Trends Private Education Loan portfolio performance trends are very stable, in part as a result of sound underwriting, pricing, servicing and default management practices 60% 50% 40% 3.0% 20% 10% 00% Private Education Loan Spread vs. Net Charge-Offs 449% 2.255% 478%
Slide 32: Limited Interest Rate Risk
Limited Interest Rate Risk SLW’s Interest Rate and Currency Hedging Philosophy — + Fund floating rate assets with floating rate liabilities of comparable duration + Convert newly issued debt to US$ floating rates at the time of issue with interest rate swaps, currency swaps and interest rate caps +
Slide 33: Stable Net Interest Margin
Stable Net Interest Margin + Extremely low loan losses and match funding of interest rate sensitivities of floating rate assets and floating rate liabilities make SLM's net interest margin highly stable 18% 16% 14% 12% 10% 8% 6% 4% 2% Net Asset Yield — Cost of Funds 0% + vs SF FF FE HKHEFEES SF Base
Slide 34: Low Operating Expenses
Low Operating Expenses SLM vs. ‘Aa’ Banks and ‘Specialty Finance Companies Operating Efficiency Ratio Unmatched Operating Efficiency - 3 + SLM's operating expenses stood at only 38% of operating revenue in 2005", following three years of steady improvement + SLM's operating efficiency ratio far outd
Slide 35: Highly Predictable Earnings
Highly Predictable Earnings SLM Net Income" through Interest Rate and Economic Cycles 1990-2005 Highly Predictable Earnings - + SLMhas generated highly consistent ‘eamings and cash flow since its inception in 1973 + Steady growth in the student loan market, the guaranteed nature of SLM's assets and
Slide 36: Highly Stable Earnings
Highly Stable Earnings Highly Stable “Core Earnings” - ‘+ Between 2001 and 2005, SLM's “core earnings” ROA displayed less than 1/3 the average volatility of leading “Aa’ banks and 1/5 the average of highly rated finance companies + SLM’s earnings have not in the past been subject to the significant
Slide 37: Strong Risk-Adjusted Capitalization
Strong Risk-Adjusted Capitalization x SallieMae adie Mde ena
Slide 38: Strong Risk-Adjusted Capitalization
Strong Risk-Adjusted Capitalization + SLIM's leverage compares extremely favorably to ‘Aa’ banks and other non-bank financials when measured relative to actual loss experience 2005 Medians for SLM Cor ‘Aa’ U.S. Banks / P Investment Grade 2003 = 2004 «2005 Finance Cos.) Tangible EquityManaged Assets
Slide 39: Funding Diversity and Liquidity
Funding Diversity and Liquidity 2° SallieMae Sango torhghr no
Slide 40: Funding Sources
Funding Sources + At year end 2005, ABS represented 69% and unsecured corporate debt 31% of SLM's $136 billion of total managed debt outstanding ABCP Global MTNs $50. $22.1 Euro MTNs $8.8 Extendibles $5.2 ‘Tem ABS Retail Notes $88.8 $36 Convertibles $20 Net: Tes may net dd ae tore “0 SallieMae Sango
Slide 41: SLM Corporate Debt and ABS Issuance
SLM Corporate Debt and ABS Issuance + SLM has issued $138 billion of long-term, non-GSE corporate debt and asset-backed securities over the past three years, across a broad range of maturities — New Issuance Volume YTD 10 2003 2004 2005 2006 Corporate Debt Issuance ©? $15B $15B $108 $17 Term Asset-B
Slide 42: Funding Diversity
Funding Diversity * During 2005, SLM issued 38 term ABS and corporate debt securities in eight different currencies to more than 500 institutional investors around the globe SLM 2005 Total Managed Debt Issuance by Currency, Investor Geography and Issue Type By Investor By Issue Geography Type Other
Slide 43: Excess Liquidity
Excess Liquidity + At December 31, 2005, SLM maintained significant excess liquidity. = Enough unused liquidity in cash, investments and committed credit lines to repay 18 months’ debt maturities — Enough additional liquidity in its readily saleable, unencumbered FFELP loan portfolio to repay 8 year
Slide 44: Dealers in SLM Corporate Debt and ABS
Dealers in SLM Corporate Debt and ABS + SLM utilizes a broad base of dealers globally, promoting liquidity in its corporate bonds and ABS Bank of America. Ss {5 Merrittiynch MorganStanley Sc Deutsche Bank CREDIT SUISSE an oluman citigroup) acs LEHMAN BROTHERS 9 = ry) BARCLAYS %%RBS Greenwich Capital
Slide 45: SLM Corporate Debt Program
SLM Corporate Debt Program 4s SallieMae Sango torhghr no
Slide 46: SLM Corporate Debt Issuance Volume
SLM Corporate Debt Issuance Volume SLM Corporate Term Debt Issuance Volume ($ billions) () — YTD 1Q Issuance Type 2003 2004 2005 2006 US$ Global and Medium Term Notes) $ 9.1 $6.4 $4.5 $14 Foreign Currency Denominated’?) 06 42 4.0 0.4 Extendible Notes 17 25 4.0 0.0 Retail Note Program 14 1.8 08 0.2 C
Slide 47: Representative SLM Corporate Benchmark Debt Issues
Representative SLM Corporate Benchmark Debt Issues Representative US$ & EUR Benchmark Corporate Debt Issues Issue Issue Size Issue Date (enil) Rating ‘Coupon Maturity usp - SLM Comp Feb ‘03 $800 AQIAIAS 3.625% Mar ‘08 SLM Cop Nov'03 $1,000 AIAIAY 4.000% dan‘09 SLM Cop Jul 05, $2,000 AQAIAY Lea Jul 0
Slide 48: Consistent Credit Spread Performance
Consistent Credit Spread Performance + SLM trades at spreads comparable to those of the leading ‘Aa’ U.S. banks SLM Corp 10 Year Bond Spreads vs. 2 Leading ‘Aa’ Banks and Finance Companies 0 Non-Bank = Caren 9 2 x ‘ ox 7 6 am a a Min 2 19 a 3 a: Moan 5 x» 0 j supw = 6 @ 100 =0 ° $ 2s SLEEP EEE EEE E
Slide 49: SLM Corporation ABS Program
SLM Corporation ABS Program 4 SallieMae Sango torhghr no
Slide 50: SLM ABS Issuance Volume
SLM ABS Issuance Volume SLM ABS Term Issuance Volume ($ billions) — YTD1Q 2003 2004 2005 2006 Non-Consolidation FFELP ABS $ 58 $10.1 $ 66 $5.1 Consolidation FFELP ABS 21.0 17.4 17.1 34 Private Credit ABS 3.8 2.8 3.4 2.20) Total ABS (1) Seas ett ver Ste ase aces camer paper pee. @) SAM Pate Coot Trus
Slide 51: SLM Asset-Backed Securities Structures
SLM Asset-Backed Securities Structures + Recent SLM new issue ABS Structures — Issue Pricing Date Collateral Initial Pricing CPR Tranching (1) Eetates pase en avy aesuntonececeering loan repameet tae, Non-Consolidation FFELP $2.68 SLM Trust 2006-3 March 2, 2008 US Govt. Guaranteed FFELP ‘Statford an
Slide 52: 2005 ABS Issuer Rankings
2005 ABS Issuer Rankings {in equivalent USS billions) {in equivalent USS billions) MARKET WARKET | RANK ISSUER PROCEEDS SHARE® RANK ISSUER PROCEEDS SHARE 1 Sallie Mae $27.0 6.1% 1 Sallie Mae $270 422% 2 Ford Motor $167 37% 2 Nelnet, Inc 965 10.2% 3 JPMorgan Chase $165 37% 3 StudentLoan Com $43 68% 4
Slide 53: SLM U.S. Government Guaranteed Student Loan ABS
SLM U.S. Government Guaranteed Student Loan ABS 53 SallieMae Sango torhghr no
Slide 54: SLM FFELP ABS Issue Characteristics
SLM FFELP ABS Issue Characteristics Typical SLM FFELP ABS Transaction Features — + U.S. Government guaranteed collateral + Issue size $1.58 to $3.0(H8 + Tranches denominated in US$ or Euros + ‘AaalAAAJAAA' rated senior tranches make up 97% of issue structure + 20% risk based capital weighting, in mo
Slide 55: SLM FFELP ABS Reset Rate Notes
SLM FFELP ABS Reset Rate Notes SLM FFELP ABS ‘Soft Bullet’ Fixed Rate, Euro and Sterling Structures - + Shorter term “soft bullet” USS fixed rate, Euro and Sterling tranches, backed by long- dated collateral + Remarketed at a date certain prior to the expected maturity date, typically 3, 5 , 7 or 10
Slide 56: SLM Trust 2004-10 Reset Rate Note Structure
SLM Trust 2004-10 Reset Rate Note Structure + Class A Notes pay sequentially A-4, AS, A-6 and A-7 Reset Rate Note remarketing dates occur well in advance of expected amortization of underlying collateral Amortization Illustration Outstanding Balance voor AT wsorm ALD wsorm Ag crn Ag = SallieMae
Slide 57: SLM FFELP ABS Relative Value
SLM FFELP ABS Relative Value + SLM FFELP ‘AAA’ ABS spreads track ‘AAA’ prime credit card ABS, yet SLM FFELP ABS collateral is backed by an explicit U.S. government guarantee Historical Year Triple-A Rated ABS Historical 7 Year Triple-A Rated ABS Secondary Spr Secondary Spreads 6 2s 5 20 4 &3 ie © —
Slide 58: SLM 'AAA' FFELP vs. US Agencies
SLM ‘AAA’ FFELP vs. US Agencies + Sallie Mae ‘AAA’ FFELP ABS offers wider new issue spreads than U.S. agency debentures across all maturities M8, [--n--ann enna enna nnn ene ne nnn nce e cence ene 10 | 7 10 Maturity (yrs.) US Agency Debt“ (9) Spread ec Apt 17,2006 US Ageny pends meage ct Faree Me nd
Slide 59: SLM 'AAA' FFELP ABS Spread Performance vs. U.S. Agencies
SLM ‘AAA’ FFELP ABS Spread Performance vs. U.S. Agencies Historical Spread to LIBOR on SLM ‘AAA’ FFELP ABS vs. U.S. Agencies SM ENMA Current 6 43 4 Max 12 6 Min 20 0 Mean 8 2 2% — 5:YearSLM‘AAA’FFELPABS Std Dev 4 Spread to US$ LIBOR '— 5-Year Fannie Mae 2 a e ow 0 40% gt ot 10 at tt at ‘yt tot at? a
Slide 60: SLM Private Credit Student Loan ABS Program
SLM Private Credit Student Loan ABS Program 60 ena
Slide 61: SLM Private Credit ABS Issue Characteristics
SLM Private Credit ABS Issue Characteristics Typical SLM Private Credit ABS Transaction Features — + Issue size $1.0B to $2.08 + US$ denominated + Student loan collateral not guaranteed by the U.S. Government + ‘Aaa/AAA/AAA’ rated class A senior tranches, ‘Aa3/A/AA’ rated Class B and ‘A3/BBBIA’ rate
Slide 62: SLM Private Credit Loan Programs
SLM Private Credit Loan Programs SLM Private Credit Loan Program Characteristics — Current Minimum — Underwriting Loan Program Description FICO Score” _Standards Signature Student Loans® Undergraduate students 640 Signature Student Loans® Graduate students 640 FICO Basis Law school and (May 1998 — L
Slide 63: SLM Private Credit ABS Issuance
SLM Private Credit ABS Issuance + Prior to its most recent $2.2 billion private credit ABS issue in March 2006, SLM had issued $10.6 billion of private credit ABS SLM Managed Private Credit ‘SLM Private Credit Loans Outstanding!) Cumulative ABS Issuance) si72 si60 $160 S140 s124 $140 $120 $12.0 § si
Slide 64: SLM Private Credit ABS Relative Value
SLM Private Credit ABS Relative Value + Spreads on SLM Private Credit ABS tightened over the past two years, until widening recently relative to credit card ABS Historical 3 Year Triple-A Rated ABS Historical 7 Year Triple-A Rated ABS. ‘Secondary Spreads Secondary Spreads 12 60 " 10 bi 3 40 = 8 _% g
Slide 65: SLM 2006-A Private Credit Student Loan ABS
SLM 2006-A Private Credit Student Loan ABS 65 ena
Slide 66: SLM 2006-A Transaction Structure
SLM 2006-A Transaction Structure WALIfe Expected Principal _ Principat toCall Principal Class__Balance($)_Balance (%) Ratings (MS/F) Index (@%CPR/") Window _Maturity ‘Ad $434,000,000 193% ASaAAAAAA aml 30 —_06/06-09/10_09/162020 AZ $207/000,000 9.2% © ASAAWAAA mi = 5.0 9/10-12/11 12/15/2020 AS $395,
Slide 67: SLM 2006-A Pool Characteristics
SLM 2006-A Pool Characteristics ‘Loan Program % Co-Borrower as Obligor | [Borrower Payment Status co. Borrower ‘oe Law cy mon In Schoo! B Noco. 7 notre Bonower as ep os + Pool Weighted Onginal Average FICO Score m9 + Pool Weighted Current Average FICO Score 707 + Average Borrower Indebtedness $12,12
Slide 68: SLM 2006-A Collateral Pool FICO Distribution at Origination
SLM 2006-A Collateral Pool FICO Distribution at Origination‘) SLM 2006-A FICO Distribution at Origination (1) 16% 14% 130% 128% 126% 12% 11.8% 10% 8% % of Poo! 6% ah 2% 0% +630 630.639 640-659 660679 680.699 700-719 720-739 740-759 760-779 780799 800+ FICO Score at Origination (1) ome le ace arava h
Slide 69: SLM Private Credit ABS Prepayment Analysis
SLM Private Credit ABS Prepayment Analysis Mistorica Life to Date PR Historical SLM Private Credit ABS CPRs 27% 14% 29% 27% 220% 22% 21% 24% 21% 22% 21% 28% 21% 20% 24% 20% 26% 19% 20% 21% 21% 24% 21% 7 24% 3.0% 21% rT) 26% 27% 29% 30% 69 Sango torhghr no
Slide 70: Additional Information
Additional Information 70 SallieMae Sango torhghr no
Slide 71: Additional Information Available at www.salliemae.com
Additional Information Available at www.salliemae.com ral
Slide 72: SLM Core Earnings Revenue Mix
SLM “Core Earnings” Revenue Mix 2005 “Core Earnings” Revenue Mix - + Net interest income from student loans made up 70% of net revenue in 2005 oo e Collection + The remaining 30% of net revenue was 17% derived primarily from fee generating businesses — Debt Management & Collections Guarantor Operati
Slide 73: SLM Summary Financial Performance
SLM Summary Financial Performance Managed Student Loans Outstanding “Core Earnings" Net Income $1,200 $1,134 soset") $1,000 $926 (nitions) g 8 2001 2002 2003-2008 2005 Private Education Consolidation 1 StaffordiPLUS ; SallieMae
Slide 74: Sallie Mae Offices
Sallie Mae Offices 10,600 employees located across the United States* Arrow ayer re Sallie Mae ‘Student Loan Finance ‘Association 5s Headquarters 0 Stan Student Loan Services m0 *As of December 31,2005 es ratinciuse al locations or employees. 1 SallieMae
Slide 75: Searchable text section of graphics shown above
Searchable text section of graphics shown above [LOGO] Debt Investor Presentation First Quarter ended March 31, 2006 April 21, 2006 Forward Looking Statements Forward Looking Statements - This report contains forward-looking statements and information that are based on management’s current expectati