The Student Loan Corporation

Transcription

1 Annual Meeting of Stockholders May 15, 2008

2 Business Overview Our Mission We are committed to building a better future by providing unparalleled solutions that enable students and their families to finance the education of their choice. We celebrate our 50th year of service in 2008 SLC is a NYSE-listed company; 80%-owned by Citibank, N.A. We participate in both Federal and alternative loan programs Continued to be #2 FFELP lender in 2007 Our CitiAssist Loan and Private Consolidation Loan are industry leading private loan products We provide competitive education finance solutions while maintaining low costs and high quality service 2

3 2007 SLC Financial Performance Net income of $183 million, 36% less than 2006 due to legislative impacts and capital market disruptions Gain on sale revenue of $112 million was $104 million or 48% less than 2006 Net interest margin of 1.66% in 2007 vs. 1.61% in 2006, driven by higher overall rates earned on our assets Total managed assets of $36.5 billion, an increase of 8% over 2006 FFELP Stafford and PLUS disbursements of $4.6 billion, a 22% increase from 2006 CitiAssist Loan commitments of $1.8 billion, decrease of 1% from 2006 primarily due to the shift in volume to Graduate PLUS loans Expenses were 0.51% of average managed loans, unchanged from

4 Legislative Impact College Cost Reduction and Access Act Impact Reduced lender spreads Eliminated Exceptional Performer Program Increased lender fee paid to Department of Education Stafford Loans not in repayment: 0.55% spread reduction to 1.19% Stafford Loans in repayment: 0.55% spread reduction to 1.79% PLUS Loans: 0.85% spread reduction to 1.79% Federal Consolidation Loans: 0.55% spread reduction to 1.04%* Limits lender reinsurance to 97% Lender reinsurance will be further reduced to 95% for claims filed on loans disbursed on or after October 1, 2012 Increased from 0.50% to 1.00% *After required payment of 1.05% to Department of Education 4

5 Impact of Capital Market Disruptions Continued disruptions in the capital markets resulted in higher funding costs for lenders who participate in the term securitization market of student loan assets. SLC Securitization Pricing June 2007 LIBOR + 11 bps November 2007 LIBOR + 49 bps March 2008 LIBOR bps 5

6 Impact on Market Players As a result of the confluence of legislative and capital market challenges, many players have exited or scaled back activities in the education finance industry: 17 lenders have laid off staff 55 lenders have suspended participation in the FFEL program 10 lenders have suspended Federal Consolidation Loan activities 22 lenders have suspended private student loans These lenders comprise over $6.9 billion or 14% of FFELP Stafford and PLUS Loan origination volume Source: finaid.org as of May 5,

7 SLC s Mitigating Actions SLC has taken a number of decisive actions in 2007 and 2008 to mitigate legislative and capital market impacts. Reduce exposure to less profitable loans (effective May 1, 2008) Suspended lending at certain schools where loans with lower balances and shorter interest-earning periods result in unsatisfactory financial returns Temporarily withdrew from the Federal Consolidation Loan market Increase returns on our FFELP Stafford and PLUS Loans (effective January 1, 2008) Increase returns on our private loan products (effective June 2008) Charged origination fees Charged federal default fee Scaled back borrower benefits Increased interest rates Charged origination fees Tightened private loan underwriting 7

8 Industry Benchmarking SLC continues to be the #2 lender of FFELP Stafford and PLUS Loans. Lender 2007 FFELP Originations ($ billion) 1 Sallie Mae $9.0 2 The Student Loan Corporation Bank of America JPMorgan Chase Wells Fargo Wachovia College Loan Corporation U.S. Bank EdAmerica Access Group 1.1 Top 10 Total $31.2 Total FFELP Market $60.5 Source: U.S. Department of Education, Federal Fiscal Year Originations represent the gross amount of student loans that enrolled students agreed to borrow. 8

9 Industry Benchmarking 1,500 1,000 Net Income ($ million) 1,157 NM FFELP Stafford and PLUS and Private Loan Originations ($ billion) % 25.5 (36%) (500) (1,000) 1.80% 1.60% 1.40% 1.20% 1.00% 0.80% 0.60% 0.40% (46%) (896) SLC Sallie Mae Nelnet Net Interest Margin 3% 1.61% 1.66% (18%) 1.54% (35%) 1.26% 1.24% 0.81% % 2.00% 1.50% 1.00% 0.50% 14% SLC Sallie Mae Nelnet 0.51% 0.51% 1.03% 1.01% 1.7 Expense to Average Managed Loans 0% (2%) (0.4%) 3% 2.06% 2.13% 0.20% 0.00% SLC Sallie Mae Nelnet 0.00% SLC Sallie Mae Nelnet Notes: Source: SLC K, Sallie Mae K, Nelnet K SLC originations include FFELP Stafford and PLUS disbursements and CitiAssist commitments Sallie Mae originations based on Preferred Channel originations Nelnet originations based on FFELP Stafford and PLUS and Branding Partner originations Expense to Managed Assets calculated as a ratio of total operating expenses over average managed student loan assets 9

10 2007 Accomplishments Based on efforts across our organization, we have achieved a number of accomplishments that continue to position us as a market leader in Actively managed through changing market conditions: Implemented pricing actions to mitigate some of the impacts of the CCRAA Refocused our Direct to Consumer efforts on more profitable options Fully responded to all legislative/regulatory inquiries without material findings Maintained flexibility in our financing sources to avoid liquidity issues and unfavorable movements in securitization spreads Delivered industry leading customer service Invested in our human capital 10

11 Looking Forward The remainder of 2008 will continue to be highly dynamic. We have taken steps to ensure continued stability and commitment to our customers, stockholders, and organization. As a market leader, we continue to build on our competitive advantages: 50 years of experience Healthy liquidity availability Disciplined expense management With continued pressures on our loan spreads, we need to fundamentally change our product distribution and refine our target markets while continuing to structure and price our products at acceptable returns. 11

12 QUESTION AND ANSWER SESSION The Student Loan Corporation