NAVIENT REPORTS FIRST-QUARTER 2024 FINANCIAL RESULTS

HERNDON, Va., April 24, 2024 - Navient (Nasdaq: NAVI) today released its first-quarter 2024 financial results.

OVERALL

• GAAP net income of $73 million ($0.64 diluted earnings per share).

RESULTS

• Core Earnings(1) of $54 million ($0.47 diluted earnings per share).

SIGNIFICANT

• GAAP and Core Earnings results included a net reduction to pre-tax income of $23 million

ITEMS

($0.16 diluted loss per share) comprised of the following items:

O

$14 million ($0.10 diluted loss per share) of regulatory-related and restructuring

expenses, of which $12 million is due to an accrual in connection with recent

developments related to CFPB matters.

O

FFELP Loan prepayments were $1.6 billion (compared to approximately $700 million

in the year-ago quarter). This resulted in the write-off of an additional $9 million

($0.06 diluted loss per share) of loan premium, a non-cash reduction to net interest

income.

CEO COMMENTARY - "We have made substantial progress on the three strategic actions launched earlier this year to outsource student loan servicing, explore strategic options for our business processing division, and streamline our shared service infrastructure and corporate footprint," said David Yowan, president and CEO, Navient. "We are nearing completion of a final outsourcing agreement - which will pave the way for the transition of nearly 900 employees to support seamless service for our customers. Further, we expect to be in a position to decide on the options to divest our business processing division. We are beginning to execute our plans for a leaner company. When completed, we believe these actions will simplify our business, reduce our expense base, and increase our financial and operating flexibility."

FIRST-QUARTER HIGHLIGHTS

FEDERAL

• Net income of $40 million.

EDUCATION

• Net interest margin of 0.55%.

LOANS SEGMENT

CONSUMER

• Net income of $73 million.

LENDING

• Net interest margin of 2.99%.

SEGMENT

• Originated $259 million of Private Education Loans.

BUSINESS

• Revenue of $77 million.

PROCESSING

• Net income of $6 million and EBITDA(1) of $9 million.

SEGMENT

CAPITAL &

• GAAP equity-to-asset ratio of 4.7% and adjusted tangible equity ratio(1) of 8.4%.

FUNDING

• Repurchased $43 million of common shares. $247 million common share repurchase

authority remains outstanding.

• Paid $18 million in common stock dividends.

OPERATING

• Operating expenses of $170 million, excluding $13 million of regulatory-related expenses.

EXPENSES

  1. Item is a non-GAAP financial measure. For a description and reconciliation, see "Non-GAAP Financial Measures" on pages 15 - 23.

SEGMENT RESULTS - CORE EARNINGS

FEDERAL EDUCATION LOANS

In this segment, Navient owns FFELP Loans and performs servicing for this loan portfolio, as well as for FFELP Loans owned by other institutions.

FINANCIAL RESULTS AND KEY PERFORMANCE METRICS

(Dollars in millions)

1Q24

4Q23

1Q23

Net interest income

$

53

$

88

$

125

Provision for loan losses

1

5

10

Other revenue

17

17

19

Total revenue

69

100

134

Expenses

17

17

20

Pre-tax income

52

83

114

Net income

$

40

$

63

$

87

Segment net interest margin

.55%

.86%

1.12%

FFELP Loans:

FFELP Loan spread

.66%

.96%

1.25%

Provision for loan losses

$

1

$

5

$

10

Net charge-offs

$

10

$

10

$

18

Net charge-off rate

.13%

.13%

.22%

Greater than 30-days delinquency rate

13.2%

15.0%

14.4%

Greater than 90-days delinquency rate

6.6%

8.7%

7.9%

Forbearance rate

16.0%

15.8%

16.9%

Average FFELP Loans

$

37,158

$

39,129

$

43,263

Ending FFELP Loans, net

$

35,879

$

37,925

$

42,148

(Dollars in billions)

Total federal loans serviced

$

42

$

44

$

49

DISCUSSION OF RESULTS - 1Q24 vs. 1Q23

  • Net income was $40 million compared to $87 million.
  • Net interest income decreased $72 million primarily due to the impact of increased interest rates on the different index resets for the segment's assets and debt, as well as the paydown of the loan portfolio which included an increase in prepayments.
  • Provision for loan losses decreased $9 million. The $1 million of provision for loan losses in the current period was the result of relatively stable credit trends.
  1. Net charge-offs were $10 million compared to $18 million.
  1. Delinquencies greater than 90 days were $1.9 billion compared to $2.7 billion.
    1. Forbearances were $5.5 billion compared to $6.8 billion.
  • Other revenue decreased $2 million primarily due to the paydown of the loan portfolio serviced for third parties.
  • Expenses were $3 million lower primarily as a result of the paydown of the loan portfolio.

2

CONSUMER LENDING

In this segment, Navient owns, originates, acquires and services consumer loans.

FINANCIAL RESULTS AND KEY PERFORMANCE METRICS

(Dollars in millions)

1Q24

4Q23

1Q23

Net interest income

$

134

$

134

$

153

Provision for loan losses

11

50

(24)

Other revenue

4

3

3

Total revenue

127

87

180

Expenses

32

27

37

Pre-tax income

95

60

143

Net income

$

73

$

46

$

110

Segment net interest margin

2.99%

2.91%

3.12%

Private Education Loans (including Refinance Loans):

Private Education Loan spread

3.10%

3.03%

3.28%

Provision for loan losses

$

11

$

50

$

(24)

Net charge-offs

$

99

$

64

$

75

Net charge-off rate

2.40%

1.48%

1.63%

Greater than 30-days delinquency rate

5.0%

5.1%

4.5%

Greater than 90-days delinquency rate

2.1%

2.3%

2.0%

Forbearance rate

1.8%

2.1%

1.9%

Average Private Education Loans

$

17,385

$

17,730

$

19,289

Ending Private Education Loans, net

$

16,608

$

16,902

$

18,275

Private Education Refinance Loans:

Net charge-offs

$

11

$

8

$

8

Greater than 90-days delinquency rate

.5%

.4%

.3%

Average Private Education Refinance Loans

$

8,796

$

8,925

$

9,521

Ending Private Education Refinance Loans, net

$

8,619

$

8,752

$

9,274

Private Education Refinance Loan originations

$

228

$

191

$

135

DISCUSSION OF RESULTS - 1Q24 vs. 1Q23

  • Originated $259 million of Private Education Loans compared to $168 million.
  1. Refinance Loan originations were $228 million compared to $135 million.
    1. In-schoolloan originations were $31 million compared to $33 million.
  • Net income was $73 million compared to $110 million.
  • Net interest income decreased $19 million primarily due to the paydown of the loan portfolio.
  • Provision for loan losses increased $35 million. The provision for loan losses of $11 million in the current period included $5 million in connection with loan originations and $6 million related to a general reserve build. The negative provision for loan losses of $(24) million in the year-ago quarter included $(52) million in connection with the adoption of a new accounting standard (ASU 2022-02) (see "GAAP Comparison of 2024 Results with 2023" for further discussion), $5 million in connection with loan originations and $23 million in connection with the resolution of certain private legacy loans in bankruptcy.
    1. Net charge-offs were $99 million, up $24 million from $75 million.
  1. Private Education Loan delinquencies greater than 90 days: $351 million, down $13 million from $364 million.
    1. Private Education Loan forbearances: $297 million, down $57 million from $354 million.
  • Expenses decreased $5 million primarily due to lower in-school loan marketing spend.

3

BUSINESS PROCESSING

In this segment, Navient performs business processing services for non-education related government and healthcare clients.

FINANCIAL RESULTS AND KEY PERFORMANCE METRICS

(Dollars in millions)

1Q24

4Q23

1Q23

Revenue from government services

$

48

$

51

$

40

Revenue from healthcare services

29

30

32

Total fee revenue

77

81

72

Expenses

69

70

67

Pre-tax income

8

11

5

Net income

$

6

$

8

$

4

EBITDA(1)

$

9

$

12

$

5

EBITDA margin(1)

11%

15%

7%

  1. Item is a non-GAAP financial measure. For an explanation and reconciliation of our non-GAAP financial measures, see pages 15 - 23.

DISCUSSION OF RESULTS - 1Q24 vs. 1Q23

  • Revenue was $77 million, $5 million higher due to continued organic growth.
  • Net income was $6 million compared to $4 million.
  • EBITDA was $9 million, up $4 million, primarily the result of the increase in revenue and the reduction of certain costs.
  • EBITDA margin was 11%, up from 7%.

Definitions for capitalized terms in this release can be found in Navient's Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 26, 2024 (the 2023 Form 10-K).

Navient will hold a live audio webcast today, April 24, 2024, at 8 a.m. ET, hosted by David Yowan, president and CEO, and Joe Fisher, CFO.

Analysts and investors who wish to ask questions are requested to pre-register at Navient.com/investors at least

15 minutes ahead of start time to receive their personal dial-in access details. Others who wish to join in listen-only mode do not need to pre-register and may simply visit Navient.com/investors to access the webcast.

Supplemental financial information and presentation slides used during the call will be available no later than start time. A replay of the webcast will be available approximately two hours after the event's conclusion.

This news release contains "forward-looking statements," within the meaning of the federal securities law, about our business and prospects and other information that is based on management's current expectations as of the date of this release. Statements that are not historical facts, including statements about the company's beliefs, opinions or expectations and statements that assume or are dependent upon future events, are forward-lookingstatements and often contain words such as "expect," "anticipate," "intend," "plan," "believe," "seek," "see," "will," "would," "may," "could," "should," "goal," or "target." Forward-lookingstatements are subject to risks, uncertainties, assumptions and other factors that may cause actual results to be materially different from those reflected in such forward-lookingstatements. For Navient, these factors include, among others, changes in the macroeconomic environment and volatility in market conditions including interest rates, the value of equities and other financial assets; the risks and uncertainties associated with increases in financing costs; the availability of financing or limits on our liquidity resulting from disruptions in the capital markets or other factors; unanticipated increases in costs associated with compliance with federal, state or local laws and regulations; changes in the demand for education finance and business processing solutions or other changes in marketplaces in which we compete (including increased competition); changes in accounting standards including but not limited to changes pertaining to loan loss reserves and estimates or other accounting standards that may impact our operations; adverse outcomes in any significant litigation to which the company is a party; credit risk associated with the company's underwriting standards or exposure to third parties, including counterparties to hedging transactions; and

4

changes in the terms of education loans and the educational credit marketplace (including changes resulting from the enactment of new laws and the implementation of existing laws). The company could also be affected by, among other things: unanticipated repayment trends on education loans including prepayments or deferrals resulting from new interpretations or the timing of the execution and implementation of current laws, rules or regulations or future laws, executive orders or other policy initiatives which operate to encourage or require consolidation, abolish existing or create additional income-based repayment or debt forgiveness programs or establish other policies and programs which may increase or decrease the prepayment rates on education loans and accelerate or slowdown the repayment of the bonds in our securitization trusts; reductions to our credit ratings, the credit ratings of asset-backed securitizations we sponsor or the credit ratings of the United States of America; failures of our operating systems or infrastructure or those of third-party vendors; risks related to cybersecurity including the potential disruption of our systems or those of our third-party vendors or customers, or potential disclosure of confidential customer information; damage to our reputation resulting from cyber- breaches or litigation; failure to successfully implement strategic and/or cost-cutting initiatives and adverse effects of such initiatives on our business; failure to adequately integrate acquisitions or realize anticipated benefits from acquisitions including delays or errors in converting portfolio acquisitions to our servicing platform; changes in law and regulations whether new laws or regulations, or new interpretations of existing laws and regulations applicable to any of our businesses or activities or those of our vendors, suppliers or customers; changes in the general interest rate environment, including the availability of any relevant money-market index rate, or the relationship between the relevant money-market index rate and the rate at which our assets are priced; our ability to successfully effectuate any acquisitions, divestitures and other strategic initiatives; activities by shareholder activists, including a proxy contest or any unsolicited takeover proposal; changes in general economic conditions, including the potential impact of persistent inflation; and the other factors that are described in the "Risk Factors" section of Navient's Annual Report on Form 10-K for the year ended December 31, 2023, and in our other reports filed with the Securities and Exchange Commission. 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 and actual results could differ materially. 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 except as required by law.

* * *

About Navient

Navient (Nasdaq: NAVI) provides technology-enabled education finance and business processing solutions that simplify complex programs and help millions of people achieve success. Our customer-focused,data-driven services deliver exceptional results for clients in education, healthcare and government. Learn more at Navient.com.

Contact:

Media:

Paul Hartwick, 302-283-4026, paul.hartwick@navient.com

Investors: Jen Earyes, 703-984-6801, jen.earyes@navient.com

# # #

5

SELECTED HISTORICAL FINANCIAL INFORMATION AND RATIOS

QUARTERS ENDED

March 31,

December 31,

March 31,

2024

2023

2023

GAAP Basis

Net income (loss)

$

73

$

(28)

$

111

Diluted earnings (loss) per common share

$

.64

$

(.25)

$

.86

Weighted average shares used to compute diluted earnings per share

114

115

130

Return on assets

.51%

(.19)%

.68%

Core Earnings Basis(1)

Net income(1)

$

54

$

24

$

133

Diluted earnings per common share(1)

$

.47

$

.21

$

1.02

Weighted average shares used to compute diluted earnings per share

114

117

130

Net interest margin, Federal Education Loan segment

.55%

.86%

1.12%

Net interest margin, Consumer Lending segment

2.99%

2.91%

3.12%

Return on assets

.37%

.16%

.82%

Education Loan Portfolio

Ending FFELP Loans, net

$

35,879

$

37,925

$

42,148

Ending Private Education Loans, net

16,608

16,902

18,275

Ending total education loans, net

$

52,487

$

54,827

$

60,423

Average FFELP Loans

$

37,158

$

39,129

$

43,263

Average Private Education Loans

17,385

17,730

19,289

Average total education loans

$

54,543

$

56,859

$

62,552

  1. Item is a non-GAAP financial measure. For a description and reconciliation, see the section titled "Non-GAAP Financial Measures" on pages 15 - 23.

6

RESULTS OF OPERATIONS

We present the results of operations below first in accordance with GAAP. Following our discussion of earnings results on a GAAP basis, we present our results on a segment basis. We have four reportable operating segments: Federal Education Loans, Consumer Lending, Business Processing and Other. These segments operate in distinct business environments and we manage and evaluate the financial performance of these segments using non-GAAP financial measures we call Core Earnings (see "Non-GAAP Financial Measures - Core Earnings" for further discussion).

GAAP INCOME STATEMENTS (UNAUDITED)

March 31, 2024

March 31, 2024

vs.

vs.

December 31, 2023

March 31, 2023

Increase

Increase

QUARTERS ENDED

(Decrease)

(Decrease)

March 31,

December 31,

March 31,

(In millions, except per share data)

2024

2023

2023

$

%

$

%

Interest income:

FFELP Loans

$

661

$

706

$

693

$

(45)

(6)%

$

(32)

(5)%

Private Education Loans

328

333

344

(5)

(2)

(16)

(5)

Cash and investments

38

43

34

(5)

(12)

4

12

Total interest income

1,027

1,082

1,071

(55)

(5)

(44)

(4)

Total interest expense

875

922

837

(47)

(5)

38

5

Net interest income

152

160

234

(8)

(5)

(82)

(35)

Less: provisions for loan losses

12

55

(14)

(43)

(78)

26

186

Net interest income after provisions for

loan losses

140

105

248

35

33

(108)

(44)

Other income (loss):

Servicing revenue

17

16

17

1

6

-

-

Asset recovery and business processing revenue

77

81

72

(4)

(5)

5

7

Other income (loss)

9

6

7

3

50

2

29

Losses on debt repurchases

-

(8)

-

8

(100)

-

-

Gains (losses) on derivative and hedging activities,

net

32

(33)

(8)

65

197

40

500

Total other income (loss)

135

62

88

73

118

47

53

Expenses:

Operating expenses

183

199

185

(16)

(8)

(2)

(1)

Goodwill and acquired intangible

asset impairment and amortization expense

3

3

3

-

-

-

-

Restructuring/other reorganization expenses

1

2

4

(1)

(50)

(3)

(75)

Total expenses

187

204

192

(17)

(8)

(5)

(3)

Income (loss) before income tax expense (benefit)

88

(37)

144

125

338

(56)

(39)

Income tax expense (benefit)

15

(9)

33

24

267

(18)

(55)

Net income (loss)

73

$

(28)

$

111

$

101

361%

$

(38)

(34)%

Basic earnings (loss) per common share

.65

$

(.25)

$

.87

$

.90

360%

$

(.22)

(25)%

Diluted earnings (loss) per common share

.64

$

(.25)

$

.86

$

.89

356%

$

(.22)

(26)%

Dividends per common share

.16

$

.16

$

.16

$

-

-%

$

-

-%

7

GAAP BALANCE SHEETS (UNAUDITED)

March 31,

December 31,

March 31,

(In millions, except share and per share data)

2024

2023

2023

Assets

FFELP Loans (net of allowance for losses of $206, $215 and $214, respectively) . .

$

35,879

$

37,925

$

42,148

Private Education Loans (net of allowance for losses of $538, $617 and $706,

respectively)

16,608

16,902

18,275

Investments

129

146

153

Cash and cash equivalents

823

839

570

Restricted cash and cash equivalents

2,125

1,954

2,208

Goodwill and acquired intangible assets, net

692

695

703

Other assets

2,773

2,914

2,856

Total assets

$

59,029

$

61,375

$

66,913

Liabilities

Short-term borrowings

$

4,427

$

4,226

$

5,753

Long-term borrowings

50,848

53,402

57,388

Other liabilities

988

987

814

Total liabilities

56,263

58,615

63,955

Commitments and contingencies

Equity

Series A Junior Participating Preferred Stock, par value $0.20 per share; 2 million

shares authorized at December 31, 2021; no shares issued or outstanding

-

-

-

Common stock, par value $0.01 per share; 1.125 billion shares authorized:

465 million, 464 million and 464 million shares, respectively, issued

4

4

4

Additional paid-in capital

3,360

3,353

3,335

Accumulated other comprehensive income (loss), net of tax

15

19

66

Retained earnings

4,691

4,638

4,579

Total Navient Corporation stockholders' equity before treasury stock

8,070

8,014

7,984

Less: Common stock held in treasury: 353 million, 350 million and 337 million

shares, respectively

(5,304)

(5,254)

(5,026)

Total equity

2,766

2,760

2,958

Total liabilities and equity

$

59,029

$

61,375

$

66,913

8

GAAP COMPARISON OF 2024 RESULTS WITH 2023

Three Months Ended March 31, 2024 Compared with Three Months Ended March 31, 2023

For the three months ended March 31, 2024, net income was $73 million, or $0.64 diluted earnings per common share, compared with net income of $111 million, or $0.86 diluted earnings per common share, for the year-ago period.

The primary contributors to the change in net income are as follows:

  • Net interest income decreased by $82 million primarily as a result of increased interest rates and the paydown of the FFELP and Private Education Loan portfolios, which includes an increase in prepayments of the FFELP Loan portfolio. This was partially offset by a $6 million decrease in mark-to-market losses on fair value hedges recorded in interest expense.
  • Provisions for loan losses increased $26 million from $(14) million to $12 million:
  1. The provision for FFELP Loan losses decreased $9 million from $10 to $1 million.
  1. The provision for Private Education Loan losses increased $35 million from $(24) million to $11 million.

The FFELP Loan provision for loan losses of $1 million in the current period was the result of relatively stable credit trends.

The Private Education Loan provision for loan losses of $11 million in the current period included $5 million in connection with loan originations and $6 million related to a general reserve build. The provision of $(24) million in the year-ago quarter included $(52) million in connection with the adoption of Accounting Standards Update (ASU) No. 2022-02, "Financial Instruments - Credit Losses: Troubled Debt Restructurings and Vintage Disclosures," $5 million in connection with loan originations and $23 million in connection with the resolution of certain private legacy loans in bankruptcy. See our 2023 Form 10-K for further discussion on the adoption of ASU No. 2022-02 as well as the resolution of certain private legacy loans in bankruptcy.

  • Asset recovery and business processing revenue increased $5 million primarily due to continued organic growth in our Business Processing segment.
  • Net gains on derivative and hedging activities increased $40 million. The primary factor affecting the change were interest rate fluctuations. Valuations of derivative instruments fluctuate based upon many factors including changes in interest rates and other market factors. As a result, net gains and losses on derivative and hedging activities may vary significantly in future periods.
  • Operating expenses decreased $2 million, primarily a result of a decline in overall servicing costs as well as lower in-school loan marketing spend. This was partially offset by a $12 million contingency loss accrual (regulatory- related expense) recorded in the current period related to recent developments in connection with CFPB matters.
  • Restructuring expenses decreased $3 million due to a decline in severance-related costs and facility lease terminations.
  • The effective income tax rates for the current and year-ago periods were 17% and 23%, respectively. The movement in the effective income tax rate was primarily driven by the reduction of tax and interest on state uncertain tax positions in the current period.

We repurchased 2.6 million and 4.9 million shares of our common stock during the first quarters of 2024 and 2023, respectively. As a result of repurchases, our average outstanding diluted shares decreased by 16 million common shares (or 12%) from the year-ago period.

9

PRIVATE EDUCATION LOANS PORTFOLIO PERFORMANCE

Private Education Loan Delinquencies and Forbearance

March 31,

December 31,

March 31,

2024

2023

2023

(Dollars in millions)

Balance

%

Balance

%

Balance

%

Loans in-school/grace/deferment(1)

$

369

$

360

$

369

Loans in forbearance(2)

297

363

354

Loans in repayment and percentage of each status:

Loans current

15,661

95.0%

15,935

94.9%

17,439

95.5%

Loans delinquent 31-60 days(3)

303

1.9

308

1.8

290

1.6

Loans delinquent 61-90 days(3)

165

1.0

173

1.0

165

.9

Loans delinquent greater than 90 days(3)

351

2.1

380

2.3

364

2.0

Total Private Education Loans in repayment

16,480

100%

16,796

100%

18,258

100%

Total Private Education Loans

17,146

17,519

18,981

Private Education Loan allowance for losses

(538)

(617)

(706)

Private Education Loans, net

$

16,608

$

16,902

$

18,275

Percentage of Private Education Loans in repayment

96.1%

95.9%

96.2%

Delinquencies as a percentage of Private Education

Loans in repayment

5.0%

5.1%

4.5%

Loans in forbearance as a percentage of loans in

repayment and forbearance

1.8%

2.1%

1.9%

Cosigner rate(4)

33%

33%

33%

  1. Loans for customers who are attending school or are in other permitted educational activities and are not yet required to make payments on their loans, e.g., internship periods, as well as loans for customers who have requested and qualify for other permitted program deferments such as various military eligible deferments.
  2. Loans for customers who have requested extension of grace period generally during employment transition or who have temporarily ceased making full payments due to hardship or other factors such as disaster relief, including COVID-19 relief programs, consistent with established loan program servicing policies and procedures.
  3. The period of delinquency is based on the number of days scheduled payments are contractually past due.
  4. Excluding Private Education Refinance Loans, which do not have a cosigner, the cosigner rate was 66%, 65% and 65% for first-quarter 2024, fourth- quarter 2023 and first-quarter 2023, respectively.

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Navient Corporation published this content on 24 April 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 24 April 2024 10:16:18 UTC.