Slm Corporation · NASDAQ:SLM
Slm — Q3 2017 Earnings Presentation
29 slides from Slm's earnings presentation, Oct 24, 2017
Slide 1: Fourth Quarter 2017 SLM Corporation Investor Presentation
Fourth Quarter 2017 SLM CORPORATION INVESTOR PRESENTATION Exhibit 99.1
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: Key Statistics for Q3 2017
4 Sallie Mae Overview Sallie Mae Key Statistics for Q3 2017 − $0.17 “Core Earnings” Diluted Earnings Per Common Share 1,2 − Portfolio of $17.0 billion of high quality Private Education Loans − 89% of Private Education Loans disbursed in Q3 are cosigned, 90% in Q3 2016 − Average Q3 Private Education
Slide 5: Strategic Overview
5 ($B as of 9/30/17) Assets 21.0 - FFELP Loans 1.0 - Private Loans 17.0 - Deposits 15.0 - Preferred Equity 0.4 - Common Equity 2.0 - Private Education Loan - Originator and Servicer Deposits - Upromise Rewards - Credit Card - - National sales and marketing - Largest salesforce in the industry - Spec
Slide 6: Favorable Student Loan Market Trends
6 $17 $17 $27 $27 $105 $34 $154 $53 Full-Time Private School Full-Time Public School Full-Time Private School Full-Time Public School Stafford Loan Limit Cost of Attendance Gap Favorable Student Loan Market Trends 12.9 13.3 13.4 13.5 13.4 13.5 09/10 10/11 11/12 12/13 13/14 14/15 (millions) Academic
Slide 7: Relationship Between Higher Education, Income and Employment
7 Relationship Between Higher Education, Income and Employment(1) 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 Less than H.S. High school Some college Associate Bachelor's Master's Doctorate Professional Unemployment Average weekly income Higher Education Value
Slide 8: Smart Option Overview
8 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 educational expenses Dis
Slide 9: High Quality Private Education Loan Growth
9 High Quality Private Education Loan Growth $3,795 $4,076 $4,330 $4,666 $4,166 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 $5,000 2013 2014 2015 2016 2017 Di sb ur se me nt s ( $M M) Private Education Loan Disbursements $4,800 $4,059 8% 7% 3% 6% 3% Disbursement Statistics ($) 20
Slide 10: Analytical Approach to Credit
10 Analytical Approach to Credit Borrower/Cosigner Initial Screen • $1,000 minimum loan • Minimum FICO of 640 • No existing SLM 30+ day past dues • No student loans 90+ day past dues • No recent bankruptcy • 2+ trades for cosigners and 4+ trades for non-cosigner • Asset expertise and rigorous underw
Slide 11: High Quality Private Education Portfolio
11 High Quality Private Education Portfolio As of 9/30/17 Customer FICO at Original Approval Smart Option Payment Type Portfolio Interest Rate Type Variable 78% Fixed 22% 780+ 30% 740 - 780 23% 700 - 740 26% <700 21% Weighted Average FICO: 746 Portfolio by Originations Vintage Interest Only 22% Fixe
Slide 12: Conservative Funding Approach
12 Stable deposit base with no branch overhead — Diversified mix of retail and other core savings, MMDA and CDs — Brokered deposits used as alternative funding source Term funding / securitizations will augment deposit funding for future growth — Experienced capital markets team — Capacity to securi
Slide 13: Delinquency and Default Performance
13 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% % of P& I R ep ay me nt B al an ce 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% % of P &I Re pa ym en t B al an ce 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% % of P &I Re pa ym en t B al an ce 0.0% 1.0% 2.0% 3.0% 4.0%
Slide 14: Cumulative Defaults by P&I Repayment Vintage
14 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 0 1 2 3 4 5 6 7 8 C u m u la ti v e De fa u lt s a s a % o f Di s b u rs e d P ri n c ip a l E n te ri n g P & I R e p a y m e n t Years Since First P&I Repayment Period 2010 2011 2012 2013 2014 2015 2016 Cumulative Defaults by P&I Repayment Vintage(1),(2),(3) Sm
Slide 15: Financial Review
15 Financial Review • Private Education Loan portfolio growth of 24% in Q3 2017 vs. Q3 2016 • Conservatively funded with 13.0% total risk based capital at the end of Q3 2017 • Growing deposit base coupled with term funding from securitizations • Return on Common Equity (Core) and Return on Assets (C
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 • 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 return on equity Sall
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 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
Slide 20: Sallie Mae Bank ABS Summary
20 (1) Smart Option loans considered in ‘P&I Repayment’ only if borrowers are subject to full principal and interest payments on the loan. Note: Pool characteristics as of the Statistical Cutoff Date for the respective transaction Sallie Mae Bank ABS Summary 14-A 15-A 15-B 15-C 16-A 16-B 16-C 17-A I
Slide 21: Sallie Mae Bank ABS Structures
21 Sallie Mae Bank ABS Structures (1) Overcollateralization for Class A & B bonds (2) Estimated based on a variety of assumptions concerning loan repayment behavior. Actual prepayment rate may vary significantly from estimates. SMB 2017-A SMB 2016-C Size $772.0MM $674.0MM Pricing Date January 31, 20
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 owned by Sallie Mae Bank sold to legacy SLM after becoming 90+ days past due. Sallie Mae Bank collects delinquent loans
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: FFELP vs. Sallie Mae Bank Smart Option Loan Comparison
24 Sallie Mae Bank Smart Option Private Education Loans FFELP vs. Sallie Mae Bank Smart Option Private Education Loan Comparison FFELP Stafford Loans Sallie Mae Bank Smart Option 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 (1) Derivative Accounting: “Core Earnings” exclude periodic unrealized gains and losses caused by the mark-to-market valuations on derivatives that do not qualify for hedge accounting treatment under GAAP, as well as the periodic unrealized gains and losses
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: Cohort default curve terms and calculations
29 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 calendar year of a loan’s First P&I Repayment Perio