Navient Corporation · NASDAQ:NAVI
Navient — Q3 2016 Earnings Presentation
19 slides from Navient's earnings presentation, Oct 19, 2016
Slide 1: 2016 3rd Quarter Earnings Call Presentation
2016 3rd Quarter Earnings Call Presentation October 19, 2016
Slide 2: Forward-Looking Statements; Non-GAAP Financial Measures
Forward-Looking Statements; Non-GAAP Financial Measures The following information is current as of September 30, 2016 (unless otherwise noted) and should be read in connection with Navient Corporation’s (Navient) Annual Report on Form 10-K for the year ended December 31, 2015 (the “2015 Form 10-K”),
Slide 3: 3rd Quarter Highlights
3rd Quarter Highlights • Generated adjusted “Core Earnings” of $0.51 per share1 • Private Education Loan charge-offs decreased 24% from year ago quarter • Issued $1.3 billion in unsecured debt • Repurchased 14.3 million common shares - Repurchased 13% or 47 million of common shares year to date 1 Ex
Slide 4: Operating Results: Core Earnings Basis
Operating Results “Core Earnings” Basis (In millions, except per share amounts) Q3 16 Q2 16 Q3 15 Adjusted Core EPS before regulatory-related costs $0.51 $0.48 $0.48 Regulatory-related costs ($0.01) ($0.01) ($0.01) Reported Core EPS $0.50 $0.47 $0.47 Operating expenses (excluding regulatory-related
Slide 5: Three Month LIBOR Basis Risk Management
Three Month LIBOR Basis Risk Management Overview • Prior to the financial crisis, the company primarily funded FFELP and private credit loans with ABS or unsecured debt indexed to 3 month LIBOR (“3ML”). In 2009, the company started issuing new debt indexed or swapped to 1 month LIBOR (“1ML”). • From
Slide 6: FFELP Loans Segment
FFELP Loans Segment “Core Earnings” Basis (In millions) Q3 16 Q2 16 Q3 15 Net income $69 $68 $70 Average FFELP Loans $91,502 $93,900 $99,367 Net interest margin 0.87% 0.85% 0.81% Annualized charge-off rate 0.09% 0.10% 0.06% Greater than 90-day delinquency rate 6.8% 7.2% 8.5% • Acquired $596 million
Slide 7: Private Education Loans Segment
Private Education Loans Segment “Core Earnings” Basis (In millions) Q3 16 Q2 16 Q3 15 Net income $60 $57 $77 Average Private Education Loans $24,948 $25,700 $28,383 Net interest margin 3.48% 3.50% 3.77% Provision for loan losses $92 $100 $117 Charge-offs $112 $127 $148 Annualized charge-off rate 1.9
Slide 8: Continued Improving Credit Quality
Private Education Loans Segment Continued Improving Credit Quality Private Education Loan Charge-Off Rate by Segment Private Education Loan Total Delinquencies by Segment 12% 10.6% 30% 25.2% 25% 22.9% 10% 8.9% Total Delinquency Rate 20% 17.7% 8% 7.0% Charge-off Rate 6.5% 15.8% 13.9% 5.2% 15% 11.2% 6
Slide 9: Business Services Segment
Business Services Segment “Core Earnings” Basis (In millions) Q3 16 Q2 16 Q3 15 Net income $81 $81 $79 Intercompany loan servicing revenue $96 $99 $106 Third-Party Loan servicing revenue $53 $51 $47 Asset recovery & business processing revenue $97 $101 $85 Federal Loans serviced ($’s in billions) $2
Slide 10: Q3 2016 Capital Markets Summary
Q3 2016 Capital Markets Summary • Acquired $662 million of student loans • Issued $1.0 billion of FFELP ABS • In total, Navient has extended the legal final maturity dates for $7.3 billion of bonds1 • Issued $1.3 billion in unsecured debt • Reduced unsecured debt by $625 million - Repurchased $538 m
Slide 11: GAAP Results
GAAP Results (In millions, except per share amounts) Q3 16 Q2 16 Q3 15 Net income $230 $125 $237 EPS $0.73 $0.38 $0.63 Operating expenses $228 $230 $228 Provision $106 $110 $123 Average Student Loans $116,450 $119,600 $127,750 Confidential and proprietary information © 2016 Navient Solutions, Inc. A
Slide 12: Navient
NAVIENT.
Slide 13: Appendix
Appendix Confidential and proprietary information © 2016 Navient Solutions, Inc. All rights reserved. 13
Slide 14: 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 Flows1 • Generated $3 billion of cash flows in the first nine months $’s in Billions of 2016 FFELP Cash Flows 9/30/16 Secured • Reduced unsecured debt by $1.3 billion2 and return
Slide 15: Allowance for Loan Loss – Core Earnings Basis
Private Education Loans Segment Allowance for Loan Loss – Core Earnings Basis September 30, 2016 September 30, 2015 Ending Allow ance as Ending Allow ance as Allow ance Balance % of Ending Balance Allow ance Balance % of Ending Balance Non-TDR Loans $ 239 $ 14,204 1.7% $ 258 $ 17,926 1.4% TDR Loans
Slide 16: Private Education Loan Seasoning – September 30, 2016
Private Education Loan Seasoning – “Core Earnings” Basis September 30, 2016 Traditional Portfolio Monthly Scheduled Payments Received Loan Status 0-12 payments 13-24 payments 25-36 payments 37-48 payments More than 48 payments Total Not Yet in Repayment 1,405 Loans in Forbearance 250 21.0% 107 8.5%
Slide 17: Private Education Loan Seasoning – September 30, 2015
Private Education Loan Seasoning – “Core Earnings” Basis September 30, 2015 Traditional Portfolio Monthly Scheduled Payments Received Loan Status 0-12 payments 13-24 payments 25-36 payments 37-48 payments More than 48 payments Total Not Yet in Repayment 2,128 Loans in Forbearance 324 19.3% 135 6.4%
Slide 18: Managing Unsecured Debt Maturities
Managing Unsecured Debt Maturities This will be reduced to $0.7 billion after (par value, $ in billions) the make whole call on October 25, 2016 of $691 million of unsecured debt $3.2 $3.1 $2.8 $2.5 $2.4 $1.8 $2.1 $2.1 $2.1 $1.4 $1.3 $1.5 $1.2 $1.0 $0.6 $0.8 $0.8 $0.1 2016 2017 2018 2019 2020 2021 2
Slide 19: Differences between Core Earnings and GAAP
Differences between “Core Earnings” and GAAP Quarters Ended Sept. 30, June 30, Sept. 30, “Core Earnings” adjustments to GAAP: 2016 2016 2015 GAAP net income $230 $125 $237 Net impact of derivative accounting (139) 32 (108) Net impact of goodwill and acquired intangible assets 12 6 3 Net impact from