SLM CORPORATION Bank of America Merrill Lynch Banking & Financial
Services Conference
NOVEMBER 12, 2013
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Forward-Looking Statements; Non-GAAP Financial Measures
The following information is current as of November 12, 2013 (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,
2012 (the “2012 Form 10-K”), and subsequent reports filed with the Securities and Exchange Commission (the “SEC”). Definitions for capitalized terms in this presentation not defined herein can be found in the
2012 Form 10-K (filed with the SEC on February 26, 2013).
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 the company’s 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 company’s Annual Report on Form 10-K for the year ended Dec. 31, 2012 and subsequent filings with the Securities and Exchange
Commission; 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 the company is a party; credit risk associated with the company’s exposure to third parties, including counterparties to
the company’s 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). The
company could also be affected by, among other things: changes in its funding costs and availability; reductions to its credit ratings or the credit ratings of the United States of America; failures of its operating
systems or infrastructure, including those of third-party vendors; damage to its reputation; failures to successfully implement cost-cutting and adverse effects of such initiatives on its business; risks associated
with restructuring initiatives, including the company’s recently announced strategic plan to separate its existing operations into two separate publicly traded companies; 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 its customers; changes in the general interest rate environment, including the rate relationships among relevant money-
market instruments and those of its earning assets vs. its funding arrangements; changes in general economic conditions; and changes in the demand for debt management services. The preparation of the
company’s 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 release are qualified by these cautionary statements and are made only as of the date of this release. The company does not
undertake any obligation to update or revise these forward-looking statements to conform the statement to actual results or changes in its 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 third quarter earnings release for a further discussion and a complete reconciliation between GAAP net income and core earnings.
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► #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 Federal and Private Education Loans
► 25 million unique customers
► $144 billion student loan portfolio, 74% of which
is insured or guaranteed
► Fully independent private sector company with
scale and a broad franchise, traded on the
NASDAQ (ticker: SLM)
SLM Corporation
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2013 Year to Date1 Highlights
1 As of September 30, 2013. For a GAAP to “Core Earnings” reconciliation, see slide 17
► Generated “Core Earnings” of $1 billion
► High quality loan originations increased 16%
► Private Education Loan charge-off rates at lowest levels in five years
► Returned nearly $600 million to shareholders through common share repurchases and dividends
► Strategic business separation announced May
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Leader in Helping Customers Achieve Successful Repayment
► Helping customers successfully repay their loans and avoid the negative consequences of default
is our top priority.
► Counselors work with customers to build a repayment plan based on each customer’s financial
profile and goals.
► In the past academic year we assisted 2.1 million past-due customers to return their education loan
accounts to good standing, preventing $41 billion in federal and private education loan defaults.
► Helped more Direct Loan borrowers avoid default than any other servicer. If all servicers
performed at Sallie Mae’s most recent default prevention rate, 250,000 fewer borrowers would
enter default next year.
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Separate Into Two Distinct Businesses
NewCo Sallie Mae Bank
Strategic
Focus Leading education loan management
company
Leading private education loan origination
franchise – retains Sallie Mae brand
Key
Businesses
FFELP Loan Portfolio
Non-Bank Private Education Loan Portfolio
Existing Secured & Unsecured Debt
Largest Education Loan Servicer
Private Loan Servicing
Collection
Guarantor Servicing
Largest Private Education Loan Originator
Private Loan Servicing
Other Consumer Assets (Future)
Deposits
Upromise
Insurance
Leadership Jack Remondi
► Currently Chief Executive Officer
Joseph DePaulo
► Currently Executive Vice President,
Banking and Finance
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Strategic Separation of Businesses
► Provide greater visibility into the financial and operating performance of each
business
► Attract a more focused shareholder base to the specific operating and return
characteristics of each business
► Create optimal structure for complex and increasingly different regulatory
environment
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NewCo Profile
► Expand leading education loan portfolio
manager, servicer, and collection business
► Maintain stable dividend and actively
manage capital structure
► Diversify fee revenue through expansion
and growth of federal and other service
contracts
► Efficiently manage expense base
► Leading market share and infrastructure
well-positioned for evolving market place
► Substantial product knowledge and
expertise – producing superior loan
performance
► Strong cash flow generation with ample
debt service coverage
► Substantial economies of scale
Strategy Strengths
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NewCo Generates Significant Cash Flows
NewCo Net Assets Projected Life of Loan Cash Flows*
Net Assets
Secured FFELP Net Assets $5.6
Secured Private Net Assets 6.6
Net Unencumbered Assets 10.3
Total Assets Net of Secured Debt $22.5
Unsecured Debt $18.7
$ in billions, as of 9/30/13
FFELP Cash Flows
Secured
Residual $8.1
Floor 1.6
Servicing 4.3
Total Secured $14.0
Unencumbered $0.8
Total FFELP Cash Flows $14.8
Private Credit Cash Flows
Secured
Residual $12.7
Servicing 1.4
Total Secured $14.1
Unencumbered $6.8
Total Private Cash Flows $20.9
Combined Cash Flows $35.7
*Floor cash flows projected using 11/1/13 yield curve. These projections are based on internal estimates and
assumptions and are subject to ongoing review and modification. These projections may prove to be incorrect.
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Loan Servicing and Collections
► Currently servicing over $300 billion of student loans making us the largest servicer of student loans
in the U.S.
► Servicing 5.7 million accounts for the Department of Education, ranked first in cumulative default
prevention success since 2009.
► Ranked #1 by the U.S. Department of the Treasury Bureau of the Fiscal Service in the most recent
quarter on its contract to recover past-due obligations owed to government agencies
► Consistently ranked #1 collector by the Department of Education
► Third-party loan servicing and contingency collections generated over $400 million of revenues YTD
► Federal loan servicing business and collection business requires little capital and generates high
returns on equity
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Sallie Mae Bank Profile
► Help families save and pay for college
through responsible loan, insurance, and
savings products
► Continue to grow market leading Private
Education Loan Origination franchise
► Leverage Sallie Mae Brand to develop
other consumer products
► Diversify and grow funding-base
► The most-recognized brands in the
education loan industry
► Leading market share in private loan
originations
► Sustainable growth model with high current
and expected returns
► Simple, low cost delivery system
► Stable, deposit funded balance sheet
Strategy Strengths
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► Private Education Loans fill the gap between the total cost of education and other available sources
► Private Education loan volume has continued to grow as total enrollment and federal loan originations have declined
Role of Private Education Loans
Source: Trends in College Pricing.© 2013 The College Board,. www.collegeboard.org,
U.S. Department of Education 2013
Cost of College (Based on a Four-Year Term) Estimated Total Cost of Education (in billions)
2012/2013 Academic Year
$103
$116
$191
$7
$21
Federal
Family Contributions
Grants
Private Education
Loans
Ed. Tax Benefit / Work Study
Sources: Department of Education, College Board, McKinsey & Company, MeasureOne, National
Student Clearinghouse, Company Analysis
$17,125 $17,125 $27,000 $27,000
$82,343
$21,563
$130,788
$44,268
Full-TimePrivate School
Full-TimePublic School
Full-TimePrivate School
Full-TimePublic School
ED Lending Limit Cost of attendance gap
Cost of
attendance
gap
Cost of
attendance
gap
AY 2002-2003 AY 2012-2013
$99,468
$38,688
$157,788
$71,268
13
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
2010 2011 2012 Projected 2013
$in
Millio
ns
Private Education Loan Originations
Private Education Loans – High Quality Originations
► 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.
► Originations of $3.3 bn in 2012 had an average winning FICO of 748 and 90% were cosigned
► YTD 2013 originations of $3.3 bn have an average winning FICO of 746 and 90% are cosigned
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Low Risk = Smart Option, Legacy Traditional Cosigned, and Law/MBA/MED/CT/Other
Moderate Risk = Legacy Traditional Non-Cosigned
Elevated Risk = Non-Traditional
Consumer Lending Segment – High Quality Portfolio
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► Issued $3.1 billion of Private ABS
► Issued $6.5 billion of FFELP ABS
► Issued $2.8 billion of long-term unsecured debt
► Repurchased $800 million of outstanding unsecured debt through tender offers
► Sold residual interests in five FFELP securitization trusts totaling $12.5 billion of assets
► Closed on a $6.8 billion FFELP ABCP facility and a $1.1 billion Private asset-backed
borrowing facility
► Returned nearly $600 million to shareholders through common share repurchases and
dividends
2013 Capital Markets Summary
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► Dominant player in the education finance industry
► High quality federally guaranteed and private education loan assets
► Generating significant and predictable cash flows
► Private education loan portfolio business continues to demonstrate high quality growth
► Strategic separation to enhance shareholder value
SLM Corporation
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($ in millions, except per share amounts) Quarters Ended
September 30, 2013 June 30, 2013 September 30, 2012
Dollars Diluted EPS Dollars Diluted EPS Dollars Diluted EPS
GAAP net income 260$ $0.57 543$ $1.20 188$ $0.39
Adjustment from GAAP to "Core Earnings"
Net impact of derivative accounting 19 (143) 140
Net impact of goodwill and acquired intangible assets 4 3 5
Total "Core Earnings" Adjustments before net tax effect 23 (140) 145
Net tax effect (12) 58 (56)
Net effect from discontinued operations - 1 -
Total "Core Earnings" Adjustments 11 (81) 89
"Core Earnings" $271 $0.60 $462 $1.02 $277 $0.58
GAAP to “Core Earnings” Reconciliation