Navient Corporation · NASDAQ:NAVI
Navient — Q4 2020 Earnings Presentation
52 slides from Navient's earnings presentation, Mar 1, 2021
Slide 1: 2020 4th Quarter Investor Deck
NAVIENT 2020 4 Quarter Investor Deck March 1, 2021
Slide 2: Forward-Looking Statements; Non-GAAP Financial Measures
Forward-Looking Statements; Non-GAAP Financial Measures The following information is current as of December 31, 2020 unless otherwite noted) and should be read in connection with Navient Corporation's "Navient” Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-X"), f
Slide 3: Leader in education loan management and business processing solutions
NAVIENT. We are the leader in education loan 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, leveraging our 4
Slide 4: Delivering Long-term Value to Shareholders
Delivering Long-term Value to Shareholders 1 ti calc ic aaa i Segment Providing payment relief to borrowers impacted by COVID-19 v Improved net interest margin from 83 bps to 99 bps, year over year, as our portfolio benefits from a low-rate environment Y¥ Actively managed our portfolio, decreasing o
Slide 5: Actual Cash Flows From Our Education Loan Portfolio Have Exceeded Projections
Actual Cash Flows From Our Education Loan Portfolio Have Exceeded Projections Actual Cash Flows Continue to Prudent Investment of Cash Flows Exceed Projections * Drives Margins and Creates Value December, 2017 to December 31, 2020 Cash flows generated Q4 2017 - Q4 2020 ($’s in Billions) were investe
Slide 6: Lifetime Cash Flows Will Exceed Original Projections
Lifetime Cash Flows Will Exceed Original Projections Navient’s student loan portfolios continues to exceed expectations ' (8's in Billions) Life of Loan Projections Q4 2017 | Q4 Net Cash Flow Total FFELP Cash Flows $12.7 $8.3 Projection at Q4 2020 Total Private Education Cash Flows $15.3 $8.4 $14.0
Slide 7: Originating Education Loans is An Attractive Opportunity
Originating Education Loans is An Attractive Opportunity Sizable Market With Attractive Yields‘ Leveraging Our Existing Infrastructure to Generate Value Estimated Total Market Annual Originations and Yields (S's in billions) + Private Education Refinance Loans: =Grad PLUS - Using our data and expert
Slide 8: Growing Earnings and Generating Shareholder Value
Growing Earnings and Generating Shareholder Value ving EPS Accretion for Shareholders Delivering Value Adjusted Core EPS Y¥ Long-term value for shareholders driven by GR - - i 28% CAS $3.40 consistent earnings and capital return Y Allocating capital to attractive investments, $2.64 including portfol
Slide 9: Navient is Focused on Cost Efficiency
Navient is Focused on Cost Efficiency Industry-leading Efficiency Continuously Rationalizing Our Expense Base Innovative financing reduces interest expense, Focused on reducing expenses and improving maximizing cashflow and shareholder value efficiency across our businesses Continue to drive strong
Slide 10: Asset Generation Drives Meaningful Returns
Asset Generation Drives Meaningful Returns Loan Originations Loan Portfolios and Corporate acquisitions Dividends Share Repurchase Reduce Unsecured Debt ‘Al cata 26 of 12/212020, Payout ratio shown on the basis cf Acusted Core Earnings, a non-GAAP thancial measure ‘Separation values we ag reported 6
Slide 11: Outlook
Outlook Key Company & Business Segment Metrics 2020 2021 Guidance Original Targets Core Earnings Return on Equity ? Core Earnings Efficiency Ratio? ~50% Adjusted Tangible Equity Ratio? Above 6.0% inorerapeletae= Lovtotisos Soe 006% 006% ae 300-3108 ae 18-17% panel ae Ho To Key Corpany & Busness Segm
Slide 12: Funding & Liquidity
Funding & Liquidity
Slide 13: 2020 Financing and Capital Management
2020 Financing and Capital Management Capital Management ¥ Committed to returning excess capital to shareholders + Returned $523 million through dividends and share repurchases + Total remaining share repurchase authority of $600 million ' v Pro Forma Adjusted Tangible Equity Ratio (ATE)? of 7.1% v
Slide 14: FFELP ABS Transactions
FFELP ABS Transactions NAVSL 2021-1 NAVSL 2021 Pricing Date: February 8, 2021 October 14, 2020 Settlement Date: February 18, 2021 ‘October 22, 2020 Issuance ae $1,015,900,000 $76,800,000 c I: U.S. Government Guaranteed U.S. Government Guaranteed — FFELP Consolidation, and FFELP Non-Consolidation Loa
Slide 15: Private Education Loan ABS Transactions
Private Education Loan ABS Transactions NAVSL 2021-A Pricing Date: January 19, 2021 Settlement Date: January 28, 2021 Issuance A nt: $817,800,000 Collateral: Private Education Refi Loans Prepayment Saat 15% CPR Class cna ‘Amt ($M) WAL? Pricing? Class. A AAAIAAA $768 2.68 Swaps + 0.60% A-1A Tranching
Slide 16: Optimized Capital Structure
Optimized Capital Structure Long-Term Conservative Funding Approach Managing Unsecured Debt Maturities + Important to maintain our credit ratings which (par value, $ in billions) support ongoing access to the unsecured debt $4.0 $2.4 $2.6 $7.6 $7.1 $5.9 markets - We pursue opportunities to repurchas
Slide 17: Managing Unsecured Debt Maturities
Managing Unsecured Debt Maturities (par value, $ in billions) On January 28, 2021, issued $500 million of unsecured debt due March 2028 $1.8 $1.8 $1.5 $1.5 $1.5 $1.4 $1.4 $1.4 $4.1 $0.7 Z| 6 $0.6 Z| 5 $0.5 $0.2 $0.2 $0.0 || 2021 2022 2023 2024 it tT 2027 2028 2029 2030+ mAs of December 31,2019 — mAs
Slide 18: Education Loan Portfolio Generates Significant Cash Flows
Education Loan Portfolio Generates Significant Cash Flows Projected Life of Loan Cash Flows over Years Enhancing Cash Flows $'s in Billions + Generated $2.7 billion of cash flows in 2020 FFELP Cash Flows 12/3120 Secured + Reduced total unsecured debt by $1.1 billion Residual (including O/C) $4.3 Flo
Slide 19: Education Loan Portfolio Generates Meaningful Cash Flows Over The Next Five Years
Education Loan Portfolio Generates Meaningful Cash Flows Over The Next Five Years Projected Annual Private Education Loan Cash Flows Projected Annual FFELP Loan Cash Flows 1.2 $1.6 $1.0 ae $1.2 $1.2 ~ = 9 ¢ $0.8 2 si.0 S. $1.0 _ 2 2 $0.8 % 306 $0.8 © £ 2 $0.4 2 806 2 = $0.4 me $0.2 $0.0 + $0.0 + 202
Slide 20: Secured Cash Flow
Secured Cash Flow $ in Millic 2018 FFELP Term Securitized Servicing (Cash Paid) $ 227 $ 253 $ 288 314 Net Cash Flow '* 830 969 1,290 1,255 Total FFELP $ 1,057 $ 1,223 $ 1,577 1,569 Private Credit Term Securitized Servicing (Cash Paid) $ 124 $ 135 $ 163 Net Cash Flow * 1,307 1,065 579 Total Private C
Slide 21: FFELP ABS
FFELP ABS
Slide 22: FFELP ABS Issuance Characteristics
FFELP ABS Issuance Characteristics +» Issue size of $500M+ + Guarantee of underlying collateral insulates bondholders from most risk of + Senior and subordinate notes loss of principal * + Amortizing tranches with 1 to 10(+) year average lives * Typically non-dischargeable in bankruptcy + Fixed rate
Slide 23: FFELP Loan Program Characteristics
FFELP Loan Program Characteristics Subsidized Stafford Unsubsidized Stafford | PLUS/Grad PLUS Consolidation Borrower Needs Based Federal Guarantee of Principal and Accrued Interest Interest Subsidy Payments ‘Special Allowance Payments (SAP) Original Repayment Term * Aggregate Loan Limit Cnty apples
Slide 24: 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 25: 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 26: Private Education Loan ABS
Private Education Loan ABS
Slide 27: Private Education Loan ABS Issuance Characteristics
Private Education Loan ABS Issuance Characteristics Private Education Loan ABS Transaction Features + Issue size of $500M+ + Senior and subordinate notes + Amortizing tranches with 1 to 10 year average lives + Fixed rate and floating rate securities * Compliant with U.S. risk retention and, dependin
Slide 28: Navient Private Education Loan Programs
Navient Private Education Loan Programs Direct-to-Cons ate Education (oTc) Origination ‘Origination Channet School ‘Schoo! Directto-Consumer Lender ‘School Typical Borrower Student Student Student College Graduates (coor cos seek 2 Student ‘Typical Co-signer Patent Parent Parent Patent Parent Parent
Slide 29: Navient Private Education Trusts
Navient Private Education Trusts As of the respective cutoff dates for each transaction 2019-2021YTD Navient Issuance Program NAV 20-8 Bond Amount (Smil) 647 ‘550 610 560 535, 714 498 620 712 546 808 499 781 786 995 604 818 Intial AAA Enhancement (%) 18% 21% 12% += 22%®_~—*13%@~—«9%~=—«*10% = 23% «1
Slide 30: Navient Private Education Legacy Loan Trusts — Prepayment Analysis
Navient Private Education Legacy Loan Trusts — Prepayment Analysis + Constant prepayment rates increased beginning 2014 on increased seasoning-related voluntary prepayment and the emergence of the external student loan refinance market + Prepayments have declined in 2020 during the COVID-19 crisis a
Slide 31: Higher Education Industry
Higher Education Industry
Slide 32: Federal government is the largest non-mortgage consumer lender
At $1.5 trillion in student loans, the federal government is the largest non-mortgage consumer lender + 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. + F
Slide 33: Navient's role as a federal student loan servicer
In its role as a federal 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 a
Slide 34: There are solutions to many of the challenges faced by borrowers
There are solutions to many of the challenges faced by borrowers (1) Provide more front-end resources to improve decision making. Students and their families need tools to understand how much they'll need to borrow to earn the degree—not simply the current semester—and to assess the likely economic
Slide 35: Borrowers who struggle most are often non-completers with less than $10,000 in debt
The borrowers who struggle most are often non-completers with less than $10,000 in debt Borrowers who do not complete a degree ... As a result, borrowers who run into trouble default at a rate almost three times higher repaying usually have below-average amounts than borrowers who earned a degree ..
Slide 36: Today's federal repayment options are numerous and complex
Today's federal repayment options are numerous and complex Forbearance Discretionary Forbearance + Hardship Forbearance Mandatory Forbearance + Medical or Dental internship Residency + Department of Defense Student Loan Repayment Programs + National Service + Active Military State Duty + Student Loa
Slide 37: We've piloted solutions to reduce complexity
We've piloted solutions to reduce complexity IDR eSign Enrollment Navient launched a pilot program focusing on past-due FFELP. borrowers to explore whether a simpler process could produce better results. Under the pilot, we made contact with the borrower, gathered salary and family information over
Slide 38: Navient delivers strong performance for borrowers
Navient delivers strong performance for borrowers Navient-serviced borrowers are 26% less likely Navient helps borrowers use forbearance responsibly to default 9.7% Pre-COVID forbearance usage is in line with other servicers - 3 z c= 45 = 26% lower se 2 than all others 5 3 5 ‘oO aS ° ~ OWeTPETErTirr
Slide 39: Student Loan Options During the National Emergency
Student Loan Options During the National Emergency: What You Need to Know If you have impacted by COVID, options depend on your loan types. Contact your servicer to discuss what's right for you. Department of Education (Direct) Loans: FFELP Loans: Private Loans: + These loans have been automatically
Slide 40: Appendix
Navient Corporation Appendix
Slide 41: Assisting Borrowers Through the Crisis
Assisting Borrowers Through the Crisis Total Private Education Loans in Forbearance * Total Private Education Loans in Current Repayment! ($'s in billions) (S's in billions) $35 $24.0 $3.0 $22.0 ne es $20.0 $18.0 $2.0 $16.0 $1.5 $14.0 $1.0 $12.0 $05 $10.0 Oo PP PP PPS PP PP oP PP PP PPP PPP LLE LAI
Slide 42: Navient Is Focused On Expense Efficiency
Navient Is Focused On Expense Efficiency Notable Items Impacting Total Expenses Compared to ($ In million: Reported Core Earnings Expenses $990, Year over Year Change in Reported Core Earnings Expenses 14% (2%) Restructuring & Reorganization Expenses - $2 $9 $6 Regulatory-Related Expenses $20 ($9) $
Slide 43: Operating Results
Operating Results “Core Earnings” except per share amounts) Q4 20 GAAP diluted EPS $0.99 Adjusted Core Earnings EPS '\? $0.97 resucny and regulatory-related ($0.09) Reported Core Earnings EPS* $0.88 ‘Average common stock equivalent 188 Ending total education loans, net $79,363 Average total educatio
Slide 44: Federal Education Loans Segment
Federal Education Loans Segment “Core Earnings” Basis ($ In millions) a420 | Q419 | 2020 2019 Segment net interest margin 1.06% 0.87% 0.99% 0.83% FFELP Loans: Provision for loan losses $- $8 $13 $30 Charge-offs $9 $9 $49 $42 Charge-off rate 0.07% 0.06% 0.10% 0.07% Greater than 30-days delinquency ra
Slide 45: Consumer Lending Segment
Consumer Lending Segment “Core Earnings” Basis ($ In millions) | Q420 | Q419 | 2020 2019 ‘Segment net interest margin 3.02% 331% 3.20% 3.30% Private Education Loans (including Refinance Loans): Provision for loan losses $2 $42 $142 $228 Charge-offs ' $28 $97 $184 $364 Annualized charge-off rate ' 05
Slide 46: Business Processing Segment
Business Processing Segment “Core Earnings” Basis (Sin millions) | a420 | as19 | 2020 2019 ae $58 $34. $191 S154 ane $35 $25 $113,104 Total Business Processing $93.» $59. $304. «$258 Revenue ee S74 $49 8254 $215 a S22 81 857849 ENE 23% 18% «= 19% = 19% eee S15 88839833 Se] ueoks Wranon mona) | Ste00
Slide 47: GAAP Results
GAAP Results (In millions, except per share amounts) Net income (loss) Diluted earnings (loss) per common share Operating expenses Provision for loan losses Average Education Loans © 2021 Navient Solutens, LLC. All ghts reserved Q4 20 $186 $0.99 $269 $2 $81,685 Q419 $171 $0.78 $235 $50 $88,266 47
Slide 48: Notes on Non-GAAP Financial Measures
Notes on Non-GAAP Financial Measures (Dollars in Millions) In addition to financial results reported on a GAAP basis, Navient also provides certain performance measures which are non-GAAP financial measures, The following non-GAAP financial measures are presented within this Presentation: 1. Core Ea
Slide 49: Notes on Non-GAAP Financial Measures
Notes on Non-GAAP Financial Measures (Dollars in Millions) 4. Earnings before Interest, Taxes, Depreciation and Amortization Expense (“EBITDA”) - This metric measures the operating performance of the Business Processing ‘segment and is used by management and our equity investors to monitor operating
Slide 50: Differences Between Core Earnings And GAAP
Differences Between Core Earnings And GAAP Quarters Ended Years Ended Core Earnings adjustments to GAAP: Dec.31, Dec. 31, (Dollars in Millions) 2020 2019 2020 ons: GAAP net income (loss) $186 s171 $412 $597 Net impact of derivative accounting (28) (27) 265 (5) Net impact of goodwill and acquired int
Slide 51: 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 52: NAVIENT
NAVIENT.