Slm Corporation · NASDAQ:SLM
Slm — IPO Roadshow (January 2007)
71 slides from Slm's IPO roadshow presentation, Jan 26, 2007
Slide 1: Debt Investor Presentation Fourth Quarter and Year Ended December 31, 2006
Debt Investor Presentation Fourth Quarter and Year Ended December 31, 2006 SLM Corporation
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: SLM Corporation
SLM Corporation #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 $20 billion(1) $142 billion managed student loan portfolio, 84% of which is U.S.
Slide 4: SLM Corporation Update
SLM Corporation Update Managed student loan outstandings increased to $142 billion, up 16% from year- end 2005 "Core Earnings" net income increased to $1.2 billion, up 15% from 2005(1) New student loan legislation passed by Congress in February 2006 and effective July 1, 2006, had no material impact
Slide 5: A Brief Corporate History
A Brief Corporate History (1) Currently known as the Federal Family Education Loan Program (FFELP). SLM Corporate Debt Ratings SLM Corporate Debt Ratings SLM Corporate Debt Ratings SLM Corporate Debt Ratings SLM Corporate Debt Ratings Moody's Moody's S&P Fitch Long-Term A2 A2 A A+ Short-Term P-1 P-1
Slide 6: What Makes SLM Corporation Unique
What Makes SLM Corporation Unique Limited Credit Risk 84% of managed student loans carried a U.S. government guarantee as of December 31, 2006 Total managed student loan losses were only 0.13% of managed student loans as of December 31, 2006 Limited Exposure to Interest Rate and Economic Cycles Inte
Slide 7: The U.S. Student Loan Market
The U.S. Student Loan Market ; sallieMae (Champions for Higher Education”
Slide 8: Sources of Funding for Higher Education in the U.S.
Federal Loans Private Loans Scholarships, Grants Parent/Student Contributions Billions of Dollars 74 22.5 80 52 Source: Based on estimates by Octameron Associates, "Don't Miss Out," 30th Edition; College Board, "2006 Trends in Student Aid"; and Sallie Mae. Includes tuition, room, board, transportati
Slide 9: Trends in U.S. Higher Education Spending
Trends in U.S. Higher Education Spending 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Enrollment 14.262 14.368 14.502 14.507 14.791 15.312 15.928 16.612 16.901 17.272 17.428 17.647 17.916 18.202 18.48 18.746 18.955 19.182 19.439 19.682 19.8
Slide 10: Higher Education's Return on Investment
Source: Postsecondary Education Opportunity, U.S. Census Bureau. Unemployment data as of 2005. Average annual income figures for 2005. Represents average earnings for a full time, year-round worker over age 25. Higher Education's Return on Investment Less than H.S. High School Some College Associate
Slide 11: Education and Unemployment Over Time
Education and Unemployment Over Time Average = 5.39% Min = 3.8% Max = 7.8% Average = 2.40% Min = 1.5% Max = 3.4% The relationship between education and unemployment has been relatively constant over time Source: Bureau of Labor Statistics.
Slide 12: The Federal Family Education Loan Program or FFELP
The Federal Family Education Loan Program or "FFELP" Provides banks and others an explicit U.S. government guarantee and a guaranteed yield on student loans made pursuant to the FFELP program Loan pricing, terms and maximum borrowing limits set by Congress Available to undergraduate students, gradua
Slide 13: Growth in Federally Supported Student Loan Originations
Growth in Federally Supported Student Loan Originations 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 FDLP loans, increased by 9% in 2005, following a 13% increase in 2004 (1) The U.S. De
Slide 14: The Private Education Loan Market
The Private Education Loan Market 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 increasing cost of higher education
Slide 15: Private Education Loan Market Demand
Private Education Loan Market Demand Private education loans help bridge the gap between funding available through government student loan programs and the rapidly increasing cost of education Cost of College AY 2006-2007 Based on a Four-Year Term Full-Time Private School Full-Time Public School 133
Slide 16: Private Education Loan Market Growth
The private education loan market has experienced steady growth, as demand for new sources of funding for higher education has increased Private Education Loan Market Growth (1) Source: Based on estimates by The College Board and Sallie Mae. Figures for academic years ended June 30.
Slide 17: Federal Student Loan Legislation
Federal Student Loan Legislation
Slide 18: Political Change and SLM Earnings Growth
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 SLM Net Income (1) 290 334 391 388 345 350 367 384 381 405 492 624 690.3 925.9 986 1131 1253 Permitted FFELP Loan Yield (2) 325 325 310 310 310 250 250 250 220 220 174 174 174 174 174 174 174 Political Change and SL
Slide 19: SLM Business Fundamentals
SLM Business Fundamentals — » SallieMae odllleMae
Slide 20: SLM Core Earnings Revenue Mix
SLM "Core Earnings" Revenue Mix Net interest income from student loans made up 66% of net revenue in 2006 The remaining 34% of net revenue was derived primarily from fee generating businesses Debt Management & Collections Operations, primarily related to student loans Guarantor Servicing for student
Slide 21: 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 Students and Parents College Financial Aid Office Preferred Channel Lending
Slide 22: SLM's Competitive Advantage
SLM's Competitive Advantage Vertically Integrated Origination/ Servicing/Collections Strong National and Regional Brands State-of-the-Art Loan Delivery Platform Largest and Most Experienced Sales Team Breadth of Products and Services $142B of managed loans Nearly 10 million customers Economies of Sc
Slide 23: Federal Student Loan Market Share
Federal Student Loan Market Share 1999 2000 2001 2002 2003 2004 2005 Sallie Mae 0.15 0.17 0.23 0.25 0.25 0.26 0.27 Federal Student Loan Originations (FFY 2004-2005) Federal Student Loan Originations (FFY 2004-2005) Federal Student Loan Originations (FFY 2004-2005) Federal Student Loan Originations (
Slide 24: SLM's Private Education Loan Portfolio
Higher Ed Tuition Answer Career Training Private Ed Loans 14.3 1.5 2.1 SLM's Private Education Loan Portfolio $23 billion of managed outstandings at year end 2006 16% of SLM's managed student loan portfolio High average FICO scores Risk-based pricing Approximately 51% of loans with co-borrowers, typ
Slide 25: 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 2002 2003 2004 2005 2006 Net Charge-Offs 0.0225 0.0185 0.0192 0.0189 0.0162 Private Education Lo
Slide 26: What Makes SLM a Unique Credit
What Makes SLM a Unique Credit
Slide 27: Extremely Low Loan Losses
Net Charge Offs East 0.9989 0.0011 Private Credit Loans Net Charge Offs East 0.9903 0.0097 Extremely Low Loan Losses FFELP Loans Net Charge Offs 0.9993 0.0007 + = Private Education Loans U.S. Government Guaranteed Loans Net Charge-Offs (1) = 0.01% Net Charge-Offs (1) = 0.82% Total Net Charge-Offs (1
Slide 28: Net Interest Margin
Net Interest Margin Extremely low loan losses and match funding of interest rate sensitivities on floating rate assets and floating rate liabilities make SLM's net interest margin highly stable Stable Net Interest Margin Note: Based on SLM Corporation "Core Earnings" results 1998-2006 and GAAP resul
Slide 29: Low Operating Expenses
Low Operating Expenses SLM's operating expenses stood at only 39% of operating revenue in 2006(1) SLM's operating efficiency ratio far outdistanced that of its peers over the past five years (1)(2) 2002 2003 2004 2005 2006(2) SLM Corp 0.37 0.36 0.36 0.38 0.39 Specialty Finance Cos. 0.58 0.55 0.58 0.
Slide 30: Highly Stable and Predictable Earnings
Highly Stable and Predictable Earnings SLM has generated highly consistent earnings and cash flow since its inception in 1972 Steady growth in the student loan market, the guaranteed nature of SLM's assets and strict asset and liability management policy protect SLM from economic and interest rate c
Slide 31: Strong Risk-Adjusted Capitalization
Strong Risk-Adjusted Capitalization 2005 Medians for 'Aa' U.S. Banks / Investment Grade Finance Cos.(4) 2004 2005 2006 2005 Medians for 'Aa' U.S. Banks / Investment Grade Finance Cos.(4) Tangible Equity/Managed Assets(1) 1.6% 1.9% 1.8% 4.9% / 7.3% Tangible Equity/Net Charge-Offs(2) 15x 16x 16x 12x /
Slide 32: Funding Diversity and Liquidity
Funding Diversity and Liquidity
Slide 33: Funding Sources
Funding Sources At December 31, 2006, ABS represented 69% and unsecured corporate debt 31% of SLM's $157 billion of total managed debt outstanding Note: Totals may not add due to rounding.
Slide 34: SLM Corporate Debt and ABS Issuance
SLM has issued $127 billion of long-term, non-GSE corporate debt and asset- backed securities since 2004, across a broad range of maturities - New Issuance Volume 2004 2005 2006 Corporate Debt Issuance (1) $15B $10B $12B Term Asset-Backed Securities Issuance (1) $30B $27B $34B Total Term Debt Issuan
Slide 35: 2006 Total Managed Debt Issuance by Currency, Geography and Type
SLM 2006 Total Managed Debt Issuance by Currency, Investor Geography and Issue Type During 2006, SLM issued 45 term ABS and corporate debt securities in nine different currencies to over 450 institutional investors around the globe USD Euro Canadian Sterling Yen HDK Peso Krona AUD 0.8697 0.0831 0.01
Slide 36: Excess Liquidity
Excess Liquidity At December 31, 2006, SLM maintained significant excess liquidity... Enough liquidity in unrestricted cash, investments and unused committed credit lines to repay 22 months' debt maturities Together with cash, investments and unused credit lines, enough additional liquidity in its r
Slide 37: Dealers in SLM Corporate Debt and ABS
Dealers in SLM Corporate Debt and ABS SLM utilizes a broad base of dealers globally, promoting liquidity in its corporate bonds and ABS corporate bonds and ABS corporate bonds and ABS corporate bonds and ABS corporate bonds and ABS corporate bonds and ABS corporate bonds and ABS corporate bonds and
Slide 38: SLM Corporate Debt Program
SLM Corporate Debt Program — © SallieMae odllltmde
Slide 39: SLM Corporate Debt Issuance Volume
SLM Corporate Debt Issuance Volume Issuance Type 2004 2005 2006 2006 US$ Global and Medium Term Notes $ 6.4 $ 4.5 $ 5.8 $ 5.8 Foreign Currency Denominated(2) 4.2 4.0 3.9 3.9 Extendible Notes 2.5 1.0 1.5 1.5 Retail Note Program 1.8 0.8 0.5 0.5 Convertible Debentures 0.0 0.0 0.0 0.0 Total Corporate De
Slide 40: 2006 Total Corporate Debt Issuance by Currency, Geography and Type
SLM 2006 Total Corporate Debt Issuance by Currency, Investor Geography and Issue Type During 2006, SLM issued 32 corporate debt securities in nine different currencies to over 300 institutional investors 2006 Corporate Debt Program Funding Diversity USD Euro Canadian Sterling Yen HKD Peso Krona AUD
Slide 41: Representative SLM Corporate Benchmark Debt Issues
Representative SLM Corporate Benchmark Debt Issues Representative US$ & Euro Benchmark Corporate Debt Issuance Issue Issue Date Issue Size (mil) Rating Coupon Maturity USD - SLM Corp Jul '05 $2,000 A2/A/A+ L+14 Jul '09 SLM Corp Jul '05 $1,250 A2/A/A+ 4.500% Jul '10 SLM Corp Jul '06 $2,000 A2/A/A+ L+
Slide 42: Consistent Credit Spread Performance
Over the past five years, SLM's five-year bond spreads have exhibited very low volatility, with levels similar to that of 'AA' bank spreads and far lower than that of brokers or other non-bank financials Note: 'AA' bank index includes Citigroup, Wells Fargo, Bank of America, Wachovia and JPMorgan Ch
Slide 43: SLM Corporation ABS Program
SLM Corporation ABS Program = a sallieMae
Slide 44: SLM ABS Issuance Volume
SLM ABS Issuance Volume 2004 2005 2006 Non-Consolidation FFELP ABS $10.1 $ 6.6 $ 5.1 Consolidation FFELP ABS 17.4 17.1 22.9 Private Credit ABS 2.8 3.4 5.7 Total ABS Issuance $ 30.3 $ 27.0 $ 33.7 SLM ABS Term Issuance Volume ($ billions) (1) - (1) Excludes outstandings under SLM's asset-backed commer
Slide 45: 2006 Total Managed ABS Issuance by Currency, Geography and Type
SLM 2006 Total Managed ABS Issuance by Currency, Investor Geography and Issue Type During 2006, SLM issued 13 term ABS issues in US$ and Euro to over 150 institutional investors 2006 ABS Funding Diversity USD Euro 94% 6% Consolidated Stafford/Plus Private Credit 68% 15% 17% US Europe Asia Other 54%
Slide 46: SLM ABS Structures
SLM ABS Structures Recent SLM new issue ABS Structures - Non-Consolidation FFELP Consolidation FFELP Private Education Loans Issue $2.6B SLM Trust 2006-3 $4.2B SLM Trust 2006-10 $1.2B SLM Trust 2006-C Pricing Date March 2, 2006 November 15, 2006 September 20, 2006 Collateral US Govt. Guaranteed FFEL
Slide 47: 2006 ABS Issuer Rankings
Note: Totals may not add due to rounding. 2006 ABS Issuer Rankings
Slide 48: SLM U.S. Government Guaranteed Student Loan ABS
SLM U.S. Government Guaranteed Student Loan ABS
Slide 49: SLM FFELP ABS Issue Characteristics
SLM FFELP ABS Issue Characteristics U.S. Government guaranteed collateral (1) Issue size $2.0B to $4.0(+)B Tranches denominated in US$ or Euros 'Aaa/AAA/AAA' rated senior tranches make up 97% of issue structure 20% risk based capital weighting in most countries Floating rate tied to 3 mo. LIBOR, wit
Slide 50: SLM FFELP ABS Reset Rate Notes
Shorter term "soft bullet" US$ 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 years from issuance Successful remarketing or call provides for full repayment of outstanding reset rate
Slide 51: SLM Trust 2004-10 Reset Rate Note Structure
Class A Notes pay sequentially A-4, A-5, A-6 and A-7 Reset Rate Note remarketing dates occur well in advance of expected amortization of underlying collateral SLM Trust 2004-10 Reset Rate Note Structure Amortization Illustration Outstanding Balance A-1 Description EUR FRN Soft Bullet USD FRN A-2 A-3
Slide 52: 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 Source: Merrill Lynch Research. 3/28/2003 4/4/2003 4/11/2003 4/17/2003 4/25/2003 5/2/2003 5/9/2003 5/16/2003 5/22/2003 5/30/2003
Slide 53: SLM AAA FFELP ABS vs. US Agencies
SLM 'AAA' FFELP ABS vs. US Agencies Attribute SLM FFELP ABS U.S. Agency Debt U.S. Govt. Guarantee U.S. government guaranteed collateral(1) No explicit guarantee...market credit for 'implicit' guarantee Risk Weighting 20% in many countries, including the US, UK, Germany, France 20% Liquidity ~$95 bil
Slide 54: SLM AAA FFELP vs. US Agencies
SLM ABS (floating rate issuance) Agency debenture (fixed rate issuance) 1 -3 -16 2 -1 -18 3 1 -17 5 2 -15 7 7 -15 10 10 -17 SLM 'AAA' FFELP vs. US Agencies SLM 'AAA' FFELP ABS (1) US Agency Debt (1) Maturity (yrs.) 18bps 22bps 27bps 13bps 17bps (1) Spreads as of December 31, 2006. US Agency spreads
Slide 55: SLM AAA FFELP ABS Spread Performance vs. Agencies
SLM 'AAA' FFELP ABS Spread Performance vs. Agencies SLM FNMA Current 2 -16 Max 12 6 Min 2 -20 Mean 7.3 -9.9 Std Dev 3.1 4.6 (1) 5-year unsecured Fannie Mae, rolling weekly average LIBOR equivalent pricing. Source: Various dealers. Spread to LIBOR on SLM 'AAA' FFELP ABS vs. U.S. Agencies Dec 2002 - D
Slide 56: SLM Private Credit Student Loan ABS Program
SLM Private Credit Student Loan ABS Program
Slide 57: SLM Private Credit ABS Issue Characteristics
SLM Private Credit ABS Issue Characteristics Issue size $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 tied to 3 mo.
Slide 58: SLM Private Credit Loan Underwriting
SLM Private Credit Loan Underwriting SLM Higher Education Loan Program Underwriting Standards - Minimum FICO score for standard programs. Prior to July 1, 2001, minimum FICO score for Sallie Mae branded loans was 630. Custom programs have been negotiated with certain schools in which the FICO cut-of
Slide 59: SLM Private Credit Cumulative ABS Issuance
SLM Private Credit Cumulative ABS Issuance(1) SLM Private Credit ABS Issuance SLM Managed Private Education Loans Outstanding(1) Gross outstandings for total managed portfolio, before deducting loan loss allowance and unamortized discount. 2001 2002 2003 2004 2005 2006 Higher Education 3.6 5 7.4 10
Slide 60: SLM Private Credit ABS Relative Value
SLM Private Credit ABS Relative Value 3/28/2003 4/4/2003 4/11/2003 4/17/2003 4/25/2003 5/2/2003 5/9/2003 5/16/2003 5/22/2003 5/30/2003 6/6/2003 6/13/2003 6/20/2003 6/27/2003 7/3/2003 7/11/2003 7/18/2003 7/25/2003 8/1/2003 8/8/2003 8/15/2003 8/22/2003 8/29/2003 9/5/2003 9/12/2003 9/19/2003 9/26/2003
Slide 61: SLM 2006-C Private Credit Student Loan ABS
SLM 2006-C Private Credit Student Loan ABS
Slide 62: SLM Private Credit Student Loan Trust 2006-C
SLM Private Credit Student Loan Trust 2006-C The structure of SLM 2006-C is similar to prior Sallie Mae Private Credit ABS issues(1) (1) Preliminary, subject to change. (2) Estimated based on a variety of assumptions concerning loan repayment behavior. Actual average life and repayment characteristi
Slide 63: SLM 2006-C Summary Pool Characteristics
SLM 2006-C Summary Pool Characteristics Loan Programs % Co-Borrower as Obligor Borrower Payment Status Pool Weighted Original Average FICO Score 714 Pool Weighted Current Average FICO Score 700 Average Borrower Indebtedness $10,999 Weighted Average Remaining Term 200 months No Co-Borrower Co-Borrowe
Slide 64: SLM 2006-C FICO Distribution at Loan Origination
SLM 2006-C FICO Distribution at Loan Origination(1) If there is a co-borrower, the co-borrower's FICO was used. Loans with FICO scores greater than zero and less than 630 represent less than 0.02% of the portfolio. Approximately 3.3% of the trust consists of student loans where no FICO scores were c
Slide 65: SLM Private Credit ABS Prepayment Analysis
SLM Private Credit ABS Prepayment Analysis Historical SLM Private Credit ABS CPRs
Slide 66: Additional Information
Additional Information — 0 SallieMae odliltmde
Slide 67: Core Earnings Presentation
"Core Earnings" Presentation Used by SLM's management in developing financial plans, tracking results, establishing corporate performance targets and determining incentive compensation Used by equity investors, credit rating agencies and debt capital providers to measure the company's business perfo
Slide 68: SLM Corporation - Summary Financial Performance
2001 2002 2003 2004 2005 2006 Stafford/PLUS 50 47.052 45.524 47 40.658 39.9 Consolidation 17 25.25 34.96 49 65.434 79.6 Private Education 4.416 5.822 8.305 11 16.437 22.6 Growth 0.142 0.14 0.14 0.15 $78 $89 $107 $123 SLM Corporation - Summary Financial Performance 2001 2002 2003 2004 2005 2006 "Core
Slide 69: Presidential Award for Corporate Leadership
Presidential Award for Corporate Leadership Most prestigious Presidential award for corporate citizenship Recognizes corporate commitment to employees and the community Presented annually at the White House by the Secretary of Commerce Sallie Mae one of two companies to receive this honor in 2006 Sa
Slide 70: Additional Information Available at www.salliemae.com
Additional Information Available at www.salliemae.com Additional Information Available at www.salliemae.com
Slide 71: Debt Investor Relations Contact Information
Debt Investor Relations Contact Information Guido van der Ven Vice President, Corporate Finance Sallie Mae, Inc. 36 Leitch Avenue Skaneateles, NY 13152 315-685-9825 [email protected] Leo Subler Managing Director, Corporate Finance Sallie Mae, Inc. 12061 Bluemont Way Reston, VA 20190 703-984