Navient Corporation · NASDAQ:NAVI
Navient — Q2 2018 Earnings Presentation
64 slides from Navient's earnings presentation, Aug 6, 2018
Slide 1: 2018 Second Quarter Investor Deck
NAVIENT. 2018 24 Quarter Investor Deck August 6, 2018
Slide 2: Forward-Looking Statements; Non-GAAP Financial Measures
Forward-Looking Statements; Non-GAAP Financial Measures ‘The following information is current as of une 30, 2028 (unless otherwise noted) and should be read in connection with Navient Corporation's (Navient) Annual Report on Form 10° for the year ended December 31, 2017 (the “2017 Form 104K"), fled
Slide 3: Navient company overview
NAVIENT. ¢ Navient is a leading provider of asset management and business processing solutions for education, healthcare, and government clients at the federal, state, and local levels. We help our clients and millions of Americans achieve financial success through our services and support. - Indust
Slide 4: Operating Results
Operating Results Core Earnings Basis (In millions, except per share amounts) | Q2 18 Adjusted Core EPS * ] $0.52 $0.43 $0.44 Restructuring and regulatory-related expenses. ($0.03) ($0.03) ($0.01) Reported Core EPS $0.49 $0.40 $0.43 Average common stock equivalent 269 269 285 Ending total education
Slide 5: Opportunities to Create Value in 2018 and Beyond
Opportunities to Create Value in 2018 and Beyond Federal Education Loans + Loan servicing & asset recovery * Default prevention & portfolio management Consumer Lending ¢ Refinancing education loans « Non-compete for new in-school Private Education Loan originations ends December 31, 2018 Business Pr
Slide 6: Federal Education Loans Segment
Federal Education Loans Segment Core Earnings Basis In this segment, Navient holds and acquires FFELP loans and performs servicing and asset recover own loan portfolio, federal education loans owned by the epartment of Education and other institution: a SL ‘Segment net interest margin 0.81% FFELP Lo
Slide 7: Consumer Lending Segment
Consumer Lending Segment Core Earnings Basis In this segment, Navient holds, originates and acquires consumer loans and performs servicing a ies on its own loan portfolio. ($'s in millions) 0218 FY 2017 ‘Segment net interest margin 3.21% 3.28% 3.33% 3.41% 3.67% Private Education Loans (including Ref
Slide 8: Refinancing Education Loans is an Attractive Asset
Refinancing Education Loans is an Attractive Asset Generating Opportunity + Leverages our 40-plus years of data, analytics, capital markets and industry experience + Graduation, employment and proven cash flows meaningfully reduce credit risk + Opportunity to acquire assets from other originators +
Slide 9: Typical Private Education Refi Borrower Profile
Typical Private Education Refi Borrower Profile We serve technology first, financially responsible, digital native young professionals Typical Borrower More Accurate Assessme Weighted Underwriters assess loan Average applications down to the transaction-level where available Borrower Age 32 Months s
Slide 10: Consumer Lending Segment Credit Detail
Consumer Lending Segment Credit Detail Delinquency & Forbearan sage Allowance for Loan Los: TDR Loans (S's in millions) | 2a18 | 10148 June 30, 2018 Ending Allow ance as 30-day-plus delinquencies $1,116 = $1,065 $1,145 (Sin mitions) Allow ance Balance % of Ending Balance 30-day-plus delinquency rate
Slide 11: Business Processing Segment
Business Processing Segment Core Earnings Basis ee inmons) <a TT ry 2016 F015 Government Services $106 Healthcare RCM Services $24 $18 $78 $68 $13 Total Business Processing $65 $53 $212 $174 $99 Revenue Operating Expenses $54 $44 $187 $149 $83 EBITDA * $12 $10 $28 $26 S17 EBITDA Margin * 18% 18% 13%
Slide 12: Expanding our Reach in Growing Markets
Expanding our Reach in Growing Markets Navient business processing has grown from a student loan and tax-centric collections business to a revenue-cycle BPO business serving government and healthcare markets, realizing $212M in non- education related revenue in 2017. Government * Services Healthcare
Slide 13: Navient is Highly Committed to Expense Efficiency
Navient is Highly Committed to Expense Efficiency Notable Items Impacting Total Expenses Compared to Prior Periods (S In millions) YTD Q2 18 YTD Q2 17 Reported Total Core Earnings Expenses $203 $230 $485 $469 ee Restructuring & Reorganization Expenses $2 5 $9 & Regulatory-Related Expenses $8 $3 $12
Slide 14: Higher Education Industry
Higher Education Industry
Slide 15: Federal Government is the Largest Consumer Lender
Federal Government is the Largest Consumer Lender, Owning or Guaranteeing $1.4 Trillion in Student Loans + Federal loan interest rates, limits and terms are set by Congress. - All federal loans are issued directly by the U.S. Department of Education since 2010 when federally guaranteed loans ended +
Slide 16: Navient's Role as a Student Loan Servicer
In its Role as a Student Loan Servicer, Navient Helps Borrowers Successfully Repay Their Loans Servicers begin helping borrowers navigate repayment after important financial decisions about the total cost and experience of their education have already been made. Congress sets product terms and ions
Slide 17: Five Recommendations for Better Student Loans
Five Recommendations for Better Student Loans @ Providing better information before borrowing @ Improving the college completion rate ® Simplifying repayment @ Helping borrowers pay off faster ® Encouraging borrower contact with servicers
Slide 18: The Borrowers who Struggle the Most are Often Non-completers
The Borrowers who Struggle the Most are Often Non-completers with Low Levels of Debt 2/3 of all defaults are on balances of less than $10,000 Borrowers who do not complete a degree ... AS a result, borrowers who run into trouble default at a rate almost three times higher repaying usually have below
Slide 19: Most Complaints Relate to Federal Policy or Loan Terms
The Vast Majority of Complaints are Related to Federal Policy or Loan Term Disagreements, Not Servicer Error Categorization of CFPB complaints, FFY 2017 i Complaints relating to loan term, federal policy, other Hl Complaints relating to servicer error 7,000 + 6,649 6,000 + 5,000 + 4,000 + 3,000 + Nu
Slide 20: In 1990, There Were Two Repayment Plans
In 1990, There Were Two Repayment Plans, and the Most Complex Area Was Deferment School Full-Time School Half-Time Graduate Fellowship Unemployment Deferment — 2 years Rehabilitation Training Program Teacher Shortage Internship/Residency Training Temporary Total Disability Armed Forces or Public Hea
Slide 21: Today's Repayment Options are Numerous and Complex
Today’s Repayment Options are Numerous and Complex Deferment Forbearance T School) Discretionary Forbearance ‘School Full-Time (2) + Hardship Forbearance ‘School Half-Time (2) Mandatory Forbearance Post Enrollment (1) Medical or Dental internship Residency Department of Defense Student Loan Repaymen
Slide 22: We've Piloted Solutions to Reduce Complexity
We've Piloted Solutions to Reduce Complexity IDR eSign Enrollment Pilot Navient launched a pilot program focusing on past-due FFELP borrowers to explore whether a simpler process could produce better results. Under the pilot, we made contact with the borrower, gathered salary and family information
Slide 23: Navient Delivers Strong Performance for Borrowers
Navient Delivers Strong Performance for Borrowers Navient-serviced borrowers are 37% less likely Forbearance usage is in-line with other servicers to default 11.5% Borrowers in forbearance as a percent of repayment” javient's CDR is 37 percent lower than all others Borrowers in forbearance (%) sa De
Slide 24: Funding & Liquidity
Funding & Liquidity
Slide 25: Second Quarter 2018 Capital Markets Activity
24 Quarter 2018 Capital Markets Activity » Funding capacity for education loans 4 Available capacity under FFELP secured facilities is $1.8 billion 4 Available capacity under Private Education Loan secured facilities is $830 million >» FFELP ABS Financing 4 Issued 1 transaction for $997 million » Pr
Slide 26: FFELP ABS Transactions
FFELP ABS Transactions NAVSL 2018 NAVSL 2018-2 Pricing Date: June 20, 2018 March 20, 2018 Settlement Date: June 28, 2018 March 29, 2018 Issuance Amount: $997M $999M Collateral: US Govt. Guaranteed US Govt. Guaranteed 2 FFELP Stafford, Plus and Consolidation Loans FFELP Stafford, Plus and Consolidati
Slide 27: Private Education Loan ABS Transactions
Private Education Loan ABS Transactions NAVSL Trust 2018. NAVSL Trust 2018. Pricing Date: July 18, 2018 May 15, 2018 Settlement Date: July 26, 2018 May 24, 2018 Issuance Amount: $632M $521M % Private Education Loans (includes Private Education Collateral: Private Education Refi Loans Refi Loans) Pre
Slide 28: Long-term Capital Allocation Philosophy
Long-term Capital Allocation Philosophy Consistently balance capital adequacy with capital allocation opportunities, including dividends, organic growth, stock repurchases and acquisitions v Execute dynamic capital allocation policy to maintain appropriate leverage that supports our credit ratings a
Slide 29: Managing Unsecured Debt Maturities
Managing Unsecured Debt Maturities (par value, $’s in billions) wAs of June 30, 2017 wAs of June 30, 2018 $2.4 993 $2.4 $2.4 $18 $1.6 $1.6 $15 s14gi4 845) $15 S15 gag gag i $0.6 $0.6 $0.0 [i oll $0.0 $0.0 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028+ Rating Agency Profile Lon rm Conservati
Slide 30: Education Loan Portfolio Generates Significant Cash Flows
Education Loan Portfolio Generates Significant Cash Flows Projected Life of Loan Cash Flows over ~20 Years Enhancing Cash Flows $'s in Billions FFELP Cash Flows Secured Residual (including O/C) Floor Income Servicing Total Secured Unencumbered Total FFELP Cash Flows Private Credit Cash Flows Secured
Slide 31: Education Loan Portfolio Generates Meaningful Cash Flows Over Next Five Years
Education Loan Portfolio Generates Meaningful Cash Flows Over The Next Five Years $2.0 ‘as $2.0 $1.8 $1.8 $16 $1.6 $1.6 . gq 814 ge 4 5 $12 & $1.2 g $1.0 Bm $1.0 = $08 = $08 & $06 & $06 $0.4 $0.4 $0.2 $0.2 $0.0 $0.0 2019 2020 2021 2022 Remaining 2019 2020 2021 2022 2018 "Cash Flows assuming trusts r
Slide 32: FFELP Cash Flows Highly Predictable
FFELP Cash Flows Highly Predictable $'s in millions Remaining as of 06/30/2018 2018 2019 2020 2021 2022 2023 2024 2025 rojected FFELP Average Balance $74,062 $68,691 $61,512 $54,632 $48,217 $41,995 $36,035 $30,379 rojected Excess Spread $435 $838 $774 $696 $633 $572 $511 $462 rojected Servicing Reve
Slide 33: Secured Cash Flow
Secured Cash Flow Sin ions 2Q18YTD 2017 201 FFELP. Term Securitized Servicing (Cash Paid) s 147 314 342 Net Residual’ (Excess Distributions) 235 643 624 Other Secured FFELP Net Cash Flow ** 236 612 503 Total FFELP 5 6i8_ 7569 S$ 1469S 7354 Private Credit Term Securitized Servicing (Cash Paid) s 75 $
Slide 34: FFELP ABS
FFELP ABS
Slide 35: Recent FFELP ABS Issuance Characteristics
Recent FFELP ABS Issuance Characteristics FFELP ABS Transaction Features + Issue size of $500M to $1.0B + Denominated in US$ + Senior and subordinate notes + Floating rate tied to 1 month LIBOR + Amortizing tranches with 1 to 15(+) year average lives + Compliant with U.S. risk retention regulations
Slide 36: FFELP Loan Program Characteristics
FFELP Loan Program Characteristics Subsidized Stafford Unsubsidized Stafford | PLUS/Grad PLUS Consolidation Borrower student Student Parents or Graduate Students Student or Parents Needs Based Yes No No NA Fo Ce Ee 97- 100% 97 - 100% 97 - 100% 97 - 100% Interest Subsidy Payments Yes No No Yes! Spel
Slide 37: Navient Stafford & PLUS Loan Prepayments
Navient Stafford & PLUS Loan Prepayments + Annualized CPRs for Stafford/PLUS ABS trusts have decreased from pre-2008 levels as incentives for borrowers to consolidate have declined + Higher prepayment activity in mid-2012 was related to the short term availability of the Special Direct Consolidation
Slide 38: Navient Consolidation Loan Prepayments
Navient Consolidation Loan Prepayments + CPRs for Consolidation ABS trusts declined significantly following legislation effective in 2006 that prevented in-school and re-consolidation of borrowers’ loans + Higher prepayment activity in mid 2012 was related to the short term availability of the Speci
Slide 39: Private Education Loan ABS
Private Education Loan ABS
Slide 40: Recent Private Education Loan ABS Issuance Characteristics
Recent Private Education Loan ABS Issuance Characteristics Private Education Loan ABS Transaction Features + Issue size of $250M to $750M + Senior and subordinate notes + Amortizing tranches with 1 to 10 year average lives - Fixed rate or floating rate tied to 1 month LIBOR * Compliant with U.S. ris
Slide 41: Navient Private Education Loan Programs
Navient Private Education Loan Programs aduate/ Aa Direct-to-Cor Ofigination Channel . College Graduates & Select ‘Typical Borrower Student Student ‘Student College Graduates paige Typical Co-signer Parent Parent Parent Parent Parent $10k avg orig bal, 10 yr avg '$50K-75k avg orig bal, 5-20 penton t
Slide 42: Navient Private Education Trusts
Navient Private Education Trusts Bond Amount (Smil) 463 664 Initial AMA Enhancement (%) 30% —- 30% Initial Enhancement (%) 17% 22% Loan Program (%) Signature/LawiNBANed 0% 26% 27% + «= 52% = 1% «= 43% «= 17% 0% 29% 0% Smart Option 0% 50% 51% 0% 0% 29% 30% 0% 16% 0% Consolidation 0% 9% 2% 8% 3% 9% 0%
Slide 43: Navient Private Education Loan Trusts — Prepayment Analysis
Navient Private Education Loan Trusts — Prepayment Analysis « Constant prepayment rates have increased since 2014 on increased seasoning-related voluntary prepayment and the emergence of the external student loan refinance market Constant Prepayment Rate (CPR) 0% PP SF FF FL SS FF FF SO SNM LN HH OO
Slide 44: Cohort Default Triangles
Cohort Default Triangles + The following cohort default triangles provide loan performance information for certain Private Education Loans of Navient Corporation and its consolidated subsidiaries that meet such subsidiaries’ securitization criteria (including those criteria listed below): - Program
Slide 45: Cohort Default Triangles
Cohort Default Triangles + The cohort default triangles featured on subsequent slides are segmented by loan program type, FICO score, cosigner status, and school type + Terms and calculations used in the cohort default triangles are defined below: - Repayment Year — The calendar year loans entered r
Slide 46: Cohort Default Triangles
Cohort Default Triangles lergraduate/Graduate 1 Disbursed Principal Entering Periodic Defaults by Years in Repayment *° Repayment Year Repayment ($m) __ 0. 1 2 3 4 5 6 7 89 40,11 12,1314 15_—‘Total 1998 $11 10.0% 0.0% 0.0% 0.0% 0.0% 0.1% 0.4% 0.8% 0.4% 0.2% 1.5% 0.8% 0.4% 0.4% 0.0% 0.1% 5.2% 1999 $2
Slide 47: Cohort Default Triangles
Cohort Default Triangles graduate/Graduate * With C: Disbursed Principal Entering Periodic Defaults by Years in Repayment ** Repayment Year Repayment ($m) __ 0. 1 2 3 4 5 6 7 8 ch) 170. 11 12,1314 15_—‘Total 1998 $6 10.0% 0.0% 0.0% 0.0% 0.0% 0.1% 0.6% 1.0% 0.4% 0.0% 0.2% 1.1% 0.1% 0.0% 0.0% 0.1% 3.6
Slide 48: Cohort Default Triangles
Cohort Default Triangles Undergraduate/Graduate ' Without Co-signer Disbursed Principal Entering Periodic Defaults by Years in Repayment ** Repayment Year__Repayment(sm) 0 1 2 #38 4 #5 6 7 8 9 10 M1 12 +48 44 ‘15 Total 1998 $5 0.0% 0.0% 0.0% 0.0% 0.0% 0.2% 0.2% 0.6% 0.4% 0.4% 3.1% 0.5% 0.8% 0.9% 0.0
Slide 49: Cohort Default Triangles
Cohort Default Triangles Undergraduate/ Disbursed Principal Entering Periodic Defaults by Years in Repayment ** Repayment Year Repayment ($m) __ 0. 1 2 3 4 5. 6 7 8.9 10.11 12 ~=-'13"— 1415‘ Total 1998 $11 0.0% 0.0% 0.0% 0.0% 0.0% 0.2% 0.4% 0.4% 0.4% 0.2% 1.1% 0.7% 0.3% 0.4% 0.0% 0.1% 4.2% 1999 $26
Slide 50: Cohort Default Triangles
Cohort Default Triangles Und luate/Graduate 1 For-Profit Disbursed Principal Entering Periodic Defaults by Years in Repayment > Repayment Year __Repayment(sm) 0.1. +2 +9 4 +5 6 7 8 9 10 1 12 13 +414 15 Total 1998 $0.4 10.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 11.7% 0.0% 0.0% 10.9% 3.5% 4.4% 0.0% 0.3% 0.0%
Slide 51: Cohort Default Triangles
Cohort Default Triangles Undergraduate/Graduate 1 Loans, FICO 74! Disbursed Principal Entering Periodic Defaults by Years in Repayment * 4 Repayment Year__Repayment(sm) 0 1 2 #9 4 5 6 7 8 9 10 M1 12 48 ‘14 ‘15 Total 1998 $3 10.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.2% 0.0% 0.4% 0.4% 0.9% 0.9% 0.0% 0.0% 0.0%
Slide 52: Cohort Default Triangles
Cohort Default Triangles Undergraduate/Graduate 1 Loans, FICO 700-739 2 Disbursed Principal Entering Periodic Defaults by Years in Repayment * 4 Repayment Year Repayment ($m) 0 1 2 3 4 5 6 7 8 9 70,11 121381415‘ Total 1998 $3 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.5% 2.2% 0.0% 0.0% 0.0% 0.0% 0.1% 0.8% 0.0%
Slide 53: Cohort Default Triangles
Cohort Default Triangles Undergraduate/Graduate 1 Loans, FICO 67! Disbursed Principal Entering Periodic Defaults by Years in Repayment ** Repayment Year__Repayment(sm) 0 4 2 3 4 #5 6 7 8 9 10 1 12 13 14 15 Total 1998 $3 0.0% 0.0% 0.0% 0.0% 0.0% 0.6% 0.6% 0.3% 0.5% 0.3% 2.8% 0.0% 0.5% 0.5% 0.1% 0.3%
Slide 54: Cohort Default Triangles
Cohort Default Triangles Undergraduate/Graduate 1 Loans, FICO 64! Disbursed Principal Entering Periodic Defaults by Years in Repayment ** Repayment Year Repayment ($m) __ 0 1 2 3 4 5 6 i 8 9 10 11 12 «13 «614 —15_—“‘Total 1998 $2 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.3% 0.5% 0.8% 0.0% 2.9% 2.8% 1.3% 0.2%
Slide 55: Cohort Default Triangles
Cohort Default Triangles Private Consolidation Loans With C ner Disbursed Principal Entering Periodic Defaults by Years in Repayment ** Repayment Year _Repayment(m) 0 4 2 3 4 5 6 7 8&8 9 10 1% 12 Total 2006 $249 0.0% 0.1% 0.1% 05% 06% 06% 0.4% 0.3% 0.4% 0.4% 0.4% 0.3% 02% 4.3% 2007 $675 0.0% 0.0% 0.
Slide 56: Cohort Default Triangles
Cohort Default Triangles DTC With Co-signer Disbursed Principal Entering Periodic Defaults by Years in Repayment '-? Repayment Year__Repayment(Sm) 0 1 2 3 4 S 6 7 8 9 10 11 12 13 14 Total 2004 $10 0.0% 00% 01% 01% 04% 1.3% 06% 06% 00% 01% 0.0% 02% 0.1% 09% 01% 4.5% 2005 $90 0.0% 0.2% 12% 0.9% 21% 29
Slide 57: Cohort Default Triangles
Cohort Default Triangles DTC Loans, FICO 740-8501 Disbursed Principal Entering Periodic Defaults by Years in Repayment *? Repayment Year__Repayment(sm) 0 1 2 3 4 S 6 7 6 9 10 1 12 13 14 Total 2004 $5 (0.0% 0.0% 0.1% 0.0% 00% 0.2% 0.4% 10% 0.0% 0.0% 0.0% 02% 00% 05% 00% 23% 2005 $39 0.0% 0.2% 0.7% 1.
Slide 58: Cohort Default Triangles
Cohort Default Triangles DTC Loans, FICO 670-699 1 Disbursed Principal Entering Periodic Defaults by Years in Repayment *? Repayment Year__Repayment(sm)_ 0 1 2 3 4 S 6 7 6 9 10 1 12 143 14 Total 2004 3 0.0% 00% 02% 09% 04% 30% 12% 17% 01% 05% 0.0% 00% 00% 0.0% 00% 8.1% 2005 $25 0.0% 0.4% 2.0% 1.8% 3
Slide 59: Cohort Default Triangles
Cohort Default Triangles Career Training Loans 1 Disbursed Principal Entering Periodic Defaults by Years in Repayment *? Repayment Year _Repayment(ém) 0 1 2 3 4 5 6 7 8 9 10 f1 12 13 14 15 Total 2003 $389 0.0% 06% 1.9% 2.1% 23% 1.7% 1.6% 1.2% 0.9% 06% 0.4% 0.3% 0.2% 0.1% 0.1% 0.0% 14.1% 2004 $510 10
Slide 60: Appendix
Navient Corporation Appendix Consent! and proprietary informaton © 2078 Navient Solutions, LC. AN gts reserves:
Slide 61: GAAP Results
GAAP Results (In millions, except per share amounts) Q218 Net income $83 EPS $0.31 Operating expenses $201 Provision $112 Average Student Loans $101,490 Consent! and proprietary informaton © 2078 Navient Solutions, LC. AN gts reserves:
Slide 62: Differences Between Core Earnings And GAAP
Differences Between Core Earnings And GAAP Core Earnings adjustments to GAAP: (Dollars in Millions) GAAP net income Net impact of derivative accounting Net impact of goodwill and acquired intangible assets Net income tax effect Total Core Earnings adjustments to GAAP Core Earnings net income Quarter
Slide 63: Investor Relations Website
Investor Relations Website www.navient.com/investors www.navient.com/abs + NAVI/ SLM student loan trust data (Debt/asset backed securities - NAVI / SLM Student Loan Trusts) Static pool information — detailed portfolio stratifications by trust as of the cutoff date Accrued interest factors Quarterly
Slide 64: NAVIENT.
NAVIENT.