UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 6, 2012
SLM CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 001-13251 | 52-2013874 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) | ||
| 300 Continental Drive, Newark, Delaware | 19713 | |||
| (Address of principal executive offices) | (Zip Code) | |||
Registrant’s telephone number, including area code: (302) 283-8000
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 8.01 Other Events.
SLM Corporation frequently provides relevant information to its investors via posting to its corporate website. On August 6, 2012, a presentation entitled “Q2 2012 Investor Presentation” was made available on SLM Corporation’s web site at
https://www1.salliemae.com/about/investors/webcasts/default.htm. In addition, the document is being furnished herewith as Exhibit 99.1.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
| 99.1* | Q2 2012 Investor Presentation. | |
| * | Furnished herewith. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| SLM CORPORATION | ||||
| Date: August 6, 2012 | By: | /s/ Jonathan C. Clark | ||
| Jonathan C. Clark | ||||
| Executive Vice President and Chief Financial Officer | ||||
EXHIBIT INDEX
| Exhibit |
Description | |
| 99.1* | Q2 2012 Investor Presentation. | |
| * | Furnished herewith. |
Exhibit 99.1
SallieMae SM
SLM CORPORATION
Q2 2012 Investor Presentation
AUGUST 6, 2012
Forward-Looking Statements; Non-GAAP Financial Measures
SallieMae SM
The following information is current as of August 6, 2012 (unless otherwise noted) and should be read in connection with SLM Corporation’s Annual Report on Form 10-K for the year ended December 31, 2011 (the —2011 Form 10-K ), the Company’s second quarter Form 10-Q and subsequent reports filed with the Securities and Exchange Commission (the —SEC ) .
This Presentation contains forward-looking statements and information based on management’s current expectations as of the date of this presentation. Statements that are not historical facts, including statements about our opinions, beliefs or expectations and statements that assume or are dependent upon future events, are forward-looking statements. Forward-looking statements are subject to risks, uncertainties, assumptions and other factors that may cause actual results to be materially different from those reflected in such forward-looking statements. These factors include, among others, the risks and uncertainties set forth in Item 1A —Risk Factors and elsewhere in the 2011 Form 10-K, the Company’s second quarter Form 10-Q and subsequent filings with the SEC; increases in financing costs; limits on liquidity; increases in costs associated with compliance with laws and regulations; changes in accounting standards and the impact of related changes in significant accounting estimates; any adverse outcomes in any significant litigation to which we are a party; credit risk associated with our exposure to third parties, including counterparties to our derivative transactions; and changes in the terms of student loans and the educational credit marketplace (including changes resulting from new laws and the implementation of existing laws). We could also be affected by, among other things: changes in our funding costs and availability; reductions to our credit ratings or the credit ratings of the United States of America; failures of our operating systems or infrastructure, including those of third-party vendors; damage to our reputation; failures to successfully implement cost-cutting and restructuring initiatives and adverse effects of such initiatives on our business; changes in the demand for educational financing or in financing preferences of lenders, educational institutions, students and their families; changes in law and regulations with respect to the student lending business and financial institutions generally; increased competition from banks and other consumer lenders; the creditworthiness of our customers; changes in the general interest rate environment, including the rate relationships among relevant money-market instruments and those of our earning assets versus our funding arrangements; changes in general economic conditions; and changes in the demand for debt management services. The preparation of our consolidated financial statements also requires management to make certain estimates and assumptions including estimates and assumptions about future events. These estimates or assumptions may prove to be incorrect. All forward-looking statements contained in this Presentation are qualified by these cautionary statements and are made only as of the date of this Presentation. We do not undertake any obligation to update or revise these forward-looking statements to conform the statement to actual results or changes in our expectations.
The Company reports financial results on a GAAP basis and also provides certain core earnings performance measures. The difference between the Company’s core earnings and GAAP results for the periods presented were the unrealized, mark-to-market gains/losses on derivative contracts and the goodwill and acquired intangible asset
amortization and impairment. These items are recognized in GAAP but not in core earnings results. The Company provides core earnings measures because this is what management uses when making management decisions regarding the Company’s performance and the allocation of corporate resources. The Company’s core earnings are not defined terms within GAAP and may not be comparable to similarly titled measures reported by other companies. For additional information, see —Core Earnings Definition and Limitations in the Company’s second quarter Form 10-Q for a further discussion and a complete reconciliation between GAAP net income and core earnings.
| 2 |
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SLM Corporation
SallieMae SM
SLM Corporation Overview Page 4
The U.S. Student Loan Market Page 11
Credit Quality Page 19
Servicing: A Competitive Advantage Page 28
Funding Diversity and Liquidity Page 32
Risk-Adjusted Capitalization Page 43
FFELP ABS Appendix Page 46
Private Education Loan ABS Appendix Page 51
SLM Appendix Page 73
| 3 |
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SLM Corporation Overview
SallieMae SM
| 4 |
|
SLM Corporation
SallieMae SM
#1 saving, planning and paying for education
company with 40-years of leadership in the
education lending market
#1 servicer and collector of student loans in the
U.S. for FFELP 1 and Private Education Loans
Serving 25 million unique customers, as of June
30, 2012
Servicing for third parties, including 3.8 million
loans for the Department
of June 30, 2012
Fully independent private sector company with
scale and a broad franchise, traded on the
NASDAQ (ticker: SLM)
$169 billion student loan portfolio, 78% of which
is insured or guaranteed, as of June 30, 2012
| 1 |
|
Federal Family Education |
| 5 |
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SallieMae SM
A Brief Corporate History
SLM Corporate Debt Ratings
Moody’s S & P Fitch
Long- Ba1 BBB- BBB-
Term
Short- Not-Prime A-3 F3
Term
Outlook Stable Stable Stable
As of June 30, 2012
Loan Portfolio
Loan Type $billions %
FFELP Loans $132.8 78%
Private Education $36.5 22%
Total Portfolio $169.3 100%
As of June 30, 2012 Net of provision
Congress creates the Guaranteed Student Loan Program, currently known
1965 as FFELP
Congress establishes, as a GSE, the Student Loan Marketing Association or
1972 —Sallie Mae
Privatization of Sallie Mae approved by Congress, SLM Corporation holding
1996 company created
GSE dissolved… SLM Corporation
2004 sector corporation
Challenging economy; U.S. Government support of FFELP, private
2008 education lending curtailed
SLM wins 5 year contract to service for US Dept Education
2009 Smart Option private loan introduced
FFELP eliminated in legislative reform July 2010
2010 SLM acquires $25 billion FFELP portfolio from Student Loan Corporation
| 6 |
|
SallieMae SM
Q2 12 —Core *
($ millions, except per share amounts) Q2 12 Q1 12 Q2 11
EPS (Reported) $0.49 $0.55 $0.48
Net Income $243 $284 $260
Net Interest Income $655 $732 $761
Loan Loss Provision $243 $253 $291
Fee and Other Income—Excluding Debt Repurchase Gains $192 $198 $193
Debt Repurchase Gains $20 $37 $0
Operating Expenses $239 $262 $268
Tangible Capital Ratio(1) 2.4% 2.4% 2.3%
Average Student Loans $172,436 $174,942 $180,783
Credit performance continues to improve year over year
Strong loan growth with high credit quality
Purchased FFELP portfolios totaling $1.9 billion
(1) The —Tangible Capital Ratio is total intangible GAAP assets divided equity by tangibleless assets (defined goodwill as total assets and less goodwill and acquired intangible assets).
| * |
|
For a GAAP to —Core Earnings reconciliation, see slide 74 |
| 7 |
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SallieMae SM
Consumer Lending Segment Earnings Detail —Core
($ millions) Q2 12 Q1 12 Q2 11
Private Originations $321 $1,160 $264
Average Private Education Loans $37,543 $37,749 $36,784
Net Interest Income after Provision—Private $187 $190 $136
Net Interest Margin—Private Education (1) 4.14% 4.26% 4.05%
Operating Expenses $64 $69 $73
OpEx Annualized as a % of Average Private Education Loans 0.69% 0.73% 0.80%
Net Income $85 $84 $49
(1) Includes non-GAAP adjustments of 0.11%, 0.13%, and 0.05%, respectively, related to the accounting for derivative instruments.
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FFELP Loan Segment Earnings Detail —Core
SallieMae SM
($ millions) Q2 12 Q1 12 Q2 11
Average FFELP Loans $134,893 $137,193 $143,999
Net Interest Income after Provision—FFELP (1) $228 $286 $342
Net Interest Margin—FFELP(2) 0.70% 0.85% 0.98%
Operating Expenses $181 $185 $192
OpEx Annualized as a % of Average FFELP Loans 0.54% 0.54% 0.53%
Net Income $44 $80 $108
(1)As a result of the recently completed Special Direct Consolidation Loan Initiative, net interest income was reduced by the acceleration of $50 million of non-cash loan premium amortization and the FFELP student loan spread was reduced by 15 basis points.
(2)Includes non-GAAP adjustments of (0.30%), (0.27%), and (0.32%), respectively, related to the accounting for derivative instruments.
9
Three Aspects of the SLM Business Model
SallieMae SM
Largest originator of Private Education Loans
Consumer Lending Significant long term value
High quality loan originations growing in double digits
Growing net income
Businesses include loan servicing and collections for Department of
Education, payment processing for colleges and universities and 529
plan servicing
Business Services Attractive fee business with little capital required & high return on
equity
ABS servicing cash flows are super senior
Opportunities exist to expand services provided, including industry
consolidation
Efficient cost structure and top performer
Existing portfolios generating substantial income and cash flow
FFELP Loan Portfolio Residuals stable due to minimal credit and interest rate risk
Actively seeking to acquire additional FFELP loan portfolios
10
The U.S. Student Loan Market
SallieMae SM
11
Favorable Student Loan Market Trends
SallieMae SM
Higher Education Enrollment (millions)
22.8 23.0 22.2 22.5 21.6 22.0 21.3 20.7 20.7 20.9 20.4 20.6 19.1 18.2
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: U.S. Department of Education, National Center for Education Statistics, 1990 through 2009 Integrated Postsecondary Education Data System, “Fall Enrollment Survey” (IPEDS-EF:90–99), Spring 2001 through Spring 2010; and Enrollment in Degree-Granting Institutions Model, 1980–2009.
Note: Total enrollment in all degree-granting institutions; middle alternative projections for 2010 onward
Federal Student Loan Origination Volume ($ billions)
147.8
124.3 131.6 139.4
116.1
104.3
94.5
75.8
64.4
2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: President’s2012 Budget. Net commitments by fiscal year
Note: Excludes consolidation volume
Annual Cost of Education ($ thousands)
Public Private
$38.6
$32.3 $34.2 $35.5 $37.0
$26.1 $27.5 $28.7 $30.5
17.1
10.5 11.4 12.1 12.8 13.6 14.4 15.2 16.2
2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: Trends in College Pricing.© 2011 The College Board,. www.collegeboard.org,
Note: Academic years, average published tuition, fees, room and board charges at four-year institutions;
enrollment-weighted
Relationship Between Higher Education, Income and Employment
100,000 14%
90,000 Average annual income
12%
80,000 Unemployment
70,000 10%
60,000
8%
50,000
6%
40,000
30,000 4%
20,000
2%
10,000
0 0%
Less than H.S. High school Some college Associate Bachelor’s Master’s Doctorate Professional
Source: U.S. Census Bureau, Current Population Survey, 2011 Annual Social and Economic Supplement.
Represents median earnings for a full time, year-round worker over age 25. Unemployment data as of Quarter
IV 2011 Represents unemployment for civilian non-institutional population over age 25.
12
College Grads Experience Lower Levels of Unemployment
SallieMae SM
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
Total Unemployment Rate Unemployment Rate with a Bachelor’s Degree or Higher
Source: U.S. Department of Labor, Bureau of Labor Statistics as of 06/30/2012
13
SallieMae SM
SLM Private Education Loan Originations
$1,400 50%
$1,200
30%
$1,000
10%
millions $800
in $600
$ -10%
$400
-30%
$200
$0 -50%
1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12
Originations Year over Year Growth
14
SallieMae SM
SLM’s Private
Private Education Loan Portfolio Characteristics
$36 billion portfolio
22% of SLM’s total student loan
Approximately 63% of portfolio has a cosigner, typically a parent
Loans originated since 2009 are approximately 90% cosigned with average FICO
scores above 740
Higher education loans typically non-dischargeable in bankruptcy
Integrated underwriting, servicing and collections
As of June 30, 2012
15
SallieMae SM
SLM’s Private
Smart Option Student Loan product offers three repayment choices designed to help borrowers
balance their goals and budget while in school
Interest Only—Requires interest only payment during in-school period
Fixed Repayment—Requires $25 monthly payments during in-school period
Deferred Repayment Allows the customer to defer payments while in-school
Variable and Fixed Interest Rate Options
Repayment term is driven by cumulative amount borrowed and grade level
Full communication with customers during in-school period
Full collection activities are employed at both the customer and cosigner level
All loans are certified by the school’s financial aid office to help ensure that customers borrow no
more than the cost of attendance
16
SallieMae SM
Role of Private Education Loan
Private Education Loan products bridge the funding gap between the cost of a college education and funds available through U.S. Department of Education (ED) programs, grants, and other sources
Estimates for academic year 2011-12 project that 20 million students will enroll in higher education and incur costs of over $436 billion; $7 billion of which is funded by private education loans Assuming Federal Loans and Grants remain constant a 4% increase in the cost of education would result in a $17 billion incremental funding requirement for students and families
Cost of College (Based on a Four-Year Term)
Total Cost of Education (in billions) 2011/2012 Academic Year
AY 2000-2001 AY 2010-2011
$147,960
$112,240
Cost of Cost of $116,960
attendance attendance
gap $95,115 gap $64,600
$42,600 $33,600
$25,475
$31,000 $31,000
$17,125 $17,125
Full-Time Full-Time Full-Time Full-Time
Private School Public School Private School Public School
ED Lending Limit Cost of attendance gap
Private
Education
$7 Loans
Family
Contributions
$200
$113 Federal
$116
Grants
Source: U.S. Department of Education, President’s
17
Private Credit Industry Originations
SallieMae SM
2010-11 academic year market share approximately 40%
SLM vs. Industry Originations
(billions)
$21.1
$19.0
$16.0
$13.0
$10.3
$9.4
$7.1 $7.7 $7.7
$6.8
$6.0
$4.8 $4.8 $3.8 $2.3 $2.5
03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11
SLM Total Market
Private Education Loan originations declined from their peak as a result of an increase in federal student loan limits, an overall increase in the use of federal student loans, an increase in federal grants, and tighter underwriting standards.
Source: Trends in Student Aid.© 2011 The College Board,. www.collegeboard.org, industry data is preliminary. Based on current dollars. Data reported by academic year, SLM quarterly data converted to academic year basis.
18
Credit Quality
SallieMae SM
19
Loan Losses
SallieMae SM
Charge-Offs (1)
= 0.07%
U.S. Government Guaranteed Loans(2) 78%
Charge-Offs (1)
= 2.45%
Private Education Loans(2) 22%
Total Charge-Offs (1)
= 0.58%
Student Loan Portfolio(2)
All data as of June 30, 2012. Annualized FFELP charge-offs as a percentage of average FFELP Loans. Annualized Private Education Loan charge-offs as a percentage of average Private Education Loans. Annualized total charge-offs as a percentage of average FFELP Loans and Private Education Loans.
Percentages of total student loan portfolio based upon average portfolio balances.
20
Private Credit Default Performance
SallieMae SM
The probability of default substantially diminishes as the number of payments and years of seasoning increases
Historical Defaults by Months in Repayment
100% 85% 88% 90% 93% 95% 98% 100%
75% 80%
69%
61%
Defaults 51%
50% 38%
Total 21% 16%
of 8% 8% 13% 13% 10% 8% 6% 5% 4% 3% 3% 3% 2% 2% 2%
0%
Percent 12 24 36 48 60 72 84 96 108 120 132 144 156 168 180
Months Since Repayment Begin Date
Defaults Per Months Since Repayment Begin Date Cumulative Defaults
Historical Defaults by Payments Made
100% 81% 85% 88% 91% 93% 95% 96% 97% 98% 99% 99% 100%
69% 76%
Defaults 58% 58%
50%
of Total 11% 7% 5% 4% 3% 3% 2% 2% 1% 1% 1% 1% 0% 1%
0%
Percent 12 24 36 48 60 72 84 96 108 120 132 144 156 168 180
# Payments Made
Defaults Per Payments Made Cumulative Defaults
As of June 30, 2012
21
SallieMae SM
Private Education Loan Portfolio Performance
Q212 Q112 Q411 Q311 Q211
Charge-offs—Traditional Portfolio (1) 2.5% 2.3% 2.7% 2.9% 2.8%
Charge-offs—Non-Traditional Portfolio (1) 9.8% 10.3% 11.9% 11.5% 12.5%
Charge-offs—Total Portfolio (1) 3.1% 3.0% 3.5% 3.7% 3.7%
90+ Day Delinq as a % of Repay—Traditional Portfolio 3.7% 3.6% 4.0% 4.0% 3.7%
90+ Day Delinq as a % of Repay—Non-Traditional Portfolio 12.6% 12.5% 13.6% 14.3% 13.2%
90+ Day Delinq as a % of Repay—Total Portfolio 4.5% 4.4% 4.9% 5.0% 4.6%
Forb as a % of Forb & Repay—Traditional Portfolio 4.1% 4.1% 4.2% 4.3% 4.5%
Forb as a % of Forb & Repay—Non-Traditional Portfolio 6.4% 6.8% 6.6% 6.7% 7.0%
Forb as a % of Forb & Repay—Total Portfolio 4.3% 4.3% 4.4% 4.5% 4.7%
Allowance as a % of Loans in Repay—Traditional Portfolio 5.7% 5.8% 5.6% 5.7% 5.2%
Allowance as a % of Loans in Repay—Non-Traditional Portfolio 22.5% 22.8% 23.1% 25.4% 24.8%
Allowance as a % of Loans in Repay—Total Portfolio 7.1% 7.2% 7.2% 7.5% 7.1%
| (1) |
|
Charge-offs as a percentage of average loans in repayment annualized for the quarters presented |
22
Private Education Loan Portfolio Performance
SallieMae SM
Traditional Loans with a Cosigner Q212 Q112 Q411 Q311 Q211
Outstanding Balance as a % of Total 60% 60% 59% 59% 58%
90+ Delinquency as a % of Repayment 2.7% 2.6% 2.9% 2.9% 2.7%
Forbearance as a % of Repayment & Forbearance 3.8% 3.7% 3.8% 3.8% 4.0%
Charge-Offs as a % of Repayment (1) 1.5% 1.4% 1.7% 1.9% 1.8%
Traditional Loans without a Cosigner Q212 Q112 Q411 Q311 Q211
Outstanding Balance as a % of Total 31% 31% 32% 32% 33%
90+ Delinquency as a % of Repayment 5.5% 5.5% 5.8% 5.9% 5.5%
Forbearance as a % of Repayment & Forbearance 4.5% 4.7% 4.7% 4.9% 5.1%
Charge-Offs as a % of Repayment (1) 4.3% 3.9% 4.5% 4.9% 4.6%
Non-Traditional Loans with a Cosigner Q212 Q112 Q411 Q311 Q211
Outstanding Balance as a % of Total 3% 3% 3% 3% 3%
90+ Delinquency as a % of Repayment 10.3% 10.4% 11.8% 12.2% 11.0%
Forbearance as a % of Repayment & Forbearance 7.6% 8.1% 7.8% 7.7% 8.1%
Charge-Offs as a % of Repayment (1) 6.6% 7.1% 7.8% 8.0% 8.8%
Non-Traditional Loans without a Cosigner Q212 Q112 Q411 Q311 Q211
Outstanding Balance as a % of Total 6% 6% 7% 7% 7%
90+ Delinquency as a % of Repayment 13.5% 13.3% 14.4% 15.1% 14.1%
Forbearance as a % of Repayment & Forbearance 5.9% 6.2% 6.1% 6.3% 6.5%
Charge-Offs as a % of Repayment (1) 11.1% 11.6% 13.6% 12.9% 14.0%
| (1) |
|
Charge-offs as a percentage of average loans in repayment annualized for the quarters presented |
23
Significant Improvement in Portfolio Quality
SallieMae SM
Legacy Loans Entering Repayment(1)
$ Volume in % of Non % of % of For Average
Billions Traditional Cosigned Profit Winning FICO
Actual
2008 $7.4 15% 54% 33% 709
2009 $6.6 13% 56% 27% 711
2010 $5.2 11% 59% 21% 713
2011 $3.5 10% 62% 17% 714
Projected (2)
2012 $1.8 9% 65% 15% 717
2013 $0.5 7% 70% 12% 726
Originations of $3.2 bn in 2009 had an average winning FICO of 745 and 83% were cosigned.
Originations of $2.3 bn in 2010 had an average winning FICO of 739 and 89% were cosigned.
Originations of $2.7 bn in 2011 had an average winning FICO of 748 and 91% were cosigned.
YTD Q2’12originations of $1.5 bn had an average winning FICO of 747 and 86% were cosigned.
| (1) |
|
Excludes Smart Option loans. |
(2) Projected loans entering repayment does not include new loan originations which are expected to be 100% Traditional loans and have significantly higher FICO scores and cosigners.
Note: Volume for all years is based on outstanding balances.
24
Loan Seasoning
SallieMae SM
June 3 0 , 2 0 12
T rad it io nal Po rt f o lio
M o nt hly Sched uled Payment s D ue
Lo an St at us 0-12 payments 13-24 payments 25-36 payments 37-48 payments M ore than 48 payments Total
Not Yet in Repayment 5,529
Loans in Forbearance 717 9.3% 190 3.1% 131 2.5% 66 1.8% 82 1.3% 1,186 4.1%
Loans in Repayment- Current 5,881 76.0% 5,504 89.2% 4,799 90.6% 3,344 93.0% 6,141 95.1% 25,669 87.7%
Loans in Repayment- Delinq 31 60 days 380 4.9% 173 2.8% 139 2.6% 71 2.0% 99 1.5% 862 2.9%
Loans in Repayment- Delinq 61 90 days 240 3.1% 95 1.5% 77 1.4% 39 1.1% 47 0.7% 498 1.7%
Loans in Repayment- Delinq 90 + days 521 6.7% 209 3.4% 152 2.9% 75 2.1% 89 1.4% 1,046 3.6%
Total Loans in Repayment or Forbearance $ 7,739 100% $ 6,171 100% $ 5,298 100% $ 3,595 100% $ 6,458 100% $ 29,261 100%
Charge-offs as a % of loans in repayment 5.1% 2.4% 1.6% 1.3% 0.9% 2.5%
N o n- T rad it io nal Po rt f o lio
M o nt hly Sched uled Payment s D ue
Lo an St at us 0-12 payments 13-24 payments 25-36 payments 37-48 payments M ore than 48 payments Total
Not Yet in Repayment 569
Loans in Forbearance 121 12.0% 24 4.9% 16 3.8% 8 2.5% 13 2.2% 182 6.4%
Loans in Repayment- Current 525 52.0% 343 70.8% 329 77.3% 277 84.1% 507 86.1% 1,981 69.8%
Loans in Repayment- Delinq 31 60 days 98 9.7% 34 7.1% 25 5.9% 16 4.6% 23 3.9% 196 6.9%
Loans in Repayment- Delinq 61 90 days 81 8.0% 24 4.9% 16 3.8% 9 2.9% 15 2.6% 145 5.1%
Loans in Repayment- Delinq 90 + days 185 18.3% 60 12.3% 39 9.2% 19 5.9% 31 5.2% 334 11.8%
Total Loans in Repayment or Forbearance $ 1,010 100% $ 485 100% $ 425 100% $ 329 100% $ 589 100% $ 2,838 100%
Charge-offs as a % of loans in repayment 17.8% 10.2% 5.1% 3.5% 3.4% 9.8%
T o t al
M o nt hly Sched uled Payment s D ue
Lo an St at us 0-12 payments 13-24 payments 25-36 payments 37-48 payments M ore than 48 payments Total
Not Yet in Repayment 6,098
Loans in Forbearance 838 9.6% 214 3.2% 147 2.6% 74 1.9% 95 1.3% 1,368 4.3%
Loans in Repayment- Current 6,406 73.2% 5,847 87.9% 5,128 89.6% 3,621 92.3% 6,648 94.4% 27,650 86.1%
Loans in Repayment- Delinq 31 60 days 478 5.5% 207 3.1% 164 2.9% 87 2.2% 122 1.7% 1,058 3.3%
Loans in Repayment- Delinq 61 90 days 321 3.6% 119 1.8% 93 1.6% 48 1.2% 62 0.9% 643 2.0%
Loans in Repayment- Delinq 90 + days 706 8.1% 269 4.0% 191 3.3% 94 2.4% 120 1.7% 1,380 4.3%
Total Loans in Repayment or Forbearance $ 8,749 100% $ 6,656 100% $ 5,723 100% $ 3,924 100% $ 7,047 100% $ 32,099 100%
Charge-offs as a % of loans in repayment 6.6% 2.9% 1.9% 1.5% 1.1% 3.1%
(Dollars in millions)
25
Loan Seasoning
SallieMae SM
M arch 3 1, 2 0 12
T rad it io nal Po rt f o lio
M o nt hly Sched uled Payment s D ue
Lo an St at us 0-12 payments 13-24 payments 25-36 payments 37-48 payments M ore than 48 payments Total
Not Yet in Repayment 6,268
Loans in Forbearance 758 9.9% 174 2.8% 116 2.2% 57 1.6% 74 1.2% 1,178 4.1%
Loans in Repayment- Current 5,942 77.4% 5,566 90.1% 4,862 91.6% 3,357 93.8% 5,742 95.3% 25,468 88.5%
Loans in Repayment- Delinq 31 60 days 295 3.8% 141 2.3% 115 2.2% 60 1.7% 80 1.3% 690 2.4%
Loans in Repayment- Delinq 61 90 days 199 2.6% 87 1.4% 65 1.2% 32 0.9% 41 0.7% 424 1.5%
Loans in Repayment- Delinq 90 + days 487 6.3% 207 3.4% 148 2.8% 73 2.0% 89 1.5% 1,003 3.5%
Total Loans in Repayment or Forbearance $ 7,681 100% $ 6,175 100% $ 5,306 100% $ 3,579 100% $ 6,026 100% $ 28,767 100%
Charge-offs as a % of loans in repayment 4.6% 2.0% 1.4% 1.2% 1.0% 2.3%
N o n- T rad it io nal Po rt f o lio
M o nt hly Sched uled Payment s D ue
Lo an St at us 0-12 payments 13-24 payments 25-36 payments 37-48 payments M ore than 48 payments Total
Not Yet in Repayment 649
Loans in Forbearance 134 12.8% 24 4.7% 16 3.6% 7 2.3% 12 2.1% 193 6.8%
Loans in Repayment- Current 587 55.9% 354 72.2% 342 79.3% 269 85.4% 478 86.2% 2,030 71.5%
Loans in Repayment- Delinq 31 60 days 86 8.2% 30 6.2% 21 4.9% 12 3.7% 19 3.4% 168 5.9%
Loans in Repayment- Delinq 61 90 days 66 6.3% 20 4.1% 14 3.3% 7 2.3% 13 2.3% 120 4.2%
Loans in Repayment- Delinq 90 + days 176 16.7% 63 12.8% 38 8.9% 20 6.3% 33 6.0% 330 11.6%
Total Loans in Repayment or Forbearance $ 1,049 100% $ 491 100% $ 431 100% $ 315 100% $ 555 100% $ 2,841 100%
Charge-offs as a % of loans in repayment 16.9% 10.5% 6.8% 4.4% 4.2% 10.3%
T o t al
M o nt hly Sched uled Payment s D ue
Lo an St at us 0-12 payments 13-24 payments 25-36 payments 37-48 payments M ore than 48 payments Total
Not Yet in Repayment 6,917
Loans in Forbearance 892 10.2% 198 3.0% 132 2.3% 64 1.7% 86 1.3% 1,372 4.3%
Loans in Repayment- Current 6,529 74.8% 5,920 88.8% 5,204 90.7% 3,626 93.1% 6,220 94.5% 27,499 87.0%
Loans in Repayment- Delinq 31 60 days 381 4.4% 171 2.6% 136 2.4% 72 1.8% 99 1.5% 859 2.7%
Loans in Repayment- Delinq 61 90 days 265 3.0% 107 1.6% 79 1.4% 39 1.0% 54 0.8% 544 1.7%
Loans in Repayment- Delinq 90 + days 663 7.6% 270 4.0% 186 3.2% 93 2.4% 122 1.9% 1,334 4.2%
Total Loans in Repayment or Forbearance $ 8,730 100% $ 6,666 100% $ 5,737 100% $ 3,894 100% $ 6,581 100% $ 31,608 100%
Charge-offs as a % of loans in repayment 6.0% 2.7% 1.8% 1.4% 1.3% 3.0%
(Dollars in millions)
26
SallieMae SM
Loan Seasoning
June 3 0 , 2 0 11
T rad it io nal Po rt f o lio
M o nt hly Sched uled Payment s D ue
Lo an St at us 0-12 payments 13-24 payments 25-36 payments 37-48 payments M ore than 48 payments Total
Not Yet in Repayment 6,431
Loans in Forbearance 842 8.8% 175 2.9% 103 2.5% 50 1.7% 55 1.2% 1,225 4.5%
Loans in Repayment- Current 7,561 79.2% 5,447 89.8% 3,801 91.0% 2,825 93.9% 4,330 95.0% 23,964 87.6%
Loans in Repayment- Delinq 31 60 days 378 4.0% 155 2.5% 104 2.5% 52 1.7% 70 1.5% 759 2.8%
Loans in Repayment- Delinq 61 90 days 239 2.5% 85 1.4% 53 1.3% 25 0.8% 31 0.7% 433 1.6%
Loans in Repayment- Delinq 90 + days 529 5.5% 207 3.4% 116 2.8% 56 1.9% 70 1.5% 978 3.6%
Total Loans in Repayment or Forbearance $ 9,549 100% $ 6,069 100% $ 4,177 100% $ 3,008 100% $ 4,556 100% $ 27,359 100%
Charge-offs as a % of loans in repayment 4.5% 2.7% 1.9% 1.4% 1.1% 2.8%
N o n- T rad it io nal Po rt f o lio
M o nt hly Sched uled Payment s D ue
Lo an St at us 0-12 payments 13-24 payments 25-36 payments 37-48 payments M ore than 48 payments Total
Not Yet in Repayment 785
Loans in Forbearance 148 11.9% 25 4.7% 15 3.7% 7 2.5% 10 2.2% 205 7.0%
Loans in Repayment- Current 693 55.7% 397 71.2% 330 79.4% 215 82.9% 395 84.3% 2,030 69.0%
Loans in Repayment- Delinq 31 60 days 109 8.8% 37 6.6% 23 5.6% 13 5.2% 22 4.7% 204 6.9%
Loans in Repayment- Delinq 61 90 days 88 7.1% 23 4.2% 13 3.0% 7 2.7% 11 2.4% 142 4.8%
Loans in Repayment- Delinq 90 + days 206 16.5% 74 13.3% 34 8.3% 17 6.7% 30 6.4% 361 12.3%
Total Loans in Repayment or Forbearance $ 1,244 100% $ 556 100% $ 415 100% $ 259 100% $ 468 100% $ 2,942 100%
Charge-offs as a % of loans in repayment 18.9% 13.1% 6.7% 5.4% 5.0% 12.5%
T o t al
M o nt hly Sched uled Payment s D ue
Lo an St at us 0-12 payments 13-24 payments 25-36 payments 37-48 payments M ore than 48 payments Total
Not Yet in Repayment 7,216
Loans in Forbearance 990 9.2% 200 3.0% 118 2.6% 57 1.8% 65 1.3% 1,430 4.7%
Loans in Repayment- Current 8,254 76.5% 5,844 88.2% 4,131 90.0% 3,040 93.1% 4,725 94.0% 25,994 85.8%
Loans in Repayment- Delinq 31 60 days 487 4.5% 192 2.9% 127 2.8% 65 2.0% 92 1.8% 963 3.2%
Loans in Repayment- Delinq 61 90 days 327 3.0% 108 1.6% 66 1.4% 32 1.0% 42 0.8% 575 1.9%
Loans in Repayment- Delinq 90 + days 735 6.8% 281 4.2% 150 3.3% 73 2.2% 100 2.0% 1,339 4.4%
Total Loans in Repayment or Forbearance $ 10,793 100% $ 6,625 100% $ 4,592 100% $ 3,267 100% $ 5,024 100% $ 30,301 100%
Charge-offs as a % of loans in repayment 6.2% 3.6% 2.4% 1.7% 1.5% 3.7%
(Dollars in millions)
SallieMae SM
27
SallieMae SM
Servicing: A Competitive Advantage
28
SallieMae SM
Business Services Segment —”Core Eaenings” Basis
Revenue of $660 million in the first half of 2012
Approximately 76% of revenue generated by services performed on FFELP Loans
ED servicing and collections businesses will grow organically with increase in federal Direct Lending
Growth in 529 account asset servicing and transaction processing is a key objective
Plan to leverage campus relationships and servicing capabilities to grow Campus Solutions processing business
29
Business Services Segment Earnings Detail —Core
SallieMae SM
($ millions) Q2 12 Q1 12 Q1 11
Intercompany loan servicing $172 $176 $187
Third-party loan servicing $26 $22 $20
Guarantor servicing $11 $11 $15
Other servicing $21 $27 $22
Contingency revenue $87 $90 $86
Other Business Services revenue $8 $8 $11
Net Income $138 $137 $140
30
Operations locations
SallieMae SM
Cincinnati, OH New York State
(GRC) Arcade, Perry,
Collections Horseheads
Collections
Newton, MA
Upromise
Business
Development
Wilkes-Barre, PA
Servicing
Call Center
Moorestown, NJ
Murray, UT Collections
Sallie Mae Bank Newark, DE Headquarters
Kansas City, MO Credit &Collections
Upromise Customer Resolution Srvcs
Campus Solutions Servicing
Fraud
Fishers, IN Muncie, IN Business Development
Collections Collections Reston, VA
Information Technology Finance Washington, DC
Servicing Legal Government Relations
Fulfillment Information Technology
Call Center
Sales Corporate Headquarters
31
Funding Diversity and Liquidity
SallieMae SM
32
2012 Capital Markets Summary
SallieMae SM
Issued $5.6 billion of FFELP ABS
Issued $3.2 billion of Private ABS
Expanded and extended our FFELP ABCP facility to 2015
Issued $1.85 billion of long term unsecured debt
Paid quarterly dividend of $0.125 per common share in both Q1 and Q2
Repurchased 40.5 million shares at an average price of $15.021
1As of June 30, 2012
33
Recent SLM FFELP ABS Transactions
SallieMae SM
Non-Consolidation FFELP Consolidation FFELP Non-Consolidation FFELP Non-Consolidation FFELP
Issue $1,252M SLM Trust 2012-5 $1,536M SLM Trust 2012-4 $1,252M SLM Trust 2012-3 $824M SLM Trust 2012-2
Pricing July 10, 2012 June 6, 2012 April 24, 2012 March 6, 2012
Date
Collateral US Govt. Guaranteed FFELP US Govt. Guaranteed FFELP US Govt. Guaranteed FFELP US Govt. Guaranteed FFELP
Stafford and Plus Loans Consolidation Loans Stafford and Plus Loans Stafford and Plus Loans
Prepayment 6% Constant Prepayment 2% Constant Prepayment 6% Constant Prepayment 6% Constant Prepayment
Speed (1) Rate Rate Rate Rate
Moody’sAmt WAL(1) Pricing(2) Moody’sAmt WAL(1) Pricing(2) Moody’sAmt WAL(1) Pricing(2) Moody’sAmt WAL (1) Pricing(2)
Tranching A-1 Aaa $280 1.0 L+20 A-1 Aaa $1,491 8.2 L+110 A-1 Aaa $1,215 4.6 L+65 A-1 Aaa $799 4.7 L+70
A-2 Aaa $360 3.3 L+35 B A2 $45 17.1 L+100(3) B Aa3 $38 9.1 L+397 B Aa1 $25 9.2 L+393
A-3 Aaa $575 7.0 L+80
B Aa3 $37 9.0 L+404
Estimated based on a variety of assumptions concerning loan repayment behavior, as more fully described in the related prospectus, which may be obtained at http://www2.salliemae.com/investors/debtasset/slmsltrusts/. Actual average life may vary significantly from estimates.
Pricing represents the yield to expected call.
SLM Retained
34
Recent SLM Private ABS Transactions
SallieMae SM
Private Education Loans Private Education Loans Private Education Loans Private Education Loans
Issue $640M SLM Trust 2012-D $1,135M SLM Trust 2012-C $891M SLM Trust 2012-B $547M SLM Trust 2012-A
Pricing July 23, 2012 May 23, 2012 April 4, 2012 February 2, 2012
Date
Collateral Private Education Loans Private Education Loans Private Education Loans Private Education Loans
Prepayment
Speed (1) 4% 4% 4% 4%
Moody’sAmt WAL (1) Pricing(2) Moody’sAmt WAL (1) Pricing(2) Moody’sAmt WAL (1) Pricing(2) Moody’sAmt WAL (1) Pricing(2)
Tranching A-1 Aaa $450 1.7 L+105 A-1 Aaa $781 1.75 L+110 A-1 Aaa $482 1.5 L+110 A-1 Aaa $379 2.0 L+140
A-2 Aaa $190 4.3 s+230 A-2 Aaa $354 4.5 s+235 A-2 Aaa $342 4.2 s+240 A-2 Aaa $168 5.2 s+285
Total $640 2.5 L+169 Total $1,135 2.6 L+177 A-3 Aaa $67 5.7 L+300 Total $547 3.0 L+217
Total $891 2.9 L+212
Estimated based on a variety of assumptions concerning loan repayment behavior, as more fully described in the related prospectus, which may be obtained at http://www2.salliemae.com/investors/debtasset/slmsltrusts/. Actual average life may vary significantly from estimates.
Yield on fixed rate tranches were 2.98%, 3.34%, 3.51%, and 3.86% for 2012-D ,2012-C, 2012-B, and 2012-A respectively.
35
High Percentage of Student Loans Funded to Term
SallieMae SM
$169* Billion Student Loan Portfolio
as of June 30, 2012
Fixed Spread FFELP Consolidation
Liabilities with Term ABS, $77 , 45%
Average Life of 5.2
years, $23 , 14%
ABCP Conduit &
FHLB, $8 , 5%
Straight A Conduit,
$15 , 9%
Private Term ABS,
$19 , 11% FFELP Non-
Consolidation Term
ABS, $27 , 16%
Conservative long-term funding model
Gross loans, Numbers may not add due to rounding.
36
Unsecured Debt Maturities
SallieMae SM
As of June 30, 2012
(par value, $ in billions)
$10
$5 $4.3
$3.0 $2.8
$2.3 $2.3
$1.5 $1.3
$0.7 $0.2
$0
Note: Does not include Sallie Mae Bank or Subsidiary funding
37
Unencumbered Assets & Unsecured Debt
SallieMae SM
Unencumbered Assets & Unsecured Debt
($ in billions) 6/30/12 12/31/11 12/31/10 12/31/09
FFELP Stafford and Plus Loans, net $ 1.0 $ 0.8 $ 1.0 $ 1.6
FFELP Consolidation Loans, net 0.4 0.2 0.5 0.5
Private Education Loans, net 10.1 11.0 11.1 12.5
Other Loans 0.2 0.2 0.3 0.4
Available Cash & Investments 4.1 3.9 5.3 8.1
Retained Interests* — — — 1.8
Other Assets 4.4 4.1 4.1 5.2
Total Unencumbered Tangible Assets $ 20.2 $ 20.2 $ 22.3 $ 30.1
Unsecured Debt Outstanding $ 24.6 $ 24.1 $ 26.9 $ 35.1
Net Assets in Secured Financing
Facilities 6/30/12 12/31/11 12/31/10 12/31/09
Off-Balance Sheet ABS (Non-GAAP)* $ — $ — $ — $ 0.6
On-Balance Sheet ABS (GAAP)** 12.8 12.9 13.1 12.7
Total $ 12.8 $ 12.9 $ 13.1 $ 13.3
On 1/1/10, upon adopting ASC 810, the Retained Interests were removed from the consolidated balance sheet and the assets and liabilities of off-balance sheet ABS were consolidated onto the balance sheet.
Amounts include loans, cash, and accrued interest receivable less debt outstanding for all secured borrowing facilities. Amounts reflect the current balance and prior period adjustments made to account for the impact of ASC 815. Further detail of the nature of the adjustment can be found in the 2011 Form 10- K.
38
Secured Cash Flow
SallieMae SM
$ in Millions YTD 2012 2011 2010 2009
FFELP
Term Securitized
Servicing (Cash Paid) $ 269 $ 563 $ 533 $ 549
Net Residual* (Excess Distributions) 298 715 746 1,435
Other Secured FFELP
Net Cash Flow 440 568 1,465 1,296
Total FFELP $ 1,007 $ 1,846 $ 2,743 $ 3,280
Private Credit
Term Securitized
Servicing (Cash Paid) $ 86 $ 189 $ 179 $ 130
Residual (Excess Distribution) 54 28 8 90
Other Secured Financings
Net Cash Flow 13 2 — 58
Total Private Credit $ 154 $ 219 $ 187 $ 278
Total FFELP and Private Credit $ 1,161 $ 2,065 $ 2,930 $ 3,558
Average Principal Balances YTD 2012 2011 2010 2009
FFELP
Term FFELP $ 105,856 $ 109,509 $ 99,041 $ 102,754
Other Secured FFELP 25,691 29,466 38,767 36,628
Total FFELP $ 131,547 $ 138,975 $ 137,808 $ 139,382
Private Credit
Term PC $ 24,068 $ 25,619 $ 25,854 $ 19,144
Other Secured Financings 2,477 233 — 2,641
Total Private Credit $ 26,545 $ 25,853 $ 25,854 $ 21,785
Total FFELP and Private Credit $ 158,092 $ 164,828 $ 163,661 $ 161,167
Note: Totals may not add due to rounding
Net residual represents excess distribution, net of payments on floor contracts and receipts from basis swaps
39
Projected Cash Flows From FFELP Portfolio*
SallieMae SM
($ in Millions)
as of 6/30/12 2012 2013 2014 2015 2016 2017 2018 2019
Projected FFELP Average Balance $125,371 $117,614 $106,851 $96,279 $86,628 $77,195 $68,398 $60,122
Projected Excess Spread $445 $823 $757 $672 $620 $557 $563 $548
Projected Servicing Revenue $334 $627 $570 $515 $460 $407 $356 $308
Projected Total Revenue $779 $1,451 $1,326 $1,187 $1,080 $964 $919 $857
2020 2021 2022 2023 2024 2025 2026 2027
Projected FFELP Average Balance $52,403 $45,201 $38,992 $33,926 $29,164 $24,593 $20,286 $16,119
Projected Excess Spread $480 $423 $346 $303 $272 $248 $217 $187
Projected Servicing Revenue $264 $222 $186 $161 $138 $117 $97 $78
Projected Total Revenue $744 $645 $532 $464 $411 $365 $314 $265
2028 2029 2030 2031 2032 2033
Projected FFELP Average Balance $12,258 $9,176 $6,920 $5,073 $3,419 $1,997
Projected Excess Spread $154 $124 $97 $78 $56 $37
Projected Servicing Revenue $60 $45 $34 $26 $18 $11
Projected Total Revenue $214 $169 $131 $103 $74 $48
Total Cash Flows from Projected Excess Spread = $8.0 Billion
Total Cash Flows from Projected Servicing Revenues = $5.0 Billion
Assumptions
No Floor Income, CPR/CDR = Stafford & Plus (5.5%), Consolidation (2.5%)
* These projections are based on internal estimates and assumptions and are subject to ongoing review and modification. These projections may prove to be incorrect.
40
Sallie Mae Bank
SallieMae SM
Bank charter
Utah based ILC regulated by FDIC and Utah Department of Financial Institutions (UDFI)
Charter granted October 2005
Current bank activity
OriginatesPrivate Sallie Education Mae’s Loans
Funded through affiliate and brokered deposits and a direct retail deposit program launched in February 2010
18.4% Total Risk-based Capital at June 30, 2012
Dividend of $220 million paid to SLM Corporation in May 2012
Deposit taking activities
Strong cash position used to fund Private Education Loan originations
Deposits totaled $5.2 billion at June 30, 2012 $3.0 billion Brokered Deposits
$2.2 billion Direct Retail and other affiliate and non-affiliate Deposits
Brokered Deposit term portfolio has a weighted average maturity of 17.4 months
Total deposits decreased by 17% in 2Q12 due primarily to scheduled maturities in the brokered CD portfolio
41
Sallie Mae Bank Capital & Deposits
SallieMae SM
Bank Deposits ($ millions)
Jun 12 Mar 12 Dec 11 Sep 11 Jun 11 Mar 11
Brokered CDs $2,352 $3,455 $3,734 $3,262 $3,262 $4,177
Brokered Other 685 536 529 519 284 273
Retail Deposits 1,676 1,768 1,589 1,435 1,199 1,222
Other Deposits* 446 462 473 529 436 461
Total Deposits $5,159 $6,221 $6,325 $5,745 $5,181 $6,133
*Primarily affiliate deposit accounts with no stated maturities
Regulatory Capital Ratios
Ratio Jun 12 Mar 12 Dec 11 Sep 11 Jun 11 Mar 11
Tier 1 Leverage 13.8% 14.2% 14.9% 16.4% 15.3% 12.9%
Tier 1 Risk Based 17.3% 16.7% 18.3% 20.3% 23.1% 17.0%
Total Risk Based 18.4% 17.7% 19.5% 21.4% 24.4% 18.3%
42
Risk-Adjusted Capitalization
SallieMae SM
43
Strong Capital Position
SallieMae SM
($ in Billions) Q2 12 Q1 12 Q4 11
GAAP Capital $4.9 $5.0 $5.3
Goodwill & Intangibles (0.5) (0.5) (0.5)
Derivative Mark-to-Market 1.1 1.1 1.0
Unamortized Premiums from Floors 0.7 0.7 0.8
Tangible Economic Capital* $6.2 $6.4 $6.5
Private Loan Loss Reserve 2.2 2.2 2.2
Available Risk Capital* $8.4 $8.6 $8.7
Risk Assets (Before Loan Loss Reserves)
Private Credit $38.6 $38.9 $38.5
Other Risk Assets 1.1 1.1 1.1
Total Risk Assets $39.7 $40.0 $39.6
Capital to Risk Assets: 21.2% 21.6% 22.0%
Tangible Economic Capital and -GAAP financial —Available measures. The reconciliation Risk Capital to GAAP capital isare shown on non this slide.
44
Capital Allocation
SallieMae SM
SLM allocates capital internally based on the risk of the assets it supports
Government
Guaranteed
Loan Assets
Assets 70% of
Assets
Private Cash,
Education Investments,
Loans Other Assets
19% of 11% of
Assets Assets
Capital 12% 0%—15%*
Allocation 0.50%
Based on Risk
*Other Assets includes a small amount of goodwill & intangible assets for which capital is allocated at 100%
45
FFELP ABS Appendix
SallieMae SM
46
Federal Student Loan Market
SallieMae SM
Outstanding Government Student Loan Market Distribution FFYE 9/30/2011 ($ in billions)
FFELP owned by ED, $147
FDLP, $256 FFELP Loans, $328
Source: Department of Education Annual Performance and Accountability Reports, FY 2011, Notes to the Principal Financial Statements, Credit Programs note; Federally-owned FFELP is calculated based on receivables in purchase program and participated loans sold to the Department.
| 1 |
|
Student Loan Xpress is a CIT company |
Top 10 Holders of FFELP Loans FFYE 9/30/2011 ($ in millions)
Lender Name FY11
SLM CORPORATION $139,540
NELNET $25,169
WELLS FARGO $17,923
BRAZOS GROUP $10,976
JPMORGAN CHASE BANK $9,371
PA HIGHER ED ASST AUTH (PHEAA) $8,172
PNC $7,732
College Loan Corp $7,645
CIT1 $7,396
Goal Financial $6,466
Top 10 Holders $240,390
47
SLM FFELP ABS Issue Characteristics
SallieMae SM
Typical SLM FFELP ABS Transaction Features
Issue size of $0.5B to $1.5B Tranches or pass-through denominated in US$
AAA rated senior tranches make up to 97% of issue structure Floating rate tied to 1 mo. LIBOR
Amortizing tranches with 1 to 15(+) year average lives Master servicer is Sallie Mae, Inc.
Insurance or guarantee of underlying collateral insulates bondholders from virtually any loss of principal(1)
Formerly a 20% risk-weighted asset, now a <10% risk-weighted under methodology
Offer significantly higher yields than government agency securities with comparable risk profiles
Short (1-3 yrs), intermediate (3-7 yrs), long (7-10 yrs) and very long (10-15+ yrs) term tranches available at new issue and in secondary
Principal and accrued interest on underlying FFELP loan collateral carry insurance or guarantee of 97%-100% dependent on origination year and on meeting the servicing requirements of the U.S. Department of Education.
48
SLM Stafford/PLUS ABS Trusts
SallieMae SM
Prepayment Analysis
Annualized CPRs for SLM Stafford/PLUS ABS Trusts have decreased significantly as incentives for borrowers to consolidate have declined
Historical SLM Stafford/PLUS ABS CPRs
50%
45%
40%
CPR* 35%
30%
25%
Average 20%
15%
10%
5%
0%
| 1 |
|
2 3 4 5 6 7 8 9 10 |
50%
45%
40%
35%
CPR* 30%
25%
20%
Average 15%
10%
5%
0%
| 1 |
|
2 3 4 5 6 7 8 9 10 |
Years Since Inception
2002 Trusts 2003 Trusts 2004 Trusts 2005 Trusts 2006 Trusts 2007 Trusts 2008 Trusts 2010 Trusts
Average CPR is the simple (non-weighted) average of four Quarterly CPR calculations for each calendar year. Quarterly CPR assumes School and Grace loans are not scheduled to make payments. Deferment, Forbearance and Repayment loans are scheduled to make payments.
49
SLM Consolidation ABS Trusts
SallieMae SM
Prepayment Analysis
CPRs for SLM Consolidation ABS Trusts have declined significantly following legislation that prevented in-school and reconsolidation of borrowers’ loans
Historical Consolidation ABS CPRs
20%
CPR* 18%
15%
13%
Average 10%
8%
5%
3%
0%
2004 2005 2006 2007 2008 2009 2010 2011 2012
20%
18%
CPR* 15%
13%
10%
Average 8%
5%
3%
0%
| 1 |
|
2 3 4 5 6 7 8 9 |
Years Since Inception
2002 Trusts 2003 Trusts 2004 Trusts 2005 Trusts 2006 Trusts 2007 Trusts 2009 Trusts 2011 Trusts
Average CPR is the simple (non-weighted) average of four Quarterly CPR calculations for each calendar year. Quarterly CPR assumes School and Grace loans are not scheduled to make payments. Deferment, Forbearance and Repayment loans are scheduled to make payments.
50
Private Education Loan ABS Appendix
SallieMae SM
51
SLM Private Loan ABS Issuance Profile
Sallie Mae is among largest issuers of ABS globally, having issued close to $250
billion in Private and FFELP ABS transactions to date
Sallie Mae has been the market leader in Private Education Loans since the late ‘80s,
with expected originations of at least $3.2 billion in 2012
Prior to the financial crisis, Sallie Mae was a programmatic issuer of Private
Education Loan ABS
In 2011, Sallie Mae reestablished programmatic issuance of private education student
loan ABS
Executed 3 transactions in 2011 totaling $2.1 billion
Executed 4 transactions YTD 2012 totaling $3.2 billion
52
Recent SLM Private Education Loan ABS Characteristics
SallieMae SM
Recent SLM Private Loan ABS Structures
Issue size of $500M to $1.5B
Triple-A rated senior notes only; no subordinate tranches
20-30% overcollateralization
Multiple tranches with 2, 5, and/or 7 yr average lives
Fixed rate or floating rate tied to 1 month LIBOR
Full-turbo structure
Collateral Characteristics
Collateralized by loans made to students and parents to fund college tuition, room and board
Underwritten using FICO, Custom Scorecard & DTI w/risk-based pricing
70(+)% with co-borrowers, typically a parent Typically non-dischargeable in bankruptcy Serviced exclusively by Sallie Mae
53
SLM Private Education Loan ABS Summary
SallieMae SM
SLM Private Education Loan ABS Trusts (2009—Present)
Summary Information
09-B 09-C 09-D 09-CT 10-A 10-B 10-C 11-A 11-B 11-C 12-A 12-B 12-C 12-D
Bond Amount ($mil) 2,593 1,109 1,680 590 1,550 869 1,701 562 825 721 547 891 1,135 640
Initial AAA Enhancement (%) 35% 34% 32% 37% 23% 45% 37% 21% 18% 26% 27% 26% 25% 26%
Loan Program (%)
Signature/Law/MBA/Med 68% 50% 52% — 76% 46% 89% 88% 91% 71% 61% 48% 43% 37%
Smart Option — — — — — — — — — 10% 20% 30% 40% 45%
Consolidation 13% 10% 14% — 1% 8% 11% 0% 0% 7% 6% 9% 5% 5%
Direct to Consumer 19% 40% 34% — 10% 20% — 9% 6% 12% 12% 12% 12% 12%
Career Training — — — 100% 13% 26% — 3% 3% 0% 1% 1% 0% 0%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Loan Status (%)
School, Grace, Deferment 63% 62% 57% 0% 63% 12% 36% 55% 55% 37% 25% 20% 16% 11%
Repayment(1 ) 34% 35% 40% 98% 32% 85% 60% 43% 43% 60% 73% 78% 81% 87%
Forbearance 3% 3% 3% 2% 5% 3% 3% 2% 3% 2% 2% 2% 3% 2%
Wtd Avg Term to Maturity (Mo.) 209 208 211 141 190 169 194 192 189 182 171 164 151 144
% Loans with Cosigner 63% 63% 64% 70% 72% 65% 62% 72% 75% 71% 75% 77% 79% 80%
% Loans with No Cosigner 37% 37% 36% 30% 28% 35% 38% 28% 25% 29% 25% 23% 21% 20%
Wtd Avg FICO at Origination 728 727 731 747 739 734 727 737 736 733 735 736 737 740
Wtd Avg Recent FICO at Issuance 714 713 714 725 725 732 713 723 722 720 724 726 728 730
WA FICO (Cosigner at Origination) 742 741 744 753 749 744 742 747 745 744 745 745 745 748
WA FICO (Cosigner at Rescored) 733 731 729 734 739 740 733 736 731 734 732 734 735 738
WA FICO (Borrower at Origination) 703 704 707 734 714 712 701 709 710 704 705 705 707 710
WA FICO (Borrower at Rescored) 680 684 686 703 691 716 679 690 695 688 700 700 702 698
Wtd Avg Loan Margin—LIBOR 6.86% 6.88% 6.86% 10.63% 7.44% 8.19% — 7.64% 7.47% 7.83% 8.35% 8.53% 8.81% 8.91%
Wtd Avg Loan Margin—Prime 2.37% 2.77% 2.43% 2.94% 2.94% 2.37% 1.89% 1.83% 2.03% 2.28% 2.37% 2.38% 2.33% 2.07%
Wtd Avg LIBOR Equivalent Margin(2 ) 5.19% 5.60% 5.23% 6.99% 7.09% 5.26% 4.64% 7.35% 7.17% 6.23% 6.60% 6.86% 7.02% 7.07%
(1) Smart Option loans considered as ‘in repayment’ if borrowers are making either interest payments or principal and interest payments regardless are of making whether the borrower either is otherwise in school, grace, or deferment status.
| (2) |
|
Assumes Prime/LIBOR spread of 2.75%. |
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Constraining rating agency AAA/Aaa gross default stress levels at issuance
SallieMae SM
70.0%
60.0% 56.8% 59.4% 58.0%
54.8% 54.4% 55.7%
52.6% 52.7%
49.8% 48.2% 50.1% 49.3% 50.9% 48.2%
50.0%
Balance 44.4%
40.0% 36.3%
Original 33.9%
of 30.0% 27.6%
25.6%
Percent 20.0%
10.0%
0.0%
06-A 06-B 06-C 07-A 09-A 09-B 09-C 09-D 09-CT 10-A 10-B 10-C 11-A 11-B 11-C 12-A 12-B 12-C 12-D
Source: Sallie Mae, Moody’s,
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SLM Private Education Loan ABS Forbearance
SallieMae SM
Forbearance usage is typically highest when loans enter repayment, and declines as loans season Use of forbearance as a collection tool peaked in early 2008; forbearance has since declined as a result of changes in SLM’sforbearance strategy
Loans in Forbearance as a Percent of Loans in Repayment and Forbearance All Loans in SLM Trusts by Year of Issuance
25.0%
20.0%
Rpmt+Forb 15.0%
of 10.0%
5.0%
Percent 0.0%
25.0%
20.0%
Rpmt+Forb 15.0%
of 10.0%
Percent 5.0%
0.0%
Quarters Since Inception
2002 2003 2004 2005 2006 2007 2009 2010 2011
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SLM Private Education Loan ABS 90+ Day Delinquencies
SallieMae SM
As expected, later stage delinquency has remained elevated in recent periods due to tightening of forbearance and the current economic environment Increased emphasis on cash payment during delinquency means more borrowers remain in delinquency instead of receiving forbearance Because they are paying, fewer delinquent borrowers are expected to default
90+ Day Delinquencies as a Percent of Loans in Repayment All Loans in SLM Trusts by Year of Issuance
All Loans in SLM Trusts by Year of Issuance
8.0%
7.0%
6.0%
Balance 5.0%
4.0%
Rpmt 3.0%
of 2.0%
1.0%
Percent 0.0%
8.0%
7.0%
Balance 6.0%
5.0%
Rpmt 4.0%
of 3.0%
2.0%
Percent 1.0%
0.0%
Quarters Since Inception
2002 2003 2004 2005 2006 2007 2009 2010 2011
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Recent Private Education Loan ABS Trust Performance
SallieMae SM
Sallie Mae is currently collecting payments from a much higher percentage of delinquent borrowers than in the past Delinquent borrowers who have made at least one payment during delinquency are far less likely to default
>90 Day Delinquent Borrowers
Trust Loans with a Payment Made in the
Last Month
30%
25%
Payment 20%
Recent 15%
Made 10%
% 5%
0%
7/31/2008/10/31/20081/31/2009/4/30/2009/7/31/2009 10/31/2010 1/31/2010 4/30/2010 7/31/2010 10/31/2010 1/31/2011 4/30/2011 7/31/2011 10/31/2011 1/31/2012 4/30/2012
Default Rate One Year Later
Trust Loans >90 dpd
Payments Made vs No Payments Made
60%
Defaulted 50%
40%
Principal 30%
Delinquent 20%
of 10%
%
0%
Dlq in Jun-10 Dlq in Jun-11
Dflt as of Jun-11 Dflt as of Jun-12
Payments Made No Payments Made
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SLM Private Education Loan ABS Annualized Gross Charge-Offs
SallieMae SM
Charge-offs have declined steadily since late 2009, after an increase resulting from changes to forbearance policy and a weak economic environment
Annualized Gross Charge-Offs as a Percent of Loans in Repayment
All Loans in SLM Trusts by Year of Issuance
14.0%
12.0%
Rpmt 10.0%
8.0%
of 6.0%
4.0%
Percent 2.0%
0.0%
14.0%
12.0%
Rpmt 10.0% 8.0%
of 6.0%
4.0%
2.0%
Percent 0.0%
Quarters Since Inception
2002 2003 2004 2005 2006 2007 2009 2010 2011
(1) For SLM Private Education Student Loan Trusts issued prior to 2005-B, the servicer has the option, but not the obligation, to repurchase loans that (i) become 180+ days delinquent and/or (ii) have a borrower who filed for bankruptcy or died. Prior to November 1, 2008, the servicer exercised this repurchase option and actual charge-offs in these trusts equaled zero. Beginning November 1, 2008, the servicer ceased purchasing from the trust loans that are more than 180 days delinquent. For the purposes of comparison across all deals, this chart reflects trust charge-offs for SLM Private Education Student Loan Trusts issued prior to 2005-B as if the servicer had never exercised its repurchase option.
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SLM Private Education Loan Gross Defaults
SallieMae SM
Actual-to-Date Cumulative Gross Defaults including Bankruptcy Information All Trust Loans
20.0%
18.0%
16.43% 16.33%
16.0% 15.31% 14.71%
13.73% 13.29% 13.07% 13.44%
Balance 14.0% 12.87% 12.65%
11.91% 14.23% 14.02%
Pool 12.0% 10.74% 12.87% 12.72%
11.67% 11.28% 11.27%
10.0% 10.79% 10.85%
Original 9.88% 7.73%
of 8.0% 8.96%
6.47%
Percent 6.0% 11.08%
3.91%
4.0% 5.01% 3.44% 3.41%
4.48%
2.0% 2.78% 2.62% 1.25% 1.06%
2.07% 0.82% 0.40% 0.13% 0.05%
0.0% 0.76%
0.00%
-2.0%
Bankruptcy or death—now current or paid off (2) Bankruptcy or death—other (3)
As of May 31, 2012
For SLM Private Education Loan Trusts issued prior to 2005-B, the servicer has the option, but not the obligation, to repurchase loans that (i) become 180+ days delinquent and/or (ii) have a borrower who filed for bankruptcy or died. Prior to November 1, 2008, the servicer exercised this repurchase option and actual charge-offs in these trusts equaled zero. Beginning November 1, 2008, the servicer ceased purchasing from the trust loans that are more than 180 days delinquent. For the purposes of comparison across all deals, this chart reflects trust charge-offs for SLM Private Education Loan Trusts issued prior to 2005-B as if the servicer had never exercised its repurchase option.
(1) Charge-offs per the servicer’s portfolio definition which is generally 212+ days delinquent. Includes loans for which a borrower has generally filed bankruptcy which 212+ have days subsequently become 212+ days delinquent.
| (2) |
|
Charge-offs due to a borrower’s bankruptcy filing for which the loan is now |
(3) Charge-offs due to a borrower’s bankruptcy filing or death for which the loan is not current or paid off but has not become 212+ days delinquent. These the loans are in is various statuses including: bankruptcy stay, deferment, forbearance or delinquency.
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Recoveries
SallieMae SM
Recoveries are typically realized over many years as a result of the prevalent use of long-term payment plans
While student loans are generally non-dischargeable in bankruptcy, the proceedings can postpone recoveries until after borrowers emerge from bankruptcy
In 2005, Sallie Mae changed its recovery practices, leading to an increase in overall recoveries and earlier collection of recovered amounts
Loans that defaulted in 1998-2003 had recovery rates of 7 14% five years after default
The 2005 cohort had a recovery rate of 24% six years after default
Recovery experience for more recent cohorts has varied based on economic conditions and the characteristics of defaulted loans
In Q3 2011, Sallie Mae provided additional provision for loan loss to provide for potential uncertainty regarding future recoveries due to continued high unemployment rates; the 27% life-of loan recovery expectation remains in place
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SLM Private Education Loan ABS Trusts Prepayment Analysis
SallieMae SM
Constant prepayment rates increased in 2007 due to the introduction of Private Education Consolidation loans, then declined following SLM’s decision to suspend its consolidation loan program in 2008.
Historical SLM Private Education Loan ABS CPRs
Historical SLM Private Education Loan ABS CPRs
14
12
Rate
10
Prepayment (CPR) 8
| 6 |
|
Constant 4
| 2 |
|
0
2002-A 2003-A 2003-B 2003-C 2004-A 2004-B 2005-A
2005-B 2006-A 2006-B 2006-C 2007-A 2009-CT 2009-D
2010-A 2010-B 2010-C 2011-A 2011-B 2011-C 2012-A
Nov-02 Feb-03 may-03 aug-03 Nov-03 Feb-04may-04 aug-04 Nov-04Feb-05may-05 aug-05 Nov-05 Feb-06may-06 aug-06 Nov-06 Feb-07may-07 aug-07 Nov-07 Feb-08may-08 aug-08 Nov-08 Feb-09may-09 aug-09 Nov-09 Feb-10 may-10 aug-10 Nov-10 Feb-11 may-11 aug-11 Nov-11 Feb-12may-12
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Cohort Default Triangles
SallieMae SM
The following cohort default triangles provide loan performance information for certain Private Education Loans of
SLM Corporation and its consolidated subsidiaries that meet such subsidiaries criteria
(including those criteria listed below):
Program types include Undergraduate/Graduate(1), Direct-to-Consumer (2)(—DTC ) , Career Training(3), Private Consolidation Loans and Smart Option (interest only) loans
FICO scores are based on the greater of the borrower and co-borrower scores as of a date near the loan application and must be at least:
Undergraduate/Graduate at not-for-profit schools: 640
Undergraduate/Graduate at for-profit schools: 670
DTC loans: 670
Career Training loans: 670
Private Consolidation loans: 640
Excludes loans made at selected schools that have historically experienced higher rates of default
The cohort default triangles are not representative of the characteristics of the portfolio of Private Education Loans of SLM Corporation and its consolidated subsidiaries as a whole or any particular securitization trust
Undergraduate/Graduate loans marketed under the Signature Student Loan brand.
Direct-to-Consumer Loans marketed under the Tuition Answer brand.
Career Training loans provide eligible borrowers financing at technical, trade, K-12 or tutoring schools.
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Cohort Default Triangles
SallieMae SM
The cohort default triangles featured on subsequent slides are segmented by loan program type, FICO score, co-borrower status, and school type
Terms and calculations used in the cohort default triangles are defined below:
Repayment Year The calendar year loans entered repayment
Disbursed Principal Entering Repayment The amount of principal entering repayment in a given year, based on disbursed principal prior to any interest capitalization
Years in Repayment Measured in years between repayment start date and default date. Zero represents defaults that occurred prior to the start of repayment.
Periodic Defaults Defaulted principal in each Year in Repayment as a percentage of the disbursed principal entering repayment in each Repayment Year
Defaulted principal includes any interest capitalization that occurred prior to default
Defaulted principal is not reduced by any amounts recovered after the loan defaulted
Because the numerator includes capitalized interest while the denominator does not, default rates are higher than if the numerator and denominator both included capitalized interest
Total The sum of Periodic Defaults across Years in Repayment for each Repayment Year
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Cohort Default Triangles
SallieMae SM
Undergraduate/Graduate(1)
Note: Data as of 6/30/12. (1) Undergraduate/Graduate loans marketed under the Signature Student Loan brand.
| (2) |
|
Periodic Defaults for the most recent two calendar Years in Repayment are for a partial year. |
(3) Numerator is the amount of principal in each cohort that defaulted in each Year in Repayment. Denominator is the amount of disbursed principal for that Repayment Year.
65
Cohort Default Triangles
SallieMae SM
Undergraduate/Graduate(1) With Co-signer
Undergraduate/Graduate(1) Without Co-signer
Note: Data as of 6/30/12. (1) Undergraduate/Graduate loans marketed under the Signature Student Loan brand.
| (2) |
|
Periodic Defaults for the most recent two calendar Years in Repayment are for a partial year. |
(3) Numerator is the amount of principal in each cohort that defaulted in each Year in Repayment. Denominator is the amount of disbursed principal for that Repayment Year.
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Cohort Default Triangles
SallieMae SM
Undergraduate/Graduate(1) Non-Profit
Undergraduate/Graduate(1) For-Profit
Note: Data as of 6/30/12. (1) Undergraduate/Graduate loans marketed under the Signature Student Loan brand.
| (2) |
|
Periodic Defaults for the most recent two calendar Years in Repayment are for a partial year. |
(3) Numerator is the amount of principal in each cohort that defaulted in each Year in Repayment. Denominator is the amount of disbursed principal for that Repayment Year.
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Cohort Default Triangles
SallieMae SM
Undergraduate/Graduate(1) Loans, FICO 740-850(2)
Undergraduate/Graduate(1) Loans, FICO 700-739(2)
Note: Data as of 6/30/12. (1) Undergraduate/Graduate loans marketed under the Signature Student Loan brand.
(2) FICO scores are based on the greater of the borrower and co-borrower scores as of a date near the loan application. (3) Periodic Defaults for the most recent two calendar Years in Repayment are for a partial year.
(4) Numerator is the amount of principal in each cohort that defaulted in each Year in Repayment. Denominator is the amount of disbursed principal for that Repayment Year.
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Cohort Default Triangles
SallieMae SM
Undergraduate/Graduate(1) Loans, FICO 670-699(2)
Undergraduate/Graduate(1) Loans, FICO 640-669(2)
Note: Data as of 6/30/12. (1) Undergraduate/Graduate loans marketed under the Signature Student Loan brand.
(2) FICO scores are based on the greater of the borrower and co-borrower scores as of a date near the loan application. (3) Periodic Defaults for the most recent two calendar Years in Repayment are for a partial year.
(4) Numerator is the amount of principal in each cohort that defaulted in each Year in Repayment. Denominator is the amount of disbursed principal for that Repayment Year.
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Cohort Default Triangles
SallieMae SM
Private Consolidation Loans With Co-signer
Private Consolidation Loans Without Co-signer
Note: Data as of 6/30/12. (1) Periodic Defaults for the most recent two calendar Years in Repayment are for a partial year.
(2) Numerator is the amount of principal in each cohort that defaulted in each Year in Repayment. Denominator is the amount of disbursed principal for that Repayment Year.
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Cohort Default Triangles
SallieMae SM
DTC With Co-signer, FICO > 670(1)
DTC Without Co-signer, >670(1)
Note: Data as of 6/30/12. (1) FICO scores are based on the greater of the borrower and co-borrower scores as of a date near the loan application. (2) Periodic Defaults for the most recent two calendar Years in Repayment are for a partial year.
(3) Numerator is the amount of principal in each cohort that defaulted in each Year in Repayment. Denominator is the amount of disbursed principal for that Repayment Year.
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Cohort Default Triangles
SallieMae SM
Career Training Loans, 670+ FICO(1)
Note: Data as of 6/30/12. (1) FICO scores are based on the greater of the borrower and co-borrower scores as of a date near the loan application.
| (2) |
|
Periodic Defaults for the most recent two calendar Years in Repayment are for a partial year. |
(3) Numerator is the amount of principal in each cohort that defaulted in each Year in Repayment. Denominator is the amount of disbursed principal for that Repayment Year.
72
SLM Appendix
SallieMae SM
73
GAAP to —”Core Earnings” Reconciliation
SallieMae SM
($ in millions, except per share amounts) Quarters Ended
June 30, 2012 March 31, 2012 June 30, 2011
Dollars Diluted EPS Dollars Diluted EPS Dollars Diluted EPS
GAAP net income (loss) $ 292 $ 0.59 $ 112 $ 0.21 $ (6) $ (0.02)
Adjustments from GAAP to “Core Earnings”
Net impact of derivative accounting (82) 264 414
Net impact of goodwill and acquired intangible assets 5 5 6
Total “Core Earnings” Adjustments before net tax effect (77) 269 420
Net tax effect 28 (97) (154)
Total “Core Earnings” Adjustments (49) 172 266
“Core Earnings” $243 $0.49 $284 $0.55 $260 $0.48
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Sallie Mae Investor Relations Website
SallieMae SM
www.salliemae.com/investors
SLM student loan trust data (Debt/asset backed securities SLM Student Loan Trusts)
Static pool information Detailed portfolio stratifications by trust as of the cutoff date
Accrued interest factors
Quarterly distribution factors
Historical trust performance —monthly charge-off, delinquency, loan status, CPR, etc. by trust
Since issued CPR monthly CPR data by trust since issuance
SLM student loan performance by trust Issue details
Current and historical monthly distribution reports
Distribution factors
Current rates
Prospectus for public transactions and Rule 144A transactions are available through underwriters
Additional information (Webcasts and presentations)
Archived and historical webcasts, transcripts and investor presentations
75