Navient Corporation · NASDAQ:NAVI
Navient — Q4 2016 Earnings Presentation
73 slides from Navient's earnings presentation, Feb 27, 2017
Slide 1: 2016 4th Quarter Investor Deck
2016 4th Quarter Investor Deck February 27, 2017 Exhibit 99.1
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, 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, 2016 (the “2016 Form 10-K”),
Slide 3: Navient provides asset management and business processing services
Navient provides asset management and business processing services to 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. $111 billion education loan portfolio
Slide 4: Operating Results Core Earnings Basis
Operating Results “Core Earnings” Basis (In millions, except per share amounts) Q4 16 Q4 151 2016 20151 Adjusted Core EPS before regulatory-related costs and reserve for legal contingencies $0.47 $0.48 $1.89 $1.82 Regulatory-related costs ($0.00) ($0.01) ($0.04) ($0.03) Reserve for legal contingenci
Slide 5: High Quality, Well Seasoned Education Loan Portfolio
Largest holder of Private Education loans with over $23 billion outstanding Average recent FICO score of 720 95% of loans in repayment status having made more than 12 payments Annualized charge-off rate of 2.2% Charge-offs declined 22% or $146 million from the prior year Predicted to generate nearly
Slide 6: FFELP Loans Segment Core Earnings Basis
($ In millions) Q4 16 Q4 15 2016 2015 Net income $68 $71 $272 $308 Average FFELP Loans $88,914 $97,472 $92,497 $100,421 Net interest margin 0.89%1 0.84% 0.85%1 0.84% Provision for loan losses $13 $12 $43 $46 Charge-offs $12 $18 $54 $61 Annualized charge-off rate 0.07% 0.10% 0.07% 0.08% Total delinqu
Slide 7: FFELP Loans Segment Credit Quality
FFELP Loans Segment Credit Quality “Core Earnings” Basis (1) Loans for customers who may still be attending school or engaging in other permitted educational activities and are not yet required to make payments on their loans, e.g., residency periods for medical students or a grace period for bar ex
Slide 8: Private Education Loans Segment Core Earnings Basis
Private Education Loans Segment “Core Earnings” Basis ($ In millions) Q4 16 Q4 15 2016 2015 Net income $41 $56 $219 $233 Average Private Education Loans $24,237 $27,551 $25,361 $28,803 Net interest margin 3.08%1 3.61% 3.41%1 3.67% Provision for loan losses $87 $110 $383 $538 Charge-offs2 $130 $141 $
Slide 9: Private Education Loans Segment Credit Quality
Private Education Loans Segment Credit Quality “Core Earnings” Basis (1) Deferment includes customers who have returned to school or are engaged in other permitted educational activities and are not yet required to make payments on their loans, e.g., residency periods for medical students or a grace
Slide 10: Private Education Loan Charge-Off, Delinquency and FICO by Segment
715 718 721 723 725 635 641 647 654 660 707 712 715 718 720 550 600 650 700 750 2012 2013 2014 2015 2016 WAV Recent Winning FICO Traditional Non-Traditional Total Private Education Loans “Core Earnings” Basis Private Education Loan Charge-Off Rate by Segment Private Education Loan Total Delinquencie
Slide 11: Private Education Loans Segment Default Performance
Private Education Loans Segment Default Performance Private Education Loan Historical Defaults by Payments Made Private Education Loans Outstanding by Payments Made The average number of payments made on loans in the Private Education Loan Portfolio is 63 The probability of default substantially dim
Slide 12: Private Education Loan Seasoning – Quarter Ending December 31, 2016
Private Education Loan Seasoning – “Core Earnings” Basis Quarter Ending December 31, 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 1,271 Loans in Forbearance 205 1
Slide 13: Private Education Loan Seasoning – Quarter Ending December 31, 2015
Private Education Loan Seasoning – “Core Earnings” Basis Quarter Ending December 31, 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 1,859 Loans in Forbearance 292 1
Slide 14: Business Services Segment Core Earnings Basis
Business Services Segment “Core Earnings” Basis (In Millions) Q4 16 Q4 15 2016 2015 Net income $71 $81 $308 $338 Number of accounts serviced for Department of Education 6.2 6.3 6.2 6.3 Total federal loans serviced (in billions) $293 $288 $293 $288 Contingent collections receivables inventory (in bil
Slide 15: Business Processing Solutions
Business Processing Solutions Well-positioned to expand to additional clients and asset types Strong business franchise Capacity to process large volume of transactions and manage complex administrative requirements Robust compliance-driven culture driven by a “customer first” approach Industry lead
Slide 16: Business Services Segment Federal Loan Servicing
Business Services Segment Federal Loan Servicing
Slide 17: Higher Education Industry
Higher Education Industry
Slide 18: In Its Role As Student Loan Servicer, Navient Helps Borrowers Successfully Repay
In Its Role As Student Loan Servicer, Navient Helps Borrowers Successfully Repay Their Loans
Slide 19: The Majority Of Student Loan Balances Are Less Than $20,000
The Majority Of Student Loan Balances Are Less Than $20,000 College Board, "Distribution Of Borrowers By Amount Of Outstanding Education Debt, 2015,," Trends In Student Aid 2016, 10/26/16 Distribution Of Borrowers By Average Balance, 2015
Slide 20: On An Individual Basis, Student Debt Is More Reasonable Than May Be Evident
On An Individual Basis, Student Debt Is More Reasonable Than May Be Evident Source: College Board: Trends in Student Aid 2016, "Cumulative Debt: Bachelor’s Degree Recipients"; National Center for Education Statistics, "Degrees/certificates conferred by postsecondary institutions, by control of insti
Slide 21: The Borrowers Who Struggle The Most Are Often Non-Completers With Low Debt
The Borrowers Who Struggle The Most Are Often Non-Completers With Low Levels Of Debt Source: President's Council of Economic Advisors, "Investing In Higher Education: Benefits, Challenges, And The State Of Student Debt," July 2016 Note: Years are fiscal years. Loan size is based on balance of loan w
Slide 22: Recent College Graduates Have Seen Wages Increase Since The Great Recession
Source: Federal Reserve Bank Of New York, "The Labor Market for Recent College Graduates: Wages," last updated January 11, 2017. Notes: Annual wages are expressed in constant 2016 dollars. Recent college graduates are those aged 22 to 27 with a bachelor's degree only; high school graduates are those
Slide 23: Class Of 2015 Student Loan Delinquency Rates Lower Than Class Of 2010
Class Of 2015 Student Loan Delinquency Rates Approximately 3 Times Lower Than Class Of 2010 January 2010 To June 2016 Federal loan delinquency rates six months after end of grace period and unemployment for bachelor's degree holders Delinquency Rate (%) Unemployment Rate (%) Unemployment Source: Nav
Slide 24: Navient's Default Prevention Expertise Was A Key Factor In Decline Of Default Rate
Navient’s Default Prevention Expertise Was A Key Factor In The Decline Of The National Default Rate 2013 three-year cohort default rate The cohort default rate (CDR) measures the percent of borrowers who defaulted on a student loan within three years of entering repayment. In 2016, the Department of
Slide 25: The Benefits Of Obtaining A College Degree Outweigh The Costs
The Benefits Of Obtaining A College Degree Outweigh The Costs By A Wide Margin Source: Sandy Baum, Jennifer Ma, and Kathleen Payea, “Education Pays 2013,” College Board, 2013; Guillaume Vandenbroucke, “Lifetime Benefits of an Education Have Never Been So High,” St. Louis Fed, July 2015; Anthony Carn
Slide 26: Young Adults That Complete A College Degree Score Higher On Financial Health
Young Adults That Complete A College Degree Score Higher On Financial Health, Including Employment & Incomes College degree (associate or higher) No college degree $ Dollars ($) $ $ $ $ Financial health self-assessment Financial health index score Median personal income Employed part time Employed f
Slide 27: Overall, 4 In 10 Did Not Borrow For Their Education
Young adults between 28 and 30 years old, who were likely to have attended college during the Great Recession, borrowed more often (63 percent). At the same time, 22–24 year-olds – who were more likely to have attended college during the economic upturn that followed the recession and are likely to
Slide 28: Program Complexity Can Be Streamlined
Program Complexity Can Be Streamlined 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 Loan Debt Burden Teacher Loan Forgiv
Slide 29: Funding & Liquidity
Funding & Liquidity
Slide 30: 2016 Capital Markets Summary
Acquired $3.7 billion of education loans Issued seven FFELP ABS transactions totaling $5.8 billion FFELP ABS spreads improved 23 basis points or 17% from 2016-2 to 2016-7 Issued one Private Education Loan ABS transaction totaling $488 million Issued $1.3 billion of long-term unsecured debt Reduced o
Slide 31: Secured Funding Table
Secured Funding Table Source: J.P. Morgan, ABS volume priced as of December 31, 2016 1Santander includes Drive Auto Receivables Trust (“DRIVE”) and Chrysler Capital Auto Receivables Trust (“CCART”) deals Navient is among the largest issuers of ABS globally, having issued over $280 billion of Private
Slide 32: Recent FFELP ABS Transactions
NAVSL 2017-1 NAVSL 2016-7 Pricing Date: Settlement Date: February 8, 2017 February 16, 2017 October 26, 2016 November 3, 2016 Issuance Amount: $1,003M $896M Collateral: US Govt. Guaranteed FFELP Stafford, Plus and Consolidation Loans US Govt. Guaranteed FFELP Stafford, Plus and Consolidation Loans (
Slide 33: Recent Private Education Loan ABS Transactions
Recent Private Education Loan ABS Transactions Estimated based on a variety of assumptions concerning loan repayment behavior, as more fully described in the related prospectus, which may be obtained from the underwriters of these transactions. Actual average life may vary significantly from estimat
Slide 34: Managing Unsecured Debt Maturities
Managing Unsecured Debt Maturities Important to maintain our credit ratings to support ongoing access to the unsecured debt markets Manage tangible net asset ratio to a range of 1.2x to 1.3x 1.24x as of December 31, 2016 Reduced total unsecured maturities by $1.4 billion from a year ago to $13.9 bil
Slide 35: Conservative Unsecured Debt Profile
Conservative Unsecured Debt Profile December 31, 2006 December 31, 2010 December 31, 2016 Total Managed Student Loans $142.1 Billion $184.3 Billion $111.1 Billion Unsecured Debt Outstanding $48.7 Billion $20.1 Billion $13.9 Billion Tangible Equity Ratio 1.9% 2.2% 2.5% Tangible Net Asset Ratio 1.06x
Slide 36: Education Loan Portfolio Generates Significant Cash Flows
Projected Life of Loan Cash Flows over ~20 Years These projections are based on internal estimates and assumptions and are subject to ongoing review and modification. These projections may prove to be incorrect. Enhancing Cash Flows Education Loan Portfolio Generates Significant Cash Flows Generated
Slide 37: FFELP Cash Flows Highly Predictable
Total Cash Flows from Projected Excess Spread = $7.3 Billion Total Cash Flows from Projected Servicing Revenues = $3.1 Billion FFELP Cash Flows Highly Predictable Assumptions No Floor Income, CPR/CDR = 4% These projections are based on internal estimates and assumptions and are subject to ongoing re
Slide 38: Secured Cash Flow
Secured Cash Flow Note: Totals may not add due to rounding 1 Net residual represents excess distribution, net of payments on floor contracts and receipts from basis swaps
Slide 39: FFELP ABS
FFELP ABS
Slide 40: Optional Servicer Clean-Up Calls and Purchases
Exercise Optional Servicer Clean-Up Calls: In 2015, Navient exercised cleanup call options related to 12 FFELP ABS trusts totaling $1.1 billion of bonds outstanding. On August 30, 2016, announced the exercise of the optional servicer clean-up call for 2004-4 and 2004-7, causing $175 million of bonds
Slide 41: Disclosure of Loan Performance Data
Disclosure of Loan Performance Data: Enhanced our quarterly reporting spreadsheets for Navient-sponsored FFELP ABS trusts to provide additional information on: The level of enrollment in the IDR program The payments owed by FFELP loans enrolled in the IDR program The distribution of FFELP loans in d
Slide 42: Recent FFELP ABS Issuance Characteristics
Recent FFELP ABS Issuance Characteristics FFELP ABS Transaction Features Collateral Characteristics (1) Principal and accrued interest on underlying FFELP loan collateral carry insurance or guarantee of 97%-100% dependent on origination year and on meeting the servicing requirements of the U.S. Depa
Slide 43: FFELP Loan Program Characteristics
FFELP Loan Program Characteristics (1) Only on the subsidized portion of the loan (2) Only applies for loans made between July 1, 1987 through January 1, 2000 if cap is reached (3) Aggregate loan limit for a Dependent Undergraduate is $31,000 (4) Repayment Term may be extended through various repaym
Slide 44: 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 Loan program Prepayments increased beginning
Slide 45: Navient Consolidation Loan Prepayments
CPRs for Consolidation ABS trusts declined significantly following legislation effective in 2006 that prevented in-school and re-consolidation of a borrowers’ loans Higher prepayment activity in mid-2012 was related to the short term availability of the Special Direct Consolidation Loan program Navi
Slide 46: Private Education Loan ABS
Private Education Loan ABS
Slide 47: Recent Private Education Loan ABS Issuance Characteristics
Recent Private Education Loan ABS Issuance Characteristics Private Education Loan ABS Transaction Features Collateral Characteristics Issue size of $250M to $750M Triple-A rated senior notes, Single-A rated subordinated notes 20-40% Triple-A overcollateralization Amortizing tranches with 1 to 10 yea
Slide 48: Navient Private Education Loan Programs
Navient Private Education Loan Programs Smart Option Undergraduate/Graduate/ Med/Law/MBA Direct-to-Consumer (DTC) Consolidation Career Training Origination Channel School School Direct-to-Consumer Lender School Typical Borrower Student Student Student College Graduates Student Typical Co-signer Pare
Slide 49: Navient Private Education Trusts
Navient Private Education Trusts (1) Assumes Prime/LIBOR spread of 3.00% for all transactions. Summary Information SLM 11-A SLM 11-B SLM 11-C SLM 12-A SLM 12-B SLM 12-C SLM 12-D SLM 12-E SLM 13-A SLM 13-B SLM 13-C SLM 14-A NAV 14-CT NAV 14-A NAV 15-A NAV 15-B NAV 15-C NAV 16-A Bond Amount ($mil) 562
Slide 50: Navient Portfolio Transition to Seasoned Collateral
Navient Portfolio Transition to Seasoned Collateral Securitized collateral will continue to season given the company transitioned from originations to portfolio acquisition and management Most defaults occur early in repayment; loan performance improves as loans season As of December 2016, the priva
Slide 51: Navient Private Education Loan Trusts – Prepayment Analysis
Constant prepayment rates increased in 2007 due to the introduction of Private Education Consolidation loans, then declined following our decision to suspend our consolidation loan program in 2008 Navient Private Education Loan Trusts – Prepayment Analysis
Slide 52: Cohort default triangles: loan performance information
The following cohort default triangles provide loan performance information for certain Private Education Loans of Navient Corporation and its consolidated subsidiaries that such subsidiaries’ securitization criteria (including those criteria listed below): Program types include Undergraduate/Gradua
Slide 53: Cohort default triangle terms and calculations
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 repayment Disbursed Principal En
Slide 54: Cohort Default Triangles
Cohort Default Triangles Note: Data as of 12/31/16. Undergraduate/Graduate loans marketed under the Signature Student Loan brand. Periodic Defaults for the most recent calendar Year in Repayment are for a partial year. Numerator is the amount of principal in each cohort that defaulted in each Year i
Slide 55: Cohort Default Triangles – With Co-signer
Cohort Default Triangles Undergraduate/Graduate(1) With Co-signer Note: Data as of 12/31/16. Undergraduate/Graduate loans marketed under the Signature Student Loan brand. Periodic Defaults for the most recent calendar Year in Repayment are for a partial year. Numerator is the amount of principal in
Slide 56: Cohort Default Triangles – Without Co-signer
Cohort Default Triangles Undergraduate/Graduate(1) Without Co-signer Note: Data as of 12/31/16. Undergraduate/Graduate loans marketed under the Signature Student Loan brand. Periodic Defaults for the most recent calendar Year in Repayment are for a partial year. Numerator is the amount of principal
Slide 57: Cohort Default Triangles – Non-Profit
Cohort Default Triangles Note: Data as of 12/31/16. Undergraduate/Graduate loans marketed under the Signature Student Loan brand. Periodic Defaults for the most recent calendar Year in Repayment are for a partial year. Numerator is the amount of principal in each cohort that defaulted in each Year i
Slide 58: Cohort Default Triangles – For-Profit
Cohort Default Triangles Note: Data as of 12/31/16. Undergraduate/Graduate loans marketed under the Signature Student Loan brand. Periodic Defaults for the most recent calendar Year in Repayment are for a partial year. Numerator is the amount of principal in each cohort that defaulted in each Year i
Slide 59: Cohort Default Triangles – FICO 740-850
Cohort Default Triangles Undergraduate/Graduate(1) Loans, FICO 740-850(2) Note: Data as of 12/31/16. Undergraduate/Graduate loans marketed under the Signature Student Loan brand. FICO scores are based on the greater of the borrower and co-borrower scores as of a date near the loan application. Perio
Slide 60: Cohort Default Triangles – FICO 700-739
Cohort Default Triangles Undergraduate/Graduate(1) Loans, FICO 700-739(2) Note: Data as of 12/31/16. Undergraduate/Graduate loans marketed under the Signature Student Loan brand. FICO scores are based on the greater of the borrower and co-borrower scores as of a date near the loan application. Perio
Slide 61: Cohort Default Triangles – FICO 670-699
Cohort Default Triangles Note: Data as of 12/31/16. Undergraduate/Graduate loans marketed under the Signature Student Loan brand. FICO scores are based on the greater of the borrower and co-borrower scores as of a date near the loan application. Periodic Defaults for the most recent calendar Year in
Slide 62: Cohort Default Triangles – FICO 640-669
Cohort Default Triangles Note: Data as of 12/31/16. Undergraduate/Graduate loans marketed under the Signature Student Loan brand. FICO scores are based on the greater of the borrower and co-borrower scores as of a date near the loan application. Periodic Defaults for the most recent calendar Year in
Slide 63: Cohort Default Triangles – Private Consolidation Loans
Cohort Default Triangles Private Consolidation Loans Without Co-signer Private Consolidation Loans With Co-signer Note: Data as of 12/31/16. Periodic Defaults for the most recent calendar Year in Repayment are for a partial year. Numerator is the amount of principal in each cohort that defaulted in
Slide 64: Cohort Default Triangles – DTC With and Without Co-signer
Cohort Default Triangles Note: Data as of 12/31/16. Periodic Defaults for the most recent calendar Year in Repayment are for a partial year. Numerator is the amount of principal in each cohort that defaulted in each Year in Repayment. Denominator is the amount of disbursed principal for that Repayme
Slide 65: Cohort Default Triangles – DTC FICO 740-850 and 700-739
Cohort Default Triangles Note: Data as of 12/31/16. FICO scores are based on the greater of the borrower and co-borrower scores as of a date near the loan application. Periodic Defaults for the most recent calendar Year in Repayment are for a partial year. Numerator is the amount of principal in eac
Slide 66: Cohort Default Triangles – DTC FICO 670-699 and 640-669
Cohort Default Triangles Note: Data as of 12/31/16. FICO scores are based on the greater of the borrower and co-borrower scores as of a date near the loan application. Periodic Defaults for the most recent calendar Year in Repayment are for a partial year. Numerator is the amount of principal in eac
Slide 67: Cohort Default Triangles – Career Training Loans
Cohort Default Triangles Note: Data as of 12/31/16. FICO scores are based on the greater of the borrower and co-borrower scores as of a date near the loan application. Periodic Defaults for the most recent calendar Year in Repayment are for a partial year. Numerator is the amount of principal in eac
Slide 68: Navient Corporation Appendix
Navient Corporation Appendix
Slide 69: GAAP Results
GAAP Results (In millions, except per share amounts) Q4 16 Q4 15 2016 2015 Net income $145 $283 $681 $984 EPS $0.48 $0.73 $2.12 $2.58 Operating expenses $246 $235 $951 $918 Provision $102 $120 $429 $581 Average Student Loans $113,151 $125,023 $117,858 $129,224
Slide 70: Correction of an Immaterial Error in Prior Periods Related to FFELP Loan Provision
Correction of an Immaterial Error in Prior Periods Related to FFELP Loan Provision for Loan Losses Quarter Ended Year Ended Year Ended Dollars in Millions Dec. 31, 2015 Dec. 31, 2015 Dec. 31, 2014 Increase to FFELP Loan charge-offs and provision for loan losses1 $5 $20 $19 After-tax reduction to net
Slide 71: Differences between Core Earnings and GAAP
Differences between “Core Earnings” and GAAP Quarters Ended Years Ended “Core Earnings” adjustments to GAAP: Dec. 31, 2016 Dec. 31, 2015 Dec. 31, 2016 Dec. 31, 2015 GAAP net income $145 $283 $681 $984 Net impact of derivative accounting (50) (186) (212) (543) Net impact of goodwill and acquired inta
Slide 72: Investor Relations Website
Investor Relations Website 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 distribution factors Historical trust performan
Slide 73: Navient
NAVIENT.