NAVIENT REPORTS FOURTH-QUARTER   

2024 FINANCIAL RESULTS   

4Q24

OVERALL

RESULTS

•   GAAP net income of $24 million ($0.22 diluted earnings per share).

•   Core Earnings(1) loss of $25 million ($0.24 diluted loss per share).

4Q24

SIGNIFICANT

ITEMS

•   GAAP and Core Earnings results included a net reduction to pre-tax income of $68 million ($0.49 diluted loss per share) comprised of the following items:

○   A loss of $28 million ($0.20 diluted loss per share) resulting from the classification of our government services business as held for sale.

○   $32 million ($0.23 diluted loss per share) of Private Education Loan provision for loan losses in connection with a general reserve build and lowering the expected recovery rate on defaulted loans.

○   $8 million ($0.06 diluted loss per share) of regulatory-related and restructuring expenses.

2024

FULL YEAR

RESULTS

•   GAAP net income of $131 million ($1.18 diluted earnings per share).

•   Core Earnings(1) of $221 million ($2.00 diluted earnings per share).

FOURTH-QUARTER HIGHLIGHTS

FEDERAL

EDUCATION

LOANS SEGMENT

•   Net income of $10 million.

•   Net interest margin of 0.43%.

•   FFELP Loan prepayments of $322 million compared to $1.2 billion in fourth-quarter 2023.

CONSUMER LENDING

SEGMENT

•   Net income of $37 million.

•   Net interest margin of 2.77%.

•   Originated $363 million of Private Education Loans.

BUSINESS

PROCESSING

SEGMENT

•   Fee revenue of $43 million.

•   Entered into an agreement on December 19, 2024 to sell the government services businesses, which constitute the remainder of the Business Processing segment. This resulted in a $28 million loss being recognized as a result of the classification of the business as held for sale and adjusting the basis to the expected sales price. We expect to close on this transaction in first-quarter 2025.

•   GAAP equity-to-asset ratio of 5.1% and adjusted tangible equity ratio(1) of 10.0%.

•   Repurchased $65 million of common shares. $111 million common share repurchase authority remains outstanding.

•   Paid $17 million in common stock dividends.

•   Retired $500 million of unsecured debt.

OPERATING

EXPENSES

•   Operating expenses of $143 million, excluding $3 million of regulatory-related expenses.

Item is a non-GAAP financial measure. For a description and reconciliation, see “Non-GAAP Financial Measures” on pages 18 – 28.

SEGMENT RESULTS — CORE EARNINGS

 FEDERAL EDUCATION LOANS

In this segment, Navient owns and manages a portfolio of FFELP federally guaranteed student loans.

(Dollars in millions)

Net interest income

Provision for loan losses

Other revenue

Total revenue

Expenses

Pre-tax income

Net income

Segment net interest margin

FFELP Loans:

FFELP Loan spread

Provision for loan losses

Net charge-offs

Net charge-off rate

Greater than 30-days delinquency rate

Greater than 90-days delinquency rate

Forbearance rate

Average FFELP Loans

Ending FFELP Loans, net

Net income was $10 million compared to $63 million.

Net interest income decreased $53 million primarily due to the maturity of Floor Income hedges related to the portfolio, the impact of decreasing interest rates on the different index resets for the segment’s assets and debt, and the paydown of the loan portfolio which included a decrease in prepayments from $1.2 billion in the year-ago quarter to $322 million in the current quarter.

Provision for loan losses increased $2 million. The $7 million of provision for loan losses in the current period was primarily the result of an increase in delinquency balances. The $5 million of provision for loan losses in the year-ago period was primarily a result of the continued extension of the portfolio.

Net charge-offs were $7 million compared to $10 million.

Delinquencies greater than 90 days were $2.2 billion compared to $2.3 billion.

Forbearances were $4.4 billion compared to $6.1 billion.

Expenses were $3 million higher primarily as a result of transitioning servicing of our portfolio to a third party on July 1, 2024. As expected, for consolidated Navient (across the Federal Education Loans, Consumer Lending and Other segments), there was a $1 million increase in costs (net of transition services revenue earned) in the current quarter as a result of this transition. Over the remaining life of the portfolio, we expect a significant overall cost savings to be realized.

Other revenue decreased $12 million primarily as a result of lower late fees and third-party servicing fees.

(Dollars in millions)

Net interest income

Provision for loan losses

Other revenue

Total revenue

Expenses

Pre-tax income

Net income

Segment net interest margin

Private Education Loans (including Refinance Loans):

Private Education Loan spread

Provision for loan losses

Net charge-offs(1)

Net charge-off rate(1)

Greater than 30-days delinquency rate

Greater than 90-days delinquency rate

Forbearance rate

Average Private Education Loans

Ending Private Education Loans, net

Private Education Refinance Loans:

Net charge-offs

Greater than 90-days delinquency rate

Average Private Education Refinance Loans

Ending Private Education Refinance Loans, net

Private Education Refinance Loan originations

Fourth-quarter 2024 and third-quarter 2024 exclude $2 million and $21 million, respectively, of charge-offs on the expected future recoveries of previously fully charged-off loans that occurred as a result of increasing the net charge-off rate on defaulted loans.

Originated $363 million of Private Education Loans compared to $223 million, up 63%.

Refinance Loan originations were $322 million compared to $191 million.

In-school loan originations were $41 million compared to $32 million.

Net income was $37 million compared to $46 million.

Net interest income decreased $17 million primarily due to the paydown of the loan portfolio.

Provision for loan losses decreased $12 million. The provision of $38 million in the current quarter included $6 million in connection with loan originations, $18 million related to lowering the expected recovery rate on defaulted loans and $14 million related to a general reserve build (primarily as a result of an increase in delinquency balances). The provision for loan losses of $50 million in the year-ago period included $4 million in connection with loan originations, $35 million related to internal policy changes in response to changing regulatory expectations related to school misconduct discharges on certain populations of private loans, and $11 million related to a general reserve build.

Excluding the $2 million related to the change in the net charge-off rate on defaulted loans in fourth-quarter 2024, net charge-offs were $71 million, up $7 million from $64 million.

Private Education Loan delinquencies greater than 90 days: $419 million, up $39 million from $380 million.

Private Education Loan forbearances: $422 million, up $59 million from $363 million.

Expenses increased $6 million primarily as a result of higher marketing spend associated with higher loan origination volume.

BUSINESS PROCESSING

In this segment, Navient performs business processing services for non-education related government clients.

(Dollars in millions)

Revenue from government services

Revenue from healthcare services

Total fee revenue

Gain (loss) on sale of subsidiaries

Total revenue

Expenses

Pre-tax income (loss)

Net income (loss)

EBITDA(1)

EBITDA margin(1)

Item is a non-GAAP financial measure. For a description and reconciliation, see “Non-GAAP Financial Measures” on pages 18 – 28.

Net loss was $20 million compared to net income of $8 million.

Gain (loss) on sale of subsidiaries was a $28 million loss in the current period as a result of entering into an agreement to sell our government services businesses on December 19, 2024, resulting in the classification of the business as held for sale and adjusting the basis to the expected sales price. The third quarter’s $219 million gain related to the sale of our healthcare services business.

Fee revenue was $43 million, $38 million lower primarily due to the sale of our healthcare services business last quarter. The $30 million decrease in expenses was primarily due to the sale as well.

EBITDA was $(25) million, down $37 million primarily as a result of the items discussed above.

EBITDA margin was (167)%, down from 15%, primarily as a result of the items discussed above.

Paul Hartwick, 302-283-4026, paul.hartwick@navient.com

Jen Earyes, 703-984-6801, jen.earyes@navient.com

 SELECTED HISTORICAL FINANCIAL INFORMATION AND RATIOS

QUARTERS ENDED

YEARS ENDED

(In millions, except per share data)

GAAP Basis

Net income (loss)

Diluted earnings (loss) per common share

Weighted average shares used to compute diluted earnings per share

Return on assets

Core Earnings Basis(1)

Net income (loss)(1)

Diluted earnings (loss) per common share(1)

Weighted average shares used to compute diluted earnings per share

Net interest margin, Federal Education Loan segment

Net interest margin, Consumer Lending segment

Return on assets

Education Loan Portfolios

Ending FFELP Loans, net

Ending Private Education Loans, net

Ending total education loans, net

Average FFELP Loans

Average Private Education Loans

Average total education loans

Item is a non-GAAP financial measure. For a description and reconciliation, see “Non-GAAP Financial Measures” on pages 18 – 28.

 RESULTS OF OPERATIONS

 GAAP INCOME STATEMENTS (UNAUDITED)

(In millions, except per share data)

Interest income:

FFELP Loans

Private Education Loans

Cash and investments

Total interest income

Total interest expense

Net interest income

Less: provisions for loan losses

Net interest income after provisions for loan losses

Other income (loss):

Servicing revenue

Asset recovery and business processing revenue

Other income

Gain (loss) on sale of subsidiaries

Losses on debt repurchases

Gains (losses) on derivative and hedging activities, net

Total other income (loss)

Expenses:

Operating expenses

Goodwill and acquired intangible asset impairment and amortization expense

Restructuring/other reorganization expenses

Total expenses

Income (loss) before income tax expense (benefit)

Income tax expense (benefit)

Net income (loss)

Basic earnings (loss) per common share

Diluted earnings (loss) per common share

Dividends per common share

(In millions, except per share data)

Interest income:

FFELP Loans

Private Education Loans

Cash and investments

Total interest income

Total interest expense

Net interest income

Less: provisions for loan losses

Net interest income after provisions for loan losses

Other income (loss):

Servicing revenue

Asset recovery and business processing revenue

Other income

Gain (loss) on sale of subsidiaries

Losses on debt repurchases

Gains (losses) on derivative and hedging activities, net

Total other income (loss)

Expenses:

Operating expenses

Goodwill and acquired intangible asset impairment and amortization expense

Restructuring/other reorganization expenses

Total expenses

Income before income tax expense

Income tax expense

Net income

Basic earnings per common share

Diluted earnings per common share

Dividends per common share

 GAAP BALANCE SHEETS (UNAUDITED)

(In millions, except share and per share data)

Assets

FFELP Loans (net of allowance for loan losses of $180, $180 and $215, respectively)

Private Education Loans (net of allowance for loan losses of $441, $471 and $617, respectively)

Investments

Cash and cash equivalents

Restricted cash and cash equivalents

Goodwill and acquired intangible assets, net

Other assets

Total assets

Liabilities

Short-term borrowings

Long-term borrowings

Other liabilities

Total liabilities

Commitments and contingencies

Equity

Series A Participating Preferred Stock, par value $0.20 per share; 2 million shares authorized; no shares issued or outstanding

Common stock, par value $0.01 per share; 1.125 billion shares authorized: 465 million, 465 million and 464 million shares, respectively, issued

Additional paid-in capital

Accumulated other comprehensive income (loss), net of tax

Retained earnings

Total stockholders’ equity before treasury stock

Less: Common stock held in treasury: 362 million, 358 million and 350 million shares, respectively

Total equity

Total liabilities and equity

 GAAP COMPARISON OF 2024 RESULTS WITH 2023

Net interest income decreased by $25 million primarily as a result of the paydown of the FFELP and Private Education Loan portfolios, the maturity of Floor Income hedges related to the FFELP Loan portfolio, and the impact of decreasing interest rates on the different index resets for the FFELP Loan assets and debt. This was partially offset by a $33 million increase in mark-to-market gains on fair value hedges recorded in interest expense.

Provisions for loan losses decreased $10 million from $55 million to $45 million:

The provision for FFELP Loan losses increased $2 million from $5 million to $7 million.

The provision for Private Education Loan losses decreased $12 million from $50 million to $38 million.

Asset recovery and business processing revenue decreased $38 million primarily as a result of the sale of our healthcare services business in the third quarter ($30 million of the decrease), as well as a decrease in our government services revenue primarily related to congressional funding not being approved to continue performing services under a particular contract.

Gain (loss) on sale of subsidiaries was a $28 million loss in the current period as a result of our entering into an agreement on December 19, 2024 to sell our government services businesses, resulting in the classification of the business as held for sale and adjusting the basis to the expected sales price. We expect to close on this transaction in first-quarter 2025.

Losses on debt repurchases decreased $8 million. We repurchased $850 million of debt at an $8 million loss in the year-ago quarter. There were no debt repurchases in the current quarter.

Net gains on derivative and hedging activities increased $92 million, primarily due to interest rate fluctuations. Valuations of derivative instruments fluctuate based upon many factors including changes in interest rates and other market factors. As a result, net gains and losses on derivative and hedging activities may vary significantly in future periods.

Operating expenses decreased $53 million, primarily due to a $27 million decrease in regulatory expense. The year-ago period had $28 million of regulatory-related expense recorded in connection with the $120 million settlement agreement entered into with the CFPB in September 2024. In addition, there was a $30 million decline in the business processing segment expenses primarily as a result of the sale of our healthcare services business in the third quarter ($22 million of the decrease) and the government services contract discussed above.

Restructuring and other reorganization expenses increased $3 million primarily due to an increase in severance-related costs. The current period’s restructuring and other reorganization expenses of $5 million included $4 million of severance-related costs in connection with the various strategic initiatives being implemented to simplify the company, reduce our expense base and enhance our flexibility.

The effective income tax rates for the current and year-ago quarters were 9% and 23%, respectively. The decrease in the effective income tax rate this year was primarily driven by the recognition of a deferred tax asset for the difference between the book basis and tax basis of our government services business that was classified as held for sale in the current period. This decrease in the effective income tax rate was partially offset by

changes in the valuation allowance attributable to the deferred tax asset for state net operating loss carryovers in the current period.

Net interest income decreased by $326 million primarily as a result of the paydown of the FFELP and Private Education Loan portfolios. In particular, the FFELP Loan portfolio experienced a $2.3 billion increase in prepayments ($5.4 billion in 2024 compared with $3.1 billion in 2023), primarily as a result of the Department of Education’s proposed debt relief regulations. The current period’s increase in prepayments resulted in the write-off of an additional $27 million of loan premium compared to 2023. Additionally, the year-ago period had a $48 million benefit related to a decrease in the speed of loan premium amortization in connection with the continued extension of a portion of the FFELP Loan portfolio. These two items resulted in premium amortization being $75 million higher in 2024 compared to 2023. There was also a decrease in net interest income due to the maturity of Floor Income hedges related to the FFELP Loan portfolio as well as the impact of increasing interest rates on the different index resets for the FFELP Loan assets and debt. These decreases were partially offset by a $51 million increase in mark-to-market gains on fair value hedges recorded in interest expense.

Provisions for loan losses decreased $10 million, from $123 million to $113 million:

The provision for FFELP Loan losses decreased $55 million from $56 million to $1 million.

The provision for Private Education Loan losses increased $45 million from $67 million to $112 million.

Asset recovery and business processing revenue decreased $50 million primarily as a result of the sale of our healthcare services business in the third quarter ($33 million of the decrease), as well as a decrease in our government services revenue primarily related to congressional funding not being approved to continue performing services under a particular contract.

Gain (loss) on sale of subsidiaries was a $191 million net gain in the current period as a result of the $219 million gain on sale of our healthcare services business in the third quarter and the $28 million loss in the fourth quarter as a result of our entering into an agreement on December 19, 2024 to sell our government services businesses, resulting in the classification of the business as held for sale and adjusting the basis to the expected sales price. We expect to close on this transaction in first-quarter 2025.

Losses on debt repurchases decreased $8 million. We repurchased $850 million of debt at an $8 million loss in 2023. There were no debt repurchases in the current period.

Net gains on derivative and hedging activities increased $59 million primarily due to interest rate fluctuations. Valuations of derivative instruments fluctuate based upon many factors including changes in interest rates and

other market factors. As a result, net gains and losses on derivative and hedging activities may vary significantly in future periods.

Operating expenses decreased $120 million primarily due to a $57 million decrease in the business processing segment expenses primarily as a result of the sale of our healthcare services business in the third quarter ($33 million of the decrease) and the government services contract discussed above. In addition, there was a $37 million decrease in regulatory costs primarily related to CFPB matters, as well as lower in-school loan marketing spend as a result of improved marketing efficiencies.

Goodwill and acquired intangible asset impairment and amortization expense increased by $136 million as a result of a $138 million impairment recognized in the third quarter related to our government services business. The impairment was recognized primarily as a result of being informed in September that a contract that represents a significant portion of Government Services net income would not be renewed in 2025. In addition, a federal program which is a significant part of a Government Services contract had remained unfunded during the third quarter of 2024 and continued to remain unfunded through year end. There has been increased uncertainty as to when or if there will be congressional approval to fund this program which would result in the resumption of services provided by Government Services under this contract.

Restructuring and other reorganization expenses increased $14 million primarily due to an increase in severance-related costs. The current period’s restructuring and other reorganization expenses of $39 million included $29 million of severance-related costs in connection with the various strategic initiatives being implemented to simplify the company, reduce our expense base and enhance our flexibility.

 PRIVATE EDUCATION LOANS PORTFOLIO PERFORMANCE

(Dollars in millions)

Loans in-school/grace/deferment(1)

Loans in forbearance(2)

Loans in repayment and percentage of each status:

Loans current

Loans delinquent 31-60 days(3)

Loans delinquent 61-90 days(3)

Loans delinquent greater than 90 days(3)

Total Private Education Loans in repayment

Total Private Education Loans, gross

Private Education Loan allowance for losses

Private Education Loans, net

Percentage of Private Education Loans in repayment

Delinquencies as a percentage of Private Education Loans in repayment

Loans in forbearance as a percentage of loans in repayment and forbearance

Cosigner rate(4)

Loans for customers who are attending school or are in other permitted educational activities and are not yet required to make payments on their loans, e.g., internship periods, as well as loans for customers who have requested and qualify for other permitted program deferments such as various military eligible deferments.

Loans for customers who have requested extension of grace period generally during employment transition or who have temporarily ceased making full payments due to hardship or other factors such as disaster relief consistent with established loan program servicing policies and procedures.

The period of delinquency is based on the number of days scheduled payments are contractually past due.

Excluding Private Education Refinance Loans, which do not have a cosigner, the cosigner rate was 66%, 66% and 65% for fourth-quarter 2024, third-quarter 2024, and fourth-quarter 2023, respectively.

ALLOWANCE FOR LOAN LOSSES

(Dollars in millions)

Allowance at beginning of period

Total provision

Charge-offs:

Gross charge-offs

Expected future recoveries on current period gross charge-offs

Total(1)

Adjustment resulting from the change in charge-off rate(2)

Net charge-offs

Decrease in expected future recoveries on previously fully charged-off loans(3)

Allowance at end of period (GAAP)

Plus: expected future recoveries on previously fully charged-off loans(3)

Allowance at end of period excluding expected future recoveries on previously fully charged-off loans (Non-GAAP Financial Measure)(4)

Net charge-offs as a percentage of average loans in repayment, excluding the net adjustment resulting from the change in the charge-off rate (annualized)(2)

Net adjustment resulting from the change in the charge-off rate as a percentage of average loans in repayment (annualized)(2)

Net charge-offs as a percentage of average loans in repayment (annualized)

Allowance coverage of charge-offs (annualized)(4)

Allowance as a percentage of the ending total loan balance(4)

Allowance as a percentage of ending loans in repayment(4)

Ending total loans

Average loans in repayment

Ending loans in repayment

(Dollars in millions)

Allowance at beginning of period

Total provision

Charge-offs:

Gross charge-offs

Expected future recoveries on current period gross charge-offs

Total(1)

Adjustment resulting from the change in charge-off rate(2)

Net charge-offs

Decrease in expected future recoveries on previously fully charged-off loans(3)

Allowance at end of period (GAAP)

Plus: expected future recoveries on previously fully charged-off loans(3)

Allowance at end of period excluding expected future recoveries on previously fully charged-off loans (Non-GAAP Financial Measure)(4)

Net charge-offs as a percentage of average loans in repayment, excluding the net adjustment resulting from the change in the charge-off rate (annualized)(2)

Net adjustment resulting from the change in the charge-off rate as a percentage of average loans in repayment (annualized)(2)

Net charge-offs as a percentage of average loans in repayment (annualized)

Allowance coverage of charge-offs (annualized)(4)

Allowance as a percentage of the ending total loan balance(4)

Allowance as a percentage of ending loans in repayment(4)

Ending total loans

Average loans in repayment

Ending loans in repayment

(Dollars in millions)

Allowance at beginning of period

Total provision

Charge-offs:

Gross charge-offs

Expected future recoveries on current period gross charge-offs

Total(1)

Adjustment resulting from the change in charge-off rate(2)

Net charge-offs

Decrease in expected future recoveries on previously fully charged-off loans(3)

Allowance at end of period (GAAP)

Plus: expected future recoveries on previously fully charged-off loans(3)

Allowance at end of period excluding expected future recoveries on previously fully charged-off loans (Non-GAAP Financial Measure)(4)

Net charge-offs as a percentage of average loans in repayment, excluding the net adjustment resulting from the change in the charge-off rate (annualized)(2)