Slide 1: SLM Corporation Investor Presentation ABS Vegas 2019
SLM CORPORATION INVESTOR PRESENTATION ABS VEGAS 2019 February 25-26, 2019
Slide 2: Forward-Looking Statements and Disclaimer
Forward-Looking Statements and Disclaimer Cautionary Note Regarding Forward-Looking Statements The following information is current as of January 23, 2019 (unless otherwise noted) and should be read in connection with the press release of SLM Corporation (the “Company”) announcing its financial resu
Slide 3: Corporate Overview
Corporate Overview 3
Slide 4: Market leading brand, products and best-in-class service drives our success
Market leading brand, products and best-in-class service drives our success • 40 years of leadership in the education Market Conservative lending market Leading Funding and Brand Underwriting • Top ranked brand • Industry leading 55% market share1(1) • Over 2,400 actively managed university Strong C
Slide 5: Private Student Loan Industry
Private Student Loan Industry • Private education loans represent Other 2% of the overall spend in higher $18 education annually Federal Loans Private • Total spend on higher education $94 Education Loans grows 2-3% annually primarily due Grants $11 to increases in cost of attendance $129 $441 Billi
Slide 6: Higher Education Value Proposition
Higher Education Value Proposition 20172(1) Unemployment rates and earnings by educational attainment, 2017 Unemployment rate Median usual weekly earnings Doctoral Degree 1.5% $1,743 Professional Degree 1.5% $1,836 Master's Degree 2.2% $1,401 Bachelor's Degree 2.5% $1,173 Associate's degree 3.4% $83
Slide 7: Smart Option Student Loan Program
Smart Option Student Loan Program 7
Slide 8: Product suite tailored to meet the needs of undergrad and grad students
Product suite tailored to meet the needs of undergrad and grad students Market Conservative • Smart Option Student Loan Leading Funding and Brand Underwriting • Introduced in 2009 • Flexible repayment options while in school • Fixed and Variable rates Strong Consistent Financial Credit • Differentia
Slide 9: Sallie Mae's Smart Option Loan Product Overview
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 te
Slide 10: Product Overview
Product Overview Undergraduate Medical Law Parent Dental Health Professions MBA General Studies Undergraduate Graduate Parent Rate Type Variable & Fixed Variable & Fixed Variable & Fixed Variable: LIBOR + 2.00% - LIBOR + 9.88% Variable: LIBOR + 2.25% - LIBOR + 7.88% Variable: LIBOR + 3.50% - LIBOR +
Slide 11: Consistent underwriting has contributed to better than model credit performance
Consistent underwriting has contributed to better than model credit performance • Proprietary Scorecard built with Experian Market Conservative Decision Analytics Leading Funding and Brand Underwriting • Initial credit screen removes applicants with low FICO scores or prior derogatory trades on file
Slide 12: Consistent High Quality Originations Growth
12 Consistent High Quality Originations Growth(1) $5,500 $5,315 11% $5,000 $4,800 $4,666 3% 8% $4,500 $4,330 $4,076 6% $4,000 Originations ($MM) $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 2014 2015 2016 2017 2018 Private Education Loan Originations Originations Statistics ($) 2014 2015 2016 2
Slide 13: High Quality Private Education Loan Portfolio
High Quality Private Education Loan Portfolio Customer CustomerFICO FICOat atOriginal OriginalApproval Approval(1)7 Smart Option Payment Type <700 Interest Only 21% 780+ 22% 29% Deferred 700 - 740 48% 27% Fixed Pay 740 - 780 30% 23% Weighted Average FICO: 744 Smart Option Loans: $19.5 billion Portfo
Slide 14: Enhancing franchise value through a deeper relationship with clients
Enhancing franchise value through a deeper relationship with clients Distribution of Sallie Mae Borrowers by Product and Age 100% 95% 93% 91% 90% 87% 83% 80% 79% 73% 70% 64% % with a Credit Card % of Borrowers 60% 54% 50% % with a Personal Loan 42% 40% 30% 29% 30% 30% 27% 25% 21% 22% 20% 18% 15% 11%
Slide 15: High Quality Portfolio Growth
High Quality Portfolio Growth Projected Balance Sheet Growth 2018-2021 $35 $30 $25 $20 $15 $10 $5 $0 2018 2021 Private FFELP Other (Personal and Credit Card) • 78% of Private Education Loan Originations have FICO scores > 700 7007(1) • 52% of Private Education Loan Borrowers make payments while in s
Slide 16: Sallie Mae Bank Servicing Policies
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 emphas
Slide 17: Sallie Mae Bank Collections
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 collectio
Slide 18: Funding and ABS Overview
Funding and ABS Overview 18
Slide 19: Conservative funding optimizes net interest margin
Conservative funding optimizes net interest margin Secured Debt Retail 19% MMDA & CD 22% Brokered $10.3b Retail $8.6b Secured Debt $4.3b Retail Brokered H.S.A. & 529 Variable 15% 27% Brokered Fixed 17% 19
Slide 20: Sallie Mae Bank ABS Summary
Sallie Mae Bank ABS Summary 14-A 15-A 15-B 15-C 16-A 16-B 16-C 17-A 17-B 18-A 18-B 18-C Issuance Date 8/7/2014 4/23/2015 7/30/2015 10/27/2015 5/26/2016 7/21/2016 10/12/2016 2/8/2017 11/8/2017 3/21/2018 6/20/2018 9/19/2018 Total Bond Amount ($mil) $382 $704 $714 $701 $551 $657 $674 $772 $676 $670 $68
Slide 21: ABS Structures
Sallie Mae Bank ABS Structures SMB 2018-C SMB 2018-B SMB 2018-A Size $544.0MM $686.50MM $670.0MM Pricing Date September 2018 June 13, 2018 March 14, 2018 Smart Option Smart Option Smart Option Collateral Private Education Loans Private Education Loans Private Education Loans Servicer Sallie Mae Bank
Slide 22: SMB 2018-C Structure
SMB 2018-C Structure • Sallie Mae Bank is the loan servicer and transaction sponsor • SMB 2018-C utilizes a sequential structure Pct of Total Expected Wtd Avg Life Principal Expected Bond Class Bond Ratings Index to Call Window to Maturity to Legal Maturity Balance Balance (M/S) (8% CPR)(1) Call(1)
Slide 23: SMB 2018-C Cashflow
SMB 2018-C Cashflow WAL to Call (yrs)(1) Projected Credit Deal Credit Enhancement(2,4) Reserve Principal Window to Call(1) (8% CPR) Enhancement(3) Non- Class A Class B Target (3)(5) Floor(5) A-1 A-2A A-2B B A-1 A-2A A-2B B 12mo 24mo 36mo 60mo declining SMB 2018-C 17% 10% 25% 10% 0.25% 1.00 5.46 5.46
Slide 24: Strong financial results translate to predictable returns to shareholders
Strong financial results translate to predictable returns to shareholders Market Conservative Leading Funding and • Consistent earnings per share growth Brand Underwriting • High return on equity • Stable net interest margin Strong Consistent • Introducing capital return programs Financial Credit Re
Slide 25: Clear Capital Priorities
Clear Capital Priorities Invest in High ROE Growth Continue to focus on high-quality Private Education Loan originations, including deeper penetration of the graduate Quarterly school market Dividend Testing Personal Loan market Invest in Share Offer credit cards to our high-quality High ROE custome
Slide 26: CECL Update
CECL Update • The Financial Accounting Standards Board’s (FASB) Current Expected Credit Loss impairment standard will require “life of loan” estimates of losses to be recorded at origination and is set to take effect in January 2020. • There will be an initial build of the loan loss allowance that w
Slide 27: Sallie Mae Investor Relations Website
Sallie Mae Investor Relations Website www.salliemae.com/investors • SMB Student Loan ABS trust data • Reg AB static pool information – Smart Option Student Loan historical performance data • Accrued interest factors • Distribution factors • Since issued CPR – monthly CPR data by trust since issuance
Slide 28: Smart Option Student Loan Program Historical Performance Data
Smart Option Student Loan Program Historical Performance Data Period Ended December 31, 2018 28
Slide 29: Important Information Regarding Historical Loan Performance Data
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 Corpo
Slide 30: Important Information Regarding Historical Loan Performance Data (cont.)
Important Information Regarding Historical Loan Performance Data (cont.) Types of Smart Option Student Loan Portfolio Data The portfolio data we used in this report comes from four separate sources of information: (1) Combined Smart Option Student Loan Portfolio Data for Legacy SLM, Navient and Sall
Slide 31: Smart Option Serviced Portfolio: 31-60 Day Delinquencies
Smart Option Serviced Portfolio: 31-60 Day Delinquencies Smart Option Student Loans - Serviced Portfolio Smart Option Student Loans - Serviced Portfolio 31-60 Day Delinquencies as a % of Loans in P&I Repayment (1) 31-60 Day Delinquencies as a % of Loans in P&I Repayment (1) Data for Legacy SLM thru
Slide 32: Smart Option Serviced Portfolio: 61-90 Day Delinquencies
Smart Option Serviced Portfolio: 61-90 Day Delinquencies Smart Option Student Loans - Serviced Portfolio Smart Option Student Loans - Serviced Portfolio 61-90 Day Delinquencies as a % of Loans in P&I Repayment (1) 61-90 Day Delinquencies as a % of Loans in P&I Repayment (1) Data for Legacy SLM thru
Slide 33: Smart Option Serviced Portfolio: 91+ Day Delinquencies
Smart Option Serviced Portfolio: 91+ Day Delinquencies Smart Option Student Loans - Serviced Portfolio Smart Option Student Loans - Serviced Portfolio 91+ Day Delinquencies as a % of Loans in P&I Repayment (1) 91+ Day Delinquencies as a % of Loans in P&I Repayment (1) Data for Legacy SLM thru April
Slide 34: Smart Option Serviced Portfolio: Forbearance
Smart Option Serviced Portfolio: Forbearance Smart Option Student Loans - Serviced Portfolio Smart Option Student Loans - Serviced Portfolio Forbearance as a % of Loans in P&I Repayment and Forbearance (1) Forbearance as a % of Loans in P&I Repayment and Forbearance (1) Data for Legacy SLM thru Apri
Slide 35: Smart Option Serviced Portfolio: Annualized Gross Defaults
Smart Option Serviced Portfolio: Annualized Gross Defaults Smart Option Student Loans - Serviced Portfolio Smart Option Student Loans - Serviced Portfolio Annualized Gross Defaults as a % of Loans in P&I Repayment(1) Annualized Gross Defaults as a % of Loans in P&I Repayment(1) Data for Legacy SLM t
Slide 36: Smart Option Vintage Data: Cumulative Gross Default by Loan Type
Smart Option Vintage Data: Cumulative Gross Default by Loan Type Smart Option Student Loans - Serviced Portfolio: All Products Smart Option Student Loans - Serviced Portfolio: Interest Only Cumulative Defaults by P&I Repayment Vintage Cumulative Defaults by P&I Repayment Vintage and Years Since Firs
Slide 37: Smart Option Vintage Data: Voluntary Prepayments
Smart Option Vintage Data: Voluntary Prepayments ► Voluntary prepay speeds trend up as more loans enter P&I repayment Smart Option Student Loans - Serviced Portfolio Smart Option Student Loans - Serviced Portfolio Voluntary CPR by Disbursement Vintage and Product (1), (2), (3) Voluntary CPR by Disbu
Slide 38: Smart Option Vintage Data: Total Prepayments
Smart Option Vintage Data: Total Prepayments ► Following the initial few years after disbursement, total prepayments begin to rise more quickly as loans begin to default. Smart Option Student Loans - Serviced Portfolio Smart Option Student Loans - Serviced Portfolio Total CPR by Disbursement Vintage
Slide 39: Smart Option: Cumulative Recoveries
Smart Option: Cumulative Recoveries Overall Smart Option Loan Cumulative Recovery Rate Interest Only Smart Option Loan Cumulative Recovery Rate For Charge-Off Vintages Since 2010 For Charge-Off Vintages Since 2010 Data for Legacy SLM and Navient thru present (1), (2) Data for Legacy SLM and Navient
Slide 40: Cohort Default Triangles – Smart Option Combined
Cohort Default Triangles – Smart Option Combined (Interest Only, Fixed Payment & Deferred) Smart Option Combined (P&I Repayment - Total) P&I Disbursed Principal Periodic Defaults Percentage Repayment Entering P&I by Years Since First P&I Repayment Period (1), (4) Vintage Repayment ($m) 0 1 2 3 4 5 6
Slide 41: Cohort Default Triangles – Smart Option Interest Only
Cohort Default Triangles – Smart Option Interest Only Smart Option Interest Only (P&I Repayment - Total) P&I Disbursed Principal Periodic Defaults Percentage Repayment Entering P&I by Years Since First P&I Repayment Period (1), (4) Vintage Repayment ($m) 0 1 2 3 4 5 6 7 8 Total 2010 (2) $426 1.2% 1.
Slide 42: Cohort Default Triangles – Smart Option Fixed Payment
Cohort Default Triangles – Smart Option Fixed Payment Smart Option Fixed Payment (P&I Repayment - Total) P&I Disbursed Principal Periodic Defaults Percentage (1), (4) Repayment Entering P&I by Years Since First P&I Repayment Period Vintage Repayment ($m) 0 1 2 3 4 5 6 7 8 Total (2) 2011 $221 0.3% 1.
Slide 43: Cohort Default Triangles – Smart Option Deferred Payment
Cohort Default Triangles – Smart Option Deferred Payment Smart Option Deferred (P&I Repayment - Total) P&I Disbursed Principal Periodic Defaults Percentage Repayment Entering P&I by Years Since First P&I Repayment Period (1), (4) Vintage Repayment ($m) 0 1 2 3 4 5 6 7 8 Total (2) 2012 $249 0.1% 1.5%
Slide 44: Additional Information
Additional Information 44
Slide 45: Smart Option Loan Program Cohort Default Triangles
Smart Option Loan Program Cohort Default Triangles Terms and calculations used in the cohort default triangles 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
Slide 46: Smart Option Loan Program: Prepayment Methodology
Smart Option Loan Program: Prepayment Methodology The Constant Prepayment Rate (CPR) represents an annualized rate of prepayment speed measuring the reduction in the principal balance of a pool of loans in excess of the scheduled pool amortization. The rate can be positive or negative depending on w
Slide 47: Smart Option Loan Program: Prepayment Methodology
Smart Option Loan Program: Prepayment Methodology Calculations Examples(1) 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑡𝑡 = 𝐸𝐸𝐸𝐸𝐸𝐸𝑡𝑡 − 𝐴𝐴𝐴𝐴𝐴𝐴𝑡𝑡 t PMTt ACTt EXPt Prepaymentt SMMt SRt CPR 𝑆𝑆𝑆𝑆𝑆𝑆𝑡𝑡 = 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑡𝑡 ⁄𝐸𝐸𝐸𝐸𝐸𝐸𝑡𝑡 0 $10,000…