Navient Corporation · NASDAQ:NAVI
Navient — Q3 2019 Earnings Presentation
53 slides from Navient's earnings presentation, Nov 4, 2019
Slide 1: 2019 3rd Quarter Investor Deck
NAVIENT 2019 3" Quarter Investor Deck November 4, 2019 oe ee
Slide 2: Forward-Looking Statements; Non-GAAP Financial Measures
Forward-Looking Statements; Non-GAAP Financial Measures
Slide 3: Navient company overview
NAVIENT. + Navient is a 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. - Industry
Slide 4: Operating Results
Operating Results “Core Earnings oo Basis ‘Quarter Highlight EG econ cain rap soescorpnsio (GAAP autos EPS. ‘089 $084 $043 ‘$0.56 in the year-ago quarter: ‘habia Sasi Fy STE ry + Originated $1.4 bition of Private Education Refinance eps? Loans in the quarter ‘Restructuring and (Oa) | e000) | Gos equ
Slide 5: On Track to Meet or Exceed Original Target
On Track to Meet or Exceed Original’ Target Financial Metrics ee = ee ‘Core Earnings Return on Equity ® 19% Midtoons Core Earnings Emilency Ratio? 4% 50% Tangible Net Asset Ratio * 425 123x-125x ‘Net interest Margin ~ Federal Education Loan x 083% Low to Mis 20's (Charge-ot Rate ~ Federal Education
Slide 6: Federal Education Loans Segment
Federal Education Loans Segment “Core Earnings” Basis FFELP Loans: Prowsin rican esses 8 |) 0 Ccharge-ts 9 7s ‘charge-orato (oe | 0.) | ooo restr han 90-day 103% 105K 14m Geinaueney rte Greater nan 90-cay8 eu ate || ow Gotnaueney rate Fortearance rte 120% 120% 12am ‘Average FFELP Loans er208 | seane
Slide 7: Consumer Lending Segment
Consumer Lending Segment “Core Earnings Basis” ‘Consumer Lending + Net Interest Margin: 3.45% + Charge-off Rate: 1.6% ‘+ Originated $1.4 blion of Private Education Refinance Loans Inthe quarter, a 57% increase from the year-ago quarter, + Crest continues its strong performance ‘Charge-offs declined
Slide 8: Originating Education Loans is an Attractive Opportunity
Originating Education Loans is an Attractive Opportunity stint Yt art ra asian and al ‘8 Talon reve souanie sina ihaes emp, 7% 8% ial reat le ai | | “= a Se Sa | + Estimated average yields since 2014 for newly Estates 2019 Ongnatons Estimated Average Yiekis originated Grad PLUS loans and in-school P
Slide 9: Typical Private Education Refi Borrower Profile
Typical Private Education Refi Borrower Profile We serve technology first, financially responsible, digital native young professionals Weighted Underwriters assess loan ‘Average applications down to the transaction-level where available as Z acme a == oe = a = oeeS Sees Bn ae —
Slide 10: Consumer Loan Segment Credit Detail
Consumer Loan Segment Credit Detail ‘Total deinquencion soit) ||/seee | stz02 Tolaldeinquencyraie sa%otloans 108% 108% 13.4% ans deinguent greater than SO days Sadi S77 S867 Greaierthan 80 aye deinqvencyrate 5.1% 54% OTH 90 Forcearance si, $505 S707 Forbearance rte rr es oo (Charge-ofrate sa % toa i
Slide 11: Business Processing Segment
Business Processing Segment “Core Earnings” Basis [seeseanancatntomatonand fates | Business Processing + EBITDA Margin : 20% + Improving margins delivered through disciplined expense ‘management and fred cost takeout + Contingent collections receivables inventory increased 8% to ‘$14.2 billon from t
Slide 12: Focused on Improving Margin and Organic Business Processing Growth
Focused on Improving Margin and Organic Business Processing Growth + Providing business processing services for approximately 600 clients in Government and Healthcare Services - Integrated technology solutions and superior data-driven approach allows governments to achieve processing efficiencies ~
Slide 13: Navient Is Focused On Expense Efficiency
Navient Is Focused On Expense Efficiency Full-Year 2018 Comparable Core Earnings Total Expenses (8s in Millions) 2017 Y* ‘$750 $725 ‘$700 $675 YTD 2019 Comparable Core Eamings Total Expenses (S's in Millions)
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 ‘Total student ioan originations, by type tH ions. $ BBsssssss
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 land experience of their education have already been made. A ina od epamen poten a — Qo asses
Slide 17: Solutions to many of the challenges faced by borrowers
There are solutions to many of the challenges faced by borrowers 5 recommendations to improve student loan program success: O) eeerehenteniremucereineron feiss eer eer ceased [alee opel olarreaaanne-eraet fauThbindotvicmusrtiepsanstoerocstes ee eran © improvetne ctlegecompletionrate tours ee ster ot
Slide 18: Default prevention expertise and national default rate
Navient’s default prevention expertise has been a key factor in the decline of the national default rate 2016 three-year cohort default rate 40.1% "Navients COR 37 lower 6.8% Default rate (%) Al borrowers Navient-serviced borrowers
Slide 19: Borrowers who struggle most are often non-completers
Percent 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 de
Slide 20: In 1990, two repayment plans existed
In 1990, there were two repayment plans, and the most complex area was deferment Forbearance Deferment Discretionary Forbearance ‘School Full-Time + Hardship Forbearance ‘School Hatf-Time Graduate Feliowship Unemployment Deferment ~ 2 years Rehabiltation Training Program Teacher Shortage Internship/
Slide 21: Today's repayment options are numerous and complex
Today's repayment options are numerous and complex Forbearance Decora [ ‘tect tas {ihn 0 FFELP boner et a oan mde on of at dy 3.1603; AL DL oe gle (2hLmteaio FFELP bavoereatsane main over ara 1087 an pero ky, 129; Leite i j ‘erowa fan FEL an ade ig pore treome Songer er 205) (@)AGTFELP an Dare gt op
Slide 22: We've piloted solutions to reduce complexity
We've piloted solutions to reduce complexity IDR eSign Enrollment PRO Plan "Navient launched a pilot program focusing on past-due FFELP Navient created a personalized report to help new-to-repayment borrowers to explore whether a simpler process could produce borrowers to compare their options. bett
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 saci -_ Borrower in forbearance a a percent of repayment” 20 = sf 45 Fy Navient’s COR § i 10 5 £35 $ EBS 8 fo Allborowers Navientserviced — PH
Slide 24: Funding & Liquidity
Funding & Liquidity
Slide 25: Q3 2019 Capital Management
Q3 2019 Capital Management Capital Return Y Repurchased 9.7 million common shares for $130 million + Since inception ', returned $3.1 billion through share repurchases ¥ Paid $36 million in dividends to shareholders + Since inception ', returned $1.1 billion through dividends v- The tangible net ass
Slide 26: FFELP ABS Transactions
FFELP ABS Transactions Pricing Date: ‘October 18,2019 ‘Settement Dat: ‘Outer 25,2018 Jesvance Amount: sont US. Government Guarantees Coitaterat: FFELP Contaldaton, FFELP Non-Consobatn Loan, ‘ns HEAL Loans Prepayment 4 CPR FFELP Consodaton/ 6 CPR FFELP Non-Consstdton ‘Speed ‘8% CPR FFELP Renabutaton/
Slide 27: Private Education Loan ABS Transactions
Private Education Loan ABS Transactions NAVSL 20: = Sea bole pee ee was = pens Se = ae = Ratings: A Ratings: Se ene eee es Ee |e fess: [ire [mwas |e eee] ces [enemy] om ar ra eosin eooral ee a eT (ES ES SS (ee
Slide 28: Long-term Capital Allocation Philosophy
Long-term Capital Allocation Philosophy Consistently balan including dividends, organic growth, capital adequacy with capital allocation opportunities, tock repurchases and acquisitions v Execute dynamic capital allocation policy to maintain appropriate leverage that supports our credit ratings and
Slide 29: Actual Cash Flows From Our Education Loan Portfolio Exceeding Projections
Actual Cash Flows From Our Education Loan Portfolio Are Exceeding Initial Projections Projected vs. Actual Cash Flows Received ‘Since separation, Navient has primarily used excess from June 30, 2014 to December 31, 2018 ‘cash flows to reduce unsecured debt and return capital (6's in Bitions) to shar
Slide 30: Optimized Capital Structure
Optimized Capital Structure + Important to maintain our credit ratings which (par value, $ in biions) ‘Support ongoing access to the unsecured debt markets ~ We pursue opportunities to repurchase debt in the open market a4 + 83% of our education loan portfolio is funded to ir] term ~ YTD 2019 issuan
Slide 31: Managing Unsecured Debt Maturities
Managing Unsecured Debt Maturities ‘On October 18, 2019, announced fourth- quarter make-whole cal of $1 billon of ‘unsecured debt, which is expected to reduce 2020 _ balance to $1.1 billion ser say ssi sua sta 202 {par value, $ in billions) sis 15 Ls er oer 2078+ I 2024 As of September 30,2018 mAs o
Slide 32: Education Loan Portfolio Generates Significant Cash Flows
Education Loan Portfolio Generates Significant Cash Flows Projected Life of Loan Cash Flows over ~20 Years $'sin Bllons. FFELP cash Flows 90019 Secured Residval (including O'C) $50 Fr income 16 Servicing 22 Total Secured 28 Unencumbeced o4 ‘otal FFELP Cash Flows 2 ‘Private Credit Cash Flows, ‘Secure
Slide 33: Education loan portfolio generates meaningful cash flows over 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 316 ns 316 sia sia 3 312 sta st - 0 Fao wo 3 808 § 8 3 sa soa = oO $00 nBHR:E = H s10 ge Private Education Loan Portfolio Assump
Slide 34: FFELP Cash Flows Highly Predictable
FFELP Cash Flows Highly Predictable Ssinmilions a of OBO2010 wi ~—«oaS*«i CC SCCSSCSC CSC Projected FFELP Average Balance $64,663 $60,455 $54061 $47,924 $42,202 $35,744 $31,541 $26,065 Projected Excess Spread so $628 $560 $508 sass Sat aso SO Projected Senicing Revenve so SOL SL HSH StL SS Projected
Slide 35: Secured Cash Flow
Secured Cash Flow su FFELP Term Securlized ‘Servicing (Cash Paid) S199 S$ BS MS 342 Net Residual’ (Excess Distributions) $538 583 643 624 ‘Other Secured FFELP. ‘Net Cash Flow *? 128 706 12 503 “Total FFELP Sse Serr S568 S469 Private Credit “Term Securlized Servicing (Cash Paid) Ss ws 7s 13 Ss 180 Re
Slide 36: FFELP ABS
FFELP ABS
Slide 37: Recent FFELP ABS Issuance Characteristics
Recent FFELP ABS Issuance Characteristics + Issue size of $S00M+ + Guarantee of underlying collateral insulates bondholders from most risk of + Senior and subordinate notes loss of principal ‘Amortizing tranches with 1 to 12(+) year average lives + Typically non-dischargeable in bankruptcy Floating
Slide 38: FFELP Loan Program Characteristics
FFELP Loan Program Characteristics Berrovee Sudent ‘Statent Parents or Graduate Sudents _Statentor Parents Needs Gases Yeo ne No NA Federal Guarani of Precpal a Seca ar 97-10% 97- 100% 97-100% 97-10% Interest Suosity Payments Yes Ne No Yes: Special Alowance Payments oo ros — Yee Yee x x 120 months p
Slide 39: 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 40: 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 41: Private Education Loan ABS
Private Education Loan ABS
Slide 42: Recent Private Education Loan ABS Issuance Characteristics
Recent Private Education Loan ABS Issuance Characteristics + Issue size of $SOOM+ + 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 on occasions with European risk retention + Navient
Slide 43: Navient Private Education Loan Programs
Navient Private Education Loan Programs Crorten er pom cont ste = set i caus Seem Gaases ype ror she seat eta ec once riot sae Pat Pat Pet Pat me Sia mgeats. toy. Sox ngeeata, 1820 Soca arco, HRNEDD, 59 tyclion SIONS SHO MBoKDDa Sy, StaeNgeL oy eememenaen Dyer epeane PN, ‘ius Shay won done pay Sosa
Slide 44: Navient Private Education Trusts
Navient Private Education Trusts ges BRS g ‘nat rarcarrt 8) Chon Pog) ‘Speen AlOANet ‘SrrtOven| Deets Commer Cae Taney Pager sts ‘Sih, Grae Otemart eon gases $38 #9933 9993 goasae §- §eagas9 252 gugs Ey vye Epgeses $93 oe WATe ety Oo Wats payee a) tose cone ‘Slot he Cosme WAFICO a orgmton WARece C0
Slide 45: Navient Private Education Legacy Loan Trusts — Prepayment Analysis
Navient Private Education Legacy 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 REED SSRs a0 HLL LAA LLL RR)
Slide 46: Appendix
Navient Corporation Appendix
Slide 47: Navient Is Focused On Expense Efficiency
Navient Is Focused On Expense Efficiency Notable ftems Impacting Total Expen: Compared to Prior Periods
Slide 48: Notable Items Impacting Total Expenses Compared to Prior Year
Notable Items Impacting Total Expenses Compared to Prior Year Reported Core Earnings Expenses Bd 5 oer es Seat reel coe ec ere * EEE —_—_—_—_—_—_——_—__—_—_—_—_— Fence eis pare 5 = eat id ern a a enn Ser Eaigs Epes 7 3 Ce nd a _ SST = 2+Paty Tl Feo 7s = Tiel aes ea ae - Inpat ASC 08 a - i aa z | eee
Slide 49: GAAP Results
GAAP Results inal _ Netincome (ss) $145 $153 si Diluted earnings (oss) per common share ae =a ma Resaristianitane? $251 san $255 Provision for lan lesses = = = ‘Average Edvcalion Loans se9411 $01,547 $98,689 Wl
Slide 50: Notes on Non-GAAP Financial Measures
Notes on Non-GAAP Financial Measures (Dollars in Millions) ‘nasston otrancal sus repre on a GAAP bas, Naver ao powse eta pesxmance mast ich ae non-GAAP trae eases. The oowng non GAAP ‘aaa! naan oe preseie ntnn a Preset ‘ove Earnings The otras betwee he company’ Cat amg and ts CAAP ents al Cte Cag ex
Slide 51: Differences Between Core Earnings And GAAP
Differences Between Core Earnings And GAAP Quarters Ended ‘Core Earnings adjustments to GAAP: ‘Sep.30, Jun.30, Sep. 30, (Dolars in Mitions) 219 2019 2018 GAAP net income (oss) sus 3153 site Net impacto donvatve accountng 0 2 a "Net impact of goodwill and acquired intangible assets 6 " 2 Not income t
Slide 52: 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 portiolio stratiications by ust as of the cutot date ‘Accrued interest factors Quartery dist
Slide 53: Navient
NAVIENT.