Navient(NAVI) - 2025 Q2 - Quarterly Results

Financial Highlights Overall Results Navient's Q2 2025 GAAP net income was $14 million, Core Earnings $21 million, impacted by higher loan loss provisions despite strong loan origination Q2 2025 Overall Results | Metric | Value | Diluted EPS | | :--- | :--- | :--- | | GAAP Net Income | $14 million | $0.13 | | Core Earnings (Non-GAAP) | $21 million | $0.20 | - GAAP and Core Earnings included a provision for loan losses of $37 million, a $23 million increase from Q2 2024, due to increased originations, a weakening macroeconomic forecast, higher delinquencies, and the extension of the FFELP portfolio[2] - CEO David Yowan noted strong loan origination growth, with over $1 billion in the first half of 2025, nearly double the same period last year, and the company is on track to meet its expense reduction targets[2] Second-Quarter Highlights Q2 2025 highlights include $30 million net income for Federal Education Loans, $500 million in private loan originations, and $24 million in share repurchases Q2 2025 Segment & Capital Highlights | Category | Highlight | Value | | :--- | :--- | :--- | | Federal Education Loans | Net Income | $30 million | | | Net Interest Margin | 0.70% | | Consumer Lending | Net Income | $26 million | | | Private Education Loan Originations | $500 million | | Business Processing | Status | No longer provides services after Feb 2025 sale | | Capital & Funding | Share Repurchases | $24 million | | | Common Stock Dividends Paid | $16 million | | | Unsecured Debt Issued | $500 million | | Operating Expenses | Total | $100 million | Segment Performance Federal Education Loans Federal Education Loans reported Q2 2025 net income of $30 million, driven by higher net interest income from reduced prepayments, despite increased loan loss provisions Federal Education Loans Financial Metrics (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Income | $30 million | $28 million | | Net Interest Income | $55 million | $33 million | | Segment Net Interest Margin | 0.70% | 0.36% | | Provision for Loan Losses | $8 million | $(2) million | | >90-days Delinquency Rate | 10.1% | 7.0% | | Ending FFELP Loans, net | $29.6 billion | $32.9 billion | - Net interest income increased by $22 million YoY, mainly because of lower premium amortization as prepayments fell sharply from $2.5 billion to $228 million[6] - The provision for loan losses increased by $10 million YoY, primarily due to a rise in delinquency balances[6] Consumer Lending Consumer Lending net income declined to $26 million in Q2 2025 due to lower net interest income and higher loan loss provisions, despite strong loan origination growth Consumer Lending Financial Metrics (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Income | $26 million | $60 million | | Private Education Loan Originations | $500 million | $278 million | | Net Interest Income | $95 million | $126 million | | Segment Net Interest Margin | 2.32% | 2.89% | | Provision for Loan Losses | $29 million | $16 million | | >90-days Delinquency Rate | 3.0% | 2.2% | - Net interest income fell by $31 million YoY, attributed to the paydown of the loan portfolio and increased reserves for accrued interest on delinquent loans[9] - The provision for loan losses increased by $13 million YoY, with the current quarter's provision including $7 million for new originations and $22 million for a general reserve build, prompted by higher delinquencies and a weaker macroeconomic forecast[9] Business Processing The Business Processing segment reported no Q2 2025 revenue or net income following strategic divestitures of its government and healthcare services businesses Business Processing Financial Metrics (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Total Revenue | $— | $81 million | | Net Income | $— | $15 million | | EBITDA | $— | $20 million | - Navient no longer provides business processing services following the sale of its government services business in February 2025[12] - Transition services for the sold healthcare business ended in May 2025, while those for the government services business are expected to be mostly finished by the end of 2025[12] Financial Statements and Analysis Selected Historical Financial Information Key financial data shows Q2 2025 GAAP net income at $14 million, a decline from Q2 2024, with the total education loan portfolio decreasing to $45.1 billion Selected Historical Financial Data (in millions, except per share) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | GAAP Net Income | $14 | $36 | $11 | $109 | | GAAP Diluted EPS | $0.13 | $0.32 | $0.11 | $0.97 | | Core Earnings Net Income | $21 | $33 | $47 | $86 | | Core Earnings Diluted EPS | $0.20 | $0.29 | $0.46 | $0.77 | | Ending Total Education Loans, net | $45,148 | $49,178 | $45,148 | $49,178 | GAAP Financial Statements GAAP financial statements show total assets decreased to $50.2 billion and liabilities to $47.7 billion, with Q2 2025 net income at $14 million due to higher loan loss provisions and lower revenue GAAP Income Statement Q2 2025 GAAP net income decreased 61% to $14 million, primarily due to increased loan loss provisions and reduced asset recovery revenue, partially offset by lower expenses GAAP Income Statement Summary (in millions) | Line Item | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $128 | $130 | $258 | $282 | | Provisions for Loan Losses | $37 | $14 | $67 | $26 | | Total Other Income | $28 | $117 | $53 | $252 | | Total Expenses | $101 | $185 | $232 | $372 | | Net Income | $14 | $36 | $11 | $109 | GAAP Balance Sheet As of June 30, 2025, total assets decreased to $50.2 billion and total liabilities to $47.7 billion, primarily due to reductions in loan portfolios and long-term borrowings GAAP Balance Sheet Summary (in millions) | Line Item | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Total Assets | $50,222 | $56,622 | | FFELP Loans, net | $29,618 | $32,940 | | Private Education Loans, net | $15,530 | $16,238 | | Total Liabilities | $47,658 | $53,874 | | Long-term borrowings | $42,345 | $47,545 | | Total Equity | $2,564 | $2,748 | GAAP Comparison of Results The year-over-year decline in GAAP net income for Q2 and H1 2025 was primarily due to higher loan loss provisions and reduced revenue from divested businesses, partially offset by lower expenses Three Months Ended June 30, 2025 vs. 2024 Q2 2025 GAAP net income decreased to $14 million, driven by increased loan loss provisions and lower revenue from divested businesses, partially offset by reduced operating and restructuring expenses - Provisions for loan losses increased by $23 million, with a $10 million increase for FFELP Loans and a $13 million increase for Private Education Loans[28] - Asset recovery and business processing revenue decreased by $81 million due to the sale of the healthcare and government services businesses[28] - Operating expenses decreased by $66 million, largely due to the business sales, and restructuring expenses also decreased by $16 million[28] Six Months Ended June 30, 2025 vs. 2024 H1 2025 net income sharply declined to $11 million, primarily due to increased loan loss provisions, reduced revenue from sold businesses, and lower derivative gains, partially offset by decreased operating expenses - Provisions for loan losses increased by $41 million, with a $17 million increase for FFELP Loans and a $24 million increase for Private Education Loans[31] - Asset recovery and business processing revenue decreased by $135 million due to business sales[31] - Net gains on derivative and hedging activities decreased by $76 million due to interest rate fluctuations[31] - Operating expenses decreased by $123 million, primarily from the business sales[31] Credit Quality and Allowance for Loan Losses Private Education Loan delinquency rates increased, with over 90-day delinquencies at 3.0%, while the total allowance for loan losses stood at $530 million with a $37 million provision for the quarter Private Education Loan Portfolio Performance Private Education Loan portfolio credit quality deteriorated, with total delinquencies over 30 days increasing to 6.4% and over 90 days to 3.0% of loans in repayment Private Education Loan Delinquency and Forbearance | Status | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Delinquencies as a % of Loans in Repayment | | | | 31-90 days | 3.4% | 3.0% | | > 90 days | 3.0% | 2.2% | | Total > 30 days | 6.4% | 5.2% | | Forbearance Rate | 1.6% | 1.8% | Allowance for Loan Losses Q2 2025 total provision for loan losses was $37 million, with net charge-offs of $88 million, resulting in an ending allowance of $530 million Allowance for Loan Losses Roll-Forward - Q2 2025 (in millions) | Description | FFELP Loans | Private Education Loans | Total | | :--- | :--- | :--- | :--- | | Allowance at beginning of period | $182 | $397 | $579 | | Total provision | $8 | $29 | $37 | | Net charge-offs | $(8) | $(80) | $(88) | | Allowance at end of period (GAAP) | $182 | $348 | $530 | Liquidity and Capital Resources Navient maintains liquidity through cash, operating flows, and capital markets, with primary liquidity at $1.3 billion and $1.9 billion in secured credit facilities, while repurchasing $24 million in shares - Ongoing liquidity needs include repaying $0.5 billion of short-term and $4.8 billion of long-term senior unsecured notes, funding loan originations, and share repurchases[41][42] Sources of Liquidity (in millions) | Source | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Primary Liquidity | | | | Unrestricted cash | $712 | $1,088 | | Unencumbered Loans | $561 | $486 | | Total Primary Liquidity | $1,273 | $1,574 | | Additional Liquidity (Capacity) | | | | Secured Credit Facilities | $1,944 | $2,504 | - The company repurchased 1.9 million shares for $24 million in Q2 2025 and has $52 million of unused share repurchase authority remaining[42] Non-GAAP Financial Measures Core Earnings Core Earnings, a non-GAAP measure, adjusts GAAP results for derivative volatility and goodwill, with Q2 2025 Core Earnings at $21 million, $7 million higher than GAAP net income - Core Earnings are used by management to evaluate performance by removing volatility from two main items: mark-to-market gains/losses on derivatives and the accounting for goodwill and acquired intangible assets[51] Reconciliation of GAAP Net Income to Core Earnings (in millions) | Description | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | GAAP Net Income (Loss) | $14 | $(2) | $36 | | Net impact of derivative accounting | $8 | $39 | $(8) | | Net impact of goodwill/intangibles | $1 | $1 | $3 | | Net tax effect | $(2) | $(12) | $2 | | Total Core Earnings Adjustments | $7 | $28 | $(3) | | Core Earnings Net Income | $21 | $26 | $33 | Tangible Equity and Adjusted Tangible Equity Ratio The Adjusted Tangible Equity Ratio, a non-GAAP metric, was 9.8% as of June 30, 2025, indicating a stronger capital position relative to non-FFELP assets compared to the prior year Adjusted Tangible Equity Ratio Calculation | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Adjusted Tangible Equity | $1,980 M | $2,001 M | $1,893 M | | Adjusted Tangible Assets | $20,168 M | $20,269 M | $22,992 M | | Adjusted Tangible Equity Ratio | 9.8% | 9.9% | 8.2% | EBITDA (Business Processing Segment) The Business Processing segment reported no Q2 2025 revenue or EBITDA following divestitures, compared to $20 million EBITDA and 25% margin in Q2 2024 Business Processing Segment EBITDA (in millions) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Core Earnings Pre-tax Income | $— | $19 | | Depreciation & Amortization | $— | $1 | | EBITDA | $— | $20 | | EBITDA Margin | —% | 25% | Allowance for Loan Losses (Non-GAAP) Navient's non-GAAP Private Education Loan allowance, excluding future recoveries, was $520 million (3.3% coverage) as of June 30, 2025, compared to $348 million (2.2% coverage) on a GAAP basis - This non-GAAP measure excludes the $172 million of expected future recoveries on previously charged-off loans to better reflect the current expected credit losses on the existing $15.9 billion loan portfolio[79] Private Education Loan Allowance Metrics (Non-GAAP vs. GAAP) - Q2 2025 | Metric | GAAP | Non-GAAP | | :--- | :--- | :--- | | Allowance at end of period | $348 M | $520 M | | Allowance as a % of total loans | 2.2% | 3.3% | | Allowance as a % of loans in repayment | 2.3% | 3.4% |