Slide 1: SLM Corporation Investor Presentation Second Quarter 2016
SLM CORPORATION INVESTOR PRESENTATION Second Quarter 2016
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 April 20, 2016 (unless otherwise noted) and should be read in connection with the press release of SLM Corporation (the “Company”) announcing its financial resu
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
4 Sallie Mae Overview Sallie Mae Key Statistics for Q1 2016 − $0.14 diluted earnings per share − 90% of Private Education Loans are cosigned − Average Private Education Loan Originations FICO of 748 − 79% of Private Education Loans outstanding have a FICO ≥ 700 at origination − 32% of Private Educat
Slide 5: Sallie Mae Summary
5 Sallie Mae Summary - Leading private education Private Education Loan - loan franchise Originator and Servicer - Conservative credit and Deposits - funding Upromise Rewards - - Expanding consumer Credit Card - finance product suite Strategic Key Overview Businesses - National sales and Competitive
Slide 6: Favorable Student Loan Market Trends
6 Favorable Student Loan Market Trends Academic Year Enrollment at Four-Year Degree Granting Institutions(1) Annual Cost of Education(2) Public Private (millions) (thousands) $42 $44 $39 $41 $36 $38 13.4 13.5 13.4 13.5 $34 $35 13.3 $32 12.9 $17 $18 $18 $19 $20 $14 $15 $16 $14 2009 2010 2011 2012 201
Slide 7: Higher Education Value Proposition
7 Higher Education Value Proposition Relationship Between Higher Education, Incremental Earnings From a College Degree Has Increased Income and Employment(1) For Generations(2) 1,800 12% 1,600 Average weekly income $ 17,500 10% $ 15,780 1,400 Unemployment $ 14,245 1,200 8% 1,000 6% $ 9,690 800 $ 7,4
Slide 8: Smart Option Overview
8 Smart Option Overview 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 ed
Slide 9: High Quality Private Education Loan Growth
9 High Quality Private Education Loan Growth $5,000 $4,600 $4,500 $4,330 6% $4,076 6% $4,000 $3,795 7% Disbursements ($MM) $3,500 $3,342 14% $3,000 $2,500 $2,000 $1,804 $1,500 $1,000 $500 $0 2012 2013 2014 2015 2016 Private Education Loan Disbursements Disbursement Statistics ($) 2012 2013 2014 2015
Slide 10: Analytical Approach to Credit
10 Analytical Approach to Credit Borrower/Cosigner Initial Screen Manual Review ► $1,000 minimum loan ► ~8% of applications ► Minimum FICO of 640 ► Asset expertise and rigorous ► Pass risk scores, but require further underwriting driven by large ► No existing SLM 30+ day past dues review due to cred
Slide 11: High Quality Private Education Portfolio
11 High Quality Private Education Portfolio Customer FICO at Origination Smart Option Payment Type <700 Interest Only 21% 780+ 22% 30% Deferred 700 - 740 47% 26% 740 - 780 Fixed Pay 23% 31% Weighted Average FICO: 746 Smart Option Loans: $11.6bn Portfolio by Originations Vintage Portfolio Interest Ra
Slide 12: Conservative Funding Approach
12 Conservative Funding Approach 2015 Target Low cost deposit base with no branch overhead — 80% of retail deposits are savings accounts 8% — Brokered deposits used as alternative funding source 30% Term funding / securitizations will augment deposit funding for future growth — Experienced capital m
Slide 13: Delinquency and Default Performance
13 Delinquency and Default Performance (As a % of Loans in P&I Repayment)(1),(2),(3) 10.0% 31-60 Day Delinquency 10.0% 61-90 Day Delinquency % of P&I Repayment Balance % of P&I Repayment Balance 8.0% 8.0% 6.0% 6.0% 4.0% 4.0% 2.0% 2.0% 0.0% 0.0% Sep-12 Sep-13 Sep-14 Sep-15 Mar-14 Mar-15 Mar-16 Mar-12
Slide 14: Cumulative Default Rate
14 Cumulative Defaults by P&I Repayment Vintage(1),(2),(3) Smart Option Cumulative Gross Defaults by P&I Repayment Vintage and Years in P&I Repayment 10% 9% 8% 7% as a % of Original Balance Cumulative Default Rate 6% 6.1% 5% 5.1% 4% 3.7% 3% 2.7% 2% 1.8% 1% 0.3% 0% 0 1 2 3 4 5 6 7 Years in P&I Repaym
Slide 15: Income Statement
15 Financial Review (in millions) Q1 2016 Q1 2015 Variance PSL $ 12,144 $ 9,786 $ 2,357 PSL Reserve (123) (85) (37) FFELP 1,091 1,212 (121) FFELP Reserve / Other (4) (5) 1 • Private Education Loan Total Loans 13,108 10,909 2,199 portfolio growth of 24% in Q1 Cash 938 876 63 2016 vs. Q1 2015 Balance
Slide 16: Sallie Mae Bank
16 Sallie Mae Bank • 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 retur
Slide 17: ABS Supplement
17 ABS Supplement
Slide 18: Sallie Mae's Smart Option Loan Product Overview
18 Sallie Mae’s Smart Option Loan Product Overview • The Smart Option loan product was introduced by Smart Option Loan Program Sallie Mae in 2009 Origination Channel School Typical Borrower Student • The Smart Option loan program consists of: Typical Co-signer Parent $10,000 avg orig bal, 5 to 15 yr
Slide 19: SMB vs. Legacy SLM Private Education Loan ABS Summary
19 SMB vs. Legacy SLM Private Education Loan ABS Summary Legacy SLM Navient Sallie Mae Bank 11-A 11-B 11-C 12-A 12-B 12-C 12-D 12-E 13-A 13-B 13-C 14-A 14-A 15-A 15-B 15-C 14-A 15-A 15-B 15-C Total Bond Amount ($mil) 562 825 721 547 891 1,135 640 976 1,108 1,135 624 676 664 689 700 359 382 704 714 7
Slide 20: Sallie Mae Bank ABS Structures
20 Sallie Mae Bank ABS Structures SMB 2015-B SMB 2015-C Size $630.8MM(1) $701.0MM Pricing Date July 23, 2015 October 19, 2015 Smart Option Smart Option Collateral Private Education Loans Private Education Loans Servicer Sallie Mae Bank Sallie Mae Bank Overcollateralization (2) 13% 14% Pricing Prepay
Slide 21: Sallie Mae Bank Servicing Policies
21 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 emp
Slide 22: Sallie Mae Bank Collections
22 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 23: Sallie Mae Bank Smart Option Private Education Loans
23 Sallie Mae Bank Smart Option Private Education Loans FFELP vs. Sallie Mae Bank Smart Option Private Education Loan Comparison Sallie Mae Bank Smart Option FFELP Stafford Loans Private Education Loans(1) Borrower Student Student or Parent Co-signer None Typically a parent Lender Eligible banks and
Slide 24: Appendix
24 Appendix
Slide 25: "Core Earnings" to GAAP Reconciliation
25 “Core Earnings” to GAAP Reconciliation Mar. 31, Dec. 31, Mar. 31, 2016 2015 2015 (Dollars in thousands, except per share am ounts) “Core Earnings” adjustments to GAAP: GAAP net income attributable to SLM Corporation $ 65,915 $ 89,845 $ 47,699 Preferred stock dividends …………………...……… 5,139 4,989 4,
Slide 26: Important Information Regarding Historical Loan Performance Data
26 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 27: Important Information Regarding Historical Loan Performance Data (cont.)
27 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 two separate sources of information: (1) Combined Smart Option Student Loan Portfolio Data for Legacy SLM, Navient and Sallie Mae